Los Angeles herald., 1891-06-15

QUAKER CITY FRAUDS
Comptroller Lacey Makes a
Lengthy Report.
Circumstances of the Closing OF
the Keystone Bank.
The Blame for Blunders Committed
Shifted Upon Others.
Bank Examiner Drew Made the Official
Black sheep-John Wanamaker
Entirely Exonerated,
Associated Press Dispatches.

AssucAdtost IAcoo 0iSphtShcS.
WASHINGTON, June 14.-After careful
preparation, and after submission to his
superiors, the statement OF Comptroller
of the Currency Lacey relative to the
downfall of the Keystone bank OF Phila-
delphia has been made public by the
secretary of the treasury, to whom it is
addressed. 1t is voluminous doeu-
ment, containing 5000 words, and en-
bodies correspondence and papers bear
ing on the Quaker city's scandal. The
statement which is in the form of a
communication to Secretary Foster,
bears date June 10th, and runs substan-
TALLY as follows;
SIR: / have the honor to submit
herewith statement OF facts leading up
to the final closing of the Keystone Ma
tional bank and the appointment OF a
receiver therefor. The first informa-
tion referred to by me in reference to
what has been known as the Lucas de-
falcation, was contained in a communi-
cation addressed to me by Bank Exam
iner Drew Of Philadelphia, dated January
"a. 1891, and received by me January ,26.
r In this communication Mr.. Dire W
says, on entering upon an examin alton
of the Keystone National bank, the 9th
instant, he was informed by the presi-
dent that there would be disclosed a
hitherto effectually concealed debt to
the bank of its late president, Johu G..
Lucas, amounting to 100000.
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 or suspicion, 30 far as he
could say, that the bank was in any
trouble. and he earnestly hoped that no
publicity would be given to the affai r
until tie bank should be rehabilitated,
or the efforts to that end were found
futile.
Accompanying this letter was pre-
liminary statement of the banks condi-
tion, which, after reconsidering all prob
able losses, left the capital stock of $780, !
600 intact and a net surplus of S53. .819
Upon receipt of thisreport, the comp-
troller was confronted with grave re-
sponsibility.
Washington, and in an interview with
bn0 COiu pbIOllCl bbdtS0 tlidt iic JudH
ment, and in the opinion of the clearing
house committee, the property con-
veyed 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 in the bank, as its re-
serve had been deficient for large part
of the time since the run in December,
and while the real estate conveyed to
the bank would ultimately produce
a sum equal to the debt which it was to
liquidate, the cash OF the bank needed
to be promptly reinforced, either by the
sale OF real estate or a reduction of its
line of discounts. 1t was, therefore,
after very serious consideration, deemed
best for 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 bank, and promptly place his as
sistant, Mr.. Jones, in charge of the
books, with the understanding that
the active directors of the bank
should visit it daily. Under these
conditions and for these reasons
the comptroller did not insist upon the
immediate resignation of President
Marsh, although it was distinctly under
stood he was to remain only so long as
his services were absolutely necessary in
adjusting the Irregularities 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 dis
astrously to the bank.
The comptroller therefore did not
close the bank at this time, for the
reason that he had no lawful authority
to do 80 upon the facts submitted, and
for the further reason that he was ad-
vised by the bank examiner
that the capital of the bank
was unimpaired; that the creditors were
therefore fully protected. and that
prompt efforts would be made to replen-
ish the cash by deposit OF $500, 900 to
be made by the leading directors and
stockholders, which should place in it
funds until its own accounts became
available.
The statement of Lacey then details
in extenso the succeeding steps in the
business. On January Both Drew tele-
graphed that the prospects were encour-
aging. r0UFudry lZtu Lacey WAS III
Philadelphia and met the leading di-
rectors 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 re-
port OF the banks condition, and says
1T will take much time to fully untan-
gle the methods by which Lucas def
cheney was abstracted."
Drew in his letter adds: 'That the
whole amount of the loss has been ap-
propriated by the late president and his
friends, am more and more convinced.
/ have felt that the present president,
who was cashier under Lucas, has not
been involved in the depreciation, fur
ther than to have been an obedient in
strument of a peculating and designing
chief; but within day or two l have
been forced to entertain suspicious of
him. / hope these suspicious are
groundless, but shall endeavor to sat.
isfy myself as soon as cam"
Drew had laid before the directors the
comwtroller's conclusions about an as
'sessment, and while some were willing