Lance Comes Out Swinging

A country slicker tangles with a divided, defensive committee

Even for a nation long saturated with theatrics in Washington, the spectacle was fascinating. Easy-going Bert Lance, the country slicker whose financial low jinks as a Georgia banker had deeply imperiled his survival as Jimmy Carter's most intimate and visible Cabinet official, had turned from an amiable Teddy-bear figure into a charging grizzly. Seizing his long-promised day in court, the man widely considered doomed tore into his tormentors, sent a senatorial committee into confusion in nationally televised hearings and gave himself, however temporarily, a fighting chance to remain in office in big, bad Washington.

The skillfully crafted argument of Carter's Director of Management and Budget, as unveiled before the Senate Governmental Affairs Committee, was much stronger in its attack on the excesses of a few of his senatorial critics than in its often strained and flawed defense against the most serious charges. Those charges focused on his great and persistent overdrafts at Georgia's Calhoun National Bank, and his frequent use of the bank's plane for personal trips when he was the president or chairman, from 1963 to 1974. Lance went too far, mawkishly equating his plight with that of victims of governmental oppression abroad, the human rights martyrs. No one, after all, has an inalienable right to a high Government job. But he struck chords designed to set off sympathetic vibrations across a scandal-weary nation.

Lance presented himself as a wronged public servant, condemned as guilty by his critics and a sensation-bent press before he could fully set forth his own defense. Invoking the Bible and Abraham Lincoln, he rather grandiosely said that his ordeal was a test of the system by which the U.S. determines whether its high public officials merit their trusted positions. That turnabout, putting his inquisitors on the defensive and setting them to partisan bickering among themselves, was a remarkable achievement for Lance. He had sufficiently muddied up some of the allegations against him so that the joking question wagging around Washington was "Now, will Bert ask the committee to resign?"

Even as a few of the Senators most directly challenged by him recovered their composure and revealed some of the weaknesses in his position, the affable Georgian remained a cool and fluent witness. Though he absorbed some telling blows as the questioning continued into the weekend, Lance clearly picked up some support on the 17-member committee. As of last week, the committee apparently was almost evenly divided. Seven Senators leaned toward support of the Budget Director (Democrats Thomas Eagleton, Henry Jackson, John Glenn, Sam Nunn, James Sasser, and Lawton Chiles and Republican John Danforth); six seemed to oppose him (Democrat Abraham Ribicoff and Republicans Charles Percy, Jacob Javits, Charles Mathias, William Roth and H. John Heinz). Four Senators appeared undecided (Democrats Ed Muskie and John McClellan were absent from the hearing, Lee Metcalf said little and Republican Ted Stevens' sentiments were unclear). Among Lance's critics, Javits turned out to be one of the most effective, slashing away at the Budget Director's ethics. The most persistent defender of Lance was Nunn, who deftly summed up the case against his fellow Georgian and found it woefully weak.

Whether the Senate committee would ever vote remained in doubt. It had unanimously approved Lance's nomination in January, reaffirmed that decision last July, and would now reverse itself only if a majority could be persuaded that Lance had deceived them in their initial, and admittedly perfunctory, appraisal of his fitness for office. Not only did any such evidence appear to be shaky, but it was certain that the committee could not legally revoke its confirmation. Apparently, at the worst, the committee could render a critical evaluation of Lance's highflying banking practices and thereby strengthen the resignation demands. Ultimately, the decision on Lance's fate still remained with the President. If the unlikely result of the hearings is to exonerate Lance completely, Jimmy Carter could joyously return to his earlier "I'm proud of you Bert" position and break out the grins. In fact, the committee's verdict on Lance is likely to be mixed. So the possibility remains that Lance, claiming to feel personally vindicated, could yet decide on his own to resign. Whether or not Lance stays, jumps, or is pushed by Carter or the committee will depend on how the President and the Senators view the public reaction to his stirring but often shaky defense.

Among politicians, former Democratic Governor Robert Docking of Kansas was sympathetic to Lance. "He defended himself very well and deserves to be heard out. We should not be too quick to condemn people in this country." Republican Richard Aurelio, former deputy mayor of New York City, called the hearings "one of the most extraordinary things I've ever seen in public affairs. The Senators have come off looking foolish. Lance's performance has been remarkable."

Even so, Lance had not erased his image as a wheeler-dealer who had used his presidency of two Georgia banks in ways that do not measure up to Carter's much-professed insistence that members of his Administration must avoid even the appearance of impropriety. Observed one Southern Democratic Governor: "It was a damned effective performance, and people will be with him emotionally. That may save Bert's reputation personally and Jimmy Carter's reputation politically, but the President has big jobs to do and he must get on with them with no handicaps." There was a widespread view that Lance had done much to help himself but still remained too great a liability to Carter and should leave his post. Declared Arkansas Governor David Pryor: "Lance has been caught in a cobweb situation. I think he is a totally honorable man, but I feel that if he is director of OMB, he will spend four years explaining and defending himself."

But it would be nearly impossible -- and unfair -- for Carter to take the position that Lance, though innocent of wrongdoing, must go because all the controversy has damaged him. That is precisely what Lance so shrewdly and dramatically warned against during the hearings: driving an innocent man from office on flimsy charges. The fact is that the main charges are not flimsy, and the country is not likely to so regard them.

TIME bureau chiefs saw little possibility that Lance had turned the tables enough to survive in office. Observed New York's Laurence I. Barrett: "About the best that Lance can hope for is to create a feeling that, well, the poor fellow is not that bad. But he still represents an intolerable symbol of loose ethics in an otherwise taut Carter Administration vessel." Added Boston Senior Correspondent Jim Bell: "Bert Lance's presentation was a fine, feisty thing that did him a lot of good. In the end he will still have to go, but his departure may be less painful than seemed possible at midweek." Reported Chicago's Benjamin Gate: "Despite Lance's aggressive and combative defense, he hasn't done very much to reassure Midwestern businessmen and bankers about his qualifications to be the chief budget officer of the U.S. At the moment, his credibility in this area is nil."

Back home in Calhoun, however, the folks were all solidly behind Bert. On the eve of his opening testimony, almost 1,500 people from the prosperous town (pop. 6,000) in the north Georgia mountains turned out at the high school to wave placards (DON'T TREAT BERT LIKE DIRT), sing his praise and pray for his deliverance from Yankee politicians and the press. Said Mayor Billy Burdette: "We just want the other people in the country to know what kind of man Bert is --to know him as we know him--to know he is not a crook."

If anything, the interest in Lance was greater in Washington. As Lance's show-down session with the Senate committee began, the crush of reporters and photographers was as intense as at John Dean's initial Watergate testimony before another Senate committee. Holding hands with his smiling and poised wife LaBelle, Lance strode into Room 1202 of the Dirksen Senate Office Building, where, at his request, 40 seats had been reserved for his relatives and friends.

Unusually solemn, Lance focused his anger on two of the Senators sitting in judgment in front of him: Abraham Ribicoff. Democratic chairman of the committee, and. more scathingly, Charles Percy, the ranking Republican. As reported in a Labor Day weekend story in the Atlanta Journal Constitution, Lance noted, the Senators had sent three committee investigators to quiz Billy Lee Campbell, a former vice president of the Calhoun First National Bank, who was serving an eight-year prison term for embezzling nearly $1 million from the bank, mostly during the time that Lance was its president. Campbell had claimed that Lance was "part of the embezzlement. Then Ribicoff and Percy met with Carter at the White House, urged Lance's resignation, and told reporters that new "allegations of illegality" had been raised against Lance.

Lance was on solid grounds of indignation in claiming that Campbell's charge was wholly unsupported by anyone else, that no one on the committee had asked him about the claim before the report reached the press, and that Campbell had consistently told his lawyers, the prosecuting attorneys, and the federal judge who presided over his guilty plea that no one had conspired with him in his thefts. Yet headlines had, indeed, linked Lance with the embezzlement charge--inevitably, considering the Senators' statements.

Still attacking, Lance seemed even more outraged at what he called Percy's "savage" suggestion in a hearing of the Senate committee on Sept. 9 that he might have backdated three checks in early Jan. 1977 in order to obtain improper tax deductions on his 1976 income tax returns. The Budget Director cited headlines linking him to tax fraud on the basis of Percy's statements. Lance convincingly explained that he had written the three checks on Dec. 31, 1976, as dated, but held them until the proceeds from a $250,000 sale of stock on Dec. 30, 1976, had been deposited in his bank. Moreover, he said, the three checks, involving interest payments on loans, had not been deducted on his 1976 tax return. "The knowledge of my innocence, however, does little to lessen the shock and anguish caused me and my family when the charge is published all over the country."

As he concluded his statement, Lance insisted that "I did not ask for this fight, but now that I am in it, I am fighting not only for myself but also our system." And he asked: "Is it part of our American system that a man can be drummed out of government by a series of false charges, half-truths, misrepresentations, innuendoes and the like?" When he finished, the caucus room swelled with applause.

Stung by Lance's attack, Ribicoff and Percy, who several weeks ago had championed his cause, stumbled onto the defensive. They claimed the Campbell allegation had somehow leaked to the Atlanta newspaper; they had not intended to talk to the press at all when they visited the President, but someone on his White House staff had told them they should meet the press waiting at the White House as they emerged from seeing Carter. They had only answered reporters' questions, they said, and had denied that Campbell had given the committee any affidavit, as the Atlanta paper reported. But they had, in fact, confirmed that their investigators had talked to Campbell.

Percy profusely apologized to Lance for causing him a Labor Day weekend of pain over the tax fraud reports--and fatuously claimed that he, too, had been appalled by the way the newspapers had interpreted his remarks. In fact, there was no other way Percy could have been read; he had, indeed, knowingly and quite precisely suggested that Lance may have intended to cheat on his income tax.

As the committee fell into a series of haggles, Lance and his recently acquired attorney, Clark Clifford (see box), watched with faintly hidden amusement. Later, Missouri Democratic Senator Thomas Eagleton picked up the Lance line and harshly assailed Percy: "On September 9, Senator Percy gave every indication that Lance was a tax fraud cheat, and in his mellifluous tones he said well, you know, I am not saying directly that you are a tax cheat, I am saying inferences can be drawn therefrom. Yesterday, Senator Percy said, 'I apologize for any anguish I may have caused you over the weekend.' Marvelous! We're playing with a man's character and his decency and reputation here. The charge of being a tax fraud will linger around Mr. Lance for the rest of his life. We can't play so fast and loose with the reputation of any person, because all we take with us to our graves is our reputation. And in some measure, Mr. Lance's has been irrevocably tarnished."

More broadly, Eagleton raised another issue neatly fitting the Lance defense. Citing the "guilt by association" that characterized the red-baiting tactics of Senator Joseph McCarthy in the late 1940s and early 1950s, Eagleton charged that "here in 1977 we have a newer technique--guilt by accumulation--every day someone will hurl a charge at Mr. Lance and a little bit more mud gets on the character and reputation of Mr. Lance." He criticized Ribicoff and Percy for spreading the vague claim that Lance had been accused of new illegalities--but never revealing what they were. In a closed session of the committee, the two leaders briefed the other Senators on what they had found and, said Eagleton, he heard only rehashes of what had been in the newspapers.

Lance's case was also strong, when he denied that he had made any attempt to conceal damaging information from the committee during its confirmation hearings in January. He said that he had met with committee investigators on Jan. 13 and discussed his major financial troubles. They mainly concerned overdrafts in his accounts at the Calhoun bank; the overdrafts incurred there by his campaign committee when he ran unsuccessfully for Governor of Georgia in 1974; and the agreement that the Calhoun bank reached with the Comptroller of the Currency in 1975, requiring, among other things, an end to all overdrafts by Lance, his wife and other relatives. Moreover, Lance noted, newspaper stories about a federal investigation into possible campaign-law violations by him had appeared before his confirmation; in fact, he had been asked about this at his initial hearing. He found it "somewhat puzzling" that Percy and Ribicoff later claimed they had not known about such matters.

Lance contended that he had not attempted to conceal anything. If the Senators did not pursue some of the matters in greater detail, he implied, that was hardly his fault. Indeed, it seemed naive to believe that an appointee should volunteer to a confirmation committee every piece of ammunition it could possibly use to deny him the office. Lance sharply denied asking any federal officials either to close the Justice Department investigation into his campaign overdrafts or to lift the Comptroller's sanctions against the Calhoun bank. The involved officials have supported Lance's denial. Although the criminal case was closed without prosecution and the agreement was ended --both conveniently just before Lance's confirmation hearings--those actions looked like attempts by minor bureaucrats to curry favor with the incoming Administration. Some Senators, however, expressed suspicion of Lance's contacts, either personal or through his lawyers, with officials making those decisions.

While some members of the committee insisted that their priority task was to determine if Lance had concealed information from them, any such cover-up charge seemed unlikely to stick. The over riding public issue remained whether the Budget Director's banking practices had been as unethical, self-serving and casual as his critics charged. On these substantive matters, Lance's defense was weakest.

Overdrafts Even friendly Senators on the committee pointed out that Lance's biggest problem was to explain why he, his wife LaBelle and relatives, as well as his 1974 campaign committee, had been allowed to write large checks that seriously overdrew their accounts. As Democrat Henry Jackson told Lance: "The man on the street comes up to me and says, I cannot have an overdraft, and he sees one after another ... I think this is the heart of your problem."

Lance responded that the Calhoun bank had long had a "liberal" overdraft policy to attract customers and that it applied to all depositors. Moreover, he contended, such a policy was "not an unusual practice" in a small rural community like Calhoun, where the bankers knew most of their customers and could judge whether this "extension of credit" involved any risk.

He added that the Calhoun bank's losses from such overdrafts had been small, ranging from $3,999 in 1972 to a high of $7,307 in 1975. He sought to minimize his personal overdrafts, listing them as $8,799 in 1972, $16,845 in 1973, $26,272 in 1974 and $24,147 in 1975. These sums, he pointed out, were nowhere near the $450,000 in overdrafts that some newspapers had attributed to him. That figure was the highest total of overdrafts listed by the Comptroller of the Currency for nine relatives between September 1974 and April 1975. Lance claimed he had always had enough money on deposit in other accounts at the Calhoun bank to cover the overdrafts in his personal checking account.

Some Senators were quick to point out, however, that Lance's other accounts were often insufficient to cover the overdrafts by himself, his wife--whose personal overdrafts reached a high of $110,493 in 1974--and his gubernatorial campaign committee, which overdrew its accounts by as much as $152,706 in 1974. He insisted, however, that he had given the bank a $110,000 certificate of deposit to cover any campaign overdrafts, as well as an unlimited signed guarantee that he would meet all of his political committee's debts to the bank. And, Lance claimed, all of the overdrafts by himself, LaBelle and his campaign committee had been repaid "without a penny being lost to the bank." This, of course, ignored the fact that the overdrafts amounted to free loans, on which the Calhoun bank lost interest. Many banks now offer overdraft privileges but set limits at $5,000 and in some cases $15,000, and charge interest fees of about 18% a year.

Delaware Republican William Roth Jr., for one, was not satisfied with Lance's explanation that he had repaid the bank. Roth compared this reasoning to the rationale "of a person who goes through a red light and says nobody was hurt so my going through was all right." Lance could not satisfactorily explain to Ribicoff why he had written a letter to federal bank examiners in 1973 saying his overdraft problem would be corrected and why he had failed to heed the criticism of bank examiners who found that the overdraft situation was "abusive" and "the age and size of the overdrafts is appalling." Instead, the collective overdrafts by Lance and his relatives increased until the Comptroller of the Currency finally demanded in 1975 that they be stopped.

Lance was wrong in claiming that federal examiners had not considered him to be in violation of a U.S. law forbidding any bank officer to get a loan of more than $5,000 from his own bank for his personal expenses. A federal examiner in 1971 and Comptroller Heimann this year both reported that Lance had been technically in violation of this civil statute, since an overdraft is, in effect, a loan. Maryland Republican Charles Mathias Jr., mixing metaphors, termed the practice of letting Lance's campaign committee "write rubber checks that wouldn't bounce, like the goose that lays the golden egg."

Lance's contention that such a loose overdraft policy was common in small country banks has been challenged by Comptroller Heimann and questioned by other bankers, including those in the rural South. There, overdrafts are frequent enough--within limits. A.E. Kelly, president of Alabama's Bank of Brewton (pop. 6,700), explained: "We've got a few good customers, substantial citizens you might say, we let run up overdrafts around $100, $200, and we figure they are entitled to just an open note to that much money. But we charge 'em interest." The size of the Lance overdrafts aroused the most anger among bankers. Said the president of a Chicago bank: "I would expect that if bank examiners walked in and found me with the overdrafts Mr. Lance had, I would go to jail." The Justice Department had decided not to prosecute Lance for his campaign committee's overdrafts. But the closing of that case by John Stokes, the former U.S. Attorney in Atlanta, was protested at the Senate hearings early last week by three of his former aides. Assistant U.S. Attorneys Jeffrey Bogart, Robert McKnight and Glenna Stone all charged that Stokes had closed the case before it had been fully investigated. All three said they thought they were developing a prosecutable case against Lance--and even now urged that the Justice Department reopen the investigation.

Bank Airplane Lance contended that after he became president of N.B.G. in 1975, he had been given carte blanche to use a Beechcraft plane owned by the bank in any way he saw fit. He said that his ambitious expansion plans for the bank required extensive travel, and it was virtually impossible to separate personal and business use of the plane. Even when on vacation, he insisted, he was constantly conducting his own campaign to give the bank "a personality image" and bring in new business.

Yet, using information supplied by Lance to the Comptroller, Percy showed that many of the some 1,300 trips made by the plane in the two years Lance was the bank's president seemed to have no solid connection with bank business and thus might involve income tax and other violations of law.

Percy noted that Lance had used the plane to attend University of Georgia football games, carry prominent Democrats to a Carter campaign kickoff rally in Warm Springs, Ga., and take numerous trips to his vacation home in Sea Island, Ga. Lance claimed he worked on or promoted bank business on most of these trips and that his bank sponsored a TV show devoted to Georgia football and wanted to retain that relationship. In most cases the bank was not reimbursed by Lance for such travel. The matter remained a serious one for Lance, if only because the Justice Department has opened an investigation into it, at the urging of Comptroller Heimann. However unlikely, any indictment of Lance would be a blow fatal to his job-survival chances.

Double Collateral Though Percy appeared bumbling and inept on procedural matters during the hearings, he persuasively showed that Lance had received a $2,625,000 loan from New York's Manufacturers Hanover Trust Co. in 1975 and signed a note pledging 148,118 shares of National Bank of Georgia stock, plus any future income from that stock, as collateral. After Lance received an N.B.G. stock dividend of 14,657 shares in December 1975, officials of the New York bank futilely sought to get Lance to deliver those 14,657 shares, to which it was entitled. Insisting that the value of stock already given Manufacturers Hanover fully collateralized the loan, he did not turn over the dividend. Instead, he tried to "negotiate" with the bank and, in fact, pledged the disputed 14,657 shares to New York's Chemical Bank in 1976 as collateral on a $150,000 loan. He did not reveal that fact to Manufacturers Hanover.

Lawyer Clifford eagerly pounced on an ill-advised invitation from Percy to clarify the matter. Clifford argued that Lance had merely bargained with Manufacturers Hanover over supplying the stock dividend and, when he and the bank could not reach agreement, ended the matter by paying off the loan. Indeed, Lance did so last January, drawing yet a third loan--for $3.4 million--from the First National Bank of Chicago. Clifford failed to point out that this was a full year after Lance first received the stock dividend. Percy was correct in insisting that Manufacturers had had a right to demand the shares, and Lance was wrong to use them to get another loan from a different bank before the first loan was paid off.

As Lance ended his first day of testimony last week, Clifford smiled and said, "I think that we started to turn it around today." At the White House, Carter aides were ecstatic. "Superb," said one about Lance's performance. Presidential Assistant Hamilton Jordan jumbled sports metaphors: "Bert hit a home run. They never even laid a glove on him. It's what we've been waiting for." The man who counted, Jimmy Carter, later watched video tapes of Lance's appearances. Said the President of his friend: "He did well."

Any gains for Lance were not the result of any effort by the President's aides. The normally cool Press Secretary Jody Powell blundered atrociously by phoning several newsmen with the sly tip that Senator Percy might have used corporate aircraft owned by Bell & Howell Co. for personal purposes. The Chicago Sun-Times exposed Powell's ploy after finding no truth to the report.

Powell limited the damage by apologizing to Percy, who graciously accepted, saying he understood that "emotions were running high" at the White House. Powell reported that he had told Carter that his action had been "inappropriate, regrettable and dumb--and the President did not disagree with my assessment." As Powell also apologized to the Washington press corps, Hamilton Jordan slipped a chrome-plated artillery round onto the podium. Attached was a note: "Although you get close to getting lead poisoning from biting the bullet, you won't. This, too, shall pass." It was signed, "Bert."

Last week's bravura performance by Lance took some of the political pressure off Carter. By neatly disposing of several of the charges against him and making others appear more complex and murky than his accusers had suggested, Lance showed that a reasonable man--like Carter--might not be sure of what, if anything, he had done wrong. But for a President who sets such high standards for morality and frugality, who insists that members of his Administration must be above suspicion, that seemed hardly enough.

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