Chairman ST GERMAIN. There was a question of an overdraft. During that same month Calhoun's correspondent account at the National Bank of Georgia went into arrears for the first time to the tune of $1,446,000. Again in July your correspondent account was in arrears by $1,258,000. It would appear that the National Bank of Georgia was in fact lending Calhoun money to cover the problems related to Mr. Lance's overdrafts and others being uncovered during the Comptroller's scrutiny of the Calhoun bank. Possibly you have a different explanation, but this is the way it appears to us who have analyzed this. Would you care to comment?

[The following additional material was submitted for inclusion in the record regarding the colloquy of Chairman St Germain:]

CALHOUN FIRST NATIONAL BANK CORRESPONDENT BANK BALANCES (1)

40

20

3488

1561

378

(98)

(1) Calhoun did not maintain a correspondent decount with 'First National Bank, Chicago, Ill. or Citibank, N. Y. during this period.

(2) Interest bearing.

(3) Noninterest hearing.

Mr. HENDERSON. Mr. Chairman, I was not aware. I don't have a ready explanation. Again I shall be happy to get you one. It looks like the bank we cleared through may have misread the letter. I don't know.

Chairman ST GERMAIN. You went from a

Mr. HENDERSON. There is no reasonable reason for it, sir.

This is the reason I would have to check our records and see. I was not aware of that.

Mr. Davis. In this same month which was I guess April 1975, the report shows a high of $1,176,000 and a low of minus $1,046,000. That means we have a different number of checks we sent to them. Sometimes there could be a slip-up in the Federal Reserve bank. That would be the only reason we would have to overdraw any account.

Chairman ST GERMAIN. Isn't it unusual for you to have gone into arrears?

Mr. HENDERSON. Yes, it is. Correspondent banks take very unkindly to that.

Mr. LAFALCE. Mr. Henderson, there was apparently a considerable practice permitting overdrafts on the part of Calhoun insofar as its officers, directors, and some of its employees are concerned, is that correct?

Mr. HENDERSON. Yes.

Mr. LAFALCE. Was this a practice of longstanding?

Mr. HENDERSON. Yes.

Mr. LAFALCE. How long?

Mr. HENDERSON. There has been some of this, Mr. LaFalce, ever since I have worked there.

Mr. LAFALCE. Now, was there a policy, were there guidelines that had been promulgated by the officers, or the board of directors of Calhoun concerning overdrafts?

Mr. HENDERSON. Not until the Comptroller's Office made this critical report in April 1975; we do have now, yes.

Mr. LAFALCE. It seems that although there was a general practice of overdrafts for that class of individuals-not your entire constituency, but just that class of individuals-it increased in frequency and in severity approximately June 1974, coinciding, it would seem, with the gubernatorial campaign, is that correct?

Mr. HENDERSON. To the best of my knowledge, that is purely a coincidence.

Mr. LAFALCE. I am not suggesting that it is other than a coincidence, but there was a coincidence?

Mr. HENDERSON. Yes.

Mr. LAFALCE. Now, did Calhoun make a judgment independently that interest should be charged as of June 1974, or was the charging of interest on overdrafts as of June 1974 suggested by somebody outside of Calhoun, such as the OCC?

Mr. HENDERSON. It was projected to me in a verbal conversation by an examiner in examining the bank.

Mr. LAFALCE. Do you recall when that suggestion was made? Mr. HENDERSON. No, I do not.

Mr. LAFALCE. Do you recall when the decision was made to charge interest on overdrafts?

Mr. HENDERSON. We started it immediately when the decision was made in June 1974.

Mr. LAFALCE. Are you suggesting the decision was made in June 1974 or at some later point in time?

Mr. HENDERSON. It was made in June 1974.

Mr. LAFALCE. So some bank examiner came to you in June 1974

Mr. HENDERSON. No. I don't recall when we had this conversation, but he stated to me-these overdrafts were generally fairly liberal throughout our whole-

Mr. LAFALCE. What I am getting at is that the Comptroller's report indicates that a reimbursement was made by Mr. Lance and by Mr. Lance's relatives.

Mr. HENDERSON. No, sir. Only on the campaign account. I think that it was charged to the individual accounts of the other people consistently all through that period. It created a larger overdraft

Mr. LAFALCE. Interest was charged on individual accounts as of June 1974 and not something done retroactive to June 1974? Mr. HENDERSON. No, sir.

Mr. LAFALCE. How about the campaign accounts though? Was that same practice followed for the campaign?

Mr. HENDERSON. No interest was charged on it after it was over with. Mr. Lance paid us the interest on that at the end of the campaign when those overdrafts were covered.

Mr. LAFALCE. Was interest being charged to him as of the time of the overdraft?

Mr. HENDERSON. No.

Mr. LAFALCE. Why did you have an inconsistent policy as of June 1974; one for personal loans or overdrafts, and a different policy for campaign loans or overdrafts?

Mr. HENDERSON. Because, as I stated to you this morning, I had complained vociferously about the campaign overdrafts and I did not see any need to increase them by the interest charge and Mr. Lance had assured us he would pay us all costs in full and we collected that interest at a later time.

Mr. LAFALCE. Let me pursue that a bit because you were charging interest as of June 1974 on the personal loans, but you weren't charging interest and debiting the accounts for the campaign committee. Apparently there was some verbal understanding. Is it correct there was some written understanding that you would not debit the campaign account for interest, that it would be reimbursed?

Mr. HENDERSON. No, sir.

Mr. LAFALCE. Precisely what was your understanding?

Mr. HENDERSON. The understanding when Mr. Lance entered that campaign for Governor was that he would reimburse the bank for any costs incurred by the bank.

Mr. LAFALCE. Yes, but insofar as the personal overdrafts are concerned, you were not talking about reimbursement, you were charging them interest as of the date of the overdraft and there was some difference in approach between personal overdrafts and campaign overdrafts, is that correct?

Mr. HENDERSON. This was entirely a decision on my part.

Mr. LAFALCE. What is the basic difference in the way you handled the personal overdrafts and the campaign overdrafts?

Mr. HENDERSON. Frankly, we have stated it.

Mr. LAFALCE. Well, restate that for me. I am really unclear as to precisely what your understanding is of the different practices which you say existed for personal overdrafts as opposed to campaign overdrafts. You stated that you determined there should be a different approach. What was that different approach?

Mr. HENDERSON. Frankly, Mr. LaFalce, I had even forgotten this until the young lady in the department that handled this told me some 3 or 4 weeks ago when she and I had a conversation in the hall and she asked me, was there any need to increase that overdraft when we knew we could collect it at the end of the campaign and I said, let's wait and collect it when some contributions come in and not increase the overdraft and that is just as clear as I can put it.

Mr. LAFALCE. Well, there is a distinction, Mr. Henderson, between the collection of what is owed and the billing for what is owed.

Now, you apparently billed the interest owed on the overdrafts on the personal account as of the date of the overdraft, is that correct?

Mr. HENDERSON. We did it monthly.

Mr. LAFALCE. You did not do it monthly, did you, for the campaign accounts?

Mr. HENDERSON. We had the figures and we had them available and we did collect the money, yes.

Mr. LAFALCE. That is not my question. I understand you collected the money subsequently, retroactively with hindsight. But as of the time, I am curious as to what was the rule of Calhoun National Bank insofar as Mr. Lance's campaign account is concerned, and what was your agreement

Mr. HENDERSON. I have answered that as definitively as I know how to answer it.

Mr. LAFALCE. I suggest that that is not very definitive.

Let me pursue another line of questioning, Mr. Henderson. During your term as president, it was necessary to enter into an agreement with the Comptroller's Office. That agreement was entered into in December 1975. The agreement was terminated by Mr. Tarleton in November 1976.

Mr. HENDERSON. Yes.

Mr. LAFALCE. During the period of that agreement did you or representatives of Calhoun have conversations with the Office of the Comptroller of the Currency, either Mr. Tarleton or other individuals, regarding your compliance with its terms and your anticipated or hoped-for termination of the agreement?

Mr. HENDERSON. Not that I remember, no, sir.

Mr. DAVIS. Perhaps I could add something to that. Mr. Henderson was on vacation in May 1976. Mr. Ashley Lee came by on a followup visit. Basically we went over the agreement point by point to point out the progress we had made in the various areas which were criticized, including loans and other matters and Mr. Lee was very careful to-there was some discussion which we covered this morning about the capital contribution and other matters in there