Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 22, 1991 TAG: 9103220167
SECTION: BUSINESS PAGE: A11 EDITION: BEDFORD/FRANKLIN
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"The agency did send somebody out to look close up at Apex," SBA spokesman Mike Stamler said about Bush's oil company. "We wanted to find out what the deal was, too."
Stamler said the SBA's examination of Apex Energy Co. of Denver has been completed, but he declined to disclose any conclusions on grounds of business privacy.
Rep. Patricia Schroeder, D-Colo., asked the SBA in mid-December to investigate the investment in Bush's company by Wood River Capital Corp. and a subsidiary, Bridger Capital Corp. Bush is the son of President George Bush.
Schroeder, who described the investment as "a sort of personal enterprise zone," has not received the SBA report, according to her aide.
Wood River and Bridger are private, for-profit companies known as Small Business Investment Corporations that provide venture capital to small start-up businesses.
Apex Energy was started with a $2.3 million investment by Wood River and Bridger in May 1989.
The venture companies were controlled by Louis Marx Jr., a prominent investor and longtime friend of President Bush who contributed $10,000 to the Republican National Committee during the 1988 campaign.
Wood River later had financial trouble and was asked by the government to sell all its assets.
Lawmakers also are looking into Wood River and Bridger as part of an inquiry into businesses that use federally guaranteed money to make loans and investments, congressional sources say.
Seventy-three of some 400 SBICs have failed since October 1987 as the economy has weakened, according to the SBA.
John Lyford, a spokesman for the Senate Small Business Committee, said questions about financial backers of the president's son "are likely to be brought up" at a future hearing on SBICs.
Marx said in a telephone interview this week that he backed Neil Bush's company for sound business reasons, notably the quality of its oil and gas acreage. He also said he was impressed by the "track record" of Bush's partner, oilman Brent Morse.
Wood River took a 49 percent stake in Apex Energy in exchange for a $1.5 million investment; Wood River and Bridger lent the oil company an additional $850,000. Bush and Morse hold the majority 51 percent. Their investment was "nominal," said Wood River spokesman Donald Dwight.
The SBA last year told Wood River - which had invested in 89 new companies, many of them successful - that its recent losses had put it and its federal loan guarantees at risk.
Wood River agreed to sell all its assets within 30 months, including its stake in Apex Energy. The proceeds will be used to pay back the agency for $25 million in loan guarantees.
Wood River could sell its share in Apex Energy back to Bush and Morse for less than the $2.3 million that was invested.
Morse didn't return calls seeking comment. Bush's attorney, James Nesland, said his client hasn't been contacted by either of the two congressional committees and declined further comment.
For every $1 of capital they raise, SBICs are allowed to raise an additional $3 from private investors that is guaranteed by the SBA. If an SBIC fails, the government must repay the investors and try to recover part of the money by requiring SBICs to sell their assets.
Guaranteed funds not recovered from failed SBICs are losses to taxpayers.
by CNB