An administrative law judge said yesterday that President Bush's son Neil had engaged in "significant" conflicts of interest while serving as a director of the now-defunct Silverado Savings and Loan and recommended that bank regulators censure him.

Bush's failure to fully disclose his business relationships with two large Silverado borrowers put the institution at "abnormal risk," said Judge Daniel J. Davidson.

Davidson rejected Bush's argument that he had no financial interest in loans to one of his partners and that he adequately disclosed how he would benefit from Silverado's transactions with another partner.

Davidson recommended that federal bank regulators issue a "cease and desist" order against Bush, requiring him to avoid any conflict of interest if he ever again becomes the director of a bank or thrift.

The proceedings against Bush are the most celebrated of dozens of actions regulators have brought against thrift directors since the savings and loan crisis began. A "cease and desist" order is the regulators' mildest sanction; many directors, including Silverado's top officers, have been banned from the banking industry altogether.

"The existence of less than fully disclosed conflicts has the effect of eroding the confidence of the public and depositors in the financial soundness of the institutions. Absent such confidence, no financial institution can long survive," concluded Davidson.

Davidson's recommendation goes to Timothy Ryan, director of the Office of Thrift Supervision (OTS), the same agency that brought the conflict of interest charges. Ryan has four months to make his decision.

Bush is the only one of Silverado's outside directors to face the threat of regulatory sanctions, although all the directors are defendants in a $200 million civil suit filed by the Federal Deposit Insurance Corp. Silverado, located in Denver, collapsed in 1988 and is expected to cost taxpayers about $1 billion.

Bush's attorney, James E. Nesland, called the ruling "ridiculous" and said he would appeal any OTS order against Bush to the 10th Circuit Court of Appeals. "The judge is wrong and so is OTS," said Nesland. "I'm confident that real judges in a real court will decide it on the merits.

"Administrative judges routinely adopt the positions of the administrative agencies over which they preside... . The judge simply adopted the OTS position," said Nesland.

Administrative law judges like Davidson rule on administrative cases within federal agencies and do not preside over civil or criminal trials.

OTS's case against Bush centered on two issues: Should Bush have voted on loans to Bill L. Walters, an investor in his oil and gas company, JNB Exploration Co.? And did Bush disclose enough information about his ties to developer Kenneth M. Good when he sought a $900,000 line of credit from Silverado on Good's behalf and when Good sought forgiveness for his loans?

Bush contended that he could vote on loans to Walters because he stood to gain "no financial benefit, no benefit period, from any transaction" involving the developer. But Bush said that if his brother had tried to borrow money from Silverado, "I would probably have bent over backwards to abstain, to stay away from voting."

Davidson said Bush's position was contradictory, because in both cases he "would not have directly benefited from the transaction... . His testimony reveals either an unwillingness or an inability to understand the underlying purposes of the conflict of interest policy."

Bush said he avoided any conflict of interest with Good, also a major investor in his oil firm, by disclosing to Silverado that he was in business with Good and abstaining from voting on any transactions involving Good.

But Davidson said Bush did not make it clear to Silverado's board that his own company would benefit when he sought a $900,000 line of credit for Good. Good needed the line of credit in order to bid with Bush in a joint venture seeking Argentine oil and gas projects.

Davidson also said that Bush should have informed Silverado that Good had pledged to invest $5 million in his firm at the same time that Good was asking Silverado to release collateral for $8 million in loans.

Both Walters and Good, said Davidson, "represented important sources of financial backing and credit" for Bush's businesses. "What {Bush} is apparently unwilling to accept is the fact that failure to disclose significant conflicts of interest constitute unsafe and unsound practices {that} ... place the financial institution in a position of potential abnormal risk of loss."

Davidson recommended that the OTS order that if Bush ever again becomes a bank or thrift director, he must disclose all business ties with borrowers, get advice from a lawyer on his duties, and refrain from voting on matters in which he or his family members have an interest.

The FDIC suit against Bush and 12 other former Silverado directors, attorneys and executives alleges that they drove the thrift into insolvency by authorizing excessive payments to managers and approving risky transactions.

In another S&L case yesterday, the OTS asked a federal court to issue a civil contempt order against David L. Paul, former chief executive of the failed CenTrust Bank of Miami, for failing to comply with a "cease and desist" order. Paul has failed to produce an accounting of his assets and failed to post a portion of them as security.