Patting Bert On the Back

An overflow crowd packed Room 3302 of the Dirksen Senate Office Building last week, drawn by the promise of a heated confrontation between Budget Director Bert Lance and the Senate Governmental Affairs Committee. Lance had been called to answer accusations that he had acted improperly while president of the National Bank of Georgia, his job before joining the Carter Administration. The major charge was that the Georgia bank had wrongly deposited $200,000 of its funds at Chicago's First National Bank in exchange for a personal loan to Lance of $3.4 million (TIME, Aug. 1).

Seal of Approval. To the surprise of almost everyone at the hearing, the greatest heat came from the Senators' eagerness to heap praise on the budget director. In a remarkable turnaround from the deep concern that many of them had expressed only three days earlier about Lance's business affairs, they lobbed soft questions at him, asked even gentler follow-ups, and accepted his answers at face value. Ohio Democrat John Glenn wondered whether "Lance's assets include his closeness to President Carter." Continued Glenn: "None of us can answer that. I will skip that one." So it went for two hours and ten minutes, with Lance beaming broadly. Finally, Florida Democrat Lawton Chiles declared that the committee was giving him "our sort of Good Housekeeping seal of approval." It was clearly a reprieve for Lance, but not the final verdict. A more thorough probe of the Chicago loan by the U.S. Comptroller of the Currency may be completed by the end of this week.

What had cooled the committee members' ardor to investigate Lance? For one thing, the Democratic Senators doubtless were reluctant to tackle Carter's close and powerful associate. But other important reasons seem to have been the inconclusiveness of the charges against the budget director and his masterful, good-humored performance in the hearing room. Said one committee member afterward: "It would have been easier for us to go on the attack if he had come up here with a battery of lawyers and a prepared statement. But Lance came alone and barehanded. You've got to respect a guy for that."

In his testimony, Lance tried to shoot down the charges against him, one by one. He maintained that the deposit of the Georgia bank's funds in Chicago's First National was a "normal banking relationship" and had no connection with his personal loan. Noting that the interest rate on the loan is three-quarters of a percentage point above the prime rate, he declared: "It is payable quarterly, it is a demand note, and I think it is a proper rate."

Nor, he said, was there anything improper about the Teamsters Central States Pension Fund's turning over $18 million to the Georgia bank's trust department during the presidential primary campaign. Lance said the negotiations with the Teamsters had been handled by the bank's former chairman, King Cleveland. Added he: "It was the kind of business that an aggressive trust department would go after, and I saw nothing wrong with our being involved in trying to attract that business."

Toward the middle of the hearing, Republican Senator Charles Percy announced: "I am completely satisfied with your answers." Committee Chairman Abraham Ribicoff, who three days earlier had called for an investigation of Lance, now rebuked the press for overzealousness. Said he: "You have been smeared from one end of the country to the other, in my opinion unjustly. There is not a thing that has developed in any way that impugns your character or your reputation or your ability."

The trustee for Lance's investments, Thomas Mitchell, contributed to the Senators' balmy mood by announcing before the hearing that "definitive negotiations" had begun for the sale of the budget director's 200,000 shares of Georgia bank stock, most of which Lance had bought in 1975 with $2.7 million borrowed from Manhattan's Manufacturers Hanover Trust. He later refinanced this debt with the loan from Chicago's First National. The potential buyer of Lance's stock is reclusive Atlanta Businessman David N. Smith, 39, who became a millionaire by selling tape-recorded language lessons overseas and minicomputers to biorhythm cultists. He wants the shares as the opening wedge in a financial transaction that would eventually make him the largest single shareholder in the Georgia bank. Smith has indicated that he would be willing to pay approximately what Lance paid for the stock--$17 a share, about $5 above the present market price.

The premium price set off speculation that the deal was as much a political as a financial bailout for Lance. Smith, a Republican, and his financial adviser, former Business Executive Henry Woodbridge of Pomfret, Conn., insisted that they conceived their plan to buy into a bank before they learned of Lance's problems. But Smith told TIME he had another purpose as well: "I wanted to contribute my little part to knocking out the hassle within the Government. Bert hadn't done anything wrong."

Lance pointedly kept his distance from Smith's representatives. Said Woodbridge, recalling how discussions of the stock purchase started: "I called Mr. Lance, and the conversation lasted 15 seconds. He said, 'I am not able to discuss this. Give me a phone number, and someone will call you.' "

Gun-Shy. Woodbridge emphasized that the deal could still fall through. The chief obstacles are the Georgia bank's other major stockholders, who may oppose Smith's bid for a greater proportion of stock than Lance's 16%, and the publicity, which has made Smith somewhat gun-shy. If the deal does fall apart, Lance may have to ask the Ribicoff committee to extend the Dec. 31 deadline for selling the stock that was set before his confirmation in January. Judging by the friendly reception he received last week, getting an extension will be no problem.

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