The morning call., 1891-06-15

been made public by the Secretary of the
Treasury. to whom it is addressed. 1t is a
volun:nous document, containing 5000 words,
and embodies correspondence and papers
bearing upon the Quaker City's financial
scandal. The statement, which is in the
form of communication to Secretary FoS
ter, bears the date of June 10th, and runs
substantially as follows:
LUCAS DEFALCATIoN.
Str: have ihe honor 10 submit herewith
statement OF the facts leading up 10 the 1nal
closing OF the Keystone National Bank, and TO
the appointment of re ceiveT therefor. The first
information which reached me In reference 10
what has been known as The Lucas defalcation.
| was cont aimed IN communication addressed 10
me by Bank: Examiner Drew from Philadelphia,
| daled January "a, 1891. and rec lVed by me
January 26Ih. In this communication Mr.. Drew
saws that on entering into an examination of the
Keystone National Bank on the 9Th inst, he was
informed by the President OF the bank that there
HOul d be disclosed a hitherto effectually con-
ceaied debt 10 the bank of its late President,
John I. Lucas, amounting 10 100000
REAL ESTATE sPECULATIoNs.
MIR. Drew then explains how, by the adroit
manipulation OF the accounts Of The bank, Lucas,
with the assistance OF Marsh, the former cashier
OF the bank, distracted large sums Of money
from The bank 10 use IN specuallonS ID real es'
tate at Spring Lake aud Sea Gir n. j., and the
construction Of the large building In Phiadel-
phia. now occupied IN part by The bank. To
protect The bank as far as possible Drew took
measures, with The assistance OF United States
District Attorney Read, 10 secure for the bank,
without publicity, whatever property belonged
10 The estate OF Lucas, and succeeded In obtain
ing the property used by the bank as banking
house for s225, 900 aud property al Spring Lake
and Sea Girt
A DEATH-BED PROMISE.
Marsh, Drew reported. was ignorantly led into
these transactions, aud promised Lucas when
the latter WAS on his deaIh.bcd 10 continue The
deception under representations that tile money
distracted would soon be returned TO the bank
from the result OF Lucas enterprises. He also
reported that there was no evidence that Marsh
had prohted by these irregularities. Drew
closed by stating that, beyond the Directors OF
the bank. seven members Of The Clearing house
CommitIee, counsel on lther side aud himself
no one had any knowledge or suspicion. as far
as lie could say. that The bank was IN any trou-
bic, ana earnestly hoped no publicity would be
given 10 the affair until the BANK should he
habilitaled, OF efforts TO that end were found
futile.
Accompanying this letter was prelmin.
airy statement of the banks condition, which.
after considering the probable losses. left
the capital stock of S500000 intact and a
net plus of S53,S19. Upon the receipt of
this report the Comptroller was confronted
with grave responsibility.
CAPITAL UNndPAIRED.
Lacey's statement then reverts to the
financial stringeney at many points, and re-
fers 10 the calamitiOus results that might
have followed Immediately upon the dis
closure of the situation or the ousting of
President Marsh; The Keystone National
Bank passed through a severe crisis
in December, and had been able to
weather the storm with 100000 less
assets than it had when this report
reached the Comptroller 1t is evident
the Comptroller would not on this showing
lawfully have closed the bank, nor could he
have even levied an assessment to make
good the impaired capital, as none existed,
according to this report. January 9Th Mr.
Drew came to Washing on and in an inter-
view with the Comptroller stated that in his
judgment and in the opinion Of the Clearing
house Committee, the property conveyed to
the bank by the Lucas estate was equal in
value to the Indebtedness which had been
concealed, and that in any event the credi-
tors Of the bank were entirely safe.
DEFICIENT RESERVE.
1t was, however, deemed necessary that
additional funds should be placed in the
bank. as its reserve had been deficient for a
large part of the time since the run in De-
cember, and while the real estate conveyed
10 the bank would ultimately produce sum
equal to the debt which it was to liquidate,
the cash III the bank needed 10 be promptly
reinforced by the sale of the real estate or
the reduction Of its line of discounts. 1t
was, therefore, after very serious cOnsidera-
tion deemed best for the bank and its cred
itOTS, for the other banking associations and
for the city of Philadelphia. whose Treas
ureT had an active account in the bank, that
Drew should continue his examination of
the bank and promptly place his assistant
Mr.. Jones, in charge of the books, with the
understanding that the active Director of
the bank should visit it daily.
PRESIDENT MARSH.
Under these conditions the Comptroller
did not insist upon the immediate resigna-
tOn of President Marsh, although it was
understood he was to remain only so long
as his services were absolutely necessary in
adjusting the irregularity which had grown
up under his management. as he was. since
the death OF Lucas, the only person living
who was cOnverSant with the operations
which resulted so dsastrously to the bank
The Comptroller, therefore, did not close
the bank at the time, for the reason that he
had no lawful right to do SO upon the facts
submitted, and for the reason that he was
advised by the Bank Examiner that the
capital of the bank was uDimpaired and the
banks creditors, therefore, amply protected
and that prompt efforts would be made to
repleniSh the cash by deposit of $780, 900
to be made by the leading Directors and
stockholders. which would place it in funds
until its own accounts became available.
DREw's REPORT.
The statement of Lacey then details in eX-
tense the succeeding steps in the business.
On January 30th Drew telegraphed that the
prospects were encouraging. On February
18TH Lacey was in Philadelphia and met
leading Directors of the bank, and it was
agreed that the reserve of the bank should
be restored and maintained. On February 18th
Drew transmitted his complete report of the
banks condition and said: ut will take
much time to fully untange the methods by
which Lucas deficiency was abstraeted."
Drew, in his letter. adds: The whole
amount of the loss has been appropriated
by the late President and his friends l am
more aud more convinced. l have felt that
the present President, who was cashier uu-
der Lucas, has not been involved in the
defacaLions further than TO have been n
o0edient instrument of the peeulating and
designing chief but within day or two
have been forced to entertain suspicious OF
him. / hOre these suspicious are groundless,
but i shall endeav0r to satisfy myself as soon
as cam"
A SUGGESTION FROM LACEY.
Drew had laid before the Directors the
Comptroller's conclusions about an assess
ment, and while some we're willing to pay.
others feared the order would create an-
other attack on the bank. On February
Goth Comptroller Lacey wrote to Drew ac-
knowledging the receipt of the draft of
Drew's iull report, and directed him to give
an estimate OF the exact value OF the re-
sources and estimate Of the discount upon
each class of investments
MY object III this ia. if possible" wrote
Lacey, ito arrive at precisely the amount of
the deficiency 1t is necessary to make up by
an assessment upon the capital stock. L
should be glad to see any committee of the
board which may visit Washington, but can
conceive no better way TO put the institu-
tlon in first-class shape than that suggested
by me. One thing is certain, that some
action is imperatiyely necessary, and the
sooner it Is taken the better will be the re-
suits"
A FINAL REPORT.
The next communication referring to this
matter seems to have been a final and for
NAL report as developed by the examination,
which had been in progress continually since
the communication Of January oath. This
March I'd: "Having duly considered all the
items stated in this report" says Lacey.
III became annarant an impairment of the