WASHINGTON — Some of the nation's largest and toughest law firms, noted for their aggressive tactics in takeovers and merger battles, say that they are willing to represent the federal government to help overturn controversial 1988 sales of dozens of S&Ls to private investors.
The law firms would operate on a contingency basis to investigate and renegotiate the 1988 deals, which provided federal subsidies of $29 billion for buyers who were willing to purchase distressed S&Ls, Sen. Howard M. Metzenbaum (D-Ohio) said in an interview Thursday.
"I assume many buyers with sweet deals would rather renegotiate than face a bruising battle in court against the federal government," said Metzenbaum, who is chairman of a Senate judiciary subcommittee that is investigating the S&L scandal.
Metzenbaum said that he has received promises of cooperation from 10 major firms that are willing to represent the government for a share of the money they can win through negotiations or litigation--including O'Melveny & Myers of Los Angeles.
Under the arrangement, the firms would waive their normally substantial hourly fees or monthly retainers and work for a percentage of the money that they would win for the government.
The Ohio senator said that he will meet today with L. William Seidman, chairman of the Federal Deposit Insurance Corp., to ask him to accept the services of the private law firms.
It was not immediately clear whether Seidman will be able to--or even whether he wants to--enlist such help. The FDIC staff is reviewing the 1988 deals, many of which were consummated hurriedly in December to meet a year-end deadline posed by the expiration of special tax advantages.
But Metzenbaum is convinced that the experienced and high-powered private sector lawyers, working for potentially big financial rewards, can give the government a powerful weapon in seeking to reopen the 1988 deals.
"The government is operating with limited resources and cannot do any significant kind of investigation," Metzenbaum said.
Metzenbaum's anti-trust subcommittee has been conducting hearings on one of the most controversial of the 1988 deals, the sale of Bluebonnet Savings of Texas to James Fail, who put up just $1,000 of his own money and borrowed $70 million to close the deal.
Fail had a history of regulatory and legal problems, but the government accepted his bid to buy Bluebonnet, even though it was $97 million over the lowest bidder at the time. Fail qualified for $1.85 billion in federal subsidies in connection with the deal.
Metzenbaum said that he has enlisted a promise of help from O'Melveny & Myers, discussing the issue with its chairman, Warren Christopher, a former deputy attorney general and former deputy secretary of state.
Other firms that Metzenbaum cited include Cravath, Swaine & Moore of New York; Sullivan & Cromwell, a powerhouse Wall Street firm, and two other New York firms experienced in takeover battles, Wachtel, Lipton, Rosen & Katz and Weil, Gotshal & Manges.
In other S&L developments, Rep. Frank Annunzio (D-Ill.) on Thursday invited two men who defaulted on more than $130 million in loans to the failed Silverado Banking, Savings and Loan Assn. of Denver to appear before a congressional hearing to "explain their current luxurious lifestyle."
Annunzio said that if Bill L. Walters and Kenneth M. Good do not agree to appear voluntarily at a hearing scheduled for Sept. 6, he will ask the Banking, Finance and Urban Affairs Committee to issue subpoenas for them.
Good telephoned Annunzio's office Thursday afternoon and said he would appear, according to Curt Prins, an aide to Annunzio. "We have not heard from Walters," Prins said.
Reached at her home in Orange County, Jacqueline Walters said: "I'm sorry, but no comment."
The pair, who bankrolled the failed oil-exploration business of President Bush's son Neil, previously had told the panel that they each had negative net worths. The Times recently reported that Walters has a $2-million home in Newport Beach and a $1-million retreat near Palm Springs.
Good has a large home in a walled Tampa, Fla., subdivision, and a condominium in New York.
Annunzio said in letters mailed Thursday to Walters and Good: ". . . your financial situation is far from desperate. Indeed, it appears that you are living a life that most Americans can only dream of."
Annunzio said in a floor speech that "both men claimed (at a congressional hearing) that they had no net worth. Mr. Walters told how at one time he was worth $100 million but now he was broke. Mr. Good talked about how he had lost his $10-million home in Colorado through foreclosure. It turns out that neither man is ready to join the ranks of the homeless.
"The American people deserve to learn how people who have cost them $100 million on defaulted loans to a failed savings and loan can afford to live in a manner worth of 'Lifestyles of the Rich and Famous,' " Annunzio said.