WASHINGTON — In what congressional overseers branded as evidence of loose controls in the savings and loan bailout, Price Waterhouse charged the government 67 cents a page to photocopy more than 11 million pages of documents at the failed Homefed Bank in San Diego, helping quadruple a $4-million contract to "$17 million and growing."
The accounting firm obtained the contract from the Resolution Trust Corp. without competitive bidding, because RTC officials--hoping to avoid a federal takeover--were scrambling to find a buyer for the giant San Diego thrift, according to congressional sources.
Officials wanted loan records and documents copied for use by prospective purchasers. But their sales efforts were unsuccessful, Homefed became insolvent and the thrift ultimately was seized by the government last July in the largest S&L failure in history.
"We are astonished that the RTC had no internal controls, or inadequate ones at best, in place to prevent such improper runaway spending," Reps. Henry B. Gonzalez (D-Tex.), chairman of the House Banking Committee, and Floyd H. Flake (D-N.Y.), chairman of the oversight subcommittee, said in a letter to RTC Chairman Albert V. Casey. The legislators demanded an investigation of the Price Waterhouse contract.
RTC spokesman Stephen Katsanos said the agency had just received the letter Friday, but "will be more than happy to provide accurate information to Mr. Gonzalez." Price Waterhouse said it had acted properly and "performed vast services" for the RTC in connection with Homefed.
"There was no cost overrun on the Homefed project," the giant accounting firm said in a statement issued Friday.
"The contract was not a $4-million contract that expanded to $17 million. Rather, the contract was a 'time and materials' contract in which charges were based on the time it took us to perform the work required by the RTC. All copying work done was performed by clerical personnel and was billed to the RTC at the clerical labor rate as defined in the contract. There was no 'per-copy cost' mandated in the Price Waterhouse contract with the RTC."
The contract already is under extensive investigation by the RTC's inspector general.
Price Waterhouse billed the RTC for $17 million through last October, according to a knowledgeable source. The billing included about $7.4 million for copying at least 11 million pages of records at Homefed.
The government was charged another $5 million "related to document management--this included storage and cataloguing and indexing of the documents," the source said.
The RTC contacted several firms, according to the source; Price Waterhouse was the second choice for the rush contract.
In their letter to Casey, Reps. Gonzalez and Flake said it was "exorbitant" for the RTC to pay 67 cents a page for copying. They asked Casey to explain how the contract was awarded and to make a comparison of the copying costs with "standard copying contracts."
Their disclosure of the contract could be a serious embarrassment for the RTC, which will be seeking $25 billion from Congress to complete the job of disposing of failed S&Ls.
Congress last year refused requests from the Bush Administration for the funds, leaving the problem to President Clinton.