Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, July 9, 1990 TAG: 9007090011
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: DENVER LENGTH: Long
Two major investigations are under way in Denver, involving Neil Bush's role as a director of the failed Silverado Banking, Savings and Loan Association, one involving allegations of serious violations of conflict-of-interest rules.
President Bush has expressed confidence in his son's integrity, but he has vowed not to interfere. Federal S&L regulators announced Thursday that, in a departure from previous practice, the hearing on Neil Bush's case - now scheduled for Sept. 25 - will be open to the public, part of an effort by regulators to persuade the public that they are cracking down on cases where violations are suspected.
Is the president's son merely a naive young man suckered by S&L sharpies who has been caught up in attempts by Democrats and Republicans to blame each other for a debacle that shows signs of becoming a major campaign issue? Or is he a willing participant in the greedy destruction of an S&L whose rescue could cost taxpayers as much as $1 billion?
The answers to these questions will help determine whether the S&L scandal lands directly at the door of the White House, as Democrats are hoping, or whether President Bush can escape most of the direct blame for the handling of the situation.
The president already has suffered some political setbacks as a result of the S&L crisis. He was forced to abandoned his no-tax pledge partly because the Department of the Treasury badly underestimated the cost of the S&L bailout. Now he is in danger of seeing his son become the most-visible example of what went wrong when sometimes-greedy developers took out huge loans that they could never repay.
"The system is going to work, whether it's the president's son or somebody else," the president declared at his June 29 press conference, "and to suggest that it doesn't undermines the basic integrity of the American process."
Nevertheless, a longtime associate of the chief executive said that the president is deeply worried about the implications of the Silverado case for his son. And an initial investigation suggests that there is at least some reason for the president to be apprehensive.
Congressional records show that less than a month before the 1988 presidential election, state officials had concluded that Silverado was insolvent and had made plans to order it shut down. Instead, they delayed the closing after a mysterious phone call from federal S&L regulators in Washington.
The Department of the Treasury's inspector general is investigating the incident. Officials here say that no one in the regulators' regional office in Topeka, Kan., remembers receiving the call, and no one in Washington remembers suggesting that Silverado be kept open.
In separate action, federal officials have charged Neil Bush with violating conflict-of-interest rules because, while serving on the Silverado board, he failed to disclose his business ties with Kenneth M. Good and Bill Walters, two developers who were big borrowers at Silverado. The two men eventually defaulted on $106 million in loans from Silverado.
Records show that Neil Bush approved major loans to Walters, and also personally arranged for a $900,000 line-of-credit from the S&L for a drilling venture in Argentina in partnership with Good. What disturbed federal regulators most, however, was Neil Bush's conspicuous silence in 1986 when Silverado released $11.5 million in collateral pledged by Good, who by then was admittedly virtually broke. Instead, Silverado accepted $3 million in cash from Good, figuring it was all the S&L could get. Good had borrowed more than $30 million from the institution, but his developments were not selling.
Federal regulators say that Neil Bush did not tell his fellow directors that at the very time he was appealing for fiscal relief at Silverado, Good was planning to pump $3 million into Bush's oil-drilling firm, JNB.
Nor did Neil Bush disclose that Good had extended him a $100,000 "loan" in 1984, the year before Bush joined Silverado's board. Good invested the $100,000 for Bush in a speculative commodities scheme, and it was to be repaid only if the investment paid off. But the investment yielded no gains and Good later canceled the loan.
In attempting to explain to the House Banking, Finance and Urban Affairs Committee why he had not included the $100,000 on a conflict-of-interest form required of S&L directors, Neil Bush conceded that the transaction "sounds a little fishy." Investigators stumbled onto the case after Good listed the $100,000 as a note payable on a federal disclosure form.
The Office of Thrift Supervision says that federal regulators have referred five such instances of suspicious actions involving Silverado to the Department of Justice since 1986. But department officials decline to confirm that the cases are under investigation and they will not say whether any of them involves Neil Bush. "I just don't have anything to say about that," said Thomas O'Rourke, an assistant U.S. attorney in Denver.
Moreover, there is a stark contrast between the sworn testimony provided by the president's son and other documents that Congress has obtained involving Michael Wise, former chairman of Silverado. In a letter to Silverado's preferred shareholders and its board of directors, Wise said that Bush had promised to abstain on any votes involving his business partners. But the president's son asserts that he never heard of any such letter, made no promise, and is being persecuted.
The timetable for the Neil Bush case, issued Thursday by Administrative Law Judge Daniel J. Davidson, virtually guarantees that the sensitive matter will not be resolved until after the November election. In fact, Nov. 6 - election day - is the date that the regulators and Bush must submit their final briefs in the case. The initial public hearing is in September - six weeks before voters go to the polls.
by CNB