Regulators Say Bush’s Son Hid Ties to S&L; Borrowers

President Bush’s son, Neil, serving as a director of a Colorado savings and loan association that later failed, voted to approve $106 million in loans to one of his business partners, federal regulators told the House Banking Committee on Tuesday.

Bush also actively sought approval of a $900,000 line of credit for another partner in his oil exploration business. In both cases, Bush violated conflict of interest regulations, officials of the Office of Thrift Supervision said.

Bush staunchly denied any wrongdoing after federal regulators filed an administrative complaint in January, accusing him of violating conflict of interest regulations. He refused to accept a settlement with the government, saying “a settlement agreement would leave an implication that I misbehaved as a director of Silverado (Banking, Savings & Loan Assn.). I have done nothing wrong.”

Tuesday’s revelations of the large sums of money involved will focus a new political spotlight on the President’s 34-year-old son. He was not available for comment Tuesday but is scheduled to testify before the committee today.

The collapse of hundreds of S&Ls; has become the biggest financial disaster in recent history. Each political party would like to persuade the public to blame the other for costing the taxpayers $400 billion or more over the next 30 years to close S&Ls; and pay off depositors.

Bush’s business partners, Bill Walters and Kenneth M. Good, were major borrowers at Silverado Saving & Loan, where Bush was a director from 1985 to 1988. All of Walters’ $106 million in loans eventually went into default. The Denver-based Silverado collapsed into insolvency and was seized by the federal government in 1988.

Paying off Silverado depositors will cost taxpayers an estimated $1 billion, since accounts of up to $100,000 are federally insured.

Under intense questioning from committee Democrats on Tuesday, federal regulators provided the first detailed look at Neil Bush’s activities in connection with loans to Walters and Good, Denver business executives who furnished the capital for Bush’s oil exploration company, JNB.

As a Silverado board member, Bush approved $106 million in loans to Walters during 1986, either voting direct approval or ratifying the decision to make loans by the S&L; investment committee, according to Stephen P. Hershkowitz, deputy director of enforcement for the Office of Thrift Supervision. Bush should have filed a statement with the S&L; detailing his business ties with Walters, according to the regulator.

Bush had information that was “relevant and did not disclose it,” Hershkowitz said.

The $900,000 line of credit for Good was intended to help one of Good’s companies develop business in Argentina. Although the board approved the credit line, the money was never used.

It was a conflict of interest for Bush to promote the Good transaction while serving as a director, according to the regulators. They said he violated the “duty of loyalty” that requires directors to put first the interests of the financial institution.

The allegations against Bush still face review by an administrative law judge, which could result in a cease-and-desist order barring him from similar conflicts if he ever works for a federally regulated financial institution in the future. The charges also could be referred to the Justice Department for possible further action, either civil or criminal.

Bush resigned his seat on the board in August, 1988, after his father, then vice president, was nominated as the Republican candidate for President.

Silverado was taken over later that year because “its management developed an excessive concentration of commercial real estate loans and investments,” David L. Paul, Colorado commissioner of financial services, told the committee.

The officers and directors of Silverado “used the institution for their own greedy purposes,” said Rep. Frank Annunzio (D-Ill.), a committee member.

“If it weren’t for the tragic consequences to the taxpayers, Silverado would make a wonderful prime-time television soap opera,” he said. “It would rank right up there with ‘Dallas’ and ‘Falcon Crest.’ ”

Federal regulators have made 11 referrals for prosecution in connection with Silverado, including five recommendations for criminal prosecutions, details of which have not been disclosed. Referrals for prosecution in the case began in 1986 and have continued until this year, regulators told the committee.

Committee members bristled angrily when Hershkowitz said he had been forbidden to tell them the specific dates when the recommendations for criminal prosecutions had been sent to the Justice Department. An OTS official said that following a call from the Justice Department Tuesday morning, T. Timothy Ryan Jr., the head of the Office of Thrift Supervision, instructed his staff to refuse to provide information about the timing of criminal referrals.

Rep. Paul E. Kanjorski (D-Pa.) charged the Justice Department didn’t want the committee or “the American people to know how slow” the department has been in going after S&L; wrongdoers.

The committee chairman, Rep. Henry B. Gonzalez (D-Ohio), noted that the committee would seek to subpoena former regulators who refused to testify about Silverado. But he emphasized that Neil Bush has announced his “complete cooperation with the committee. He has been forthright.”

Rep. Jim Leach (R-Iowa), a committee member, defended Bush as an innocent victim of scheming executives connected with Silverado. “I know Neil Bush is a thoughtful young man” who may have been “lured into being an outside director,” said Leach.

It is “inconceivable Neil Bush wittingly did anything wrong,” Leach said. “He is a fine young man.”