Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, July 9, 1990 TAG: 9007090243
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: RONALD J. OSTROW and ROBERT A. ROSENBLATT LOS ANGELES TIMES
DATELINE: DENVER LENGTH: Medium
Two major investigations are under way in Denver, involving 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 last week that, in a departure from previous practice, the hearing on 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 Treasury Department 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 news 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 Treasury Department'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 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 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 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 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 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."
The full truth about the depth of Neil Bush's involvement in the Silverado case may never be known but the political stakes are likely to be enormous, as the public becomes increasingly angry over the costs of closing defunct S&Ls - a price-tag now calculated at $90 billion to $120 billion.
by CNB