The failed savings and loan association where Neil Bush was a director had a strict code of ethics requiring officials to avoid any action that might "in any way" be a conflict of interest, and the President's son ignored the rules, a federal regulator testified Wednesday.
"A director is required to give full disclosure to other directors," said regulator Terry Sandefur, offering an emphatic shorthand summary of the case against Bush. He is accused of failing to inform his colleagues on the board of Silverado Banking, Savings & Loan Assn. that he had important business connections with Bill L. Walters and Kenneth M. Good, two big borrowers at Silverado.
Even if there is nothing more than an appearance of conflict of interest, "the director should seek to avoid that situation," said Sandefur, the assistant deputy district director for the Office of Thrift Supervision.
The OTS is seeking a cease-and-desist order barring Bush from any future violation of conflict of interest regulations.
Because the collapse of hundreds of S&Ls; will cost taxpayers $130 billion, the role of the President's son in the Silverado case is drawing nationwide attention.
His defenders portray Neil Bush, who was 30 when he joined the Silverado board in 1985, as an honest but naive young man who is being persecuted because he is the President's son. But federal regulators say Neil Bush was supporting Silverado financing for Good and Walters without disclosing that they were bankrolling his oil exploration business.
In addition to the OTS complaint, Bush is one of the defendants in a $200-million suit by the Federal Deposit Insurance Corp. against the Silverado directors. Walters and Good defaulted on more than $130 million in loans at Silverado during the three-year period when Bush served on the board.
The Silverado code of ethics, made available by the OTS on Wednesday, said officers and directors should "keep themselves free of influences that might conflict or appear to conflict" with the S&L;'s interest.
Directors also should submit annual statements covering potential conflicts of interest, and should offer special submissions "if the director feels any of his activities, interests or relationships might possibly give rise to a conflict of interest," according to the Silverado ethics guide, dated April 24, 1985.
The officer or director's statements should "include any activity that might in any way be deemed to constitute" a conflict of interest, the document said.
The hearing will conclude today with the long-awaited appearance of Neil Bush.
Daniel Davidson, the administrative law judge handling the case, will decide next year whether to recommend issuing the cease-and-desist order against Bush. The final decision will be made by Timothy Ryan, the OTS director. His ruling can be appealed to the courts.