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 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. 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 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. 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. 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 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. 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 (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. 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 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. 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.