After President-elect Jimmy Carter announced that his friend Bert Lance would head the Office of Management and Budget, reportedly a number of officials in the Comptroller of the Currency's Office openly discussed ways to block the appointment.
As national bank regulators, these officials had intimate knowledge of the operations of the two banks that Lance had headed. Calhoun (Ga.) First National Bank and National Bank of Georgia in Atlanta.
They were troubled by both legal and ethical questions.
"There was a debate about what to reveal about Lance." recalls a source inside the comptroller's office. "We were trying to figure out how to stop him."
One reason for concern was that examiners from the comptroller's office had turned up overdrafts up to $150,000 by Lance at his Calhoun bank. Some of these funds had been used to finance Lance's unsuccessful campaign for the Georgia gubernatorial nomination in 1974.
Lance had signed an agreement that he would make good the overdrafts and he did.
But national banks, under law, are prohibited from making contributions to political campaigns, and the Lance overdrafts raised the possibility that the law had been violated.
"We had done a good investigation at Calhoun," recalled the source in the comptroller's office. "We were proud of it. But something went wrong after we gave our findings to Justice for prosecution."
At the Department of Justice, the case remained in the hands of the U.S. attorney's office in Atlanta for 11 months. It was not pressed. On Dec. 1, 1976, two days before Carter announced the Lance nomination, the case was terminated.
The assistant U.S. attorney in Atlanta, in charge of the Lance case there, was Jeff Bogart. Recently he has expressed frustration with the handling of the entire matter, saying he was being held back from prosecuting.
Bogart has been quoted by Newsweek magazine - a quote he confirmed - as saying that Calhoun First National was run like a "piggybank."
A source in the comptroller's office said Calhoun National had long been a subject of inquiry because of allegedly slipshod management practices. Lance was president of Calhoun before joining National Bank of Georgia as president in 1975.
The comptroller's probe of the management practices at Calhoun wound up just before Lance was named budget director. About the same time, the case involving the overdrafts was officially abandoned.
It was the outcome of the two inquiries that triggered the internal debate in the comptroller's office on whether - and how - to try to block the Lance nomination.
But apparently the misgivings about the Lance nomination were not conveyed to the Senate Committee on Governmental Affairs, which after two days of hearings confirmed lance.
Nor, according to the comptroller's office source, was the information given to the FBI, which routinely checks the records of nominees to high government posts.
On July 21, the new comptroller of the currency. John Heiman, was officially sworn in. Next day, after reading a Washington Post report about bank loans to Lance, Heimann ordered a broad investigation of these dealings.
A source familiar with the first days of Heimann's tenure recalls that the new comptroller, who had a reputation as a tough regulator while New York State banking commissioner, was fearful of getting caught up in a "cover-up."
So Heimann called on another branch of the Treasury Department, the intelligence unit of the Internal Revenue Service, to question all those involved in any phase of regulating Lance's two banks.
The results of the IRS investigation are still unknown, but one official in the comptroller's office, who was questioned for three hours by the IRS, later stated flatly that the FBI and others were mailed about Lance.
During Lance's confirmation hearings, a letter was introduced from then acting Comptroller Robert Bloom. He cited the overdrafts at the Calhoun bank but added that in his opinion Lance was well qualified for the position of budget director.
Bloom has returned to his position of deputy comptroller since Heimann's confirmation.
As has been reported earlier, particularly a plane owned by National Bank of Georgia, is a target of the current investigation by the comptroller's office.
One question is whether Lance used the plane for personal travel. If so, he would probably have to declare the value of such trips as income on his tax return.
In a January interview with Washington Post reporter Ronald Kessler, Lance confirmed that he had been using NBG's twin-engine Beechcraft King Air 200 for himself and his family since Carter's election.
He said he would reimburse the bank, as he had in the past, if the trips were personal, but he questioned whether they were.
"If I'm using it for getting situated, I don't think there's anything wrong with it," Lance said.
Flight plans filed with the Federal Aviation Administration show the plane flew from Atlanta to Washington on Jan. 14 and 16, and from Washington to Atlanta on Jan. 23. Passengers on the last flight were Lance's son and a relative of his wife. The pilot, Vann W. Warren, is an NBG employee.
In the January interview, Lance said the bank would tell him if he should pay for the trips. But William E. Gree Jr., executive vice president of NBG, disagreed.
"As long as Mr. Lance was the chief executive officer of the bank he was in the best position to make the judgment on the purpose of the trip," he said. "He tells us if it's personal or not."
The bank has since sold the plane. CAPTION: Picture, BERT LANCE . . . $150,000 in bank overdrafts