S&L; Regulators May Sue Neil Bush

Federal regulators are considering filing a lawsuit against President Bush’s son Neil and other former directors of a failed savings and loan in Denver, charging them with negligence in causing substantial losses to the thrift, government officials said Tuesday.

If a lawsuit is filed, it would seek substantial damages, perhaps in excess of $100 million, from Neil Bush and other former directors for the losses allegedly caused while they served on the board of Silverado Banking, Savings & Loan in Denver, officials said.

The possible civil complaint is being discussed at the Federal Deposit Insurance Corp., the agency that is overseeing the financial clean-up of hundreds of insolvent thrift institutions across the country.

FDIC Chairman L. William Seidman and the other members of the three-person board will make the decision whether to file a suit against Neil Bush and other former directors of the defunct Silverado.

“An investigation is under way,” said Alan Whitney, a spokesman for Seidman. “But no final decision” has been made on filing a lawsuit, he said.

Neil Bush could not be reached for comment on the possible lawsuit, but he has denied repeatedly that his actions as a Silverado director were improper. He is challenging a separate administrative action filed against him by the government.

Bush was a Silverado director from August, 1985, until August, 1988. Silverado was seized by the federal government in December, 1988, and the loss to taxpayers may exceed $1 billion.

Colorado regulators wanted to close Silverado in October, 1988, because the institution suffered massive losses on real estate loans that went bad and had exhausted its capital.

But Colorado lacked the money to pay off depositors, whose accounts were insured by the federal government up to $100,000. Federal authorities had the effective last word on Silverado’s fate, and regional regulators have said that an official in Washington made a phone call ordering them to keep Silverado open beyond the date of the presidential election.

The Treasury Department’s inspector general is conducting an investigation to determine who placed the call from Washington, and whether political pressure was involved.

The President’s 34-year-old son already has been charged by another government agency, the Office of Thrift Supervision, with violating conflict of interest rules. The agency said he failed to disclose to other board members that he was involved in business relationships with two Denver developers who were major borrowers from Silverado.

The OTS is seeking a cease-and-desist order barring Neil Bush from committing future violations of the conflict of interest rules. An administrative law judge will hear the case in Denver on Sept. 25. A final ruling will not come until well after the November election.

Because Neil Bush’s case will not be immediately resolved either for or against him, the uncertainty seems likely to cause political problems for the Administration.

The FDIC frequently sues directors or officers of failed financial institutions. But the naming of the President’s son as a defendant would be an embarrassment for the White House, which is engaged in a political struggle with the Democratic Party over who should be blamed for the huge S&L; scandal.

White House spokesman Marlin Fitzwater said at the economic summit in Houston that he had no information about the possible lawsuit.