Nation: The Wayward Warehouse

Final verdict: no crime, much chaos in Carter finances very nickel and every peanut have been traced into and out of the warehouse, and no funds were unlawfully diverted in either direction.” With that exculpatory conclusion, Special Counsel Paul J. Curran last week wrapped up his exhaustive, seven-month dig through the tangled finances of the Carter family peanut warehouse. There was “no evidence whatsoever” of criminal financial maneuvers by Jimmy or Billy Carter, said Curran, and “no indictment can or should be brought against anyone.”

Curran’s words came as good news for Jimmy Carter, long bedeviled by unproven accusations of financial misdealing and even coverup. The disclosures of banking shenanigans that forced Bert Lance’s resignation as Director of the Office of Management and Budget two years ago and finally ended in his indictment last May, had aroused suspicions that the Carters had illegally diverted family funds, including money borrowed from Lance’s bank, to Jimmy’s campaign treasury. The charges became so persistent that then Attorney General Griffin Bell reluctantly announced he would appoint a Watergate-style investigator. Last March he handed that touchy job to Curran, a cautious, scrupulously methodical former U.S. Attorney from New York, who also happened to be a Republican.

Curran and his team of three lawyers, four FBI agents and four investigative accountants pored through 80,000 bank and business documents and took 3,800 pages of testimony from 64 witnesses before a federal grand jury in Atlanta. The 180-page public version of Curran’s report (a fuller version, with transcripts of testimony before the grand jury in Atlanta, remains sealed) demonstrates beyond serious challenge that no family or loan funds were siphoned into Carter’s 1976 presidential campaign. More narrowly, it finds that Presidential Adman Gerald Rafshoon did not borrow from any bank in 1976 to keep Carter’s media campaign alive, as some press reports had alleged. But less persuasive is Curran’s conclusion that no banking or conspiracy laws were violated by the eccentric loan arrangements between Carter’s warehouse and Lance’s National Bank of Georgia. Curran’s team found a quagmire of shoddy business dealings, inept management and astoundingly irregular transactions.

At both the warehouse and the bank, there were countless errors of both bookkeeping and judgment. Although short on capital, the Carters unwisely launched a massive expansion of the warehouse. From 1975 through 1977, they borrowed nearly $10 million to buy a huge new peanut sheller and enormous supplies of raw peanuts. But from the beginning, the warehouse consistently sold peanuts it was supposed to be holding as collateral for the loan. At one point in the spring of 1976, there were no peanuts at all on hand for two months, while the warehouse owed N.B.G. $1.1 million.

With Jimmy busy campaigning, Billy was left in charge. His management was as unorthodox as it was sloppy. Despite the heavy debts at the warehouse, Billy borrowed cash from it for his gas station. He frequently wrote loan repayment checks on the warehouse account when there were insufficient funds in it to cover them, ultimately piling up nearly $2.4 million in overdrafts. But N.B.G. obligingly held the checks, devising a dubious system of accounting to prevent them from bouncing. Despite that permissiveness, however, N.B.G. still managed to earn a respectable $392,990 in interest on the loans.

Eventually the missing collateral and rubber checks began to worry even N.B.G. In June 1977, Vice President Robert Flynt gingerly sent a dunning letter to Billy Carter for some $400,000 in outstanding loan payments. He added in a gentle handwritten P.S.: “Please try to keep us in balance.” That, and Bert Lance’s troubles, finally brought the situation to the attention of Charles Kirbo, Jimmy Carter’s trustee. Kirbo made himself overseer of the warehouse and by last year had finished paying off the bulk of the loans. Still, the President was obliged to borrow some $440,000 to bail out the warehouse so it could be put up for sale early this year.

In all this finagling, Curran found only one “fairly low-level bank person” who had violated technicalities in the law. He was given immunity in exchange for testimony. Nor were any of the bank’s or the Carters’ sloppy practices deemed intentional enough for prosecution. Said one investigator: “There was no evidence of fraud. Misstatements were part of the pattern of errors.”

Among those errors are several that could still trouble Jimmy Carter, at least financially. Curran discovered that on 1975, 1976 and 1977 income statements used to compute taxes, the purchase and sale of thousands of pounds of peanuts had been recorded on the wrong dates.

That, cautioned Curran, could result in “material income tax consequences.” Just how much extra the Internal Revenue Service might now charge Jimmy, Billy and Lillian Carter (who was also part owner of the warehouse) has not yet been determined.

The President is said to have resented the drain the allegations made on his time and especially his reputation. But he was eager enough for public vindication to submit to a highly unusual four-hour grilling under oath. On Sept. 5 in the Treaty Room of the White House, Carter was formally “deposed,” in the legal sense, by Curran and four deputies, only the second sitting President ever to undergo such an ordeal. (Gerald Ford testified on video tape in November 1975 for the trial of Lynette Fromme for her attempt to assassinate the President.) Courteous and surprisingly relaxed, speaking without notes but with two attorneys by his side, Carter patiently answered every probing question from the special counsel. (His testimony remains sealed.) It was not surprising last week when Carter reacted smugly to Curran’s clean bill. “I knew it all the time,” he said. “I’m glad the whole process is over. I hope that now they [the Justice Department] can turn their attention to crime control.”