Rush For Gold: How Silverado Operated

By Jonathan Beaty/Denver

The collapse of Denver's Silverado Banking has exposed much more than just the questionable business relationships of President Bush's son Neil. The fall of Colorado's No. 3 savings and loan has put the spotlight on a group of go-go bankers and developers who, with access to Silverado's money, built political influence in Colorado and even Washington.

Congressional investigators are just beginning to probe the way in which Silverado was entwined in dubious deals with M.D.C. Holdings, the state's largest home builder. Former employees of Silverado and M.D.C. have told TIME that the home builder made improper campaign contributions to local and national politicians. Among those donations were payments made to the 1987 re- election campaign of Denver Mayor Federico Pena in the hope of ensuring that key portions of a huge new $2.9 billion airport, then still on the drawing board, would be located on land owned by Silverado and M.D.C.

Most Denver residents welcome the 52-sq.-mi. project, not only to ease air- traffic congestion but also to provide an economic stimulant to a city that has been nearly paralyzed since the oil bust of the mid- 1980s. When Pena first ran for office in 1983, he opposed the new airport, advocating instead an expansion of Denver's Stapleton International Airport. But after he was elected, Pena became a supporter of the popular project. Throughout 1984, as Denver secretly negotiated with neighboring Adams County for a new site, M.D.C. and Silverado quietly began buying up farmland that would eventually be selected as part of the development corridor leading to the airport. "Despite all the millions of profits they were showing on paper, M.D.C. and Silverado had been running on empty for a long time, and they looked at potential profits from the new airport as a savior," says a former key employee of M.D.C.'s housing arm.

The new owners of the potentially valuable land were members of an emerging power elite in Denver, who proceeded to orchestrate formidable civic support for the airport project. The main boosters: developer Bill Walters, a colleague of Neil Bush's and then president of the Denver Chamber of Commerce; Michael Wise, then chairman of Silverado; and Larry Mizel, chairman of M.D.C.

Mizel met with Pena in 1986 to urge an accelerated time-table for the airport construction. Pena, citing a study forecasting the creation of 20,000 new jobs, announced a plan to move up the airport's opening date more than a year, to 1992. When Pena entered a tight race for re-election in 1987, M.D.C. was a principal backer.

Public records show that M.D.C. and its executives contributed $34,000 to his campaign. In fact, the company funneled additional thousands to Pena through back channels. To disguise the extent of its political influence, former employees say, M.D.C. coerced many of its building subcontractors into making contributions to Pena and then allowed them to recoup the money by submitting phony bills for construction work. Asked about these contributions, a Pena spokesman said, "We have absolutely no knowledge of this."

Local contractors went along with the arrangement because M.D.C., relying heavily on junk bonds and a series of loans from Silverado, was one of the last big developers to continue building projects in Denver after the oil boom collapsed. "There was little work in Denver, and M.D.C. said we would be blackballed if we didn't go along," a contractor participant says.

According to a major building contractor, the contribution scheme was not limited to local politics. The contractor told TIME that M.D.C. directed his company to contribute thousands of dollars to Senators, to the Republican National Committee and to a 1986 senatorial fund raiser at which Mizel was the host and President Reagan was a guest. Asked about these illegal contributions, M.D.C. said it "recently became aware of assertions that some of its employees were involved in using corporate funds to reimburse subcontractors for political contributions." The company said it was investigating the allegations. M.D.C.'s Mizel and Silverado's Wise were major, aboveboard fund raisers for Bush and Reagan, and were hosts for dinners that netted as much as $1 million for the candidates. Congressional investigators aim to find out whether the hefty fund raising by the Denver executives influenced federal regulators to postpone the seizure of Silverado for almost two years.

In the end, time ran out for the big-clout club formed by Denver's go-go boys. They failed to benefit from the airport's progress because the Federal Government finally seized Silverado six months before Denver voters gave final approval for the giant project.