In October, 1979, the National Bank of Washington was on a collision course with federal bank examiners over a very sensitive issue: Joseph B. Danzansky.
Chairman of NBW and chairman emeritus at Giant Food Inc., Joe D., as his friends sometimes called him, was a revered figure in Washington, the city's Mr. Everything. He was active in politics. He fought to return baseball to the nation's capital and he helped bring professional soccer to RFK Stadium. President of the Greater Washington Board of Trade, chairman of the United Way -- you name it, Joe D. had done it for Washington.
But Danzansky presented the bank with a $2-million legal delimma. According to the agreement that made him NBW chairman in 1978, Danzansky was not supposed to function as an executive officer, whose job it is to set bank policies.
But as Danzansky was dying of cancer, federal bank examiners determined that he had been receiving salary and benefits from the bank as if he were an executive officer.
Executive officers of national banks such as NBW cannot, under federal law, receive loans from their banks in excess of $10,000. Danzansky's insider loans from NBW totaled nearly $2 million. Therefore, on the simple definition of who is and who is not an executive officer turned a question of great importance to Danzansky.
If it was determined that he was functioning as an executive officer, Danzansky would have to pay off the loans at NBW and attempt to refinance his various business ventures through other banks, federal officials told the bankers.
The story of how the late business leader was able to circumvent this law is one of "insider" privilege documented in the thousands of pages of bank records and more than 100 interviews that were part of a five-month investigation by The Washington Post.
Danzansky died before giving his own version of events inside the NBW board room. Without exception, friends and associates who knew him best during his 65 years say he was a man of the utmost integrity who put the interests of his city and his friends above his own.
When he became chairman of NBW in late 1978, Danzansky's agreement with United Mine Workers president Arnold Miller, whose coalfield union owns three quarters of the bank's stock, was that Danzansky would not run the day-to-day operations of the bank. That would be left to Dale L. Jernberg, the bank's new president.
Danzansky had said that he had no interest in becoming a fulltime banker. He had just finished a long career at Giant Food and President Carter had just named him to serve as chairman of the Pennsylvania Avenue Development Corp., the government corporation overseeing the restoration of Pennsylvania Avenue.
As a sort of figurehead and guiding force for the bank, Danzansky would receive a chairman's salary of $80,000, but not numerous other benefits that come with being a top officer of the bank.
Nevertheless, within months of Danzansky's appointment as chairman, he had begun sharing in the benefits reserved exclusively for the bank's executive officers.
He received a Cadillac purchased by the bank for his and his family's use. And he was chauffuered to and from his business destinations in the bank's limousine.
[About 15 of the bank's top officers receive free automobiles. The status of an officer could be discerned by his car: Mercedes and Cadillacs for the chairman and president, something less for executive vice presidents, and, for the senior vice presidents, Bonnevilles.]
The key incentive program into which Danzansky was included was the bank's executive bonus plan that paid top officers as much as one half their salaries if the bank's net profits grew by 15 percent or more per year. Danzansky would have been eligible to receive a $40,000 bonus for the 15 percent earnings increase the bank achieved in 1979.
Danzansky was only excluded from one of the major benefit programs -- a combination insurance and pension program -- available to the other top officers of the bank.
Aside from receiving executive benefits, a review of thousands of pages of minutes from the bank's executive committee on which Danzansky also served shows that the former chairman actively participated in setting bank policies on lending, ethics, foreclosure and the support of political campaigns.
Danansky had been an NBW director since 1969. At the time he was named NBW's chairman, he held a $650,000 loan from NBW at the bank's prime interest rate, usually reserved for the bank's best corporate customers. The loan carried a due date of March 1981, and was secured by stocks in other companies.
Danzansky also had guaranteed loans totalling $1.1 million for various real estate ventures, including a downtown Washington office building, a motel and other real estate in Miami, and a suburban Maryland development project.
Some of the loans had been at NBW for a long time. When federal examiners questioned the loans, the new NBW chairman told other bank officers that he did not want to move his loans to another bank. There ought to be some way to work out the problem of definitions, he told them.
The bank's officers and their lawyers reasoned that if the chairman's job could be structured so that legally it was little more than a director's post with a larger salary, then the bank would not have to require that Danzansky pay off the loans.
Internally, the bank's top officials, the mine workers leadership and the bank's general counsel, Ronald G. Nathan, decided that the bank would argue to regulatory authorities that Danzansky did not participate in setting bank policy and, therefore, was not an executive opinion.
During mid-October 1979, NBW president Dale L. Jernberg met with then-regional administrator of national banks Robert Herrmann.
On Oct. 24, Jernberg reported to the bank's executive committee. "Referring to the view of the examiner, with which NBW does not agree, that Mr. Danzansky is an executive officer of the bank, Mr. Herrmann advised that it was a legal matter and had been referred to counsel."
Two weeks later, the issue was moot. On Nov. 8, 1979, Joe Danzansky died.