Following is the text of a letter yesterday from John G. Heimann, comptroller of the currency, to Sen. Abraham A. Ribicoff, chairman of the Governmental Affairs Committee:

Dear Mr. Chairman:

On July 12, 1977 when I assumed office as comptroller of the currency, I was aware of allegations from various quarters that T. Bertram Lance, director, Office of Management and Budget, prior to his assumption of that office, may have committed infractions of law or regulations relating to national banks. An inquiry was begun by my office into these allegations on July 14, 1977, and the Secretary of the Treasury was so informed. On July 21, 1977, the secretary told me that the President expected me to take such action as was appropriate to carry out the responsibilities of my office.

Prior to the hearing of your committee on July 25, 1977, at which Mr. Lance testified, you inquired as to the actions the Office of the Comptroller was taking concerning such allegations. I informed you that I had initiated an inquiry into such allegations, and you asked to be supplied with the results of that inquiry as promptly as practicable. That requests was confirmed at the July 25, 1977, public hearing of the committee. Subsequently, I have received request for a report from the chairman and the ranking minority members of the U.S. Senate Committee on Banking, Housing and Urban Affairs and the Committee on Banking, Finance and Urban Affairs for specified information from several other members of the Congress.

As you know, the general responsibility of his office is to supervise the activities of, and to enforce the laws and regulations relating to national banks. The office has no authority to prosecute violations of criminal statutes or to enforce the laws that do not relate to national banks. Prior to becoming director of the Office of Management and Budget, Mr. Lance had served as an executive of two national banks, the National Bank of Georgia and the Calhoun First National Bank. Since the allegations involved activities relating to these two national banks, the comptroller clearly had a duty to make an appropriate inquiry. In order to produce a report within a reasonable time, this inquiry has covered principally the priod sice January, 1975. I also want to stress that it has not dealt with matters which fall outside of the general jurisdiction of this office, that is, matters that do not relate to national banks.

This report has been compiled from the files of this office, extensive examination of the records of banks through the use of this office's bank examination process, and depositions under oath of a number of individuals. Assistance was rendered by several other state and federal banking agencies. As you know, there are statutory restrictions on the public disclosure of material from bank examinations. Mr. Lance has informed me that he has no objection to the public release of any information relating to him. However, question about the rights ot privacy of other individuals are raised by some portions of this inquiry and the propriety of the public release of information previously supplied to the Department of Justice. Accordingly, this report has been divided into an extensive summary of the date generated by the inquiry and certain conclusions that the office has drawn from the data, and exhibits consisting of copies of documents that provide the basis for the statements in the summary.

To accommodate unique circumstances here involved, we have attempted to write the summaries so that their public release would not unacceptably compromise the privacy of individuals or raise any question about the release of bank examination material. While none of the exhibits raises any substantial question concerning the solvency or condition of any bank, you and the chairman of the other committees to whom I am transmitting copies of this report may wish to review the exhibits to determine whether the benefits from their public release outweigh individuals' rights to privacy and the general principles protecting bank examination material from public release. In addition, we are not transmitting to you at this time transcripts of depositions taken and copies of material previously transmitted to the Department of Justice on Dec. 24. 1975. Should you desire such material. I will be glad to undertake arrangements to make it available to yoU.

While we have endeavored to complete this inquiry expeditiously, the following areas remain to be concluded:

1. It became clear to me in the first days of this inquiry that certain parts of the inquiry involved questions as to whether employees of this office had correctly followed the internal rules and regulation of our office and of the Department of the Treasury and as to whether they had properly performed their responsibilities. Accordingly, i requested the assistance of the Secretary of the Treasury, to whom this office is responsible, since I felt an inquiry into this subject could not properly be conducted by personnel of this office. On July 18, 1977. the secretary directed the assistant commissioner for inspection of the Internal Revenue Service to conduct such an inquiry under my general supervision. The inspection services has had extensive experience in conducting such inquiries, and I am informed that the Department of the Treasury has followed this procedure in the past in analogous situations. The results of this inquiry will not be available for several weeks, but I have not reason to beleive it will reveal any violation of any applicable law or regulation by Mr. Lance not covered by this report.

2. Allegations have been made that the National Bank of Georgia may not have adequately controlled the accounts relating to owner or leased aircraft in the priod from February, 1975, to the present. The inquiry thus far conducted (which has included examination of available records and depositions of one witness) has not progressed to a point where any conclusions may properly be drawn.

3. In the course of this inquiry thus far, it has not been possible to resolve all matters that have come to that attention of this office, particularly where they relate to periods prior to 1975. We expected to pursue as appropriate all open matters but I did not believe it desirable to delay reporting on those areas which I believe have been the focus of your committee.

In addition to the conclusions stated in the body of the report, I beleive that it might be helpful to add a few general comments:

We do not believe the information developed to date in the inquiry warrants the prosecution of any individuals.

It is clear from the summary of information that Mr. Lance made his principal borrowings from banking institutions which had correspondent relationship, including deposit balances, with the banks in which Mr. Lance served as officer and director. This recurring pattern of shifting bank relationships and personal borrowing raises unresolved questions as to what constitutes acceptable banking practice. The office intends to address the question of whether its regulations under the Securities Exchange Act of 1934 or under other statues should be amended to require public disclosure of such practices or other remedial action.

The report recites that the management of the Calhoun First National Bank from 1972 to 1975 permitted officers, directors, some employees, and their families to overdraw checking accounts in substantial amounts for considerable priods of time. In the case of the Lance for Governor Campaign account, the facts were referred to the Department of Justice on Dec. 24, 1975. On Dec. 2, 1975, the office entered into an agreement pursuant to the Financial Institutions Supervisory Act of 1966 with the board of directors of Calhoun which, among other things, required management to cease permitting insiders to maintain overdrafts. The questionable averdraft practices were corrected in complaince with the agreement. The agreement itself was terminated by the regional administrator on Nov. 22, 1976.

As is developed fully in this summary, Mr. Lance did not file with the banks of which he was an officer certain reports of outside business interests and personal borrowing and of borrowing by his affiliates as required by statute or regulation in the years covered in this inquiry. If Mr. lance were still with the banks, the normal action of this office would be to direct that the reports forthwith be filed.

I look forward to continued cooperation with you and your committee, as well as the other intersted committees of the Congress, in this matter. If there is any you feel this office can be of assistance to you in your deliberations. I know you will call on us.

For your information, in addition to the copies of this report being furnished you and your ranking minority member, Sen. percy, I am also supplying minority members of the U.S. Senate Committee on Banking, Housing and Urban Affairs and of the Banking, Finance and urban Affairs Committee of the U.S. House of Representatives.


(s) John G. Heimann