A previously unpublicised investigation into Bert Lance's use of an airplane belonging to National Bank of Georgia was opened last December and ordered dropped by the acting comptroller of the currency on March 31 of this year, it was learned yesterday.
Sen. John H. Heinz III (R-Pa) revealed yesterday at hearing of the Senate Committee on Governmental Affairs that the inquiry had been opened in December and subsequently dropped.
Later yesterday it was learned that a bank examiner in Atlanta, Emory Wayne Rushton, asked his boss there, Donald Tarleton, to authorize him to interview Lance to pursue such an inquiry. In the course of a regular examination of the bank, Rushton had found that records on the plane at NBG (of which Lance was president) were badly jumbled.
Tarleton passed this request on to the acting comptroller of the currency, Robert Bloom. On March 31, Bloom wrote a memo saying Lance's use of the NBG plane had been "deminimus" sources said, and refused the request to pursue the inquiry.
Both Tarleton and Bloom knew Lance personally. Bloom has testified that he talked to Lance in March or April-not for the first time-about who might get the job of comptroller of the currency, which Bloom admittedly sought.
Lance denied yesterday, under questioning by Heinz, that he had talked to BLoom about this airplane inquiry.
After investigating Lance's affairs this summer, the comptroller's office decided that his use of the NBG airplane should be referred to the Department of Justice, the Internal Revenue Service and the Securities and Exchange Commision for possible criminal or civil legal action.
Sen. Charles H. Percy (R-III) introduced new details last evening on Lance's use of the NBG airplane, and asked Lance to explain many of the trips he took. These new details were produced by the comptroller's investigation this summer.
Percy asked about flights by Lance, his wife and other family members to University of Georgia football games last fall, and to New Orleans in the spring of 1976 for the Mardi Grs festival. Lance defended all these trips as in leeping with his goal of seeking new business and building a new image for NBG as its president.
Percy said he had been to the Mardi Gras himself and observed that the festival is delightful but "hardly seems to be the atmosphere for developing serious business."
Responded Lance, "There are some people who say that about Washington, Senator."
Percy also brought out the fact that in early 1974 Lance personally bought a Beechcraft airplane that was seven or eight years old for $80,000, and sold it to NBG 18 months later for $120,000.
Lance's strongest supporter on the Senate committee, fellow Georgian Sam Nunn, offered a summation for "the defense" yesterday and said the charges against Lance should now be "dismissed." But other senators obviously disagreed.
More systematically and thoroughly than they have before, several senators carefully cross-examined the directors of the Office of Management and Budget,producing some new damaging material.
Lance was also able to score points against some of his questioners, most notably Heinz, who challenged him to "explain the ethics" of simultaneously accepting full-time salsries as director of the stae highway department in Georgia and as chairman of First National Bank in Calhoun, Ga-as Lance did in the early 1970's.
Lance gave a long reply, saying in part "In the process of making a decision about our going into public service in Georgia in 1970 . . . LaBelle and I faced with a very difficult decision . . . Do we disrupt our family life to make that kind of sacrifice? . . . What do we do about the salary situation? . . ."
"We made the decision" Lance then said, "to devote the salary (of the state highway director,$25,000 a year) to a proper charity."
Lance had other good moments during a long day and evening of questioning, but he also had a number of bad moments.
Two of these involved Lance's testimony to the same Senate committee in January, at his confirmation hearing. At the time Lance briefly discussed the fact that the Justice Department had investigated overdrafts that his Calhoun bank allowed to two accounts used by his campaign for governor in 1974.
Among other things, Lance said in January that after official investigations into those campaign overdrafts, "there appeared to be no cause that there was anything that was wrong with regards to the overdrafts . . ."
Yesterday Sen. Jacob Javits (R-N.Y.) questioned Lance in detail about the campaign overdrafts, which exceeded $150,000. Javits elicited an acknowledgement that Lance had signed a personal guarantee for these overdrafts, so in a sense they were loans to him - "an indirect indebtedness," Lance called it.
[TEXT OMITTED FROM SOURCE] drafts violations of the federal law restricting a bank's loans to its own officers for general purposes to $5,000. Lance said he didn't think it was a violation.
Javits asked if Lance could say those overdrafts had not been criticized by federal bank examiners, since the examiners explicitly ordered the bank to provide no more financial support to any Lance political campaign in a cease-and-desist agreement imposed on the bank in December, 1975.
By then, Lance said, the campaign overdrafts were past history - "it was all paid off, and at a high rate of interest."
Sen. Bill Roth (R-Del) returned to this issue later. He asked how Lance could hae told the committee in January that "there was no cause that there was anything that was wrong with regard to the overdrafts," given the way bank examiners had criticized them.
"Senator," said Lance, "in response to that I think it's obvious that they lookedinto the case and my reference was to the fact that it was throughly investigated."
Overdrafts remain the subject on which the senators appear to feel Lance was most vulnerable. Even Nunn, who has tried repeatedly to help Lance, said yesterday that the overdraft question "has emerged as one of the most serious issues."
Roth challenged Lance on a letter he wrote to a regional federal bank administrator in October, 1973, promised to take "immediate action" to clear up overdrafts by bank insiders that examiners had discovered and criticized.
"You pledged your word that immediateaction would be taken," Roth said. "The action was not taken."
Lance replied: "Senator, the action was taken. And there was on criticism of the overdraft sitution in the examiners' report of 1974."
What Lance did not mention was that insider overdrafts at the bank grew the pledge of "immediate action." The comptroller of the currency has testified to the Senate committee that the 1974 examiners' report omitted mention of the overdrafts only because of an "oversight." Action was taken to stop the overdrafts only after the bank examiners imposed a cease and desist agreement on the Calhoun bank in December, 1975.
Several senators queried Lance about whether he had tried to conceal information about his past from the Senate, or from President Carter, or whether he had used his influence as a protere of Carter's to quash investigation in his affairs.
Lance appeared to effectively refute one accusation along these lines made by Sen. Charles McC. Mathias (R-Md).
On Friday Mathias said he had information that Lance had tried to delay the beginning of an FBI back ground check until the end of December of last year.
Yesterday Lance said he had looked up the dates and found that he authorized the FBI to begin its inquiry into his background on Dec. 15, and that the FBI did began on Dec. 23. Mathias accepted his explanation.
Lance denied flatly that his attorney, Sidney Smith, had asked the U.S. attorney in Atlanta to close the pending but inactive case against him involving the campaign overdrafts at the Calhoun bank. (The bank examination had referred this matter to the Justice Department for possible prosecution.)
Smith's own account of a phone call to the U.S. attorney in Atlanta, John Stokes, was read to Lance. Smith told investigators he "asked Mr. Stokes if there was any reason the case could not be closed before Bert's nomination" to head OMB.
Lance reiterated that he had not asked Smith to try to get the case closed. In the event, it was closed a day after that phone call.
Lance did not deny a statement by Robert Bloom, then acting comptroller, that Lance did not want to release to the FBI a copy of the cease and desist agreement with the Calhoun bank, though he also refused explicitly to confirm this recollection by Bloom. Lance insisted that he wanted to protect innocent third parties, and was always ready to make full disclosure about matters involving only himself.
The cease and desist agreement-normally a completely confidential document-contained strong criticisms of the management of the Calhoun bank, some of which reflected on Lance as chairman, and also criticized the Lance family and political overdrafts.
Mathias challenged Lance on his reported failure tonotify fellow directors of the two banks he ran aboutloans he had personally taken out with other financial institutions, as required by federal law. Mathias noted that, according to a comptroller's investigation of Lance's affairs, he did report five such loans-an indication, Mathias said, that he knew the law, and Lance agreed he did -but did not report 50 others.
"Senator, I'll be very frank . . .," Lance replied. "I did not do a good job meeting the reporting requirements."
"The obligation is absolute," Mathias said. "At least that's the way I read it."
Lance, hunched over the microphones on the witness table,did no reply.
Committee Chairman Abraham Ribicoff (D-Conn) asked why Lance had not reported fully in his financial disclosure statement to the Senate on his partnerships, especially two that he controlled either 100 per cent (with his wife) or 90 per cent.
Lance replied that he had followed normal accounting procedure by reporting the net assets of all his partnerships. But Ribicoff disagreed that this single figure was adequate under the circumstances, and asked Lance to provide more details.
Ribicoff also proposed that the General Accounting Office audit Lance's financial statement of January to determine the current value of his assets and liabilities. Ribicoff said this would be needed to help the commitee decide if it should grant Lance'srequest to extend the year-end deadline on the sale of his National Bank of Georgia stock.
The request to extend that deadline, which Lance with the Senate, is what set off the Lance affair this summer.
Lance objected to the idea of a GAO audit. Ribicoff said the committee would have to vote on that later.
Lance revealed yesterday that one of his partnerships, "L & M," comprised of himself, the trustee who now manages his private finances and another man, and controlled 90 per cent by Lance, was organized "to deal with" large debts remaining from his 1974 campaign for governor of Georgia.
This is a new element in the complicated story of the financing of that campaign, but Lance was not asked to explain what role this partnership actually played in regard to that campaaign debt.