Failed Financial Institutions: RTC/FDIC Risk Fraud and Mismanagement by
Employing Those Deemed Culpable (Letter Report, 10/03/94, GAO/OSI-95-1).
The Resolution Trust Corporation (RTC) and the Federal Deposit Insurance
Corporation (FDIC) may not always know when they are about to hire, or
already employ, someone whom either RTC or FDIC has found to be
responsible for the losses that caused a federally insured financial
institution to fail. Neither agency systematically screens job
applicants or workers to determine their culpability in financial
institution failures. Their inability to make informed decisions on the
hiring or duties of such persons increases FDIC's vulnerability to
fraud, abuse, or mismanagement. Further, although RTC will transfer its
assets and operations to FDIC when RTC closes down at the end of 1995,
GAO believes that both agencies need to respond to the findings of this
report as they prepare for the upcoming transition. Despite the
dwindling number of institutions now in conservatorship, the
vulnerability of any failed thrift to culpable individuals will remain a
concern as long as conservatorship is a resolution option.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: OSI-95-1
TITLE: Failed Financial Institutions: RTC/FDIC Risk Fraud and
Mismanagement by Employing Those Deemed Culpable
DATE: 10/03/94
SUBJECT: Insured commercial banks
Fraud
Personnel evaluation systems
Bank failures
Internal controls
Risk management
Bank holding companies
Liability (legal)
Savings and loan associations
Data bases
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Cover
================================================================ COVER
Report to the Chairman, Committee on Governmental Affairs, U.S.
Senate
October 1994
FAILED FINANCIAL INSTITUTIONS -
RTC/FDIC RISK FRAUD AND
MISMANAGEMENT BY EMPLOYING THOSE
DEEMED CULPABLE
GAO/OSI-95-1
RTC/FDIC Vulnerable to Fraud, Waste, & Mismanagement
(600291)
Abbreviations
=============================================================== ABBREV
FDIC - Federal Deposit Insurance Corporation
FIRREA - Federal Institutions Reform, Recovery, and Enforcement Act
GAO - General Accounting Office
OSI - Office of Special Investigations
RTC - Resolution Trust Corporation
Letter
=============================================================== LETTER
B-257933
October 3, 1994
The Honorable John Glenn
Chairman, Committee on Governmental Affairs
United States Senate
Dear Mr. Chairman:
As you know, GAO identified the cleanup of failed, federally insured
savings and loan institutions (thrifts) as 1 of 17 federal program
areas that are especially vulnerable to fraud, waste, abuse, and
mismanagement. The Resolution Trust Corporation (RTC) now largely
controls the cleanup, and the Federal Deposit Insurance Corporation
(FDIC) will assume complete control of the cleanup by 1996. This
report responds to your concerns as to whether RTC and FDIC (the
Corporations) have sufficient systems to assist hiring and management
officials in identifying job applicants and current employees for
whom the Corporations had made culpability determinations.\1 You were
also concerned that the Corporations do not share information about
the determinations.
At your request, we limited our investigation to those positions that
had disposition responsibilities for the failed institutions' assets
(vital positions). We also examined whether sufficient systems exist
to inform RTC management of culpable nonfederal employees who hold
vital positions in thrifts that are operating in conservatorship
under RTC control.
--------------------
\1 Determinations of "culpability" are administrative determinations
made by the Corporations based on the Corporations' own belief that
sufficient evidence exists to file a professional liability suit or
submit a criminal referral to the Department of Justice. These
determinations are administrative in nature and may be followed by
civil suit or criminal prosecution.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The Corporations are vulnerable to fraud, abuse, or mismanagement
because they do not systematically screen employees or applicants to
determine if they have been found culpable in the losses that caused
institutions to fail. If the Corporations attempted to implement a
systematic employment screening process for culpability
determinations, all necessary information would not be in their
existing databases. For example,
-- The Corporations' databases of culpable individuals are not
complete in that they do not include the names of all culpable
directors and officers of failed institutions. Notably, they do
not always include the names of culpable employees if the
Corporations have determined that legal action would not be
cost-effective.
-- Social security numbers or other personal identifiers of
culpable individuals are often not included in the Corporations'
databases, making positive identification difficult.
-- RTC's database of professional liability suits against
individuals it has determined to be culpable includes the names
of individuals against whom no suits have been filed.
The Corporations also have no systematic means for promptly notifying
managers and supervisors of employees against whom a culpability
determination has been made. Even if notified of such
determinations, managers have no clear policy and guidance concerning
what action, if any, should be taken regarding those identified.
Further, the Corporations do not systematically share information
regarding individuals each has found culpable for institution
failures, thus increasing each Corporation's vulnerability.
Thus, during our investigation, the Corporations and we separately
identified certain employees of RTC, FDIC, and conservatorship
institutions who had previously been determined to be culpable yet
who held vital positions. In addition, the Corporations'
vulnerability may not be limited to these identified employees
because of the systemic problems identified above. For example, RTC
does not maintain a database of "non-federal conservatorship
employees,"\2
including those who perform asset disposition functions.
In addition, RTC does not subject conservatorship employees to the
integrity requirements of the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA), the basic law that governs
RTC, although the law clearly covers them. However, many
conservatorship employees perform RTC functions and activities and
thus add to RTC's vulnerability.
As a result of these and other shortcomings, the Corporations'
vulnerability to fraud, abuse, or mismanagement from culpable
individuals in vital positions is significant, given the positions
they hold and the value of the assets they control. The Corporations
need to address these vulnerability issues to ensure the proper
disposition of the failed institutions' assets and to protect
insurance funds' and taxpayers' interests. Because RTC is
transferring its assets and operations to FDIC by 1996, we are making
recommendations to the Corporations to assist them as they prepare
for the transition period.
--------------------
\2 Employees of the failed institutions, as defined by the RTC
Conservatorship Operation Manual.
BACKGROUND
------------------------------------------------------------ Letter :2
The Financial Institutions Reform, Recovery, and Enforcement Act
(FIRREA) established RTC in 1989 to contain, manage, and resolve
hundreds of failed thrift institutions. The Federal Deposit
Insurance Corporation Improvement Act of 1991 clarified or expanded
RTC's and FDIC's responsibilities for resolving failed thrifts and
banks. As of April 25, 1994, RTC was responsible for resolving 743
thrifts. From fiscal year 1990 to May 19, 1994, FDIC was responsible
for resolving 465 failed banks. Under the RTC Completion Act, RTC is
to cease operating by December 31, 1995. After that date, FDIC will
become responsible for (1) resolving the thrifts that fail after June
30, 1995, and (2) completing the disposition of thrift assets
remaining in RTC's inventory.
When RTC assumes control of an institution, its Office of
Investigations and its Legal Division's Professional Liability
Section work together. They determine which institution officers and
directors, if any, are responsible for, or culpable in, the losses
that resulted in the institution's failure. Once these
administrative determinations are made, RTC generally then files a
professional liability suit or submits a criminal referral naming the
culpable individuals. FDIC operates in much the same manner.
Between its inception and June 30, 1994, RTC filed 245 professional
liability suits against directors and officers, of which 181 are
pending, and made 1,134 criminal referrals to the Department of
Justice. FDIC had approximately 400 professional liability suits
against directors and officers between January 1990 and July 1994, of
which 120 are pending. In addition, FDIC filed 998 criminal
referrals in that same period.
RTC/FDIC ARE VULNERABLE
------------------------------------------------------------ Letter :3
RTC and FDIC are vulnerable to fraud, abuse, and mismanagement
because they do not systematically screen job applicants or current
employees to determine if they have been found culpable in the losses
that caused federally insured institutions to fail. The Corporations
have no systems designed to screen prospective employees to determine
if the Corporations have found them culpable in the failures. In
addition, after the Corporations make culpability determinations,
they have no systems to verify whether they or a conservatorship
institution currently employ the individuals deemed culpable.
SHORTCOMINGS OF EXISTING
CORPORATION DATABASES
------------------------------------------------------------ Letter :4
The Corporations' databases concerning professional liability suits
and criminal referrals are not designed to be used for employment
screening and contain a number of shortcomings for performing this
function. First, the databases are incomplete: Names of culpable
individuals against whom legal action was not cost-effective\3 are
not always included in Corporation databases, and criminal referral
listings to the Department of Justice are incomplete. Second,
configuration of the Corporation databases constrains their
usefulness in locating names of culpable individuals. Third, one RTC
database incorrectly lists individuals as culpable when they are not.
These shortcomings become critical when verifying whether prospective
employees for, or current employees in, some vital capacity have been
found culpable for institution failures.
--------------------
\3 The Corporations consider the litigation's cost, the value of the
claim, and the potential defendant's ability to pay any resulting
judgment before pursuing a professional liability suit.
CORPORATIONS' DATABASES OF
CULPABLE INDIVIDUALS ARE
INCOMPLETE
---------------------------------------------------------- Letter :4.1
The Corporations' databases of culpable individuals are incomplete,
continuing to leave them vulnerable to fraud and mismanagement. For
example, the Corporations do not always include in their databases
the names of those individuals found culpable for institution
failures if RTC and FDIC have determined that legal action would not
be cost-effective.
In addition, FDIC criminal referral listings are incomplete. After
we compared all FDIC criminal referrals filed with Justice for one
failed bank with an FDIC listing of all criminal referrals filed in
the past 5 years, we found over half missing from the FDIC listing.
FDIC had filed criminal referrals against eight individuals from the
failed bank between November 1990 and February 1991, yet only three
of the names were on its criminal referral listing. As a result, if
the Corporations had performed employment screening, they would have
been unaware of the culpability of the five not on the listing. FDIC
acknowledged that the criminal referral listing, which came from a
database not designed for employment screening, is not appropriate
for this purpose due to the number of errors it contains.
A similar situation exists with the RTC databases. RTC acknowledged
that because each RTC region is responsible for entering its own
data, some may not have entered all of the professional liability
suit and criminal referral data necessary to make this database an
integral part of an accurate screening system. This inconsistent
reporting occurs because each region has discretion about how much
information is placed in the system.
FORMAT/ORGANIZATION OF
DATABASES MAKE EMPLOYMENT
SCREENING DIFFICULT
---------------------------------------------------------- Letter :4.2
The Corporations' databases lack systematic means to identify
culpable individuals, and the organization of FDIC's database of
professional liability suits constrains its usefulness. Both
situations increase Corporation vulnerability.
None of the Corporations' databases pertaining to professional
liability suits or criminal referrals systematically provide social
security numbers or other similar identifiers necessary to make a
positive identification for similar names. To perform our
verification when social security numbers were not available, we
requested individuals' home addresses and dates of birth from the
Corporations. These were sometimes available only on documents
maintained by outside legal counsel.
Further, the organization of FDIC's professional liability suit
database, containing over 1,500 individuals' names, is such that it
constrains the usefulness of the database for employment screening.
It does not have the capability to retrieve defendants by name.
Instead, this database, which FDIC officials acknowledged would be
difficult to use for employment screening, identifies failed
institutions resolved by FDIC, each followed by a list of defendants'
names. Therefore, we were unable to determine whether the
Corporations employed any of these individuals in vital positions.
RTC PROFESSIONAL LIABILITY
SUIT LISTING INCORRECTLY
INCLUDED TWO INDIVIDUALS AS
DEFENDANTS
---------------------------------------------------------- Letter :4.3
RTC had never filed suit against two other RTC employees we found on
its professional liability suit listing. RTC included these two
names on the listing because it routinely enters the names of all
directors and officers from a failed institution in the database from
which it drew the listing. RTC told us that this database was not
designed, nor ever intended to be used, for employment screening.
RTC AND FDIC DID NOT
COMMUNICATE CULPABILITY
DETERMINATIONS PROMPTLY
------------------------------------------------------------ Letter :5
Neither RTC nor FDIC has established a systematic means for
communicating determinations of culpability to managers in a timely
way. Managers become aware of culpability determinations made
against current employees through happenstance. However, early
notification would allow managers to evaluate and determine, in a
timely manner, whether to restrict the employees' duties and
responsibilities or to evaluate their employment status. Such action
would help limit the Corporations' vulnerability to fraud, abuse, and
mismanagement.
For example, RTC hired an individual in January 1990 as a credit
specialist to manage a conservatorship institution with $1.9 billion
in assets. RTC filed a professional liability suit against him in
December 1992. Being unaware of the suit, a senior manager at the
regional RTC office offered the employee a new position (and a paid
move) 4 days after RTC had filed the professional liability suit. In
fact, the manager did not learn of the suit for 11 days after making
the offer (15 days after RTC had filed suit). After learning of the
suit on December 28, 1992, the manager acted to limit RTC's
vulnerability: He restricted the individual from all RTC offices and
placed him on a fully paid administrative-leave status for
approximately 1 month until his employment was to expire because the
local RTC office was closing. Previously, the credit specialist's
duties included (1) providing guidance, direction, and control to the
institution through the documentation and inventory of assets; (2)
directing the sale of owned real estate and loans; and (3) assuming,
in the absence of the managing agent in charge of the RTC
conservatorship institution, the responsibilities and delegated
authorities of the managing agent.
In another instance, RTC filed a professional liability suit against
the Vice President for Loan Workout\4 (a conservatorship employee) at
an RTC conservatorship institution having over $200 million in
assets. Following the filing of the suit in December 1992, RTC sent
a letter to the individual's residence requesting that he resign.
RTC did not inform the managing agent in charge of the RTC
conservatorship institution where the vice president worked of either
the suit or the letter. According to the managing agent, he was
unaware that RTC had determined the vice president to be responsible
for the failure of an institution until the employee showed him a
copy of the RTC letter. The managing agent thus had no opportunity
to consider revising the vice president's duties and limiting RTC's
vulnerability. A Virginia newspaper published an article about RTC's
employment of the vice president. The article, entitled "Thrifts:
From One Failure to Another," stated that when RTC filed suit against
the individual, it did not have to look far for the defendant as he
was working a block away at another failed thrift being managed by
RTC.
--------------------
\4 The Corporations use "workouts" to develop the planned disposition
of assets with regard to their price and purchaser.
RTC/FDIC POLICY UNCLEAR AS TO
WHAT ACTION TO TAKE REGARDING
THOSE FOUND CULPABLE
------------------------------------------------------------ Letter :6
In January 1994, RTC issued a policy covering civil service employees
determined to be culpable in the losses of failed institutions. The
policy states in part that "Conduct which does not clearly fall into
one of [FIRREA's] prohibited categories\5 is less clear-cut and
requires further analysis." The policy also states, "An example that
requires careful consideration is when an RTC employee is named, or
about to be named, in a suit filed by the RTC Professional Liability
Section."
While this policy is critical for managers in making employment
decisions, it does not describe what "further analysis" is required.
Thus, the policy provides neither the direction nor the clear
guidance that managers need when deciding (1) to hire an individual
previously found culpable for the failure of an institution or (2)
what personnel action, if any, should be taken against current
employees whom the Corporations have found culpable.
Similarly, FDIC policy does not provide clear guidance for managers
to make necessary employment decisions regarding culpability
determinations. FDIC standards of ethical conduct, which adhere to
those of the executive branch, state only that FDIC employees cannot
be indebted to a failed institution through any extension of credit.
--------------------
\5 FIRREA requires RTC to ensure that anyone who directly or
indirectly performs services for it meets minimum standards of
competence, experience, integrity, and fitness. These standards
prohibit any person from performing any service for RTC who
� has been convicted of a felony;
� has been removed from or prohibited from participating in the
affairs of an insured depository institution pursuant to any final
enforcement action by any federal banking agency;
� has demonstrated a practice or pattern of defalcation
(misappropriation);
� is currently in default on one or more obligations to FDIC, the
Federal Savings and Loan Insurance Corporation, or RTC; or
� has caused a substantial loss to federal deposit insurance funds.
RTC AND FDIC DID NOT SHARE
FINDINGS OF CULPABILITY
------------------------------------------------------------ Letter :7
Several federal agencies--including RTC and FDIC--coordinate their
efforts to pursue claims, prosecutions, and enforcement actions to
maximize recoveries at the lowest possible cost. Unfortunately, this
effort does not extend to the systematic sharing of information
between RTC and FDIC regarding the directors and officers each had
found culpable in the failures of federally insured institutions.
Responsible officials at RTC and FDIC acknowledged that the
Corporations do not customarily share such information. Therefore,
they are aware only of those employees against whom their own
organization has brought action.
RTC/FDIC EMPLOYEES FOUND
CULPABLE
------------------------------------------------------------ Letter :8
After our request, RTC and FDIC identified 12 individuals, one of
whom was a conservatorship institution employee, whom the
Corporations had previously determined to be culpable and who were
holding vital positions in FDIC, RTC, or conservatorship
institutions. We identified two additional employees occupying vital
positions whom the Corporations had found culpable. These
discoveries illustrate the Corporations' vulnerability.
RTC/FDIC-IDENTIFIED
EMPLOYEES PREVIOUSLY FOUND
CULPABLE
---------------------------------------------------------- Letter :8.1
In response to our request for a list of such employees, RTC's Office
of Investigations identified three individuals who held vital
positions although they had been determined to be culpable. Those
individuals had been found responsible for losses and had been made
subjects of professional liability suits or criminal referrals to the
Department of Justice since 1989. FDIC's investigative office
identified nine FDIC employees holding vital positions who had been
subjects of FDIC professional liability suits or criminal referrals
during the 5 preceding years. The 12 RTC/FDIC-identified culpable
employees held the vital positions of RTC managing agent, credit
specialist, and operations specialist; loan workout officer at RTC
conservatorship institutions; or FDIC credit specialist.
We did not include in our investigation two other persons whom FDIC
identified because they did not have asset disposition
responsibilities. These two, however, held positions of trust, as
FDIC employed them as investigators to ascertain individuals'
liability for institution failures.
GAO-IDENTIFIED EMPLOYEES
PREVIOUSLY FOUND CULPABLE
---------------------------------------------------------- Letter :8.2
Concentrating on employees with asset disposition responsibilities,
we obtained a list of 1,132 Corporation employees from RTC and FDIC.
We compared this list with RTC's database of subjects of professional
liability suits and RTC's and FDIC's databases of subjects of
criminal referrals to the Department of Justice. We found two
additional employees deemed culpable in vital positions--an FDIC
credit specialist and an RTC supervisory operations specialist.
FDIC hired the credit specialist in February 1993, although RTC had
previously filed a criminal referral that named the individual in
1990. While FDIC was aware that this person had resigned from RTC in
May 1992, FDIC's hiring and supervisory managers were unaware of the
criminal referral until we asked that they check with RTC. The FDIC
employee's responsibilities included the analysis of proposed
workouts; settlements; and budgets of large, complex assets, ranging
to several millions of dollars.
RTC hired the supervisory operations specialist in February 1990. In
April 1991, RTC made a criminal referral to the Department of
Justice, naming this individual. RTC overlooked this individual in
the list of culpable employees it provided to us although the
criminal referral clearly stated that he was an RTC employee. This
oversight further emphasizes the need for both an effective,
systematic screening process and adequate databases to support it.
ADDITIONAL CULPABLE INDIVIDUALS
MAY HOLD VITAL POSITIONS
------------------------------------------------------------ Letter :9
The Corporations' vulnerability may not be limited to the 14 RTC,
FDIC, or conservatorship employees that we identified during our
investigation. For example, we were limited in our ability to use
FDIC's database of professional liability suits because the databases
could not retrieve individuals by name. Thus, we were unable to
determine whether the Corporations employed in vital positions any of
the individuals whose names were contained in the database.
Additionally, RTC maintained no database of employees of institutions
that were in conservatorship and could not identify those having
previous culpability determinations. Thus, RTC's vulnerability to
fraud, abuse, or mismanagement is increased.
RTC ASSESSMENT DID NOT IDENTIFY
ITS VULNERABILITY TO CULPABLE
INDIVIDUALS
----------------------------------------------------------- Letter :10
In March 1990, the U.S. Secret Service offered to do a vulnerability
assessment targeting RTC employees and contractors. RTC did not
accept the offer and performed its own assessment, which was
published in November 1990.
The Secret Service proposal included a review of the application
process for new RTC employees and its contractors, as well as a
review of RTC databases and criminal referral processes. The subject
of RTC's vulnerability assessment included adherence to RTC's ethical
standards--FIRREA. RTC found that its employment efforts are
particularly vulnerable "in view of the need to rapidly employ staff
. . . because RTC must ensure that prospective employees meet its
own and other ethical requirements." However, RTC's ethical standards
for its employees do not specifically address the employment of
individuals against whom an administrative determination of
culpability has been made, with the result that RTC did not identify
its vulnerability to such individuals. While we cannot be certain
that a Secret Service assessment would have identified the lack of
RTC controls for determining which employees and applicants were
culpable, as RTC's focus was on existing ethical standards it did not
identify this lack of controls as a vulnerability.
FIRREA IS NOT APPLIED TO
CONSERVATORSHIP EMPLOYEES
----------------------------------------------------------- Letter :11
RTC does not consider conservatorship employees to be either RTC or
contract employees and therefore does not apply the FIRREA employment
standards regarding competence, expertise, and integrity to them. We
believe that conservatorship employees should be subject to the
FIRREA standards because the standards apply to individuals who
perform the functions and activities of RTC.
FIRREA establishes various experience and integrity standards that
are applicable to RTC employees. FIRREA also states that
"Any individual who, pursuant to a contract or any other
arrangement, performs functions or activities of the [RTC],
under the direct supervision of an officer or employee of the
[RTC], shall be deemed to be an employee of the [RTC] for the
purposes of title 18, United States Code and [FIRREA]." (12
U.S.C.A. 1441 a(n)(1)(West Supp. 1993)).
We found that many conservatorship employees perform critical
functions of RTC, such as loan workout. They also report directly to
an RTC employee, such as the managing agent or credit specialist.
Nonetheless, RTC maintains that conservatorship employees are not
subject to FIRREA's employment restrictions.
CONCLUSIONS
----------------------------------------------------------- Letter :12
RTC and FDIC do not have the systematic means to always know when
they are about to employ, or are already employing, someone whom
either Corporation has found to be culpable in the losses that caused
the failure of a federally insured financial institution. Their
inability to make informed decisions concerning the hiring or duties
of such individuals increases the Corporations' vulnerability to
fraud, abuse, or mismanagement.
Further, while RTC will transfer its assets and operations to FDIC
when RTC closes on December 31, 1995, we believe it is important for
both Corporations to address the findings of this report now as they
prepare for the transition period. Despite the dwindling number of
institutions presently in conservatorship, the vulnerability of any
failed thrift to culpable individuals will remain a concern as long
as conservatorship is an available means of resolution.
Addressing the findings of this report will not only help protect the
assets of the institutions under the Corporations' purview, it will
help provide FDIC with assurance that it is aware of any RTC and
conservatorship/receivership institution employees who have been
found culpable for the losses of failed institutions.
RECOMMENDATIONS
----------------------------------------------------------- Letter :13
We recommend that the Acting Chairman of FDIC and the Deputy and
Acting Chief Executive Officer of RTC direct their agencies to
-- perform employment screening before hiring individuals and
routinely do so for their current employees, using reliable
databases of individuals found responsible for institution
failures;
-- develop reliable databases that will effectively identify
individuals found culpable in institution failures;
-- share information systematically, enabling each to be aware of
those individuals the other has found culpable in the failure of
federally insured institutions; and
-- ensure that personnel guidance is clear and appropriate
regarding employees and prospective employees for whom the
Corporations have made culpability determinations.
We also recommend that RTC's Deputy and Acting Chief Executive
Officer ensure that conservatorship employees who occupy positions
with responsibilities for asset disposition--such as those performing
loan workout functions--be included in the employment screening
process.
AGENCY COMMENTS
----------------------------------------------------------- Letter :14
We sent a draft of this report to FDIC and RTC for comment. In their
written comments dated September 14 and 16, 1994, respectively, FDIC
and RTC agreed with our report and acknowledged that the issues
raised are significant. According to FDIC's Acting Chief Operating
Officer and Deputy to the Chairman, FDIC will continue to review the
draft report's conclusions, providing us with the preliminary results
of that review, and, in coordination with RTC, develop steps to
correct the weaknesses identified. RTC's Chief Financial Officer
indicated that RTC will pursue our recommendations to the fullest
extent possible and proposed specific initiatives to address each
recommendation. RTC's initiatives are responsive to our findings and
recommendations. If fully and effectively implemented, these
initiatives could resolve the issues identified. (See app. II and
III for complete agency comments.)
--------------------------------------------------------- Letter :14.1
As agreed with your office, we plan no further distribution of this
report until 30 days after the date of the letter, unless you
publicly announce its contents earlier. At that time, we will send
copies to the Secretary of the Treasury, the Acting Chairman of FDIC,
the Deputy and Acting Chief Executive Officer of RTC, and other
interested parties. We will make copies of this report available to
others upon request.
If you have questions concerning our investigative findings, please
contact Robert Hast, Assistant Director for Investigations, of GAO's
New York Regional Office at (212) 264-0730. A list of major
contributors is included in appendix IV.
Sincerely yours,
Richard C. Stiener
Director
METHODOLOGY
=========================================================== Appendix I
We performed our investigation between October 1992 and December
1993. We reviewed and considered relevant laws, regulations, and
policies and interviewed responsible management officials at RTC and
FDIC headquarters.
From RTC, we requested the names of any RTC employee who had been the
subject of a professional liability suit or criminal referral for
responsibility in a failure of any federally insured institution
since the inception of RTC. We requested the same information from
FDIC regarding any FDIC employee in the past 5 years.
To verify whether the Corporations had provided us the names of all
such individuals, we requested personnel information as well as
professional liability suit and criminal referral information. We
matched RTC and FDIC employees with responsibilities concerning
assets of failed institutions against both organizations' criminal
referral listings and against RTC's professional liability suit
listing. From RTC, we obtained listings from databases of (1)
federal employees with asset disposition responsibilities\6 and (2)
individuals against whom RTC had filed professional liability suits
or criminal referral actions for responsibility in the failures of
federally insured institutions. From FDIC, we obtained listings from
databases of (1) employees at FDIC consolidated offices who have
responsibilities over assets of FDIC-controlled failed institutions
and (2) individuals against whom FDIC had in the past 5 years filed
professional liability suit\7 or criminal referral actions for
responsibility in the failures of federally insured institutions.
(See figure in printed edition.)Appendix II
--------------------
\6 We could not obtain listings of nonfederal conservatorship
employees with asset disposition responsibilities as RTC maintains no
database of them.
\7 We did not use FDIC's professional liability suit listing because
it could not readily be converted into a format suitable for this
screening purpose.
COMMENTS FROM RTC
=========================================================== Appendix I
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)Appendix III
COMMENTS FROM FDIC
=========================================================== Appendix I
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
OFFICE OF SPECIAL INVESTIGATIONS,
WASHINGTON, D.C.
Donald Wheeler, Deputy Director for Regional Investigations
M. Jane Hunt, Special Assistant for Investigative Plans and Reports
Barbara W. Alsip, Reports Analyst
NEW YORK REGIONAL OFFICE
Robert H. Hast, Assistant Director for Investigations
Daniel P. Schultz, Project Manager
Me'Shae Brooks-Rolling, Evaluator
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C.
James M. Lager, Assistant General Counsel
Glenn G. Wolcott, Assistant General Counsel
*** End of document. ***