The New York Times, by William Safire

By William Safire

Jimmy Carter is trying to sell the Senate a dubious bill of goods about his long‐time friend, Office of Management and Budget Director Bert Lance.

The Georgia banker should be excused from conflict‐of‐interest divestiture promises the President has asserted, because his promise to sell his stock has depressed its market value.

That is a deception. The reason that National Bank of Georgia stock has slid from 16 to 11 this year has little to do with the “overhang.” The stock has dropped because of the revelation that Mr. Lance tolerated bad loans on his books. The man who inherited the mess has had to write off the bad loans and suspend dividend payments.

The truth is that Mr. Lance's departure for Washington did not cause his financial embarrassment. On the contrary, we now see how his willingness to carry questionable loans as assets may have artificially maintained the price of his stock.

Mr. Carter is intimately familiar with Mr. Lance's affairs. On June 19, 1975, only a few weeks after borrowing $2.7 million to finance the purchase of his stock, Bert Lance brought Jimmy Carter to the Manufacturers Hanover Bank in New York to meet Lew Jenkins, the bank Officer responsible with Bruce Broughm for making the Lance loan.

Purely a social call, insists Mr. Lance, nothing to do with using the former Georgia Governor to shore up his reputation as a borrower. But Mr. Jenkins was the only banker to whom Mr. Lance took the new Presidential candidate that day.

Bankitician Lance, who was Governor Carter's highway commissioner, also claims to have had nothing to do with the infusion of the Teamsters Central States pension fund money into his bank in early 1976, as Mr. Carter's star began to rise. At the time, the Lance bank's three‐person trust department had no account ever $2 million to manage; for no apparent reason, the politically sensitive Teamsters fund put into. the Lance bank $18 million that has since grown to $23 million.

Not my doing, says the modest Mr. Lance today. Bank officials want us to believe that Atlantans John Spickerman, Teamster employer trustee, and Robert Pollar, Teamster fund lawyer, initiated the deal with King Cleveland, Mr. Lance's colleague, now retired.

But after Mr. Carter's election, on the very morning Mr. Lance's picture was front-paged as the first Carter Cabinet likelihood - Nov. 24, 1976 - Mr. Lance met in his bank with Teamster pension fund executive director Dan Shannon, John Spickerman and Teamster lawyer William Nellis of Chicago. Mr. Lance sees no impropriety in a Cabinet designee helping to line up some future business with the fund that the Labor Department says corruptly. bankrolls Las Vegas mobsters.

Just before leaving Atlanta six months ago. Mr. Lance must have had cause to worry about his financial house of cards. He turned to another Democratic bankitician, J. Robert Abboud, the, go-go boss of the First National Bank of Chicago, who has replaced his mentor, the late Mayor Daley, as the city's most powerful man.

Mr. Abboud must have been delighted to bail out a man Who would be part of the President's quadriad, and whose ambitions include becoming chairman of the Federal Reserve. On Jan. 6, 1977, prior to his Jan. 11 trip to Washington, Mr. Abboud refinanced the $2.7 million Manufacturers Hanover Loan that enabled Mr. Lance to own his stock - adding another $725,000.

Why? Mr. Lance (give him credit, he answers his phone) says, “First Chicago is moving aggressively in the Atlanta area.”

I see a more sinister motive. First Chicago's Abboud knows all about bad real estate limns, and should have known that Mr, Lance's assets would shrink when the bad loans were audited by a successor. Here was Mr. Abboud's chance to gain life-and-death financial control over the man closest to the President.

The central question, which Senators Ribicoff and Percy do not see, is this: Was the President's most powerful Cabinet member given a “sweetheart loan”? Did Mr. Lance's assets include his closeness to President Carter? And why did he need that extra money in the refinancing?

One source who, had been close to the refinancing passes the word that the stories of Mr. Lanee's need for funds to meet interest. payments may be off the track—that the Abboud-Lance loan is so favorable that it defers interest payments. Such special arrangements are denied to most non-Cabinet borrowers.

Here we have a situation in which the man in charge of the nation's books is deeply, dangerously in. hock; who goes home, every night not knowing whether the Labor Department will find out about his teamster connections, or the S.E.C. will leak into his assurances to 45 people about a stock issue, or the bank examiners and First Chicago stockholders will expose sweetheart loan, or the Min on whom he depends for financial  solvency will exert some subtle pressure for political advantage.

Jimmy Carter's Broken Lance is walking conflict-of-interest. The complaisant Senate subcommittee now glancing at his wheeling and dealing should stop making an exception and start making an example.

By William Safire

When Sherman Adams made a phone call to inquire of a Federal official about the status of a Bernard Goldfine request, outraged Democrats pointed to a vicuna coat and demanded the scalp of President Eisenhower's chief of staff.

When Howard "Bo" Calloway was accused (falsely, as the current Harper's magazine reveals) of using his government job to help along a private project, editorial voices boomed and President Ford's campaign manager was forced to resign.

But they were Republicans. Since Democrat Bert Lance, President Carter's most influential adviser, was revealed to have used his public job to line his pockets, the trumpets of rectitude have been muted.

Lest loyal Carter men complain that a charge of using public office for private gain is excessive, let us count the ways the President's chief financial man cut his corners:

The sweetheart loan. Mr. Lance's bank put $200,000 of its depositor's money in the First National Bank of Chicago, at no interest. Within three months, and after being appointed to the Carter Cabinet, Mr. Lance turned to Democrat Robert Abboud, who runs the Chicago bank, and personally borrowed $3.5 million.

First Chicago's spokesman at first told reporters that officials of Lance's bank "came to us as a result of the correspondent banking relationship" to borrow Mr. Lance's money. Evidently every lawyer in the bank landed on that harried fellow's neck, because he tells me his words were "misinterpreted" - but an investigator from the Controller of the Currency spent all day Friday at First Chicago to determine whether an illegal "compensating balance" can be proved.

Despite denials, the full record will show that Bob Abboud's loan was one sweet deal for Mr. Lance. One hopes Senator Ribicoff's committee will insist on a detailed, comparative analysis of that loan's terms - and its underlying collateral, which a prudent bank is obligated to examine - by the Controller of the Currency, else why did not the original lender - New York's Manufacturers Hanover - "Manny Hanny" - compete for the business?

The Teamster connection. How can an itty-bitty bank, with a tiny trust department, latch on to 18 million dollars in Teamster Central States Pension fund money in a Presidential year? By flexing political muscle, as detailed in this space last week, that's how.

The Butcher appointment. Thanks to the investigative reporting of John Berry, Jack Egan and George Lardner, Jr. of The Washington Post, who also broke the no-interest deposit story, a vivid picture emerges of the way Mr. Lance uses his political clout to shore up his financial house of cards.

The Butcher brothers, Jake and C. H., own a few banks in Knoxville and Nashville. Their old friend Bert Lance Is into one of their banks for $443,466 on terms not likely to be available to the average borrower.

Now that their debtor has the run of the White House, the Butcher boys thought it would be a dandy idea to get on a first-name basis with the Secretary of the Treasury, Michael Blumenthal.

So they called friend Bert. "We asked for the appointment," blurted C. H. Butcher, not realizing how the truth would hurt, "because we had never met him [Blumenthal] and he does regulate our business as Treasury Secretary."

That candor caught Mr. Lance In the middle of a cover-up. He had enlisted his press spokesman in concocting a story that gave a quasi-public purpose to the Butchers’ meetIng with Secretary Blumenthal: some folderol about promoting a Knoxville exposition, which is, of course, of enormous concern to the Secretary of the Treasury.

But Mike Blumenthal knew nothing about the exposition, or why he had been asked to glad-hand these particular two bankers. Mr. Lance had never confided the real reason to his Cabinet colleague: He owed the Butchers $443,000 (skip the change), and wanted to show them he could put them on a first-name basis . with the man who, in C. H.’s phrase, "does regulate our business."

Yet here is Bert Lance using his office to protect and improve his personal fortunes with impunity. Worse than that: One week ago, the President of the United States sent the Senate a letter about Mr. Lance's finances that was patently misleading. Who drafted that letter?

The unhappy Government Affairs committee wants to "confront" Mr. Lance with a few newspaper clippings, let him make ringing, self-serving denials, and then claim the Senate has discharged its responsibility.

But Mr. Lance's appearance should be the beginning, not the end, of a serious investigation. Illinois Senator Percy, who will come under great pressure from well-connected Chicagoan Abboud, bears a heavy burden; he should insist' the G.A.O. be assigned to audit the truthfulness of the asset statements Mr. Lance submitted at his confirmation.

On the other hand, Senators and editorialists can agree that Mr. Lance is too amiable a guy, and Mr. Carter too new and clean a President, to charge with such tawdry abuse of power. In the event of such a whitewash, let thp Senate at least vote a single-standard resolution of exoneration for Sherman Adams.

By William Safire

"You have been smeared," clucked Senator Abe Ribicoff to O.M.B. Director Lance last week, declaring no investigation was needed. Republican Charles Percy, ranking Republican on the "millionaire's committee," solemnly agreed. President Carter reaffirmed his faith in his old friend's "impeccable integrity.''

Editorial writers on The New York Times and Washington Post tut-tutted gently at this brazen whitewash, awaiting only a report from Mr. Carter's new Comptroller of the Currency. By not asking the President a single question about his first scandal at his press conference last week, the White House press corps completed its transformation from hound dog to lap dog.

A few questions that Senators and reporters did not see fit to raise:

1. Mr. Lance has sworn that the reason he switched his $2.7 million loan from the Manufacturers Hanover Bank in New York to the First Chicago was that he had assured "Manny Hanny" repayment when he left the presidency of his own bank. Was that really a condition of the loan? Does it not suggest collusion to make the personal loan because of the correspondent bank relationship, and not on its merits?

2. When Mr. Lance refinanced his loan after the election, switching from Manny Hanny to First Chicago, he borrowed an additional $725,000. He swears this was primarily for "debt service." Does that mean he was in arrears on his New York loan? On any other loans? Was this extra money to help pay future interest? Did Manufacturers Hanover want to continue its loan - or was that bank delighted to see First Chicago take it over?

3. Mr. Lance’s long-time pattern has been to use a "correspondent bank" relationship to borrow money personally. Is the Comptroller looking into all those double deals, or has his inquiry been limited to the Chicago sweetheart Joan?

4. When Senator Heinz (R-Pa.) asked the only cogent question of the hearing-about Mr. Lance's collateral on his Chicago loan - the witness suddenly could not remember such trifling details. Mr. Lance had previously sworn, however, the loan was "fully collateralized" - with what? Why can't we know?

5. On the assumption that most of his Chicago loan was collateralized by his Georgia bank stock, what happened at First Chicago when the stock's price dropped from 16 to 8? Did First Chicago call the loan. or demand more collateral, as it surely would do with normal borrowers on non-sweetheart loans?

6. What are the terms of the loan made to Mr. Lance by the Butcher brothers of Tennessee, whom Mr. Lance then introduced to Secretary of Treasury Blumenthal? Will the Comptroller look for a triangular relationship between Mr. Lance. Manufacturers Hanover, and the Butcher brothers?

7. Under 18 United States Code 656, and after the 1975 decision in United States versus Brookshire, the United States Attorney In Atlanta began an investigation into misapplication or funds in Lance banking operations. On Dec. 2, 1976 - one day before President-elect Carter named Mr. Lance to his Cabinet - U.S. Attorney John Stokes ordered the investigation quashed, over the objections of his investigators. Mr. Stokes, a Nixon appointee, was then continued in the U.S. Attorney's Office by Mr. Lance's friend, Griffin Bell. Mr. Stokes denies a quid pro quo, and quit last week. Did a deal fall apart?

8. The F.B.I. prepared a report based on the aborted investigation and submitted it to the White House before Mr. Lance's Senate confirmation hearings. Robert Lipschutz, the President's counsel and Mr. Lance's Atlanta friend and associate, improperly withheld this disturbing information from the Senate. Has Mr. Lipschutz passed on this evidence of an earlier pattern or misapplication of funds to Comptroller John Heimann - or is he still trying to contain the inquiry to the Chicago loan (the modified limited hangout)?

9. Since questions were raised about Mr. Lance's wheeling and dealing, Carter fundraisers have launched a frantic angel hunt to find an "investor" to buy the Lance bank stock at about $1 million over its market value. ln my opinion, at the inflated price, the sale would be a fraud, since it would not involve control stock.

What or the other investors, who cannot, like Mr. Lance, get $17 a share for a stock selling at $11? Is the Security and Exchange Commission asleep? Will Team Player Blumenthal's I.R.S. not consider the payoff premium to be ordinary income?

10. Time magazine led the way into this story, with Newsweek aggressively following up; the Atlanta Constitution must have resisted pressure from Mr. Lance to suppress this column, but almost everyone else is ''waiting tor Proxmire," the only Senator to have voted against the Lance confirmation.

Which leads to the question sure to be asked after the truth has been forced out: Where were you during the cover-up of the first scandal of the Carter Administration?

By William Safire

When the White House press corps finally lobbed a softball about the Bert Lance scandal to the President, Mr. Carter curtly replied that he knew “little about the details of the loan” and directed the reporters to ask questions about welfare reform. Meekly, the corps complied. (Let us not languish in Lancegate.)

White House strategy is to contain the scandal by pretending the matter is purely Mr. Lance's problem, and that Mr. Carter knows nothing and is doing nothing. The strategy depends on the widely-held hope that the President himself is in no way “tainted.”

But the follow-up questions remain: What was Jimmy Carter doing in the office of Lew Jenkins, in charge of correspondent banking for Manufacturers Hanover, on June 19, 1975? Did he know that Bert Lance, whom he had accompanied to the bank, had just negotiated a personal loan for $2.7 million? Who else in that bank did he meet, and what did he discuss? Has any government investigator asked the President about his presence with lender and borrower near the onset of a loan that might be corrupt?

Those are pertinent, if impertinent, questions. Lest we forget, Mr. Carter borrowed $708,000 from Mr. Lance's bank in 1975, only two months before their joint visit to “Manny Hanny.” If he was lending the prestige of a former Governor and active Presidential candidate to his creditor, Bert Lance - to help that go-go banker cement a possibly illegal or unethical arrangement with a New York bank—then Mr. Carter cannot today look coldly at his old friend and pretend to be holier-than-him. No wonder the President tells reporters to confine questions to welfare reform.

Meanwhile, the investigation (sorry, the “inquiry”) seems to be contained to the office of Treasury's Comptroller of the Currency, and everybody thinks that's fine. It's not. Although the brand-new Comptroller, John Heimann, is clean, his staff has an eight‐month cover‐up to answer for, and self-investigation is never a good idea,

Here's how it came about: Last year, Senator William Proxmire, whose committee has jurisdiction over the Comptroller's office, blocked the appointment of any Republican to the five-year term. He thus became responsible for the reign of an Acting Comptroller, Robert Bloom, who evidently sought to, ingratiate himself with the new Administration.

At Lance confirmation time, Acting Comptroller Bloom sent a “no-violation” letter to the Senate about Nominee Lance and his bank. The clearance was glowing and profoundly misleading; Treasury officials now lamely explain it meant ,“no prosecutable violations.” Worse, the “smoking gun” - the Manufacturers Hanover memo that seems to cry out “compensating balance” - was either not examined or not forwarded on to the F.B.I.

That is why Senator Proxmire says “We are not going to settle for a routine report. Any study of alleged inaccuracy In the Comptroller's office should not be left to the Comptroller's office.” Though previously deferential to the jurisdiction over Mr. Lance by the Ribicoff-Percy Whitewash Brigade, Senator Proxmire now seems awake to his responsibility for the lack of self-control.

As for the new Comptroller, John Heimann, he is not likely to be suckered again as he was last week by the canny Mr. Lance. When the Comptroller confronted the O.M.B. Director with the “smoking gun” memo, Mr. Lance promptly managed the news by putting it out himself with a phony excuse about leaks (which never happened). By dribbling out its evidence piecemeal, Mr. Lance hopes to defuse the Heimann report.

Reluctantly, belatedly, other investigations are under way. The S.E.C. will not say if it has begun a preliminary inquiry to see if Lance's bank reported “material” developments in its required reports, but it has. And soon bank stockholders in Atlanta, Chicago, New York and Knoxville may be directing queries to the Chairman of the Audit Committees of the suspect banks to see if Mr. Lance's dealings were reviewed and approved.

One agency of government frozen into inaction is the political Department of Justice. Attorney General Griffin Bell has declared himself out, and the head of the Criminal Division —Ben Civiletti, the Baltimore political fund‐raiser put in by Lance crony Charles Kirbo—refuses to lift a finger pending the Heimann report.

Why? When the Department of Justice learns of evidence of a potential Federal crime—misapplication of national bank funds—should it not investigate, empanel a grand jury, and prosecute? Why should Justice await another agency, especially when its F.B.I. suspects that other agency to have already withheld evidence?

As I vacate this space until Labor Day, let me make this prediction: belatedly aroused, the Comptroller, the S.E.C., Senator Proxmire, and the press will all do their duty. Mr. Lance will resign and try to take the scandal out the door, while Mr. Carter professes to be above it all.

But unless a special prosecutor is appointed—one with “impeccable integrity,” as Mr. Carter recently said of Mr. Lance—the Carter‐Kirbo‐Bell—Lance cabal will cut off the investigation before it gets to the top.

By William Safire

“Nobody wants to be a skunk at a garden party,” said job‐hungry Robert Bloom, explaining why his Comptroller's office concealed Bert Lance's shady past from Senator Ribicoff, who didn't want to know anything about it.

Rather than sift through year‐old chicanery, let us focus attention on the original charge, which deals with this year's venality—committed quite recently by a leading member of the Carter Administration.

My charge was that after his Cabinet appointment, Mr. Lance received a “sweetheart loan” from Democrat Robert Abboud's First Chicago Bank—so favorable a loan that one could only conclude Mr. Lance was using his position of public trust to line his private pockets.

A crucial test of whether a loan is corrupt or legitimate is collateralization. On July 25 of this year, under oath before the Senate, Mr. Lance was asked: “Was it fully collateralized, or was it just a personal loan?” His sworn testimony: “No, sir, it was fully collateralized.”

Let's see how true that was.

According to the report of the Comptroller, Mr. Lance signed two notes to First Chicago on Jan. 6, 1977: “a secured note for $1.8 million and an unsecured note for $1,625,000.” The word “unsecured” means that no collateral was required as security.

Even the secured note was defective: For some time Mrs. Lance would not provide the stock powers necessary to make the collateral salable.

On its face, Mr. Lance's sworn testimony was untrue. That explains why, when asked by Senator Heinz to describe his collateral, Mr. Lance had a sudden attack of forgetfulness—as if any banker would forget the collateral he has pledged on his biggest outstanding loan.

In an effort to tone down that “fully” assertion, Mr. Lance's trustee responded to the Senate query in an Aug. 12 letter lumping together the two notes and trying to stretch the collateral over both: “When the loan was originally made there was provided as collateral 162,920 shares of the National Bank of Georgia with a value of $2,932,000, 9,422 shares of the Calhoun First National Bank with a value of $235,000. . . .”

That's a total of $3,167,000 in collateral, a quarter million dollars short of the total loans. Straining, Mr. Lance's trustee throws in a life insurance policy (which, documents show, First Chicago never considered as collateral). But there is no way to consider the politically motivated loan to Mr. Lance “fully collateralized.”

Indeed, the First Chicago loan officer wrote on the day a $4 million line of credit was extended to Mr. Lance that “approximately $3 million in other securities” was “to be pledged.” But they were never put up, and First Chicago did not demand the missing “full” collateral until the inadequate collateral was sinking.

The key point is that “fully collateralized” meant that far more than 100 percent of the value of the loan must be put up: On listed stocks, banks and brokers must demand 200 percent collateral. Bank stocks are unconscionably exempt from regulation, but on thinly traded stocks such as those put up by Mr. Lance, any prudent banker would ask for an even higher percentage of collateral.

However, on July 7 of this year, when the two notes were combined into one $3.4 million loan, First Chicago priced its Lance collateral at $1,717,611. That's 50 percent collateral.

Curiously, on July 21, Mr. Lance's trustee raced to First Chicago with an additional $1,150,000 in collateral (using First Chicago's strange computation of $15 a share for stock selling at $11).

What happened on July 21 to prompt Mr. Lance's trustee and his favorite bankitician to shore up the woefully inadequate collateral? Answer: On that Thursday morning, a column appeared in this space charging Messrs. Abboud and Lance with a “sweetheart loan.” On that same morning, according to the Comptroller's report, Treasury Secretary Blumenthal told the Comptroller “that the President expected me to take such action as was appropriate....”

The hurry‐up collateralization was hardly the action of innocent men. First Chicago refuses to say if William Wood Prince, chairman of its audit committee and responsible to its stockholders, has approved this grossly improper and imprudent banking practice.

The plain fact is that. Mr. Lance's First Chicago loan was not fully collateralized when he signed the two notes in January; it was not when he testified under oath in July; and it is not today. The only reasons he was given such preferential treatment are (1) Carter fund‐raiser Jack Stephens made sure “it would be difficult to refuse the relationship” and (2) Robert Abboud wanted a friend in the Carter White House.

Will our suddenly vigilant Senator Ribicoff send the Lance testimony to the Justice Department for examination for perjury? If so, it would be left, to Lance crony Charles Kirbo's former correspondent lawyer, Criminal Division chief Ben Civiletti, to handle with care. The cause of justice would be better served with a special prosecutor to be the skunk at the garden party.