Ex-Official of Silverado S&L; Backs Up Neil Bush : Thrifts: A former executive of the institution testifies that the President’s son disclosed close ties with developers who later defaulted on loans.
A former official of the failed Silverado Banking, Savings & Loan Assn. said Tuesday that he knew Neil Bush was involved in a business deal with a man seeking a $900,000 line of credit at Silverado, where the President’s son served as a director.
Russell Murray, former senior vice president of the S&L;, told a court hearing that he and Bush had at least two conversations about Bush’s proposed oil company venture in Argentina with Kenneth Good, a big borrower at Silverado.
The testimony was helpful to Bush, accused by the government of violating conflict-of-interest rules. The Office of Thrift Supervision says Bush failed to disclose to his fellow directors at Silverado that he had extensive business ties with Good and Bill L. Walters, another major Denver developer. Good and Walters defaulted on about $130 million in loans from Silverado during Bush’s three-year tenure on the board.
Another witness, former bank president and consultant J. Donald Wright, said Bush should never have voted on the Walters loans. “If people associated with directors borrow large sums and default,” the transaction will be considered “a sweetheart deal,” Wright said. “It will be very harmful to the institution when intimates of directors cause large losses. It’s a damaging thing.”
The scene of the testimony was the biggest courtroom in Denver, with room for 150 people. It was crowded with sketch artists, reporters and members of the general public eager to attend the first day of hearings on the regulatory complaint against Bush. Camera crews, barred from the courtroom, waited downstairs.
The most severe punishment that could arise from the proceeding would be issuance of a cease and desist order by the Office of Thrift Supervision banning Neil Bush from violating the conflict-of-interest rules in the future.
But the significance of the hearings is political, resonating far beyond the courtroom. The potential jeopardy is to his father’s Administration if 35-year-old Neil Mallon Bush becomes a public symbol of the S&L; debacle.
Silverado failed in 1988 and was seized by the government. It will cost taxpayers about $1 billion to pay off insured depositors.
Democrats are eager to use Neil Bush as electoral ammunition.
“Many people say he’s the poster boy for the S&L; crisis,” Josie Heath, Democratic candidate for the Senate in Colorado, said at a rally outside the courthouse, timed to coincide with the noon recess in the hearings. “He’s got a lot of company,” she said.
“Neil Bush is both a part of and a symbol of all that has gone wrong,” she said. “If you have money and power and access, the rules do not apply.” Later in the day, a group of demonstrators gathered outside the courthouse chanting, “It’s wrong to steal, yes, Neil.”
Bush’s oil exploration firm, J N B, received initial capital of $150,000 from Walters and later sold a majority interest to Good for $3 million. Bush also received a $100,000 risk-free loan from Good for commodity speculation, a loan Bush said was never meant to be repaid.
And Bush sought approval from the Silverado board for a $900,000 line of credit for a venture in Argentina by his firm and a company controlled by Good.
Murray, the former Silverado executive, told the court that he would have asked an attorney to review the Argentina deal if he had known the extent of the complex ties between Bush and Good.
Murray said he prepared a memo for directors about the Argentina deal because he considered the transaction was “getting into what I perceived was a board member’s personal business.”
The government says this sort of disclosure wasn’t sufficient. According to regulators, Bush himself should have filled out conflict-of-interest forms declaring his ties with Good and Walters.
Murray admitted under questioning by Bush’s attorney, James Nesland, that he had discussed the Argentina deal in two phone conversations with Bush. Murray also said he discussed it with Silverado Chairman Michael Wise.
Wise, in the judge’s chambers Tuesday, invoked his Fifth Amendment right against self-incrimination and declined to testify.
The hearing, expected to last three days, is being conducted by federal Administrative Law Judge Daniel Davidson, who has received extensive written testimony from both sides on the issue. He will decide next year whether to recommend issuing a cease and desist order against Bush.
A final decision on the order will be made by Timothy Ryan, director of the Office of Thrift Supervision. His ruling can be appealed to the federal courts.
Bush is last on a list of witnesses. His lawyer said he will have no comment beyond his testimony.
