Criticism – by Gary W. PotterDuring the 1980’s hundred of Savings and Loan Banks failed. Those bank failures cost U.S. taxpayers over $500 billion to cover federally insured losses, and much more to investigate the bank failures (Pizzo, Fricker, and Muolo, 1989; Brewton, 1992; Johnston, 1990). More than 75% of the Savings and Loan insolvencies where directly linked to serious and often criminal misconduct by senior financial insiders (Pizzo, Fricker and Muolo, 1989: 305). In fact, less than 10 percent of bank failures are related to economic conditions, the rest are caused by mismanagement or criminal conduct (Pizzo, Fricker and Muolo, 1989: 305).
A good example of the Savings and Loan failures can be found in the activities of Mario Renda, a Savings and Loan insider who often worked in close collaboration with organized crime (Pizzo, Fricker and Muolo, 1989: 123-126;302). Renda served as a middle man in arranging about $5 billion a year in deposits into 130 Savings and Loans, all of which failed (Kwitny, 1992: 27). Many of these deposits were made contingent on an agreement that the Savings and Loan involved would lend money to borrowers recommended by Renda, many of whom were organized crime figures or people entirely unknown to the banking institution involved (Kwitny, 1992: 27).
Equally good examples of financial misconduct in the Savings and Loan scandal is found in the activities of the Bush family. In some cases Bush family members helped skim Savings and Loan funds which were delivered to outsiders as a part of deals involving lucrative payoffs to bank directors. In other cases, members of the Bush family intervened to influence decisions involving highly speculative and unsound investments involving loans that would not be repaid if the venture was not profitable. And finally, the Bush family’s political connection served to protect those guilty of misconduct in the Savings and Loan scandal (Kwitny, 1992: 24).
Neil Bush: Taking Down Silverado
In 1990 federal bank regulators filed a $200 million lawsuit against the officers of Silverado Banking, including Neil Bush, brother of the current President. The lawsuit accused them of gross negligence which resulted in a loss of $1 billion by Silverado and the bank’s ultimate collapse (Los Angeles Times, 1990). According to the Federal Deposit Insurance Corporation: “Our conclusion is that Silverado was the victim of sophisticated schemes and abuses by insiders and of gross negligence by its directors and outside professionals” (Johnston, 1990). Neil Bush was reprimanded by the Office of Thrift Supervision for pervasive conflicts of interest while serving as a paid director of the bank Of particular concern was his role in a serious of loans totaling $132 million from the bank to two businessmen, Bill Walters and Kenneth Good (Los Angeles Times, 1990: 1; Isikoff, 1992: A1). Walters and Good, after securing the loans from Silverado, lent Neil Bush $100,000 and later forgave the loan entirely. In addition, Walters and Good owned a company which paid $550,000 in salaries to Neil Bush (Los Angeles Times, 1990: 1; Isikoff, 1992: A1). In the end Walters and Good lost a total of $330 million loaned to them by Silverado. They also received instructions from a member of Silrverado’s board of directors on the establishment of family trusts to prevent the government from seizing the money they owed the bank (Kwitny, 1992: 32). The shutdown of Silverado was postponed from October to December 1988 so that it would happen after President Bush, Sr.’s election campaign had ended. Neil Bush had to pay only $50,000 to settle the federal lawsuit against him and he was able to avoid any legal costs because a senior banking industry lobbyist formed a legal defense fund to pay the legal costs (Fritz, 1992).
Neil Bush also profited enormously from another company on verge of bankruptcy. Apex Energy paid him over $2000,000 in salary and oil deed compensation payments while teetering on the edge of bankruptcy (Failing firm paid Neil Bush big salary, 1992).
Neil Bush’s small oil company also seemed to profit from its political connections when it was awarded a 1987 contract to drill for oil in Argentina (Bush ‘s Son Misses Deadline For Reporting “Inside” Sale,1991).
Jeb Bush: Influence Peddling for a “Bust-Out” Scam
But, Neil Bush was not the only Bush brother involved in the Savings and Loan collapses. Jeb Bush’s, the current Governor of Florida, curious relationship with Miguel Recarey is another illustration. Recarey was a long-time business associate of Tampa organized crime figure Santos Trafficante. Recarey also fled the U.S. facing three separate indictments for labor racketeering, illegal wiretapping and Medicare fraud (Freedburg, 1988: A1). Recarey’s business, International Medical Centers, was the largest health maintenance organization for the elderly in the U.S. and had been supported from $1 billion in payments from the Medicare program. International Medical Centers went bankrupt in 1988 (Freedburg, 1988: A1; Royce and Shaw, 1988: 4). When International Medical Centers went under it left $222 million in unpaid bills and was under investigation for $100 million in Medicare fraud (Freedbrug, 1988: A1; Frisby, 1992: G1). The U.S. Office of Labor Racketeering in Miami referred to Recarey and his company as “the classic case of embezzlement of government funds … “a bust-out operation” (Freedburg, 1988: A1)
Jeb Bush’s role in this saga being in 1985 when Recarey’s attempt to create his “bust-out scam” corporation ran into a federal regulation that said no HMO could get more that 50% of its revenue from Medicare (Freedburg, 1988: A1; Royce and Shaw, 1988: 4). Jeb Bush intervened on Recarey’s behalf with Helath Human Services Secretary Margaret Heckler and one of her top aides. Convincing them to waive the regulation in the case of Recarey’s company (Freedburg, 1988: A1; Royce and Shaw, 1988: 4). In addition to Jeb Bush’s intervention, Recarey had paid $1 million to senior Republican lobbyists in Washington, who were also working the staff of Health and Human Services in pursuance of a waiver (Freedburg, 1988: A1; Royce and Shaw, 1988: 4). In addition, Jeb Bush had contacted Secretary Heckler earlier about complaints from doctors over the quality of International Medical Centers’ care and allegations that Recarey had embezzled funds form another hospital (Royce and Shaw, 1988: 4). Jeb Bush told an aide to Secretary Heckler that “contrary to any rumors that were floating around concerning Mr. Recarey, that he was a solid citizen from Mr. Bush’s perspective down there [in Miami], that he was a good community citizen and a good supporter of the Republican Party” (Royce and Shaw, 1988: 4).
Not surprisingly, in 1988 Recarey’s company gave Jeb Bush’s real estate company $75,000 to help it find a site for a new corporate headquarters (Freedburg, 1988: A1; Royce and Shaw, 1988: 4). It was a bad investment because International Medical Centers had already selected a corporate headquarters location when it hired Jeb Bush (Royce and Shaw, 1988: 4).
Jeb Bush had a role in yet another Savings and Loan fiasco when he defaulted on a loan from Broward Federal Savings and Loan (LaFraniere , 1990: A24). Broward Federal loaned $4,565.000 to J Edward Houston, a real developer in February, 1985. The loan was secured only by Houston’s personal guarantee. On the same day, one of Houston’s company lent the same amount to a partnership made up of Jeb Bush and Armondo Codina for the purpose of purchasing a building in Miami. The Bush-Condina partnership was required to repay the loan only if revenues from the building were sufficient to cover the repayment. Bush and Condina made no payments on the loan at all and in 1987 Houston defaulted on the Broward Federal loan and the Bank sued both Houston and the Bush-Condina real estate partnership. In a sweetheart settlement with the Federal Deposit Insurance Corporation, Bush and Codina only had to repay $500,000 of the $4.5 million loan and got to retain ownership of the building which had been the collateral on the loan. In 1991, the FDIC sued the officers and directors of Broward Federal charging that the loan ultimately used by Bush and Codina was an example of the bank’s negleient lending practices (Frisby, 1992: G1). The Bush-Codina loan played a key part in the failure of Broward Federal which cost taxpayers $285 million (LaFraniere , 1990: A24).
George Bush, Jr.: Insider Information, Oil, and Baseball
The present President Bush has also reaped significant benefits from some highly questionable business practices:
Bush sold $828,560 worth of Harken stock [on June 20, 1990] just one week before the company stock posted unusually poor quarterly earnings and Harken stock plunged sharply. Shares lost more than 60% of their value over 6 months. When Bush sold his shares, he was a member of a company committee studying the effect of Harken’s restructuring, a move to appease anxious creditors. According to documents on file with the Securities and Exchange Commission, his position on the Harken committee gave Bush detailed knowledge of the company’s deteriorating financial condition. The SEC received word of Bush’s trade eight months late. Bush has said he filed the notice but that is was lost (Hedges, 1992: 57-59).
At the time of the stock sale President Bush was fully aware that Harken Energy was in a serious cash flow crisis and was about to lose millions of dollars (Yost, 2000). Bush was investigated for insider trading, but on October 18, 1993, Bruce A. Hiler, the SEC’s associate director for enforcement, wrote a letter to Bush’s lawyer stating that “the investigation has been terminated as to the conduct of Mr. Bush, and that, at this time, no enforcement action is contemplated with respect to him” (Lardner and Romano, 1999: A1). Hiler’s official letter went on to say that it “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation” (Lardner and Romano, 1999:) It is instructive to note that head of the SEC at the time of investigation was a supporter of then-President Bush, as was the SEC’s general counsel (who later acted as George W. Bush’s private attorney) (Yost 2000). In addition, Harken, despite its poor performance and large losses, paid unusually high salaries and benefits to President Bush (Hedges, 1992: 57-59). Bush was allowed to purchase stock options at a 40% discount, paid for by company loans that were frequently forgiven (Hedges, 1992: 57-59).
Harken Energy was awarded a contract to drill offshore oil wells for the government of Bahrain in 1990. It was a curious contract because Harken had never drilled an oil well in water. While Bahrain government officials denied that the fact that the President’s son was on Harken’s board had any impact on the contract, the Wall Street Journal quoted an official of Harken Energy as saying there was “never any question” about George W. Bush’s involvement (Morrison, 1999: A26).
Harken Energy also had links to the infamous Bank of Credit and Commerce International (BCCI). BCCI was the seventh-largest privately owned bank in the world. It had over four hundred branch offices operating in seventy-three countries. Among its many criminal activities was the laundering of at least $14 billion for the Colombian cocaine cartels; the facilitating of financial transactions for Panamanian president Manuel Noriega and international arms merchant Adnan Khashoggi; the funneling of cash to the contras for illegal arms deals and contra-backed drug trafficking; and the assisting of Phillipine President Ferdinand Marcos in transferring his personal fortune, accrued through corruption and graft, out of the Philippines. Despite the enormity of BCCI’s crimes and its vital role in drug trafficking, the U.S. Justice Department was more than reluctant to investigate. In fact, the Justice Department had complete information on BCCI’s drug and arms operations and its illegal holdings in the United States for over three years before it even initiated an inquiry. Perhaps the reluctance of American law enforcement to interfere with such a major organized crime entity can be explained by the proliferation of what some have perceived as BCCI’s “friends” in the U.S. government holding high office (Castro, 1988; Beaty and Gwynne, 1991).
The Wall Street Journal commented extensively on Harken’s links to BCCI saying: “The mosaic of BCCI connections surrounding Harken Energy may prove nothing more than how ubiquitous the rogue bank’s ties were … But the number of BCCI-connected people who had dealings with Harken — all since George W. Bush came on board — likewise raises the question of whether they mask an effort to cozy up to a presidential son” (Morrison, 1999).
President Bush’s relationship with the Texas Rangers shows a similar pattern of curious business dealings. In investigating his purchase of the Texas Rangers, the Wall Street Journal commented that following “a pattern repeated through his business career, Mr. Bush’s play did not quite make the grade” (Morrison, 1999: A26). In 1989, an investment group Bush led was given preferential treatment to buy the Texas Rangers baseball team by its seller, a friend of George Bush, Sr. (Morrison, 1999: A26; Sack, 1999: 1). When they underbid for the team baseball commissioner Peter Ueberroth brought another financier into the deal, “out of respect for his father,” President Bush (Morrison, 1999: A26; Sack, 1999: 1). Bush later successfully promoted a controversial arrangement in which the City of Arlington provided a $135 million subsidy for a new ballpark, funded by a sales tax increase, with an option for the team to repurchase the park at a vastly reduced price (Milbank, 2000, A1; Romano and Lardner, 1999: A1). The present President Bush realized $15 million on a $600,000 investment when he sold his share of the team in 1998 (Morrison, 1999, A26).
Jonathan Bush: An Unregistered Broker
Jonathan Bush rounds out this discussion of brotherly financial chicanery. Jonathan was cited for carrying out stock transactions without registering in the Commonwealth of Massachusetts. While he was settling the complaint against him he continued to violate Massachusetts securities laws. Neal Sullivan, who handles security trading issues for the Massachusetts Secretary of State expressed his concern: “That created great concern for us. We were dismayed … Anyone who has been notified that he is violating state law and continues to do so certainly exemplifies a cavalier attitude toward the registration laws.” Jonathan Bush is a veteran stockbroker who, of course, knows about registration requirements. As Mr. Sullivan went on to comment: “Any time you have 880 transactions over several years, I wouldn’t characterize that as minor” (Phillips, 1991: 1).
Prescott Bush: The Yakuza’s Frontman
Finally, and perhaps most seriously, the Bush family pioneered the practice which has now become commonplace of collaboration between corporate and organized criminals. Prescott Bush, uncle of the current President and brother of the former President, played a key role in helping the Japanese Yakuza extend their financial and real estate holdings to the United States. In 1989, Prescott Bush made arrangements for a front company for Japanese organized crime groups to buy into two U.S. corporations and to make a sizeable real investment in the U.S. (Helm, 1991a: 1; Isikoff, 1992: A1). West Tsusho, a Japanese corporation, was identified by Japanese police officials as a front company for one of that country’s largest organized crime syndicates. Prescott Bush was paid a fee of $500,000 for his help in negotiating West Tsusho’s purchase of controlling interest in Assets Management, a U.S. corporation (Helm, 1991a: 1; Isikoff, 1992: A1). Bush also assisted the Japanese mob in investing in Quantam Access, a U.S. software company, which was ultimately taken over by the Japanese (Helm, 1991b: 10; Isikoff, 1992: A1). Both companies ultimately went into bankruptcy (Isikoff, 1992: A1; Moses, 1992).
George Bush Sr.: Shutting Down the Organize Crime Strike Forces
Despite assessments from senior law enforcement officers and experts on organized crime that efforts to control organized crime would be crippled, in December 1989, the administration of George Bush, Sr. abolished all 14 regional organized crime strike forces (McAlister, 1989: A 21; Struck out, 1990). The organized crime strike had been created as independent entities so they would not be subject to political influences or bureaucratic wrangling within federal law enforcement. In the two decades of their operation the strike forces had secured convictions of major organized crime figures in several U.S. cities (Struck out, 1990). It is at the very least curious to note that the federal strike force in Miami had been responsible for indicting Miguel Recarey, the man for whom Jeb Bush had intervened with regulators. Organized crime strike forces had similarly indicted Mario Renda, the organized crime liaison to the S& L’s, as well as several other key figures in the Savings and Loan Fiasco (Pizzo, Fricker, and Mulolo, 1989: 112, 120-123, 303, 337).
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