Clinton Adviser Involved in S&L; Lawsuit : Thrifts: As a transition aide, Thomas McLarty is in a position to influence policy on Resolution Trust Corp., which is handling the bailout and filed suit.

WASHINGTON â€”  As President-elect Bill Clinton prepares to make the savings and loan cleanup a key issue in his Administration, a top adviser to his transition is a defendant in a $535-million lawsuit with the federal agency handling the thrift crisis.

The adviser, Thomas (Mack) McLarty, a childhood friend of Clinton who sits on the President-elect’s transition board, is not charged with any wrongdoing in the suit filed by the Resolution Trust Corp. But a spokeswoman said the transition board will “take seriously� the possibility that his role might cause a conflict of interest.

The RTC suit alleges that McLarty’s firm, Arkla Inc., is ultimately responsible for the “misdeeds and negligence� that occurred in the operation of University Savings of Houston, which was seized by federal regulators in 1989.

Arkla must shoulder the blame, the RTC contends, because one of the firm’s subsidiaries owned University during the years when the thrift was making questionable loans and dubious financial judgments.

But McLarty notes that Arkla never owned University Savings and thus should bear no responsibility for University’s failure, which the RTC has estimated could cost taxpayers $2 billion. McLarty is chairman and chief executive officer of Arkla, a holding company for natural gas distribution companies.

As a member of the eight-person board of directors for Clinton’s transition, McLarty is in a position to influence key Clinton decisions on RTC personnel and policies--a topic the President-elect has said is a major issue facing his transition.

RTC policy has not yet come before the transition board, which met with Clinton on Tuesday in Little Rock to consider major personnel and policy issues, according to Transition Team press secretary Dee Dee Myers. In the meantime, McLarty has not decided whether to remove himself from involvement in RTC-related issues.

“These issues have not come up yet in the board meetings. It’s a legitimate issue. It’s something we will take seriously and will apply appropriate standards to,� Myers said. “We’re committed to avoiding both conflict and the appearance of conflict of interest.�

But Clinton, who has often turned to McLarty for advice, clearly has had RTC issues on his mind. In a briefing for reporters Tuesday in Little Rock, Clinton communications director George Stephanopoulos described the RTC as “one of the issues the governor is reviewing right now.�

“The governor has said hundreds of times throughout the campaign that he wants to review what the RTC is going through right now,� Stephanopoulos said. Clinton “wants to look at the funding requests and make sure that we have an orderly payoff of the S&Ls;� as he goes into his office, he said.

Among the issues involved in any review of RTC practices is the agency’s litigation policy, which in cases such as the one involving McLarty’s company, often has involved suits against large so-called “deep pocket� defendants to try to recoup some of the government’s expenses in the S&L; bailout.

Arkla’s involvement with University Savings began in 1988, when it acquired a company named Entex, a natural gas distribution firm.

Entex owned University from 1977 to 1987.

Federal regulators seized University in 1989, and filed suit in February of this year, charging negligence and misdeeds in connection with the operation of the thrift, including the years in which Entex owned it. The RTC moved just before the three-year statute of limitations expired. The defendants’ names in the sealed lawsuit have never been made public.

However, the RTC filed an amended complaint last month, adding Entex and Arkla as defendants. The RTC says that Arkla is “liable as a successor in interest to Entex,� according to a letter McLarty sent to his shareholders last month. McLarty said in the letter that “we believe that this is another case where the RTC is chasing ‘deep pockets’ in response to political pressure. The company believes that it has meritorious defenses to the RTC claims and intends to vigorously pursue such defenses in the suit.�

The RTC action against Arkla “alleges compensatory damages of at least $535 million,� McLarty said.

“The suit is now in the hands of the lawyers,� he wrote. “It is a sad commentary on our current legal system that we may have to expend considerable legal fees over the next three to four years to protect the interests of our shareholders, when that money could be so productively employed on our business,� the letter said.

McLarty’s office referred inquiries on Tuesday to Paul W. Plunket, the vice president and general counsel for Entex. Plunket’s office cited a previously issued statement in which Plunket had said, “the RTC’s approach is to harass dedicated and honest business people and corporations who have had some relationship with a troubled savings institution in hopes of extracting money from someone.�

The case is a highly unusual one, because the defendants have not been officially disclosed since the case was filed in February.

The RTC agreed to the special conditions because it hoped to reach settlements with some of the defendants, RTC spokesman Stephen Katsanos said Tuesday.

“Those who were interested in settling said to us, ‘If this suit is filed, the publicity will sweep our names into the newspaper, and we will spend all our time dealing with publicity--we would rather deal with you,’ � Katsanos said.

The RTC agreed to keep the names secret “as long as we have productive settlement discussions,� Katsanos said. But when the settlement talks bogged down, the RTC went to court and asked to remove the seal of silence on the identity of the defendants. U.S. District Judge David Hittner in Houston denied the request.

The RTC has filed another motion and there will be a hearing next week on whether to make the other defendants’ names public.

Arkla and Entex are the only publicly identified defendants. They announced their involvement to shareholders because the lawsuit is considered an important event requiring disclosure under federal securities regulations.