The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1891-06-15
LAcEY's REPORT OF THE CASE.
The Whole Crooked Story Coming
Now to the Front.
Report Reveals Careless Handling Of
Bank Anairs-The Keystone's Condi-
ton Concealed Too Long, Hoping for
Change for the Better.

Oh the currency Lacey, relative to the
downiali OF the Keystone bank, of Phila-
deiphla, has been made public by the
secretary of the treasury, to whom it is adj
dressed. 1t is a voluminous document,
containing 10000 words, and embodies cor
respondence and papers bearing upon the
Quaker Citys financial scandal. The
statement, which is in the shape of COM
munication to Secretary Foster, bears the
date of June 10, and runs substantially as
follows:
or: have the honor 10 submit statement
OF FACTS leading up TO the final closing OF the
Keystone National bank and the appointment Of
receiver thereof. The first information re-
ceived by me in reference to what ia known a.
the Lucas defalcstion was contained in COM
munication addressed 70 me by bank Examiner
Drew, from Philadelphia, dated January ~. 1891,
and received by me January 26. In this COM
munication Mr.. Drew says, on entering upon an
examination of the Keystone National bank the
9th inst. he was informed by the president that
there would be disclosed hitherto effeciually
concealed debt to the bank of its late president,
John G. Lucas, amounting TO 100000.
Mr.. Drew then explained how by adroit mani
puiaton OF the accounts of the bank Lucas.
with the assistance OF Marsh, the former cash
ier OF the bank, distracted large sums OF money
from the bank to use in speculation In real
estate at Spring Lake aud Seagirt, n. j.. and in
the construction OF n large building in Phfla-
delphia, now occupied In part by the
bank. To protect the banks as far
as possible, Drew took measures with the assist
ance OF the United States district attorney, Read,
to secure for the bank without publicity what
ever property belonged 10 the estate of Lucas,
and succeeded in obtaining property used by the
bank as banking house valued ut s225,000. and
property at Spring Lake and seagirt. Marsh,
Drew reported, was ignorantly led into these
transactions and promised Lucas wheh the lat
ter was on his death bed to continue the deeep-
tion on representation that the money
abstracted would soon be returned
to the banks from the result of Lucas enter
prises. He also reported there was no evidence
that Marsh had profited by these irregularities.
Drew closed by stating that beyond the dircc-
tors OF the bank, seven members OF the clearing
house committee. the counsel on either side and
himself, no one had any knowledgeor suspicion,
as far as he could say, that the bank was in
any trouble, and earnestly hoped that no pub
licity would be given 10 the affair until the
bank should be rehabilitsfed or efforts ~ thst
end were found futile.
Accompanying this fftHef waE Eas,--s--.-.
statement of the bank a condition. which, aflor
rcconsiderlng all the probable losses Icfs fle
capital stock Of t5o0, 900 intact Snd -.
plus s53,Sl9 Upon the receipt OF this report
the comptroller was confronted with grave re-
sponsibiIity. Laceys statement then reverts 10
the financial stringency at many points, and re-
iers to the caiamitous result that might
have followed Immediately upon the dig
closure OF the situation or the ousting
OF President Marsh. The Keystone National
bank passed through severe crisis I'm Deern1-
Der and had been able to weather the storm With
100000 less assets than IL had when this ressss
reached the comptroller. IL is evident that the
comptroller could not at this time have lawfully
closed the banks, nor could he have even levied
tO mai 70 noH fha inn
itsl, as none existed according to this report
Mr.. Drew came to Washington City, and in al
interview with the comptroller stated that IN
his Judgment and in the opinion OF the clear ne
house committee the property conveyed to tho
bank by Lucas estate was equal in value to the
Indebtedness which had been concealed. and
that in any event that the creditors OF the
bank were entirely safe. II was, however,
deemed necessary that additional funds should
be placed In the bank, its reserve had been
deficient for a 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 II was to llquidate. that the cash the
bank needed would be promptly reinforced
either by sale OF real estate or reduction Of
its line of discounts. It was, therefore, after
very serious consideration, deemed best for the
bank, for its creditors for other banking asso-
Citations and for the city OF Philadelphia, whose
X.
that Drew should continue the examination
Of the bank and promptly place his
assistant, Mr. Jones, in charge Of the books, with
the understanding that the active directors OF
the bank should visit II daily under these con-
ditions. and for these reasons the comptroller
did not insist upon the immediate resignation
of President Marsh, although il was distinctly
understood that he was to remain only so long
as his services were absolutely necessary in ad-
justlng the irregularities which had grown up
under his management, as he was, since the
death OF Lucas, the only person living
who was eonversant with the operations which
resulted so odIsastrouhly to the bank The comp
troller therefore did not close the bank az this
time for the reason tha. he had no lawful
authority to do so upon the facts submitted
and for the further reason that he was advised
by the bank examiner that the capitai OF the
bank was unimpsired, and that the creditors
therefore were fully protected, and prompt
efforts would be made to replenish the cash
by deposit Of $4,000, 20 be naa6e
by leading directors and stockholders.
which should place In 10 funds until ito own
accounts become available. The statement OF
Lacey then details in extent each succeeding
step. January 20 Drew telegraphed that pros
poets were encouraging. February Il Lacey was
in Philadelphia and met the leading direetorso Of
the bank, and 1t was agreed that the reserys
OF the bank should be restored and
maintained On February II Drew trans
mitted his complete report OF the banks
condition and says: at will take much time so
fully untange the methods by which the Lucas
deficiency was distracted. Drew, in his letter
added that the whole amount OF loss had be
appropriated by the late president and "a
friends, am moro and more convinced have
felt the present president, who was cashier un-
der Lucas, has not been involved in the depre-
dation further than to have been the obediens
instrument OF specuIatlng and design
ing chief, but within q day or two I
have been forced to entertain snspfe-
ions OF him. ! hope these suspicious srs
groundIess, but shall endeavor 70 satisfy N.Y.
self as soon as l can. Drew had laid before the
directors the cornptroller's conclusions about an
assessment, and while some were willing 20 pay.
Others feared the order would create another at
tack on the bank. " onFebruary10 the compfroi1er
wrote to Drew acknowledging the receipt of the
draft of Drew's full report, and directed him to
give an estimate Of the exact value OF the re-
sources and estimated discount upon each class
OF investments
"Ny object in this is, II possible" wrote
Lacey, 'is to arrive at precisely the amount of
the deficiency necessary to be made up by an
assessment upon the capital stock. Eshould Be
glad TO see any committee of the board which
may visit Washington. but can conceive no bet
ter way 10 pnt tho institution in frst-clsss
shape than that suggested By me. One thing 10
certain, that some action is iInperativeIy neces-
sary, and the sooner II 10 taken the better will
be the results"
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