The morning news. [volume] (Savannah, Ga.) 1887-1900, 1891-06-15
CRASH OF THE KEYSTONE.
CONTROLLER LACEY's REPORT TO
SECRETARY FOSTER

The First Intimation of Ex-Prss.dent
Lucas DefAlcation Received by the
Controller Jan. 26-The Promise to
Make it Good Resulted in tae Matter
Peiug flushed Up.
WASHINGTON, June 14.-The statement
TO Secretary Foster by E. s. Lacey. con-
rroller Of the currency, of the facts leading
ND to the final closing OF the Keystone
National Bank and the appointment of a
receiver therefor, was made public to-day.
Mr.. Lacey SAYS the frat information received
by him in reference to President
Lucas defalcation was contained in
n communication received Jan. 26 from
Bank Examiner Drew. The controller
quotes Examiner Drew's communication
and says 1T will be noticed that the bank
examiner, in the communication above
quoted, states that the indebtedness of Presi-
dent Lucas estate had been heretofore con-
cealed and amounted to $500, 900, aud that
the amount thereof had been verified by ex-
animation subsequently, made by the bank
examiner.
DEATH BED PLEDGE.
ut is also to be observed that, SO far as
the letter shows, this confession was made
by President Marsh Jan. 8. OF his own mo-
ton. and that be was said to have been at
first ignorantly led into the irregular trans
actions by the late President Lucas, whose
protege he was, and to whom he was under
very great obligations, and that President
Lucas had on his death-bed exected a
promise from President Marsh to continue
the deception until the missing sum could
be made good from the results of President
Lucas enterprises. It is further to be
noted that the statement is made that no
evidence appeared that President Marsh
had prohted in the least by
these Irregularities, ana that he had since
the disclosure faithfully and earnestly CO.
operated in all the efforts to assist the bank
to secure property to make good the in
dahtedness, and that his intimate knowl-
edge of the matters connected with the
affair was almost indispensable.
WANTED 1T KEPT QUIET.
ut is also to be observed that the letter
ST tes that the directors of the bank, seven
members of the clearing house committee,
the counsel on either side lone of whom was
the United States attorney for Philadel-
phia) and the bank examiner himself were
the only persons who had knowledge Of
the indebtedness of the Lucas estate
and Of the conveyance OF the property.
which, SO far as the report shows, made
2ooI the sum abstracted. 1t is also to be
observed that in Examiner Drew's opinion,
and presumably upon consultation with the
gentlemen named, and upon their advice,
1t was important that no publicity be given
TO the affair until the bank should be fully
rehabilitated.
A GRAVE RESPONSIBILITY.
Upon the receipt Of this report the eon>
troller was confronted with grave respon-
sibility. The entire country had but
recently passed through crisis, caused by
severe monetary stringency, which made
absolutely necessary the issuing of clear
Ing house certificates in three of
the great seaboard cities. The uneasiness
caused by this situation had been greatly
aggravated in Philadelphia by reason of
the failure Of several large private and
state banking houses, and by run which
had been made upon the Keystone National
Bank in December, under the effects of
which it was still suffering.
HAD wEATHERED THE STORM
1t is also true that the Keystone Ma
tional Bank had passed through severe
ri is in December and been able to weather
storm, with 5000, 200 less assets than it
'ai when this report reachad the controller
1t is evident that the controller could
lot at this time have lawfully have closed
J1e hank, nor c)u.d he have even levied
al assessment to make good the impair
ment of the capital, AS none existed, ac-
cordi1g to this report. The danger then
vas for the time past, and the controller
decided to await the arrival OF Mr. Drew
on Jan. q, the day following the receipt OF
this communication, when full considera-
ton of the situation in Philadelphia was
entered upon and it was exhaustively dis
cuSsed.n
NO AUTHORITY TO CLOSE 1T.
The controller says that after consultation
with Mr.. Drew he did not close the bank
Tor the reason that he had no lawful author
lty to do so upon the facts submitted. and
tor the further reason that he was advised
oy the bank examiner that the capital of the
pank was unimpaired; that the creditors
were therefore fully protected, and that a
prompt effort would be made to replenish
tne cash by deposits OF $500, 900 to be made
by leading directors and stockholders, which
should place il in funds until Its own assets
became available.
IT'S CAPITAL IMPAIRED.
The controller quotes telegram of Jan.
81 and TWO letters of Feb. 16 and II from
MIR. Drew, and then says: "The next com
munication referring to this matter seems
10 hove been the final and formal report, as
developed by the examination, which has
been In process continuously since
the communication of Jan. "a.
This was dated Feb. % and
reached me on March 2. Having duly
considered all the items stated in this re-
PSoi 10 became apparent tnat lmparment
OF the capital existed to the extent of at
least $3.50, 900, whereupon. under date of
March Z, l levied an assessment Of $3.50, 900
upon the association, to make good the Inn
Palrment of its capital to that amount, un-
DER the provisions Of section 5205 of the
Revised Statutes Of the United State5.n
FAILED TO PAY UP.
The controller says the assessment was
levied under a positive promise by a COM
mittee, consisting of Messrs. Haines, Hughey
and Marsh, who visited him, that the
amount would be paid within week. Not
having been advised that the amount had
oeen paid in accordance with the agree
,ment. he wrote Mr.. Drew March
Is, asSing what had been done in
ne matter. In response Mr.. Drew
informed him the matter had been
!ald before the board, but the board had
not lnaugurated any measures to obtain it,
aod no portion had been paid in, and said:
although the old board of eleven members
wes Reelected in January last, several of
mem have failed dssignedly to qualify or
uaYe rendered their designations
TWO OF THE BIG STOCKHOLDERS.
Among them d. z. s. Nichols. who l
nad hoped would accept for the time being
az least the vice presidency, and who Is
president of the Central Trust Company.
with quarters in the same room with the
oank, and Charles McFadden, who rendered