FALLING DOWN

WHEN A POWERFUL GOVERNMENT ATTORNEY SIGNED ON WITH A DENVER LAW FIRM, THEY BOTH EXPECTED TO CASH IN. THEN THE BOTTOM DROPPED OUT.

When Jeff North first arrived at the Denver law offices of Baker & Hostetler in July 1992, he must have seemed like quite a catch.

Barely 43, North had been wooed away from the upper echelons of the Resolution Trust Corporation, the federal agency charged with cleaning up the nation's savings and loan mess. As the RTC's Denver-based regional counsel, North had presided over the work of more than 350 government lawyers in seventeen Western states. He had overseen tens of millions of federal dollars set aside every year for RTC contracts with outside law firms. And he had developed personal relationships with high-ranking officials at RTC headquarters in Washington, D.C., and in branch offices around the country. Now he was bringing his experience--and his contacts--to Baker & Hostetler, a nationally prominent firm that already counted the RTC among its most important and deep-pocketed clients. On paper North appeared to be a classic "rainmaker"--someone who could help win the firm millions of dollars in future RTC legal work.

Today, however, Baker & Hostetler's decision to court and acquire North turns out to have been a drastic mistake--for both North and the law firm itself.

North has been ignominiously drummed out of the firm's 17th Street offices in the wake of a nasty falling-out with the firm's managing partner in Denver, James A. Clark. Once one of the RTC's most powerful in-house lawyers, North now is unemployed and says his career has been "irreparably damaged."

And Cleveland-based Baker & Hostetler, already smarting from RTC sanctions imposed in an unrelated case, is being forced to fend off a new series of damaging charges and revelations contained in a lawsuit North filed recently in Denver District Court.

That lawsuit reveals that Baker & Hostetler's hiring of North triggered a federal investigation of how Clark recruited North into private practice. Because of RTC secrecy rules, the exact status of that investigation is unclear, but an April RTC memorandum obtained by Westword shows that the RTC and its sister agency, the Federal Deposit Insurance Corporation, believe the firm violated federal ethics guidelines.

Attorneys for North also allege in the suit that Baker & Hostetler improperly pulled punches while litigating an S&L case on behalf of American taxpayers because of an internal conflict of interest. According to North's complaint, the law firm resisted a recommendation by North that the government sue a Big Six accounting firm for damages arising out of a thrift failure because the accounting firm was a Baker & Hostetler client.

And the complaint alleges that Clark lied to North when he hired him, falsely promising him the chance to develop a legal practice with banks and other private financial institutions. In reality, the suit charges, "Clark was interested only in the bonanza of RTC work which he expected North's presence to attract to B&H."

Neither North nor Baker & Hostetler will comment on the dispute. But North's lawsuit has tongues wagging inside Baker & Hostetler and the RTC. Present and former attorneys from those organizations say it offers a rare view of how law firms go about cultivating government business--and how government officials can capitalize on their status as insiders. Many of those observers fault both North and Baker & Hostetler for entering into an agreement that was bound to raise eyebrows--and, they say, cause them both grief in the long run.

"It was like one greedy force meeting another," says one RTC attorney familiar with the case. "There's no black-and-white here. Both parties came to work with one another with the idea of making some quick money."

"It had the sense of impropriety almost from the outset," says a lawyer formerly employed at Baker & Hostetler. "Neither side is particularly innocent."

Allegations of waste and ineptitude have dogged the RTC ever since it was founded in 1989. Created by Congress to handle the massive wave of S&L failures in the late Eighties, the agency has seized more than 700 institutions around the country and has spent more than $85 billion closing them down and selling off their assets. But RTC horror stories are legion. A government audit, for instance, revealed that the accounting firm of Price Waterhouse billed taxpayers for $5 million in photocopying fees for work on one RTC case. In Texas, the RTC has reportedly been unable to get a single professional liability case before a jury in five years. In California, a recent investigation by the Orange County Register concluded that the RTC "tolerated widespread harassment and discrimination of agency employees" and paid millions to lawyers and accountants for work that in some cases was never done.

Colorado has seen its own series of thrift failures--Silverado, Otero, American Federal, Capitol Federal--as well as its share of RTC shenanigans. In 1991, for instance, the Denver Post revealed that the agency's Denver branch office could not account for more than $7 billion in assets in a scandal that came to be known as "Operation Western Storm." An accounting firm that was paid $25 million to hunt down the assets itself became the source of further controversy, receiving payment for some work that was never performed and hiring workers with little or no training.

But the RTC was still just a fledgling agency when Phillip Jeffrey North came on board as a deputy regional counsel in 1989, eleven years after his graduation from law school. A native of West Virginia, he held an MBA from the London Business School and a master's in law from the London School of Economics. Though North had spent a few years working in the London office of a Philadelphia law firm, the bulk of his previous work experience was in government. He'd worked as a lawyer for the West Virginia state senate, as a trial attorney for the U.S. Department of the Interior and then as counsel for the Federal Home Loan Bank Board in Washington, D.C.

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