A Little Help for His Relatives

Henceforth, promises Bert Lance, he will do no wrong

As he rose from a $90-per-week bank teller to millionaire bank president, Bert Lance never forgot his friends -or his poor relations. Between 1963 and 1974, while he was president of the First National Bank in Calhoun, Ga. (pop. 6,000), he arranged five loans totaling about $140,000 for his unemployed mother-in-law, Ruth M. Chance. When the interest payments were due, Lance sometimes wrote checks on her overdrawn Calhoun account to make the payments. He also arranged loans, and made similar repayments, for three brothers-in-law: a total of $57,982 to retired Naval Officer Frank M. McAfee; $180,820 to School Administrator Beverly David, who apparently committed suicide in 1974; and $214,000 to sometime Florist Claude David. There were also overdrafts and accompanying loans of $88,000 to Wife LaBelle and of $99,236 to Son David, who was in his late teens at the time.

So grateful were the relatives for Lance's help that LaBelle and Brother-in-Law Claude in April 1974 refurbished a cottage known as Eagle's Nest on the Lance farm as a gift to Bert. To pay for the work, Claude wrote $40,000 in checks on his already overdrawn Calhoun checking account.

These family financial dealings were among those alleged in a civil suit filed in U.S. district court last week by the Securities and Exchange Commission and the Comptroller of the Currency. The borrowing arose, said the examiners, because a number of Lance's relatives "were experiencing extreme financial difficulties and needed additional funds to meet living expenses." The sweeping, 90-page complaint was the final act in the agencies' seven-month investigation of Lance, the Calhoun bank and the National Bank of Georgia (NBG), which Lance headed in 1975 and 1976. The investigation began shortly before he resigned last September as Jimmy Carter's Director of Management and Budget.

In addition to Lance's irregular way of helping his relatives, the federal agencies said they found evidence of misleading and inaccurate bank record keeping, questionable loans to bank officers and friends, overstatements of bank assets and inadequate reserves for loan losses. They claimed that Lance inflated his net worth by up to $1,409,779 in applying for loans from his own banks and others. The investigators also found that Lance used an NBG airplane, which cost $223,180 to operate from 1975 through 1977, during which Lance and other bank officials flew on 1,373 trips. But the bank could only produce records indicating that 259 of the trips were for business purposes.

The federal examiners called the irregularities "unsafe and unsound" banking practices. For failing to disclose them to stockholders, the examiners accused Lance and the banks of "fraud and deceit." Lance and the banks admitted no wrongdoing. Indeed, Lance in the past has blamed part of his troubles on "careless, erroneous or biased reporting" by the press. But he and the banks signed a consent decree, promising not to commit these kinds of questionable acts in the future. The decree bars Lance from ever again bouncing a check except in an "isolated and inadvertent" case. In addition, Lance agreed to give the Government 60 days advance notice before again assuming control of a bank.

News of last week's complaint came while Lance was traveling in Australia. In Washington, his attorney, Robert Altman, said that "Lance fully stands by his testimony" in September before the Senate Governmental Operations Committee. Lance had argued that "no depositor [had] ever lost a cent while I was with those banks" and that his family loans and overdrafts had been repaid. Under his leadership, he noted with pride, Calhoun Bank assets jumped from $11.9 million to $54.1 million, while NBG's assets soared from $254 million to $404 million. That record was not challenged substantially by the federal examiners. But on other points, they took sharp issue with Lance's eloquent self-pleading:

>> Lance claimed it was a "gross distortion of the truth" to lump his Calhoun overdrafts of up to $26,272 with his relatives' overdrafts. But the federal examiners charged that Lance was in complete control of the finances of many of his relatives, often making loan repayments and using loan proceeds without their knowledge, and even signing their names to financial statements.

>> Lance said that the family overdrafts resulted from a general policy at the bank. Said he: "Members of the Lance family were not accorded special favors regarding overdrafts." But the complaint asserts that the extent and amount of overdrafts available to Lance family, friends and insiders "were not extended to other customers of Calhoun." The federal examiners added: "For extended periods of time in 1974 [and] 1975, the daily overdraft total [of the Lance-related accounts] was never less than $70,000; and on Nov. 5, 1974, these overdrafts reached a high of $800,000, or in excess of 70% of all overdrafts of accounts at Calhoun on that date."

>> Lance emphasized that the Comptroller of the Currency had given good marks to the bank for correcting overdraft and management problems by 1976, when the Comptroller decided that special procedures for monitoring Calhoun's performance were no longer necessary. But the complaint charged that a portion of Calhoun's improvement was more apparent than real. In response to examiner criticism of an array of substandard loans, Calhoun had transferred the loans temporarily to other Georgia banks, with the understanding that Calhoun would take the loans back at a later date. The complaint charges that these "loan repurchase agreements" were not shown on the bank's books or reported to examiners.

Although the consent decree ends the SEC's and Comptroller of the Currency's investigations of Lance, his legal troubles are far from over. The decree exposes him to the possibility of suits from stockholders on grounds that his management practices deprived them of profits. The Internal Revenue Service is expected to dun him for taxes on the value of personal trips he took on the NBG plane. Finally, a federal grand jury in Atlanta is expected to spend at least several more months hearing evidence before deciding whether to indict him on possible charges of bank fraud or misuse of bank funds. qed

This file is automatically generated by a robot program, so viewer discretion is required.