Carter Cabinet Member Resigns over Ethics Violations Summary

  • Last updated on November 11, 2022

Bert Lance was forced to resign as head of the U.S. Office of Management and Budget during the first year of U.S. president Jimmy Carter’s administration because of allegations of illegal banking by Lance while chairman of the National Bank of Georgia and due to his overly familiar business dealings with the Carter family.

Summary of Event

Jimmy Carter, inaugurated as president of the United States on January 20, 1977, appointed Bert Lance, one of his closest friends, to head the U.S. Office of Management and Budget (OMB). Over the years, Carter’s association with Lance had grown into an enduring friendship. The Carters, including First Lady Rosalyn Carter, even considered Lance a surrogate family member. [kw]Carter Cabinet Member Resigns over Ethics Violations (Sept. 21, 1977) National Bank of Georgia Lance, Bert Carter, Jimmy [p]Carter, Jimmy;and Bert Lance[Lance] Office of Management and Budget, U.S. National Bank of Georgia Lance, Bert Carter, Jimmy [p]Carter, Jimmy;and Bert Lance[Lance] Office of Management and Budget, U.S. [g]United States;Sept. 21, 1977: Carter Cabinet Member Resigns over Ethics Violations[01680] [c]Corruption;Sept. 21, 1977: Carter Cabinet Member Resigns over Ethics Violations[01680] [c]Government;Sept. 21, 1977: Carter Cabinet Member Resigns over Ethics Violations[01680] [c]Banking and finance;Sept. 21, 1977: Carter Cabinet Member Resigns over Ethics Violations[01680] [c]Politics;Sept. 21, 1977: Carter Cabinet Member Resigns over Ethics Violations[01680] Ribicoff, Abraham A. Heimann, John G. Tarleton, Donald

Lance, a small-town banker in Calhoun, Georgia, ran unsuccessfully for the governorship of Georgia in 1974 and, in doing so, incurred debts that he never fully repaid. Following his failed gubernatorial campaign, he left Calhoun to become president of the National Bank of Georgia (NBG), based in Atlanta. Shortly afterward, Lance and some business associates, using a complicated network of loans involving millions of dollars, bought a controlling interest in the bank of which Lance had become president. Lance owned more than 200,000 shares of stock in NBG and derived a substantial portion of his income from the dividends his shares paid.

To avoid being accused of conflicts of interests, persons appointed to high public office usually divest themselves of assets that might raise questions about their impartiality. In Lance’s case, President Carter knew that Lance’s major holding in NBG could prove embarrassing, if not unethical. He also realized that this holding constituted a major portion of Lance’s net worth and that it had declined in a deteriorating stock market, making it a bad time for Lance to be forced to liquidate his stock.

On July 10, 1977, Carter wrote to Senator Abraham A. Ribicoff, chairman of the Senate Government Affairs Committee, requesting a modification in an earlier agreement that forced Lance to dispose of his stock by the end of 1977. Carter explained to Ribicoff that if Lance were forced to dispose of his stock, he would be placed under considerable financial pressure. Requests of this sort were frequently viewed as routine.

As early as 1975, however, the U.S. Office of Comptroller of the Currency had been investigating some irregularities involving Lance at the Calhoun First National Bank (CFNB), where he still served as chairman of the board of directors. This investigation revealed that during a four-year period, Lance and members of his family had run up as much as $450,000 in overdrafts at CFNB.

Other unsettling facts began to emerge, including information that NBG, to attract Lance as its president, had agreed to provide him with an airplane that ultimately was bought from Lancelot & Company, a partnership owned by Lance and his wife, LaBelle Lance, for $120,000. Lancelot & Company had a year earlier paid $80,000 for that aircraft. It also was revealed that Lance’s bank earlier had lent money to the peanut company owned by President Carter and his brother, Billy Carter. Although such a loan was legitimate, it raised discomfiting questions about the Carter-Lance relationship.

An agent with the Federal Bureau of Investigation looking into an embezzlement case that focused on a CFNB official stumbled upon irregularities that involved the Lances. The agent attempted to subpoena bank records but was rebuffed by the bank’s president. Lance apparently did not apprise President Carter of this ongoing investigation or of the bank’s refusal to cooperate fully.

Lance met with Carter following the November election to discuss being appointed head of the OMB. Lance then approached Donald Tarleton, director of the comptroller’s regional office in Atlanta and, telling him of Carter’s wish to appoint him to the OMB post, suggested that he ease up on the investigation of CFNB. Tarleton did so immediately after his meeting with Lance.

Senior officials in the comptroller’s Washington, D.C., office, including its acting director, Robert Bloom, were outraged by Tarleton’s actions. Bloom, however, wanted to cooperate with the Carter administration in the hope of being appointed comptroller. Bloom did what he could to help Lance, even writing a press release that Lance could use to cover up details relating to CFNB’s difficulties.

Lance’s problems might have ended at this point had it not been for Carter’s appointment of John G. Heimann to the comptroller’s post. On December 1, 1976, Sidney Smith, Lance’s attorney, asked U.S. attorney John Stokes about the status of the Lance case. Stokes removed the prosecutor from the case the same day and, on the following day, said the case was closed. Carter then announced Lance’s appointment as head of the OMB. Carter, who had campaigned on a platform of restoring integrity to the government, was placed in an awkward position, although he and the First Lady supported Lance as fully as they could for the nine months he served the administration.

It was also revealed that the day before his appointment, Lance had sought a loan of some $3.4 million, which he finally obtained from the First National Bank of Chicago. When he took office, he was more than $5 million in debt. Senators Ribicoff and Charles H. Percy led an investigation that unearthed many irregularities in Lance’s business dealings. Following Lance’s forced resignation, however, he was found innocent of intentional criminal wrongdoing.

Meanwhile, Jody Powell, Carter’s press secretary, surreptitiously circulated press stories accusing Percy of unethical practices, a tactic that eventually came to light and evoked memories of the attempted Watergate cover-up that brought down the administration of U.S. president Richard Nixon. Investigative reporters latched onto the attempted cover-up, which led to further investigations by the Senate’s Government Affairs Committee.

On September 19, Lance had a forty-five minute White House conference with Carter, and on September 21, he resigned as head of the OMB. Carter, in an emotional press conference the following day, announced Lance’s resignation.

Impact

The scandal of Lance’s bank dealings and his resignation as head of the OMB was unfortunate for the president and the United States as a whole. The status of the new Carter administration, devoted to upholding ethics in government, was badly damaged in the eyes of the public. The government comptroller and the Senate committee appointed to investigate the matter discovered an increasingly complex muddle of questionable actions, more oversights than intentional crimes, on Lance’s part.

The closeness of Lance to the president and his family increased substantially the impact of these revelations. Actions by both the president and Lance led people to believe the two were participating in a cover-up, which, in the context of governmental affairs, could bring down an entire administration. If any lesson was learned from the Lance debacle, it was that transparency in government affairs is inevitably the best policy. Deception and duplicity eventually come to light, especially in countries in which a free press scrutinizes the government and civil servants. National Bank of Georgia Lance, Bert Carter, Jimmy [p]Carter, Jimmy;and Bert Lance[Lance] Office of Management and Budget, U.S.

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Dumbrell, John. The Carter Presidency: A Re-evaluation. New York: Manchester University Press, 1993. Dumbrell offers fleeting references to the Bert Lance affair. Valuable for placing this scandal within the broader context of Jimmy Carter’s presidency.
  • citation-type="booksimple"

    xlink:type="simple">Fink, Gary M., and Hugh Davis Graham, eds. The Carter Presidency: Policy Choices in the Post-New Deal Era. Lawrence: University Press of Kansas, 1998. Melvyn Dubofsky’s chapter, “Jimmy Carter and the End of the Politics of Productivity,” contains cogent insights into the Carter-Lance matter.
  • citation-type="booksimple"

    xlink:type="simple">Johnson, Haynes. In the Absence of Power: Governing America. New York: Viking Press, 1980. Although dated, this account of the Lance scandal is detailed, accurate, well written, and easily accessible.
  • citation-type="booksimple"

    xlink:type="simple">Lance, Bert, with Bill Gibson. The Truth of the Matter: My Life In and Out of Politics. New York: Summit Books, 1991. In this book, Lance tries to vindicate himself, largely by emphasizing the differences between banking practices in the rural South and those of the great financial centers of the United States.
  • citation-type="booksimple"

    xlink:type="simple">Lance, LaBelle. This, Too, Shall Pass. New York: Bantam Books, 1978. A heartfelt account of the problems of LaBelle Lance’s husband during the Carter administration, published a year after his forced resignation. Although not wholly objective, provides many useful details.
  • citation-type="booksimple"

    xlink:type="simple">Roberts, Robert North. Ethics in U.S. Government: An Encyclopedia of Investigations, Scandals, Reforms, and Legislation. Westport, Conn.: Greenwood Press, 2001. A comprehensive encyclopedia documenting American political scandals, ethical controversies, and investigations from 1775 to 2000.

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