RTC/FDIC Are Vulnerable

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. A similar situation exists with the RTC databases. It does not have the capability to retrieve defendants by name. RTC and FDIC Did Not Communicate Culpability Determinations Promptly

Neither RTC nor FDIC has established a systematic means for communicating determinations of culpability to managers in a timely way. RTC/FDIC Employees Found Culpable

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. Additionally, RTC maintained no database of employees of institutions that were in conservatorship and could not identify those having previous culpability determinations. Recommendations

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 reviewed and considered relevant laws, regulations, and policies and interviewed responsible management officials at RTC and FDIC headquarters.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed whether the Resolution Trust Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC) have sufficient systems to assist hiring and management officials in culpability determinations.

What GAO Found

GAO found that: (1) RTC and FDIC are vulnerable to fraud, abuse, or mismanagement because they do not systematically screen employees or applicants found culpable for bank failures; (2) RTC and FDIC databases do not include the names of all culpable directors and officers of failed institutions; (3) RTC and FDIC databases do not include personal identifiers of culpable individuals; (4) the RTC database includes the names of individuals against whom no suits have been filed; (5) RTC and FDIC have no systematic means for promptly notifying managers and supervisors of employees against whom a culpability determination has been made; (6) RTC and FDIC do not share information regarding individuals found culpable for institution failures; (7) certain employees of RTC, FDIC, and conservatorship institutions hold vital positions although they have previously been determined to be culpable; (8) RTC and FDIC cannot ensure the identification of all culpable employees; (9) RTC is vulnerable to conservatorship employees who have been found culpable, since it does not maintain a database of non-federal conservatorship employees; and (10) RTC and FDIC should address these vulnerability issues to ensure the proper disposition of failed institutions' assets and to protect insurance funds' and taxpayers' interests.