The record-union., 1891-06-15
Special to the RECoRD-UN1oN.

Special to the RECoRD-UNIoN.
WASHINGTON, June 14.-After careful
preparation, and after submission to his
superiors, the statement of Comptroller
of Currency Lacey, relative to the down
fall of the keystone Bank Of Philadelphia
has been made public by the Secretary OF
the Treasury, to whom it is addressed II
is voluminous document containing
nine thousand words, and embodies cor
respondence and papers bearing upon
the Quaker City's financial scandal. The
statement, which is in the form of com
munication to Secretary Foster, bears
date of June 10th, and runs substantially
as follows:
II have the honor to submit here
with statement of the facts leading uu
to the final closing of the keystone Ma
nonal Bank and the appointment of a
RecelVer therefor. The first information
referred by me in reference to what has
been known as the Lucas defalcation was
contained in communication addressed
to me by Bank Examiner Drew for Phil
adelphla, dated January "a, 1891, and
received by me January Goth. In this
communication, Mr.. Drew says that on
entering into an examination of the Key
Sl.,
was informed by the President that there
would be disclosed the hitherto effectually
concealed debt to the bank of its late
President, John c. Lucas, amounting to
100000.
''Mr. Drew then explained how, by
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 to use in speculations in real estate
at Spring Lake and Sea Girt, n. j., and
the construction of large building in
Philadelphia, 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 At
torney Read, to secure for the bank,
without publicity whatever, property be-
longing to the estate of Lucas, and sue
ceeded in obtaining the property used by
The bank as banking house for S225, ,000
and property at Spring Lake and Sea
Girt. Marsh, Drew reported, was ignor-
4ntly led in these transactions, and
promised Lucas, when the latter was on
his death bed. to continue the deception
under representations that this money
distracted would soon be returned to the
oank from the result of Lucas enter
prises. He also reported that there was
no evidence that Marsh had profited by
these irregularities. Drew closed by
stating that beyond the directors of the
bank, seven members of the Clearing
House Committee, counsel on either side
and himself, no one had any knowledge
0r suspicion, as far as he could say, that
she bank was in any trouble, and earnestly
loped that no publicity would be given to
Jhe affair until the bank should be re-
habilitated or the efforts to that end were
found futile.
Accompanying this letter was a pre-
iminary statement Of the banks condi-
ion, which, after reconsidering all prob
able losses, left the capital stock of
100000 intact, and net surplus of
;$53, ,Sl9"
Upon receipt of this report the Comp
yorller was confronted with grave re-
f5ponsibility. Lacey's statement then re-
gerts To the financial stringency at many
points, and refers to the calamitous result
hat might have followed Immediately
upon the disclosure of the situation, or the
ousting of President Marsh. The Key
stone National Bank passed through a
severe crisis in December, and had been
able TO weather the storm with 5000, 900
-ess assets than it had when this report
reached the Comptroller.
1t is evident that the Comptroller
could not at this time lawfully have
closed the bank, nor could he have even
levied an assessment to make good the
unpaid capital, as none existed.
According to this report, on January
9th Mr.. Drew came to Washington,
and, in an interview with the Comptrol-
Ter, stated that, in his judgment, and in
he opinion of the Clearing House Com
nittee, 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
creditors of the bank were entirely safe
1t was, however, deemed necessary that
additional funds should be placed
n the bank, as its reserve had
oeen deficient for a large part of the
.ime since the run in December,
and, while the real estate conveyed
20 the bank would ultimately produce
n sum equal to the debt which it was to
.iquidate, that the cash the bank needed
oe promptly reinforced, either by the
sale of real estate or the reduction in its
inc accounts. 1t was therefore after a
very serious consideration, deemed best
Gor the bank, for its creditors, for other
banking associations, and for the city of
Philadelphia, whose treasurer had an
active account in the bank, that Drew
should continue the examination of the
)ank, and promptly place his assistant,
Mr.. Jones, in charge of the books with
The understanding that the active direc-
Jors of the bank should visit it daily.
Under these conditions, and for these
reasons, the Comptroller did not insist
lpon the immediate resignation of Presi-
dent Marsh, although 1t was distinctly un-
derstood that he was TO remain only so long
;ts his services were absolutely necessary
N adjusting the irregularities which had
grown up under his management, as he
vas, since the death of Lucas, the only
person living who was conversant with
bhe operations which resulted so disas-
Jrously TO the bank.
The Comptoller, therefore, did not
close the bank at this time, for the reason
hat he had no lawful authority to do so
upon the facts submitted, and for the
-urther reason that he advised the Bank
Examiner that the capital of the bank
was unImpaired; that the creditors, there
1ore, were fully protected, and prompt
efforts would be made To replenish the
cash by deposit of $500, 900. to be made
oy the leading directors and stockhold-
ers, which should place in it funds until
lis own accounts became available.
The statement of Lacey then details in
extenso the succeeding steps in the busi-
ness. On January 30th Drew telegrapbed
that the prospects were encouraging. On
FEBRUARY 18th Lacey was in Philadel-
-1hja. and met the leading directors of the
f1ark. and il was agreed that the reserve of
he bank should be restored and main
aimed. On February 18th Drew trans
-nitted his complete report of the banks
condition, and says:
II will take much time to fully un-
angle the methods by which the Lucas