Memo Accuses Bush’s Son of S&L; Dishonesty
Federal regulators charged that President Bush’s son Neil engaged in “personal dishonesty” as a director of the failed Silverado Banking Savings & Loan Assn. and sought to bar him from future service as a thrift director, according to a confidential memorandum disclosed Tuesday at a congressional hearing.
The memo, prepared early this year by the enforcement staff of the federal Office of Thrift Supervision, was never formally issued as a complaint against Bush, and the agency eventually moved against him on lesser charges.
The allegations contained in the OTS memorandum provide the most detailed account made public about the role of the President’s son in the financial demise of Silverado, one of the biggest failures among hundreds of S&L; insolvencies.
Neil Bush was not present at Tuesday’s hearing, but in previous appearances he has strongly denied any wrongdoing in connection with his tenure as a Silverado director. He is challenging in an administrative proceeding the government’s allegations that he violated thrift rules.
Bush “willfully breached” his duty as a director by failing to inform the board that a major borrower at the S&L;, Kenneth M. Good, was going to pay $3 million for an 80% interest in Bush’s oil exploration company, the OTS document says.
About the same time Good was buying control of Bush’s firm, the Silverado board agreed to forgive $11 million in loans and obligations owed by Good to the S&L; because he allegedly could not pay his bills, the memorandum states.
Bush abstained from voting on Silverado’s loans to Good, but the OTS document said he did not disclose his business relations with Good as required by federal regulations affecting thrift directors.
Good and another investor in Bush’s firm, William L. Walters, ultimately defaulted on more than $130 million in loans at Denver-based Silverado. The cleanup of the institution, which was seized by federal regulators last December, could cost taxpayers as much as $1 billion.
Good, appearing in response to a subpoena by the House Banking, Finance and Urban Affairs Committee, defended the President’s son.
“At no time did I ask or expect Neil to influence or vote on any of the transactions that were negotiated with Silverado management,” he testified.
Good said he was “shocked by the personal attacks that continue to be made upon (Bush) with regard to his role in Silverado. I can testify without hesitation that Neil is a man of absolute integrity . . . .”
Rep. Frank Annunzio (D-Ill.), who obtained the OTS document, said the office and its predecessor, “under Republican control for nearly the past 10 years, is clearly not an agency designed to make political hay by going after the son of the President of the United States.”
“Serious charges have been leveled against Neil Bush,” Annunzio said. “Is that the end of the case? That the taxpayers are going to have to pick up a $1-billion tab without ever knowing whether Neil Bush was right or wrong?”
Good and other key figures in Silverado’s downfall testified in the third day of Banking Committee hearings on the S&L;, where Neil Bush served as a director from August, 1985, until August, 1988.
Democrats have tried to link the President’s son to greedy real estate developers who defaulted on loans from the thrift, and Republicans have defended him as an honest, if occasionally naive, young man.
When Bush left the Silverado board in August, “the Colorado savings and loan commissioner had all but sounded the death warning when he told Silverado that it would have to raise $62 million of new capital or face a closure order,” committee Chairman Henry B. Gonzalez (D-Tex.) said.
When the state official moved to enforce his order and attempted to shut Silverado in October, the Federal Savings and Loan Insurance Corp. in Washington quickly ordered a two-month delay, putting off any action until after the presidential election. Kermit Mowbray, serving as the chief regulator for the region, told the committee that he received a phone call from his superiors in Washington directing a postponement in closing Silverado.
On Nov. 9, the day after President Bush won the election, Mowbray submitted a formal recommendation that Silverado be placed into receivership, and the government took control on Dec. 9. In response to questions, Mowbray said he did not think the postponement was based on political considerations. He said he had never been subjected to any political pressure or influence in the case.
In the memo, the federal regulators’ criticism of Neil Bush focused on his failure to disclose his business ties with Walters and Good, major borrowers at Silverado.
Walters invested $150,000 in JNB, Bush’s oil exploration firm, providing half of its original capital. Bush later voted to approve loans to Walters and his companies, although he abstained from voting on loans to Good.
The enforcement staff’s document, prepared in January, named Bush, along with former Silverado Chairman Michael Wise, Director James Metz, Executive Vice President Russell Murray, and outside counsel Ronald Jacobs. It said their conduct “involved personal dishonesty, or demonstrated a willful or continuing disregard for the safety or soundness of Silverado.”
The document called for a hearing to decide on issuance of an order barring the four men from ever working again for federally insured institutions without prior government approval. The proposed prohibition was never issued by the Office of Thrift Supervision.
Gonzalez noted that Wise and Metz, and two other former Silverado executives, chief operating officer Richard K. Vandapool and chief financial officer Robert M. Lewis, signed consent orders accepting the prohibition.
The OTS filed a lesser complaint against Neil Bush, seeking a cease-and-desist order that would direct him to refrain from committing any future violations of disclosure rules. An administrative law judge at the agency will conduct a hearing later this year to determine whether to proceed against Bush.
There was not sufficient evidence against Bush to seek a prohibition order, according to OTS officials.
The pending case against Bush “has thrown a bright spotlight on the obligation of boards of directors to meet their fiduciary responsibility,” Gonzalez said. “This responsibility is critical to the safety and soundness of any institution, and it is the first line of defense against raids on the insurance funds and the taxpayers.”
