Former federal budget director Bert Lance last week told top officials of Financial General Bankshares that he was interested in a senior position with the Washington-based bank holding company.
At the meeting last Tuesday, Lance told the officials that he represented foreign investors looking to buy a controlling share in the company. The investors, Lance reportedly said, had ties to Agha Hasan Abedi, a Pakistani-born London banker. It was Abedi who helped Lance sell his stock in the National Bank of Georgia last year.
Financial General Bankshares is the second-largest banking company in the Washington area. It has $2.2 billion in assets and controls Union First National Bank of Washington and nearly a dozen banks in Maryland and Virginia.
The meeting, according to several sources, took place at the Washington offices of Occidental Petroleum, whose chairman, Armand Hammer, also is a General Bankshares board member.
Hammer had planned to attend, but his flight to Washington was canceled because of snow. On hand for the meeting with Lance were Financial General's chairman, B. F. Saul, and its president, G. William Middendorf, former secretary of the Navy, Lance's son, David, was also present.
Hammer was reportedly to attend the meeting as a peacemaker among the various contending factions at General Bankshares.
An unpublicized corporate battle has been brewing for months over the Middendorf management at Financial General. A number of board members have quit, others have offered to sell their shares to outside interests.
Lance was reported to have said at the Tuesday meeting that there were persons in his group who wanted Middendorf removed.
This has led to speculation that the job Lance really wants at Financial General is the presidency.
In the middle of the takeover attempt is Financial General board member Eugne Metzger, a Washington attorney who acknowledged yesterday that he has been involved in sales of the stock, but insisted he had no connection with Lance. Shareholders asked to sell their stock, however, said that Metzger appeared to be associated with Lance.
Last Friday, because of investor confusion about the corporate battle, stock trading was suspended in Financial General, which is listedlon the American Stock Exchange.
Yesterday, the Secirities and Exchange Commission ordered the suspension to last for up to 10 days while it investigates.
According to sources, the SEC has taken statements from Saul and Middendorf about last Tuesday's meeting with Lance.
Lance's financial affairs in Georgia have been under investigation by the SEC since before he resigned as director of the President's Office of Management and Budget last September.
Before joining the Carter administration, Lance was chairman of National Bank of Georgia in Atlanta and also Calhoun First National Bank in Calhoun, Ga. His financial dealings while at these banks led to his resignation from the government.
Sources say the SEC will file a civil suit against Lance, probably next month, because of his bank dealings. A federal grand jury in Atlanta is listening to evidence to determine whether Lance should be indicted on criminal charges.
Stanley Sporkin, chief of the SEC's enforcement division, was quoted in a memo obtained last fall by The Washington Post as saying Lance might have to stay away from banking for a period of time as part of the settlement of an SEC suit.
But according to sources, Lance at last Tuesday's meeting said he knew of no reason why he could not return to banking.
Financial General's second-largest shareholder, Eugene B. Casey, said he met twice in the past three weeks with Lance to discuss selling his 8.6 percent of the company's shares.
"I told Bert Lance I like the cut of his jib.I'd like to see somebody like him in there," said Casey, "but I was not of a mind to sell."
A prominent Montgomery County developer and head of a private engineering company, Casey said he was prepared to nominate Armand Hammer as chairman of Financial General.
The buyers of the Financial General stock have not been identified because their purchases are small enough so they do not have to be reported to federal regulators.
The SEC and Federal Reserve require reports on purchases of 5 percent or more of a bank's stock. The biggest single block known to have been sold to the Lance interests was 4.9 percent.
SEC officials, however, say that because the buyers worked through the same interest and seem to have a common interest, the agency could still require disclosure. Metzger confirmed that SEC has already obtained the names of the stock purchasers.
After last Thursday's meeting, sources said, Lance announced he was leaving for Karachi, Pakistan, to meet with Abedi, who heads the London-based Bank of Credit and Commerce International.
Abedi's London office confirmed he was in Pakistan. It also issued a carefully worded statement saying: "The bank has not bought shares in Financial General nor is it involved in trying to gain full control of the U.S. bank."
Sources here said the shares were being bought by individuals acting for Abedi or the bank.