DENVER -- Federal regulators have fired their opening salvo against Neil Bush's conduct in the $1 billion Silverado savings and loan scandal, saying Bush and other Silverado directors sent the institution's professional loan officers out of the room when they made loans to themselves.
The new charges were leveled minutes after Michael Wise, the Silverado chairman who brought Bush onto the thrift's board in 1985 and had agreed to appear at the Denver hearing, refused to testify yesterday about his dealings with the president's 35-year-old son, citing the 5th Amendment protection against self-incrimination.
Either tomorrow or Friday Bush will give his long-awaited testimony about allegations that he improperly approved Silverado loans in the tens of millions of dollars to two business partners. Before he does, a string of witnesses are laying out the government's complex case against him.
The lead-off witness for the U.S. Office of Thrift Supervision was Russell Murray, once Silverado's vice president in charge of commercial and real estate loans. He told the hearing he had been required to leave the room along with other staff experts when questions of board members' personal loans from Silverado funds came up.
He said employees were excluded from a session on Nov. 12, 1986, when the board of directors' investment committee voted to approve a $900,000 line of credit that Bush and his close business associate, Silverado borrower Kenneth Good, wanted for an unspecified oil deal in Argentina.
"Non-board members were excused from any meeting" that dealt with loans to directors for their houses or any personal loans, said Murray, who worked for Silverado from 1980 to 1988, when the S&L was ordered shut by federal bank examiners at an estimated cost to taxpayers of $1 billion.
Murray also testified that had he known the extent of the business ties between Bush and Good, one of Denver's biggest developers, he would have advised his employers to ask Silverado's lawyers to review the loan to make certain it didn't violate federal laws regulating directors' inside deals.
In documents released as the hearings opened in the federal courthouse in Denver, Bush's lawyers acknowledged that he did not list on conflict-of-interest forms his business ties with Good and with an even bigger Silverado client, developer Bill Walters. The two became Bush's partners in an oil exploration company called JNB Inc.
But Bush distributed a memo to reporters in July in which Murray advised the board that Bush and Good had business ties and that, therefore, the proposed $900,000 line of credit would have to be decided by directors and not by professional loan officers like himself.
The memo, Bush said, proved that his Silverado colleagues knew he and Good were partners; and since he abstained from voting on the line of credit, he said, no conflict occurred.
Murray testified yesterday, however, that had he known the $900,000 line of credit was to finance a project in which Bush and Good were directly sharing the proceeds, he would have asked lawyers to review it.
Murray said he had sent a memo instead of attending the board meeting in question because of the ban on employees being present when board members' personal loans were discussed.
Regulators charge that Bush committed "unsafe and unsound" banking practices by bringing the request before his fellow board members after writing "none" on the form asking if he had any conflicts of interest due to business dealings with Silverado customers.
The Denver hearings before an administrative law judge will produce a decision, possibly in early December, about whether Bush should be required to sign a "cease and desist" order promising not to engage in such banking practices in the future.
James Nesland, Bush's attorney, who subjected each anti-Bush witness to blistering cross-examination yesterday, charged that the government was using unfair tactics.