Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, September 28, 1993                   TAG: 9309280069
SECTION: BUSINESS                    PAGE: A-3   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

RTC BREAKS ITS OWN RULES

The rules for the Resolution Trust Corp., which oversees the government's S&L cleanup effort, say firms cannot receive new business if they are being sued, have caused losses of more than $50,000 or are under investigation for contributing to S&L failures.

But New York-based Coopers & Lybrand was awarded 25 contracts worth $22.6 million from January 1992 to July 1993 while it was under investigation in the failure of a New Mexico thrift, according to RTC documents.

And a second firm, Chicago-based Grant Thornton, received 17 contracts worth $4.5 million over the same period even though it had been sued in one thrift failure in 1989 and is under investigation in another, the documents showed.

Although the regulations provide for waivers to allow such firms to get new business, the RTC granted them for only two of the 42 contracts.

A member of the House committee that oversees RTC expressed outrage that such firms are getting contracts and escaping the waiver process.

"We were pretty dead serious that those that caused this problem should not be benefiting from this," said Rep. Bruce Vento, D-Minn., a member of the House Banking Committee.

A spokesman for the RTC suggested the agency interprets its regulations liberally.

"The way we work . . . is we don't take any adverse action against the contractor until the lawsuit is filed," said Marty Blumenthal, RTC's manager of contractor ethics.

Both firms were being investigated for conducting faulty audits that falsely portrayed the financial health of ailing S&Ls, which were their clients before they failed. The new RTC contracts pay the firms to help audit other failed S&Ls the government has taken over.

An industry expert said the apparent conflict results from the government's heavy reliance on 10 or so of the nation's largest accounting firms.

"One of the things you have to recognize is that the largest firms, the Big Six, have staffing in the thousands," said Tom Kelley, an executive with the American Institute of Certified Public Accountants. "When you get below them, you're talking about firms that number their whole staff at 100. . . . They are limited in how much they can take on."