A typographical error in yesterday's article by Walter Pincus caused the amount of the loan received by Bert Lance from the First National Bank of Chicago to be stated as $13.4 million. The correct figure should have been $3.4 million.
President Carter's heartfelt defense of his friend Bert Lance and Mrs. Lance's touching statements about her husband and their faith in God - plus the passage of a couple of weeks - have already blurred what it was that gave rise to the Lance affair in the first place. It was not the usual conflict of interest that confronts most top appointees to government jobs who must consider whether their financial holdings may conflict with their official responsibilities.
In the case of Bert Lance the question was what he owed rather than what he owned . And that, of course, raised possible conflicts that could not be as easilly disposed of by the normal techniques of divestiture or creation of blind trusts.
Lance, as director of the Office of Management and Budget, was highly influential in top government councils - particulary those areas involving finance. He was also the President's eyes and ears with the banking and business communities.
At the same time, however, from the time he took office, Lance was deeply in debt to one major national bank and had loans - some of them uncollateralized - outstanding with at least a half dozen other banks.
Several of those bank loans - including the $13.4 million from the First National Bank of Chicago - were more on the eve of Lance's taking office. It was apparent to the bankers that Lance's personal income was going to be cut sharply as budget director (from $150,000 to $63,000), and he would not be able to work on his own personal investments. For a man such as Lance, who made his money from going in and out of deals with borrowed money, the latter inhibition was bound to cut further into his income.
The bankers were apparently willing to gamble.
A few months after Lance took office, however, his already tough financial situation took a downward turn. The National Bank of Georgia - whose stock was the keystone collateral for his Chicago loan - reported it had lost money during 1976, Lance's last year as its president. The NBG stock went down and Lance's collateral fell in value.
NBG also failed to pay its first common stock dividend in 1977 because of its loses. That put additional pressure on Thomas Mitchell. Lance's trustee who was now handling the finances, to come up with cash to meet interest payments.
Mitchell had to turn to the very bankers and businessmen whose own futures depend in part on government decisions for the money to bail the budget director out.
That was one concern over conflict when the Lance affair first became a public issue.
There was another element growing at the same time.
In 1973 and 1974, Lance, according to campaign fund reports filed in Atlanta, spend $1.2 million on his unsuccessful gubernatorial campaign. Those same records show the Lance campaign was able to raise from others only $300,000 - the remainder coming in the form of listed loans ($350,000) and an apparent additional deficit of $520,000 paid by lance or others after the campign or perhaps still outstanding.
In February 1972, a $100-a-plate dinner was held in Atlanta to pay campaign debts then outstanding. Some $80,000 was raised, according to L. L. Gellerstedt Jr., who was Lance's 1974 treasurer and held the same post for the dinner.
Prior to the dinner, its chairman, then-Atlanta lawyer Philip Alston, declared to newsmen that "Lance still owes some $350,000. . . ."
There was no accounting for receipts and despite the dinner income, Lance's campaign debt by the end of 1976 was higher than Alston had said it was 12 months earlier.
In December 1976 and January 1977 (after Lance was in government), his campaign committee borrowed a total of $390,000 from one Atlanta bank to pay off campaign debts.
Lance - while OMB director - personally guaranteed $250,000 of the loans although he was not required to put up any collateral.
The loans were due to be paid by Dec. 30, 1977.
A spokesman for Lance confirmed to newsmen that fundraising to pay off the old campaign debts was to be undertaken this year while Lance was in government - but not by Lance himself.
A second possible conflict thus existed. Who was to be solicited in 1977 to pay off three-year-old Georgia campaign debts for the present OMB director who was also the president's friend?
The White House knew it had a problem. Carter's counsel, Robert, Lipshutz, said recently he discussed possible fundraising with Lance, and they could find "no satisfactory way to go about it" so the effort was suspended.
There are no reports listed on any donors so far and under Georgia law, none are required. Furthermore there is no single accounting as to just how big the debt really is - and to whom the money is owed.
It was against the background of two possible conflicts of interest that the inquiries into Lance's past was undertaken - first by the press and then by the Congress.
Lance was not the average businessman coming to government whose past was being probed. His overdrafts, use of the bank's airplane, insider loans and apparent transfer of funds from one campaign loan to pay off another loan in his wife's name would not in themselves have forced the resignation of a top White House adviser - or even brought on the investigation.
They were, however, decisive given the conflict of interest problems Lance already faced as a consequence of his indebtedness.