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BRUCE'S GENEROUS PALS

part 2 of 2
The Savings & Loan Connection

In 1991 Benson made much public hay over Senator Tim Wirth's ties to the national savings-and-loan debacle. Specifically, Benson accused Wirth of indirectly propping up an unhealthy industry through the senator's allegedly overclose relationship with junk-bond company Drexel Burnham Lambert.

Yet a couple of Benson's contributors also became tangled up in the savings-and-loan messes of the 1980s. Topping the list is Bo Callaway, who has written two checks to Benson totaling $5,000.

Callaway raised eyebrows several years ago when he purchased a resort near Crested Butte ski area. Buying the hotel wasn't a surprise--Callaway owns much of Crested Butte. What was interesting was Callaway's history with the very same hotel.

In 1983 he and his partners borrowed $31 million from several S&Ls to finance construction of the hotel. Two years later they defaulted on the loan. The hotel project was taken over by the thrifts and eventually built for $41 million. Subsequently, several of the thrifts--which lost millions of dollars on the deal--defaulted at a cost of millions of dollars to taxpayers.

In 1991 Callaway repurchased the hotel. The price: less than $10 million. Callaway has explained that he did nothing improper. He said he did not personally guarantee the original loan and that he took a financial bath on the project.

Benson's fourth-largest campaign contributor was TCD North, which owns the Denver Tech Center. The company has written Benson checks for $32,000.

According to state records, TCD's president is William Pauls. Among Pauls's many business ventures is his involvement in a large British company called EF International (TCD's vice president, George Wallace, also was an officer of EF). In the 1980s Pauls owned a controlling stake of the company with his friend, business partner and fellow Canadian, John Dick.

Dick, formerly of Cherry Hills, recently has found more fame than he was looking for. He has been accused by his estranged wife of helping bankrupt Denver developer Bill Walters spirit away millions of dollars into an offshore account on an island in the English Channel. This irritated the Resolution Trust Corporation, which estimated that Walters had $132 million in bad loans from the failed Denver thrift Silverado. Both Dick and Walters have denied the charges.

More recently, Peter Kellogg has found himself bogged down in his S&L connections. For the past several years Kellogg has been on the board of directors of CityFed Financial Corp. of Nantucket. One of the holding company's businesses was City Federal Savings Bank in New Jersey.

The thrift was taken over by the federal Resolution Trust Corporation in November 1989. This June the Office of Thrift Supervision issued a notice of charges against six of CityFed's current and former directors, including Kellogg. According to Tom Mason, a spokesman for OTS in Washington, the CityFed directors were charged with neglecting their fiduciary responsibility to City Federal Savings Bank.

Specifically, OTS has charged that the holding company, which had money on its books, failed to infuse the bank with adequate capital when the federal agency ordered it to. The subsequent failure of City Federal Savings Bank cost taxpayers $1.5 billion, according to OTS's reckoning.

Mason says that Kellogg, along with other directors, is being asked to pay a penalty of $51,750. In addition, five of the directors, Kellogg included, have been assessed $400,000 more in restitution fees by OTS. The agency levied a $2.65 million fine against CityFed itself.

The Prep School Connection

Benson likes to portray himself as the ally of the common man. That's partly what his bus tour through Colorado this spring was about. Still, when you are a millionaire, selling the common touch can be a dicey act. Like it or not, sooner or later many of your friends turn out to be millionaires. Many of them will be dyed-in-the-ascot blue bloods.

Much of the reason for that lies with Benson himself. Benson spokesman Sparrow stresses the candidate's "middle-class" roots, noting that Benson's father was a Culligan man and that the family lived in modest comfort on a farm outside Chicago. He adds that Benson worked his way up through the oil business.

Yet Benson is a graduate of a very private, very expensive New England prep academy called the Berkshire School, founded in 1907 in Massachusetts. According to Leon Weil, a Berkshire diploma runs in the family; Benson's uncle attended there, too.

So did a lot of rich people who have grown up and now give money to Republican political causes. Weil attended Berkshire and served on the board of trustees as vice president when Benson was president.

So when Benson came calling for support for his campaign, Weil was prepared to help. (Weil says Benson asked for $50,000, which was too rich for his blood. But he gave $20,000, then corralled additional money from, among others, Seattle pension manager Anthony Hovey, who gave $10,000, and National Review president Thomas "Dusty" Rhodes, who coughed up $5,000.)

Peter Kellogg is a graduate of Berkshire, says Weil. So is Kellogg's father; his sons have attended as well. (Unlike Weil, when Benson asked for the $50,000, Kellogg paid.)

And although $10,000 donor Gilder didn't attend Berkshire, he still has a connection. One of Gilder's instructors from his New England prep school, the exclusive Northfield Mount Hermon, is now the headmaster at Berkshire.

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