Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
25466773
label
Whitewater, January 1994 [Folder 3]
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
25466773
sourceUrl
contentType
document
title
Whitewater, January 1994 [Folder 3]
citationUrl
collections
Records of the First Lady's Office (Clinton Administration)
Karen Finney's Files
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
25466773
levelOfDescription
fileUnit
otherTitles
42-t-18546082-20150734S-007-005-2015
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
ef565a6389e65b85
ocrText
Aggressive Prosecutor
Robert Bishop Fiske Jr.
By STEPHEN LABATON
Special 10 The New York Times
WASHINGTON, Jan. 20 - Robert
Mr. Fiske's colleagues say, he will
new investigation
B. Fiske Jr.'s reputation for integrity
look for more evidence rather than
Alan Levine, who tried the Scotto
and thoroughness is so entrenched
bring a case, even if he dislikes the
case with Mr. Fiske. said Mr. Fiske's
that if he finds no wrongdoing during
targets of an investigation or others
cross-examination sivie does not em
his investigation of the Whitewater
are clamoring for prosecution
anair. nis findings could put rumor.
not hambovant
hostile witness with nis firm grasp of
about Bill and Hillary
stretch of the imagination, but he's
minute facts.
Clinton's business deal-
Man
businesslike," said Harold R. Tyler, a
"We had on a tape the fact that
ings to rest.
former Federal judge and senior Jus-
in the
Scotto had handed over an envelope
"The choice is one that
tice Department official. who first
to the Commissioner of Ports and
News
you simply can't argue
met Mr. Fiske in the 1950's, when he
Terminals," Mr. Levine recalled.
with," said former
was a young lawyer and Mr. Fiske
"Scotto had said that there were tick-
Treasury Secretary Nicholas F. Bra-
was a summer intern.
ets to a political event in the envelope,
dy, a close friend of former President
Mr. Tyler ultimately became one of
but Bob was able to show through his
George Bush and a college classmate
Mr. Fiske's most important mentors.
cross-examination and through his
of Mr. Fiske's more than 40 years
As Deputy Attorney General in the
questioning of other witnesses how
agn. "He's one of those guvs who's
Ford Administration he persuaded
unbenevable that was."
always conducted himself with integ-
the President to name Mr. Fiske as
rity."
the top Federal prosecutor in Man-
Other lawyers who worked with
But Mr. Fiske, a 63-year-old Wall
hattan.
Mr. Fiske recalled his restraint, and
Street lawyer, earned his reputation
Mr. Fiske is also a protégé and
said he can be conservative in mak-
by being an aggressive prosecutor; if
former partner of Lawrence E.
ing decisions about whether and how
the Clintons have something to hide.
Walsh. dating from the davs when the
to charge potential defendants
ne could pose a formidable problem.
two worked together at the Wall
"I remember an incident that
If he lives up to his billing, at the very
Street firm of Davis, Polk & Ward-
quickly showed his mettle," said
least his investigation will disrupt the
well. In 1986. shortly after Mr. Walsh
Frederick P. Hafetz. who was the
lives of the First Family.
was appointed independent counsel to
chief of the criminal section under
Blunt and Effective Style
investigate the Iran-contra affair, he
Mr. Fiske "When he first came in as
turned to Mr. Fiske for advice about
United States Attorney, a young pros-
Mr. Fiske's blunt and effective
who to select as his deputies. Mr.
ecutor had a large and complex fraud
style was evident immediately after
Walsh ultimately considered select-
he was appointed today, when he
=
ing as his deputy either Mr. Fiske or
curtly dismissed a reporter's ques-
Bernard W. Nussbaum, who is now
A thorough
White House counsel. but at the time.
neither man was able to take the job.
investigation of
An investigator
Two Different Styles
the Clintons
Although Mr. Fiske admires Mr.
whose findings
Walsh, their styles are different. Col-
leagues of both said today that it
appears certain.
will carry great
would be a mistake to assume that
Mr. Fiske's investigation would end
weight.
up as fruitless as his mentor's
Among other things, they said. Mr.
investigation against a high-visibility
Fiske is more decisive, moves faster
person. Fiske made the call not to go
and is able to recognize when he
on the case because he didn't think it
tion about the White House refrain
cannot make a case.
could be proved.
that no evidence existed to suggest
Mr. Fiske, a Republican who was
"It showed real guts that he had the
the need for a special prosecutor.
appointed United States Attorney by
judgment to say no, particularly be-
"I think we're past that," he said at
President Gerald Ford in 1976, sub-
cause investigations often develop a
the news conference. "1 have been
mitted his resignation when Jimmy
momentum of their own. And it was a
asked to do this job and I'm going to
Carter was elected President. But
call for which he earned the wide
do it."
Mr. Carter kept him on at the sugges-
respect of the office."
He said that he would hire a "sig-
tion of a number of Democratic ad-
But Mr. Fiske has not always
nificant number" of lawyers and in-
mirers. including Senator Daniel Pat-
moved smoothly between New York
vestigators, and that he would be the
rick Movnihan of New York.
and Washington legal circles. Almost
kind of hands-on prosecutor who
Mr. Fiske broke the conventional
five vears ago. some conservative
makes the case rather than a counsel
mold of a United States Attorney by
Senators succeeded in shooting down
who simply sits back to make the big
personally trying some of his office's
Mr. Fiske's proposed appointment to
calls and leaves the day-to-day work
biggest and most difficult cases. One
be the Deputy Attorney General in
to vounger lawvers.
case. involving Anthony M. Scotto. a
the Bush Administration
At a time when many clients prefer
leader of the International Long.
flashy lawyers, Mr. Fiske's style is
shoremen's Association was brought
The proposed appointment was op-
unitormly described as "workman-
by Mr. Fiske with the aid of a young
posed because in the 1980's he headed
and "low-key
agent of the Federal Bureau of Inves-
a committee of the American Bar
He has rarely lost a big case. in
tigation, Louis Freeh. Mr. Freeh. who
Association that questioned some of
large part because he does not pros-
IS now the Director of the bureau, met
President Ronald Reagan's nominees
ecute unless he thinks he has abun-
today with Mr. Fiske to discuss what
for the bench. Critics, led by Senators
dant evidence to win. In close call
roie the F.b.I. will be playing in the
Strom Thurmond of South Carolina
and Charles E. Grassley of lowa, both
Republicans accused Mr. Fiske of
undermining efforts to reshape the
courts in the Reagan mold.
The conservatives contended that
Mr. Fiske had erred in seeking the
views of the Alliance for Justice, a
liberal group in Washington. The Sen-
THE NEW YORK TIMES. FRIDAY, JANUARY 21. 1994
ators painted this as part of a conspir-
acy, although Mr. Fiske maintained
that he was merely trying to find out
whether any of the nominees had
histories of discriminating against
women or members minorities
Mr. Fiske left the bar association
committee shortly before it issued a
divided appraisal that contributed 16
the failure of Mr. keagan S nomina
tion of Judge Robert H. Bork to the
Supreme Court. But the appraisal SO
angered the conservatives that the
normally staid bar association be-
came a target of searing criticism.
Reno names lawyer to probe Whitewater deal
WASHINGTON (UPI) Attorney General Janet Reno named New York lawyer Robert
Fiske Thursday as the special counsel to investigate President Bill Clinton's
connections to a failed land deal when he was governor of Arkansas.
Fiske, 63, is a Republican and a partner in the Wall Street firm of Davis, Po
In 1976, President Gerald Ford appointed him U.S. attorney in Manhattan, a posit
until 1980.
Reno made the announcement at her regular weekly news conference, which was a
by Fiske. He said he would start his investigation Thursday by meeting with
Justice Department lawyers.
Fiske said his authority ``was very broad'' but expressed reluctance to place
completing the investigation. He said he would question the president and the fi
lady under oath with the aim of conducting an independent investigation.
The president and Mrs. Clinton invested in a real estate venture, Whitewater
Development Corp., managed by James McDougal. Questions arose when McDougal
purchased a savings and loan that went bankrupt.
Investigators have been looking into whether McDougal funneled money from the
thrift, Madison Guaranty and Savings and Loan Association, into Whitewater d
into Clinton's re-election campaign in 1984.
Fiske also represented Clark Clifford, adviser to four Democratic presidents,
became head of a U.S. bank that was secretly and illegally owned by the Bank of
Commerce International.
Fiske said he has not discussed his assignment with Lawrence Wash, a special
prosecutor who released his final report on the Iran-Contra arms-for-hostages de
**** filed by:UPI-(us) on 01/20/94 at 09:53EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 10:03EST ****
BC-CLINTON-WHITEWATER
FISKE NAMED AS CLINTON WHITEWATER PROSECUTOR
WASHINGTON (Reuter) - Attorney General Janet Reno Thursday named New York
lawyer Robert Fiske as an independent counsel to conduct a wide-ranging
criminal investigation into President Clinton's land and financial dealings
in Arkansas in the 1980s.
In a statement, Reno noted she had promised to appoint someone who was
`ruggedly independent, a characteristic she said the former federal
prosecutor would bring to the job.
Reno said the scope of his investigation would include any violation of
federal criminal law by ``any individuals or entities'' relating to dealings
conducted by Clinton and his wife Hillary.
She said those dealings included the failed Madison Guaranty Savings &
Loan, Whitewater Development Corp, a money-losing real-estate venture in which
the Clinton's were part-owners, and the Arkansas-based firm Capital Management
Services Inc.
``I don't expect him (Fiske) to report to me. I expect him to report to
the American people and I do not expect to monitor him,' Reno told a news
conference.
She said the independent counsel would also have the authority to
investigate any possible obstruction of justice and ``any material false
testimony or statement'' in connection with the investigation.
She said Fiske would be able to seek indictments and prosecute anyone who
is ``reasonably believed to have committed
a violation of any federal criminal law
...
including persons or entities who
have engaged in an unlawful conspiracy or who have aided or abetted any
criminal offense.'
Asked whether he would investigate whether the July 1993 suicide of Vince
Foster, a close friend and Clinton and a White House counsel, was linked to
Whitewater or Madison in any way, Fiske said in a news conference: ``That will
be one of the things we will be trying to find out.''
Fiske was named a federal prosecutor in New York in 1976 by Republican
President Gerald Ford but he was kept on in the post until 1980 by Democratic
President Jimmy Carter because of this ``skill and integrity,' Reno said.
Recently he worked as a defense attorney for former secretary of defense
Clark Clifford and his partner Robert Altman in the Bank of Credit and
Commerce International scandal.
REUTER
**** filed by:RB--(--) on 01/20/94 at 09:59EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 10:03EST ****
P4-Whitewater-Special Counsel, 2nd Ld-Writethru, a0532-449,500
URGENT
Reno Names New York Attorney as Special Counsel
EDs: Combines pvs; news conference under way
By CAROLYN SKORNECK= Associated Press Writer=
WASHINGTON (AP) A former Republican U.S. attorney today was named special
counsel to probe President Clinton's ties to a failed Arkansas savings and
loan when he was governor.
The appointment of Robert B. Fiske Jr., was made by Attorney General Janet
Reno at a morning news conference.
Reno's selection of the 63-year-old Wall Street attorney answered
suggestions that the special counsel be a veteran attorney and, to
demonstrate independence, a Republican.
But some conservatives are likely to oppose Fiske, who ran the U.S.
attorney's office for the Southern District of New York in Manhattan from 1976
to 1980. He was appointed by President Ford but continued in office during the
Carter administration.
Conservatives scuttled Fiske's chance to become deputy attorney general
during the Bush administration because of his involvement in the American Bar
Association's screening of potential judges.
Former Sen. Gordon Humphrey, R-N.H., accused Fiske of sharing the names of
prospective nominees with liberal groups, thus enabling those groups to
target conservative candidates even before their nominations were made
public.
Fiske, with the Wall Street law firm of Davis Polk & Wardwell, recently
has represented key defendants in the Bank of Credit and Commerce
International fraud case.
He previously helped his former law partner, Independent Counsel Lawrence
Walsh, pick a staff to investigate the Iran-Contra arms and money scandal.
The choice was finalized a week after Clinton asked for an outside
investigation of his investment in the 1980s in Whitewater Development Corp.
and its links to Madison Guaranty Savings & Loan.
Justice Department investigators have been trying to determine whether
depositors' money was diverted illegally from Madison, which failed in 1989,
to Whitewater, a planned vacation-home project in Arkansas.
Madison was owned by longtime Clinton supporter James McDougal. He and his
former wife, Susan, co-owned Whitewater with the president and Hillary Rodham
Clinton. The Clintons have said they lost $68,900 on their investment.
Also being investigated is whether Madison funds were diverted to help
retire Clinton's 1984 gubernatorial campaign debt.
Among the candidates said to have been considered for special counsel were
former Attorney General Benjamin Civiletti, who served under President Carter;
former U.S. Attorney Dan K. Webb of Chicago, who was deputy independent
counsel in the Iran-Contra investigation; and Michael Manning of Kansas City,
who prosecuted of Charles Keating, owner of Lincoln Savings in Irvine, Calif.
Senate Republican leader Bob Dole pushed Reno for weeks to appoint a
special counsel, and he suggested Civiletti and Webb, among others.
Reno resisted, saying anyone appointed by her would not be considered
truly independent because he or she would still be answerable to Reno.
But after Clinton succumbed to political pressure Jan. 12 and asked her to
appoint a special counsel, she vowed to selected a ``ruggedly independent''
prosecutor.
**** filed by:APE-(--) on 01/20/94 at 09:39EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 10:04EST ****
Whitewater, public money and Congress
has been asked, is there any need for a
the taxpayers of Arkansas, and would be their prob-
congressional investigation and Capitol Hill
lem to deal with. But when it is the taxpayers of the
in the Whitewater affair now that
nation as a whole who have to pick up the tab, there
Attorney General Janet Reno has acquiesced to
is little pressure on Arkansans to clean up their less-
demands that she appoint a special prosecutor? Don't
than-scandal-free political and financial environ-
such undertakings by lawmakers serve merely to
ment.
undermine the inquiries of prosecutors? No.
Some apologists for the president have said that
Even though Lawrence Walsh blamed the fact that
anything unseemly regarding Madison and White-
he came up empty-handed in part on the immunity
water is no big deal, just the way business is done in
granted to key Iran-Contra players by the select con-
Arkansas. Well, it is up to Congress to find out just
gressional committee that first delved into the scan-
how business is done in that state, and if it is as shifty
dal, the truth was that there wasn't a vast web of crim-
and incestuous as it seems, it is up to Congress to
inality to be prosecuted. Mr. Walsh got into the nasty
change a system that puts federal guarantees behind
habit of assuming that everyone he targeted was
such business practices.
guilty, however, and the lack of evidence to support
Rep. Jim Leach, the Iowa Republican and rank-
that assumption was somehow evidence of an even
ing minority member on the House Banking Com-
more sinister conspiracy. Even if the convictions of
mittee, has done yeoman service to catalog the reg-
John Poindexter or Oliver North had not been over-
ulatory breakdown at Madison Guaranty and pursue
turned on grounds that their immunized testimony
a careful investigation into whether such failings are
before Congress tainted the accounts of witnesses
being repeated in Arkansas and other states. Mr.
against them, Mr. Walsh would still have closed shop
Leach points out that Madison stayed open long after
with a minimally feathered cap. The fact that he
it was shown to be insolvent and continued to be "a
didn't bag President Reagan, President Bush, Sec-
private piggy bank" for Mr. McDougal and his asso-
retary of State George Shultz and so on had nothing
ciates. The amount of loans given to officers, direc-
to do with the fact that Congress held hearings and
tors and executives of the thrift exploded once Mr.
everything to do with the absence of evidence of
McDougal bought it, ballooning from $500,000 to $17
wrongdoing.
million. Mr. Leach argues compellingly that Con-
The most important reason for Congress to hold
gress should inquire into whether the growth of
hearings on Whitewater, beyond the need to give the
such insider loans should be made a warning signal
matter a much-needed public airing, is that White-
that a thrift's assets are being abused. The account-
water, tangled as it is with the failure of the Madison
ing and documentation at Madison was a disaster.
Guaranty Savings & Loan Association, speaks to one
Why? And even more important from a congressional
of the most pressing legislative issues facing the Con-
point of view, how? How is it that a federally insured
gress' banking committees: reform of federal deposit
institution could bumble along, burning money, and
insurance.
seemingly burning the records as well?
Madison Guaranty cost taxpayers $50 million in
These are questions that a special prosecutor -
a fiasco that seems to exemplify the problems with
looking into the specific questions of whether the pres-
federally insured savings and loans. The thrift,
ident and/or his wife were involved in criminal wrong-
owned by Clinton friend James McDougal, was char-
doing will not and cannot address. Aside from the
tered by the state of Arkansas, but was federally
issues of presidential scandal, this is an opportunity
insured. This points up a serious weakness in federal
for Congress to find out how to save taxpayers from
banking laws. If it were the state that was insuring a
more Madisons in the future. That's what congres-
thrift like Madison, then losses resulting from slop-
sional investigations are supposed to be about, and
py regulation or political hanky-panky would fall on
now is the time for lawmakers to do their job.
The Washington Times
1/20/94
Whitewater counsel
selected, officials say
The Washington Times 1/20/94
Republican Fiske
loans and channeled some of the
cash to Mr. Clinton's gubernatorial
campaigns.
may get job today
The Clintons, Mr.MtDodgal and
his wife, Susan, were partners in
Whitewater Development Corp.
By Jerry Seper
northern Arkansas real estate ven
THE WASHINGTONTIMES
ture at the time of the financial in
Robert B. Fiske Jr., a former U.S.
regularities. Whitewater eventually
attorney in New York, is expected to
failed :fronk not
be named today by Attorney General
Mr. Fiske was U.S. attorney In the
Janet Reno as special counsel to in-
Southern District of New York III
vestigate President and Mrs. Clin-
Manhattan from 19761 1980, during
ton's involvement in the Whitewater
the Carter administration. The New
Madison affair, Justice Department
York office is the largest of the 93
officials said last night.
U.S. attorney's offices in the nation.
The 64 year Republican, who
Mr. Fiske is now à senior partner at
reportedly was one of three lawyers
the New York law firm Davis, Polk
on a short list of candidates, will be
and Wardwell with
assigned by Miss Reno to look into
In 1990, during the Bush adminis-
financial irregularities involving
tration, then Attorney General Dick
Mr. Clinton, the first lady and the
Thornburgh sought to have Mr. Fiske
owner of a failed Arkansas savings
appointed as deputy attorney gen-
and loan.
eral, the Justice Department's No. 2
Miss Reno has discussed the
position, but GOP conservatives ob-
ground rules for the probe with Mr.
jected to his involvement in judicial
Fiske, the official said.
screenings by the American BarAs
The expected appointment comes
sociation and blocked the nomina
after. the president succumbed to
tion.
clamorous bipartisan demands that
to
a special counsel be named to inves-
see
tigate charges that James B. Mc-
Dougal, owner of the now-defunct
review first
Madison Guaranty Savings and
year in office
Loan Association, Issued illegal
A report card on promises, A9.
FISK
judge panel to appoint an inde-
Miss Reno repeated her conten-
pendent, outside investigator in the
tion that no one she chooses will be
From page Al
case. Her position changed after the
seen as truly independent, but she
White House decided on Jan. 12 that
argued: "It is important that public
Most recently, he has represented
the appointment of a special counsel
confidence be preserved and that
key defendants in the Bank of Credit
was necessary.
the public knows we are doing every-
and Commerce International fraud
The sources said Assistant At-
thing we can.
People have submit-
case. He previously helped his for-
torney General Jo Ann Harris, who
ted a number of lists, but we will
mer law partner, independent coun-
heads the Justice Department's
consider everybody possible to
sel Lawrence Walsh, choose a staff
criminal division, played an integral
make sure that we select the person
to investigate the Iran-Contra scan-
role in helping to narrow the choice
who can be fair, impartial, and who
dal.
to Mr. Fiske.
has a reputation for integrity and
According to Justice Department
Mrs. Harris is a former assistant
skill," she said.
officials, the selection came after a
U.S. attorney in New York who spe-
Justice Department investigators
weeklong search, with a decision be-
cialized in white-collar tax, securi-
have been looking into the White-
ing made late yesterday.
ties, antitrust and fraud cases; pro
water-Madison affair for months. It
The sources said other short-list
bono defense of indigents; and
was first handled by U.S. Attorney
candidates included Dan K. Webb,
teaching law students and young
Paula J. Casey in Little Rock after
former U.S. attorney in Illinois, and
lawyers.
the Resolution Trust Corp., which
Kenneth W. Starr, solicitor general
The special counsel will be asked
oversees failed S&Ls, made 10 crim-
during the Bush administration,
to make a public report to the Amer-
inal referrals involving Madison to
Others mentioned include former
ican people on his findings in the
her office.
Sen. Warren Rudman, former Su-
tangled financial dealings involving
Later, she recused herself when
preme Court Justice Byron White,
Madison, Whitewater, the Clintons
press reports confirmed that she
Arthur
Liman,
and the
general
Mr. Fiske was not available last
Griffin Bell and Benjamin Civiletti,
night for comment. A call to his Dar-
was married to a man Mr. Clinton
former Senate Ethics Committee
ien, Conn., home was answered by a
had appointed to a state job in Arkan-
counsel Robert Bennett, former U.S.
woman who said he was not home
sas
Attorneys Michael Baylson and An-
and would not be available for com-
Much of what the special counsel
ton Valukas, and Reagan administra-
ment until today.
is expected to examine will be doc-
tion White House Counsel A.B.
Republicans. led by Senate Mi-
uments released last week by the
Culvahouse
nority Leader Bob Dole of Kansas
White House showing the Clintons'
Miss Reno had rejected early de-
and Rep James Leach of lowa, the
involvement with Whitewater The
mands to appoint a special counsel
ranking Republican on the House
White House has released 10 boxes
in the case. saying it would not guar-
Banking Committee. have called for
of Whitewater documents but has
antee independence. She said the ap-
a special counsel for weeks. The
declined to make them public.
pointee would still work for her
Clintons steadfastly opposed such a
Some of the records include those
She had suggested that she would
probe but yielded after 11 Demo
taken from the office of Deputy
be receptive to waiting until Con-
cratic senators joined the Republi-
White House Counsel Vincent W.
gress passes the Independent Coun-
cans in asking that a special counsel
Foster Jr., who killed himself July
sel Act. which would allow a three-
beinmed
20.
OP-ED
Washington Times
THURSD
JANUARY 20. 1994 / PAGE A17
to separate health and welfare legis-
The growing sense of urgency on welfare reform
lation, with welfare a decided second
Mr. Moynihan is a powerful oppo-
nent as chairman of the Senate
Finance Committee because he
aniel Patrick Moynihan
doesn't like
money in Whitewater has weak
cent of births to white women. Wel-
the welfare system is not working
knows how to figure. Sixty votes are
long memory and an even
issue Bill Clinton
rigorously
sup-
ened her position as a power propo-
fare payments not only lead to
a complete overhaul is required
necessary to break a filibuster. A fili-
longer attention span. He's
ported during
the
campaign
nent for health care
increased illegitimacy, but undercut
break the cycles of poverty created
buster is likely if the Clintons insist on
been trying to get welfare reformed
change
welfare
know
is
Worse, to a welfare reformer like
values of abstinence, education and
employer-paid health care and uni-
for years.
now
considered
Mr. Moynihan (and others), Hillary is
work.
versal coverage.
His long memory reminds him that
considerably less
strongly suspected of trying to lead
If welfare reform includes cutting
Nearly everybody
Reforming welfare is much less
his bill was aggressively opposed six
urgent than the
her husband up that garden path
payments after two years; if there is
controversial; many liberals have
years ago by the Children's Defense
first lady's health
where so many "Old Democrats" lie
a freeze on benefits for additional
agrees that the welfare
joined conservatives in noting that
Fund. Hillary Rodham Clinton, mere-
reform."
buried in the Republican landslides of
children; if children who have chil-
the importance of work and respon-
ly the wife of the governor of an
It's probably not:
the past two decades. Mr. Moynihan
dren are required to live with their
system is not working
sibility are tied to family values
obscure Southern state, was board
cincidental that
(and others) want to coax the presi-
own parent or parents rather than
(Many have not.) Those who see work
chairman. She was followed by Donna
Mr. Moynihan was
dent to remember his promise to be a
moving out to live independently; if
and a complete
as "punitive" are like permissive par-
Shalala, now secretary of health and
the first Democra
New Democrat" New Democrats
able-bodied men and women are
services. Both of these women
tic senator to tell
are welfare reformers.
overhaul is required to
ents who never teach their children
1
required to work for welfare checks,
limits. Such indulgence invariably
are leading proponents of health care
the president to
"There's no health care crisis in
then - and probably only then -
reform.
break the cycles of
cripples.
submit to aspecial
America," says Mr. Moynihan. There
young women in the welfare cycle
Growing numbers of teen-agers
Does anyone doubt now. that Mr.
Suzanne
counsel to find out
is a welfare crisis in America."
may have a decent chance of not get-
poverty created by
and even family planning enthusiasts
Moynihan means it when he says, "I
Fields
what really went
His concern goes back almost
ting pregnant.
can once again talk about the virtues
might just hold health care hostage to
on in Whitewater,
three decades, when he saw the "neg-
Liberals have always had an inher-
welfare-supported
of teen-age virginity without smirk-
welfare reform"? It's hardball time in
despite the first
ative incentives" created by the wel
ent reluctance to push work as a cri-
ing. The talk is of devotion and love.
iful downtown Washington, He
lady's stubborn resistance. Hillary's
fare culture, and the growing num-
terion for receiving welfare pay-
illegitimacy.
not raw sex. If these moral attitudes
insistence that she was only a pas-
bers of single young black mothers
ments, especially for single mothers.
can spill over into our understanding
sive partner" in the Clintons' White-
being caught up and ground down in
Conservatives have always been
of welfare reform, linking love and
Suzanne Fields, a columnist for The
water investment when everyone
the cycles of welfare, The latest sta-
reluctant to pay for training programs
welfare-supported illegitimacy. The
work as staples of a secure society,
Washington Times, is nationally syndi-
suspects she was more, than that in
tistics tell the grim progress of the
because they see too much make-
notion that the White House can't
Mr. Moynihan's long attention span
cated Her column appears here Mon-
her work as the lawyer for a savings
cycle: Illegitimacy comprises 68 per-
work instead of real work.
direct two major pieces of legislation
(and memory) might be rewarded
day and Thursday.
and loan that went bust after putting
cent of births to black women, 22 per-
But nearly everybody agrees that
at the same time is behind the effort
with reform and reunion at last.
N.Y. Lawyer Fiske
Is in Line to Head
Whitewater Inquiry
By Michael Isikoff
mal request from the White House,
Washington Post Staff Writer
agreed to name a special counsel to
take over the department's inves-
Robert B. Fiske Jr., a Wall Street
tigation into allegations of possible
lawyer and former federal prose-
wrongdoing involving Clinton's in-
cutor, emerged yesterday as Attor-
vestment in Whitewater as well as
ney General Janet Reno's expected
the company's ties to the failed
choice as special counsel to inves-
Madison Guaranty Savings & Loan.
tigate the Whitewater Development
The S&L closed in 1989 at a tax-
Corp. affair, sources said.
payer cost of about $60 million, ac-
Reno is planning to name her
cording a recent estimate by the
choice at a news conference today.
Resolution Trust Corp.
Sources familiar with the process
Madison Guaranty was owned by
said Fiske, 63, became the leading
James McDougal, who, along with
contender after Justice Department
his ex-wife Susan, was a business
officials developed a "short list" that
partner of Clinton's in Whitewater,
also included former solicitor gen-
an Ozark mountain real estate ven-
eral and federal judge Kenneth W.
ture.
Starr and former U.S. attorney and
Reno said in a news conference
Iran-contra prosecutor Dan Webb.
last week that she wanted to name
Fiske was described by depart-
a "ruggedly independent" prosecu-
ment officials and outside lawyers
tor with a reputation "for honesty
as having unusually strong creden-
and for real skill in terms of matters
tials for a politically sensitive and,
such as this." But while Reno had
some believe, thankless task. A Re-
hoped to make the selection almost
publican named by President Gerald
immediately, finding a candidate
R. Ford to be U.S. attorney for the
proved difficult.
southern district of New York,
Sources said one significant prob-
Fiske continued to serve in that
lem was potential conflicts of inter-
post during the Carter administra-
est.
tion and was praised for his han-
At least some of the lawyers ini-
dling of a number of high-profile
tially under consideration worked
cases. As a senior partner in the
for firms that have represented
New York firm of Davis, Polk &
prominent savings and loans. Jus-
Wardell, Fiske most recently was in
tice Department officials were con-
the news as one of the lawyers who
cerned that such ties might raise
helped defend Clark M. Clifford and
too many questions.
Robert Altman in the BCCI case.
One example was former Carter
Fiske has close ties to a number
administration attorney general
of Justice Department officials, in-
Benjamin Civiletti, who had been
suggested as a possible candidate
array of hard-edged prosecutorial
cluding Criminal Division Chief Jo
by congressional Republicans.
tactics, such as threatened indict-
Ann Harris, who worked in the U.S.
Civiletti's Baltimore law firm,
ments and grants of immunity to
attorney's office under Fiske, and
Venable, Baetjer, Howard &
key players.
FBI Director Louis J. Freeh, who
Civiletti, was sued by the state of
One administration official said
had been one of the top agents in a
Maryland in the mid-1980s as part
yesterday the investigation "could
major waterfront racketeering case
of a savings and loan scandal.
get ugly," one reason that some
prosecuted by Fiske. In 1989, then-
Civiletti said yesterday that while
candidates appeared reluctant to
Attorney General Dick Thornburgh
he had gotten a message to call the
accept the job.
sought to name him deputy attor-
Justice switchboard this week, no-
Sources said that in recent days
ney general.
body got back to him after he re-
Starr had been mentioned as a pos-
But Fiske withdrew his name
turned the call, leading him to con-
sible candidate, touted as another
from consideration after conserva-
clude he was no longer in the run-
prominent Republican lawyer and
tives complained he had under-
ning.
former judge who would give the
mined some Reagan administration
But equally troublesome, sources
selection a bipartisan cachet. He
nominees for the federal judiciary
said, was finding a candidate willing
had
President
while chairman of an American Bar
U.S. Court
Association screening committee
some investigators believe a
of Appeals for the D.C. Circuit at
from 1984 to 1987.
complete investigation of the
the unusually young age of 37; he
The selection comes more than a
Whitewater matter could take more
later was solicitor general in the
week after Reno, faced with a for.
than a year and could require an
Bush administration.
THE WASHINGTON POST
28
Reno Is Said to Choose
New Yorker as Counse
By STEPHEN LABATON
Special to The New York Times
WASHINGTON, Jan. 19 - Attorney
circumstances of the death of Vince
General Janet Reno has settled on Rob-
M. Foster Jr. At the time of his suicint
ert B. Fiske Jr., a New York lawyer
last July, Mr. Foster, a deputy White
and a Republican, to be the special
House counsel and longtime friend
counsel to investigate the real estate
Mr. Clinton and his wife, Hillary, had
investments of President Clinton, an
been handling some of their involve.
Administration official said today.
ment with the Whitewater Develop
Ms. Reno and other senior Justice
ment Company, the real estate busic
officials were described today as com-
ness that the Clintons owned
with
pleting their work on the appointment
James and Susan McDougal.
and going through a final background
The search for an independent countr
check on the selection before making
sel had thrown into question the inve
the announcement.
tigations by the Justice Department
Aides to Ms. Reno said that she could
into the Whitewater affair. Mr. McDAIL
make the announcement as early as
gal also ran an Arkansas savings and
Thursday morning at her weekly news
loan that failed almost five years ago
conference. The conference was sched-
and investigators have been examining
uled even though the Justice Depart-
whether the institution, Madison Guar
ment was closed because of the cold
anty Savings and Loan Association
weather.
improperly funneled money into White
Mr. Fiske, a 63-year-old partner in
water or into Mr. Clinton's 1984
the Wall Street law firm of Davis, Polk
election campaign when he was Govern
& Wardwell, was appointed by Presi-
nor of Arkansas.
dent Gerald R. Ford in 1976 to be the
Separate investigations have been
United States Attorney in Manhattan,
conducted over Madison's relationship
and held that position until 1980. He has
to Whitewater and a note apparenting
had a series of high-profile clients in
left by Mr. Foster. As Mrs. Clinton
recent years in both political and fi-
law partner in Little Rock, Mr. Foster
nance circles. He did not respond today
handled some matters relating
to several messages left at his home in
Whitewater and Madison and when
New York and his office.
died, Whitewater files were found
Seasoned Litigator
office. They were secretly sent to their
Clinton's family lawyer, David
In selecting Mr. Fiske, Ms. Reno has
dall, by the White House counsel, Beve
turned to a seasoned and widely re-
nard W. Nussbaum.
spected litigator who is known for his
Although a Republican, Mr. Fisher
low-key, yet effective approach to-
has many friends who were lawyers
wards cases. Justice Department offi-
New York and now hold senior post
cials have said that Ms. Reno has
tions in the Clinton Administration
struggled to find a person of un-
Those officials involved in his selection
matched integrity, particularly so that
included Deputy Attorney General
if no wrongdoing is ultimately found,
Philip Heymann and Assistant AUDO
she would be able to deflect any criti-
ney General Jo Ann Harris, the head
cism about the independence and thor-
the criminal division and a former
oughness of the investigation.
York prosecutor who has worked when
During the Bush Administration, Mr.
Mr. Fiske.
Fiske had been selected to be the No. 2
official at the Justice Department. But
he withdrew his name from considera-
tion as Deputy Attorney General after
a protracted battle with conservative
Republican senators. Mr. Fiske had
been chairman of the American Bar
Associations committee on the Federal
judiciary from 1984 to 1987, a time
when the A.B.A. panel criticized some
of President Ronald Reagan's choices
for the bench.
Nonetheless, Mr. Fiske is highly re-
garded in New York circles as a litiga-
tor and defense lawyer. A native of
Brooklyn, he graduated from Yale Uni-
versity and earned his law degree at
the University of Michigan. He has long
been considered a leader of the New
York bar, and many of his friends and
colleagues now have senior positions in
the Clinton Administration.
In 1986, when one of his former part-
ners from Davis, Polk, Lawrence E.
Walsh, was named to be independent
counsel in the Iran-contra investiga-
tion, Mr. Fiske was consulted by Mr.
Walsh about what lawyers to be ap-
point as the deputies in the investiga-
tion.
Defending Clifford
Most recently. Mr. Fis.
news as a defense lawyer or Clark
Clifford, the lawyer and lobbyist who
advised four Democratic Presidents
and later headed a Washington bank-
ing company that was secretly and
illegally owned by the Bank of Credit
and Commerce International Mr. Clif-
ford, who was never tried because of ill
health, ultimately switched lawyers be.
cause he disagreed with Mr. Fiske's
advice that he not respond publicly to
accusations that he was involved in
wrongdoing
One of the special counsel's first
duties will be to work out with the
Attorney General the scope of his as.
signment In particular the Justice D.
7
partment must decide about whethe
the counsel will also investigate 5
THE NEW YORK TIMES. THURSDAY. JANUARY 20, 1994
BC-COUNSEL national editors:NY
Reno to announce Whitewater counsel today
By Richard Sisk
New York Daily News
WASHINGTON Attorney General Janet Reno on Thursday will announce her
choice of a special counsel to investigate the tangled business affairs of
President and Hillary Rodham Clinton in the Whitewater development, legal
sources said.
Among the top contenders are former U.S. Attorneys Robert Fiske of New
York and Dan Webb of Chicago, according to sources.
Fiske, 64, was appointed U.S. attorney by Republican President Gerald R.
Ford. He was also tapped to be the top deputy to Attorney General Dick
Thornburgh during the Bush administration but was forced to withdraw his
nomination because of strong opposition by conservatives in Congress.
Reno, who had initially resisted making such an appointment because it
would be perceived as politically tainted, was to make the announcement at her
weekly briefing for reporters, the sources said.
The attorney general has tightly guarded the names she has under
consideration for the politically sensitive post of special counsel. But she
has acknowledged being familiar with a list suggested by Senate Minority
Leader Bob Dole, R-Kan., who suggested former Attorneys General Griffin Bell
and Benjamin Civiletti, among others.
Last week, after several Democrats joined Republican calls for a special
counsel, Clinton dropped his resistance to the move.
The Whitewater affair, which hounded Clinton through the 1992 presidential
campaign, began with the Clintons' 1980s investment in the Arkansas real
estate development with James McDougal, the owner of Madison Guaranty Savings
and Loan Association. The S&L eventually failed and cost taxpayers as much as
$47 million to bail out.
Clinton has insisted that he lost money on the real estate deal, but
Republicans have called for a probe to determine whether funds from the S&L
may have been used to offset Clinton's campaign debts.
Reno had been opposed to appointing a special counsel, arguing that she
would be accused of picking an investigator who would go easy on the
president. Instead, she urged Congress to pass a new special prosecutor
statute that would enable her to have the courts pick an independent counsel.
But Reno bowed to Clinton's wishes after the president changed his mind as
the Whitewater affair threatened to overshadow his European tour.
**** filed by:KR-F(--) on 01/19/94 at 23:54EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 10:01EST ****
BC-ROE-COLUMN op-ed editors:W
I hope Clinton didn't get caught up in something illegal in the Whitewater
deal
By Myrne Roe
Knight-Ridder Newspapers
Two words spring to mind when one considers how the Clintons have reacted
to `Whitewatergate'':
``Dumb.'
Guilty.
I hope the accurate word is the former, not the latter. And if they
haven't done anything wrong, then dumb is a mighty fine way to describe the
Clinton administration's handling of the situation. Doesn't anyone in the
White House understand that, if the story is going around, stonewalling won't
make it go away? Didn't anyone tell them that when they don't respond
immediately and with all the relevant details that they are assumed guilty
until proven innocent?
The whole matter of an Arkansas investment deal gone sour started piquing
curiosity when papers were removed from the office of White House aide and
close Clinton friend, Vince Foster, who killed himself last year. Reporters
dug around and found just enough to get the public more and more curious about
any connection between the Clintons' financial loss and a failed savings and
loan. Unfortunately, instead of stepping forth and answering questions
evolving from all the allegations, the president's response was pretty much an
in-your-face-America non-response.
Let us assume that Bill and Hillary Clinton have done nothing worse than
get caught up in a money-losing proposition. Let us assume that no laws were
broken, that at a minimum there was some poor but not fatal judgment
involved. If that is the case, then why wasn't the policy to approach the
matter by telling all there was to tell up front and real loudly? All that
foot shuffling and no-big-deal stuff has made what may well turn out to be a
tempest in a teapot of white water a really big deal.
So what should the administration have done? As soon as the story began to
break and not a minute later go to the media and say, ``Here are the facts.
All the facts. Lay them out. Chances are if all questions are answered
directly, the story will die. If there's no dirt, there's no dirt. If,
however, there was some wrongdoing not criminal, but doubtful behavior then
confess, say why it won't happen again, apologize and get on with it.
That was the tack with Gennifer Flowers. The Clintons went on ``60
Minutes, said that they had had marital problems. Pointed out discrepancies
in Flowers' story. It worked. The story except among diehard Clinton foes
went away. There was the saga of two former and apparently disgruntled aides
and an old political nemesis going to a right-of-center publication and
alleging some nonsense about Gov. Clinton using the Arkansas Highway Patrol to
procure dates for him. That tall tale has pretty much died for lack of proof
positive and consideration of the source. The Clintons stood together and said
loudly and firmly, `No way.
So why be dumb about the Whitewater thing when the ``bimbo eruptions''
were addressed directly? Did the president suddenly forget that anyone in such
a high office always needs to remember a basic political rule? To wit: The
appearance of wrongdoing can be every bit as damaging as actual wrongdoing,
especially when you try to ignore it?
As it is, there is a search on for a counsel to investigate. Some senators
and representatives want Congress to do its own investigation. The story goes
on and on and on, getting in the way of the president's recent trip abroad and
such upcoming legislative imperatives as health care.
See, nothing is quite so damaging as a political story that just keeps
unfolding, bit by bit and rumor by rumor. A hemorrhage in such situations is
far better for the politician and for the country than a slow bleed. Get the
bloody thing over with rather than keep mopping up and putting on Band-Aid
after Band-Aid for weeks and months.
,
I'm hoping that the president didn't get caught up in something illegal in
the Arkansas Whitewater deal. I already know that he has done something dumb
about it in Washington.
XXX
(Myrne Roe is an editorial writer for The Wichita (Kan.) Eagle. Readers
may write to her at The Wichita Eagle, 825 E. Douglas Ave., Wichita, KS,
67202.)
**** filed by:KR-F(--) on 01/20/94 at 09:17EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 09:57EST ****
bc-white-side
TRIALS AND TRIBULATIONS
OF JAMES B. MCDOUGAL
Eds: With mainbar, WHITEWATER.
By JOHN HANCHETTE=
Gannett News Service=
LITTLE ROCK If James McDougal ends up testifying before a federal grand
jury Thursday as scheduled, it won't be his first time in the U.S. Courthouse
on West Capitol Street.
McDougal, erstwhile business partner of Bill and Hillary Rodham Clinton in
the Whitewater realty controversy, beat bank fraud and conspiracy charges in
the same building after an eight-day trial in 1990.
Jim McDougal started out in the mid-1960s on the staff of the Senate
Permanent Investigations subcommittee, a famous panel run by the late Arkansas
Sen. John McClellan, which at the time was ripping apart the Mafia.
Three years later he switched to the staff of legendary Arkansas Sen. J.
William Fulbright, where he met a young Fulbright aide named Bill Clinton.
Clinton has told friends he first was attracted to McDougal because he
could do an uncanny imitation of Franklin Delano Roosevelt, a hero to them
both.
McDougal and his wife, Susan, brought the Clintons in on an Ozark realty
deal in 1978 Whitewater and four years later bought a savings and loan of
their own, Madison Guaranty. McDougal always had wanted to be a banker he
tried to start one in his hometown in his mid-20s, but then-Gov. Orval Faubus
would not approve it.
In any case, Madison Guaranty went belly-up in 1989, costing taxpayers
between $47 million and $60 million. McDougal soon was indicted by the Justice
Department, accused of bank fraud and misapplying funds.
The government said he arranged a ``sham'' transaction by having Madison
loan ``straw buyers'' $950,000 for fake purchases of a Little Rock warehouse
and surrounding industrial park acreage here deals financed entirely by the
thrift, but made to appear as if others were using their own money.
Federal prosecutors claimed McDougal set up the ``bogus'' transactions to
show a profit on the Madison books, then took $75,000 in bonuses for those
`profits. They also claimed he used his wife's two brothers David and
James Henley (the latter a Baptist minister)
as front men by paying them false real estate `'commissions'' which they used
as down payments to buy the property in the name of another company.
In one transaction, a carpenter on the property was made president of the
purchasing company, which had no assets or cash. He later testified he did not
understand the whole deal.
These ``straw man'' transactions were fairly common in the S&L scandals of
the 1980s intricate buy-backs set up to disguise the total use of a thrift's
money on both ends of a sale; this allowed S&L chieftains to divert deposits.
His lawyer then and now, Sam Heuer, first offered a form of insanity
defense, claiming McDougal was a manic depressive. He filed papers showing
McDougal had been hospitalized in Little Rock in 1986 for florid manic
episodes'' in which he felt invincible and used poor judgment with money,''
then at other times feels worthless and sees little hope for the future.
The judge sent McDougal to the Springfield, Mo., medical prison, where
doctors `concluded that Mr. McDougal was mentally competent to stand trial
and was not suffering from a severe mental disease defect that caused him to
be unable to appreciate the nature and quality of the wrongfulness of his
acts.
David Henley got his charges dismissed partly by showing he actually had
begun paying back the `loan'' he apparently thought was real.
McDougal and James Henley went to trial. Prosecutors claimed McDougal saw
Madison as ``an endless supply of money.
But Heuer argued the prosecution was a ``witch-hunt,''' and the government
had not proved McDougal actually had made money, or connived to defraud the
bank.
When the jury acquitted him and James Henley, McDougal said: ``This was a
political show trial that would do Joe Stalin proud. "
A Little Rock columnist suggested the federal prosecutors did not use
enough `cornbread English'' to explain complex financial transactions to the
jury.
In 1989, the Justice Department indicted 247 top S&L officers in trying to
clean up the industry. McDougal was one of only three acquitted after trial.
He could have received 40 years.
Heuer thinks the jury was quite sophisticated.
``We proved to them that McDougal hadn't taken any money out of Madison,
he told Gannett News Service. ``It would have been like robbing from
yourself.
Three years ago, looking back on the trial, McDougal told an interviewer
``The one encouraging thing I thought of was that if they put me in jail,
they'll have to fix my teeth and maybe pay for this medicine I take, which
consumes about 45 percent of my monthly income.
The court accepted McDougal's status as a pauper, his only income a $560
monthly disability check. In 1986, he had an operation to clean out the
carot artery that was causing blackouts and causing mini-strokes. He can
read three minutes, then his vision blurs. His teeth were falling out before
the trial.
The court awarded Heuer more than $13,000 for his defense.
Now McDougal has been summoned to appear before another jury this time a
federal grand jury to tell what he knows of the Whitewater property venture
he embarked upon with the Clintons. His testimony will be secret, unless a
special counsel to be named by Attorney General Janet Reno eventually decides
to take the matter public.
**** filed by:GN-F(--) on 01/19/94 at 18:13EST ****
**** printed by:WHPR(JEL) on 01/20/94 at 10:01EST ****
NOTEBOOK
cohe
restic program and no political strategy 1:
two months Vladimir Zhirinovskv has shown himselt to
be a buffoon. and while buffoons do occasionally win
W
power in places like Russia (and eisewhere). his ascen-
HITEWATER RAPIDS: There's no easy war to dispel
sion is neither inevitable nor immediate. Meanwhile
every concern about the Clintons messy involvement
there's no tangible sign that Russia has either the means
with Whitewater Development Corporation: but the
or the desire to threaten Eastern Europe. This is not. pace
response of the administration is mystifvingiv detensive
Lech Walesa 1939 The administration compromise of
Why not the fullest public disclosure? Why not the most
partnership or peace" with the Eastern nations is there-
independent investigation possible? This is not a matter
fore right for the wrong reasons. it's right not because
of privacy. as the state troopers discredited reports were
Yeitsm should exercise a veto over our foreign policy
It's a matter of public interest. In particular. janet Reno's
the shouldn out because it's a pragmatic first step
decision not to appoint a special prosecutor to investi-
toward eniarging our alliance without imperiing
gate the affair
its tocus and
no longer tenable
its effectiveness. A
"If appoint a spe-
more urgent men-
cial prosecutor. it's
ace to democracy
still my prosecutor
YOU CAN EXPECT TO
in Eastern Europe
and there will
CHANGE JOBS II TIMES IN THE
is economic dis-
still be questions
COURSE OF YOUR WORKING LIFE.
tress. Western
about that per-
Europe's leaders
son's indepen-
would rather de-
dence." she said
bate NATO than
on December 24.
open their pro-
I'm going to be
tected markets to
responsible for
click
Eastern European
the outcome of
products. Yet
any investigation.
speeding up the
then I want to
East's inclusion
make sure it's
in the European
done the right
Union might
way." In the same
make a solid short-
breath.
Reno
term contribution
seemed to take
to the security and
responsibility and
Employee Surfing
prosperity of those
to disclaim re-
countries The
sponsibility for the
BUT
president should
investigation: and
make use of his
she refused to sav whether she supported the decision of
trip to Europe to drive that point home
her career prosecutors to subpoena the Whitewater files.
At this point. only a special prosecutor can dispel the
impression that Reno's inquiry is compromisable. And
T
HE INVISIBLE HAND:
only the renewal of the independent counsel statute
(killed by Republicans)-which would allow a special
Fed Dispels Notion
prosecutor to be appointed by judges rather than be the
Of Raising Rates Now
attorney general- that this
not repeated again.
Washington Post. December 1993
Short-Term Rates
E
Will Be Increased.
UROPE CALLING There's a dangerous new phe-
nomenon in foreign policy these davs: the notion that the
Fed Aide Indicates
relative success of neo-tascists in the recent Russian elec-
Wall Street harnal. same den
tions should determine our entire approach to the
Thanks Black Washington
region. (Call it Zhirinovskvism. To the Poles. Czechs
and Hungarians. Zhirinovskvism proves they need NATO
membership to protect against a more aggressive Russia
S
ORRY BATMAN Wed like to apologize to DC
To the Clinton administration. Zhirinovskvism means the
Comics for the gratuitous use of Its cartoon characters.
opposite. because expanding NATO would lend credibilin
Batman and Robin. IM a context that was cleariv inconsis
to the Russian nationalists and their allies in the Russian
tent with the way the characters are portraved in the
military. Both are wrong. The Zhirinovskvites have no
company publications and merchandise
8 THE NEW REPUBLIC JANUARY 24. 1994
108
Grand Jury Reconvenes
on Arkansas S. &L.
WASHINGTON, Jan. 18 - A Federal
grand jury looking into the collapse of a
failed savings and loan association re-
convened today in Little Rock, Ark.
There was no indication that it heard
any evidence about the ties between
the association and President Clinton's
land development company.
Grand jury proceedings are secret,
but people involved in the investigation
said today that there had been no pre-
sentation of evidence about the real
estate concern, the Whitewater Devel-
opment Company. Mr. Clinton and his
wife, Hillary, invested in Whitewater
with James B. McDougal, the owner of
the Madison Guaranty Savings and
Loan Association, which was taken
over by Federal regulators in March
1989.
A Federal prosecutor moved last
week to have a second grand jury
empaneled, saying the first jury did not
have the time to take up the White-
water investigation. It was unclear to-
day what jury would take up the mat-
ter. Furthermore, with Attorney Gen-
eral Janet Reno expected 10 name a
special counsel in the Whitewater case
in a few days, it was also unclear what
role a grand jury in Little Rock would
play in an investigation.
Mr. McDougal has already been or-
dered to appear before a grand jury,
and other Clinton associates have said
that they were notified that they would
be subpoenaed. Betsey Wright, Gover-
nor Clinton's chief of staff, had also
said she was to be summoned, but she
told The Associated Press today that
she had heard that the subpoena had
inexplicably been withdrawn.
Federal investigators are trying to
determine whether money was im-
properly diverted from Madison to
Whitewater or to help Mr. Clinton re-
pay a $50,000 loan for his 1984 cam-
paign for governor. Mr. Clinton has
said that he engaged in no wrongdoing
and that he lost money in the White-
water investment. But last week he
yielded to Congressional pressure and
asked the Attorney General to appoint
a special counsel to investigate the
case.
THE NEW YORK TIMES, WEDNESDAY, JANUARY 19, 1994
An Old Friend of the Clintons Stays Loyal, Spends
Spare Time Doing Damage Control for President
By JAMES M. PERRY
Ms. Wright comes from rural Texas-
back beyond the campaign. Fortunately.
Staff Reporter of THE WALL STREET JOURNAL
she was reared in little Alpine, just down
Washington swarms with them. "It's
WASHINGTON - Poor Betsey Wright.
the road from Marathon. in the southwest-
nice," she says, "I can't walk much more
capital insiders said with a hint of conde-
ern "Big Bend" corner of the state - and
than a block or so without bumping into
scension. Her old Arkansas boss. Bill Clin-
honed her political skills at the University
someone from Arkansas."
ton. didn't offer her a job in the White
of Texas. She met Bill Clinton in 1972. when
She was first used at Wexler Group
House or anywhere else in his new govern-
they both worked in Texas in George
to lobby for Nafta. working mostly to drum
ment. And so, they said. the best she could
McGovern's forlorn presidential cam-
up support from governors and mayors. "I
do was accept a kindly benefice-an empty
paign. She came to Little Rock in 1980,
must say, I was impressed," says Craig
desk in a downtown lobbyist's office.
after Mr. Clinton had been defeated for
Fuller. a former high-ranking aide to
Poor Betsey Wright indeed.
re-election as governor. and then served as
George Bush. and now senior vice presi-
All she's done since she came to town
his chief of staff after he was returned to
dent of Philip Morris Cos., who worked
last March is make a splash lobbying for
office in 1982. She ran his successful
with Ms. Wright on the Nafta campaign.
everything from
re-election campaigns in 1982. 1984 and
"We were at the White House almost every
the North Ameri-
1986.
day, and she won the respect of a lot of
can Free Trade
"There is no person in the entire uni-
people."
Agreement to
verse who is more loyal to Bill and Hillary
She has also used her connections to set
American Airlines
Clinton than Betsey," says Ms. Wexler.
up White House meetings for representa-
to health care.
tives of the paper industry in their efforts
And when she
Ms. Wright is almost as protective of
to water down federal provisions on how
wasn't doing that.
the state of Arkansas. She loves the place.
much recycled waste should be contained
she was flying
When Mr. Clinton decided to run for presi-
in paper bought by the federal govern-
down to Little
dent, Ms. Wright saw that each of the
ment. The Wexler firm's client is the
Rock on her own
hard-edged handlers he hired was given a
American Forest and Paper Association.
time to work some
copy of Diane Blair's book about Arkansas
Ms. Wright also has put in a lot of time
dextrous damage
government and the state's rich, and
with an obscure, congressionally spon-
control over alle-
sometimes gamey, political history. She
sored agency called the College Construc-
gations by Ar-
Betsey Wright
wanted them to read the book and learn to
tion Loan Insurance Association, better
kansas
state
appreciate Arkansas's rural charms.
known to its friends as Connie Lee. Con-
troopers that they had seen Mr. Clinton in
The fact that none of Mr. Clinton's
gress set up Connie Lee in 1987 to guaran-
some pretty compromising situations.
hired guns - she calls them the "white
tee low-rated bonds for building programs
"I'm having the time of my life." she
boys" - read the book, or tried to give
at colleges and universities. The congres-
says in an interview in her comfortable
Arkansas a fair shake. still riles her.
sional thinking was that the private mar-
office on the sixth floor of Washington's
"They showed so much disdain towards
ket would cover the insurance for the
first steel-beamed office tower. "This is
the state. I felt it was very offensive," she
higher-rated bonds.
wonderful."
says.
But with such restrictions in its operat-
"She's a great strategist and she's
At a campaign-managers' seminar at
ing charter. profit-seeking Connie Lee
doing wonderful things for us," says her
Harvard University's Institute of Politics
hasn't had much of a chance to spread its
boss, Anne Wexler. a prominent Democrat
after the election. she unloaded on the
wings. And so it has turned to Ms. Wright
and chairman of Wexler Group, a govern-
attitudes of a number of Mr. Clinton's
and Wexler Group to lobby the White
ment relations and public affairs consult-
handlers. fingering pollster Stanley
House and Congress for permission to
ing unit of Hill & Knowiton Inc. Its client
Greenberg as being particularly nasty
list runs from American Airlines to Gen-
about Arkansas and what Mr. Clinton had
eral Motors Corp. to J.P. Morgan & Co.
done for the state during the 12 years he
Ms. Wright won't even discuss who her
was its governor. "I don't know why I
expand its insurance business to bond
clients are, let alone how much she is paid
singled him [Mr. Greenberg) out," she
issues for secondary and elementary
as one of Wexler Group's seven executive
says. "He wasn't any worse than the rest
schools and possibly to bond issues for
vice presidents. But it's a fair bet that it is
of them."
infrastructure work - everything from
a lot more than she made in her years as
She is intense about her Clinton-
bridges to sewers.
one of Mr. Clinton's top aides and political
Arkansas connection. and it was this inten-
Ms. Wright says she knows a lot about
operatives in Little Rock. "For the first
sity that often led the campaign handlers
this line of business from her days in Little
time in my life. I can say it's no one else's
to work around her during the campaign.
Rock. "People keep saying if you come
business," she says.
in which she was officially listed as
from local government you don't know
What makes the 49-year-old Ms. Wright
deputy chairman. The handlers won't soon
anything about Washington. That's a
so special is her relationship to Bill and
forget the time she set out to rebut charges
crock. We've been the ones dealing for
Hillary Rodham Clinton. She's SO close to
that Mr. Clinton had raised taxes and fees
years with all these programs dumped on
the first couple that she can afford to turn
in Arkansas something like 128 times. Not
us by the federal government."
so, she told reporters. it was only about 110
"Betsey Wright has been very effec-
down an invitation to drop by the White
times - an admission that left senior strat-
tive." says Oliver Sockwell, Connie Lee's
House for an informal dinner and a movie,
egist James Carville speechless.
ambitious president. "She has an almost
an opportunity most lobbyists and
unique skill to translate highly complex
wheeler-dealers here would die for. "I
She continues to view the "white boys"
issues into words that everyone can under-
didn't want to see the movie," she says.
left over from the campaign and still
stand."
So close, too, that Ms. Wright expects to
working for Mr. Clinton with deep suspi-
Ms. Wright has now reached the point
be subpoeaned by a federal grand jury in
cion. She lays the White House's problems
Little Rock looking into Mr. and Mrs.
in dealing with the Whitewater contro-
where she gets credit for pulling off lobby-
ing coups in situations where she has
Clinton's role in the controversy surround-
versy to the fact that "none of them knew
barely been involved. It was rumored. for
ing their Whitewater Development Co.
anything about the issue. There was no
real-estate investment. Ms. Wright says
continuity. They couldn't connect the
example, that she was a pivotal factor in
the Federal Bureau of Investigation told
dots.' Left unsaid was the thought that she
getting President Clinton to intervene in
did know something about Whitewater and
the American Airlines strike just before
her to expect such a subpoena. but she
could have done a better job connecting the
Thanksgiving, and that a grateful airline
says she has now been told to disregard
dots.
had paid out $1 million to the Wexler firm
that warning. In any event, she says, she
in acknowledgement. "Ridiculous," says
expects to be subpoenaed eventually be-
And so, when it comes to lobbying the
Ms. Wexler. Ms. Wright was barely in-
cause she knows so much about Mr. Clin-
White House, not everyone working there
volved with the strike, according to several
ton's Arkansas campaign records. She
is her friend. She prefers to deal with old
people familiar with the situation.
says she will co-operate with investiga-
friends and colleagues from Arkansas
Ms. Wright see nothing wrong in blend-
tors.
whose connections to the Clintons go
ing personal rescue missions for the presi-
dent with her lobbying efforts inside the
administration. "I'm very careful not to
abuse the relationship," she says. "When I
call people I always mention the subject I
want to talk about and I always identify my
client."
But it does help, she concedes. that she
knows so much about the president and
how he thinks. "Every now and again.
some staffer tells me, "The president be-
lieves this or the president believes that.'
'Boy,' I sometimes can say, 'you better
THE WALL STREET JOURNAL TUESDAY, JANUARY 18. 1994
check back with him on that. It's not what
he told me.
64
these rights came into being. In the
Bigger than Watergate
INSIDE THE
past, only Abe Lincoln has had such
a "speaking" role.
"The only reason he refuses to
release them [the documents) is be-
Well, our item didn't sit well with
cause he knows they will be politi-
cally damaging to him," Al Gore re-
BELTWAY
Donna Wiesner of Arlington, an ob-
vious Lincoln fan who fired off a
marked.
letter to Martin Sklar, president of
OK, so our vice president isn't
Walt Disney Imagineering in Glen-
talking about his boss, Bill Clinton,
dale, Calif.
or even Whitewater-Madison, for
She wrote: "If Disney is going to
The Washington Times
that matter.
be so political, register as a cam-
Instead, the date is Oct. 15, 1992,
in the world to negotiate with.
paign contribution and be above-
just two weeks before the pres-
Should President Clinton be check-
board. If [you] are a theme
idential election, and Mr. Gore is
ing his pockets on the way home to
park, act like one, politics aside. I
demanding that opponent George
D.C.?"
will remember this when you want
Bush release documents pertaining
A: "President Assad is very
tax breaks from our area to build
to any U.S. dealings with Iraq be-
tough. Whether President Clinton
another park."
fore its invasion of Kuwait.
should be checking his pockets or
"What we are seeing now," Mr.
not depends on whether he had
Oral utter
Gore said then, "is President Bush
anything in them to begin with."
presiding over a cover-up signifi-
Things were fairly quiet around
cantly larger than the Watergate
Clinton vs. Dole
Washington yesterday, maybe be-
cover-up."
cause the federal government was
President Clinton is expected to
on holiday or because the snow and
address the nation's governors not
ice deadened the usual noise of
Relnventing gas
once but twice when they hold
rhetoric, punditry and assorted
their 1994 winter meeting here
other gasbaggery. So we thought it
As we all know, President Clinton
later this month. Reforming the na-
a good time to peek inside our na-
and Vice President Gore have be-
tion's health care, welfare and edu-
tion's courtrooms, gathering a few
gun the monstrous task of reinvent-
cation systems will top an agenda
excerpts from actual court tran-
ing government. Doing his part in
where the governors will also hear
scripts contained in Richard
this unimaginable process, Trea-
from Senate Minority Leader Bob
Lederer's new book, "Anguished
sury Secretary Lloyd Bentsen ap-
Dole, who's all but announced his
English."
pointed representatives from each
intention to seek the presidency in
Q: "Mrs. Jones, is your appear-
of Treasury's offices and bureaus
1996.
ance this morning pursuant to a de-
and placed them on a "six-month
On health care, the Republicans
position notice which I sent to your
detail," dubbing them the "Treasury
contend that Mr. Clinton's "rhetoric
attorney?"
Reinvention Team," or TRT. It is the
Lawrence Eagleburger has a wry
has not matched the substance" of
A: "No. This is how I dress when
TRT's job to advise the executive
take on the Clinton-Assad talks.
what's officially called the Clinton
I go to work."
level of any Treasury reinventions.
Health Security Act, H.R. 3600.
For instance, we've learned that
general's office, in doing its share
Q: "What is your name?"
the TRT invented two new news
services - the "Reinvention News
to reinvent government, will "re-
Certain theme park
A: "Ernestine McDowell."
vise" its mission of "strict compli-
Q: "And what is your marital sta-
Service," which compiles and dis-
tributes reinvention news to em-
ance auditing" and instead develop
Back on Nov. 3, we were the first
tus?"
a "strategy for improving customer
to report that Walt Disney execu-
A: "Fair."
ployees, and "Reinvention On Line,"
satisfaction."
tives were replacing Abraham Lin-
TUESDAY, JANUARY 18, 1994
an 800-numbered phone service
coln, of all popular presidents, with
Q: "Doctor, how many autopsies
that provides Treasury employees
Bill Clinton as a talking figure in
have your performed on dead peo-
with reinvention news at their fin-
gertips.
Nothing of value
Walt Disney World's Hall of Pres-
ple?"
idents.
A: "All of my autopsies have been
Callers to the latter can hear ap-
Gene Randall was host of CNN's
Mr. Clinton's bust, we reported,
on dead people."
proximately five minutes of re-
"Late Edition" early Sunday night,
has become the first living presi-
corded messages about Treasury
and his guest was former Secretary
dent to "speak" to guests in the the-
Q: "And lastly, Gary, all your re-
reinvention activities, events,
of State Lawrence Eagleburger.
ater. "He" explains to visitors the
sponses must be oral, okay?"
successes and other topics. For in-
Q: "Secretary Eagleburger, I am
many important freedoms of being
A: "Oral."
stance, the recording yesterday
told you consider President Assad
an American and how, aided by
Q: "How old are you?"
told us that Treasury's inspector
of Syria one of the toughest leaders
strong presidential leadership,
A: "Oral."
The Washington Times
Whitewater hypocrisy on the Hill
T
he word "hypocrisy" has been tossed around
ferent congressional committees holding investiga-
a good deal by White House aides and liberal
tions. The crime they accused Mr. Hubbard of was
reporters and pundits when discussing calls by
not exactly conflict-of-interest, but rather the possi-
Republicans for a special prosecutor to look into the
bility that at some point in the future he might have
Whitewater affair. In fact, in arguing against the now-
a conflict of interest.
defunct independent counsel law - the Watergate-
Similarly, when allegations surfaced that there
era legislation under which a special "court"
might have been irregularities in the food assistance
appoints an independent counsel who is accountable
program to Iraq, irregularities that might have
to no one in the executive branch, much to the detri-
allowed the regime of Saddam Hussein to buy some
ment of the Founders' concerns about the separation
heavy trucks for his military, Congress again went
of powers - Republicans have mostly maintained
into overtime with multiple hearings by multiple
that executive branch scandals can be sorted out,
committees, most notably the House Banking Com-
when necessary, by outside prosecutors appointed by
mittee chaired by Texas Democrat Henry Gonzalez.
the attorney general as well as by Congressional
Mr. Gonzalez thought it sufficiently important to edu-
hearings. This is just what the political minority has
cate the public about presidential doings that he read
called for in the Whitewater case, with varying suc-
classified documents into the Congressional Record.
cess. Janet Reno, upon instruction from her boss, has
In fact, as editorials here agreed at the time, he there-
finally bowed to political inevitability and announced
by shed much light on a disgraceful part of the Bush
she will appoint a special prosecutor to conduct an
administration's record. Yet this same lawmaker has
investigation into the Clintons' land-development
repeatedly shrugged off demands that his commit-
scheme. But Democrats on the Hill have bobbed and
tee look into the Whitewater case, which would be a
weaved and squirmed their way out of holding hear-
natural for him given that the questions all swirl
ings of their own to uncover the Whitewater facts.
around the failure of a savings and loan.
This is hypocrisy of a breathtaking order. There
There is palpable relief in some quarters on Capi-
can be no explanation for the stonewalling on Capi-
tol Hill that the whole matter is going to be in the
tol Hill other than a desire to protect a president of
hands of a special prosecutor, where it will be han-
the majority party. Compare congressional Democ-
dled quietly for some time. The apparent hope is that
rats' new-found reticence with the zeal lavished
if there is no discovery of criminality, the affair can
upon any question about propriety in Republican
be buried.
administrations. Investigative hearings were not
But is criminality the only concern? No. The White
even limited to issues that touched on the activities
House has gone to extraordinary lengths to keep the
of the president.
Whitewater files or what is left of them - out of
Consider the wilding inflicted on Allen Hubbard
public view. It is hard to avoid the conclusion that
two years ago when he was the executive director of
something mighty interesting is lurking there. As
the Vice President's Council on Competitiveness. Mr.
Sen. Robert Dole said over the weekend, in his ongo-
Hubbard stepped on toes all over Capitol Hill by try-
ing campaign to embarrass Democratic lawmakers
ing to short-circuit the lines of command by which
into doing what they have long professed is their duty,
lawmakers exercise unaccountable power. Legisla-
"Somebody must know something we don't know."
tors are used to getting their way by privately call-
What is most troubling about Whitewater isn't
ing up regulators, rulemakers and other federal
what is known about it, but what is not known. It
bureaucrats and telling them what to do. (This often
seems the White House doesn't want the fog to clear
goes by the name "constituent service.") Mr. Hub-
and is willing to go to great lengths to see that it
bard made multiple enemies by encouraging George
doesn't. Capitol Hill is accommodating its desire. If
Bush and Dan Quayle to review and sometimes
legislators want to protect their own credibility, they
override the decisions made by bureaucrats at the
should join the call for hearings- if for no other rea-
surreptitious direction of powerful congressmen.
son than to pry loose for public release all the docu-
And so Congress ganged up on him, with six dif-
ments the White House is SO zealously guarding.
A Syrian commitment to peace?
A
nother remarkable announcement came over the
sideration. Removal from the list of terrorist nations
wires Sunday morning just in time for the
would mean great benefits for Syria in terms of pref-
talking heads to chew on. President Clinton
erential trade agreements and access to military
announced, speaking at a Geneva news conference,
technologies from the United States.
that Syrian President Hafez Assad had committed
But Mr. Assad did get something for himself. He
himself to "normal peaceful relations" with Israel.
got the prestige of a highly publicized meeting with
Puzzled commentators, such as former Secretary of
Mr. Clinton. In addition, even as the Geneva meet-
State Henry Kissinger, found it a generally positive
ing was proceeding, Mr. Assad got the first of three
sign, it being the first time Syria has acknowledged
Boeing 727 jets he has long wanted, the Commerce
any such willingness, but there was a lot of uncer-
Department having granted the necessary export
tainty as to what exactly it meant. In fact, Israeli
license. The State Department considers the 727s a
politicians and Americans analysts are still won-
goodwill gesture, a sign of "improved" relations
dering, since neither the American nor the Syrian
with Syria and a needed incentive to get "over the
president have been forthcoming with details.
hump" in the peace process.
Mr. Assad's plans in relation to Israel are open to
Mr. Clinton also announced that the two leaders
a variety of interpretations most of them not very
had discussed US.-Syrian relations and that they had
confidence-inspiring for Israel. But it is pretty clear
instructed their secretaries of state "to establish a
that he wants better relations with the United States.
mechanism to address issues in detail and open-
Sunday's more than four-hour long discussion with
ly." The alert reader might wonder what "issues"
Mr. Clinton was part of that campaign. In fact, it was
stand in need of such a special mechanism. Proba-
part of Syrian conditions for showing up at the next
bly Mr. Clinton meant terrorism, but felt that the T-
round of peace talks, which begins in Washington
word was too indelicate for such a fine occasion.
today and was arranged during Secretary of State
Actually, there already is a mechanism. When
Warren Christopher's visit to the Middle East in
Syria sustains such groups as the Hezbollah, which
December.
attacks Israeli settlers from southern Lebanon, or the
Mr. Assad would dearly like the United States to
Popular Front for the Liberation of Palestine or the
pressure Israel to agree to withdraw from the Golan
Hamas or the Marxist Kurdish Workers Party or (as
Heights. This the administration has wisely refused
families of the victims believe) the terrorists who
to do so far. He would also very much like to be
blew up Pan Am 103, Syria ends up on the State
removed from the State Department's list of nations
Department's list of terrorist states. If it ceases these
that sponsor terrorism. It was reported in early
activities, then it will be removed from that list. This
December that Mr. Christopher favored such a move.
may sound a little primitive, but as long as the evi-
In a reply to concerned inquiries from parents of vic-
dence is honestly considered and not glossed over for
tims of Pan Am 103, however, National Security Advi-
reasons of political expediency, then it actually
sor Anthony Lake stated that it was not under con-
works.
112
WASHINGTON EDITION / LOS ANGELES TIMES
TUESDAY. JANUARY 18, 1994
Whitewater Probe Sparks Little
Public Interest, Survey Finds
By THOMAS B. ROSENSTIEL
Only 13% of those interviewed
thought the press was being unfair.
TIMES STAFF WRITER
said they had paid "very close"
Clinton's approval rating was
attention to questions about the
highest in February. 1993. gradu-
W
ASHINGTON-Despite in-
First Family's investment in
ally dropping to a low point in June
tense media coverage, most
Whitewater Development Corp., an
and August. It has climbed since
Americans are paying little or no
Ozark Mountain vacation resort.
then, with a slight dip in October.
attention to news accounts of the
while Clinton was governor of
The low level of interest in the
investigation into President Clin-
Arkansas, the survey found. Twen-
Whitewater story is not out of line
ton's past business dealings, ac-
ty-nine percent said they had paid
with past survey figures concern-
cording to a survey released Fri-
"fairly close" attention.
ing stories about Washington con-
day.
By contrast. 57% said they had
troversies or allegations of wrong-
Moreover, after a month in
followed the stories "not too close-
doing.
which the so-called Whitewater
ly" or "not at all."
Since 1989, when the Times Mir-
Only 15% of those surveyed said
ror Center first began examining
FROM SATURDAY EDITIONS
they had paid very close attention
such matters, the highest level of
to claims by some Arkansas state
interest in such stories-31%-oc-
story has increasingly become the
troopers that they helped arrange
curred during the Iran-Contra trial
focus of White House press cover-
extramarital affairs for Clinton
of Oliver L. North.
age, Clinton's approval rating has
when he was governor and before
The use of public planes for
remained unchanged at 48%. ac-
his presidential inauguration.
private travel by John H. Sununu.
cording to the study by Times
Nearly 60% of those interviewed
White House chief of staff during
Mirror Center for People and the
said they had followed that story
the George Bush Administration,
Press.
"not too closely" and "not at all
was followed very closely by 26%.
The rating is nearly equal to the
closely."
In Clinton's tenure. the most
highest point it has reached in the
Unlike coverage of some other
closely watched controversy in-
Clinton presidency. Only in the
controversies, the Whitewater sto-
volved attorney general candidates
first few days after the inaugura-
ry has not yet provoked anger at
Zoe Baird and Kimba M. Wood.
tion was it higher.
the press. Rather. the matter seems
Both women lost out over issues
The survey. in which 1,494 adults
simply not to have registered with
surrounding the hiring of house-
were interviewed from Jan. 6
the public.
hold workers who were immigrants
through Jan. 13. has a margin of
Sixty-one percent of those inter-
and whether the nominees had paid
error of plus or minus three per-
viewed said the press has been fair
Social Security taxes. That story
centage points. The results could
to the Administration. while only
was followed closely by 24% of
have been influenced by the word-
21% said it has been unfair. about
those interviewed.
ing of the questions.
the same as last August.
Other controversies involving
The Times Mirror Center is
In June, after news accounts of a
Clinton-the suicide of White
owned by Times Mirror Co., which
purported $200 haircut for the
House counsel Vincent Foster and
also owns The Times and other
President and the firing of several
the firing of the travel staff-gen-
newspaper and communications
White House travel office workers,
erated about the same public inter-
operations.
about 43% of those polled said they
est as Whitewater.
A Warning Exit in Moscow
On its face, Yegor Gaidar's departure from the
is the kind of decision that has made Viktor Gera-
Russian Government is a blow to Boris Yeltsin and
shchenko, chairman of the Russian central bank, a
an embarrassment to President Clinton. Only last
symbol of incompetence. He has printed money
Friday in Moscow, Mr. Clinton praised President
chiefly to keep unproductive factories afloat. So
Yeltsin for his commitment to economic reform,
appalling has been his stewardship that Boris Fyo-
though he was apparently then aware that Mr.
dorov, the Finance Minister as well as a Deputy
Gaidar, one of Russia's ablest reformers, was about
Prime Minister, threatens to resign rather than
to quit as First Deputy Prime Minister. Citing
serve with Mr. Gerashchenko.
profligate decisions taken without Cabinet consulta-
To view these disputes as arguments over the
tion, Mr. Gaidar gave a blunt farewell: "I cannot be
pace of reform wholly misses the point. Runaway
at one and the same time in the Government and in
inflation sabotages any economic system, and the
opposition to it."
poorest are the biggest losers. Voters cannot eat
A dramatic exit, certainly. But not yet a last
worthless rubles. Unfairly if understandably, Mr.
bow for Mr. Gaidar, who has quit, or threatened to
Gaidar's reformist party was punished in recent
quit, on previous occasions. Resignations are a way
elections by frustrated Russians who turned to
of forcing decisions, and one of the biggest facing
ultra-nationalists.
Mr. Yeltsin is whether to continue on a ruinous
Fiscal restraint is a precondition for any func-
inflationary course. The specific moves protested
tioning economy, with or without reforms - a point
by Mr. Gaidar illustrate the point: the earmarking
underscored by Mr. Clinton and his economic team
of $500 million for a lavish new parliamentary
in their overtime talks last week. How Russia
building and, far more troubling, a proposed mone-
moves against hyperinflation is first and foremost
tary union between Russia and insolvent Belarus.
the job of the Russians themselves.
The draft agreement with Belarus, adopted by
While not taking sides in Moscow's internal
the Yeltsin Government without discussion, pro-
quarrels, Washington needs to keep pressing for an
vides that already weak rubles would be exchanged
end to fiscal folly. Seen in this context, Mr. Gaidar's
one for one with a still weaker local currency,
exit is a warning that, if unheeded, could presage a
worsening Russia's own monetary hemorrhage. It
calamity.
Aftershock
To the people of southern California, it always
The elapsed time is generally about 30 seconds,
seems to happen the same way. Sometime before
start to finish. And then it stops, although the
dawn, in that deepest hour of sleep, they suddenly
adrenaline flow, the fear and the aftershocks, some
awaken, confused and disoriented. The china is
of them large, do not. And then the damage assess-
shaking. The windows are rattling. In an instant -
ment begins.
less time than it takes to read this sentence - they
For the people in and around Los Angeles, that
leap from bed, staggering and stumbling and gath-
damage includes the tragedy of lost lives, the mil-
ering other family members under the flimsy secu-
lions of dollars in property destruction and the
rity of a door frame.
widespread inconvenience caused by the severing
And so it was yesterday in the San Fernando
of four of the region's busiest highways, daily
Valley, where a violent predawn earthquake, meas-
arteries for hundreds of thousands of commuters.
uring 6.6 on the Richter scale, killed at least 24
Only someone who has been through an earth<
people, set fires, buckled freeways and turned build-
quake can possibly understand the terror it brings.
ings into rubble.
In the days and weeks to come, the slightest noise in
"This place was moving like a jackhammer
the night - the creak of a screen door, the flapping
was going at it," said Richard Goodis of Sherman
of a shutter - will bring residents of the San
THE NEW YORK TIMES, TUESDAY, JANUARY 18, 1994
Oaks, an affluent Los Angeles suburb. "Our bed-
Fernando Valley fully awake, hearts quivering.
room wall tore away. I was looking at the ceiling one
They, better than most of us, will understand the
moment, then I was looking at the sky. I thought we
precariousness of human life on the edge of nature's
were dead."
immense, imponderable forces.
The Veep Signs On
The Clintons' style of damage control has cer-
Whitewater Development Corporation and whether
tain hallmarks that have been on clear display since
Mr. Clinton's Arkansas bank regulators went easy
the 1992 campaign.
on the Clintons' Whitewater partner, James McDou-
Phase one involves expressions of anger from
gal.
President and Mrs. Clinton. Mr. Clinton's unseemly
Throughout his relationship with Mr. Clinton,
outburst at NBC correspondent Jim Miklaszewski
Vice President Gore has resisted serving in the role
in Prague was a classic example of his calibrated
of uninformed political bodyguard. His public refus-
tantrums. The anger is usually followed by dollops
al to defend Mr. Clinton's veracity against attacks
of self-pity. The implied message is this: "Why are
from then Vice President Quayle in their Oct. 13,
you asking me these petty questions when I am
1992, debate got Mr. Gore in trouble with Mr.
working so hard to improve the world?"
Clinton's strategists. But it was also read in political
Next come the surrogates asserting that any
Washington as a tough signal from Mr. Gore to his
questioning of Mr. Clinton's behavior, motives, leg-
running mate that he would not vouch for Mr.
islative compromises or personal or campaign fi-
Clinton's conduct in the years before they teamed
nances is out of bounds. If the questions come from
up.
the Republicans, Mr. and Mrs. Clinton are cast as
But Mr. Gore has now signed on as a defender
the undeserving victims of partisan malice. If they
sans facts. In a series of appearances recently, he
come from the press, they are the targets of promis-
has said categorically that there was no wrongdoing
cuous curiosity designed to undercut bursts of Pres-
on Whitewater. Loyalty is expected of Vice Presi-
idential popularity.
dents, of course, but students of politics will want to
One interesting feature of Clintonian damage
note that Mr. Gore has now stepped boldly into
control is that the spokesmen seldom have full
territory he avoided. He has bonded himself to Mr.
firsthand knowledge or the authority to produce
Clinton as never before.
documents. Their job is to assert that based on their
Is this move based on Mr. Gore's knowledge,
faith in Mr. and Mrs. Clinton, nothing untoward
his faith or a gambler's instinct for what best serves
could have occurred. These spokesmen are also
his own ambitions? Interesting speculation in light
expected to attack the character or motives of
of the fact that the Vice President has not, accord-
anyone who asks for information on questions such
ing to his office, read the Whitewater documents
as how much the Clintons paid for their half share of
himself.
24
5
Clinton, Marking King Holiday, Pushes Domestic Policy Programs
By GWEN IFILL
apply for a new, federally sponsored
Howard University, the President com-
to Dr. King's life work, Mr. Clinton said
Special to The New York Times
development program of "empower-
mented on the results of his 10-day trip
the United States has problems at
WASHINGTON, Jan. 17 - Declaring
ment zones" for urban and rural areas.
to Europe, where he said he witnessed
home that are as significant as the
that "the absence of discrimination is
Mr. Clinton tried to emphasize his
the kinds of steps being taken toward
challenges he faced abroad.
not the same thing as the presence of
urban policy agenda by making the
peace, democracy and freedom that
"I come home thinking to myself I
opportunity," President Clinton today
empowerment zone announcement and
Dr. King would have supported.
am so proud of the fact that I had the
marked the Rev. Dr. Martin Luther
signing a memorandum on fair housing
Rise In Domestic Violence
chance to be President at a time when
King Jr.'s birthday holiday by promot-
enforcement at the end of the Howard
ing several of the Administration's do-
University speech.
"I pledged to help the people who
the United States was leading an agree-
mestic policy initiatives and linking
Tossing two other initiatives into his
believe in democracy," Mr. Clinton
ment with Russia and Ukraine and
said of his trip. "And democracy
Belarus and Kazakhstan to dismantle
them to Mr. Clinton's just-completed
grab-bag of references today, he also
trip to Europe.
called attention to his Administration's
means more than one thing. It means
weapons of mass destruction," he said.
The President, speaking at Howard
national service program and efforts to
majority rule. It also means respect for
"But we can't get guns out of our own
University to an audience of students
promote innovations in high technol-
minority and Individual human
schools.
and prominent blacks, was accompa-
"We would be asked, I think, by
ogy.
rights."
nied by most of his black senior advis-
"We've also learned, after several
Citing the continued rise in domestic
Martin Luther King, 'How come this is
ers, including Mike Espy. the Secre-
years of neglect, that neglect is not a
violence and the contrast that presents
so?'
THE NEW YORK TIMES. TUESDAY, JANUARY 18, 1994
tary of Agriculture.
very good policy either," Mr. Clinton
Drawing on elements of the speech
said as he discussed the empowerment
he delivered to black ministers in
zone plan at the White House. "Some-
Memphis last year. Mr. Clinton said
how, there needs to be a new partner-
Dr. King, the civil rights leader who
ship between Washington and the com-
was assassinated in Memphis on April
munities and the individuals of this
4, 1968, would be disappointed if he saw
country, and there needs to be a way of
what had become of his ideals.
doing business in which we try to cre-
"As I come home on this Martin
ate the conditions in which people can
Luther King Day from a trip that
seize opportunities for themselves."
fought for democracy and economic
Tax Incentives and Grants
progress and security, I have to ask
myself. 'How are we doing on these
The President's new Community En-
things here at home?' Mr. Clinton
terprise Board will oversee efforts by
said.
the Department of Housing and Urban
Development, the Small Business Ad-
Practice What Is Preached
ministration and the Department of
"If democracy is the involvement of
Agriculture to designate the nine em-
In Clinton Land Deal Inquiry
over the inquiry into the President's
Last week, Mr. Clinton requested an
independent prosecutor after months
in which he and his aides dismissed
news reports about his financial deal-
ings in his home state as outdated
accusations that he had already ad-
As the grand jury prepared to renew
its deliberations, some Federal law-
enforcement officials said they were
unsure whether the testimony and doc-
uments obtained by the grand jury
would have to be sought anew when a
The search for a lawyer to carry out
the inquiry appears to be a complicat-
ed task, as Ms. Reno's aides sift
through the records of prospective can-
didates to avoid any who might be
perceived as partisan. The Attorney
General's advisers said Ms. Reno
wants someone with a national reputa-
They also said that she wants to
avoid appearing to be dragging her feet
in making her choice. Some aides
worked through the weekend to narrow
The President's willingness to bring
in someone from outside the Govern-
ment to investigate has not silenced
Republican critics, like Representative
Jim Leach of lowa, who continued to
press for a Congressional inquiry. But
Mr. Clinton's allies in Congress, like
Senator David Pryor, Democrat of Ar-
kansas, have said the Republicans are
simply trying to keep the issue alive
long enough to embarrass Mr. Clinton
all of our people, if it is making
powerment zones and 95 enterprise
to say to the people in the troubled
Panel Starting Critical Phase
west. Aides say she hopes to name an
independent prosecutor quickly to take
communities that will receive $2.5 bil-
Arkansas land dealings.
equately explained.
special prosecutor enters the case.
Seeking a National Reputation
strength out of our diversity, if we want
lion in Federal tax incentives and $1
areas of Europe: 'Put your ethnic ha-
billion in grants. The deadline for appli-
treds behind you. Take the differences
cations is June 30.
By DAVID JOHNSTON
Special to The New York Times
the list of possibilities.
in the 1996 Presidential campaign.
tion.
- the religious differences, the racial
Asserting that in his first year in
differences, the ethnic differences of
office there had been a 35 percent
your people, and make them a strength
increase in the number of housing dis-
in the global economy, surely we must
crimination complaints that were filed,
do the same here."
Mr. Clinton said, "That is the sort of
The President also sought to drive
thing that Martin Luther King would
his point home today by holding a cere-
want us to do not just to let discrimi-
mony in the White House state dining
nation go away, but to create opportu-
room to announce that the application
nity."
process has begun for communities to
Time and again during his speech at
WASHINGTON, Jan. 17 A Federal
grand jury in Little Rock, Ark., will
reconvene on Tuesday and begin a crit-
ical new phase in the investigation of
ties between President Clinton's land
development company and the owner
of a failed Arkansas savings and loan.
For the first time, the panel is ex-
pected to hear from several central
witnesses, including Mr. Clinton's for-
mer business partner, and weigh po-
tentially pivotal evidence from the box-
es of documents the White House was
ordered to turn over to Government
prosecutors in recent days.
The White House files shipped to
Little Rock under F.B.I. guard relate
to Mr. Clinton's investment in the
Whitewater Development Company,
the real estate concern in which the
Clintons were partners with James B.
McDougal, the owner of Madison Guar-
anty, a savings and loan taken over by
Federal regulators in 1989.
Mr. McDougal has been ordered to
appear before the grand jury later this
week. Other Clinton associates have
also been subpoenaed, including Betsey
Wright, Governor Clinton's chief of
staff, who supervised campaign fi-
records.
Investigators from the Justice De-
partment are trying to determine
whether Madison funds were improp-
erly diverted to Whitewater or to help
Mr. Clinton repay a $50,000 loan for his
1984 campaign for governor. Mr. Clin-
ton has said he engaged in no wrongdo-
ing and that he and his wife, Hillary,
lost money in the Whitewater invest-
As Federal prosecutors seek to un-
derstand the financial relationships be-
tween the Clintons and Mr. McDougal,
Attorney General Janet Reno is sched-
uled to return to Washington on Tues-
day evening from a trip to the South-
nance
ment.
Wright-2: Clinton Friend Fiercely Loyal To Arkansas
What makes the 49-year-old Wright so special is her relationship to Bill
and Hillary Rodham Clinton. She's so close to the first couple that she can
afford to turn down an invitation to drop by the White House for an informal
dinner and a movie, an opportunity most lobbyists and wheeler-dealers here
would die for. So close, too, that Wright expects to be subpoeaned by a
federal grand jury in Little Rock looking into and Clinton's role in the
controversy surrounding their Whitewater Development Co. real-estate
investment.
She met Bill Clinton in 1972, when they both worked in Texas in George
McGovern's forlorn presidential campaign. She came to Little Rock in 1980,
after Clinton had been defeated for re-election as governor, and then served
as his chief of staff after he was returned to office in 1982. She ran his
successful re-election campaigns in 1982, 1984 and 1986.
'There is no person in the entire universe who is more loyal to Bill and
Hillary Clinton than Betsey,' says Wexler.
Wright is almost as protective of the state of Arkansas. She loves the
place. When Clinton decided to run for president, Wright saw that each of the
hard-edged handlers he hired was given a copy of Diane Blair's book about
Arkansas government and the state's rich, and sometimes gamey, political
history. She wanted them to read the book and learn to appreciate Arkansas's
rural charms. The fact that none of Clinton's hired guns - she calls them the
'white boys' - read the book, or tried to give Arkansas a fair shake, still
riles her. 'They showed so much disdain towards the state. I felt it was very
offensive,' she says.
(MORE) AP-DOW JONES NEWS 01-18-94
0532GMT
**** filed by:DOWV(--) on 01/18/94 at 00:38EST ****
**** printed by:WHPR(JEL) on 01/18/94 at 07:54EST ****
LOS ANGELES TIMES / WASHINGTON EDITION
TUESDAY. JANUARY 18. 1994
A3
NATION
Bill Clinton and James B.
Federal regulators begin to
McDougal. old friends who had
9
question banking practices at
worked for Sen. J. William
8
Madison Guaranty after
8
Fulbright of Arkansas in the
4
McDougal transfers five bad
1960s, become 50-50 partners
loans to the thrift from a bank
Whitewater
7
(along with their wives) in
he also owns. In this same
9
Whitewater Development
period, Whitewater makes
AND THE
Corp., a real estate venture
Clinton's loan payments on a
offering cabins and vacation
$20,000 note he had taken out
homes along the scenic White River
on another Arkansas bank
in the northern
White House
Arkansas Ozarks.
1
In April. McDougal hosts a
WHITEWATER
The McDougals
9
political fund-raiser in the
put up more than
8
lobby of his S&L to help retire
What began as a simple real estate venture for Bill and
half of the money
5
Clinton's 1984 campaign debt of
Hillary Rodham Clinton in the late 1970s has led to the
and manage the
$50,000. About $35,000 is raised
announcement that a special counsel will investigate
Bill and Hillary Clinton during his first term as governor.
company.
during the party, with some of
the now-complex matter. How deeply were the
the proceeds in the form of
Clintons involved and what did they gain? What
insists that the Clintons could not
Whitewater. The expanded
Clinton. then
cashier's checks drawn on
follows is a history of what is known so far about the
have lost that much. The
request lists nine instances of
state attorney
Madison Guaranty.
Whitewater affair.
Clintons, represented by Foster,
possible criminal activity.
general. is
Investigators now suspect a total of
sell their interest in Whitewater
The report is sent to the new
Sales pitch from
elected
about $12,000 may have come from
to McDougal for the nominal
U.S. attorney in Little Rock.
Whitewater brochure
govenor of
overdrafts at the institution.
amount of $1,000. In the fall, the
Paula Casey. A Clinton appointee
Arkansas
"We thankful
Madison Guaranty's assets have
money to clean up some bad
RTC presents the U.S. attorney's
and former campaign volunteer.
He names
soared to $107 million. Loans to its
loans at Madison Guaranty.
we found
McDougal to his
Whitewater Vacation
office in Little Rock a detailed
she recuses herself from any role
own officers and directors have
(They deny this.) About
Whitewater
Cabinet as
Development
summary on their investigation of
in the matter. A team of Justice
grown from $500,000 to $17 million.
$110,000 winds up in
director of
Madison Guaranty. The 21-page
Department attorneys goes to
and have the
Large loans are also being extended
Whitewater's accounts.
economic
report accuses McDougal and his
Little Rock to look into the case.
opportunity to
to Fulbright and other state political
Hale will later be indicted on
Mtn.
enjoy life
development.
now ex-wife Susan of criminal
figures. Jim Guy Tucker, who later
At year's end. with political
The Clinton
charges of defrauding the Small
Home
will follow Clinton into the
WHITE
wrongdoing. It identifies the
pressure on Clinton mounting. the
the way it
Business Administration, which
Administration
governor's office, negotiates a 50%
RIVER
Clintons and Jim Guy Tucker,
White House agrees to surrender
was meant to
also leases one of
1
backed the loans his
reduction in his debt of more than
now the governor, as principals in
the Clintons' Whitewater records
be lived.
McDougal's
investment company was
$1 million. Seth Ward,
9
"shell corporations" created by
to the Justice Department. It does
We' really
buildings for a
father-in-law to Webster L.
8
supposed to be making to
Little4
minority small businesses.
Rock
McDougal but says there is no
so under a subpoena that blocks
lucky-just
state office.
Hubbell, then a law partner with
7
hard evidence that they were
their public disclosure.
Having resigned from the
ARKANSAS
10% down and
Hillary Clinton at the Rose Law
involved in improper activities
Firm and currently a Justice
bench, he is scheduled to go
related to the institution.
1
On Wednesday, Jan. 12
seven years to
pay it off
Department official, defaults on
on trial in March.
In October, federal prosecutors
Clinton changes his
Federal regulators move
Madison
$587,793.
in Little Rock file a report to the
Guaranty S&L
9
posture and asks Atty. Gen.
Madison Guaranty puts Hillary
in on Madison Guaranty
Justice Department, indicating
4
Janet Reno to name a special
McDougal, who by now has
Clinton on a $2,000-a-month
and oust McDougal as
that further investigation of the
counsel to investigate the
left state government, lends
retainer to do legal work.
chairman.
matter is needed.
Whitewater matter. She
8
Hillary Clinton $30,000 to build
McDougal, in an interview later.
0
a three-bedroom ranch-style
1
According to McDougal, all
Clinton is elected President
begins considering
says he hired her because Bill
unit at Whitewater. The next
9
Whitewater records are sent
candidates for that post.
Clinton told him the family needed
year she sells the property for
8
the money. The White House denies
at Hillary Clinton's request
about $27,500. In 1988, after the
Clinton solicited the job for his wife.
9
to the governor's mansion in
1
Federal prosecutors in
buyer defaults on
With regulators increasingly
Little Rock. The Clintons
9
Washington decide against
THE KEY QUESTIONS
concerned about Madison
say they made no such
9
authorizing a formal criminal
his payments and dies, she buys
request and did not receive
3
investigation in the case. But
Among the questions that lie at
the property again for about $8,000
Guaranty's stability, Hillary
negotiated down from the
them. Many records are
they leave the final decision
the heart of determining the
and resells it for about $23,000.
Clinton, on behalf of the institution,
government's original demand
to the U.S. attorney in Little
depth of President and Hillary
After paying a $13,000 debt on the
seeks state approval to recapitalize
believed to be missing.
for $6 million. The law firm
Rock.
Clinton's involvement:
property, the Clintons report a
the institution with a special stock
1
Madison Guaranty fails and
receives $400,000 in legal fees
$1,640 capital gain from the
On July 20, Foster, now
Were funds illegally diverted
sale. The request is supported by a
9
is taken over by the Federal
from the FDIC.
White House counsel, shoots
from Madison Guaranty Loan to
transaction.
financial report that indicates the
8
Deposit Insurance Corp. and
McDougal is indicted on federal
institution is solvent.
himself in an apparent suicide. As
the Whitewater Development
1
9
McDougal buys Madison
the Resolution Trust Corp.
charges of bank fraud. He is
Beverly Bassett Schaffer, the state
White House officials later
Corp., which was partly owned by
9
Vincent Foster. a senior
Guaranty Savings & Loan, a
acquitted the following year.
acknowledge, the Clintons'
the Clintons, or used to defray a
securities commissioner appointed
8
partner at the Rose
With Clinton now
small financial institution with
by Gov. Clinton, approves the sale.
records on Whitewater are
$50,000 debt from Clinton's 1984
2
assets of about $3 million. He
Law Firm, solicits the FDIC
running for President, new
removed from Foster's office
campaign for governor of
However, the plan is never put into
begins lending money to im-
to handle its legal work on
attention is drawn to
effect because Madison Guaranty's
before investigators probing his
Arkansas?
portant people in the state and
failed financial
financial condition becomes too dire.
2
Whitewater and the Clinton-
death have a chance to examine
2
Did the Clintons use political
becoming involved in large
institutions in
McDougal association The
them. The files are sent to
influence in any way to help keep
speculative ventures. He also
Arkansas. The
David Hale, a Little Rock
Clinton campaign hires
1
Clinton's personal lawyer, David
the troubled institution in
continues to
FDIC hires the
judge appointed by Gov.
James Lyons, a Denver
9
Kendall.
business longer than it should
run the White-
firm to sue the
Clinton and head of a small
attorney and Clinton
In September, the RTC asks the
have been. thereby increasing the
water real estate
Frost & Co.
confidant, to review the
6
business investment
Justice Department to open a
cost to taxpayers when the thrift
business, but
company. lends $300,000 to
accounting firm
matter. He releases an
criminal investigation into
ultimately failed?
buyers for the
a real estate firm owned by
for negligence in
accounting report, based on
Madison Guaranty's collapse. This
vacation property
McDougal's wife, Susan. He
V. Foster
auditing Madison
incomplete Whitewater records,
time, RTC investigators note that
on the 200-acre
Guaranty's books.
that concludes the Clintons
site are becoming
later claims the loan was
they have found evidence that
harder to find.
solicited by Clinton and
Much of the legal work is
gained nothing from the
depositors' funds may have been
1. McDougal
handled by Hubbell The suit is
investment Rather, he says.
McDougal. who needed the
improperly diverted to Clinton's
later settled for $1 million,
they lost $68,900. McDougal
1984 campaign and to
Clinton Didn't Profit in 1979 Transfer
Of Land to Whitewater, Associate Says
By JEFFREY H. BIRNBAUM
McDougal - bought the land in 1978. and
Staff Reporter of THE WALL STREET JOURNAL
those same four formed the Whitewater
WASHINGTON - President Clinton
partnership into which that asset was
didn't make a capital gain when he and his
placed in 1979.
partners transferred some Arkansas land
That kind of transaction is better classi-
to their own Whitewater Development Co.
fied as a reorganization. the person close
in 1979, according to a person close to the
to the Clintons said. and does not lead to
Clintons who is familiar with the transac-
either profit or loss, regardless of what
tion.
value the owners place on it. No money
The comment was made in response to
actually changed hands. And. the person
a Time magazine article this week. The
asserted. the increased valuation of the
article notes that the land's value $882 an
land was reasonable because in the year of
acre when it was first purchased by Mr.
ownership, work was done on the property.
Clinton and his partners in 1978 - was
including the building of a road and sur-
pegged by them at a higher price, $1,087 an
veying and marketing of the land for
acre, when it was transferred to Whi-
sale.
tewater about a year later.
The Clintons and McDougals bought
The Whitewater investment is under
the land from a company called 101 River
federal scrutiny, and. at the president's
Development Inc. The land was part of a
request, Attorney General Janet Reno
3.600-acre tract for which 101 River Devel-
plans to appoint a special counsel to look
opment had paid about $400 an acre less
into it and related matters. Among the
than a month earlier. The person close to
issues involved are whether Mr. Clinton
the Clintons said this price discrepancy
earned any profit on the investment and
was irrelevant because the Clintons and
whether he and his wife accurately re-
McDougals were buying choice pieces of
ported any profits or losses to the Internal
the larger tract. The person also said 101
Revenue Service and other authorities.
River Development was not owned by
The person close to the Clintons, who
either family.
declined to be identified otherwise, as-
The White House declined to comment
serted vigorously that the asset transfer in
on any specific allegations raised by the
1979 wasn't a taxable transaction from
Time article. "The Whitewater matter is in
which a capital gain or loss could be
the hands of the special counsel, once it is
recorded. Four people - Mr. Clinton, Hil-
appointed." said George Stephanopoulos,
lary Rodham Clinton and James and Susan
a senior aide to the president.
THE WALL STREET JOURNAL TUESDAY, JANUARY 18. 1994
63
TUESDAY. JANUARY 18. 1994
WASHINGTON EDITION / LOS ANGELES TIMES
Hillary Clinton in Spotlight
for Her Role in Whitewater
Inquiry: Her reputation as a top corporate lawyer seems to conflict with her purported
naivete about high finance.
By JOHN M. BRODER
Hillary Clinton's reputation as a top corporate lawyer and
and JAMES RISEN
board member of some of the nation's biggest corporations.
TIMES STAFF WRITERS
The question being asked more openly in Washington
and Arkansas is: How could Hillary Clinton-whom one
W
ASHINGTON-As the White House struggles to
legal journal called one of the 100 most influential lawyers
contain the controversy surrounding the First
in the United States-be unaware of gross mismanagement
Family's involvement in the tangled Whitewater
at a savings institution she represented as an attorney and
real estate and banking affair. First Lady Hillary Rodham
neglect her family's only substantial financial asset?
Clinton's role has begun to raise as many questions as her
husband's.
Indeed, the Whitewater matter now seems to be a
T
hose questions intertwine with a web of others as
federal investigators continue their inquiry.
controversy befitting the Clintons' modern, two-career
Specifically, they are trying to determine whether, amid
political marriage: Just as the First Lady has played a
the careening disorder in the runaway S&L and Whitewa-
critical role in major policy decisions on health care and
ter, money from a federally guaranteed thrift was diverted
other issues, she now finds herself a central figure with her
into Clinton's 1984 campaign coffers. Also, there is the
husband in this politically threatening affair.
matter of whether the institution got favorable treatment
It is Hillary Clinton's independent career as a top
from Arkansas authorities that helped keep it in business
attorney in Little Rock, Ark., while her husband served as
before federal regulators finally shut it down in 1989.
governor-and her reputation for being the financial
It is Hillary Clinton's role as a former attorney for the
brains of the household-that have prompted questions
savings and loan that has raised concerns about her
actions.
about her role in the Whitewater matter.
Even friends in Arkansas are wondering why she has not
McDougal. who worked with Clinton in Sen. J. William
come forward with a fuller account of what she did and
Fulbright's office in the 1960s, bought Madison Guaranty in
what she knew at the time the events in Arkansas were
1982 and soon began using it to make loans to important
unfolding.
figures and to finance an assortment of speculations
including his 4-year-old Whitewater venture with the
"I don't know why she hasn't been more open about
Clintons, according to records filed with state regulators.
explaining" her work as a lawyer for the defunct savings
Before long, the S&L was on dangerous ground, and in
and loan at the center of the affair, said Beverly Bassett
1984 federal regulators warned that they considered its
Schaffer. a former Arkansas state regulator and longtime
lending practices questionable. The Federal Home Loan
acquaintance. "I don't understand why they [the Clintons]
Bank Board directed the S&L-along with others in
were in business with someone like McDougal," the thrift's
Arkansas-to raise more capital and put its house in order.
owner.
McDougal hit upon a quick way to raise money: selling
James B. McDougal. a friend of Clinton's. owned Madison
stock. But that was not normal practice for savings and
Guaranty Savings & Loan and was half-owner with the
loans in Arkansas, and the proposal needed approval from
Clintons in an Ozark Mountain real estate venture called
the Arkansas Securities Commission. So McDougal had
Whitewater Development Corp.
Little Rock's Rose Law Firm-and specifically partner
The President and Hillary Clinton have said they were
Hillary Clinton-make his case for the stock sale to state
innocent bystanders as McDougal drove his lending
regulators.
institution into the ground with a binge of bad loans and
The White House has acknowledged that Hillary
frittered away nearly $70,000 of their assets on the
Clinton, then on a $2,000-a-month retainer with Madison
bankrupt Whitewater project.
Guaranty, worked on the proposal in 1985. But senior
Unresolved, though. is the mystery of how to reconcile
presidential adviser Bruce Lindsey said her involvement
this image of naivete in the world of high finance with
Please see HILLARY, A3
HILLARY: First Lady in Spotlight
Continued from A2
McDougal said there weren't sufficient funds from
was minimal and that most of the legal work was done
property sales to cover that month's mortgage pay-
by a junior associate. Richard N. Massey, then a
ments. that didn't seem unusual."
28-year-old. first-year lawyer at the firm.
He said the Clintons were aware that the property
Joe Madden. the current commissioner of the
appeared to be losing value. but rather than ques-
Arkansas Securities Department. said there are at
tioning McDougal or seeking detailed financial state-
least three Rose Law Firm documents to the commis-
ments on the deal. they fust wrote it off as "bad
sion that refer questions back to either Hillary Clinton
business judgment, "Lindsey said.
or Massey. But he said the case was fairly routine and
Another family friend's assessment is that neither of
that a "competent first-year attorney (as Massey was
the Clintons was interested in getting rich; they
at the time) could have been primarily responsible for
concentrated through the 1980s on Clinton's political
doing the research and doing the drafting."
career and his wife's policy crusades.
Schaffer. who had just been appointed securities
"They don't know beans about business." said this
commissioner by then-Gov. Clinton when the case
Arkansas friend. who asked to remain nameless.
arose. said Massey handled meetings with her staff and
According to McDougal. the Clintons early in 1985
that Hillary Clinton was the only senior attorney at
expressed interest in Madison Guaranty's affairs-as
the Rose firm with whom she or her staff communi-
well as their personal enrichment-and sought the
cated.
thrift's legal work for the Rose Law Firm. McDougal
Ultimately, Schaffer and her staff decided that the
said he put Hillary Clinton and the Rose firm on the
unusual capital-formation plan did not violate Arkan-
$2.000-a-month retainer at then-Gov. Clinton's re-
sas law and approved it. Because of its growing
quest-a claim the White House has denied.
financial problems. though. the plan was never carried
In 1988, when Madison Guaranty clearly was on the
out by the thrift.
verge of failure and McDougal was suffering personal
Schaffer. now an attorney in private practice in
problems, records show that Hillary Clinton wrote to
Fayetteville, Ark., said she did not feel pressured to
McDougal to seek power of attorney over all White-
rule favorably because the governor's wife was
water-related business.
involved in the case.
She received that power but apparently did not use
But she expressed frustration at her old friend's
it until 1992. when she authorized Rose firm law
seeming hesitation to publicly explain her role as a
partner Vincent Foster to work on Whitewater's
senior attorney in the case and thereby allow suspi-
delinquent tax returns.
cions to grow.
In an unrelated case, she took a distinctly active role
Repeatedly, Hillary Clinton has insisted that ques-
in a family investment involving much less money. In
tions arising from private matters a decade or more
1983, she, Foster and Webster L. Hubbell, another law
ago are not a fit subject for public scrutiny. She has
firm partner. formed an investment partnership called
refused to respond to any detailed inquiries. including
Mid-life Investors. with each contributing an initial
the central one: whether it was proper to represent a
$15,000.
business partner before a state regulatory board run
Roy P. Drew. a stockbroker who helped them set up
by a personal friend and appointee of her husband's.
the venture. said neither Foster nor Hubbell later
She has expressed bewilderment that the press and
expressed much interest in the performance of the
investigators are interested in the aftermath of a
partnership but that Hillary Clinton called frequently
money-losing private real estate investment.
to ask about her investment. at times phoning him
Jack Pitney, a political scientist at Claremont
daily with questions and instructions.
McKenna College in Claremont, said the First Lady's
The partnership eventually foundered, paying an-
response created a credibility problem. It is difficult,
nual dividends of between $2 and $20 from 1986 to
he said, to believe she would ignore a major family
1992. according to the Clintons' income tax returns.
investment and overlook a potential conflict of
Lindsey, who follows the Clintons' personal business
interest.
closely. said he knew virtually nothing about Mid-life
"She can't just throw her hands in the air and say
Investors except that it was an insignificant part of the
she doesn't understand all this legal stuff. She can't
family's portfolio.
claim ignorance of legal details," he said. "It is not a
Some of the White House defensiveness about
credible defense. Her involvement is a fix of her own
Whitewater questions over the last three weeks can be
making."
attributed to concern for Hillary Clinton's potential
Friends and associates said the two images of
exposure to political damage.
Hillary Clinton-meticulous lawyer and absent-mind-
The chief item on the White House agenda for 1994
ed investor-are not mutually exclusive. While she
is the health care reform initiative, which the First
was a keen professional at work. she had little interest
Lady has headed.
in acquiring wealth or closely monitoring her family's
White House aides-and ultimately the Clintons-
finances, according to her defenders.
concluded this week that until questions are resolved
Lindsey, a longtime Arkansas friend of the First
about the First Family's business matters, little
Family, said the Clintons got into the Whitewater deal
progress can be made on affairs of state, officials said.
on the assumption that McDougal would manage the
"There ain't going to be no health care campaign if
property and the Clintons would simply make pay-
they don't get Whitewater out of the way," said
ments periodically on loans taken out to purchase the
Betsey Wright, Clinton's former gubernatorial chief of
undeveloped land.
staff and an informal adviser.
"They went into a real estate development with a
"Right now, it is very difficult for the White House
developer with the clear understanding that he would
to be heard on health care or anything else.
Until
manage the investment and with the clear under-
that cacophony quiets down. you can't get health care
standing they would be passive investors." Lindsey
back on track."
said.
"When they were asked to write a check to Citizens
Times staff writer Thomas B. Rosenstiel contributed to
Bank of Flippin [Ark.] or even to the McDougals when
this story.
Ex-Clinton Aide
WASHINGTON EDITION / LOS ANGELES TIMES
Faces Subpoena
TUESDAY. JANUARY 18. 1994
in Madison Case
Whitewater: The FBI focuses on what the
T
he Whitewater case is not the first White House
controversy in which Wright has become involved.
chief of staff to the then-Arkansas governor
Last month. she took time off from her lobbying job to
knows of a thrift owner's role in the paying
help senior presidential aide Bruce Lindsey coordinate the
White House response to allegations made against the
off of a $50,000 loan.
President by two Arkansas state troopers. They claimed
that the President offered them federal jobs to discourage
By DOUGLAS FRANTZ
them from speaking publicly about his alleged extramarital
and WILLIAM C. REMPEL
affairs while he was governor.
TIMES STAFF WRITERS
FBI agents also served a new subpoena on the small
Arkansas bank that actually made the $50,000 loan to the
L
ITTLE ROCK. Ark.-The FBI has notified Betsey
Clintons in 1984, in an apparent attempt to uncover the
Wright, a senior aide to President Clinton when he was
loan's paper trail.
governor of Arkansas, that she will receive a grand jury
The institution-the Bank of Cherry Valley-was owned
subpoena in the expanding investigation of Clinton's
in part by W. Maurice Smith. a former member of Clinton's
business dealings with the owner of a failed savings and
staff. There was no collateral for the loan, which was used
loan, Wright acknowledged Friday.
by Clinton to bolster his gubernatorial campaign in its final
The FBI also subpoenaed documents from a small
days.
Arkansas bank that loaned Clinton and his wife, Hillary
Smith. later named by Clinton to head the Arkansas
Rodham Clinton, $50,000 to help finance his 1984 campaign
highway department. is a longtime friend and political
for governor.
confidant of the President. According to Wright, he was
The subpoenas are part of a wide-ranging federal
Clinton's mentor and "like a father" to the young Arkansas
investigation into ties between the Clintons and their
politician.
Federal investigators examining the failure of Madison
FROM SATURDAY EDITIONS
Guaranty suspect that some of the money raised by
McDougal may actually have come from the savings and
former business partner, James B. McDougal. the owner of
loan's funds. sources said. The White House has said that
the now-defunct Madison Guaranty Savings & Loan here.
Clinton and his campaign would have had no way of
Numerous questions have been raised about whether the
knowing the origin of the contributions.
Clintons and McDougal improperly benefited financially
Leon Foust. the president of the First Bank of Arkansas,
from the relationship and Atty. Gen. Janet Reno is
which bought the Bank of Cherry Valley, confirmed Friday
preparing to appoint a special counsel to investigate the
that the institution has received three subpoenas in recent
matter.
weeks from FBI agents. the most recent coming Wednes-
The primary focus of the investigation is the Whitewater
day.
Development Corp., a partnership formed by the Clintons
Foust declined to discuss the nature of the material
and McDougal in 1978 to develop 200 acres of resort land in
sought by the subpoenas. But a knowledgeable source said
the Ozark Mountains. The Clintons have said that they lost
that the FBI is seeking bank records related to the
$68,900 in the venture, but key records apparently are
Clintons' loan and checks used to pay it off in 1985.
missing and FBI agents have been trying to reconstruct
Sources said that investigators also are interested in
the finances of the project.
checks sent to the Bank of Cherry Valley from the
Whitewater Development Corp. account at Madison Guar-
A
mong some of the questions investigators hope to
anty.
answer is whether McDougal received political favors
Some records have been located and turned over to the
in exchange for helping the Clintons pay off the $50,000
FBI, Foust said, and bank staff members are trying to find
loan. McDougal has told reporters that he staged a
additional material.
fund-raiser in 1985 to help retire the debt.
"We've complied with the subpoenas to the best of our
Investigators apparently believe that Wright may be
ability. and we are still searching for records," Foust said.
able to shed light on the loan issue. She attended the 1985
The possibility that Madison Guaranty funds were
fund-raiser as then-Gov. Clinton's chief of staff and helped
contributed to Clinton's campaign is one of several
collect $35,000 toward the loan repayment.
questions expected to be examined by the special counsel.
Although campaign laws require such contributions to
be reported to the state, the list of contributors to the
Madison Guaranty
Special correspondent Michael J. Goodman contributed to this
story.
fund-raiser has dis-
appeared and Wright
has said that she does
'I will be happy to help
not know what hap-
anyone to get the
pened to it.
Wright acknowl-
history sorted out.'
edged Friday that
BETSEY WRIGHT
the FBI had informed
Clinton aide, commenting on
her that she would be
documents sought by FBI
subpoenaed. She also
said, however, that
she was told the sub-
poena had been withdrawn temporarily pending the
naming of the special counsel.
In anticipation of the subpoena. Wright said that she
moved several boxes of documents from her office at the
Wexler Group. a Washington lobbying firm and part of the
Hill & Knowlton communications firm. to her Washington
home. She said that she planned to sort through the
material over the weekend.
"I will be happy to help anyone to get the history sorted
out," Wright said.
She declined to disclose the nature of the material sought
by the FBI or the types of documents she said she is
examining.
However, during the 1992 presidential campaign, Wright
collected numerous documents to rebut questions raised
then about the Clintons' involvement with McDougal.
earch Begins for Special Prosecutor on Land
By DAVID JOHNSTON
Deal
Special 10 The New York Times
Bewing to Pressure
WASHINGTON, Jan. 13 Attorney
the Congressional inquiry into the Iran-
General Janet Reno began a search for
contra affair.
Ms. Reno's search began after Mr.
an independent prosecutor today, sort-
No one at the White House was being
Clinton bowed on Wednesday to heavy
ing through names of what aides de-
consulted on the decision, the officials
pressure from lawmakers in both par-
scribed as a "handful" of candidates
said.
ties to request a special prosecutor.
for the politically perilous job of inves-
Some Justice Department officials,
Ms. Reno, who opposed bringing in a
stung by news accounts suggesting
prosecutor from outside the Govern-
tigating President Clinton's role in a
that Federal prosecutors had respond-
ment, acceded to the President's re-
failed Arkansas land deal.
Justice Department officials said
ed slowly to the case, expressed con-
quest, saying it was necessary to main-
Ms. Reno and several top advisers
cern that a lengthy search for a special
tain public confidence in the criminal
have weighed the names of several
prosecutor could slow the investigation
justice system.
well-known lawyers as potential candi-
or raise questions about the Govern-
Early today, the White House press
dates and have telephoned some to
ment's tactics.
secretary, Dee Dee Myers, said in Mos-
cow that Mr. Clinton had made his
determine whether they were interest-
Grand Jury Subpoena
decision after conferring on Tuesday
ed. The officials would not identify the
In recent days, agents from the Fed-
with his Mrs. CLinton, who was in
pr ective choices but said they did
Washington, as well as with aides.
not expect to have difficulty finding a
eral Bureau of Investigation delivered
pr utor.
a grand jury subpoena to the president
"The President slept on it overnight
A spokesman for the Justice Depart-
of First Bank of Arkansas, a small
and decided to go forward," she said.
ment, Carl Stern, said Ms. Reno "wants
bank in Wynne, Ark., that had financial
Ms. Myers said there were no com-
dealings with Mr. Clinton and White-
munications between the President
to do it quickly, to minimize any disrup-
tion to the investigation."
water in the past. Leon Foust, the
and the Attorney General in the days
One official said tonight that Ms.
bank's president, said he was served
preceding the White House decision to
Reno had made progress today in nar-
with the subpoena on Wednesday by
ask for an independent review of the
rowing the list of potential candidates
F.B.I. agents.
issue. Mr. Clinton has not spoken to Ms.
and might name a prosecutor within
Mr. Foust's bank, once called the
Reno during his overseas trip and did
days.
Bank of Cherry Valley, lent money to
not plan to discuss the matter with her,
Mr. Clinton and to Whitewater during
Ms. Myers said. "I just don't think we
Legal Obstacles
the 1980's, according to public records.
have a lot to say about it"
But there were legal obstacles that
The bank also served as a repository
Other officials said the Justice De-
could delay the decision. One was that
for Mr. Clinton's 1984 gubernatorial re-
an independent prosecutor must com-1
election campaign funds. In 1985, Fed-
partment did not know that Mr. Clinton
was going to seek an independent pros-
eral regulators traced money from
ecutor until a few minutes before the
ply with Federal ethics rules that bar
Madison to Mr. Clinton's campaign ac-
White House disclosed a letter from
such a lawyer from representing cli-
count at the Bank of Cherry Valley,
ents on matters before the Justice De-
Bernard W.: Nussbasing the White
Federal officials said.
partment for at least a year after com-
House counsel, to Ma. Rage Asking for
Mr. Foust declined to discuss the
pleting a term as prosecutor. Depart-
contents of the subpoena, and it is not
the inquiry.
ment officials could seek a waiver of
clear whether the bank still had the
Related Development
the restrictions, but preparing such an
relevant records requested by the
In a related development, Faderal
action could take several days.
grand jury. Mr. Foust said that the
banking regilators are reviewing
Ms. Reno had made no preparations
bank retained paper records for five
whether Mrs. Clinton's former. law.
for selecting a special prosecutor, the
years and that some additional records
firm in Little Rock misled them about
officials said, and she had started with
might still be available on microfilm.
the firm's pastyleatings with Madian
a "blank slate," though it appeared
Last week, the Senate Republican
Guaranty.
likely she was focusing her search on
leader, Bob Dole of Kansas, gave Ms.
nationally known lawyers with prose-
Reno a list of seven people he said
The inquiry, which is separate from
cutorial experience.
would be credible candidates for spe-
the Justice Department investigation,
stemmed from a lawsuit originally
cial prosecutor. Ms. Reno said she
The officials said Ms. Reno was
would consider Mr. Dole's candidates.
brought by Madison Guaranty against
meeting with aides like Philip B. Hey-
On Mr. Dole's list were two Carter
its accountants. When the savings and
mann, the Deputy Attorney General,
Administration attorneys general,
loan was taken over by bank regulators
and Jo Ann Harris, head of the criminal
in 1989. the Government inherited the
Griffin Bell and Benjamin Civiletti;
division, who has been supervising the
suit.
Robert Bennett, formerly a special
Justice Department's investigation.
counsel to the Senate Ethics Commit-
The inquiry centers on the Madison
tee; former United States Attorneys
Guaranty Savings and Loan Associa-
Michael Baylson, Anton Valukas and
tion, a failed Arkansas thrift.
Dan Webb; and A. B. Culvahouse, a
Madison Guaranty was owned by
counsel in the Renald Reagan White
James B. McDougal, the Clintons' part-
House.
ner in the Whitewater Development
Corporation, a vacation-home develop-
ment in northern Arkansas. The Jus-
tice Department is investigating
whether Madison Guaranty improper-
ly funneled money into Whitewater or
into Mr. Clinton's 1984 re-election cam-
Quick action is
sought for an
inquiry on
Clinton.
paign when he was governor of Arkan-
webster L. Hubbell, the Associate
Attorney General and No. 3 official at
the Justice Department, who is often
involved in personnel matters, has re-
CU himself from the inquiry and is
not included in the deliberations con-
cerning an independent prosecutor.
Mr. Hubbell is a friend of Mr. Clinton
and a former law partner of Hillary
Rodham Clinton in the Rose law firm of
Little Rock. In addition, Mr. Hubbell's
father-in-law defaulted on loans from
Madison Guaranty.
Ms. Harris was a Federal prosecutor
in New York, and her role in the selec-
tion process has aroused speculation
that Ms. Reno might consider well-
known lawyers from the New York
area, like Robert Fiske, a former Unit-
ed States Attorney in Manhattan, or
Arthur Liman, who was a top lawyer in
Aspin Moves to Open Many Military Jobs to
By ERIC SCHMITT
to do."
Special to The New York Times
Mr. Aspin said today that he has
A new standard
WASHINGTON. Jan. 13 - In one of
discussed the changes with his desig.
Women
last major actions as Defense Sec-
nated successor. Bobby Ray Inman,
that will define
tary, Les Aspin today announced a
and that Mr. Inman supported the new
licy change that could eventually
policy. Mr. Inman would be responsible
en thousands of jobs that are now off
for reviewing the armed services' pro-
what is risky in
nits to women in the Army and Ma-
posed changes, which are due by May
he Corps.
1.
ground combat.
It will take several months, however,
Mr. Aspin said today that he would
tell how the new policy works in
remain Defense Secretary until the
actice. Using a new standard defin-
Senate confirmed Mr. Inman's nomina-
g what is risky in ground combat, the
tion. The Senate Armed Services Com-
casualties in combat.
med services will review all the posi-
mittee has scheduled hearings on Jan.
Mr. Aspin today rescinded this so-
ons now closed to women to deter-
25 or 26.
called risk rule and replaced it with a
nne if they should stay closed. Troops
The final proposed changes from the
new definition that bars women from
volved in direct ground combat, like
Defense Department are to be sub-
ground combat positions only if troops
fantry and tank units, will remain all
mitted to Congress by Oct. I for review
in those jobs have a high probability of
hale, but several maintenance, engi-
The Pentagon does not need formal
fighting enemy forces in close combat
eering and other combat support posi-
Congressional approval, but lawmak-
under hostile fire near or at the front
ons could open to women.
ers could block changes they thought
lines.
Pentagon officials today predicted
went too far.
The Army immediately issued a
hat 15,000 to 20,000 positions could be
Women would be eligible to serve in
statement saying that the change could
pen to women in the reserves and
99 percent of all positions in the Air
open about 7,000 additional spaces to
ctive-duty military. But Marine and
Force, 90 percent of positions in the
women in the active-duty forces, and
rmy commanders have resisted re-
Navy and 67 percent of all positions in
11,000 in the National Guard and Army
axing the prohibition against women
the Army. The Marine Corps could not
Reserve. The additional jobs would in-
n ground units and could seize on
provide a figure, but personnel experts
clude military police, mechanics,
xceptions in the new policy to continue
said it would be lower than the Army's.
scouts, engineers and intelligence ana-
arring women from traditionally
Fundamental Change
lysts. Women serve in these jobs now,
nale jobs.
Today's action follows sweeping
The new policy hinges on a funda-
but mostly at headquarters or units far
from the battlefield.
changes Mr. Aspin made last April to
mental change in the standard by
pen combat aircraft and surface war-
which women are excluded from direct
Matter of Interpretation
ships to women. These changes affect-
ground combat. Until now, the military
ed mainly the Air Force and the Navy
barred women not only from ground
The Army and Marines are likely to
and have proceeded smoothly.
combat units, but also any support po-
open some positions in air defense ar-
sitions that faced the same risk of
tillery, like Hawk antimissile batteries.
'Right Thing to Do'
direct enemy fire.
Despite the objections of senior civilian
"We've made historic progress in
It has been military tradition to bar
Pentagon officials, the Army is likely
opening up opportunities for women in
women from ground combat partly be-
to continue barring women from one its
all of the services," Mr. Aspin said at a
cause of physical requirements, a
most sophisticated artillery weapons,
news conference. "Expanding the roles
threat to the morale of all-male units
the multiple-launch rocket system. Al-
for women in the military is the right
and an unwillingness by the American
though the rocket system has a range
thing to do, and it's also the smart thing
public to suffer large number of female
of about 20 miles, field commanders in
the Persian Gulf war used the system
at the front lines against Iraqi forces
Whitewater Issue Hampers
Female Army officers expressed
tempered optimism about the prospect
of additional spaces in ground units
Nightline's Access to Clinton
"Aspin has done great things in ex.
panding opportunities for women, but it
comes down to how the Army and
Marine Corps choose to interpret this.
By BILL CARTER
said Maj. Lillian Pfluke, a West Point
The special access that President
Force One. CBS, NBC. and CNN have
graduate who has commanded ordi-
Clinton has granted to the ABC News
all formally complained about the deal,
nance units that repair tanks and
program "Nightline" during his trip to
though the protests are less a matter of
trucks on the battlefield.
Europe was temporarily interrupted
anger than of strategy. Executives at
Major Pfluke and other military offi-
on Wednesday when Mr. Clinton re-
the other news organizations acknowl-
cials who support broadening opportu-
fused to give an interview to the pro-
edged that they were hoping to force
nities for women said that command
gram's anchor, Ted Koppel.
the White House to grant them their
ers could seize on four exceptions to the
Mr. Clinton had agreed to give
own interviews.
new policy to deny positions to women
"Nightline" an interview on each of
And, as CBS News executives said
Women, for example, could be
five consecutive nights this week, an
this week. the strategy has worked.
barred from units where the cost of
arrangement that has had the other
Both the CBS anchor, Dan Rather, and
renovating berths and arranging for
networks grumbling. But the President
the NBC anchor, Tom Brokaw, had
privacy are prohibitively expensive
refused to answer questions on
interviews with Mr. Clinton on Tuesday
The Navy, thus, might refuse to put
Wednesday about the decision to seek a
night. Jim Miklaszewski, an NBC cor-
women on a warship that was near
special prosecutor in the investigation
respondent, also had an interview with
retirement.
of the Whitewater Development Corpo-
the President on Wednesday night, but
Long-range scout and special opera
ration, so no interview was conducted.
Mr. Clinton walked out after being
tions units would remain off limits to
asked about the Whitewater issue.
women, as would any job with physica
The executive producer of "Night-
"There's no question there's grum-
requirements beyond the ability of the
line," Tom Bettag, said that White
bling,' said Eric Ober, the president of
vast majority of women.
House officials agreed to resume the
CBS News "Obviously we, CNN and
The exception about which most in
interview agreement without condi-
NBC are not going to be thrilled if
male officers expressed concern Was
tions yesterday.
there's an extraordinarily long amount
one that allows the armed forces to bar
In a telephone
women from support jobs that by mile
cow, Mr. Bettag said the White House
But. as Mr Ober ano other network
cary doctrine operate and remain with
had been aware all along of the risk
news executives pointed out, the exclu-
direct ground combat units that are
that another news story would break
sivity being enjoyed this week by
closed to women.
during the week regarding Mr. Clin-
"Nightline" IS not all that unusual for
Mr. Aspin initially intended to an
ton's involvement in the Whitewater
this President "Nightline" already es-
nounce the new policy last week. bu
real estate development project and its
tablished a close connection to Mr.
sent back a draft submitted by his for
relationship to a failed Arkansas sav-
Clinton when it won special access for
personnel aide, Edwin Dorn, because
ings and loan and that the President
a behind-the-scenes look at Election
Mr. Aspin said the draft's language
would be asked about it.
Day 1992 That program, "72 Hours to
could be interpreted as more restric
Victory." won an Emmy award.
live than the current policy.
'The Agreement Was Broken'
CBS also had exclusive access to Mr.
"We made an agreement that the
President would give us an interview
Clinton for a special news program
built around the Inauguration NBC's
each night," Mr. Bettag said "We feel
Mr. Brokaw had access to the Presi-
the agreement was broken."
The agreement with "Nightline" has
dent and his staff for a special program
last May about a day behind the scenes
given the program unusual access to
at the White House.
the President, his staff, planning meet.
ings and everything that has taken
"They kind of pick their spots and
place on the daily travel aboard Air
try to even it out anyway," Mr Ober
said
BC-WHITEWATER national editors:GL
Investigation of Whitewater deal may produce no clear-cut answers
(HAS TRIMS)
By John Aloysius Farrell and Adam Pertman
Boston Globe
LITTLE ROCK, Ark. Their toughest critics blanch and stutter when asked to
list the crimes that Bill and Hillary Rodham Clinton are supposed to have
committed as investors in the now-notorious Whitewater Development Corp.
`I think there is hardly a soul who thinks there is not some sort of
eyebrow-raising circumstance, said Rep. James Leach, the Republican from
Iowa who has led congressional attacks on the Clintons. `But that doesn't
bring down a president, and it shouldn'
An examination of records here and in Washington and interviews with key
figures in the case suggest conflicts of interests and ethical missteps by the
Clintons and their friends in the close-knit Arkansas business, legal and
political circles.
But elements necessary to make a criminal case proof the Clintons had
knowledge of the unseemly actions that their associates are said to have
taken, or evidence that Clinton used his power as governor in exchange for
financial favors have yet to emerge in the available files.
Whether those elements are in still-confidential materials is not known.
If the available public record turns out to be a sound representation of
what lies behind the scenes, legal experts say, the special counsel to be
selected by Attorney General Janet Reno to investigate the Whitewater saga may
have a difficult task finding flames beneath the smoke.
'It's an amazingly complicated swamp, says Jack Blum, a Washington
lawyer who investigated the Bank of Commerce and Credit International, or
BCCI. special counsel looking for something criminal is probably going to
find some very difficult and complicated numbers, and trouble with the statute
of limitations. Then, in a terribly unsatisfactory way, the special counsel
will come back and say, `Ain't anything I can do.
Now that the Clintons have turned over their records to the U.S. Justice
Department, and bowed to calls for a special counsel in the case, their
interlocking relationships with old pals and partners may present Clinton and
his wife with a need to explain more embarrassing episodes and actions, Leach
said.
But ``I see nothing, he acknowledged, that is beyond very serious
embarrassment.
The case presented against the Clintons is simple in theory: Clinton is
alleged to have done favors as governor for James McDougal, the desperate
owner of the crumbling Madison Guaranty Savings and Loan. In return, McDougal
is alleged to have employed Hillary Clinton as a lawyer; improperly funneled
Madison's funds to help pay off loans owed by Clinton, and used Madison
Guaranty to boost their joint investment in the Whitewater Development Corp.,
an Ozarks real estate development in which the Clintons and McDougals invested
in the late 1970s.
If such a quid pro quo were proven, the scenario could lead to charges of
embezzlement, bribery, political corruption, false statements and obstruction
of justice.
But making a case on the known evidence could be difficult, say legal
experts. The available documents are ambiguous. Most of the testimony thus far
tends to support the Clintons.
If you had to do this stuff over again, you might avoid some of these
appearances and buddy-buddy things, said Charles F. Handley, the financial
examiner supervisor for the Arkansas securities division, a civil servant who
was not a Clinton appointee. But I've been here 26 years and I never had any
sense there was any pressure'' by Clinton to protect McDougal. I don't
believe that happened at all.
You would have to say that Mrs. Clinton's actions, since she presumably
knew she was in partnership with the McDougals, were dubious when she also
agreed to represent that bank that her partner owned,'' said a Justice
Department official with knowledge of the case. That's not illegal or
anything, but you'd have to guess that's at least one reason the White House
didn't want too much light focused on this initially.''
Clinton served as governor of Arkansas from 1979 to 1980 and from 1983 to
1992. The Clintons' major exposure to questions of wrongdoing occurs in 1984
and 1985, when McDougal sped Madison toward its final crash under the noses of
state banking regulators. Federal auditors warned in 1984 that Madison, while
solvent, was engaged in unsound practices. Yet McDougal was not removed until
1986. The thrift's failure eventually cost U.S. taxpayers around $50 million.
During this time, McDougal performed several favors for the Clintons. If
the Clintons were found to be aware of, or active participants in, McDougal's
wheeling-dealing, federal prosecutors might try to build a case that there was
an illegal quid pro quo.
In the spring of 1985, McDougal hosted a fund-raiser for Clinton to help
pay off leftover debt from the governor's 1984 campaign. Like many
politicians, Clinton had borrowed money in this case $50,000 in the closing
weeks of an election that he then loaned to his campaign to pay for
television ads and other expenses. McDougal, by hosting the fund-raiser,
helped Clinton pay it back.
(EDITORS: NEXT 2 GRAFS OPTIONAL)
Neither of the Clintons attended McDougal's fund-raiser at Madison, and
some of the campaign finance records are missing. But U.S. investigators are
trying to determine if McDougal used the event to illegally channel Madison
funds into Clinton's campaign treasury.
``I don't think it is pretty that the Clintons went to this savings and
loan for this fund-raiser,' said Leach. ``On the other hand, they can't
really be held accountable if there is some fudging down at the S&L.''
(END OPTIONAL TRIM)
McDougal performed another favor for the Clintons when he hired the
nationally-known Rose law firm, at which Hillary Clinton was a major partner,
to represent Madison before Arkansas securities commissioner Beverly Bassett
Schaffer.
(EDITORS: NEXT 2 GRAFS OPTIONAL)
Correspondence in the security division files shows that Hillary Clinton
was one of two lawyers listed by Rose in two requests it made on behalf of
Madison, which wanted to issue stock to stay afloat. Schaffer OK'd the
request, but it was never acted upon.
Hillary Clinton acknowledges that she discussed Madison's retention of the
Rose firm with McDougal in April 1985, and that she worked on the case, but
says, ``My involvement there was minimal.
(END OPTIONAL TRIM)
Arkansas is a small state, but it was still an apparent conflict of
interest although not necessarily illegal for Hillary Clinton to have
represented a business partner, McDougal, before a state agency while her
husband was governor.
It was around mid-1985, as McDougal frantically shuffled to keep Madison
in business, that money began to churn through the Whitewater corporation
accounts.
McDougal may have been using Whitewater as a shell through which to
maneuver money for Madison, Leach said, but because the Clintons were his
partners in the development firm, any knowledge of his transactions which
they deny could expose them to tax, fraud and negligence charges.
-END-OF-AUTOBREAK(1)-
**** filed by:KR-F(--) on 01/18/94 at 08:14EST ****
**** printed by: WHPR(JEL) on 01/19/94 at 08:58EST ****
BC-WA--Editorial Roundup
By The Associated Press= Here are excerpts from recent editorials in
Washington state newspapers:
Jan. 16
Seattle Post-Intelligencer on Whitewater:
President Bill Clinton's order to Attorney General Janet Reno to appoint
an independent counsel to investigate the Whitewater matter should have come
sooner but is nonetheless the right decision; for the sake of the Clintons and
the American people.
The president was reported to be unhappy with having been forced into the
decision. The only argument I can see for doing it is just to free up all
the people who work for me to go back to work for the taxpayers of the United
States, Clinton told NBC News.
Precisely. And it is also the best argument for the decision.
The young president has shown excellent promise. He has clearly
demonstrated the conviction, vision, vigor and political skills to accomplish
great things on his domestic and foreign relations agendas. This nation needs
the kind of change Bill Clinton is capable of producing. If, as the president
and First Lady Hillary Rodham Clinton insist, they have been involved in no
wrongdoing, then it would be a serious mistake to let public and
congressional preoccupation with Whitewater continue to get in the way of
the important things the administration needs to get done. If there has been
wrongdoing, it cannot long escape discovery.
The appointment of an independent, credible special counsel is the best
talisman against the sort of political witch hunt Sen. Bob Dole and the
Republican minorities in both houses might like to see. The appointment of a
credible special counsel eliminates the need for additional congressional
inquiry at this time.
Let the special counsel's investigation be swift, thorough and conclusive.
The country has got better things to do than arm-wrestle over Whitewater. The
president has done himself and his country a service by channeling the inquiry
into the proper venue.
Jan. 15
The Seattle Times on House votes:
Rep. Greg Fisher of Seattle has a terrific idea: House members should be
present to cast a vote for legislation.
What a concept!
At present, House rules allow just about anybody to cast a vote for a
House member who is away from the floor. Fisher blames an avalanche of
legislation for creating a nearly endless cycle of voting, which in turn
causes a domino effect of lackluster speeches, tepid debate and distracted or
absent representatives.
If no one is around when roll-call votes are held, then colleagues and
surrogates start punching the electronic yeas and nays. Fisher says mistakes
are made, and the whole unseemly process makes a poor impression on the public
in the House gallery.
Change the rules, otherwise the House will just continue to publish
essentially phoney-baloney voting records. And, as if politicians have not
noticed, the public is in no mood to be trifled with. Being too clever with
something as basic as truth-in-voting is risky behavior.
This fundamental reform may not be easy or convenient, but, well, too bad.
Busy House members might find it difficult to allocate time between
constituents, committee duties and floor votes. Tough. Go back to Fisher's
main point: The enemy is the volume of legislation.
Make representative government work, don't work around it.
Jan. 13
The Bellingham Herald on Hill's pension:
What's most infuriating about a wink-of-the-eye deal between Tim Hill and
Gary Locke that will bilk taxpayers is than neither seems to understand why
the deal really is so wrong.
Outgoing King County Executive Hill will get a bigger pension payoff and
start receiving it 29 months earlier because incoming Executive Locke allowed
Hill to stay on the county payroll one extra day.
Hill qualifies for pensions from both Seattle and King County. He should
have begun to receive them after he turns 60 on Aug. 23, 1996.
But if Hill worked one day in 1994, a new law would double his Seattle
pension to $2,600 a month and allow him to begin receiving it and his
$2,170-a-month state pension beginning in March.
So he telephoned Locke and asked for a one-day job. Sure, Locke said. On
Jan. 3, Hill worked as a personnel analyst.
Hill said he was just taking advantage of the new law. Locke said he
wouldn't have agreed to the deal had he realized how much extra money Hill was
going to receive more than $70,000.
Didn't it occur to Hill that he'd be using a loophole to bilk taxpayers?
It should have.
Didn't it occur to Locke that the violation of public trust would be a
bigger wrong than the amount of money involved? It should have.
Jan. 13
The Herald (Everett) on nuclear tension:
Nuclear tensions remain much reduced from the days of the Cold War. But it
is uncertain how well the Clinton administration is doing with its efforts to
preserve the improvements.
The end of tensions between the West and the former Soviet Union brought a
blessed reduction in the fear of nuclear war. Yet it also opened the door for
new concerns.
The administration has been quick to recognize those dangers. Last summer,
President Bill Clinton went to Korea and declared North Korea could not be
allowed to build a nuclear bomb. The administration also has pursued
vigorously efforts to assure that Ukraine gives up the nuclear missiles that
had been stationed on its soil by the Soviet forces.
Much worse, though, is the situation with North Korea. Not long ago,
administration officials were confidently predicting a diplomatic breakthrough
in talks with the North Koreans. Now it appears that the talks have centered
on an agreement that would fall far short of stated U.S. goals.
The best that can be said about the discussions with North Korea is that
they leave open the possibility of further progress in additional talks the
two sides anticipate. Yet that is a very slim result for 10 months of effort
during which North Korea may have been secretly furthering any plans to
violate the Nuclear Non-proliferation Treaty.
The Clinton administration may not want to put further pressure on the
North Koreans. Japan and South Korea have shown uneasiness about outright
confrontation on the issue. China doesn't appear willing to approve U.N.
sanctions against North Korea. China wants continued talks.
So the administration may be getting as good a deal as it can with North
Korea at this point. That hardly qualifies, though, as what an undersecretary
of state, Lynn Davis, recently called very good news. Indeed, the
tentative agreement with North Korea seems more likely to increase nuclear
concerns somewhat rather than to continue their reduction.
**** filed by:APW-(WA) on 01/18/94 at 14:06EST ****
**** printed by:WHPR(JEL) on 01/19/94 at 08:59EST ****
whitewater a1658
(ATTN: National editors) (Includes optional trims)
S&L Lawyer Says Feds Would Have Known of Clinton Wrongdoing (Washn)
By Melissa Healy= (c) 1994, Los Angeles Times=
WASHINGTON The attorney for a key figure in the controversial Whitewater
land deal on Sunday insisted that funds from a failed Arkansas savings and
loan could not have been diverted into Bill Clinton's gubernatorial campaign
coffers without being noticed by a host of federal agents.
Sam Heuer, attorney for James B. McDougal, the president of the defunct
Madison Guaranty Savings & Loan, said the only possible source of diverted
funds would be Madison Guaranty's cash account'' a pot of money that Heuer
said ``is the first thing the (bank) examiners look at.
Bank examiners, FBI agents and Justice Department attorneys pored over the
account's records and McDougal ``would have been very quickly charged at that
point in time with criminal activity had any money been diverted,' Heuer said
on ABC's This Week With David Brinkley.
Heuer was commenting on one of the central questions surrounding the
tangled land deal in which President Clinton, his wife Hillary Rodham Clinton
and McDougal were investors: whether Clinton's 1984 gubernatorial campaign
benefited financially from his relationship with McDougal.
But the remarks left unanswered some of the Whitewater deal's other
mysteries, including whether then-Gov. Clinton may have acted to shore up the
failing thrift, which was seized by regulators in 1989, to help his business
partner.
In another development, the administration stepped up efforts to put the
Whitewater affair behind it following a decision last week to ask Attorney
General Janet Reno to name a special counsel to investigate the Clintons'
role.
Speaking on NBC's `Meet the Press, presidential counselor David Gergen,
reviewing the White House's handling of the Whitewater affair, acknowledged
that there are some things we would have done differently'' but he said that
we've dealt with it, we're moving on.''
Two key Republicans suggested that there will be limits to the GOP effort
to investigate the politically charged affair. Senate Minority Leader Bob
Dole, R-Kan., who has called for a congressional investigation into the
matter, said that ``we need to wait and see'' who is appointed as special
counsel. `That may change the attitude some.
Rep. Jim Leach, R-Iowa, who has been one of the key GOP figures raising
questions about the Whitewater affair, pledged to proceed on his own if the
Democrats refuse to create a bipartisan panel to investigate Whitewater.
In pressing his case for a congressional investigation, Leach, the ranking
Republican on the House Banking Committee, noted that while a special counsel
would focus on potentially criminal activity, Congress would be the
appropriate body in which to air issues of public trust.
(Optional add end)
This isn't the largest issue, " he told CBS' Face the Nation.
There are possible breaches of law, but more importantly there's a public
ethic here that's at issue.
However, Heuer disputed the suggestion that investigators will find
breaches of law in documents turned over to investigators by McDougal and
others involved in the Whitewater deal.
Madison Guaranty's books were examined by the Federal Home Loan Bank Board
twice, once in 1984 and again in 1986, Heuer said. The institution was also
investigated by the Federal Deposit Insurance Corp., the Federal Savings and
Loan Insurance Corp. and two independent accounting firms, as well as by
attorneys of the Justice Department and the FBI, he said.
don't know of any real major secrets in any of the Whitewater
materials, and I would suspect, were there some secrets, we would have known
before now, " Heuer said.
filed by: LAWP (--) on 01/17/94 at 02:27EST ****
printed by: WHPR (JEL) on 01/17/94 at 09:59EST ****
TIME
THE WHITE HOUSE
SEARCHING FOR THE
MISSING
PIECES
The Clintons' messy handling of the Whitewater
scandal intensifies the demand for a special prosecutor
to find some answers to its complex puzzles
By GEORGE CHURCH
WHY WOULD A LAWYER
happened. Justice lawyers were already
WHITEWATER
ask the Justice Depart-
drafting a subpoena; Kendall persuaded
ment to subpoena some
them to broaden it and demand more doc-
of the papers of his
uments than they originally wanted to see.
own clients-especially if
Kendall handed over about half the papers
those clients are the Pres-
last week. after a couple of days of confu-
ident of the U.S. and his
sion and contradiction the White House
wife? White House se-
had first announced that all the papers had
nior adviser Bruce Lind-
been turned over and then that none
sey has a simple answer: "Privacy." Indeed
would be for a couple of weeks because
subpoenaed papers become part of the rec-
they had to be "cataloged
ord of a criminal investigation. unavailable
Had the President wanted to amplify
for release under the Freedom of Informa-
whispers of "cover-up" into roars. he could
tion Act and thus shielded more effectively
hardly have devised a better strategy And
than otherwise from Congress and the press
the Administration promptiv compounded
Accordingly. on the day last week that
the damage Besieged by demands that she
the Justice Department received a request
appoint a special counsel to look into the
under the Freedom of Information Act to
case. Attorney General lanet Reno stead-
make public files on Whitewater Develop-
fastly refused to do NO at this time That
ment Corp.-an Arkansas land venture
"might be a possibility" she said. if Con-
in which Bill and Hillary Rodham Clinton
gress passes a new hw authorizing her to
were partners-the White House an-
ask a court to choose J special counsel the
nounced that those files were under sub-
old law expired in 1992 But if she were to
poena. David Kendall. the Clintons per-
name one on her own now. said Reno. no
sonal lawyer. had asked for that subpoena
one would beheve the counsel would by
almost two weeks earlier. on Dec. 23-the
"truiv independent" to crities the reason
day Clinton announced he would turn over
mg seemed lame and even inside the White
all the files to Justice "voluntarily" As it
House some andes were ottering to bet that a
20
TIME
special counsel will be named soon. But
might be too late to save Clinton from sus;
cion that he resisted as long as he could
Altogether. it seems as if the Presider
the First Lady and their aides have forgi
ten everything they tearned about dama
control during the bitter campaign of 199
Old Washington hands point out that su
picions of hiding a scandal usually hurt
President far more than the scandal itsc
That seems especially true in this case. Th
affairs of Whitewater and its partners-ti
Clintons. James McDougal. the owner of
failed Arkansas savings and toan. and h:
wife Susan-were so convoluted that the
defy quick summary. Even the question
that the dealings raise are too complex to f
on a bumper sticker. The press and televi
sion paid almost no attention until recent
ly, and then largely because it develope
that a file relating to Whitewater had bee
removed from the office of White Hous
counsel Vincent Foster after he committed
suicide last July (that file IS one of the pa
pers Justice subpoenaed and Kendal
handed over last week)
But there IS a strong reason for White
House efforts to soft-pedal the whole affair
and it can be put in a single word Hillary
Compared with the President. the First
Lady was a central player. Among other
things, she sought power of attorney for
Whitewater and represented McDougal's
S&L before a state regulator appointed by
her husband. then Arkansas Governor
"This is hers." says a White House official
"If the troopers [who accused Bill Clinton of
extramarital affairs) were about him. this
one is about her"
But within the White House no one is
allowed to voice anything that sounds like
criticism of Hillary The last person who
tried-staff secretary John Podesta. who
suggested that Mrs Chinton might have
had something to do with the dismissal of
the White House travel-other staff-was
banished from the inner ench for months
It would take considerable bravers for it
Clinton aide to face the President with ad
vice to agree to a special counsel and let the
chips fall where they may, since some of
those chips might fall on his wites head
Late last week. nonetheies some senior
White House ofherals did disclass the you
cial counsei idea with Clinten butween the
Commander in Chief deterred to Hillary
fierce opposition-at least NIF new The
problem for the White House
that stonewaling or the supprior of a
only intensities the question
The essential background B simple
enough: the Chinters and M Dougal
formed Whitewater a computer that tried
unsuccessfully to sell land IN northern At
kansas for vacation homes. in 1979 Cirr.
ton's first year as Governor it impered 17
existence until late last was in 140
McDougal's S&I- Mainson within went
21
How Deeply Is Hillary
Clinton has denied any knowledge of
Clinton Involved?
money improperly diverted into his
campaigns.
A loan she took
out for
DID THE CLINTONS GET SWEETHEART
Whitewater
DEALS IN WHITEWATER AND OTHER
appears
VENTURES? Quite the opposite. say the
to be
President and First Lady: they put
improper. A
$69.000 into Whitewater and lost virtual-
file on the
ly all that money. But Bill Clinton once
company was
removed from
put the loss at "at least $25.000." and the
the office of
Clintons never wrote off any loss at all on
White House counsel-
their tax returns. A Clinton aide contends
and the Clintons' personal
that the documentation is too poor to en-
lawyer-Vincent Foster
able them to do so
(shown here with the First
Other aspects of the Whitewater ven-
Lady and his wife Lisa) after
ture are somewhat odd. To begin with.
his suicide in July.
the Clintons got a half share. although
they invested much less than the McDou-
broke. costing federal taxpayers $47 mil-
somewhat less clear. But there is no ques-
gals (who put in $92.000). The Clintons
lion. Madison was regulated by Clinton's
tion that James McDougal was one of Clin-
have claimed to be only "passive" inves-
state government, while its deposits were
ton's money raisers. In particular. it is
tors who let the McDougals run the show.
insured by the Federal Government.
known that he held a fund raiser in 1985
but that hardly squares with Hillary's
Suspecting check kiting and other
and came up with $35,000 to help repay
known activities. In her 1988 letter re-
abuses. the Resolution Trust Corp., the
Clinton for a $50,000 loan that the Gover-
questing power of attorney. she mentions
federal body formed to clean up the affairs
nor had made to his own campaign fund
having been actively involved in selling
of failed S&Ls. referred the matter to the
the previous year (making personal loans
lots. Also. she built. sold and then bought
Justice Department in 1992 for investiga-
to their campaigns is a common practice
back a model home. It now turns out that
tion and possible prosecution. The referral.
among politicians). There is some suspi-
Hillary built the house in 1981 with a
which has never been made public, men-
cion that at least part of the money may
$30,000 loan from the tiny Bank of Kings-
tioned the Clintons. but in what capacity is
have come from Madison's depositors
ton. which was controlled by McDougal
uncertain. People who have seen the refer-
rather than from bona fide individual
and Steve Smith. a former top aide to
ral say it definitely did not identify the
contributors.
Governor Clinton. (Another shareholder
Clintons as suspected wrongdoers. Some
Iowa Republican Jim Leach. ranking
was Jim Guy Tucker. who has succeeded
say they were named as potential witness-
minority member of the House Banking
Clinton as Arkansas Governor.) Marlin
es. or as people who might have benefited
Committee. makes this charge explicitly.
Jackson. who was then Arkansas banking
from improper activities. though perhaps
Says he: "The effect is that the money that
commissioner. has told TIME that the
unwittingly. As investigators delve more
flowed into the Clinton campaign to pay
loan violated state regulations because
deeply into the tangled affair. they will be
back a personal loan of the Clintons' ends
the home and borrower's residence were
seeking answers to these questions:
up being deferred public financing of a
outside the area in which the bank was
campaign. and not by choice. That is, the
permitted to lend.
WAS MONEY FROM MADISON GUARANTY
money in effect came from an insolvent
Then there was an incident in which
AND/OR WHITEWATER DIVERTED INTO
thrift [institution], paid back later by the
McDougal in effect swapped 20 White-
CLINTON'S CAMPAIGNS FOR GOVERNOR?
federal taxpayer" in the form of reim-
water bailding lots. almost half the proj-
The RTC is known to have raised this ques-
bursements to money-losing depositors.
ect's total. for little more than a twin-en-
tion. The grounds for its suspicions are
Nothing has been proved. however, and
gine Piper Seminole airplane that was later
sold for a loss of $13,000. That loss was ab-
Why Was Whitewater
sorbed by Madison Guaranty's depositors.
Such a Messy Deal?
but federal taxpayers eventually had to
pick up the tab through the RTC. Another
The forested property was
intriguing factor is that the plane was at
entangled in the chummy and
one point owned by Seth Ward. the father-
often clumsy world of
in-law of Webster Hubbell. then a law part-
Arkansas business and
ner of Hillary's and now Reno's top deputy
politics. For example, Steve
Smith, a top aide to
at the Justice Department. McDougal sold
Bill Clinton. and
Ward the plane. and his S&L loaned him
James
the money for the purchase. Ward told
McDougal, the
TIME. in order to keep the aircraft off Mad-
Clintons'
ison's books. where it might have aroused
principal
suspicion among regulators. Hubbell acted
partner in the
as counsel to his father-in-iaw in the deal.
Whitewater
one of several connections with the thrift
enterprise, were on
the board of the Bank of
that have had the effect of forcing Hubbell
Kingston, which loaned
to dissociate himself from any investiga-
Hillary Clinton $30,000 in
tions involving Whitewater or Madison
1980 to build a model home
All in all. Whitewater's finances were tan-
on one of the 42 lots in the
gled enough to make the traditional can of
real estate development.
worms look simple.
22
TIME JANUARY 1994
DID STATE REGULATORS GO EASY ON
Where Does the Failed
MADISON GUARANTY IN RETURN FOR
FAVORS TO THE CLINTONS? This is anoth-
Madison S&L Fit In?
er charge leveled by Leach. who cannot
Almost everywhere-but
conveniently be accused of blind partisan-
never neatly. Hillary Clinton
ship. He is. in fact. perhaps the least parti-
represented Madison
san Republican in the House. One reason
before state regulators.
for the contention at the start of 1985. Clin-
Its wheeler-dealer
ton appointed Beverly Bassett Schaffer as
chairman James
head of the state department that regulates
McDougal, who also ran
Whitewater, once
S&Ls. Later. Schaffer approved a proposal
received loans specifically
for an unusual stock sale to shore up
restricted to "disadvantaged
McDougal's already troubled S&L The
persons.' The tactics of
proposal was presented by none other than
McDougal and his now
Hillary Clinton. acting as attorney for Mad-
estranged wife Susan
ison Guaranty The stock sale. however,
eventually caused Madison
never went into effect. and records in the
to go under-at a cost of $47
Arkansas state security division show that
million to federal taxpayers.
Schaffer was quite tough on Madison. In
the middle of 1986. state and federal regu-
the bench. and McDougal pressured him
Casey's recusal. the Justice Department in
lators joined in removing McDougal as its
to arrange a $300,000 loan to clean up
Washington took over the investigation:
chief.
some dubious Madison Guaranty loans.
pending possible appointment of a special
Hale did approve a loan of that amount to
counsel. it is being run by Donald Mackay:
WERE THE EVENTUAL INVESTIGATIONS
McDougal's wife. but $110,000 went into
a senior trial attorney-and a Republican
LESS VIGOROUS THAN THEY SHOULD
Whitewater. Clinton denied exerting any
HAVE BEEN? In 1992. when Whitewater's
pressure and said he had been unaware of
It is important to note that no one has
name was starting to crop up in stories
such money winding up in Whitewater
offered proof of any criminal activity Even
about Bill Clinton's campaign. Denver law-
Hale proposed to Casey that he have him-
if anyone did. it would be very difficult to
yer James Lyons did an audit, at Clinton's
self wired up to record incriminating con-
prove the Clintons knew of It and ap-
request. that to critics seemed highly inad-
versations, perhaps with Clinton and aides.
proved. Who would be a credible witness
equate. The RTC'S referral of the case to Jus-
Casey refused, suspecting the offer was
against them? James McDougal insists
tice landed in Washington in the fall of
not serious. Hale. who had been indicted
they did nothing wrong. appearing last
week on the tabloid TV A Current Affair to
What Did the Clintons
make the point. Even if he were to decide
Know About the Plane?
otherwise. he-has suffered a mental break-
down. Susan McDougal IS separated from
Did they know that their
him: last week she pleaded not guilty to a
partner McDougal had
California indictment charging her with
exchanged Whitewater land
embezzling $200.000 from symphony con-
and diverted
ductor Zubin Mehta. whom she served as a
money from
financial adviser. Even Leach concedes the
Madison to
purchase the
whole affair has no potential to be another
Piper
Watergate: it IS entirely possible the Chn-
Seminole? Or
tons will never face any penalties at all or
was it simply
be asked only to repay some money to
another of
Madison Guaranty depositors and be ac.
McDougal's secrets?
cused of a conflict of interest Still even by
Madison's directors were
the standards of Arkansas where members
certainly kept in the dark.
Clarence Edwards. a board
of a tiny financial-political eine constantly
deal with one another. Hiliars
member, heard of the plane
for the first time last week.
tation of a business partner before a hank
"The board should have been
ing regulator appointed IN that mishand
informed," he said.
the Governor seems to come rather
At the very least. the Controls choices
1992-just as Clinton was forging decisive-
for fraud in a separate case. wanted Cases
of lames and Susan McDougar David
ly ahead of George Bush in the presidential
to give him a plea bargain: Casev offered
Hale as associates call
race. Justice officials were afraid they
instead a reduction in sentence if he plead
ability to rudge character
would be accused of a partisan effort to
ed guilty and cooperated with the govern
questions raised by the affact
smear Clinton if they had Washington take
ment on other matters But Hale refused
back to haunt Cinton III his print
over the investigation. so they left it with
the deal and will stand trial next month
re-election run It may
the U.S. Attorney in Little Rock. At the time
Casey eventually recused nerself from both
dent and his wite are
that was Republican Charles Banks. but af-
the Haie and Madison cases. but most to
wrong
All
the
more
ter Clinton's victory he was replaced by
latedly. last November She would have
a special counsel conduct
Democrat Paula Casey
trouble claiming impartiality she had been
tigation that IS tree of ann SUSPR
Enter David Hale. an Arkansas judge
a law student of Bill Clintons and a volun
I niess that IS done. nome
and head of a lending company that was
teer in all his campaigns Her husband
know. Reported by Laurence 1. Barrett and
backed by federal money Hale claims that
works for Arkansas Governor lucker who
Michael Duffy/Washington, Richard Behar and
in 1986. Clinton. who had appointed him to
had many dealings with McDougal After
Adam Zagorin/Little Rock
TIME.JANUARY IT been
NATIONAL AFFAIRS
Troubled
WATERS
White House: The president has finally launched
a Whitewater counteroffensive. But if he has
nothing to hide, why is he so defensive?
BY HOWARD FINEMAN
contradictory. And the suicide last summer
AND BoB COHN
of White House Deputy Counsel Vincent
ILL CLINTON'S AIDES ARE AC-
Foster. who had been the Clintons' lawver
customed to his angry "morn-
for years and had dealt closely with
B
ing vents." But last Tuesday he
Whitewater. envelops the controversy in
was Vesuvius. A New York
the aura of novelistic intrigue.
Times editorial said that the
At the very least. a full review of the
Justice Department's investi-
documents concerning the Clintons' busi-
gation into the tangle of Clin-
ness dealings in Arkansas would show that
ton business deals known as "Whitewater"
they associated. at times, with a sleazy as-
wasn't credible. The paper demanded the
sortment of 1980s hustlers. Not a flattering
appointment of a special prosecutor and
picture. especially for Democrats who ran
accused the president of failing to seek
against the wheeling and dealing of the
"open government and impartial justice."
Reagan-Bush years. but hardly enough to
Slamming his fist on the JFK desk in the
warrant raising the word impeachment. as
Oval Office. the president declared that
GOP Rep. Jim Leach did last week. Still. if
he had never been a punching bag-and
there's nothing illegal to hide. why has the
wouldn't be one now.
White House been so unwilling to talk-
So. two days before he left Washington to
and to chart the paper trail?
attend his mother's funeral in Arkansas and
Part of the explanation may be simple
then embark on his trip to Europe. Clinton
miscommunication Files related to White-
launched a counteroffensive. He renewed
water were found months ago in Foster's
his promise to turn over all files to the Justice
White House office. but that fact was dis-
Department. A top-level team was told to
closed only recently. At the time. the Clin-
get a handle on the facts ("We don't know
tons' business dealings had faded from the
what our total exposure is." moaned one top
news. White House Counsel Bernard
White House aide) and to persuade the
Nussbaum. who oversaw the dispersal of
world that there is no scandal here. Report-
Foster's files. apparently didn't know that
ers were offered detailed briefings. Aides hit
authorities had started a new investigation
the talk shows to denounce the GOP "witch
into the dealings of James McDougal the
hunt" and decrya town that wouldn't allow a
S&L cowboy who was the Clintons part-
president to mourn his mother.
ner in the original Whitewater develop-
But the damage control was several davs
ment. Nussbaum sent the files to the
and several dollars short. For too long the
Clintons' personal law firm. Williams i-
White House- and the Clinton campaign
Connolly. which is only now in the process
before it behaved as though there were a
of turning them over to Justice. Disorgam-
land mine hidden in the Arkansas thicket of
zation also helped create an image of dis-
politically incestuous banking and business
sembling. The Clintons hadn't declared
deals (next story). Disclosure has been
their Whitewater losses And White Houg
grudging at best. Official statements were
aide George Stephanopoulos declared on
14 NEWSWEEK JANUARY 17. 1994
Jan. 2 that all Whitewater files had been
DAMAGE
turned over to the Justice Department. In
CONTROL
fact. none had been. They wont all be
After silence only fed
transferred until Jan. IS
the furor, last week
But the grudging disclosure isn't entirely
the administration
accidental The Clintons.apparently think a
came out punching
"zone of privacy" extends to their family
financial records - a curious notion. at best.
when applied to their Arkansas business
ventures. Clinton was governor for a dec-
ade: the First Ladv was one of the state's
leading corporate lawvers. and she repre-
sented McDougal's S&L Madison Guaran-
tv for the Rose Law Firm from 1985 to 1986.
The Clintons have brought a defensive
campaign mentality into the presidency.
The theory IS: don't give ammunition to
enemies. In 1991. before his candidacy.
Clinton hired "opposition researchers" to
examine his public record in search of trou-
blesome issues Whitewater was the most
problematic. When The New York Times
investigated it in March 1992. the Clintons
DAVID GERGEN
declined to be interviewed. sending one of
The spin doctor is in,
Hillary's best friends. New York attorney
specializing in pleas
Susan P Thomases. instead. Later. the
for a bygone 'decency'
campaign commissioned a report that
cleared the Clintons. But the documents
were never released.
Iran-contra: White House spin doctors
have their own reasons for wariness The
business files are scattered and incomplete.
and. aides sav. leave too much room for
conspiratorial fantasy. David Gergen wor-
nes about "selective leaking" from Justice.
Knowing that Justice had drafted a narrow
subpoena. David Kendall. the Clintons'
lawver. expanded it to cover a wide arrav of
documents. Why? Because disclosing infor-
mation from a subpoenaed document is a
federal crime. And in an ironic twist on the
JANET RENO
lessons of the 1980s. Clinton aides tear that
She held the line
a special prosecutor might become a "run-
against calls for a
away" another Lawrence Walsh. who
special prosecutor
spent six years investigating the Reagan ad-
ministration and Iran-contra. Attorney
General lanet Reno thinks Justice lawvers
can handle the case. but she IS no longer
ruling out naming a so-called "independent
counsel" if Congress gives her the power
Whatever else happens. the contusion
should dissipate with the arrival of the new
White House deputy chief of staff. Haroid
Ickes. a 54-vear-old New York lawver. His
first task was to be health care. but he was
detailed last week to run the Whitewater
team instead. Blunt. toul-mouthed. indeta-
tigable known for breaking furniture and
scuffling with es-Ickes brings legendary
organizing skills and zealous advocacy to
HAROLD ICKES
the job. He was an early civil-rights lawver
New deputy chief of
in the South. and has 25 years ot campaign
staff is also chief of
experience in the only media environment
damage control
tougher than the capital: New York. He'll
need all that survival skill to help the Clin-
tons make Whitewater go away
THE
11+7
CARDS
TRANSING
32
Shirt Pocket Briefcase®
THE POLITICAL SCENE
THE BRIDGES OF MADISON GUARANTY
Whitewatergate is one old story the Clintons can't shake-which means
Capitol Hill is about to get a crash course in Little Rock mores.
BY PETER J. BOYER
Our Shirt Pocket Briefcase lets you take
B
ILL CLINTON'S Arkansas past ar-
The Arkansas troopers are already
notes on the run. Instead of writing on
rived at his door like a Christ-
off the screen, but Whitewater (as the
business cards, which are often coated so
mas ghost. "Old story," he said,
Clinton-McDougal involvements are
the ink doesn't dry, write freely on
but the old story-the Clintons' relation-
coming to be collectively known) is not
3" by 5" cards.
ship with a reckless Arkansas savings-
going to fade anytime soon. This week,
Our new model has a writing surface
and-loan adventurer named Jim Mc-
as the White House was directing at-
plus two pockets for cards (so you can keep
Dougal-kept spilling out revelations,
tention to the President's European trip,
completed cards separate from blank ones).
one for each day of Yuletide. There was
Whitewater clamored distractingly from
Made in America of luxurious saddle
tan, black, or burgundy leather. (We
news of a personal loan McDougal
the sidelines. "I think the Whitewater
welcome corporate orders.)
made to Bill and Hillary Rodham
matter is going to be a big problem for
Clinton, repaid by questionable means,
the President," Senate Minority Leader
$29.95 + $4.95 shipping
and a hint of political favors granted to
Robert Dole warned, and Representa-
$3.95 Optional Monogram
him. There were also new twists in the
MC/VISA/AMEX/DI/Check Florida add 6%
tive James A. Leach, of Iowa, the rank-
Money-Back Guarantee Catalog on Request
still-mysterious suicide of the White
ing Republican on the House Banking
800-544-0880 or 407-276-4141
House lawyer Vince Foster: word that
Committee, continues to demand that
LEVENGER
Foster kept a personal diary, which ex-
there be congressional hearings on the
cited new speculations, and that records
matter. Whitewater is not yet a scandal,
TOOLS SERIOUS READERS
975 S. Congress Ave., Code NYSP6, Delray, FL 33445
of the Clintons' business dealings with
but in a way it is something worse-
McDougal were removed from Foster's
a potential scandal, the unfolding of
office after his death and kept from
which the White House will have to
investigators. The latter, with its over-
spend much energy endeavoring to
tones of intrigue and coverup, produced
control. If the White House succeeds—
SEASIDE
a tense minidrama, in which the White
say, by avoiding the appointment of
The Florida You Dream About
House at first hesitated and then, facing
an independent counsel to investigate
a possible subpoena, said it would turn
the matter-it risks the appearance of
Porch swings and bare feet.
over to the Justice Department all pa-
coverup; if the White House fails to
White sand and emerald water.
pers relating to the Whitewater Devel-
control the issue and there is an inde-
Slip away to your own cottage
opment Corporation-the misbegotten
pendent inquiry or, worse, a full con-
by the sea,
in this small town
Arkansas business partnership between
gressional investigation, the inevitable
on Florida's Panhandle.
McDougal and his wife and the
spectacle could step on welfare reform,
Call today for information and
Clintons. So there was plenty of unwel-
health care, and other Clinton initiatives
reservations.
come excitement to spoil the President's
planned for 1994.
1-800-277-8696.
holiday mood without the sneak attack
That President Clinton should be
from the Arkansas State Police officers.
confronted with just this sort of contro-
Their tales of a sex-mad Bill Clinton, so
versy-murky financial dealings with
enslaved by his appetites that he imper-
shadowy figures who have criminal
FLOWERING DUTCH GARDEN
A unique and exciting gift.
illed his reputation with low-rent assig-
lawyers-surprises the common wis-
19 carefully selected bulbs (5 vari-
nations and his digestive system with in-
dom. Even those who criticize the jour-
eties)are preplanted, rooted and
cautious eating habits (picking up a
nalism of adultery while privately ac-
ready to bloom in stages for weeks.
whole baked potato and devouring it in
cepting much of the raunch as true find
Compliment your Dutch Garden
with a beautiful piece of handcrafted
two bites), heated up the December air
it hard to believe that Bill and Hillary
NH pottery (as shown).
before vanishing into the void between
Clinton could be involved in financial
Available through Easter (April 3).
Christmas and New Year's. Even so, the
shenanigans. After all, they are, in
SEND:
Dutch Garden $29.00 ea.
stories killed any chance of rosy year-
the now retired phrase that introduced
Dutch Garden w/ Handcrafted Pot $53.00
Add $2.50 shpg. & hdlg. for each delivery address.
end reflections on Clinton's 1993 victo-
the Clinton era, hopeless "policy
TOTAL $
CHECK ENCLOSED
MC
VISA
ries; instead, there were Letterman jokes
wonks." This is in the Clintons' favor
CARD NO.
EXP
("Top Ten Ways Santa Relaxes: No. 4,
and reflects the deep impression that
NAME
STREET
The Arkansas State Police rustle him up
Bill Clinton is strictly the sum of
CITY
STATE
ZIP
some babes").
those elements which built for him
MARLBOROUGH GREENHOUSES, INC.
PO Box 32 NY
Marlborough, NH 03455
603-876-4397
33
a national persona-his Oxford edu-
Lindsey & Jennings, the law firm that
from the Country Club of Little Rock.
cation, his extraordinarily accomplished
hired Clinton during his out years and
will take you past the late Vince Fos-
wife, his years of toil on the Demo-
that Bruce Lindsey, the White House
ter's house. which is just a little ways
cratic Leadership Council and the gov-
aide who directed spin on the trooper/
down Stonewall Road from the home
ernors' conferences, his cultivation of
sex story, was a partner in; down Fourth
of Kaki Hockersmith, Hillary Clinton's
friendships in the media. But Clin-
Street stands the First Commer-
interior designer: a couple of streets
ton was not pulled fully formed from
cial Bank Building, where Frank White,
away is the house that belongs to archi-
the loins of C-SPAN; first, there was
the Republican who handed young
tect Terry Rasco (as almost anyone can
Arkansas.
Governor Clinton his only gubernatorial
tell you, he and his wife, Carol, go:
Clinton ran for the Arkansas Con-
defeat, can often be found standing
divorced after Carol went to Wash-
gress in 1974, at the age of twenty-
outside his glassed-in office in shirt-
ington to become Clinton's director
eight, and was involved in a statewide
sleeves and suspenders, jawing poli-
of domestic policy). "These people
campaign every two years after that
tics; nearby is the Stephens Building,
didn't just see each other downtown-
until he became President.
they shopped at the same
Almost all his adult life
Kroger's, they saw each
has been spent in the un-
other mowing their lawns,"
tidy brawl of Arkansas poli-
says one Little Rock Friend
tics, a milieu of naked
of Bill. In such an at-
favor-trading and of eye-
mosphere, alliances are
gouging political warfare—
made and friendships are
the cocaine dependency of
formed-particularly be-
Clinton's brother, nurtured
tween politicians and their
by the generosity of a Clin-
sources of money-that are
ton financial supporter, was
deemed standard procedure
a theme of one guber-
but seem like conflicted en-
natorial race. All this is
tanglements when they are
squeezed into the confines
scrutmized outside that
of a small, extremely insular
context.
state, where no one, it
seems, is more than two de-
grees removed from the
THERE is is lexample no more vivid
of such an
business of anyone else. (In
entanglement than that
a typical encounter during a
binding Jim McDougal to
recent visit to Arkansas, I
Bill Clinton. The two men
ran into a couple at dinner,
met in 1968, while working
both of whom had connec-
on the reëlection campaign
tions to the Clintons: the
of that Arkansas icon Sena-
wife used to be Chelsea's
tor J. William Fulbright.
dance teacher, and the hus-
McDougal amused Clinton.
band is Gennifer Flowers'
then a college student at
attorney.)
Georgetown, with his dead-
Some of what the in-
on imitations of F.D.R.,
quiries may reveal could be
and advised him in politics.
learned on a walk through
eventually helping to run
downtown Little Rock, or a
Clinton's failed '74 con-
drive through one of its
gressional race. Each man
neighborhoods. The town's
harbored political ambi-
power culture lives and
tions, but it was plain that
works elbow to elbow in an
Bill Clinton was not pulled fully formed from the loins of
Clinton, not McDougal.
atmosphere that invites,
C-SPAN; first, there was Arkansas
had the talent with voters
with its particular sort of
McDougal was driven to
conviviality, a certain cronvism. Step out
monument to the megabucks Stephens
make the big score financialiv. and to
the front door of the venerable Rose
family, longtime Clinton benefactors.
benefit his political friends if he suc-
Law Firm and vou're a block away from
where Clinton has his Arkansas White
ceeded. Senator Fulbright and his fam:
the Worthen Banking Corporation,
House office. Along the route are the
ily entrusted McDougal with a number
which provided Clinton's Presidential
Capital Hotel and the Little Rock
of property deals. and in 1978. when
campaign with a $3.5-million line of
Club. favorite dining haunts for the
Clinton was Arkansas Attorney Gen-
GERALD SCARFE
credit in the crucial davs before Super
power crowd. A drive through the
eral. McDougal invited Bill and Hillian
Tuesday; housed in the Worthen Bank
comfortable residential neighborhood
Clinton to join him and his wife. Susan.
Building are the offices of Wright,
known as the Heights, extending out
in a land deal that promised to make
34
THE NEW YORKER, JANUARY 17, 1994
both couples a lot of money. The land,
Susan, who was also the secretary for
highway contracts, and thus dispensing
called Whitewater Estates, comprised
Whitewater, in television commercials
jobs in a district, and in deciding where
two hundred and thirty acres of property
for his developments. "We called him
state roads will be built.)
on the White River in the Arkansas
Diamond Jim, because he's the kind of
Clinton bought a lot of TV com-
Ozarks; McDougal planned to subdi-
guy who always had money, always
mercials with the money he borrowed
vide and sell it for vacation homes, and
promoted money, always drove nice
from Smith, and, just as had been pre-
a new company he formed with the
cars." one close friend savs. "You know,
dicted, he easily won the race. He then
Clintons-Whitewater Development-
Jim was just a high roller." McDougal
asked Jim McDougal for a favor. As
would develop it. Whitewater seemed a
liked to create the impression that
McDougal later put it, the Governor
way for the Clintons, who had little
he would take care of his friends, and
came to him and asked if McDougal
money at the time, to cash in on the
not only politicians such as Fulbright
could "knock out the deficit"-Bill and
Sun Belt land boom at little risk:
and Clinton and the current gover-
Hillary's personal fifty-thousand-dolla:
McDougal gave the Clintons fifty-per-
nor, Jim Guy Tucker: he ran Madison,
debt to the Bank of Cherry Valley.
cent ownership in White-
Representative Leach now
McDougal said, "Sure," and that spring
water, although they appar-
says, like "a private piggy
he threw a fund-raiser for Clinton
ently put up no cash; the
bank." In three years under
at Madison Guaranty's headquarters.
project was financed by
McDougal's control, loans
According to McDougal, the event
loans arranged by McDou-
to officers, directors, and ex-
raised thirty-five thousand dollars,
gal, with the land itself the
ecutives of Madison or its
which went toward clearing the Clin-
only collateral.
subsidiaries grew from five
tons' debt. It was an extremely valuable
Whitewater would even-
hundred thousand dollars to
favor that McDougal performed, be-
tually put Clinton in the
seventeen million.
cause, according to a Times report last
awkward position of being
Clinton, in contrast, had
month, Bill and Hillary Clinton would
in business with a man
limited financial resources
have been hard-pressed to repay the
whose principal enterprise-banking-
during this period, although his politi-
fifty-thousand-dollar loan themselves.
was regulated by the state. When this
cal fortunes were building. "He has ab-
The couple had a combined income in
issue was raised during the Presidential
solutely no interest in money," David
1984 of a hundred and eleven thousand
campaign by a New York Times inves-
Leopoulos, a longtime friend of Clin-
dollars.
tigation, Clinton dodged it by pointing
ton's, says, but money was a problem
McDougal's generous gesture came
out that he hadn't yet become governor
for someone who had to run for office
at a moment when he himself was at
when Whitewater was formed. That
every two years. Clinton's 1980 guber-
the center of a gathering disaster. He
was technically true-Whitewater De-
natorial loss to Frank White height-
had overpaid for bad property, indulged
velopment was founded a few weeks be-
ened a tendency on his part to de-
the wrong hunches, and in every way
fore Clinton was elected governor. (He
velop last-minute nerves before an elec-
lived the S. & L. experience of the
then named McDougal to his staff, as
tion, touching off binge spending on
eighties. In 1984, the Federal Home
an adviser on economic development.)
campaign ads, which, in turn, height-
Loan Bank Board examined Madison
But Clinton maintained his business
ened the need for friends with deep
Guaranty, made note of "unsafe and un-
partnership with McDougal after
pockets. Such was the case in 1984,
sound lending practices," and though it
McDougal left the staff to start his
when Clinton went into the final days
found Madison to be still solvent,
banking career-a decision that haunts
of his bid for a third term comfortably
warned that if McDougal stayed on the
him now, fourteen years later.
ahead in the polls but still worried about
same course he could sink the bank. But
Still, that was the way of things in
the outcome. He called on a close
McDougal, who loved the play of it.
Arkansas, and Clinton's partnership
friend, W. Maurice Smith, who was a
apparently believed that he could pull
with McDougal caused him no particu-
member of his staff and, more impor-
Madison out of its nosedive if he could
lar political strain through the years. On
tant, owned a small bank in the tiny
only forestall the regulators. By 1985.
the contrary, McDougal seemed just
town of Cherry Valley, Arkansas.
when the situation became dire, he
the sort of friend that an ambitious
Clinton asked Smith for a personal loan,
needed a friendly ear at the Arkan-
Arkansas pol would value. In 1982, af-
and Smith granted it without asking for
sas Securities Department. whose per-
ter Clinton came back from defeat to
collateral: he simply transferred fifty
mission would be required to keep the
reoccupy the Governor's Mansion, Mc-
thousand dollars to Clinton's campaign
bank's doors open. As McDougal saw it.
Dougal took control of a small savings-
account-and it was shown on the
his friend and business partner. Gover-
and-loan called Madison Guaranty: in
campaign-finance reports as a personal
nor Clinton. had already provided that
three years, he built Madison into one
contribution by Clinton to his own
for him.
of Arkansas's largest state-chartered in-
campaign. (After the election. Clinton
stitutions. He rode the wave of the
named Smith director of the state
eighties with gleeful abandon. leverag-
Highway and Transportation Depart-
S
HORTLY after his 1985 inauguration.
Clinton removed his sitting com-
ing big, playing hunches, and acquiring
ment, a patronage job ranking some-
missioner at the Arkansas Securities
the posture of success. He drove a blue
where just below King in the state of
Department and appointed an old
Bentley, created a maroon Art Deco
Arkansas: whoever holds this office has
friend from Favetteville named Beverly
headquarters downtown. and featured
considerable influence in awarding
Bassett. Both Clintons had taught at the
36
THE NEW YORKER. JANUARY 17, 1994
Guaranty was gone, but, in the hope
Hale's firm raised money to seed
hidden
of recouping some of the taxpayer
projects for disadvantaged companies,
money lost in the Madison bailout, the
such as those run by minorities, and
Federal Deposit Insurance Corporation
the S.B.A. matched the funds. As a
treasure
decided that year to sue the account-
judge, Hale was known for shows of
ing firm Frost & Company, which
temper, but when I met with him in
waiting to be discovered
had prepared the audit that the Rose
the Little Rock office of his attorney,
Law Firm used in arguing the case for
Randy Coleman, he was the picture of
Per night
Madison's continued operation back
sad-eyed contrition, politely answer-
$199
double occupancy
Effective through
in 1985.
ing my questions with the "Yes, sir"
12/22/94
Lo and behold, it turned out that the
and "No, sir" he had once demanded
chief auditor assigned to the case, James
in his own court. He is under a fed-
Discover the secret to an
unforgettable Maui vacation
Alford, had had two outstanding loans
eral fraud indictment in connection with
Mid-sized Rental Car
at Madison. The F.D.I.C. looked for
his S.B.A. dealings but feels he is
Partial Oceanview Room
outside counsel. At that point, Vince
being made the "fall guy" for Arkansas
Breakfast Buffer
Call the Maul Prince Hotel and Golf
Foster, Mrs. Clinton's partner and close
politicians he helped with his invest-
Courses and ask for the Prince Special
personal friend at Rose, wrote a letter to
ment company, including Clinton. Hale
the F.D.I.C. soliciting business for the
has said that in 1986, when McDou-
1-800-321-MAUI
firm. "The firm does not represent any
gal was facing scrutiny from federal
HAWAII'S MOST
savings-and-loan association in state or
regulators and was about to be ousted
COVETED SETTINGS.
federal regulatory matters," Foster
from Madison, he had lent Susan
wrote, wording it in the present tense,
McDougal three hundred thousand
and avoiding mention of the fact that
dollars in the guise of helping a disad-
Rose had previously represented Madi-
vantaged (in this case, female) entre-
MAUI HOTEL
son Guaranty. Rose got the F.D.I.C.
preneur. Hale said that he had been
case, and assigned as the lead lawyer
pressured into making the loan dur-
MAKENA RESORT
PRINCE RESORTS HAWAII
Webb Hubbell, the former mayor of
ing a visit by Clinton and McDougal,
MAUNA KEA BEACH HOTEL/BIG ISLAND
Little Rock, whom Clinton had ap-
and that some of "that money had
HAPUNA BEACH PRINCE HOTEL/BIG ISLAND
HAWAN PRINCE HOTEL WAIKIKI & GOLF CLUB/OAHU
pointed to the State Supreme Court in
ended up in Whitewater." The White
1984, and who is now Clinton's No. 3
House maintains that no such meeting
man at the Justice Department. (Inci-
occurred.
TOY SOLDIERS - Collectables by W. Britain
dentally, Hubbell's father-in-law, Seth
Hale was caught by surprise when,
Ward, had been an executive of a
as a result of the federal investigation
Madison real-estate subsidiary and had
into his dealings, his company offices
defaulted on two outstanding Madison
were raided, on July 21st. Finding him-
loans, totalling $587,793. Hubbell in-
self in a corner, he decided to try to
formed the F.D.I.C. of Ward's ties to
make a deal with prosecutors. He told
the defunct bank.) Hubbell settled the
them that he had had financial dealings
$80.00 #8821 3" tall THE 5th DRAGOON GUARDS
F.D.I.C.'s case against Frost & Com-
with some of Arkansas's most promi-
4 pace British Covery Set
Catalog $3.00 TNY
pany for a reported one million dollars,
nent politicians, including Governor
Colourlul a complete with lowng
MILITARY MITES
which was considerably less than the ac-
Clinton and his successor, Governor
red and white plumes. The set comprises
P.O. Box 2324
two troopers with drawn sabres. 8
Rockville, MD 20847-2324
counting firm's insurance coverage; Rose
Tucker, and he offered to coöperate in
trumpeter with the traditional at red
Toll Free 1-800-296-6483
plume and - offer signature the charge
Fax (301) 770-6254
collected a four-hundred-thousand-
building a case.
dollar fee.
A key element in such a case would,
VIVA L'ITALIA
Whitewater Development survived
be the fact that a hundred and fifty
the demise of Madison, and until 1988
thousand dollars of Hale's S.B.A.
AGHETTI
McDougal had continued to manage
money did end up in Whitewater's ac-
-
Support your culinary
the partnership for himself and the
count. McDougal's lawyer, Sam Heuer,
alma mater with a tasteful
sweatshirt and baseball cap
Clintons. Some of the methods he ap-
said that there's a simple explanation for
1
STATE
Sweatshirt, Size: L & XL $36
parently employed, however, are now
that, however. "That was just a screwup,
Baseball Cap. Adjustable. $22
Black with Red Lettering
the subject of federal investigation. One
is all it was. That money was supposed
White with Green Lettering
deal involved David Hale. a muni-
Chasee from
to go as a down payment on [another
Call: IT'S AMORE 800 805-1100
LINGUINI TECH
PO Box 641952. Los Angeles, CA 90064
cipal judge and entrepreneur in Little
piece of property] and Jim inadvertently
SPAGHETTI STATE
PAY BY Visa, MC, AmEx. or Check
RAVIOLI UNIVERSITY Add S&H In CA add 8.25% tax
Rock, who seemed to have bad luck
put it in Whitewater's account. When
with his investments (such as a Bible-
he realized he'd made a mistake, he
based theme park), but who had a
pulled it out."
PERSONALIZED CARTOUCHE JEWELRY
gold mine in the form of an investment
Hale, however. said that he had "a
Translate Anything into Ancient Egyptian Hieroglyphs
firm, Capital Management. that was
ton of documents" to support his story,
SS Pendants from $40 18k from $150
Call
Tell
Free
I
Free Color Brochure includes Alphabet
Discoveries
backed by the Small Business Admin-
and copies of some of those documents
(cat. 1980)
Pendants Rings Bracelets Earrings 526 N. Fayette
St.,
istration. Under the S.B.A. program.
are said by local officials to be in the
1-800-237-3358
Alexandria.
Virginia
22314
HANDMADE
IN
EGYPT
C
THE POLITICAL SCENE
35
University of Arkansas School of Law,
ing Madison Guaranty for another year,
in Fayetteville, in the nineteen-seventies.
until the bank's board voted his removal.
THE TIMES
(In the way of things, Bassett's brother
During that time, Madison grew from
LITERARY SUPPLEMENT
Woody had taken criminal law from
a forty-nine-million-dollar institution to
Hillary and constitutional law from Bill.
a hundred-and-twenty-five-million-
TLS
Woody Bassett actively campaigned for
dollar institution, fattening the load—
Clinton in the 1976 Arkansas Attorney
about sixty million dollars-picked up
General race and became a close politi-
by taxpayers when the bank finally went
cal adviser, managing the campaign in
bust in 1989.
Washington County, which includes
Bassett, who now uses her married
Fayetteville, during Clinton's critical
name, Schaffer, is bemused by any sug-
1982 comeback race against Governor
gestion that she gave Madison preferen-
White. Beverly Bassett, meanwhile,
tial treatment. The obvious conflicts
would eventually marry Archie Schaffer,
didn't seem as bad to her in 1985 as
a nephew of Arkansas's Senator Dale
they seem now, she said recently. True,
Bumpers and now an executive at Tyson
the rules of professional conduct prob-
Foods-owned by Don Tyson, a serious
ably should have precluded Mrs. Clin-
S
ubscribe today to the world's preemi-
nent international literary review-for
Clinton financial backer.) Bassett did
ton from representing her business
90 years a lively, entertaining and infor-
not know McDougal personally, but, as
partner, but, Schaffer said, at the time
mative weekly habit of some of the keenest
minds, here and abroad.
a securities lawyer for a Little Rock firm
she didn't know of the existence of
The TLS bas no rivals Everyone is
called Mitchell, Williams, Selig, Gates
Whitewater, besides, it wasn't in the
bappy to acknowledge its influence. its
& Woodyard, she had done work for
state commissioner's power to decide
fame and its authority Le Monde
Madison Guaranty.
a petitioner's legal representation.
Special Introductory U.S. Offer:
Members of her own staff had had
1/3 off the cover price
In 1985, shortly after McDougal
Six months $49 D One Year $75
helped Bill and Hillary Clinton "knock
strong reservations about Madison, but
0 Two Years $150
out the deficit," his lawyers proposed to
Schaffer told me that, on the basis of
Call 1-800-370-9040
the Securities Department a plan that
the information available to her, her
to order by creda card or send payment
could save Madison-an unusual recapi-
only choice was to allow Madison the
(cheques payable to Times Supplements) to
talization scheme involving the issuance
chance to recover. "What we had was
TLS. 386 Park Avenue South *1605
New York. NY 10016
of new preferred stock in the savings-
their examination report"-the report
and-loan. One of those representing
by the Federal Home Loan Bank
McDougal in this effort was Hillary
Board-"clearly showing them solvent,
Clinton, whom, McDougal later re-
plus their audit showing them solvent,"
HOW THE
called, be had hired on retainer after her
Schaffer said.
WEST WAS
husband approached him one day com-
The 1985 audit that was commis-
ONCE
plaining about family finances. In a let-
sioned by the bank and became the
ter to Bassett, Hillary Clinton argued
foundation for the Rose lawyers' argu-
that Madison should be allowed to is-
ment that Madison should be allowed
And still is at
sue the stock. Using an audit recently
to continue operating is at the heart of
Grapevine Canyon Ranch.
commissioned by the bank, another
the problem of conflicting interests. By
own
Rose lawyer argued that the bank was
1989, McDougal had hit rock bottom.
CANNOY
Come spend unhurried
solvent.
His wife had left him, and many of his
GR
time at one of Arizona's
RANCH
It made for an amazing tangle of in-
political friends had abandoned him.
premier guest ranches
terests: Hillary Clinton was arguing for
("He asked Clinton for a job even
First class food. accommodation horse:
a rescue plan on behalf of her business
sweeping floors, anything," one friend
Call 1-800-245-9202 for free color brochure or
write Box 302. Pearce AZ 85625 FAX 602 826 3636
partner (and her own financial rescuer)
says.) He had also been hospitalized
before a state official who was also a
for what was diagnosed as manic de-
friend, and who had been appointed by
pression. A psychiatric report said
SILVER MOUSETRAP Fin cut Hender
Hillary's husband, the Governor, and
of McDougal in 1987 that his "first re-
Harbonng Steel Spring and Rube be
who had herself done work for the bank
ally florid manic episode" was "charac-
55 14K $310
Add H
in question.
terized by increased energy, increased
VIM MC Check MO
Soon after McDougal raised the
talkativeness, 'felt invincible, used poor
1-800-262-6026
Spring City Craitsmar
thirty-five thousand dollars for the
judgment with money, and apparently
190 N Mair
Clintons, Beverly Bassett approved
really lost his whole business and savings
Soring City Utah 84662
Free
Catalos
Madison's recapitalization plan in a let-
in unwise real estate and other invest-
ter that began, "Dear Hillary." In fact,
ment ventures." In 1989, McDougal
despite the federal loan board's severe
was indicted-and eventually acquit-
ENGLISH WANDERER
criticism of Madison's practices a year
ted-by the federal government for
Walking holidays in the hills and along
the coastal paths of Britain staying at
earlier, Bassett's Securities Department
fraud, in a prosecution focussing on one
quality country inns
allowed McDougal to continue operat-
of his development deals. Madison
English Wanderer (NY) 6 George Street
FERRYHILL County Dumam England
Tel 740-653169 Fax 740-657996
THE POLITICAL SCENE
37
hands of federal investigators. "They
phia. (Susan McDougal, for her part,
lawyer, and among the documents in his
want to indict me, discredit me, convict
was recently charged with forgery and
possession were records of the Clintons'
me," Hale said, referring to a powerful
grand theft in an unrelated case in Cali-
sale of their share, in 1992.
clique of politicians he claims to have
fornia and has pleaded not guilty.) Af-
Bruce Lindsey, the White House
been associated with since his youth.
ter he was acquitted of criminal charges,
aide, said that the Clintons sold their
The United States Attorney in Little
"Bill Clinton did not help him one
interest in Whitewater to McDougal for
Rock, Paula Casey, who is a Clinton ap-
damned bit," says an old friend, but it
a thousand dollars, and, in the process,
pointee and a longtime Clinton sup-
is not likely that McDougal, who once
discovered that the company had not
porter, has declined to make a plea bar-
shared his political savvy with the young
filed tax returns for three years; on the
gain with Hale. He is nevertheless still
Clinton, expects the President to get in
advice of Foster, they had an accountant
hoping for some sort of leniency, and
touch. He survived the fraud trial, but
prepare the returns and then sent them
claims to be quite ready to make his
current federal inquiries are likely to
to McDougal for filing. Lindsey added.
case. "We haven't lost any of our
bring him back into court.
that a copy of the returns was also sent
records," he said.
Federal investigators believe that
to Foster, who was by then working in
The last comment was a pointed ref-
McDougal channelled a great deal of
the White House.
erence to the remarkably high incidence
money in and out of the Whitewater ac-
After Foster's suicide, the White
of missing records in connection with
count, and it is still not known where
House counsel, Bernard Nussbaum, re-
McDougal, with Madison, and, particu-
much of the money went. That is one
trieved the Whitewater material and
larly, with Whitewater. In 1992, Susan
of the reasons investigators were so ea-
forwarded it to David Kendall, the
McDougal told the Washington Post
ger to inspect Vince Foster's White-
Clintons' new personal lawyer, instead
that, as Whitewater's secretary, she had
water files. Foster had worked on
of handing it over to the investigators
kept all the corporation's records, but
Whitewater as the Clintons' personal
probing Foster's death; Nussbaum
that at Hillary Clinton's re-
cited lawyer-client privilege,
quest she had sent all her
thereby raising the separate
records to the Governor's
Mansion-"every sheet of
PRESCRIPTIONS
issue of whether Foster,
a government employee,
paper
every file I had, all
should have been doing the
the purchase agreements,
Clintons' private work in his
copies of the deeds, all
capacity as deputy White
monthly payments by cus-
House counsel. On Decem-
tomers, all checks written
ber 23rd, Clinton finally or-
by the corporation, all cor-
dered the Whitewater papers
respondence." The Clin-
turned over to Justice, but
tons, who have maintained
there was a further delay for
that they lost money on
"cataloguing." (Foster's diary,
Whitewater, have said that
which Nussbaum gave to
they have only some of the
Foster's personal attorney,
corporation's records.
has not been turned over to
government investigators.)
IN his happier, high-roll-
гд
The paper trail recording
ing days, Jim McDou-
McDougal's dealings with
gal was known to delight in
the Clintons follows a sinu-
his friendship with the
ous course, and often disap-
Clintons, and in his access
pears altogether beneath the
to the Governor's inner
patchwork of Arkansas poli-
sanctum. Now the Clintons
tics. One sought-after piece
don't speak his name, and
of paperwork is the cam-
aides murmur about a busi-
paign-finance report show-
ness associate whose rogue
ing the contributions col-
dealings were strictly his
lected at that 1985 fund-
own. And what is known
raiser given by McDougal to
about McDougal's life now
relieve the Clintons' personal
seems to warrant the phrase
debt. Government investiga
that so many of his Arkan-
-tors believe that at least
sas friends employ when
twelve thousand dollars of
speaking of him: "Poor of
Jus Cine
the money turned over to
Jim." McDougal's marriage
Clinton's aides that night
and business are gone, and
may not actually have been
he has been living in a
"Arthritis Pain Formula Anacin, Poli-grip,
raised but, rather, improperly
trailer home near Arkadel-
and a home-pregnancy test."
diverted from Madison. The
Resolution Trust Corporation, combing
not there.) The paperwork would also,
more ominously for the White House,
through the records of the defunct
of course, be evidence that the Clinton
Attorney General Janet Reno is consid-
savings-and-loan, discovered four cer-
campaign actually reported the take
ering the appointment of a special coun-
tified checks, each in the amount of
from that event. The report, however,
sel to conduct an independent investiga-
three thousand dollars and each bearing
is not among the Clinton files at
tion. There is coming, one way or
the name of a Clinton "contributor."
the Pulaski County Clerk's office, in
another, a discomfiting seminar on Ar-
One of those whose names appeared on
Little Rock-Wright said she should
kansas manners.
a check was Kenneth Peacock, who was
have filed it there but apparently didn't
a college student at the time, and who
Neither is it at the secretary of state's
F
OR the Clintons, what could prove
says he didn't make a contribution to
office. Officials there said that it might
more troubling is the handling of
Clinton-a scenario that suggests that
have been disposed of, because they
the Whitewater-McDougal-Madison-
the checks bearing his and the three
were not then required to keep such
Hale entanglements after they left
other names might have been phantom
records indefinitely. The consensus in
Little Rock. They appear not to have
contributions intended to disguise a di-
Little Rock political circles is that
benefitted financially from White-
version of Madison deposi-
Wright, who is known for
water-they assert that in fact they
tors' money to Clinton. (The
meticulous recordkeeping,
lost sixty-nine thousand dollars-bus a
three other checks bore the
would be the best source for
final assessment can't be made until
names of Susan McDougal,
the list of contributors. "I
there is full disclosure, and the posture
Fulbright, and an employee
can't find those reports," she
of the White House in that regard can-
of Peacock's father's.) "It's a
said. "It has us tied into a
not be described as forthcoming. What-
disgusting situation," I was told by
situation that emerged on other people's
ever embarrassments the Whitewater
Betsey Wright, Clinton's longtime chief
parts, not ours. And my not having the
papers hold-assuming they are not
of staff in Arkansas, who ran his 1984
files is grist for getting more focus on us
criminal-could hardly be as damaging
campaign and received the money from
than on where the problem was. And I
as the impression now taking hold that
the McDougal fund-raiser. "I can't
wish I could stop that, but I don't know
the White House has something to
imagine anything worse than putting
how. I'd give anything to be able to
hide. At the least, the two lawyers
someone's name on a check that that
solve this."
living in the White House, and the
person didn't put on himself, or request
A former high-ranking official in
lawyers on their staff, caused the re-
to put on himself. We had no way of
the secretary of state's office told me that
moval of material that is part of a fed-
knowing it."
many such records-especially those
eral investigation.
McDougal has denied any such mis-
likely to be of lasting public interest,
The prospect of inquiries-the very
deeds. His lawyer, Sam Heuer, believes
such as a Clinton campaign report-
fact of the continuing interest in White-
that there is probably a simple explana-
were microfilmed for historical safe-
water-seems to have the First Couple
tion for the phantom contributions.
keeping. I asked Phil Hoots, who had
somewhat nonplussed. Mrs. Clinton
Noting that Peacock's father, Charles
been the secretary of state's manager of
said, as the new revelations came spill-
Peacock, of Bald Knob, Arkansas, was a
records in 1985, about this, and he
ing forth, "I am bewildered that a los-
business associate of McDougal's and a
confirmed that such records, probably
ing investment which for us was signifi-
onetime member of the Madison board,
including Clinton's crucial campaign
cant-sixty-nine thousand dollars,
Heuer said, "I suspect that Jim talked to
report, were regularly microfilmed at
which is provable by the accountants—
Peacock's father, rather than to Peacock
that time. However, he added, "All
is still a topic of inquiry." A defense that
himself, on something like that. And I
that stuff was kept in a room that used
a questionable business partnership
would assume that Peacock's father
to be a boiler room to generate steam
couldn't have been improper, because it
would have been a person in appro-
heat. They had all that stuff back there
was not profitable, is hardly lawyerlike.
priate authority to have O.K.'d that
in the catty-combs. Bingo! It was all
Yet there may be something uninten-
deal."
ruined. You'd open the drawers and
tionally exculpatory in the Clintons' loss'
However, up in Bald Knob, Charles
the stench from the acid would knock
on Whitewater-in the implicit asser-
Peacock maintains that he didn't autho-
you down. It was all ruined."
tion that if Bill Clinton were a crook he
rize the contribution to Clinton, and
It is likely, though, that another
could have found a better accomplice
offers as what he considers sufficient
mountain of paper relating to White-
than Jim McDougal and a more lucra-
proof the fact that his line of Peacocks
water, McDougal, and his dealings with
tive avenue than Whitewater
have been Republicans dating back to
the Clintons will soon be building, as
When I asked Beverly Bassett
his granddaddy. Peacock said that he
the Justice Department continues in-
Schaffer about the entanglements sur-
"never had" supported Clinton.
vestigating the fact that S.B.A. funds
rounding the official reprieve that she
The campaign report, which Betsey
ended-up-in Whitewater and the possi-
had awarded Madison Guaranty in
Wright was obliged by state law to file
bility that McDougal diverted in-
1985, she acknowledged that outsiders
with the Arkansas secretary of state,
sured depositors money to political
might see a conflict of interest. "We
would show the names of other con-
campaigns, including that 1985 Clin-
can't help bumping into each other all
tributors at McDougal's fund-raiser,
ton fund-raiser. Not surprisingly, Re-
the time," she explained. "But we do do
which was attended mostly by Madison
publicans on Capitol Hill are press-
stuff out in the open, so at least y'all can
executives and employees. (Clinton was
ing for hearings on Whitewater. and.
check on us."
For C nto WI itewa er Wsdom rom Past
By Saundra Torry
Washington Post Staff Writer
Presidents' Defenders
here are only a handful: Leonard Gar-
T
should take part in briefing reporters to make
ment, James St. Clair, Theodore OI-
sure they understand the legal reasoning.
son and a few others. They are law-
Ironically, Garment, who is as comfortable
yers who have represented presi-
at a press conference as in a courtroom. artic-
dents in times of stress or scandal. including
ulated the downside of Kendall going public:
Watergate and the Iran-Contra affair. They
know what President Clinton's lawyer. David
"Lawyers are not seen as credible spokesmen
Kendall. is going through in the Whitewater
in this country at this time."
matter and what pitfalls may lie ahead.
Mortenson suggested that the lawyer doesn't
Though they were reluctant to give advice
have to be the person giving the answers, but it
to Kendall or his famous client, a list of do's
should be "one spokesperson who has a direct
and don't's quickly emerged from interviews
line of communication with the lawyer."
with them last week.
Cut out the middle people.
Get private counsel.
In 1974. Nixon finally did retain outside coun-
So far, Clinton gets an "A" for retaining a
sel. Boston litigator James St. Clair. But then
"private lawyer"-Williams & Connolly litiga-
Nixon refused for the most part to deal directly
for Kendall-to handle questions about his Ar-
with his lawyer. Instead. St. Clair and the legal
kansas land dealings in the Whitewater Devel-
team had to deal with Nixon mainly through
opment Corp.
White House Chief of Staff Alexander Haig.
"Presidents do not view their
staff
law-
By the time Nixon resigned. he got it right.
yers as lawyers, but as staffers." said Gar-
When white-collar defense specialists Herbert J.
ment. who served as in-house counsel to Presi-
dent Richard M. Nixon during Watergate. And
(Jack) Miller and Stan Mortenson began repre-
when your client is the president. Garment
senting Nixon days after the resignation they got
direct access. Mortenson said.
said, "you can't tell the client to show up at
your office at 2:15."
"Working through a buffer with a client is ter-
Garment said he talked with Nixon about
ribly unsatisfactory," said Mortenson. "Cut out
getting outside counsel as early as the spring
of 1973. but Nixon's first choice-then-Secre-
tary of State William P. Rogers-declined the
the middle people."
job. according to Garment. Garment and Fred
Stay in touch with your client.
Buzhardt, then general counsel to the Defense
Sound simple? Not when it's the president of
Department, joined to assemble a legal team,
the United States.
mostly from within the government.
You don't "want to wake up some morning and
There are several good reasons why outside
find out he is in Egypt," said St. Clair, who re-
counsel is essential.
called a trip Nixon made to the Middle East at
White House Counsel Bernard Nussbaum,
the height of the Watergate scandal. St. Clair in-
like all White House counsels, represents "the
sisted on knowing "what was going to happen and
institution of the presidency." not the presi-
why and when," so he could tailor his work
dent as an individual, said Fred Fielding, White
schedule around the president's.
House counsel to former president Ronald
Likewise. St. Clair said he met daily with Haig
Reagan. The White House counsel "can never
to discuss "what we'd say to the press today,
be giving the president legal advice about
what should the president be informed of" and
purely personal issues."
what the president's response might be on Wa-
Another former White House counsel noted
tergate issues.
that there's a federal law mandating that gov-
Ultimately the president's lawyer is on his
ernment officials, including lawyers, notify the
own, and there is no single answer to all the legal
Justice Department if, while advising another
and political dilemmas.
government official, they learn of a matter
"This is free-form litigation," said Garment,
that might have criminal consequences. The
who described the Whitewater inquiry as "a very
president, like anyone else in government.
weird type of fungus that spreads quickly in a
needs outside counsel "to whom he can talk
hundred different directions."
freely." this lawyer said.
"There are no brilliant winning solutions," said
Protect the office.
Lloyd Cutler, White House counsel to former
Anything you do can to create precedents
president Jimmy Carter. "If you had all the expe-
for future presidents, so it's impossible to sep-
rience in the world. these are still very difficult
arate the person from the office. "You have to
choices to make."
protect the institution of the presidency and
the ability of the person to continue being
resident.
And that's tricky," said Olson.
tho represented Reagan when defense law-
ers sought the former president's diaries and
estimony in the Iran-Contra trial of Adm. John
'oindexter.
Most clients "have time they can give you to
elp themselves," he said. "But in a sense your
lighest responsibility to
:ent to go on and do things that the people
lected him or her to do."
Speak with one voice.
Though they were too polite to say so, it's
bvious Clinton gets an "F" on this score. A
raggie of White House staffers has been talk-
ng to the press, while Kendall. in true Wil-
ams & Connolly style. has been speechless.
Speak through one person. say the experts,
hether it's the lawyer or someone else.
"Everything you do is potentially subject to
great deal of scrutiny. and you have the re-
onsibility to deal with the public perception
what's
being
done
as
well
15
legal
sad.
Ken-
23
PM-AR--Whitewater-Heuer, 1st Ld-Writethru, 570
McDougal Subpoenaed to Appear before Grand Jury This Week
EDS: Retransmitting to CORRECT spelling of subpoenaed in summary line
phradfon
By JULIE STEWART= Associated Press Writer=
LITTLE ROCK (AP) James McDougal, the former Arkansas S&L executive who
co-owned a real estate venture with Bill and Hillary Clinton, has been
subpoenaed to appear before a federal grand jury in Little Rock.
McDougal's lawyer, Sam Heuer, said Sunday that McDougal is to testify
before the grand jury Thursday.
Heuer said he accepted the subpoena Friday on McDougal's behalf.
Earlier Sunday on ABC's This Week with David Brinkley, Heuer said the
FBI had subpoenaed documents related to Whitewater Development Co Inc., the
Marion County real estate venture in which the Clintons and McDougals were
50-50 partners from 1978 to 1992.
'We invite an investigation because there's no wrongdoing, and we're
intending to comply fully with the subpoena and provide as many materials as
we can to the FBI, Heuer said.
``I don't know of any real major secrets in any of the Whitewater
materials, and I would suspect, were there some secrets, we would have known
about them long before now, he said, referring to the number of times the
S&L has been examined since McDougal left it in 1986.
McDougal was acquitted in 1990 of eight federal fraud charges in
connection with the operation of the S&L, which was named Madison Guaranty
Savings and Loan.
The S&L, of which McDougal owned a controlling share, failed in 1989,
costing taxpayers $47 million. Federal audits questioned practices of the S&L
when McDougal was chairman, but he has said it failed because of actions of
his successors and federal regulators.
Federal investigators are trying to determine whether Madison funds were
illegally diverted to Whitewater or to help Clinton repay a $50,000 loan for
his 1984 gubernatorial campaign.
Clinton has been accused of no wrongdoing, and he has denied any
wrongdoing. He has said he lost $69,000 in the Whitewater venture.
Attorney General Janet Reno is expected to make an announcement soon of
her choice as special counsel to investigate dealings involving Whitewater.
Heuer said no funds from Madison Guaranty were diverted to Clinton or
anyone else. He said the S&L was examined by the Federal Home Loan Bank Board,
the Federal Deposit Insurance Corporation, two independent certified public
accounting firms, and, previously, by the FBI and the Justice Department.
`Jim McDougal would have been very quickly charged at that point in time
with criminal activity had any money been diverted, Heuer said.
The linchpin of this whole thing seems to be the fact that Jim McDougal
was a savings and loan executive, which is akin to being a communist in the
McCarthy era, or a witch in the Salem era, and that's ludicrous. Jim McDougal
is a fine fellow, and the Clintons are good people.
Heuer also talked about why Whitewater failed. You have raw land in a
remote area of Arkansas that has to have water and sewer, it has to have
roads. It has to have all of these comforts that we have, and too much money
was spent in developing those.
Whitewater is not an IBM or a Xerox or any large it's a very small
corporation that cost $300 to form by filing with the secretary of state, he
said.
**** filed by:APW-(AR) on 01/17/94 at 06:14EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 10:00EST ****
OUTLOOK
CALENDAR
U.S.NEWS
King Day concern. The Martin Luther
King Jr. holiday on January 17 is a
WHO WILL PAY THE WHITEWATER TOLL?
time for reflection on the tamed civil
As if the political price of the Whitewater affair now troubling the White House were
rights leader's accomplishments. But
not high enough (story. Page 431. the financial fallout from President Clinton sour
White House officials are worried
Arkansas real estate deals keeps growing as well. For the advice of Washington lawver
about criticism because the adminis-
David Kendall. the Clin-
tration has yet to fill top civil rights
tons are faced with legal
jobs-including that of assistant at-
fees that at the prestigious
torney general for civil rights and the
firm of Williams & Connol-
chair of the Equal Employment Op-
ly can run close to $500 an
portunity Commission.
hour. Even at a discount.
North exposure. Later this month. OI-
the bills could eat up a big
iver North is due to announce he will
chunk of the president's
run for the Republican nomination in
$200.000 salary. So far.
aides say. the Clintons plan
NO
Virginia's 1994 U.S. Senate race. The
CLOSED
ex-marine and former aide to Presi-
to pay the bills themselves.
TRESPAST
But if the toll from the
dent Reagan is best known for his
role in the Iran-Contra scandal.
investigations piles up.
might they consider a legal
defense fund. a strategy
Full stop. At the Whitewater project
with a long Washington
tradition? Sen. Robert Packwood. whose ethics-investigation expenses are said to
approach $1 million. has established a fund. as have other elected officials under
investigation. What Clinton is not likely to do. sources say, is risk further political
scorn by paying legal expenses from campaign funds. Still. critics say any source other
than Clinton's own pocket would be objectionable. "It's just another way to gain
influence," says Charles Lewis of the Center for Public Integrity. "The indebtedness
you would feel for one who has helped save your neck-you would remember that.
DATABASE
Number of days North testified
before the congressional committee
WHERE THE (LICENSED) GUN DEALERS ARE
investigating Iran-Contra: 6:
In hopes of driving many of America's 258,000 licensed gun dealers out of
transcript pages of testimony: 1,388:
business, the Clinton administration proposes to raise the $66-a-vear gun-
word count: more than 300,000
selling license to $600. But fewer dealers doesn't automatically mean less crime.
Florida, with 8.6 licensed dealers per 10,000 people, has America's highest
Years independent counsel
violent-crime rate. North Dakota. with 25.8 dealers per 10,000. has the lowest
Lawrence Walsh conducted criminal
investigations in Iran-Contra affair:
24.4
Licensed gun dealers
More than 20
7: amount prosecutors have spent
per 10.000 population
15 to 20
27.5
on the investigation: nearly $40
10 to 15
million: total indictments: 14: total
25.8
Fewer than 10
convictions: 11: convictions upheld
59.0
40.5
on appeal: 9
5.4
23.2
39.7
North's sentence from federal
6.9
district court. prior to appeais court
2.2
dismissal: $150,000 fine, 1,200
$ of community service, 2 years'
probation and total disqualification
from holding any office under the
United States
8.6
Number of copies of Under Fire,
7.9
North's autobiographical account of
the controversy. sold since
cata bureau of Alcoh:
Tobacco and Firearms Census Bureau
publication in 1991: 625,000
EPC
PALMA
FOR
U.S.NEWS & WORLD REPORT
U.S. NEWS
The Whitewater files
How a botched land
next year. McDougai quit to join a
have a loss when something goes bad.
group buying the Bank of Kingston in
loan or a stock. and there
deal boomeranged
northern Arkansas. In 1982. he bought
loss. savs one tax lawver But neither
Madison Guarantv Savings & Loan As-
these things IS reflected on the Cinton
on the Clintons
sociation near Little Rock. Trouble foi-
tax return Whitewater collapsed under
lowed. By 1983. federal regulators were
the weight of the McDougals Madison
examining Kingston Bank. The Clintons
troubles he was ousted in 1987 and lat-
t may be left to a Little Rock grand
continued their dealings with McDou-
er tried and acquitted of fraud charges-
jury to decide whether Bill and Hil-
gal. and regulators moved into Madi-
The Clintons sold him their share in 1992
lary Rodham Clinton broke any
son. One event in particular has since
for $1.000. but they never declared a tax
laws in their failed attempt to sell off a
captured law enforcement interest: a
loss on their investment
wooded bend of northern Arkansas's
winding White River. But political vet-
erans inside and outside the White
House say the Clintons are guilty on all
counts of breaking the two crucial laws
on damage control: Offer quick and
clear explanations. and. by all means.
avoid any appearance of a coverup.
The breach is intentional.
WHITEWATER
The Clintons have told aides
that they resent continuing
"intrusions" and have resist-
DEVELOPMENT
ed release of documents
r.
rig to their Whitewater
D: :lopment investment.
LOTS FOR SALE
But the result is what might
In the Ozarks
have been expected: lots of
damage. very little control.
Only last week. the White
House announced that two
weeks earlier a Little Rock
grand jury had subpoenaed
the Whitewater files. The fact
that the Clintons simultaneoush
requested a subpoena-
guaranteeing that the
records would remain se-
also raised suspi-
cions. Meanwhile. aides
to Attorney General Janet Reno sug-
1985 fund-raiser McDougal held to help
The investigation today centers
gested that she may assign the inquiry
Clinton pay off a $50.000 campaign
the flow of funds at Madison and
to a special prosecutor it Congress rein-
debt. The event raised $30.000 but
subsidiaries. White House Chief
states the independent counsel law.
some of that money may have come di-
Staff Mack McLarn has asked his
Follow the money. Under these roiled
rectly from Madison. If so. that could
deputy. Harold Ickes. to direct a "coun-
waters rest the still unanswered ques-
be a violation of federal law.
teroffensive against the Clintons
tions of Whitewater's books and the
The Clintons sav they eventually in-
ics. But semior officials sav they
Clintons refusal to disclose details of
vested and $68.900. though the
have only spotty knowledge
their investment The facts are not sim-
loss was never claimed on tax returns
went on
ple. In 1978. the Clintons purchased wa-
Instead. savs White House counseior
Indeed. within the administrative
terfront real estate in northern Arkan-
Bruce Lindsev. the Clintons claimed
Hillan Clinton IS considered the
sas with James and Susan McDougal
most of it as interest tax deductions on
person who realiv knows all the
The couples took on a $183.000 mort-
the Whitewater mortgage payments. Be-
especially after the suicide last Jun
gage and a $20.000 bank loan for the
tween 1979 and 1990. those deductions
incent Foster. the deputy
down payment. They then formed
amounted to more than $40.000. a sub-
House legal counsel who had handle
Whitewater Development Corp.. divid-
stantial tax savings. The remaining
the case internally Now few dare
ed up the 230 acres and put the lots up
Whitewater loss. Lindsey says. went for
Mrs. Clinton questions about Il
for sale.
business expenses. Tax experts say that
In 1979. Clinton became governor
claiming an interest deduction isn't the
BY STEPHEN 1. HEDGES. KENNETH
and named McDougal an aide. The
same as declaring a loss. "You can only
WALSH AND SUSAN HEADDEN
U.S.NEWS & WORLD REPORT JANUARY 17. 1994
PM-Whitewater, 510
Need for Congressional Probe on Clinton Financial Dealings Disputed
WASHINGTON (AP) Republicans continue to press for Congress to investigate
President Clinton's ties to a failed S&L, while the Democrats accuse
administration critics of using the issue for political gain.
All the information has been turned over, every scrap of it. A special
counsel (is being) appointed. What do you want?'' Vice President Al Gore asked
Sunday on ABC's` This Week with David Brinkley.'
Attorney General Janet Reno is expected soon to announce the name of a
special counsel to investigate the ties between Clinton, first lady Hillary
Rodham Clinton and James McDougal, owner of the Madison Guaranty Savings and
Loan that failed in 1989 at a cost to taxpayers of $47 million.
McDougal and the Clintons also co-owned the Whitewater Development Corp.,
an Arkansas real estate venture. Investigators are trying to determine whether
Madison S&L funds were illegally diverted to Whitewater or to help Clinton
repay a $50,000 loan for his 1984 gubernatorial campaign.
Clinton denies any wrongdoing, saying he lost $68,900 in the Whitewater
venture.
McDougal's attorney, Sam Heuer, agreed Sunday. ``I would suspect if there
were some secrets, we would have known them long before now, he said. ``Jim
McDougal was a savings and loan executive, which is akin to being a communist
in the McCarthy era.''
Heuer also said Sunday that McDougal has been subpoenaed to appear before
a federal grand jury in Little Rock on Thursday.
Rep. Jim Leach, R-Iowa, the ranking Republican on the House Banking
Committee, repeated his call for bipartisan congressional hearings, saying the
special counsel would look into illegal activities while Congress needed to
air an issue of public trust.
This isn't the largest issue. It's somewhere between much ado about
nothing and something might be a little rotten in part of the Ozarks, he
told CBS' Face the Nation. ``There are possible breaches of law, but more
importantly there's a public ethic here that's at issue.
Sen. Bob Dole, R-Kan., who also has pushed for hearings, on Sunday
criticized the vice president for opposing them when, as a senator, Gore
called on Congress to investigate controversies plaguing the Reagan and Bush
administrations.
Gore responded that Dole last week said the appointment of a special
counsel would satisfy him. ``Let's let the special counsel ... do his or her
job, Gore said.
What we are looking at here is not an issue of national security,
agreed Sen. David Pryor, D-Ark. ``Sen. Dole and his Republican colleagues want
to keep this issue alive until 1996 and beyond so it can be a campaign
issue.
Leach pledged to proceed on his own if the Democrats refuse to create a
bipartisan committee to investigate Whitewater.
But he said he did not envision questioning Mrs. Clinton, who was
Madison's attorney at the time. `Nothing would be more inappropriate than a
congressional effort to embarrass Mrs. Clinton, he said. We are looking
at a prior elected official, a current elected official.
**** filed by:APE-(--) on 01/17/94 at 01:44EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 09:58EST ****
Politics & Policy: Clintons Made Profit In Series of Land Sales,
Magazine Report Says
WASHINGTON -- The price of a parcel of land related to the Whitewater
controversy rose almost 172% in a little more than a year, thanks to a series
of sales, including one in which Bill Clinton and his business partners sold
the property to the company they controlled, Time magazine reports.
Time said it was unable to obtain the Clintons' 1979 income-tax return to
learn whether the couple paid capital-gains taxes on what appears to be a
paper profit on their sale of the land to Whitewater Development Co. A White
House spokeswoman said she couldn't comment on the Time report, saying all
Whitewater matters are being examined by the Justice Department and will soon
be the purview of a special counsel.
Citing deed records on file in Marion County, Ark., the magazine traced the
Whitewater acreage from its original sale as part of a 3,600-acre tract sold
by Arkla Land Co. in July 1978 to a company called 101 River Development Inc.
The sale price was about $400 an acre.
In early August 1978, according to Time, Bill and Hillary Rodham Clinton
and their partners, James and Susan McDougal, purchased a 230-acre parcel from
101 River Development for $203,000, or about $882 an acre. That parcel was
sold in late September 1979 to Whitewater Development, the company newly
formed by the Clintons and McDougals.
The transfer from the Clintons' and McDougals' individual ownership to
their corporate ownership was accomplished at $250,000, or about $1,087 an
acre, according to Time. The president of the bank that provided a loan to
Whitewater for that purchase -- James Patterson Jr. of Citzens Bank & Trust in
Flippin, Ark. -- said the final per-acre price was higher than the original
because the property had a large amount of river frontage.
**** filed by:DOWV(--) on 01/17/94 at 02:26EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 09:59EST ****
Pruden on
the months finally broke it pen with the pupilical
tion if Mrs. Clinton's letter demanding the power
Politics
attorney to run the Whitewater investment. and
then with the disclosure that files were looted from
Vince Foster's office by Clinton aides before inves-
By Wesley Pruden
tigators could see them
But if anyone has been treated with more care
Bill. it's Hillary. and if Da: Gergen is doing
The looming payday
job this morning. he's telling her that in Wash
ingion there's always a payday someday
We women seek the glory." says Harriett Woods.
for Miss Hillary
president of the National Women's Political Caucus.
"hut we also have to take the consequences when we
make mistakes. I don't know if she has made mis-
There's enough grief in the Whitewater for both
takes. but if she has I hope she would be equally
of them. but Hillary Rodham is the Clinton with the
accountable."
problem.
Anna Quindlen. among the most blindly devoted
She came to Washington as the role model for a
of the media princesses. is rattled. too. "While look-
lot of feminists. particularly in the media. who were
ing down your nose may work with sexual innu-
looking for the good mommies they thought they
endo. it does not adequately address conflict of in-
never had. Republicans. eager as always to roll ner
terest." she writes in the New York Times. "The
to have their bellies scratched by Democrats. Blue
Clintons have not controlled Whitewater They have
bered and gushed with an excess of gallantry at the
inflated it with the gases of temporizing. A big bang
very sound of the nanny's voice.
looms."
Actually: Mrs. Clinton is an old-fashioned kind of
Mrs. Clinton earned the reputation in Little Rock
woman She learned early in her marriage to throw
as the Clinton who keeps her cool in the face of en-
her husband's weight around with maximum effec-
emy fire when the other Clinton panics. Now we
tiveness. like the wife of the boss who arrives at the
may see how much. if at all. our young president
office or factory and demands that everyone stop
has grown.
work to accommodate her whims and pouts.
A lot of people know the type Some of them live
in Little Rock. Ark.. where the fine mess the Clin-
tons at last find themselves in IS regarded with con-
siderable deja vu. That's the way we talk down
there.) The president himself may regard the fine
mess much in the way of the man in that well-
known example of domestic bliss. watching his
mother-in-law drive over the cliff in his new car.
Betsey Wright. who as the governor's chief of
staff conducted what she calls "the bimbo patrol"
and who may know him as well as any of his loyal-
ists. insists this view. propounded by several old Ar-
kansas hands in the White House. as "fundamental
sexism." She calls it disloyal because it "makes Bill
Clinton look like a wimp."
Well. yes. it does. But this is how. while Mrs. Clin-
FRIDAY, JANUARY 14, 1994
ton was back at the ranch trying to arrange the
Whitewater files so they fall with minimum damage
once they get into the hands of someone who may
try to find out what actually happened. the pres-
ident himself was talking in Prague:
"Basically," he told NBC News. "the press has edi-
torialized and pressured the politicians into saying.
'Here's a guy that. as far as we know. hasn't done
anything wrong. nobody's ever accused him of do-
ing anything wrong. there's no vidence that he's
done anything wrong. but we think the presumption
of guilt almost should be on him. He should some-
how prove his innocence."
Then. this to CBS News: "I can't recall anything
like it in American history
where everybody says.
'Well. there's no evidence
this guy's done anything
wrong. but we think he
should invite another in-
vestigation of himself:"
And. finally. this to
NBC: You got your two
questions, Jim."
Jim Miklaszewski of
NBC: "OK"
you
Jerry Brown
not interested in the
truth" With that. the pres-
ident took off his microphone and walked away: For
reasons of its own. NBC chose not to broadcast the
The Mashington Times
president's tantrum. This is the kind of break that
few other politicians ever got. not even Teddy Ken-
nedy, and the kind that Mr. Clinton may be seeing
the last of The tantrum. by the way, looked a lot like
the tantrum he threw when Jerry Brown tried to
bring up Whitewater during the '92 campaign. He
accused Mr. Brown of "attacking" the missus. (The
press went back to sleep until Jerry Seper of The
^
D. M. REGISTER NEWS-
eye DCD suvines negister
126
POTOMAC FEVER/Jane Norman
Health care, ethics and Whitewater await Congress
T
he mayor of the District of Co-
Jim Numsle.
WHITEWATER - That nasty old
lumbia last week declared a
A recent memo from Project for
Independent counsel law that the Re-
DATION - Congressman Jim Leach
manded, or returned, from that court
and formed a campaign committee.
state of emergency and shut
the Republican Future, headed up by
publicans so disliked now will move
gets to give yet more speeches using
to a federal district court; Grassley
down all "non-essential" businesses
a former top aide to former Vice
faster through Congress than a pay
the word "Intriguingly" at key
and the other members oppose such
FIRING LINE: In a particularly
due to electrical demands posed by
President Quayle, advised that "any
raise.
points.
a move. Grassley says if a new trial
blistering column sent out to papers
the record cold.
Republican urge to negotiate a least
CAMPAIGN FINANCE REFORM
Then there's education funding,
is granted it could "open a giant
in his district recently, Congressman
Nonetheless,
bad' compromise with the Demo-
Unpopular, complicated and in
welfare reform, anti-crime mean-
loophole" in child-porn laws passed
Jim Ross Lightfoot took out after
Congress is ex-
crats, and thereby gain momentary
pected to return
dispute. Lack of action will keep
ures, access to abortion clinics, for-
by Congress. Justice officials have
President Clinton and company for
public credit for helping the presi-
to business Tues
Common Cause staffers gainfully
eign aid, revisions to the Brady bill,
said they want a conviction and
being "major players in promoting
dent 'do something' about health
employed.
establishment of a national highway
feared a reversal at the Supreme
the gun control mania." You could
day, with the
'care, should
be
resisted."
BALANCED BUDGET AMEND-
system and the 1995 budget. Plus it's
Court If they stuck with interpreta-
say Lightfoot remains unimpressed
president's State
The memo also maintains Republi-
MENT As if a debate was needed
now officially an election year. That
tions of child-porn laws followed by
with the Brady bill.
of the Union ad-
cans should agree there are problems
yet again over this staple of cam-
first recess, scheduled for the week
the Reagan and Bush administra-
Wrote Lightfoot: "The president
dress scheduled
but "scrupulously avoid endorsing
paign rhetoric. But senators have
of Valentine's Day, can't come too
tions.
and others are well-schooled in the
for that night.
the president's depiction of a nation
scheduled a vote for Feb. 22, and
soon.
art of taking a tiny, fractional bit of
Barely healed
beset by fear over health care." No,
Congressional Quarterly says House
fact, mixing it with a great deal of
from the wounds
there's probably not a lot of anxiety
Speaker Tom Foley has promised a
GRASSLEY UPDATE: Senator
IN TOWN: Dr. Shella McGuire of
emotion, stirring the brew until the
of NAFTA, members will slog back
down at the country club.
House vote if the Senate approves it.
Charles Grassley grinds on in his
Boone was here last week, talking to
national press believes it to be the
through the ice and cold to tackle an
ETHICS - What will happen to
USDA REORGANIZATION
crusade against the Justice Depart-
folks around town about her plans to
undehiable truth, and then serving
agly array of issues. They include:
Senator Bob Packwood? Will Con-
The vast main building had to close
ment's stance on child pornography.
seek the Democratic nomination for
the resulting concoction to the gener-
HEALTH CARE Committees
gressman Dan Rostenkowski be in-
because of a lack of heat last week
This month, Grassley and more than
the 5th District seat left open by
al public as a simple cure for a com-
will immediately begin fighting over
dicted? It's not clear but you can bet
and no one noticed. Not a good omen.
130 other members of Congress,
Congressman Fred Grandy. Al-
plex problem."
the revamping of a $1 trillion indus-
the farm on a related Issue - mem-
CONFIRMATION OF A DE-
Democrats and Republicans; filed a
though she hasn't yet made a formal
As was observed above, it is an
try. Look for louder and more insis-
bers will resist a proposal banning
PENSE SECRETARY Any appli-
brief with the U.S. Circuit Court of
announcement, McGuire appears
election year.
tent criticism from some Republi-
virtually all gifts, meals and enter-
cants?
Appeals for the 3rd Circuit in the
ready to roll she's hired JoDee
cans, including lowa Congressman
tainment from lobbyists.
BANK REGULATORY CONSOLI
case of Knox VB. United States.
Winterhof, a longtime aide to Sena-
JANE NORMAN is a reporter in The Reg
The department wants the case re-
tor Tom Harkin, and consultants,
ister's Washington, D.C., bureau.
2
Summary
Search Begins for Special Prosecutor on Land
By DAVID JOHNSTON
Special to The New York Times
the Congressional inquiry into the Iran-
Bowing to Pressure
Deal
WASHINGTON, Jan. 13 - Attorney
General Janet Reno began a search for
contra affair.
Ms. Reno's search began after Mr.
an independent prosecutor today, sort-
No one at the White House was being
Clinton bowed on Wednesday to heavy
ing through names of what aides de-
consulted on the decision, the officials
pressure from lawmakers in both par-
scribed as a "handful" of candidates
said.
ties to request a special prosecutor.
for the politically perilous job of inves-
Some Justice Department officials,
Ms. Reno, who opposed bringing in a
ligating President Clinton's role in a
stung by news accounts suggesting
prosecutor from outside the Govern-
failed Arkansas land deal.
that Federal prosecutors had respond-
ment. acceded to the President's re-
Justice Department officials said
ed slowly to the case, expressed con-
quest, saying it was necessary to main-
Ms. Reno and several top advisers
cern that a lengthy search for a special
tain public confidence in the criminal
have weighed the names of several
prosecutor could slow the investigation
justice system.
well-known lawyers as potential candi-
or raise questions about the Govern-
Early today, the White House press
dates and have telephoned some to
ment's tactics.
secretary, Dee Dee Myers, said in Mos-
determine whether they were interest-
cow that Mr. Clinton had made his
ed. The officials would not identify the
Grand Jury Subpoena
decision after conferring on Tuesday
prospective choices but said they did
In recent days, agents from the Fed-
with his Mrs. CLinton, who was in
not expect to have difficulty finding a
eral Bureau of Investigation delivered
Washington, as well as with aides.
prosecutor.
a grand jury subpoena to the president
"The President slept on it overnight
A spokesman for the Justice Depart-
of First Bank of Arkansas. a small
and decided to go forward." she said.
ment, Carl Stern. said Ms. Reno "wants
bank in Wynne, Ark., that had financial
Ms. Myers said there were no com-
to do it quickly, to minimize any disrup-
dealings with Mr. Clinton and White
munications between the President
tion to the investigation.
water in the past. Leon Foust, the
and the Attorney General in the days
One official said tonight that Ms.
bank's president, said he was served
preceding the White House decision to
Reno had made progress today in nar-
with the subpoena on Wednesday by
ask for an independent review of the
rowing the list of potential candidates
F.B.I. agents.
issue. Mr. Clinton has not spoken to Ms.
and might name a prosecutor within
Mr. Foust's bank, once called the
Reno during his overseas trip and did
days.
Bank of Cherry Valley, lent money to
not plan to discuss the matter with her,
Legal Obstacles
Mr. Clinton and to Whitewater during
Ms. Myers said. "I just don't think we
the 1980's. according to public records.
have a lot to say about It"
But there were legal obstacles that
The bank also served as a repository
could delay the decision. One was that
for Mr. Clinton's 1984 gubernatorial re-
Other officials said the Justice De-
an independent prosecutor must comal
election campaign funds. In 1985, Fed-
partment did nor-know that Mr. Clinton
eral regulators traced money from
was going to seek an Independent pros-
ply with Federal ethics rules that bar
Madison to Mr. Clinton's campaign ac-
ecutor uncil a few minutes before the
such a lawyer from representing cli-
count at the Bank of Cherry Valley,
White House disclosed a letter from
ents on matters before the Justice De-
Federal officials said.
Bernard W.: Nussbasing for
partment for at least a year after com-
Mr. Foust declined to discuss the
House counsel, to Mr. Rame
pleting a term as prosecutor. Depart-
contents of the subpoena, and it is not
the inquiry.
ment officials could seek a waiver of
clear whether the bank still had the
Related Development
the restrictions, but preparing such an
relevant records requested by the
action could take several days.
in a related development, Faderal
grand jury. Mr. Foust said that the
banking registers are reviewing
Ms. Reno had made no preparations
bank retained paper records for five
whether Mrs. Clinton's total Last
for selecting a special prosecutor, the
years and that some additional records
firm in Little Rock misled them aboad
officials said, and she had started with
might still be available on microfilm.
the firm's pasticipalings with
a "blank state." though it appeared
Last week. the Senate Republican
Guaranty.
likely she was focusing her search on
leader, Bob Dole of Kansas, gave Ms.
nationally known lawyers with prose-
Reno a list of seven people he said
The inquiry, which is separate from
cutorial experience.
would be credible candidates for spe-
the Justice Department investigation,
cial prosecutor. Ms. Reno said she
stemmed from a lawsuk originally
The officials said Ms. Reno was
would consider Mr. Dole's candidates.
brought by Madison Guaranty against
meeting with aides like Philip B. Hey-
On Mr. Dole's list were two Carter
its accountants. When the savings and
mann. the Deputy Attorney General.
Administration attorneys general.
loan was taken over by bank regulators
and Jo Ann Harris. head of the criminal
Griffin Bell and Benjamin Civiletti:
in 1989. the Government inberited the
division, who has been supervising the
Robert Bennett, formerly a special
suit.
Justice Department's investigation.
counsel to the Senate Ethics Commit-
The inquiry centers on the Madison
(ee: former United States Attorneys
Guaranty Savings and Loan ASSOCIA-
Michael Bayison, Anton Valukas and
tion. a failed Arkansas thrift.
Dan Webb: and A. B. Culvahouse, a
Madison Guaranty was owned by
counsel in the Renaid Reagan White
James B. McDougal, the Clintons' part-
House.
ner in the Whitewater Development
Corporation, a vacation-home develop-
ment in northern Arkansas. The Jus-
tice Department is investigating
whether Madison Guaranty improper-
ly funneled money into Whitewater or
into Mr. Clinton's 1984 re-election cam-
Quick action is
sought for an
inquiry on
Clinton.
paign when he was governor of Arkan-
sas.
Webster L Hubbell, the Associate
Attorney General and No. 3 official at
he Justice Department, who is often
nvolved in personnel matters, has re-
:used himself from the inquiry and is
not included in the deliberations con-
cerning an independent prosecutor.
Mr. Hubbell is a friend of Mr. Clinton
and a former law partner of Hillary
Rodham Clinton in the Rose law firm of
Little Rock. In addition, Mr. Hubbell's
father-in-law defaulted on loans from
Madison Guaranty.
Ms. Harris was a Federal prosecutor
in New York, and her role in the selec-
tion process has aroused speculation
that Ms. Reno might consider well-
known lawyers from the New York
area, like Robert Fiske, a former Unit-
ed States Attorney in Manhattan, or
AI
1
who was a top lawyer in
THE NEW YORK TIMES, FRIDAY, JANUARY 14, 1994
Special Counsel: A Risky Tactic?
Success of Clinton Move Depends on What He Has to Hide
By DAVID E. ROSENBAUM
More than a decade later when the
had never broken the laws of the Unit-
Specialio The New York Times
Iran-contra case broke. Mr. Reagan
ed States. The truth was that he had
WASHINGTON, Jan. 13 - Most re-
adopted a similar strategy. He insisted.
used marijuana when he was a student
in the face of considerable evidence to
in England.
cent Presidents have faced the quanda-
rv of how to respond to potentially
the contrary. that he had never autho-
In the White House. he did not an-
rized trading arms for hostages or
swer completely at first when he was
damaging questions about their con-
duct. and their inclination has been to
supporting the rebel forces in Nicara.
asked about the dismissal of the travel
gua when It was against the law to do
office staff and the suicide of his friend
trim. hedge and dissemble.
so.
and deputy counsel. Vincent W. Foster
The tactic has had
mixed results. For Rich-
In that case. the tactic succeeded.
Jr. So the matters never seemed to be
News
The Iran-contra affair. which involved
put to rest. New information is still
ard M. Nixon, it was a di-
saster that cost him his
a private foreign policy run outside
coming out about Mr. Foster. most
Analysis
Presidency. For Ronald
normal channels without the scrutiny
recently just before Christmas when it
Reagan. it succeeded in
of the State Department. Congress and
turned out that a file on Whitewater
the public. was fixed in the public mind
was removed from his office the day of
preserving his reputation and getting
George Bush elected to succeed him.
as a political squabble of little conse-
his death before it could be examined
quence
by Federal investigators - a fact Mr.
Nothing that IS known about Presi-
dent Clinton's financial dealings indi-
The Best Strategy
Clinton and his wife. Hillary, surely
knew.
cates that they should be compared to
So Mr. Nixon would have benefited
Watergate or the Iran-contra case. But
from baring everything. But if Mr.
Public's Suspicions
Mr. Clinton's initial instinct was the
Resgan had told the whole truth, the
All this enhances Mr. Clinton's
same as his predecessors': to keep the
"Slick Willie" image, and some on his
full truth from becoming public. Now,
staff view it as a political problem. A
he has agreed to the appointment of a
CBS News Poll taken last week showed
special counsel. Whether that was a
that only 12 percent of the public
wise choice politically depends on
Baring all could
thought Mr. Clinton had told the whole
whether he has anything to hide.
truth about his personal life. Another 51
Former President Jimmy Carter put
have costly
percent said he mostly told the truth
the matter in some perspective this
but was hiding something.
week when he was asked in a National
Public Radio interview why he thought
political
But in the Whitewater matter. staff
members are handicapped. They can-
President Clinton was being so close-
not really argue that the Clintons
mouthed about his investment many
consequences.
should be more candid because they do
years ago in the Whitewater Develop-
not know the facts.
ment Corporation, a real estate ven-
It is difficult to know what kind of
ture.
disclosure would be more damaging to
political consequences could have been
Mr. Clinton politically than the public
'Stonewalling' by Presidents
significant.
perception that he is hiding something.
"I think one reason." Mr. Carter
Public relations specialists generally
For instance, James B. McDougal
replied. "15 that Presidents Bush and
hold that the best response to a damag-
and his wife. Susan, the Clintons' part-
Reagan got away with the Iran-contra
ing disclosure IS to Ret all the truth out
ners in the Whitewater venture, invest-
embarrassment. They stonewalled and
as quickly as possible. The textbook
ed substantially more money in the
are still doing so. and the information
examples are from the 1980's when
company than the Clintons did. even
about Iran-contra has never been
Tylenol quickly recovered its market
though the Clintons were to share
made fully public. So I think it may be
share after news that consumers had
equally in the profits. What if it turns
that some of President Clinton's advis-
died after taking cyanide-laced cap-
out that Mr. McDougal agreed to such
ers thought that he could do the same
sules. The reason. public relations ex-
an arrangement simply because he
thing.
perts hold. IS that the the drug's manu-
thought the project would benefit from
But I don't believe it's possible in
facturer. Johnson & Johnson. never
the prestige of the Clintons' name in
the case of this issue. I think that it's
pretended that nothing was wrong and
the partnership? Is that a particularly
going to all come out. and it would be
made every effort to appear candid
damaging disclosure?
much better to let It come out volun-
and contrite.
Probably not. But what if, as Gover-
tarily and not have it forced out."
But if the lesson IS that such a strat-
nor. Mr. Clinton appointed a savings
Mr. Nixon had little to hide about the
egy IS good politics as well as good
and loan regulator he thought would be
Watergale burgiary, but that did not
public relations. Mr. Clinton does not
sympathetic to Mr. McDougal? What if
cause him to be candid. On March 22.
seem to have learned it. On questions
Mrs. Clinton was paid for legal work
1973. with details of the break-in pour-
involving his personal conduct. Mr.
she did not perform? What if there are
ing out and the White House under fire.
Clinton $ instinct has been to circle the
tax discrepancies? What if Mr. Clinton.
he told his aides, "I want you to stone-
wagons.
who earned only $35,000 a year as
wall it."
During his election campaign. when
Governor, had secret funds stashed
Less than 17 months later. he was
he was questioned about reports of
away? Nothing that IS known publicly
forced to resign, not because of the
marital infidelity. his draft record and
indicates that any of those situations IS
burgiary - no credible evidence was
his marijuana smoking, his initial an-
the case.
ever produced that he knew about It in
swers were lawyerly at best and de-
But if the answer to any of those or
advance - but primarily because of
ceiving at worst On marijuana. for
similar questions IS "yes," it might
the illegal steps he and his staff took to
example when he was first asked if
explain why Mr. Clinton wants to keep
cover it up.
had ever smoked it. he replied that he
the information under wraps.
CO
17
THE NEW YORK TIMES. FRIDAY. JANUARY 14, 1994
1
JANUARY 14. 1994
THE WASHINGTON POST
Reno Begins Hunt
affair by independent counsel Law-
rence Waish.
"In the history of these special
counsels, once they have an inch
For Special Counsel,
they take yards and miles," said
Terry Eastland, a former top aide
to Meese and now a fellow of the
Ethics and Public Policy Center.
Seeks Probe's Limits
The central issue is going to be the
scope of the investigation."
On its face, the investigation into
Whitewater would appear to be fair-
By Michael Isikoff
the 1980s investigating alleged im-
ly simple: The Justice Department
Washington Post Staff Writer
proprieties involving then-Attorney
has already subpoeaned all docu-
General Edwin Meese III.
ments relating to Whitewater in the
As Attorney General Janet Reno
"My prediction is that this person
Clintons' posssession.
began reviewing possible candi-
[the special counsel] is going to feel
One possible charter for the new
dates to serve as special counsel
compelled to be thorough. And to
outside counsel would be a review
yesterday, Justice Department of-
be thorough where an investigation
of those records to determine
ficials were grappling with an equal-
is nourished by political consider-
whether the Clintons were aware of
ly significant issue: Defining the
ations, it could go on for quite a
any financial improprieties relating
scope of an investigation that could
long time."
to hundreds of thousands of dollars
become an open-ended inquiry into
Justice Department sources said
that appear to have passed through
Arkansas business affairs and hang
that Reno and her top aides, includ-
Whitewater's accounts.
over President Clinton for much of
his first term.
ing Deputy Attorney General Philip
But the problem gets much
B. Heymann and Jo Ann Harris, chief
stickier when matters branch out to
In requesting that Reno name an
outside prosecutor, White House
of the criminal division, spent much
Madison. The thrift at one point
counsel Bernard Nussbaum asked
of yesterday working on selection of
was represented by the Rose Law
only that the prosecutor investigate
a special counsel. Sources said a
Firm whose partners included Hil-
"the Whitewater matter"-a refer-
number of possible candidates were
lary Clinton, Associate Attorney
contacted and an announcement
ence to the real estate development
General Webster Hubbell, and Vin-
firm half owned by the president
could come in the next few days.
cent W. Foster, Jr., the deputy
and Hillary Rodham Clinton that
Under the expired independent
White House counsel who com-
bought and sold Ozark property
counsel law, which governed how
mitted suicide July 20. Foster, as
during the 1980s.
Stein and others operated. a three
personal attorney for the Clintons,
But Whitewater is only a slice of
judge federal panel set forth a man-
had handled matters relating to
a much broader, existing Justice
date based on a specific allegation
Whitewater before his death.
Department investigation underway
of a federal crime committed by a
An even more pressing problem
for months. It touches on a host of
high-level government official.
is the case of David Hale, the for-
related matters: the failed Madison
No such allegation has been made
Guaranty Savings & Loan Associ-
in the case of Whitewater. Instead,
mer Arkansas municipal judge who
ation owned by the Clintons' part-
there is a grab bag of suggested
is scheduled to go on trial March 28
improprieties by a wide assortment
on charges that be defrauded the
ner in Whitewater, the alleged di-
of people, most prominently, James
Small Business Administration in
version of Madison money into a
Clinton campaign account, question-
McDougal. the owner of Madison
the management of his federally
able loans to other state political
who had close ties to many Arkan-
backed small business investment
figures and the thrift's possible le-
sas political and business leaders.
firm. Hale has publicly alleged that
nient treatment by Arkansas reg-
"It can go in every conceivable dif-
Clinton and McDougal pressured
ulators during Clinton's tenure as
ferent direction," said Washington
him to make a $300,000 SBA-
governor.
lawyer James Mackay, the former
backed loan that ended up in White-
The initial assumption of Justice
independent counsel who prosecuted
water accounts. He also has
Department officials yesterday was
former Reagan administration official
charged that similar potentially im-
that the new special counsel would
Lyn Notziger. "There's all sorts of
proper loans benefited among oth-
immediately take over all these
ramifications that are involved."
era, Jim Guy Tucker, now governor
matters. DOW being handled by
At her news conference minutes
of Arkansas-allegations that
three career prosecutors in Little
after receiving Nussbaum's letter,
Tucker has denied.
Rock. But some former indepen-
Reno avoided all questions about
The issues in Hale's upcoming trial
dent counsels warned yesterday
the new prosecutor's mandate, say-
are wholly unrelated to Whitewater;
that such a broad charter was es-
ing she first wanted to consult with
one former federal prosecutor sug-
sentially opening a Pandora's box.
whomever she selected. But Reno
gested yesterday that a special coun-
"You've got an investigation that is
also said she wants the issues re-
sel who was only interested in get.
starting on an island, that is White-
solved "thoroughly" and "prompt-
ting to the bottom of Whitewater
water, that is going to find a cause-
ly"-an objective that has proven
would quickly seek a plea agreement
way to a continent known as Arkan-
difficult in the past, as demon-
with Hale and bring him before a
sas politics," said Jacob Stein, who
strated by the more than six-year
grand jury to hear what be has to say
served as independent counsel during
investigation into the Iran-contra
about the president.
Department officials said the im-
minent appointment of a special
counsel who would take over the
Hale case creates a host of prob-
lems that could delay matters.
"There are various complications
that the attorney general had in
mind" when she initially opposed
appointment of an independent
counsel, said Carl Stern. the Justice
Department spokesman. "But ob-
viously, we'll do whatever we can to
get over what hurdles there are."
32
FRIDAY, JANUARY 14, 1994
THE WASHINGTON POST
White House Redirects
Focus From Land Deal
To Rest of Its Agenda
By Dan Balz
"Things were getting done, but
Washington Post Stall Writer
probably not at the pace anyone
After a frenzied week of White-
would have liked," said one aide.
water damage control, the Clinton
The growing clamor for a special
White House on two continents
counsel, which came not just from
tried to affect an air of normalcy
Republicans or the media but from
yesterday.
Democratic senators this week,
In Moscow, White House officials
pinned down top White House aides
attempted to redirect interest to
and created a sense of inevitability-
President Clinton's foreign policy
even if it was slow in coming. Offi--
and his meetings with Russian Pres-
cials described Tuesday as tense,
ident Boris Yeltsin. In Washington,
Wednesday as simply chaotic.
senior advisers who had spent the
Senior adviser George Stephano-
week grappling with whether to ask
poulos, new White House Deputy
for a special counsel to investigate
Chief of Staff Harold Ickes, senior
Whitewater happily took a renewed
adviser Bruce Lindsey and others
vow of silence on the issue.
who were left here to deal with the
"I'm not going to answer any more
mess while Clinton and the bulk of
questions about it," one adviser said
the staff headed for Europe had time
yesterday. Why not? "Special coun-
for little other than Whitewater.
sel," be replied.
The process of decision-making
Even as the Justice Department
was complicated by time zone differ-
searched for someone to head the
ences, Clinton's frenetic schedule of
new investigation, the word "White-
meetings, speeches and photo oppor-
water" was virtually banned from the
tunities abroad-and by the reluc-
lexicon of White House aides. "Ev-
tance of the president and Hillary
erything is in the Justice Depart-
Rodham Clinton to accept the need
ment's court," one official said.
for a special counsel to examine their
The decision to seek a special
past financial affairs.
counsel, however, did nothing to an-
By Tuesday there was a consensus
swer the substantive questions sur-
in Washington that the president had
rounding the Clintons' partnership in
to change his opinion and ask Reno
the Whitewater Development Corp.
to appoint a special counsel, not be-
or the relationship between the land
cause they believed it was justified,
development firm and the failed
but in the words of one adviser, be-
Madison Guaranty Savings & Loan,
cause "the distraction factor became
which was owned by James McDou-
sufficient that you say the beck with
gal. the Clintons' business partner.
it." But Clinton was not ready to
It will take more than White
yield until Wednesday.
House talking points to put the issue
Clinton's irritation with White-
to rest, but Wednesday's decision by
water's intrusion on his first trip to
Clinton to ask Attorney General Ja-
Europe was evident Wednesday, first
net Reno to appoint a special counsel
when be upbraided an NBC reporter
provided the circuit breaker the
for asking only about Whitewater.
White House was looking for to shift
and later when be got a question
the focus of the story and prevent it
about the special counsel during a
from overwhelming everything else
news conference in Kiev.
Clinton is doing.
The questions won't go away, but
The official word yesterday was
White House officials believe for
that the White House was back
now, at least, they can point to some-
working at full speed on things like
one else to answer them.
health care, welfare reform, crime
and the president's upcoming State
Staff writer Ann Devroy, traveling
of the Union Address.
with Clinton in Moscow, contributed
to this report.
34
Whitewater Hearings: A Risk
A
N INVESTIGATION of the Whitewater
other people who could be affected by competing
affair by a special counsel without ties to
inquiries. The Fifth Amendment protects a wit-
the Justice Department has now been au-
ness from being compelled to testify against
thorized, but some who want answers in a faster
himself. But if Congress wants information badly
and more public forum demand that a simulta-
enough, it can can compel self-incriminating tes-
neous investigation be undertaken by a select
timony by granting immunity, which forecloses
committee of Congress. We don't agree. The
the use of that testimony at trial. It was exactly
case involves complicated financial dealings
such an agreement that led to the collapse of the
among individuals who were not, at the time,
case against Oliver North and the reversal of the
federal officeholders. There is no conflict of
conviction of his boss, John Poindexter.
authority here among the three branches of
government. While Mr. Clinton's political oppo-
In reviewing these cases, the U.S. Court of
nents may want to see all the charges and
Appeals here set a standard that will make it very
countercharges hashed out on national television
difficult to use congressional immunity and still
right now, there is no real need for legislative
preserve a prosecutor's case. The court ruled
hearings at this point.
that all the witnesses who testify before a grand
In fact, there is a strong argument that con-
jury or at trial must be examined "line-by-line and
FRIDAY, JANUARY 14, 1994
gressional hearings might be counterproductive.
item-by-item" to determine whether they used
Legislators need only recall the history of the
immunized testimony "to refresh their memories
Iran-contra probe to see the pitfalls involved
or otherwise focus their thoughts, organize their
when a case is handled in two forums at the same
testimony or alter their prior or contemporane-
time. Problems arise because Congress and pros-
ous statements" before giving testimony in the
ecutors have different objectives and they often
criminal proceedings. People who watched con-
conflict. Committee hearings are designed to
gressional hearings on television would find it
provide a public forum for the gathering of
hard to swear they had no such impact.
information, while prosecutors strive to accumu-
late admissible evidence leading to a conviction.
The court has rightly made it difficult for
All this, it should be remembered, remains whol-
Congress to circumvent the Fifth Amendment by
ly in the realm of the hypothetical because
compelling testimony through immunity. If it
neither the president nor anyone else associated
turns out that the Whitewater matter involves
with the White House has been accused of any
criminal conduct, prosecutions could be jeopar-
crime. But if a special investigation is to take
dized by aggressive congressional probers who
place, it is prudent to let it play out its course
want the whole story notwithstanding the risk to
without this particular conflict. This investiga-
the criminal proceedings. For now, at least, the
tion, it is also wise to remember, does not
investigation should be left in the hands of the
concern only the president but involves many
independent special counsel.
to seed
bawol
679
sved
9139
5
check
THE WASHINGTON POST
of mid
noo
aid
ai II
lasts ,si
FRIDAY, JANUARY 14, 1994
The Washington Times
Probe of first lady expected
to write new chapters in law
By Nancy E. Roman
THE WASHINGTON TIMES
Al
Paul Rothstein. a law professor at
For example, the accounting firm
Georgetown University. said execu-
Ernst and Whinney spent $5 million
tive privilege does not apply to per-
on a legal battle before it agreed to a
The unprecedented investigation
sonal information but it does apply
$2.5 million settlement of the Fed.
of a first lady for possible civil or
to information that might include
eral Deposit Insurance Corp's $100-
criminal wrongdoing in the White-
military secrets, for example.
million-plus lawsuit against it after
water-Madison affair unleashes a
"But it is conceivable to use ex-
the collapse of Franklin National
host of legal questions and strate-
ecutive privilege by promoting an
Bank.
gies, top defense lawyers said yester-
illusion that there is a danger in re-
In the case of the Rose Law Firm.
day.
vealing secret things," he said.
Mrs. Clinton and another par
The lawyers interviewed by The
Invoking any of the special privi-
Richard N. Massey, represented
Washington Times also said the pow-
leges will make the investigation
Madison before state regulators in
erful Rose Law Firm in Little Rock,
more difficult. Mr. Rothstein said.
1985, using an audit by Frost & Co.
Ark., for which Hillary Rodham
"But there will be available un-
to show that it was solvent. Four
Clinton worked. may be vulnerable
privileged material and witnesses
years later, the firm in a case han-
to lawsuits as the result of the de-
who will be able to provide a picture
died by another partner, Webster L
mise of Madison Guaranty Savings
of what happened," he said. "The
Hubbell, now associate attorney
and Loan Association, which cost
public's need to know will be satis-
general sued Madison for the Fed-
taxpayers $50 million.
fied, but it will take some time and
eral Deposit Insurance Corp., saying
The relationships between Madi-
some digging."
the Frost audit was bogus.
son, the Rose Law Firm, bank reg-
Mr. Lefcourt said that as the case
ulators, and friends and family of
progresses David Kendall, the Clin-
President Clinton raise so many ethi-
tons' personal attorney, may invoke
cal questions that Harvard law pro-
special privileges such as the
fessor Alan Dershowitz will begin
attorney-client privilege, which
this semester's legal ethics course
would protect certain documents
with an assignment to scrutinize
drafted by Mrs. Clinton as her hus-
their activities.
band's attorney.
"My nose as a legal professor
"As a defense attorney it would be
my goal to preserve any privileged
smells something suspicious in the
material. I would certainly look into
activities of the Rose firm," Mr.
it," he said. "You carefully screen all
Dershowitz said. "It is the kind of
documents and information to see
elite insensitivity that Harvard and
whether any privilege applies. I'm
Yale and other elite law school stu-
sure that's what would be done here."
dents should be particularly sensi-
The Clintons also might attempt to
tive about."
use marital privilege, Mr. Lefcourt
Mrs. Clinton, a partner asthe Rose
said. "Spousal testimonial privilege
prevents a spouse form testifying
Law Firm. represented Madison be-
against another spouse to preserve
fore state banking regulators in the
the sanctity of a marriage," he said.
Mr. Dershowitz, however, said it
1980s while her husband was gover-
would be outrageous to claim that
nor of Arkansas.
privilege.
see HILLARY, page A8
"I cannot imagine the nation be-
ing willing to accept the spousal
privilege from the president or the
first lady," he said. "The only real
HILLARY
privilege the president has is execu-
tive privilege, and that comes at a
From page Al
great political cost."
Mr. Dershowitz said he will ask
Questions have been raised about
his students to examine the role of
Madison's ties to Whitewater. a
the spouses of public officials.
northern Arkansas real estate ven-
"Since so many of my students -
ture jointly owned by the Clintons
men and women - will be married
and James B. McDougal, owner of
to important public officials, I want
Madison, and his wife, Susan.
them to look at the relationship be-
The lawyers who discussed with
tween practicing Law and being an
The Times the first lady's potential
advocate." he said.
case noted several murky legal
So many powerful people are mar-
areas:
ried to each other that potential ethi-
Will executive privilege apply to
cal violations are bound to come up
Mrs. Clinton?
more frequently, Mr. Dershowitz
Because Mrs. Clinton rep-
said. "The purpose of my course is
resented Mr. Clinton in the White-
preventative, to make sure that no
water investment, is attorney-client
student of mine gets himself or her-
privilege applicable?
self into this Hillary mess." he said.
Will marital privileges, such as
Mr. Rothstein urged some le-
one that prevents one spouse from
niency in this area.
testifying against another, apply?
"Unless you want to say the wife
"There are a whole range of privi-
of an important man can never apply
leges spousal and executive priv-
her trade, you've got to be lenient on
ilege," said Gerald Lefcourt, a de-
that," he said. "You don't want to dis-
fense lawyer in New York. "It's
able professional wives from prac-
almost a joke, but their conversa-
ticing their trade."
tions are protected by more privi-
As for the legal vulnerability of
leges than any other couple in the
the Rose Law Firm. Mr. Rothstein
country's."
said the lawyers there would have to
Executive privilege originated to
have known of the shaky financial
protect the president and his staff
conditions of Madison and then to
from releasing information that
have actively helped the client cover
could jeopardize national security.
them up.
Lawyers agreed that executive
"I don't know if there was that
privilege would not apply to any of
and of involvement." he said. "But
the Whitewater dealings because
his is a new, forefront area of the
they occurred long before Mr. Clin-
3W - to hold the lawyers and the
ton assumed the presidency. But Mr.
ccountants responsible of the
Dershowitz said executive privilege
might apply to the allegations of a
vrongdoing of the managers of an
&L"
Whitewater-Madison cover-up.
92
The Bashington Times
FRIDAY, JANUARY 14, 1994
Why didn't Clintons deduct losses?
By Jerry Seper
At
the Clintons legally could have de-
THE WASHINGTON TIMES
clared capital losses of up to
$3,000 a year over 23 years if they
Bill and Hillary Clinton rou-
lost $68,900 on Whitewater.
tinely claim $1 and $2 deductions
The tax deduction would have
for used underwear on their fed-
been limited to $3,000 a year and
eral tax returns but never took a
would have been taken against the
legal tax deduction for the $68,900
couple's ordinary income.
they claim to have lost on the
This analysis contradicts Paul
Whitewater Development Corp.
Begala, a senior presidential ad-
Federal investigators want to
viser, who said the Clintons could
know why.
have taken a deduction only in
Internal Revenue Service offi-
1992. when they sold their 14-year
cials, tax lawyers and others fa-
miliar with federal tax laws say
see TAXES, page A8
TAXES
Mr. McDougal. the focus of a Jus-
firm could not vouch for the accu-
tice Department investigation into
racy of its findings.
suspicions of illegal loans and cam-
The Lyons report, issued March
From page Al
paign fraud involving Whitewater
24, 1992, took no notice of the fact
half-interest in Whitewater to one of
and his now-defunct Madison Guar-
that Whitewater had failed to file
their partners, James B. McDougal,
anty Savings and Loan Association,
corporate tax returns from 1985 to
for $1,000.
has said he does not remember the
1987. When inquiries were made
Mr. Begala told the Wall Street
Clintons losing that much.
during the campaign, the Clintons
Journal last week that the Clintons
During an interview with The
said the Whitewater tax records
would have saved only $280 if they
Times in April 1992. he said he
were not available.
claimed losses to cancel out the
thought the Clintons lost "signifi-
The tax problem was resolved in
$1,000 gain and "it wasn't worth it
cantly less" than $68,900 in White-
December 1992 by White House
because of the hassle factor."
water.
Deputy Counsel Vincent W. Foster
Other White House officials have
In a Jan. 7 interview with the As-
Jr., who was the Clintons' personal
said no capital losses were declared
sociated Press, he said he recalled
attorney until he killed himself July
because documentation was so poor
the Clintons investing about $9,000
20. He filed returns showing that
that it was impossible for the Clin-
in the venture.
Whitewater had earned no income.
tons to prove their losses.
The New York Times reported in
The returns made no mention of any
Even if the Clintons were "passive
March 1992 that the Clintons had
capital losses.
shareholders" in Whitewater. as a
taken $5,133 in illegal tax deductions
IRS officials told The Times it is
spokesman has said, they could have
on their 1984 returns for a White-
not necessary for someone to have
legally claimed $3,000 annual deduc-
water loan that should have been de-
accumulated capital gains to declare
tions until the whole loss was written
off. the experts told The Washington
ducted for the corporation.
capital losses.
Mr. Clinton at that time told re-
They also said that if a taxpayer is
Times.
But the Clintons did not claim
porters the couple lost $25,000 on
aware of the provision for the $3,000-
these deductions at a time when
Whitewater.
per-year deduction, he must claim
the deduction on his federal income
Mrs. Clinton was routinely claiming
James M. Lyons. a Denver lawyer
tax returns. Failure to do so because
tax write-offs for donations of used
and longtime Clinton ally who was
of ignorance is not a violation of the
underwear, sweat shirts. tennis
called in by the campaign to write a
law.
shoes, socks. slippers, stockings,
report in response to the Whitewater
Richard Morris, a former IRS
mittens. bikin.s and "Clinton for
disclosures. was the first to put the
agent who works as a tax preparer,
Governor" T-shirts.
Clintons' loss at $68,900. Mr. Lyons
said the capital loss deduction is a
Mr. and Mrs. Clinton were joint
prepared the report in conjunction
common one claimed by taxpayers
partners with Mr. McDougal and his
with the Denver-based accounting
and recommended by tax preparers
wife, Susan, in Whitewater. which
firm Patten, McCarthy & Associates.
as long as it is claimed within three
planned to build vacation homes on
Mr. Lyons later acknowledged -
years of the year in which the loss
42 lots on the White River in north-
and The Washington Times reported
occurred.
eastern Arkansas. The project
in November - that many of the
Three Washington-based tax law-
failed. The partnership appears to
Whitewater documents were miss-
yers who asked not to be named told
have been structured to enable the
ing and that he had never discussed
The Times there was "no logical rea-
Clintons to receive half the profits
the matter with the McDougals.
son" why the legal deductions were
with Little or no investment.
The Wall Street Journal reported
not taken if the losses occurred.
The Clintons said during the 1992
yesterday that Patten, McCarthy &
"Sometimes a loss is a freebie in
presidential campaign that they lost
Associates in a March 1992 letter to
exchange for other considerations,
$68,900 in the venture, but questions
the Clintons said that "due to the na-
such as regulatory help through a
have arisen about the validity of that
ture of the engagements and incom-
figure.
government agency." one of the law-
plete or unavailable records." the
yers said.
TOWARD
(sottition
viganess
as
93
96
The Washington Times
Your guide to Whitewater
hat is Whitewater?
W
The Whitewater Development Corp.
The partnership bought the land in 1978 for $203,000
with two loans — one acquired, without collateral, from
change for $35,000 and a twin-engine Piper Seminole
was a real estate partnership formed in
a Little Rock bank and another using the land itself as
airplane, which was valued at about $30,000. The trans-
1978 by Bill and Hillary Clinton and
James and Susan McDougal. The ven-
collateral. It is not clear from the records who paid the
action was not reported on the Clintons' 1985 tax returns,
$20,000 each year in combined principal and interest.
and it is not clear what happened to the plane.
ture was conceived to build vacation
homes on 42 lots on a 203-acre property along the White
Mrs. Clinton borrowed $30,000 from a McDougal-
The Clintons, who claim they lost as much as $68,900
River in northern Arkansas.
owned bank to pay for a model home in the development.
in the venture, sold their half-share in Whitewater to Mr.
Twenty-four Whitewater lots were sold in 1985 in ex-
McDougal for $1,000 in 1992. It is not clear how much, if
anything, the Clintons invested in Whitewater.
1/3
JANUARY 14, 1994
THE STORY so FAR
1978 - Bill and Hillary Rodham Clinton. along with James B. McDougal
and his wife. Susan. purchase 203 acres in the Arkansas Ozarks in a plan
to build vacation homes on 42 lots. They form a joint partnership known as
Whitewater Development Corp.
1984 and 1985 The Clintons improperty deduct $5,133 on their
federal tax returns for interest paid on $30,000 in bank loans made through
Whitewater. The deductions save them about $1,000 in taxes.
1984 - Arkansas Securities Department targets Madison Guaranty
Savings and Loan Association, owned by McDougal, as being insolvent.
March 1984 Mrs. Clinton receives first payment of a $2.000-a-month
fee for helping Madison fight efforts by the Arkansas Securities Department
to close the S&L. The fee was paid by Mr. McDougal in a deal he said was
arranged by Mr. Clinton.
July 1985 - Madison's accounting firm, Frost and Co., says the S&L is
solvent. The Frost report is used by Mrs. Clinton to help keep Madison in
October 1986- Federal Home Loan Bank Board report faults thrift for
risky investments in real estate deals, low cash reserves and shoddy
December 1987 Mrs. McDougal personally delivers Whitewater
records to the governor's mansion at the request of Mrs. Clinton.
November 1988 - Mrs. Clinton signs letter to Mr. McDougal requesting
power of attorney so she can extricate herself and her husband from the
March 1989 Madison fails and is shut down by the federal government
July 1989 Mr. McDougal is indicted on fraud charges in connection with
March 1992 The New York Times reports bes between Mr. McDougal
James M. Lyons saying the Clintons lost $68,900 in Whitewater. The report
March 1992- Clinton campaign denies report in The Washington Times
saying Mrs. Clinton received a $2.000-a-month retainer to help Madison
administration officials and turned over to the Clintons new lawyer, David
Police and FBI investigators from looking through Foster's personal papers
Oct. 31 Whitewater controversy is renewed when The Washington Post
Nov. 4- The Washington Times reports the Clintons. who said they were
management and that Mrs. Clinton had sought power of attorney over it.
Nov. 9- Paula J. Casey. U.S. attorney in Little Rock, recuses herself from
Dec. 20 The Washington Times reports White House officials removed
over to the Justice Department, but warn that process might take several
Sunday Sen. Daniel Patrick Moynihan of New York is first Democrat to
join Republicans in call for a special prosecutor or independent counsel.
making the issue bipartisan. Seven other Democratic lawmakers issue the
Whitewater-Madison affair. Reno says she will appoint a special counsel.
Sources: The Washington Times. Associated Press. House Republican Policy Committee. New York Times
business.
record-keeping.
Whitewater venture.
at cost of $50 million.
Madison He later IS acquitted.
and the Clintons. their connections to Whitewater and their illegal tax
March 1992 - Clinton campaign issues a report by Denver lawyer
also says missing records makes a complete study impossible.
fight state regulators. In November 1993. the White House confirms the
deductions.
retainer was paid to Mrs. Clinton.
December 1992 The Clintons sell their half of Whitewater to Mr.
McDougal, and claim a $1,000 capital gain on their taxes. The sale was
arranged by Vincent W. Foster Jr., the Clintons personal lawyer.
July 20, 1993 Foster commits suicide. Documents related to
Whitewater-Madison are among those secretty taken from his office by
July - White House Counsel Bernard Nussbaum prevents U.S. Park
during search of his office.
reports federal regulators recommended to Justice Department that a
criminal investigation be conducted into Madison's failure.
"passive shareholders' in Whitewater, were active in the venture's
probe of Whitewater's ties to Madison and is replaced by Justice
Department prosecutor Donald Mackay. Republicans call on Attorney
General Janet Reno to nominate a special counsel to investigate the
Whitewater-Madison affair.
records on Whitewater from Foster's office after the deputy counsel's
Dec. 21 White House admits that records were taken. but denies any
Dec. 23- Mr. Clinton says he and his wife will turn Whitewater records
Jan. 5 - White House reveals that subpoena has been issued for
Whitewater records under terms negotiated on Dec. 23 between
suicide.
wrongdoing.
prosecutors and Kendall.
same demand within the next 48 hours.
Wednesday - Bowing to pressure. Clinton asks a special counsel be
appointed to investigate the role he and his wife played in the
Kendall.
weeks.
KEY PLAYERS
98
President Clinton: With his wife,
Vincent W. Foster Jr.: He was White
He says Clinton and McDougal
his suicide.
Hillary, he owned half of Whitewater
House deputy counsel when he killed
pressured him to approve a $300,000
Kenneth Peacock: An Arkansas
Development Corp. He reportedly
himself July 20. He was a partner with
SBA-guaranteed loan to Mrs.
businessman who says he never
received $12,000 in campaign
Mrs. Clinton in the Rose Law Firm and
McDougal.
contributed to the 1984 Clinton
donations from co-owner James B.
Midlife Investors. He was the Clintons'
David Kendall: The Clintons'
campaign, his name is on a $3,000
McDougal in the form of cashier's
attorney in their later Whitewater
personal attorney, he is handling their
cashier's check in the hands of the
checks from Madison Guaranty
dealings.
Whitewater dealings.
Justice Department.
Savings and Loan Association.
James B. McDougal: He owned
Reports also say he obtained a
James M. Lyons: A Denver lawyer
Beverly Bassett Schaffer: A
Madison Guaranty and, with ex-wife
and Clinton friend, he reviewed
Clinton-appointed regulator of
$50,000 unsecured personal loan
Susan, half of Whitewater. He has
Whitewater after it became a
Arkansas savings and loans, she
from the Bank of Cherry Valley and
been accused of diverting money from
campaign issue. He concluded that
approved Madison's stock sale.
contributed to his gubernatorial
Madison to repay Clinton's 1984
the McDougals controlled the venture
Patsy L. Thomasson: A White House
campaign.
gubernatorial campaign debts. He
Hillary Rodham Clinton: A
says the governor pressured him to
McDougal
Foster
and that the Clintons lost $69,000. He
aide who helped Nussbaum in the
3/3
Hubbell
Hale
called Foster on the morning of the
post-sulcide search of Foster's office.
part-owner of Whitewater, she was a
hire Mrs. Clinton to represent
deputy counsel's suicide.
Jim Guy Tucker: The current
senior partner in the Rose Law Firm
Madison. He says he turned over
defaulted on the SBA loan. She faces
J. William Fulbright: A former U.S.
Arkansas governor, he recieved $1
and a partner with Webster Hubbell
Whitewater's records to the Clintons in
charges in California that she
senator with early ties to Clinton and
Paula J. Casey: She was named U.S.
million in loans from Madison while his
and Vincent W. Foster Jr. in Midlife
1987.
embezzied $200,000 from conductor
McDougal, he borrowed money from
attorney in Little Rock by Clinton. After
law firm represented it.
investors. While her husband was
Susan H. McDougal: She was
Zubin Mehta.
Madison. His name was on a personal
refusing to do so, she recused herself
Chris Wade: A real estate agent who
governor in the mid-1980s, she
McDougal's partner in Whitewater
Webster L. Hubbell: The associate
check made out to Clinton that the
from the Justice Department's
represented the Clintons and
received $2,000 a month to help
while they were married. She has
attorney general and a close Clinton
Resolution Trust Corp. turned over to
Whitewater investigation because of
McDougais in Whitewater, he counters
Madison fight efforts by the Arkansas
been accused of using part of a
friend, he was a partner in the Rose
the Justice Department.
her familiarity with some of the parties
claims that it was a money-loser.
Securities Department to close the
$300,000 loan from the Small
Law Firm and Midlife Investors with
David L. Hale: Once a municipal
involved.
Margaret Williams: Mrs. Clinton's
S&L for insolvency. She sought power
Business Administration for her Little
Mrs. Clinton and Foster. He recused
judge in Little Rock, he has been
Bernard Nussbaum: The White
chief of staff, she accompanied
of attorney from the McDougals to act
Rock, Ark., advertising firm to
himself from the Justice Department
indicted on Iraud charges as president
House counsel was reportedly the first
Nussbaum and Thomasson in the
on behalf of Whitewater.
purchase land for Whitewater. She
probe of Whitewater and Madison.
of Capital-Management Servies Inc.
person to search Foster's office after
search of Foster's office.
Reno might seek
two-for-one deal
on special counsel
unlikely to reveal criminal behavior.
It is clear that whomever is cho-
sen will have access to all the doc.
uments in the case, but premature
disclosure could affect the ongoing
grand jury probe in Little Rock, Ark.
"That would be up to the counsel.
I certainly wouldn't comment on It
so as to indicate any preference."
Miss Reno said in announcing
Wednesday night she would honor
the president's grudging request.
Such questions are deemed pre-
mature until Miss Reno negotiates
the limits of the probe with her
choice for the sensitive post.
Meanwhile. it is clear the White
House is optimistic the public will
accept an outcome they expect to be
favorable, implying that opposing
lawmakers and major newspapers
painted themselves into a corner by
advocating a special counsel.
Senior presidential adviser
George Stephanopoulos mentioned
only The Washington Post and the
Wall Street Journal. but other pa-
pers recommending the step include
The Washington Times. the New
York Times and USA Today.
Some staff advisers emphatically
argued that the public does not care
about the issues raised in the
Whitewater-Madison controversy.
and Mr. Stephanopoulos cited
steadiness of polls despite the issue's
dominance of the news.
Whitewater-Madison has become
a catchall tag for apparent ethical
conflicts in the Clintons' links to
Whitewater Development Corp., a
failed real estate deal in which they
had invested, and Madison Guaran-
tee Savings and Loan Association.
whose principal owner helped them
repay a $50,000 personal loan.
A spokesman for the Federal De-
posit Insurance Corp. said yesterday
that Mrs. Clinton's prior representa.
tion of Madison in a state regulatory
matter would not have been consid-
ered a conflict of interest if the
FDIC had been told about it.
In a nine-page letter soliciting
FDIC business that eventually pro-
duced a $400,000 fee for negotiating
a $1 million insurance settlement,
Vincent W. Foster Jr. spelled out the
Rose Law Firm's experience in a
number of thrifts but neglected to
mention that Madison had been one
Mr. Foster killed himself July 20
when he was deputy White House
J. Jennings Moss contributed to
of them.
counsel.
this report.
in
Attorney General Janet Reno is
names
considering asking Congress to al-
she
counsel
By Frank J. Murray
THE WASHINGTON TIMES
special
the Whitewater-Madison investiga-
tion to become a statutory indepen-
dent counsel, if lawmakers pass a
new counsel law next month.
"This may be a stopgap that she
was urged to employ. It depends on
how the new law is worded." a senior
Justice Department official said yes-
terday. indicating that Miss Reno
wants Congress to waive the ban on
appointing a "public officer" since
that would eliminate whomever she
names to investigate President Clin-
ton and first lady Hillary Rodham
Aides to Miss Reno said she began
contacting the "first tier" of candi-
dates Wednesday night and expects
to name someone next week after a
check for possible conflicts of inter-
the
low
Clinton.
est. Her decision is final.
Questions abounded yesterday
about whether the Whitewater-
Madison special counsel will have
power to seek criminal indictments
if wrongdoing is found by the Clin-
tons. or even to clear them with rel-
evant documents, which are under
grand jury seal.
Rep. Jim Leach, the Iowa Repub-
lican who was among the first to call
for both committee action and a spe-
cial counsel. termed the quest "an
episode of embarrassment" that is
FRIDAY.
JANUARY
14.
1994
What might Clintons
have done wrong?
THE WASHINGTON TIMES
manding power of attorney for full
Federal investigators are probing
control of the venture.
several angles in the tangled White-
Why was Mrs. Clinton paid a
water-Madison case.
monthly retainer by Madison?
In 1985, Mrs. Clinton was paid
How much money was lost?
$2,000 a month for convincing state
President Clinton and his wife,
regulators appointed by her hus-
Hillary, said they lost $684.00 on the
band that Madison was solvent -
Whitewater Development Corp., a
despite federal bank reports to the
real estate venture with James B.
contrary - at a time when Mr.
and Susan McDougal, but they failed
McDougal was her business partner
to take legal tax deductions for capi-
in Whitewater. The payments were
tal losses that would have saved
made by Mr. McDougal in a deal ar-
them thousands of dollars. Mr.
ranged by Mr. Clinton.
McDougal was owner of the now-
Were there illegal money diver-
defunct Madison Guaranty Savings
sions to pay off campaign debts?
and Loan Association.
Shortly after his election as gov.
When Whitewater first surfaced
ernor in 1984, Mr. Clinton asked Mr.
as a 1992 presidential campaign is-
McDougal to "knock out a deficit" of
sue, Mr. Clinton said the couple had
$50,000 for a personal loan Mr. Clin-
lost $25,000.
ton took out to fund his campaign.
Was there an illegal loan?
Mr. McDougal held a fund-raiser
David L. Hale, a former municipal
for his business partner and retired
judge in Little Rock now under in-
at least $35,000 of that debt. At least
dictment for misdirecting Small
one of the checks from the fund-
Business Administration loans, said
raiser used to pay off Mr. Clinton's
Mr. Clinton pressured him during a
loan was signed by Kenneth Pea-
face-to-face meeting in 1986 to give
cock, who now denies ever donating
a questionable $300,000 loan to Su-
money to the Clinton campaign.
san McDougal. Mr. Clinton said he
Where are the Whitewater-
Republicans will seek appointment
When Congress returns Jan. 25,
authorized to seek indictments.
lic, but the counsel also may be
clude a report to the American pub-
date. The White House wants to in-
selection the boundaries of the man-
Miss Reno will negotiate with her
Whitewater-Madison affair.
skill to be special counsel in the
nized credentials of integrity and
governmental attorney with recog.
select within about a week a non-
Attorney General Janet Reno will
THE WASHINGTON TIMES
did not recall the meeting.
Madison records?
Was money diverted from fed-
Mrs. McDougal said she delivered
eral funds to Whitewater or the Clin-
Whitewater records to the Arkansas
ton campaign?
governor's mansion in December
Mr. McDougal used $110,000 of
1987, at Mrs. Clinton's request. The
the SBA loan to his wife to buy prop-
Clintons said the records were lost
erty for the Whitewater project. It is
before The Washington Times' Dec.
not clear if other money was di-
20 report that Whitewater records
verted from Madison to Whitewater
were secretly removed July 20 from
or to Mr. Clinton's 1984 gubernato-
the office of White House Deputy
rial campaign.
Counsel Vincent W. Foster Jr.
. Were the Clintons more than
shortly after he killed himself.
been subpoenaed from the Clintons.
least five cartons of documents have
Madison-Whitewater, on which at
fraud, continues its investigation of
career lawyers who specialize in
Rock, Ark., under direction of three
federal judges.
of an independent counsel by three
arate law providing for appointment
swiftly finish enactment of a sep-
Whitewater case.
Next step: Naming special counsel
"passive sharebolders"?
Now. the White House has turned
The Clintons described them-
over at least five boxes of White-
selves as "passive shareholders" in
water records to investigators under
the Whitewater development. but
terms of a subpoena worked out by
Mrs. Clinton wrote a letter to Mr.
the Clintons' lawyer and the Justice
A federal grand jury in Little
Congress also is expected to
both houses to look into the overall
of select investigating committees in
McDougal in November 1988 de-
Department to keep them secret.
Madison
Buil
Shoats
Lake
MISSOURI
story dates
ARKANSAS
5
201
to 1982
Mountain
Home
THE WASHINGTON TIMES
412
James B. McDougal, a friend and
business partner of Bill Clinton, took
over a tiny operation known as Madi-
235
101
son Guaranty Savings and Loan As-
Marion
Baxter
sociation, about 75 miles north of
14
County
County
Little Rock. Ark., in 1982. Within
Ozark
Whitewater
three years. Madison's assets grew
National
from $500,000 to more than $17 mil-
Forest
203-acre real
lion.
estate project
Mr. McDougal. from his new base
Area
MISSOURI
of operations in Little Rock, pros-
of detail
pered through a web of connections
OKLAHOMA
TENN.
and friendships that included Mr.
Clinton and his wife, Hillary. But the
ARKANSAS
Federal Home Loan Bank Board in
a 1984 report already had noted
TEXAS
MISS.
Madison's "unsafe and unsound
LA.
lending practices."
The Arkansas Securities Depart-
The Washington Times
ment was asked to determine
whether the S&L should be closed.
band that Madison should remain in
Mrs. Clinton. a lawyer on a $2,000-a-
business. By 1989. the institution
month retainer from Mr. McDougal,
had a paper worth of $125 million.
argued successfully before state
But that year it finally was closed by
regulators appointed by her hus-
regulators. and taxpayers got a $50
million bill for its defaulted loans.
213
97
FRIDAY, JANUARY 14, 1994 *
The Washington Times
Papers from Foster's office draw
missing media into Whitewater
cause it developed that a file relating
Clintons can thank the "Trooper-
By Joyce Price
to Whitewater had been removed
gate" scandal for "getting White-
THE WASHINGTON TIMES
from the office of White House coun-
water on television."
The Whitewater-Madison contro-
sel Vincent Foster after he commit-
Network reporters played down
versy, ignored by most of the media
ted suicide last July."
two Arkansas state troopers' accusa-
until recently, has become the hot-
The Washington Times' Jerry
tions of womanizing by President
test story around.
Seper broke the story Dec. 20 about
Clinton and pointed to the White-
It's on the front pages of daily
the removal of the Whitewater files
water-Madison controversy as an is-
newspapers, a staple on the nightly
from Mr. Foster's office. Media scru-
sue that warranted closer scrutiny,
network news shows. and the subject
tiny of Whitewater and Madison has
he said.
of lengthy articles in this week's is-
since intensified.
sues of Time and Newsweek.
"A story isn't really big until tele-
Mr. Graham dismissed argu-
But a month ago, a person would
vision picks it up. and television dis-
ments that the controversy's com-
have been hard pressed to find any
covered this story around Christ-
plexity was a major reason the me-
reports about the Whitewater Devel-
mastime." said Robert Lichter,
dia ignored it. "Iran-Contra was
opment Corp., a failed Arkansas
founder and co-director of the Cen-
complicated. but that didn't stop any-
land deal in which the Clintons in-
ter for Media and Public Affairs.
body." be said.
vested. or Madison Guaranty Sav-
He said most news organizations
Katherine McQuay, spokeswoman
ings and Loan Association. a failed
ignored the story because "it's com-
for NBC-TV, said her network aired
thrift owned by Whitewater partner
plicated and esoteric and it didn't
reports on Whitewater and Madison
James B. McDougal.
seem to lead anywhere."
"going back to September but
no-
Before last month. only The Wash-
"What killed the story for many
body was paying attention."
ington Times and The Washington
news organizations was that they
Post had reported regularly on the
[the Clintons) said they lost money
But Mr. Graham said he has
growing controversy.
and nobody gained." he said.
tracked media coverage of White-
The Washington newspapers ex-
"So if nobody gained. why don't
water and Madison and that NBC
posed details in the matter after the
they want to talk about it? A cover-up
"did its first story on Whitewater No-
disclosure in October that the Res-
of higher-ups is suggested.
When
vember 11. That was 12 days after
olution Trust Corp., the federal
it became a White House cover-up
The Washington Post" reported the
agency that disposes of failed S&Ls.
story, television latched onto it."
RTC request for a probe of Madison.
had asked the Justice Department to
Like Time's Mr. Church, Mr. Lich-
It was also seven days after The
investigate Madison Guaranty.
ter said the report that files were
Times reported that the Clintons
As Time writer George Church
removed from Mr. Foster's office
were active partners in Whitewater's
says this week in "Searching for the
was the catalyst for wide coverage of
management and that Hillary Rod-
Missing Pieces," the magazine's
Whitewater and Madison.
ham Clinton had sought power of at-
four-page report: "The press and
Tim Graham. the associate editor
torney over the venture. The Clin-
television paid almost no attention
of MediaWatch. a conservative me-
tons had said they were only passive
until recently and then largely be-
dia watchdog newsletter. said the
partners in the deal.
99
Pruden on
non Mr. custon letter demanding the power
Politics
attorney to run the Whitewater investment. and
then with the disclosure that thes vere looted from
Vince Foster Canton before invest
By Wesley Pruden
could see them
: anyone nas Deen treated with more care
Bill. it's Hillary and if Paid Gergen :- done
The looming payday
job this morning. its 3 telim. her that in Wash
meton there's always a payday someday:
for Miss Hillary
We women seek the glory" says Harriett Woods.
president of the National Women's Political Caucus.
"hit we also have to take the consequences when we
make mistakes. I don't know if she has made mis-
There's enough grief in the Whitewater for both
ares. but if she has I hope she would be equally
of them. but Hillary Rodham is the Clinton with the
accountable."
problem.
Anna Quindlen. among the most blindly devoted
She came to Washington as the role model for a
the media princesses. is rattled. too. "While look-
lot of feminists. particularly in the media. who were
ing down your nose may work with sexual innu-
looking for the good mommies they thought they
endo. it does not adequately address conflict of in-
never had. Republicans. eager as always to roll ner
terest." she writes in the New York Times. "The
to have their bellies scratched by Democrats. MOD-
Clintons have not controlled Whitewater. They have
bered and gushed with an excess of gallantry at the
inflated it with the gases of temporizing. A big bang
very sound of the nanny's voice.
looms."
Actually Mrs. Clinton is an old-fashioned kind of
Mrs. Clinton earned the reputation in Little Rock
woman. She learned early in her marriage to throw
as the Clinton who keeps her cool in the face en-
her husband's weight around with maximum effec-
emy fire when the other Clinton panics. Now We
tiveness. like the wife of the boss who arrives at the
may see how much. if at all. our young president
office or factory and demands that everyone stop
has grown.
work to accommodate her whims and pouts
A lot of people know the type Some of them live
in Little Rock. Ark.. where the fine mess the Clin-
tons a: last find themselves in IS regarded with con-
siderable deja vu. (That's the way we talk down
there. The president himself may regard the fine
mess much in the way of the man in that well-
known example of domestic bliss. watching his
mother-in-law drive over the cliff in his new car.
Betsey Wright. who as the governor's chief of
staff conducted what she calls "the bimbo patrol"
and who may know him as well as any of his loyal-
ists. insists this view. propounded by several old Ar-
kansas hands in the White House. as "fundamental
sexism." She calls it disloyal because it "makes Bill
Clinton look like a wimp."
Well. yes. it does. But this is how. while Mrs. Clin-
FRIDAY. JANUARY 14, 1994
ton was back at the ranch trying to arrange the
Whitew files so they fall with minimum Jamage
once they get into the hands of someone who may
try to find out what actually happened. the pres-
ident himself was talking in Prague:
"Basically," he told NBC News. "the press has edi-
torianzed and pressured the politicians into saying.
Here's a guy that. as far as we know hasn't done
anything wrong. nobody's ever accused him of do-
ing anything wrong. there's no vidence that he's
done anything wrong. but lie think the presumption
of guilt almost should be on him. He should some-
how prove his innocence."
Then. this to CBS News: "I can't recall anything
like It in American history
where everybody says.
Well. there's no evidence
this guys done anything
wrong. out we think he
should invite another in-
vestigation of himself:
And. finally. this to
NBC: "You got your two
questions. Jim."
Jim Miklaszewski of
NBC: "OK"
You had your two ques.
tions
I m surry you re
Jerry Brown
not interested in the
truth." With that. the pres-
ident took off his microphone and walked away. For
reasons of its own. NBC chose not to broadcast the
president's tantrum. This is the kind of break that
The Mashington Times
few other politicians ever got. not even Teddy Ken-
nedy. and the kind that Mr. Clinton may be seeing
the last of. The tantrum. by the way. looked a lot like
the tantrum he threw when Jerry Brown tried to
bring up Whitewater during the '92 campaign. He
accused Mr. Brown of "attacking" the missus. (The
press went back to sleep until Jerry Seper of The
501
101
FRIDAY, JANUARY 14, 1994 *
The Washington Times
PAUL CRAIG ROBERTS
from personal use of state employees.
hat's the
It is possible that a discombobu-
"W
charge?."
lated White House has been engaging
asks White
in a state-of-the-art coverup when
House
there is no crime. But if Whitewater
Press Sec.
is merely a political embarrassment
retary Dee
for the first couple, it could hardly be
Dee Myers. By asking this question,
worse than the disingenuous denials
Miss Myers is inviting us to guess
that are flowing from the White
what a special prosecutor-might find
House. "Where is the evidence?," asks
in the files of the Whitewater Devel-
Clinton spokesman Stephanopoulos,
opment Corp., an Arkansas real estate
thus underlining the White House's
partnership between the Clintons and
prolonged withholding of it.
the McDougals.
In a misstatement of tax law and
These files have had a curious exis-
fact, Vice President Gore claimed in
tence. They were first said to be
front of a national TV audience that
"missing." Then they were purloined
the Clintons could not take their
from White House Deputy Counsel
$69,000 tax loss because they had no
Vincent Foster's office, which should
capital gains to set it against. The law
have been sealed. They have been
permits a $3,000 per year deduction
unavailable to investigators of Mr.
of a capital loss against ordinary
Foster's death and to investigators of
income and a carry forward of the
savings and loan irregularities in Lit-
remainder. Moreover, Lisa Schiffren
destroyed in anticipation of possible
tie Rock. They next turned up in the
reports in the August 1993 American
proceedings. Moreover, the 1989
safe of a white collar crime lawyer at
Spectator that in 1988 the Clintons
FIRREA Act in response to the S&L
Williams and Connolly, a noted crim-
realized a $42,000 profit from an
crisis specifies that investigations by
inal defense firm. Today they are
investment in Arkansas Cellular
the Resolution Trust Corp. are con-
being "catalogued," and possibly
Communications. A lawyer familiar
sidered "pending proceedings" under
culled. before being turned over to the
with the deal says it was structured as
the obstruction of justice statute. The
Justice Department under a negoti-
a capital gain. A couple that itemizes
RTC is looking into Madison S&L,
ated subpoena that protects the con-
deductions for used underwear is
and inappropriate handling of the
fidentiality of the files.
unlikely to let pass a legitimate deduc-
Whitewater files could constitute
The White House maintains that
tion for capital losses.
obstruction of justice.
the files are innocuous and merely
It is a good thing for the Clintons,
Sen. Pat Moynihan, New York
document a legitimate $69,000 busi-
as well as the country, that they
Democrat, was right. The Clintons'
ness loss that was never claimed on
apparently have reassessed the risk of
spin doctors got them deeper in trou-
tax returns. By stonewalling on the
stonewalling.
ble without sparing them the scruti-
release of the files, the White House
The problem with coverups is that
my of a special prosecutor.
built up demands for a special prose-
they can become obstruction of jus-
cutor to which it has finally acceded.
tice, a federal crime. Numerous fed-
According to newspaper reports,
eral courts have ruled that proceed-
Paul Craig Roberts, a columnist for
federal thrift investigators have found
ings do not have to be pending for
The Washington Times and the Scripps
evidence that money from Madison
obstruction of justice to occur if evi-
Howard News Service, is a distin-
Savings and Loan was diverted to
dence is concealed, altered or
guished fellow at the Cato Institute.
Whitewater and other McDougal
companies and listed the Clintons
among the possible beneficiaries.
Newspapers have also reported that a
possibly fraudulent Small Business
Administration loan was diverted. in
part. to the Whitewater partnership.
Newspapers have also reported that
there appear to be significant flows of
money in and out of Whitewater's
accounts that do not relate to real
estate transactions. Madison S&L and
Whitewater monies appear at times to
Prosecutor
have been commingled, and White-
water did not file income tax returns
for a number of years.
All of this has raised suspicions
that, however it began, Whitewater
became a slush fund for its partners.
It is the unspoken charge of experi-
pirouette
enced tax. campaign, and criminal
lawyers that the Clintons benefited
from money flows that violated cam-
paign, tax, and banking statutes.
These charges, should they be
Fandango
brought by the special prosecutor,
1/2
would be over and above any conflicts
of the files
of interest the Clintons may have
experienced in obtaining favorable
regulatory treatment for McDougal's
Madison S&L and any improprieties
112
FRIDAY, JANUARY 14, 1994
The Washington Times
TONY SNOW
because the facts available to the pub-
ernment.
lic raise the possibility that the pres-
*Violation of attorney-client priv-
ident and/or his friends bent the law
ilege: Vincent Foster Jr. solicited fed-
during his tenure as governor of
eral contracts to sue Madison Guar-
Arkansas. Here's a small, incomplete
anty on behalf of the Rose Law Firm
list of allegations.
of Little Rock. He failed to disclose
oIllegal gratuity: Just before
the fact that Rose partner Hillary
becoming governor of Arkansas, Bill
Rodham Clinton had represented the
Clinton and his wife joined a real-
savings and loan. The solicitation at a
estate partnership with old friend
bare minimum threatened Madison's
James McDougal and McDougal's
attorney-client privilege with Rose.
then-wife, Susan. The Clintons put up
©Obstruction of justice: White
less than 9 percent of the start-up
House counsel Bernard Nussbaum
money for the Whitewater Develop-
took several boxes of files from Vin-
Gimmicks
ment Corp. and got 50 percent of the
cent Foster's office after Mr. Foster's
stock.
suicide. He shipped the deceased
The arrangement is public record.
aide's personal diary and papers to
that failed
Does the discounted price of the part-
the Foster family lawyer, James
nership constitute an illegal gratuity?
Hamilton, and records regarding the
oIllegal campaign contributions:
Whitewater Development Corp. and
James McDougal threw a fund-rais-
other dealings to David Kendall, the
er on April 4, 1985,
Clinton family
he bluff didn't work. The
T
to help rescue Mr.
lawyer. He pre-
White House spent a week
Clinton from a
vented investiga-
besmirching Republicans
$50,000 personal
Administration
tors from looking at
who wanted a special prose-
loan. The party
cutor to look into what has come to be
stonewalling and
the documents.
raised $35,000.
These acts could
known as "Whitewatergate," but pub-
Federal investi-
name-calling have
have violated sev-
lic pressure finally forced the presi-
gators suspect that
eral
federal
dent to ask for one, anyway.
at least $12,000 of
The question now is whether the
transformed a
statutes, including
the donations were
Laws that require
Clinton team will come clean or try to
siphoned from a
political nuisance into
the preservation of
manage the flow of information to
savings and loan
investigators. So far, it has employed
a potential disaster,
White House docti-
owned by McDou-
ments and prohibit
every trick in the book to foil inquisi-
gal. If so, the Clin-
tors, including the cheesy use of the
received
and that is amazing.
the removal of
tons
records relevant to
president's late mother, Virginia Kel-
money taken from
an ongoing crimi-
ley, as a political human shield. Al
depositors of the
nal investigation.
Gore thumped the poor woman's cof-
Madison Guaranty Savings and Loan
The public deserves a full look at
fin four times on CBS's "Face the
- an institution that failed in 1989 at
all the weird strands of Whitewater-
Nation" last week. hoping her beloved
a cost to taxpayers of $47 million to
Madison. which means that Attorney
memory would hold the curious at
$60 million.
General Janet Reno must suspend
bay.
Conflicts of interest: When fed-
the statute of limitations for all relat-
These gimmicks haven't worked
eral regulators were recommending
ed civil and criminal infractions. (The
that Madison Guaranty mend its ways
statute on fraud and other civil viola-
or close its doors, McDougal con-
tions expires in March.) The attorney
cocted a plan to sell preferred stock to
general also needs to avoid placing
the public. He hired Hillary Rodham
undue restrictions on the prosecu-
Clinton as his lawyer in response to
tor's investigation. Otherwise, Con-
Bill Clinton's personal request for
gress will impanel Watergate-style
2/2
"help."
committees, which will make even
Mrs. Clinton asked a securities
the smallest Clinton peccadillo look
commissioner appointed by her hus-
like a crime against humanity.
band to approve a stock-sales plan
Administration stonewalling and
proposed by his (and her) business
name-calling have transformed a
partner, James McDougal-
political nuisance into a potential
telling the Arkansas official about her
disaster, and that is amazing. As polit-
ties to the thrift operator.
ical scandals go, Whitewatergate
*Conspiracy: Former Arkansas
should have been small potatoes.
Judge David Hale made a $300,000
Rep. Jim Leach, Iowa Republican,
Small Business Administration loan
put it best in an interview the other
to a real-estate company owned by
day. "It's my own view that they
Susan McDougal. Half that money
should Lay everything on the table,
found its way into the Whitewater
take responsibility, perhaps have a
Development Corp.
civil penalty or two (against people
Government investigators question
other than Clinton).
the propriety of the SBA loan, which
"Then this thing would be over," be
was intended to help minority-owned
said, snapping his fingers, "just like
small businesses. Hale claims Bill
that."
Clinton and James McDougal pres-
sured him into giving the money to
Mrs. McDougal and says he has
records to prove it. If so, the president
Torry Snow is a Washington-based
and his friend may have engaged in a
editorial page columnist for the Detroit
conspiracy to defraud the federal gov-
News and is nationally syndicated.
13
R.EMMETT ELL.JR.
I is an amazing spectacle! One of
Attack of
accuracy, as they surely will with Mr
columnst Frank Rich says of the
mg a charge that Mr. Book never
describes abuses of power, and the
I
the must liberating writers in
Brock's work on Miss Hill and the
troopers' testimony regarding Mr.
raised. Mr. Brock never said Presi-
heavy handed threats of Clinton
American journalism continues
Clintons.
Clinton's serial sex. "If true, [the
dent Clinton offered this trooper a
henchman Buddy Young, the troop-
to be viblied. mainly by journal-'
Why are the vilifiers of David
charges] would make the president
job "for silence" as the affidavit states,
ers' former buss, who claimed to Mr.
ists, for writing bold and accurate
journalism
the media
Brock not hissing at CNN and the Los
seem all too pathetically ordinary."
but rather for information on the
Brock not to be in contact with the
Angeles Times? I suppose they think
Newsweek columnist Joel Klein says,
other troopers. Mr. Brock's charge
White House and then was recorded
Admittedly. his vilifiers are the
that by reviling Mr. Brock they will
"the story is trash." and innocently
remains unrefuted.
by ABC conferring with White House
bought you nalists of the social-climb-
scare all other American journalists
asks, "Where are all the women?" You
Mr. Brock's piece begins by
aide Bruce Lindsey. Only then do we
ing variety whose party-line pruse
marauders
away from their patrons. They are
know how many women engerly step
describing past presidents' sexual
get into steamy testimony regarding
ene www.jungton eanes
has made American journalism dubi-
going to fail. The Clintons are singu-
forward and admit to adultery. You
misbehavior and the attendant polit-
the sex lives of the Clintons, and
ous to millions of Americans.
larly corrupt. As the multiplying
know how "ordinary" it is to maintain
ical coercion that always follows such
charges of Hillary Clinton ordering
Yet they continue to at David
headlines about Whitewatergate and
half a dozen sexual partners and to
promiscuity, making it a serious
the destruction of records. It is a
Brock and to ulter dark threats. Mr.
the Madison bank bust make clear,
arrange yet more one-night stands.
threat to the commonweal. Next he
charge that re-echoes through the
Brock is the journalist who revealed
They are wasting their spit balls.
increasing numbers of inquisitive
And are the charges of Mr. Clinton's
introduces the troopers, acknowl-
Whitewatergate reports.
Anita Hill's testimony for the salad of
What makes Mr. Brock a marvel
journalists are unearthing vast finan-
security detail "old stories"? Does
edges their possible motives noble
Does this sound like "tabloid fare"
falsehoods and contractions that it is.
among journalists is that he does not
cial and political corruption in their
Paul Duke know something about
and ignoble and details their
to you? Actually, it is probably the
He is now the journalist who bruke
care what others think, and he does
wake. After Mr. Brock's boldness it is
these troopers that other Americans
responsibilities and access to the Clin-
most devastating revelation of a sit-
the story of the Clintons' repeated
not have to. Rather than work in one
going to be ever more difficult for
do not, or has the TV commentator
tons even after the election. His next
ting president's past corruptions ever
abuse of power, their continued lies to
of the gigantic bureaucracies of our
editors and publishers to muzzle dili-
again failed to read that which he
section profiles Mr. Clinton: A quick
published. Journalists and citizens
the electorate and to the press, their
media where advancement comes
gent reporters.
jabbers about?
study, hard-working, once-radical
concerned by the corruption of Amer-
dissimulations regarding the suicide
with flattering some highly politicized
As for Mr. Brock's writing, it is
Actually Mr. Brock's 11,000-word
now eager to please all very inter-
ican life can thank David Brock for its
of the highest level federal official.
and otherwise craven editor, Mr.
alive with vivid detail and careful
piece is argued on a very high
esting and not all unflattering Next
liberating effect. My fellow journal-
since James Horrestal, and Bill Clin-
Brock writes for small independent
analysis that leaves his detractors
intellectual plane. II is based on
Mr. Brock discusses the new morali-
ists, continue your work. The bought
ton's satyriasis Mr Brock's report is
journals. He is free to do what inves-
looking like naifs or simple propa-
Impopers' testimony that had yet to be
ty that sank other public figures, some
journalists may soon be out of work.
about the same story that two line
tigative journalists are supposed to
gandists. TV commentator Paul Duke
refuted by the Clintons (who have
deserving, some not for instance,
reporters at the Los Angeles Times,
do, namely, establish the truth of a
calls David Brock one of the year's
carefully avoided denying the
John Tower, Robert Packwood and
finally published two days after CNN
story by corroboration and ver-
"losers," who "wrote that slimy mag-
chargestor by other tropers one
Gary Hart Then Mr. Brock demon-
and Mr. Brock broke it. Nonetheless,
ilication of the evidence at hand.
azine article that revived all those
of whom howed In Clinton adviser
strates how Mr. Clinton has manipu-
the bought journalists target Mr.
Later, when more evidence is avail-
old charges about Bill Clinton's per
14 INV Wright's importunities to
lated the media. for instance, his
R Enmett Tyrrell Jr. is editor in chief
Brock
able. historians can affirm journalists'
sonal behavior." New York Times
depose best that MEG an attulavit deny-
deceits on "Sixty Minutes." He then
of The American Spectator
74
Speculation swirls over high-profile position
By Sam Vincent Meddis
of the probe, says Stein, "some-
nouncing the counsel Wednes
USA TODAY
one who is busy and has anoth-
day evening, officials said.
er job to return to."
Justice Department officials
The Justice Department isn't
Otherwise, he says, the in-
also want to make sure the per-
expected to pick a special
vestigation could become "in-
son they select does not have
counsel in the Whitewater case
terminable."
any possible conflict-of-Interest
until at least next week.
At Issue are the roles played
problems - any personal or
But inquiries are already be-
by President Clinton and wife
professional links, for exam-
Ing made to several lawyers to
Hillary Rodham Clinton in the
ple, to some controversial sav-
FRIDAY, JANUARY 14. 1994 USA TODAY
see If they might be Interested
land deal and failure of an Ar-
ings-and-loan case.
in the high-profile job, Justice
kansas savings and loan. The
Among the possible candi-
officials said Thursday.
busted S&L cost taxpayers at
dates are those suggested by
Attorney General Janet
least $47 million.
Sen. Robert Dole, R-Kan.
Reno would do well not to rush
The matter is already being
They include two former at-
a selection, says lawyer Jacob
Investigated by Justice Depart-
torneys general in the Jimmy
Stein. He was appointed Inde-
ment lawyer Donald MacKay,
Carter administration, Grittin
pendent counsel In 1984 to In-
a political appointee in the Nix-
Bell and Benjamin Civiletti;
vestigate then-attorney general
on and Bush Justice Depart-
and two former U.S. attorneys,
nominee Edwin Meese on alle-
ments and now a career mem-
Anton Valukas and Dan Webb.
gations of favoritism when he
ber of the department.
Others mentioned Include
was White House counselor.
Justice officials declined to
retired Supreme court Justice
By Joe Marquette, AP
Whoever is chosen should be
say who might be approached
Byron White and former
TOUGH SELECTION: Attorney General Janet Reno is consider-
someone with "a sense of dis-
for the special counsel job.
American Bar Association
ing numerous candidates for special counsel to probe the
patch" who will not try to make
But Reno began considering
presidents Talbot D'Alemberte
Whitewater difair. A selection is unlikely before next week.
a long-term legal practice out
people almost immediately an-
and John Curtin.
FRIDAY, JANUARY 14, 1994 USA TODAY
Says some of
She bought it in September
1988 for $8,000 and sold it two
her actions
months later for $28,000.
Hillary Clinton's involve-
ment in Whitewater's manage-
were his idea
ment, as described by Wade,
runs counter to the Clintons' ef-
By Judy Keen
forts to downplay their role.
and Dennis Cauchon
Still, says Wade, "Hillary
USA TODAY
Clinton didn't do anything
wrong - nothing. Absolutely,
FLIPPIN, Ark. - The man
and that's not a guess. That's a
who sold Whitewater lots says
fact. I know it"
he, not Hillary Rodham Clin-
Wade has turned over docu-
ton, was responsible for her
ments relating to Whitewater
role in two of several areas
to the FBI and says he expects
likely to be part of a special
to be subpoenaed by the spe-
counsel's probe of the deal.
cial counsel who will investi-
Chris Wade, who handled all
gate Whitewater.
sales at the Whitewater Devel-
Meanwhile. Beverly Bassett
opment Co. Inc. property, says
Schaffer, then the state super-
he initiated her active involve-
visor of savings and loans, says
ment, which critics have used
a letter she received from Hil-
Salesman details Hillary's role
Tours, ballet
to undermine the claim of
lary Clinton's law firm request-
President Clinton and Hillary
ing permission for Madison
Guaranty to raise money from
for first lady
Clinton that their participation
in the investment was minimal.
investors was routine and did
Most of the 42 lots have been
not imply pressure from then-
governor Clinton.
harn
sold in the 230-acre develop-
ment along the White River.
Only a handful of homes have
On April 30, 1985, the Rose
been built.
Law Firm wrote to Schaffer's
Interviewed at his realty of-
agency seeking the go-ahead to
fice here. Wade says, to his
sell preferred stock to shore up
Moncow
knowledge. the Clintons never
Madison's net worth. The letter
lin
and
visited the property.
asked state regulators to con-
other
"They were really passive
tact Hillary Clinton or her col-
investors." he says. That
league at Rose, Richard Mas-
changed when he urged Hilla-
sey, if they had questions.
when
ry Clinton to become more ac-
Two weeks later, Schaffer
tively involved:
wrote a "Dear Hillary" letter
He suggested that Hillary
saying the plan "is not inconsis-
Clinton seek power of attorney
tent with Arkansas law." The
over Whitewater in November
appropriateness of Hillary
1988. That would have effec-
Clinton's representation of
tively given her control.
Madison in the request -
the
Wade says the Clintons' part-
made to an official appointed
ner in the deal, James McDou-
by her husband - also has
gal, was too busy with his fail-
been questioned.
ing Madison Guaranty Savings
Madison was owned by
and Loan to make routine busi-
ness decisions.
"That was my idea," Wade
McDougal, the Clintons' part-
ner in the Whitewater invest-
says of the letter in which Hil-
ment. The thrift failed in 1989
by
lary Clinton requested power
of attorney. "I couldn't get
and cost taxpayers $47 million
to $60 million.
the
shold of Jim because of the
Madison problems. Hillary and
"Nobody in my office would
Square
have any problem saying 'no'
dent
Clinton
I were talking on the phone
(to the Rose Law Firm re-
and
other
and I told her she should get
quest) just because her name
In
power of attorney so we could
was on it" Schaffer says. "No-
tour in
deal with some decisions on
body was going to get fired
ton
will
Whitewater. I don't know that
over that Bill Clinton was my
she ever did get it"
Bruce Lindsey, a senior Clin-
boss, not Hillary Clinton."
ton adviser at the White House,
Wade says McDougal han-
died all of Whitewater's a-
says Hillary Clinton never ac-
nances while Wade handled
quired power of attorney.
Wade suggested that Hilla-
the marketing of the vacation-
ry Clinton pay for a model
home lots, surveying of the
home on the property in 1981
property and the construction
of access roads.
to try to spur sales. To build the
three-bedroom, ranch-style
modular home on the 2.66-acre
lot, Hillary Clinton borrowed
$30,000 from the Bank of
Kingston, Ark., in which
McDougal had an interest.
In 1988, Wade says, it was
also his idea that she buy back
the home from the estate of an
owner who went bankrupt be-
fore dying "Here we had a
loan on the house, nobody
making payments," says Wade.
"We had a problem. (Her
repurchase of the house) was
the only wav."
75
bc whitewater-times - a1810
(ATTN: National editors) (Includes optional trims)
Reno Starts Search for Special Counsel to Probe Whitewater (Washn)
By Ronald J. Ostrow and Ronald Brownstein= (c) 1994, Los Angeles Times=
WASHINGTON Attorney General Janet Reno Thursday launched what aides
described as a highly personal search for a special counsel to investigate the
role of President Clinton and his wife in the tangled Whitewater real estate
and banking affair, asking Justice Department colleagues about possible
candidates for the job.
While some officials want a counsel to be selected by the end of the week,
Justice Department sources cited the time-consuming inquiries that would have
to be conducted for any potential conflicts in a prospect's legal practice.
''You don't want to pick the special counsel and then have the individual
forced to withdraw because you find out he represented savings and loans in
Arkansas, one source said.
Among candidates said to be under ''serious consideration'' are Dan K.
Webb, a former Reagan administration U.S. attorney. Webb caught attention with
his dogged questioning of the ex-president in videotaped testimony during the
Iran-Contra investigation.
''There's also the retired judge category,' said a department official
familiar with the search. ''But there's concern about picking a person who can
really hit the ground running and a retired judge may not fit that.'
'They' 11 probably pick a white male Republican over the age of 55,
probably some retired judge,'' said Victoria Toensing, a former deputy
assistant attorney general. 'That seems to be the image of what they' re
looking for.
The Clintons invested in the Whitewater Development Corp., an Ozarks
mountain vacation resort, with a friend, James B. McDougal, and his wife,
Susan, in 1978.
McDougal owned Madison Guaranty Savings & Loan, an Arkansas thrift that
was seized by federal regulators in 1989 at a cost to taxpayers of at least
$47.6 million. The real estate deal went sour as well and the Clintons, by
their account, lost $68,900.
Critics have questioned whether the Clintons may have benefited improperly
from the relationship or whether the savings and loan was permitted to operate
longer than it should have because of friendship between the Clintons and
McDougal.
Justice Department officials insisted Thursday that Reno had no advance
knowledge that the White House would ask her to reverse her oft-stated
position and name a special counsel, saying that she learned of the decision
officially only 10 minutes before it was announced on television. Thus, she
had no list of prospects at hand, one official said.
In Moscow, White House Press Secretary Dee Dee Myers said early Thursday
that Clinton made the decision to seek a special counsel after conferring
Tuesday night with his wife, Hillary Rodham Clinton, and with senior aides in
Washington.
'`The president slept on it overnight and decided to go forward,'' Myers
said.
(Optional add end)
Lawyers interested in the job, including a former assistant attorney
general during the Ford administration, sent resumes to Justice Department
acquaintances with the expectation that they would be sent on to the attorney
general. Those who could, cited their Republican credentials on the theory
that Reno is unlikely to choose a Democrat.
One prominent Republican proposed the name of a well-known Florida
attorney to a department official. But the name was not passed on because the
individual was a longtime associate and a onetime employer of Reno.
While the search progressed, congressional Republicans Thursday continued
their calls for legislative investigations into the Whitewater affair. But
Democrats remained cautiously optimistic that they could maintain enough party
unity to quash those demands.
**** filed by: LAWP (--) on 01/14/94 at 02:26EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:07EST ****
bc whitewater-ndy a1842
(ndy) (ATTN: National editors) (Includes optional trims)
Whitewater Flood Should Subside, but Damage Has Been Done (Washn)
By Susan Page= (c) 1994, Newsday=
WASHINGTON The daily flood of disclosure and attack from the Whitewater
case is expected to subside now with the administration's decision to appoint
a special counsel, White House aides and others said Thursday, but it has left
behind stains on the ceiling and loose floorboards underfoot.
The controversy over the Clintons' investment in an Arkansas real estate
deal has damaged President Clinton's reputation for honesty among the public,
angered him again about news coverage of his administration, distracted his
top aides from other issues and done nothing to help his relations with
Congress, where top Democrats were noticeably silent while he was under fire.
Some analysts say the furor and the impression that the White House was
stonewalling had begun to threaten Clinton's ability to focus on other issues,
including the soon-to-start debate in Congress over health care. That was the
factor that finally persuaded a reluctant president and first lady to accede
to growing demands for an independent investigation, aides said.
''We still don't think that the evidence is there to require a special
counsel, (but) it appears that this could end up interfering with the
president's agenda,' senior adviser George Stephanopoulos told reporters
Wednesday night. ' 'We don't want to let that happen, so we'll go to the
special counsel.'
''If he had not moved when he had to accept an independent counsel, I
think this could have become a politically serious situation," Democratic
pollster Geoffrey Garin said. ''But I think he did it before it was too
late.''
Whitewater already had distracted aides who are preparing the Jan. 25
State of the Union address and marred coverage of the president's European
trip. Even Harold Ickes, newly on board as deputy chief of staff with the
assignment of shepherding health care through Congress, found himself heading
a damage-control team that spent hours strategizing about Whitewater.
' 'We only have a finite number of days in office,'' said political
strategist Paul Begala, a member of the damage-control team, said. ''Every day
we talk about something besides fixing the economy, reforming health care,
fighting crime, reforming welfare, is a day we'll never have back."
Of course, the decision to appoint a special counsel may end up giving the
Clintons a respite rather than a reprieve, depending on what the inquiry
covers and what it finds.
The letter from White House Counsel Bernard Nussbaum to Attorney General
Janet Reno asked for ''an appropriate independent investigation of the
Whitewater matter.' But Reno, at a news conference afterward, said she would
appoint a counsel to ''pursue all matters concerning the Madison Bank
investigation,' a failed Arkansas savings and loan with links to Whitewater
Development Corp., the real estate partnership.
And the history of independent counsels indicates that the inquiry is more
likely to broaden further than to narrow. It could look into the suicide in
July of deputy White House counsel Vincent Foster, who was handling Whitewater
matters for the Clintons; allegations by a former Arkansas judge who is
scheduled to go on trial for fraud in March; and the law practice of Hillary
Rodham Clinton and the Rose Law Firm.
For the moment, at least, the White House has managed to squelch one line
of media questions on the appearance of stonewalling and can decline to
discuss allegations by noting that a special counsel is at work. They also
have made it more difficult for Republicans to press the issue without seeming
partisan; Democratic congressional leaders, meanwhile, are blocking their
demands for Capitol Hill hearings.
(Optional add end)
Working on other issues may have been made a bit harder, however. While
Clinton's job-approval ratings haven't been affected, a CNN-USA Today Gallup
Poll conducted last week showed a decline in the number of Americans who said
he was honest and trustworthy. In November, the poll found Americans by 56
percent to 39 percent calling Clinton honest; now they are almost evenly split
on the question, at 49 percent to 46 percent.
Some analysts said questions about the integrity of Clinton and Hillary
Clinton could especially affect their ability to push for the health care
package that is expected to be the centerpiece of the White House legislative
agenda this year.
''You can only guess that there's a kind of erosion of moral authority
that makes everything a little more difficult," said Suzanne Garment, a
fellow at the American Enterprise Institute and author of ''Scandal: The
Culture of Mistrust in American Politics. "The health-care plan is very
technical, but it's also being sold on moral grounds, that we as citizens have
a moral right to health care and there are providers insurance companies and
doctors and drug companies who are behaving immorally in taking more than
their fair share of this money.
...
''It's harder to make an argument like that if you're under a cloud and
suspected of being a profiteer yourself," she said.
Distributed by the Los Angeles Times-Washington Post News Service=
**** filed by:LAWP (--) on 01/14/94 at 02:30EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:06EST ****
bc whitewater-names - a1824
(ndy) (ATTN: National editors)
Reno Sounding Out Candidates for Special Counsel (Washn)
By Martin Kasindorf= (c) 1994, Newsday=
WASHINGTON Aides to Attorney General Janet Reno Thursday began sounding
out potential candidates for special counsel in the investigation of President
Clinton's involvement with an Arkansas real estate company and a failed
savings and loan.
Justice Department spokesman Carl Stern said ''a handful'' of individuals
were to be questioned on their availability for the politically sensitive job.
In searching for the ''ruggedly independent" counsel she has said she
will insist upon, Reno was speedily acceding to a White House request
Wednesday to appoint someone to take over the investigation of the Whitewater
Development Co. and Madison Guaranty Savings and Loan from career Justice
Department prosecutors.
Asked about reports that Reno would name her choice in the middle of next
week, Stern said, ''That would be consistent with her stated desire to get it
done as rapidly as possible. She would make the appointment sooner if she
could, Stern said, but ''if it's a practicing lawyer, we would want to look at
past and present clients for potential conflicts of interest or ethical
problems.'
The scope of the special counsel's mandate has not been decided and will
be discussed first with the appointee, Stern said. Presumably, it would
include investigating whether the 1984 Clinton gubernatorial campaign or the
Whitewater vacation development, in which the Clintons were partners with
banker James McDougal, improperly received Madison Guaranty depositors' funds.
It could also extend to possible connections with the July 20 suicide of White
House deputy counsel Vincent Foster, who handled Whitewater matters for the
Clintons as their personal lawyer.
Stern would not list those under consideration for the counsel's job.
Among names publicly speculated about have been those of former Attorneys
General Griffin Bell and Benjamin Civiletti, three former United States
attorneys, former Supreme Court Associate Justice Byron White and Washington
lawyer Robert S. Bennett.
Distributed by the Los Angeles Times-Washington Post News Service=
**** filed by: LAWP (--) on 01/14/94 at 02:27EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:06EST ****
BC-PROBE national editors: GL
Clinton request for special counsel may lessen chance for congressional probe
By Michael Kranish
Boston Globe
WASHINGTON As Attorney General Janet Reno intensified her search
Wednesday for a special counsel in the Whitewater development case, there
were signs that President Clinton's reluctant decision to authorize an
independent probe would preclude the possibility of a congressional one.
Clinton continued to be dogged by questions about the controversy as he
attended a summit in Moscow with Russian President Boris Yeltsin. In a
television interview aired Wednesday night, Clinton angrily unclipped his
microphone when he was asked about Whitewater, telling an NBC-TV reporter,
''You had your two questions. I'm sorry you're not interested in the truth.''
The Whitewater investigation focuses on the investment by the president
and his wife, Hillary Rodham Clinton, in an Arkansas real estate deal in which
they say they lost money. Questions have been raised about whether Hillary
Clinton had a conflict of interest in representing a savings and loan
controlled by a Whitewater partner, and whether then-Gov. Clinton received
favors from the partner.
At the White House, officials said they were confident that President
Clinton's decision to ask for a special counsel would cool the immediate
controversy. Deputy press secretary Ginny Terzano said the inundation of
telephone calls about the matter had subsided. But a lawyer familiar with the
process said the probe could last at least six months, and possibly much
longer, meaning the story is likely to continue to dog the president.
At the very least, the president's decision appeared to lessen
dramatically the possibility that Republicans would succeed in their effort
to create a special committee to investigate the matter. Senate Minority
Leader Robert Dole, R-Kan., called for such a panel Wednesday after being
rebuffed in his efforts to persuade the Banking Committee to hold a hearing.
But with the Senate controlled by Democrats by a 54-46 margin, and with
most Democrats apparently satisfied by the president's agreement to appoint a
special counsel, it appeared Dole's effort would not succeed.
''Who knows, there might be some Democrats who would go along with it,''
said Dole's spokeswoman, Kristin Hyde. But she said that so far, none had done
so.
Dole Wednesday released a list of proposed candidates for the position of
special counsel, including former Attorneys General Griffin Bell and Benjamin
Civiletti; former counsel to President Reagan A.B. Culvahouse; former U.S.
Attorneys Michael Baylson, Anton Valukas and Dan Webb; and Washington lawyer
Robert S. Bennett.
Speculation also included New York City attorney Robert Fisk, former
Supreme Court Justice Byron White and former American Bar Association
president Sandy D'Alemberte. A decision is likely next week, officials said.
Rep. Jim Leach, the Iowa Republican who has led the call for an
investigation of the Whitewater affair, said Wednesday that he would have
preferred that a congressional hearing be held.
"The awkward aspect of a special counsel from a historical perspective is
that it probes possible criminal misdoings, and my sense here is what we have
is some conflict of interest and some remedies that might be applied in kind
of a civil dimension," Leach said on CBS-TV.
Some administration officials, meanwhile, expressed concern that President
Clinton had been too vague in his letter to Reno seeking a special counsel.
The person appointed to that post might interpret that mandate as being so
broad that he or she could take months to examine anything remotely related to
Whitewater, the officials said. Some special counsels have written scathing
reports even if no indictments are forthcoming.
(Staff writer John W. Mashek contributed to this report.)
**** filed by:KR-F(--) on 01/13/94 at 20:27EST ****
BC WHITEWATER national editors:
First lady's involvement in Whitewater poses tricky political dilemmas
(HAS TRIMS)
By Angie Cannon
Knight-Ridder Newspapers
WASHINGTON President Clinton has a lot at stake in the Whitewater
controversy, but another high-profile Washington figure Hillary Rodham
Clinton also has much to lose.
At almost every turn, the first lady is centrally involved in the ruckus
and her entanglement poses tricky political dilemmas for both Democrats and
Republicans.
Republicans have tiptoed around criticizing the popular Hillary Clinton,
who has redefined the role of first ladies and who serves as
a model for millions of women.
'Whether Mrs. Clinton did or did not do anything wrong ... people would
be nuts to focus on Mrs. Clinton's role. She is not the president,' said GOP
consultant Bill McInturff.
On the other hand, Democrats are worried that if Hillary Clinton is
embarrassed or distracted by the Whitewater mess, it could hurt the health
care reform effort she has championed.
''She is in the middle of the problem, and she is in the middle of the
policy, said GOP strategist Eddie Mahe. ''She cannot separate herself. She
wants to make a statement on health care, and the first question someone will
ask is: 'Did you do this or what about that?'''
By some accounts, Hillary Clinton's involvement in the controversy has
caused difficulties for those attempting to manage the crisis for the
president.
She reportedly resisted an independent investigation of the Clintons'
private business dealings, while some senior aides argued that it was a
political necessity. That dispute may have delayed the decision announced
Wednesday to seek a special counsel. The delay created the impression that the
administration was in disarray and maybe even stonewalling.
(EDITORS: NEXT 2 GRAFS OPTIONAL)
Clinton aide George Stephanopoulos insisted this week there was ''general
reluctance throughout the White House'' to seek the special counsel because it
''sets a bad precedent" and ''has the potential to interfere with the
president's agenda.
The Clintons have denied knowledge of any wrongdoing, with Hillary Clinton
saying last month she was ''bewildered'' that Whitewater ''remains a topic of
inquiry.'
(END OPTIONAL TRIM)
At the heart of the problem for the Clintons is a real estate partnership
with James and Susan McDougal in Whitewater Development Corp. James McDougal
also owned Madison Guaranty Savings and Loan, which failed in 1989.
A Justice Department investigation has been probing whether Madison
Guaranty improperly diverted money into Whitewater and into Bill Clinton's
1984 gubernatorial re-election campaign.
The Federal Deposit Insurance Corp. also is investigating whether Hillary
Clinton's former Little Rock law firm misled the agency about the firm's
dealings with Madison Guaranty.
Among the questions that could be raised about Hillary Clinton's role in
Whitewater-Madison affair:
Did it create the appearance of a conflict for Hillary Clinton to legally
represent a savings and loan before state regulators when her husband was
governor?
In 1985, then-Gov. Clinton stopped by Madison while jogging through Little
Rock and complained to McDougal about family finances, the Washington Post has
reported. The newspaper quoted McDougal as saying that he promptly awarded a
,000-a-month retainer to the Rose law firm, where Hillary Clinton was a
partner.
A few months later, Hillary Clinton represented the thrift before state
regulators, presenting a plan for selling preferred stock to raise capital.
State officials approved the plan but it was never carried out.
Was it a conflict for Hillary Clinton's law firm to represent federal
regulators trying to recover money lost in the thrift's collapse after the
firm previously had represented Madison Guaranty?
In 1989, the federal government shut down Madison Guaranty, and the FDIC
paid the Rose law firm $400,000 to sue the auditors of Madison Guaranty, which
earlier had been represented by Hillary Clinton and another lawyer.
''There are different things that could pop up and create some real
issues, said Lawrence Dubin, a law professor at the University of
Detroit-Mercy specializing in legal ethics. ''A lawyer is supposed to
represent clients without conflicting interests unless there is appropriate
consent and disclosure.'
Dubin said the first scenario representing a client before state
regulators when a relative is governor is more a political problem than an
ethical one.
The other issue representing both sides of the street, first Madison,
then government regulators could pose ethical difficulties.
'When Hillary Clinton was representing the thrift, she would have been
privy to information that a lawyer is obliged to keep confidential and not use
in any way adversely to that client's interests,' Dubin said.
If a second client, such as the FDIC, uses some of that confidential
information to the detriment of the first client, then it could be an
''ethical violation," he said.
At the same time, if the FDIC wasn't told of the law firm's prior
representation of Madison Guaranty and the firm held back to protect the
thrift, that creates a conflict of interest, Dubin said.
(EDITORS: STORY CAN TRIM HERE)
Whatever the legal or ethical judgments, Hillary Clinton may end up
holding the hot potato.
Democratic strategist Bob Beckel said: ''This is the first time you have a
first lady being dragged into something like this. You will have some
Democrats who will want to put all this on her. After all, he'll be the one on
the ticket in '96.''
**** filed by: KR-F (--) on 01/13/94 at 19:35EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:08EST ****
bc-nj-bradley
BRADLEY SAYS CLINTON RIGHT
IN AGREEING TO SPECIAL COUNSEL
By DAVID BAUMAN=
Gannett News Service=
WASHINGTON Sen. Bill Bradley, D-N.J., said Thursday the White House
''took the right step'' in calling for the appointment of a special counsel to
look into President Clinton's financial dealings with the Whitewater
Development Corp.
But Bradley rejected the call by Senate Minority Leader Bob Dole, R-Kan.,
for a Senate investigation.
' 'We don't need a special select committee," Bradley said. ''A special
prosecutor is the appropriate step to take.
Bradely said despite denials by Clinton and first lady Hillary Rodham
Clinton of any financial wrongdoing in the Whitewater case, the mounting
political pressure over the issue forced the White House to request the
appointment.
''The Whitewater issue was building, and anytime an issue builds like
that, the easiest way to deal with it is get the facts out, Bradley said.
'`The president has done the right thing. It's the best way for him to get
beyond all this.''
Bradley was among a group of 10 Democratic senators who called last week
for a special council to investigate whether Clinton improperly benefited from
his business partnership with James McDougal, operator of both Whitewater and
the now-defunct Madison Guaranty Savings and Loan.
Bradley dismissed suggestions that pressure by Democratic senators for the
special prosecutor had embarrassed the president.
''There are questions about Whitewater that the facts can answer,''
Bradley argued. ''Another issue at stake here is the trust between the people
and government, which is enormously important.
Speaking to reporters in his Capitol Hill office, Bradley outlined his
legislative priorities for 1994, which include health care reform, cutting
federal spending, and helping advance a national policy debate on violence.
Bradley called ''enormously important'' President Clinton's proposed
sweeping changes to the country's health-care system to guarantee coverage to
every American.
He predicted Congress would pass some form of health-care reform before
the November elections, but acknowledged that most lawmakers, himself
included, consider the president's proposal a working draft.
''At the moment I don't support any specific approach, said Bradley. He
added that ultimately "Congress will adopt a hybrid'' between the Clinton
plan that seeks to keep health costs down through
a series of cost controls and alternative proposals such as the single-payer,
Canadian style health-care system.
Major issues in the health delivery system that Bradley said must be
resolved are the administration of state-run health insurance alliances where
most consumers would buy coverage, mandates upon businesses, and a patient's
right to choose their own doctor.
''This will be an enormously complicated debate, he predicted.
Another top-shelf issue for the senator is cutting federal spending.
Bradley, who voted to cut spending more often than any other Democratic
senator last year, said he intends to introduce ''a budget reform bill that
will make it easier for us to cut spending.
He noted that although spending cuts are approved, the money saved, rather
than being removed from the budget, is returned to the appropriations
committees to be earmarked for some other project.
On the issue of violence, Bradley said that he wanted to ''help frame the
issue more broadly in terms of what it means for society and what we all will
have to do to solve this problem.'
The senator said he would be giving ''major speeches'' on violence before
this summer, and planned to hold congressional hearings that would explore
ways to deal with the problem.
**** filed by:GN-F(--) on 01/13/94 at 17:53EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:08EST ****
bc-voice
WHITEWATER: A FISHING
EXPEDITION IN THE MAKING
Eds: Another Voice column; for spot or weekend use
By DeWAYNE WICKHAM=
Gannett News Service=
WASHINGTON There's something madly insane about this.
Pressured by a pack of political wolves and journalists who themselves
would never peacefully submit to such an outrage President Clinton has
agreed to the naming of a special counsel to investigate whether there is any
reason he should be investigated at all.
This great fishing expedition has come about because 15 years ago the
president and his wife became investors in a land deal with James McDougal, a
man who later bought a savings and loan, which over time loaned money to
Clinton and his wife.
Eventually, the land deal went sour; the savings and loan bellied up and
was taken over by federal regulators; and McDougal was tried and acquitted of
bank fraud. End of story, right?
Wrong.
The Clintons' dealings with the Whitewater Development Corporation and
McDougal's savings and loan were dredged up during the 1992 presidential
campaign, but nothing came of it. No accusations of criminal wrongdoing. No
investigation by the then Republican-led Justice Department. No indictments.
Nothing.
End of story, right?
Wrong.
When Vincent Foster Jr., the deputy White House counsel, committed suicide
last July, FBI investigators discovered months later that a file he'd
maintained on the Clintons' involvement in the Whitewater project had been
removed from his office. News of this action loosed howls of protests from
Republicans on Capitol Hill who demanded that a special counsel be named to
figure out why this happened and to investigate the Clintons' involvement
with McDougal and Whitewater.
Why? What evidence does anyone have that a crime has been committed by the
president or his wife? So far, none. But then that's why the president's
political enemies want a special counsel, to troll through his private papers
in search of something anything even mildly incriminating that would justify
this witch hunt.
Recently, several Democrats joined the call for the appointment of
a special counsel. By doing so, it was said, they de-politicized this issue.
So, end of story, right?
Wrong.
Moments after it was announced that Clinton capitulated under the weight
of this pressure from members of his own party and asked the Attorney General
to name a special counsel, Bob Dole, the Senate Republican leader, went before
television cameras to complain that this was not enough. Now, he wants
Congress to get into the act and launch its own investigation to determine if
the president did anything that could possibly justify any of this.
Politically, I don't like Bill Clinton. In his first year of office, the
president has shown little loyalty to the causes he's embraced or the people
he befriends.
But personally, I chafe at what he is being made to suffer not because
there is a shred of evidence of wrongdoing by him, but mostly because he looms
as Washington's biggest target of political opportunity.
Republicans pressed for a special counsel in retaliation for what their
party and presidents were put through during the Iran-contra investigations
which, should you need reminding, resulted from specific allegations of
criminal misdeeds by people in the White House.
And the faint-of-heart Democrats who joined Republicans in calling for the
appointment of a special counsel surrendered to the political mob, not good
sense.
In the past, the job of the special counsel has been to investigate
charges of wrongdoing. Now, in the case of Bill Clinton, it is actually to go
looking for them.
Unfair? You bet it is.
Such an investigation has to begin with the presumption of guilt because
no charges of wrongdoing have been levied against the president. Otherwise,
why would this investigation be necessary?
To clear his name? Of what?
Dole and others say the public has a right to know what's in the personal
files the Clintons kept of their involvement in the Whitewater case.
They're wrong.
The voyeur in us begs for a peek at these records, but the rational
thinker in us must demand an end to this witch hunt.
**** filed by: GN-F (--) on 01/13/94 at 17:02EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:11EST ****
bc-firstlady
FIRST LADY HAS WORK CUT
OUT IN WHITEWATER SNAFU
By ANDREA STONE=
USA TODAY=
Mary Todd Lincoln's loyalty was questioned because of her Confederate
kinfolk.
Nancy Reagan was denounced for her expensive taste in china and gowns.
But those were minor embarrassments compared to the potential damage
Hillary Rodham Clinton's role in Whitewater poses to her husband's presidency
and to his goal of reforming the nation's health-care system.
The Clintons say they've done nothing wrong. Still, this week President
Clinton reluctantly bowed to pressure and asked for a special counsel to
investigate.
Regardless of the outcome, Whitewater raises unprecedented questions about
a first lady who, unlike her more traditional predecessors, has been both
breadwinner and policy advisor to her husband:
Critics say Hillary Clinton, shaper and shepherd of the White House's
health care reform package, should be held to the same standards as other
senior policy advisors a potentially impossible standard to apply to the
president's wife.
Others argue that as the nation's first lady, Hillary Clinton is entitled
to the same deference afforded to first ladies of years past.
'We're
... into uncharted territory," says University of Texas historian
Lewis Gould. "There is no precedent.
Republicans already know that. Early criticism of Hillary Clinton viewed
as insensitive, personal attacks on the president's wife backfired. This time
the GOP, though hungry for details, is treading carefully around her.
Although the problems confronting the Clintons are new, there are plenty
of examples of women whose political careers were threatened by revelations
about their husbands.
Geraldine Ferraro's historic 1984 race for vice president was sullied by
reports linking husband John Zaccaro to organized crime. More recently, Sen.
Diane Feinstein, D-Calif., was dogged by questions on her husband's finances.
It's ''a whole new world,' says University of Southern California
political scientist Larry Berg. '`The conventional way of looking at a spouse
is no longer valid.''
Says Harriett Woods, president of the National Women's Political Caucus:
Whitewater makes "clear that she is her own person and that she as a
professional must be resposnible for her own actions.
''I don't think at this point she becomes the president's wife who can't
be questioned."
Hillary Clinton isn't the first to try to reshape the role of first lady
by custom the nation's model wife.
Eleanor Roosevelt wrote a newspaper column. Betty Ford lobbied for the
Equal Rights Amendment. Rosalynn Carter attended cabinet meetings. Yet, each
maintained distinct identities from their husbands.
If Roosevelt caught flak for her strong views, says Stephen Hess of the
Brookings Institute, it was understood ''they were uniquely her opinions.
That fine line is blurred at best with the Clintons. He ran on a ''two for
one'' platform, promising to use her expertise as a top lawyer to mold policy.
Hillary's county-by-county sales job on education reform in Arkansas was
pointed to as a model during the campaign.
''The difference here is the degree to which (she) is really a
co-political partner, says Hess. ''Right from the very beginning
...
there's been no doubt that she is an official person in her own right.
Though she put aside her career when she moved to Washington, Hillary
Clinton worked full-time as a private lawyer in Little Rock. Her six-figure
income was the main family support while Clinton earned $35,000-a-year as
governor.
Her work then as a lawyer for the failed Madison S&L and possible
conflicts of interest as governor's wife and lobbyist now are key questions
in the investigation.
New York Times columnist William Safire Thursday accused Hillary Clinton
of wanting to hide Whitewater documents ''because they may show her to be not
merely an inept wheeler dealer, but an occasionally less than competent
attorney.'
In addition, Whitewater may prove hurtful to the Clintons health plan.
Says former congressman and GOP commentator Vin Weber: ''If she's weakened
by Whitewater, that shifts substantially the center of gravity in that debate
and makes it much less likely the Clinton administration will hold on to their
proposals.
Until now, ''Hillary Clinton has gotten almost a free ride,' says
Republican consultant David Keene, noting the fawning reception she received
on Capitol Hill. ''If she goes up there again, the bloom is off the rose.
At best, critics say media questions about Whitewater will divert her
attention and energies away from health reform. At worst, she could be found
guilty of ethics or criminal violations.
Then, ''She clearly can't continue to serve in a policy-forming role,'
says Weber. ''On the other hand, do we insist the president remove her? And
what does that do to the president's state of mind? I don't think there is a
good answer.'
**** filed by: GN-F (--) on 01/13/94 at 20:07EST ****
**** printed by: WHPR (PMEY) on 01/14/94 at 09:14EST ****
WHITEWATER DEVELOPI
ANY
The Whitewater Case:
Finding the Connections
On Wednesday, President Clinton
Clinton
Hillary
David Hale
James
Susan
asked Attorney General Janet Reno to
Rodham
McDougal
McDougal
appoint a special counsel to review his
Clinton
role as an investor in Whitewater
Development Company, an Arkansas
real estate development company, and
THE NEW YORK TIMES, SUNDAY, JANUARY 16, 1994
Whitewater's links to a failed savings
MADISON BANK AND TRUST, MADISON GUARANTY
and loan, Madison Guaranty.
Mr. Clinton has maintained that he
and his wife did nothing except lose
almost $70,000 in a real estate
venture; nothing that is known
publicly about the investment
indicates that the Clintons or anyone
else in the Adminis-tration did
Bill Clinton
Hillary
Vincent W.
Webster L
James B.
Susan
Beverly
anything illegal.
Rodham
Foster Jr.
Hubbell
McDougal
McDougal
Bassett
These are the people and institutions
Clinton
Schaffer
who figure prominently in the inquiry
and their connections to one another.
Direct and indirect connections are
CLINTON'S CAMPAIGNS
ROSE LAW FIRM
ARKANSAS STATE
shown. For example, Mr. McDougal
FOR GOVERNOR
GOVERNMENT
owned both Madison institutions while
Mrs. Clinton did legal work for
Madison Guaranty.
Bill Clinton
James B.
Hillary
Vincent W,
Webster L
Bill Clinton
Beverly
McDougal
Rodham
Foster Jr.
Hubbell
Bassett
Clinton
Schaffer
The Players
associations in the 1980's.
Was Indicted for bank fraud In 1989 and
MADISON GUARANTY,
acquitted in 1990.
MADISON BANK AND TRUST
A Justice Department Inquiry is reviewing
BILL CLINTON
the circumstances surrounding Mr. Foster's
A savings and loan and a bank, both owned
death, Including the removal of the
SUSAN MCDOUGAL
by Mr. McDougal.
Governor of Arkansas from 1979 to 1981
Whitewater file.
Former wife of James McDougal.
Madison Guaranty's assets rose from $3
and from 1983 to 1992, when he resigned
after being elected President.
Officer of Whitewater Development
million in 1982, when Mr. McDougal bought
DAVID HALE
Company. In 1986, received a loan from a
it, to more than $120 million In 1985. It
Major shareholder In Whitewater
A former muncipal judge and owner of
company backed by the Small Business
Invested In real estate developments in
Development Company from 1979 to 1992, an
Capital-Management Services Inc., which
Administration, of money meant to help
Arkansas and Canada that ultimately falled,
Investment that represented the largest of
received Federal assistance for lending to
struggling entrepreneurs. Some of this
and courted politicians and held political
his life. Maintained close personal, political
disadvantaged entrepreneurs. Records show
money was used by Whitewater In Its land
fundraising events.
and business relationships with James B.
that in 1986, he made several loans to
deals.
Federal examiners criticized the savings
McDougal, the owner of the two banks, for
borrowers with ties to the Democratic
about 20 years. After Mr. McDougal suffered
Ran marketing company in 1980's that
and loan In 1984 for "unsafe and unsound
Party, and Mr. Hale is under Indictment on
financial setbacks in 1986, the two men
earned all of its Income from her husband's
lending practices" and numerous violations;
charges Involving transactions that he says
savings and loan.
the next examination, in 1986, found so many
drifted apart; their last known conversation
grew out of the earlier loans.
possible violations that Mr. McDougal was
took place in 1990.
removed from control.
His company lent $300,000 to Susan
BEVERLY BASSETT SCHAFFER
Appointed the state regulators who
McDougal in 1986. Some of this money was
The Justice Department Is Investigating
oversaw Mr. McDougal's savings and loan.
eventually used in a land purchase by
A lawyer; appointed Arkansas' chief
whether Madison Guaranty Improperly
Whitewater. Mr. Hale says he only made the
savings and loan and securities regulator by
funneled money into Whitewater or into Mr.
HILLARY RODHAM CLINTON
loan because Mr. Clinton and Mr. McDougal
Mr. Clinton.
Clinton's 1984 campaign for governor.
A partner in the Rose law firm, which she
asked him to do so; Mr. Clinton and Mr.
Briefly represented Madison Guaranty
joined in 1977 and left in 1992.
McDougal have denied that.
before becoming a state regulator.
ROSE LAW FIRM
Major shareholder in Whitewater
Although as a lawyer she had written a
A prestigious Arkansas law firm at which
WEBSTER L. HUBBELL
Development Company from 1979 to 1992.
memorandum saying Madison Guaranty
Mrs. Clinton, Mr. Foster and Mr. Hubbell
A law partner of Mrs. Clinton and Mr.
had engaged in "willful" violation of Federal
Borrowed $30,000 from Madison Bank and
were partners. It represented Madison
Foster, and their partner In a business
laws, she took no action against the savings
Trust as part of Whitewater's land dealings.
Guaranty, as well as Federal regulators
venture, now defunct Mr. Clinton named
and loan for 18 months. She concurred when
trying to clean up falled savings and loans
Represented Madison Guaranty when it
him Associate Attorney General.
Federal regulators removed Mr. McDougal
that Included Madison Guaranty.
sought approval from state regulators for a
from control in 1986. Ethics experts say
plan to raise capital by issuing preferred
Mr. Hubbell's father-in-law, Seth Ward,
state ethics guidelines suggest she should
Federal bank regulators are reviewing
stock.
borrowed hundreds of thousands of dollars
have recused herself from any decisions
whether the firm misled them about its past
from Madison Guaranty, and, according to
concerning Madision, but Mrs. Schaffer
dealings with Madison Guaranty.
VINCENT W. FOSTER JR.
court records, failed to repay more than
denies giving the organization preferential
THE NEW YORK TIMES, SUNDAY, JANUARY 16, 1994
$500,000.
Childhood friend of Mr. Clinton. Appointed
treatment.
WHITEWATER DEVELOPMENT COMPANY
deputy White House Counsel by Mr. Clinton.
A real estate development company
JAMES B. MCDOUGAL
Was a law partner of Mrs. Clinton at the
Arkansas businessman; a friend, political
The Institutions
Incorporated by the Clintons and the
Rose law firm. He committed suicide in July.
McDougals in 1979.
In 1992, Mr. Foster was the Clintons'
associate and business partner of the
Clintons for many years.
The four partners borrowed more than
ARKANSAS STATE GOVERNMENT
lawyer when they sold their share of
$200,000 to buy 230 acres in the Ozarks,
Whitewater back to Mr. McDougal. A
President of Whitewater Development
Several people linked to Whitewater or the
hoping to re-sell the land for retirement
Whitewater file was taken from his office
Company. Whitewater maintained a
McDougals were elected or appointed
homes, but the venture was not successful.
after his death, a fact that was not publicly
checking account at Madison Guaranty, Mr.
officials in Arkansas.
disclosed until December.
McDougal's savings and loan, and was
A 1992 report supervised by a Denver
permitted overdrafts.
lawyer says the Clintons lost $68,800 on the
Before joining the Administration, he
CLINTON CAMPAIGNS FOR GOVERNOR
deal, mostly resulting from loan payments
represented Madison Bank and Trust.
Owned Madison Bank and Trust and
In 1985, Mr. McDougal raised money to
they made, and the McDougals lost $92,000.
Federal regulators also frequently hired
Madison Guaranty. a savings and loan. Both
help retire a Clinton campaign debt.
Mr. McDougal claims this report vastly
Mr. Foster and the Rose law firm to
were criticized by regulators, and In 1986
Investigators now suspect that money was
overstates the Clintons' losses.
represent the Government in cleaning up
Mr. McDougal was removed from control of
improperly diverted from Madison
failed Arkansas savings and loan
Madison Guaranty by Federal regulators.
Guaranty.
STEPHEN ENGELBERG AND JEFF GERTH
hel Powell/The New York Times. Photographs by The New York Times and the Arkansas Democr Carder
White House Memo
While the two were ultimately con-
All Admit,
vinced that they had to appoint a spe-
cial counsel, everyone else at the White
House thought it was bad idea. The
Whitewater
President despised the idea of appoint-
ing someone to investigate behavior
that not even his worst enemies would
claim as criminal, aides said. Mrs.
Overtook
Clinton resisted the idea for similar
reasons, and Bernard W. Nussbaum,
the White House counsel, supported
their contention.
Handlers
But aides who had studied President
Jimmy Carter's handling of a Federal
Investigation into his family's peanut
business concluded that a special coun-
sel was the best tactic for putting the
By GWEN IFILL
affair to rest. The Carter inquiry,
Specialio The New York Times
which took seven months, found "no
WASHINGTON, Jan. 15 - Even by
evidence whatsoever" that bank loans
its own accounting, the White House
were diverted to Mr. Carter's 1976
handling of questions about President
Presidential campaign.
Clinton's Arkansas real estate dealings
The stubborn and unpleasant White-
has been a near fiasco.
water venture has plagued the Clintons
For now, Clinton aides say they have
for nearly two years. Questions about
stemmed the flood of publicity about
their investment in what was to have
the role of Bill and Hillary Rodham
been a 200-acre retirement community
Clinton in the Whitewater Develop-
in the Ozarks first arose during the
ment Company, a real estate invest-
1992 Presidential campaign, dogged
ment company they formed with the
them for a short while and then faded.
owner of a failed Arkansas savings and
New questions arose late last year
loan. But first the aides had to per-
when it was disclosed, months after the
suade the Clintons, and their legal ad-
fact, that White House officials had
visers - as well as themselves - that
the only way out was to go along with
removed Whitewater files from the of-
the rising cry for an independent inves-
fices of Vincent W. Foster Jr., the
tigation into the matter.
White House deputy counsel and for-
That took some time, and before the
mer law partner of Mrs. Clinton, short-
drama played out, it featured bouts of
ly after he killed himself in July.
Presidential temper, battles with Con-
White House officials began to real-
gress and, finally, abrupt capitulation.
ize they had lost their grip over the
All along, the issue was complicated
latest twists practically at the stroke of
by the involvement of Mrs. Clinton,
the New Year.
who as a Little Rock lawyer had repre-
George Stephanopoulos, the Presi-
sented Madison Guaranty Savings and
dent's senior adviser, returned to
Loan, the failed institution owned by
Washington fresh from a ski holiday
James B. McDougal, the Clinton's part-
and declared on television that all of
ner in Whitewater.
the pertinent papers in the matter had
'Political Reality'
been turned over to the Justice Depart-
ment, which was investigating Madi-
THE NEW YORK TIMES, SUNDAY, JANUARY 16, 1994
As a matter of principle and legality,
son Guaranty and its dealings with
the Clintons had insisted that their pri-
vate financial dealings before Mr. Clin-
Whitewater.
ton assumed the Presidency were not
But Mr. Stephanopoulos's remarks
the public's business.
were premature at best and mislead-
But some of the President's political
ing at worst; no papers had been deliv-
advisers watched with dread this week
ered. Dee Dee Myers, the White House
as news reports about Whitewater fol-
press secretary, spent the bulk of her
lowed him abroad, threatening to
first news briefing of the New Year
drown out the themes of international
correcting Mr. Stephanopopulos's mis-
stability and strength they had worked
impression. Mark D. Gearan, the com-
so carefully to project during his 10-
munications director, later devoted
day trip to Europe and Russia.
even more time to explaining why the
As one White House official said: "At
White House had failed to note that the
some point, the principle of the issue
papers were being turned over to the
got caught up in the political reality. So
Justice Department just in time to
we called the President and talked
avoid a subpoena.
about how he saw it."
Still later, it emerged that the Clin-
By announcing the decision to have
tons had taken steps to make sure that
the Attorney General appoint a special
the information would be subpoenaed,
counsel, aides believe the White House
and thus shielded from the public and
- at least for the moment short-
the news media.
circuited the debate and perhaps cut
off the controversy before it began to
Fears of Paralysis
drag Mr. Clinton down in opinion polls.
When Mr. Clinton's mother died un-
'Every innocent little slip or lack of
expectedly just before his European
complete information was pounced
trip, and the President traveled to Ar-
on," moaned one White House official.
kansas for the funeral, White House
"And when you get to that point, you
aides expected that the Whitewater
have to face reality, look for a circuit
drumbeat would stop. They were
breaker."
wrong.
Hillary Clinton's Role
Once the White House had begun to
Mrs. Clinton, who left Washington to
dissemble on the details of the White-
join her husband in Moscow on Thurs-
water deal, Republicans immediately
day the day after the White House
raised questions. White House efforts
announced the decision to seek a spe-
to label the attack as a partisan assault
cial counsel represented her fam-
were undercut when important Demo-
It all boiled over in Europe, as was
ily's interest in determining what the
evidenced by Mr. Clinton himself, when
crats, along with leading newspaper
circuit breaker would be, aides said.
But when Mrs. Clinton is involved in
editorials, joined the call for an inde-
he snatched off his microphone and
stalked out of an interview with Jim
any issue, most White House officials
pendent investigation.
For the White House, the major con-
Miklaszewski, an NBC reporter, who
stand clear. While they acknowledged
cern was that the issue would paralyze
had asked him two Whitewater ques-
that her chief of staff, Margaret Wil-
hams, sat in on damage-control meet-
its staff first, then preoccupy members
tions in a row.
of Congress and move on to distract the
Asked about the encounter the next
ings on the Whitewater affair, Mr. Clin-
President and the electorate from the
day in another television interview, Mr.
ton's aides were loath to discuss his
wife's role in the discussions.
important issues Mr. Clinton hoped to
Clinton said he had been misled about
Aides who traveled with the Presi-
focus on, providing universal health
the topic of the interview and said he
dent on Air Force One this week said
care coverage and curbing crime.
was tired as well as preoccupied with
Mr. Clinton discussed the Whitewater
"I mean, I guess the media's been
the tasks at hand.
situation with his wife by telephone, but
obsessed with this," Mr. Clinton said
last week in an interview on ABC
"There's no point in going into it
they refused to provide any details.
News' "Nightline." "But it never
now," he added. "I don't have to talk
about it any more."
crosses my mind."
7
Time Magazine: Whitewater yields more problems for Clinton
NEW YORK (UPI) Despite President Clinton's claims, losses from a real
estate deal involved in the Whitewater investigation may have been
exaggerated, Time Magazine reported Sunday.
The magazine's issue to be distributed Monday reported that Arkansas
records show there was a profit of $47,000 made in the real estate deal
Clinton says cost him nearly all of the $69,000 he and Hillary Clinton
invested.
Time says that because the sale was made from one partnership involving
the Clintons to another partnership they formed, the profit may have been
entirely on paper. The Sept. 30, 1979, sale, however, generated profits which
the magazine said should have been subject to federal capital gains taxes and
should have been reported on Clinton's tax returns.
No such profit is reported on returns filed from 1980 through 1987, the
newsweekly says, although 1979 returns were not available.
Time claims other new developments suggest ethical problems in how Clinton
conducted himself concerning his dual role as governor and investor in the
real estate industry.
When Clinton's Whitewater Development Corp. partner needed the approval of
a state board to overcome a rival's objections and open a Salinas County
branch, Clinton filled a temporary vacancy on the board with his own
appointment to specifically hear'' the case.
Clinton's appointee, and the board, voted for Clinton's partner. Time said
some lawyers interviewed for the story said it was unethical for Clinton to
put his appointment in for the decision affecting his business partner.
Attorney General Janet Reno said she will name a special prosecutor to
investigate the Clintons' Arkansas real estate deals. Questions that have been
raised include whether any money was channeled illegally to Clinton's
presidential campaign.
Using values estimated by Arkansas stamp taxes on real estate deeds, Time
reports odd escalations in value of property the Clintons bought and sold.
Some property was sold by Clinton partnerships to other companies in which the
Clintons also were partners.
Such maneuvers are not illegal, but Time questions what it called
quick'' upswings in value between the transactions.
Time says a local bank president involved in the deals gave ``a not fully
satisfying'' explanation, that the properties were more desireable than others
in the area and included riverfront parcels.
Vice President Al Gore, on ABC's This Week with David Brinkley''
program, stoutly defended Clinton Sunday in the Whitewater matter, saying the
president's reaction has been, ``A normal reflex of outrage when you've done
absolutely nothing wrong and somebody kind of vaguely accuses you of doing
something wrong.
``I think that's kind of a normal human trait, Gore said. ``A special
counsel is going to be appointed, Gore said. ``All of the information has
been turned over, so let it run its course.
**** filed by:UPI-(us) on 01/16/94 at 18:06EST ****
**** printed by: (JEL) on 01/17/94 at 09:55EST ****
AM-Whitewater, 1st Ld-Writethru, 530
Need for Congressional Probe on Clinton Financial Dealings Disputed
Eds: Inserts 1 graf after 7th graf pvs. `McDougal's attorney'' etc. to
UPDATE with McDougal subpoenaed; transitional change in 8th graf pvs.
By LAURAN NEERGAARD= Associated Press Writer=
WASHINGTON (AP) A Republican congressman pressed again Sunday for
congressional hearings into President Clinton's ties to a failed S&L, calling
the Arkansas venture a small issue but one of public trust.
The administration, meanwhile, stressed that Clinton is cooperating fully
with a probe, and a Senate Democrat accused the GOP of rehashing the issue for
partisan gain even after Clinton agreed that a special counsel should
investigate.
`All the information has been turned over, every scrap of it. A special
counsel (is being) appointed. What do you want?'' Vice President Al Gore asked
Sunday on ABC's` This Week with David Brinkley.
Attorney General Janet Reno is expected soon to announce the name of a
counsel to investigate the ties between Clinton, first lady Hillary Rodham
Clinton and James McDougal, owner of the Madison Guaranty Savings and Loan
that failed in 1989 at a cost to taxpayers of $47 million.
McDougal and the Clintons also co-owned the Whitewater Development Corp.,
an Arkansas real estate venture. Investigators are trying to determine whether
Madison S&L funds were illegally diverted to Whitewater or to help Clinton
repay a $50,000 loan for his 1984 gubernatorial campaign.
Clinton denies any wrongdoing, saying he lost $68,900 in the Whitewater
venture.
McDougal's attorney, Sam Heuer, agreed Sunday. ``I would suspect if there
were some secrets, we would have known them long before now, he said. `Jim
McDougal was a savings and loan executive, which is akin to being a communist
in the McCarthy era.
Heuer also said Sunday that McDougal has been subpoenaed to appear before
a federal grand jury in Little Rock on Thursday.
Rep. Jim Leach, R-Iowa, the ranking Republican on the House Banking
Committee, repeated his call for bipartisan congressional hearings, saying the
special counsel would look into illegal activities while Congress needed to
air an issue of public trust.
This isn't the largest issue. It's somewhere between much ado about
nothing and something might be a little rotten in part of the Ozarks, he
told CBS' Face the Nation. `There are possible breaches of law, but more
importantly there's a public ethic here that's at issue.
Sen. Bob Dole, R-Kan., who also has pushed for hearings, on Sunday
criticized the vice president for opposing them when, as a senator, Gore
called on Congress to investigate controversies plaguing the Reagan and Bush
administrations.
Gore responded that Dole last week said the appointment of a special
counsel would satisfy him. Let's let the special counsel do his or her
job, Gore said.
What we are looking at here is not an issue of national security,
agreed Sen. David Pryor, D-Ark. ``Sen. Dole and his Republican colleagues want
to keep this issue alive until 1996 and beyond so it can be a campaign
issue.
Leach pledged to proceed on his own if the Democrats refuse to create a
bipartisan committee to investigate Whitewater.
But he said he did not envision questioning Mrs. Clinton, who was
Madison's attorney at the time. Nothing would be more inappropriate than a
congressional effort to embarrass Mrs. Clinton, he said. We are looking
at a prior elected official, a current elected official.
**** filed by:APW-(AR) on 01/16/94 at 20:09EST ****
**** printed by: WHPR (JEL) on 01/17/94 at 09:55EST ****
More Whitewater
questions surface
President Clinton and Hillary Rodham Clinton may face
new questions about their role in the Whitewater land deal.
The Clintons bought the property at questionably high
prices in a quick turnaround land sale, records show.
The significance of the transaction is unclear. but could
be as simple as a bad investment or as complicated as a
plan to run up the value of the land.
The Clintons and partners Jim and Susan McDougal
bought the 230-acre property on Aug. 3. 1978. for $883 an
acre from a group of local investors called 101 River Devel-
opment, according to Marion County, Ark., land records.
101 River Development had bought the land just one day
earlier as part of a purchase of 3,600 acres for $1.4 million
from Arkla Land Co. 101 River Development - formed just
two weeks earlier - immediately turned around and sold
2,700 of the acres for $1.4 million to 15 investors. All 15 in-
vestors were local - except the Clinton-McDougal partner-
suggesting the elections had
produced a "new sensitivity"
toward reforms' effect on Rus-
sians. "I'm not sure it's a bad
thing that there are one or two
changes," Christopher said on
NBC's Meet the Press.
Gaidar said he opposed Yelt-
sin's recent decisions to ex-
pand use of the Russian ruble
into the former Soviet republic
ship, who had not yet created the Whitewater Development
of Belarus, which would re-
quire a heavy Russian expendi-
ture, and a new $500 million
parliament building.
Co. Inc.
In buying the undeveloped par-
cel, the Clintons and McDougals
paid far more than any local inves-
tors. A similar property on the
White River was sold to a local in-
vestor for $308 an acre. The high-
est amount paid by local investors
was about $650 an acre - but that
was for more valuable land located
on a main highway.
Rep. Jim Leach, R-Iowa. dissat-
isfied with the White House's call
"correct" and soften Russia's
reforms, avoiding the painful
"shock therapy" associated
with Gaidar's free-market re-
forms, launched in January
1992. The reforms led to 900%
for a special counsel to probe Clin-
Inflation last year.
More Cabinet changes are
expected this week. Finance
minister Boris Fyodorov, an-
other key reform figure, also is
expected to resign.
Secretary of State Warren
Christopher said he wasn't sur-
prised by Gaidar's departure,
By Rick Willung. Reuters
GERGEN: Files not
ton's ties to a failed Arkansas sav-
for public
ings and loan and the Whitewater
deal, said Sunday he still wants
congressional hearings. Leach, top Republican on the bank-
ing committee, said on CBS's Face the Nation Congress
should explore whether Clinton violated the "public trust."
Investigators are trying to determine whether funds from
McDougal's Madison Guaranty Savings & Loan were divert-
ed to Whitewater or to help Clinton repay a $50,000 loan for
his 1984 gubernatorial campaign.
The White House on Friday turned over the last five box-
es of Whitewater-related documents to the Justice Depart-
ment but won't reconsider its decision not to make them
Yeltsin's economic architect quits
first fallout from Communist
and nationalist gains in last
month's parliament elections.
The resignation, demanded
by parliament's hard-liners op-
posed to radical reform, could
shake international confidence
in Russia's economic future. It
comes on the heels of Yeltsin's
assurances to President Clin-
ton last week that reforms
would continue.
Both Yeltsin and prime min-
ister Viktor Chernomyrdin
have spoken of the need to
public. "There are no current plans by the White House to
release documents," said David Gergen. counselor to Clin-
ton, on NBC's Meet the Press.
"All the information has been turned over, every scrap of
it. A special counsel (is being) appointed. What do you
want?" said Vice President Gore on ABC's This Week with
David Brinkley.
Sam Heuer, McDougal's lawyer. said Sunday on the
Brinkley show he doesn't believe there's anything "sinister"
President Boris
in the documents. "I would suspect if there were some se-
crets, we would have known them long before now," he
said. - Judy Keen and Dennis Cauchon In Yellville, Ark.
JOB HUNTING: Outgoing Defense Secretary Les Aspin
Yeltsin's economics guru, Ye-
gor Gaidar, resigned Sunday,
is trying for a seat on a Pentagon commission to study how
to reduce duplication in the armed forces, The New York
By Jack Kelley
USA TODAY
saying he feared that his re-
forms are about to be gutted.
"I cannot serve in the gov-
ernment and at the same time
be in opposition to it," said Gal-
dar, 37, who will retain his par-
liament seat as head of the pro-
Yeltsin Russia Choice party.
Gaidar's departure is the
Times reported. Aspin has asked his designated successor,
Bobby Inman, for the appointment. Aspin could earn up to
$108,000 on the commission, the Times said. His annual sal-
ary is $148,400. His departure date remains open.
CHINA WARNED: House Majority, Leader Richard
Gephardt. D-Mo., warned China Saturday that its preferen-
tial trade status may be canceled as punishment for human
rights abuses. Washington is threatening deep cuts in Chi-
na's textile import quotas starting today.
NIXON CENTER: The Richard Nixon Library & Birth-
place is adding a think tank that will focus on the United
States' new role in world affairs, library board member
Ken Khachigian said. The Center for Peace and Freedom
in Yorba Linda, Calif., is to open Thursday, the 25th anni-
versary of Nixon's first presidential inauguration.
MARY McGRORY
Whitewater
MARY McGRORY
Runs
Shallow
Whitewater Runs Shallow
F ALL the bad ideas that
o
came out this past week. the
McGRORY, From C1
constitutional mayhem of Ronald
bringing about nuclear
Reagan?
disarmament? Scores of incensed
worst was Sen. Bob Dole's
years a favorite Republican
That is not to say that public
listeners called to protest the
request for a joint congressional
whipping-boy, useful in direct-mail
hearings might not be diverting.
interruption of Lorena's lament.
inquiry on Whitewater.
fundraising. But now special counsel
Maybe not so riveting as the Bobbitt
Whitewater hearings would, it is
The answer should be no.
is not enough for the Kansas
saga, but Lorena's famous bob-job
true, offer interesting possibilities.
First off. we can't afford it. either
Republican. He would repeat the
has perhaps been sufficiently noted.
The president might volunteer to be
the time or the money. The joint
appalling fiasco of the select
We do not need any more
a witness. He is much at home in
congressional inquiry into the
committee that revealed so little
embarrassing lessons about the
the confessional mode. Hillary
Iran-contra affair cost $36 million
about the Iran-contra scandal and so
national tabloid mentality. Some
Clinton, who does not suffer fools
and took seven years. And we still do
much about Congress's ability to be
kind of a low was reached last week
gladly, perhaps had better not
not have the whole story. The
fat-headed, faint-hearted and
appear. But the supporting cast is
stonewalling that began when the
redundant.
promising. James McDougal, owner
story of arms-for-hostages broke in a
Everything the committee did
Imagine if Zubin
of the failed Madison Guaranty
Beirut newspaper on Nov. 4.
was wrong. but most wrong was its
S&L, sounds like a genial good ol'
1986-Ronald Reagan called it
pre-hearing decision to avoid
Mehta were called
boy, a reliable source of Arkie
"without foundation"-continues to
impeachment of Ronald Reagan, no
charm. His estranged wife, Susan, is
this day. Reagan's present lawyer,
matter where the evidence led.
to introduce a
even more intriguing. She is being
Theodore Olson. has been fighting to
Thus hobbled. and pressured by its
sued by a former employer, the wife
protect his client from the
self-imposed deadlines, it lurched
consequences of his foolish actions.
little majesty into
of symphony conductor Zubin
into its fatal indulgence of Oliver
Mehta, whose personal bookkeeper
The final report, which Special
North. Spooked by his uniform, the
she was. Imagine if Zubin Mehta
Prosecutor Lawrence E. Walsh
the proceedings
members allowed North to quaver
were called to introduce a little
submitted last Aug. 7. is still to be
and blink his way into celebrity. Sen.
and could be
majesty into the proceedings.
released. Perhaps we should wait for
this last bit of business before we
Orrin Hatch (R-Utah). an unfailing
Imagine, further. if he had the
source of bad ideas, kept asking the
persuaded to
inspiration to bring his orchestra
embark again.
president to pardon him. Rep. Jack
with him and could be persuaded to
Certainly we can understand how
Brooks (D-Tex.) suggested North
conduct his
conduct his magnificent "Harold In
tempted Dole must be. It is a chance
be subpoenaed. If he resisted, a year
Italy." It is an intoxicating prospect,
to discredit a popular Democratic
president. Not only that. he could
in jail might focus his mind. Brooks
magnificent
and hearing that music would justify
the bother of the hearings and t
bring down Hillary Rodham Clinton
was ignored. North testified on his
from her high perch. Hillary Clinton
own terms, making prosecution all
Harold In Italy."
perspective to the Caucus Room.
But we all have better things to
drives Republicans crazy. She is no
but impossible. Because of
do. Things like health care reform
end an uppity feminist. On organizing
congressional stupidity, he went on
when we saw NBC anchorman Tom
and welfare reform and improving
to become a millionaire and a
a program like health care. she can
Brokaw, all bundled up in Red
and extending Head Start and
lick any man in the house-or the
candidate for the U.S. Senate.
Square and pretending to be at the
learning to live together. A special
Senate.
Let's say no to Sen. Dole.
epicenter of world news, bringing on
prosecutor will be quite sufficient.
Dole, it should be understood. was
Does Dole have dreams of
a long Lorena segment from
On a congressional inquiry,
adamantly opposed to renewing the
impeaching Bill Clinton? Do any of
Manassas. What happened when
Congress should take its cue from
special counsel law. Walsh was for
the Whitewater accusations reach
CNN paused in its coverage of the
Nancy Reagan. wife of the subject of
the level of "high crimes and
See McGRORY, C5, Col. 4
Bobbitts to bring to viewers a
the expensive and eternal attempt
misdemeanors" charged against
historic moment in Kiev where
to find out what Ronald Reagan did
Mary McGrory is a Washington Post
Richard Nixon in office or the
Clinton and Ukrainian leaders were
and when he did it: Just say no.
columnist
SUNDAY. JANUARY 16. 1994
THE WASHINGTON POST
36
AM-Whitewater, 530
Needed for Congressional Probe on Clinton Financial Dealings Disputed
By LAURAN NEERGAARD= Associated Press Writer=
WASHINGTON (AP) A Republican congressman pressed again Sunday for
congressional hearings into President Clinton's ties to a failed S&L, calling
the Arkansas venture a small issue but one of public trust.
The administration, meanwhile, stressed that Clinton is cooperating fully
with a probe, and a Senate Democrat accused the GOP of rehashing the issue for
partisan gain even after Clinton agreed that a special counsel should
investigate.
All the information has been turned over, every scrap of it. A special
counsel (is being) appointed. What do you want?'' Vice President Al Gore asked
Sunday on ABC's` This Week with David Brinkley.
Attorney General Janet Reno is expected soon to announce the name of a
counsel to investigate the ties between Clinton, first lady Hillary Rodham
Clinton and James McDougal, owner of the Madison Guaranty Savings and Loan
that failed in 1989 at a cost to taxpayers of $47 million.
McDougal and the Clintons also co-owned the Whitewater Development Corp.,
an Arkansas real estate venture. Investigators are trying to determine whether
Madison S&L funds were illegally diverted to Whitewater or to help Clinton
repay a $50,000 loan for his 1984 gubernatorial campaign.
Clinton denies any wrongdoing, saying he lost $68,900 in the Whitewater
venture.
McDougal's attorney, Sam Heuer, agreed Sunday. ``I would suspect if there
were some secrets, we would have known them long before now, he said. ``Jim
McDougal was a savings and loan executive, which is akin to being a communist
in the McCarthy era.
But Rep. Jim Leach, R-Iowa, the ranking Republican on the House Banking
Committee, repeated his call for bipartisan congressional hearings, saying the
special counsel would look into illegal activities while Congress needed to
air an issue of `public trust.
This isn't the largest issue. It's somewhere between much ado about
nothing and something might be a little rotten in part of the Ozarks, he
told CBS' Face the Nation. There are possible breaches of law, but more
importantly there's a public ethic here that's at issue. "
Sen. Bob Dole, R-Kan., who also has pushed for hearings, on Sunday
criticized the vice president for opposing them when, as a senator, Gore
called on Congress to investigate controversies plaguing the Reagan and Bush
administrations.
Gore responded that Dole last week said the appointment of a special
counsel would satisfy him. ``Let's let the special counsel do his or her
job, Gore said.
What we are looking at here is not an issue of national security, "
agreed Sen. David Pryor, D-Ark. Sen. Dole and his Republican colleagues want
to keep this issue alive until 1996 and beyond so it can be a campaign
issue.
Leach pledged to proceed on his own if the Democrats refuse to create a
bipartisan committee to investigate Whitewater.
But he said he did not envision questioning Mrs. Clinton, who was
Madison's attorney at the time. Nothing would be more inappropriate than a
congressional effort to embarrass Mrs. Clinton, he said. We are looking
at a prior elected official, a current elected official.
**** filed by:APE-(--) on 01/16/94 at 15:14EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 09:54EST ****
(refiling, fixing coding)
UPI Spotlight
Time: Whitewater yields more problems for Clinton
NEW YORK (UPI) Time Magazine is reporting President and Hillary Clinton
made money, at least on paper, from Whitewater real estate investments.
President Clinton has said he lost money but Time says records show profits
from a land sale that went unreported in available Clinton tax returns.
**** filed by:UPI-(us) on 01/16/94 at 16:21EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 09:55EST ****
b:-whitewater-hillary - a1743
(ATTN: National editors) (Includes optional trims)
Waitwater Raises Questions of Hillary Clinton Involvement (Washn)
John M. Broder and James Risen= (c) 1994, Los Angeles Times=
WASHINGTON As the White House struggles to contain the controversy
surrounding the Clintons' involvement in the tangled Whitewater real estate
and banking affair, first lady Hillary Rodham Clinton's role has begun to
raise as many questions as her husband's.
Indeed, the Whitewater matter now seems to be a controversy befitting the
Cl intons' modern, two-career political marriage: Just as the first lady has
played a critical role in major policy decisions on health care and other
issues, she now finds herself a central figure with her husband in this
politically threatening affair.
It is Hillary Clinton's independent career as a top attorney in Little
Rock, Ark., while her husband served as governor, and her reputation for being
the financial brains of the household, that have prompted questions about her
role in the Whitewater matter.
Even friends in Arkansas are wondering why she has not come forward with a
fuller account of what she did and what she knew at the time the events in
Arkansas were unfolding.
I don't know why she hasn't been more open about explaining'' her work
as a lawyer for the defunct savings and loan at the center of the affair, said
Beverly Bassett Schaffer, a former Arkansas state regulator and longtime
acquaintance. I don't understand why they (the Clintons) were in business
with someone like McDougal, the thrift's owner.
James B. McDougal, a friend of Clinton, owned Madison Guaranty Savings &
Loan and was half-owner with the Clintons in an Ozark Mountains real estate
venture called Whitewater Development Corp.
The president and Hillary Clinton have said they were innocent bystanders
as McDougal drove his lending institution into the ground with a binge of bad
loans and frittered away nearly $70,000 of their assets on the bankrupt
Whitewater project.
Unresolved, though, is the mystery of how to reconcile this image of
naivete in the world of high finance with Hillary Clinton's reputation as a
top corporate lawyer and board member of some of the nation's biggest
corporations.
The question being asked more openly in Washington and Arkansas is: How
could Hillary Clinton who one legal journal called one of the 100 most
influential lawyers in the United States be unaware of gross mismanagement at
a savings institution she represented as an attorney and neglect her family's
only substantial financial asset?
Those questions intertwine with a web of others as federal investigators
continue their inquiry.
Specifically, they are trying to determine whether, amid the careening
disorder in the runaway S&L and Whitewater, money from a federally guaranteed
thrift was diverted into Clinton's 1984 campaign coffers. Also, there is the
matter of whether the institution got favorable treatment from Arkansas
authorities that helped keep it in business before federal regulators finally
shut it down in 1989.
It is Hillary Clinton's role as a former attorney for the savings and loan
that has raised basic concerns about her actions.
When Madison Guaranty ran into financial trouble, McDougal decided to sell
stock to raise money. But that was not normal practice for savings and loans
in Arkansas and the proposal needed approval from the Arkansas Securities
Commission. So McDougal had Little Rock's Rose Law Firm and specifically
Hillary Clinton make his case for the stock sale to state regulators.
The White House acknowledges that Hillary Clinton, then on a $2,000 a
month retainer with Madison Guaranty, worked on the proposal in 1985. However,
senior presidential adviser Bruce Lindsey said her involvement was minimal and
that most of the legal work was done by a junior associate, Richard N. Massey,
then a 28-year-old first-year lawyer at the firm.
Schaffer, who had just been appointed securities commissioner by then-Gov.
Clinton when the case arose, said Massey handled meetings with her staff and
that Hillary Clinton was the only senior attorney at the Rose firm with whom
she or her staff communicated.
Repeatedly, Hillary Clinton has insisted that questions arising from
private matters a decade or more ago are not a fit subject for public
scrutiny. She has refused to respond to any detailed inquiries, including the
central one: whether it was proper to represent a business partner before a
state regulatory board run by
a personal friend and appointee of her husband.
Jack Pitney, a political scientist at Claremont McKenna College in
Claremont, Calif., said the first lady's response creates a credibility
problem. It is difficult, he said, to believe she would ignore a major family
investment and overlook a potential conflict of interest.
She can't just throw her hands in the air and say she doesn't understand
all this legal stuff. She can't claim ignorance of legal details, he said.
``It is not a credible defense. Her involvement is a fix of her own making.
Friends and associates said the two images of Hillary Clinton meticulous
lawyer and absent-minded investor are not mutually exclusive. While she was a
keen professional at work, she had little interest in acquiring wealth or
closely monitoring her family's finances, according to her defenders.
Another family friend's assessment is that neither of the Clintons was
interested in getting rich, concentrating through the 1980s on Clinton's
political career and his wife's policy crusades.
They don't know beans about business, said this Arkansas friend who
asked to remain nameless.
(Optional Add End)
Nevertheless, in 1988, when Madison Guaranty clearly was on the verge of
failure and McDougal was suffering personal problems, records show that
Hillary Clinton wrote to McDougal to seek power of attorney over all
Whitewater-related business. She received that power but apparently did not
use it until 1992, when she authorized Rose firm law partner Vincent Foster
to work on Whitewater's delinquent tax returns.
And in an unrelated case, she took a distinctly active role in a family
investment involving much less money.
In 1983, she, Foster and Webster L. Hubbell, another law firm partner
formed an investment partnership called Mid-life Investors, with each
contributing an initial $15,000.
Roy P. Drew, a stockbroker who helped them set up the venture, said
neither Foster nor Hubbell later expressed much interest in the performance of
the partnership but that Hillary Clinton called frequently to inquire about
her investment, at times phoning him daily with questions and instructions.
The partnership eventually foundered, paying annual dividends of between
$2 and $20 from 1986 to 1992, according to the Clintons' income tax returns.
**** filed by: on 01/16/94 at 02:39EST ****
**** printed by: (JEL) on 01/17/94 at 09:53EST ****
bc-whitewater-hillary - a1743
(ATTN: National editors) (Includes optional trims)
Whitwater Raises Questions of Hillary Clinton Involvement (Washn)
By John M. Broder and James Risen= (c) 1994, Los Angeles Times=
WASHINGTON As the White House struggles to contain the controversy
surrounding the Clintons' involvement in the tangled Whitewater real estate
and banking affair, first lady Hillary Rodham Clinton's role has begun to
raise as many questions as her husband's.
Indeed, the Whitewater matter now seems to be a controversy befitting the
Clintons' modern, two-career political marriage: Just as the first lady has
played a critical role in major policy decisions on health care and other
issues, she now finds herself a central figure with her husband in this
politically threatening affair.
It is Hillary Clinton's independent career as a top attorney in Little
Rock, Ark., while her husband served as governor, and her reputation for being
the financial brains of the household, that have prompted questions about her
role in the Whitewater matter.
Even friends in Arkansas are wondering why she has not come forward with a
fuller account of what she did and what she knew at the time the events in
Arkansas were unfolding.
'I don't know why she hasn't been more open about explaining'' her work
as a lawyer for the defunct savings and loan at the center of the affair, said
Beverly Bassett Schaffer, a former Arkansas state regulator and longtime
acquaintance. ``I don't understand why they (the Clintons) were in business
with someone like McDougal, the thrift's owner.
James B. McDougal, a friend of Clinton, owned Madison Guaranty Savings &
Loan and was half-owner with the Clintons in an Ozark Mountains real estate
venture called Whitewater Development Corp.
The president and Hillary Clinton have said they were innocent bystanders
as McDougal drove his lending institution into the ground with a binge of bad
loans and frittered away nearly $70,000 of their assets on the bankrupt
Whitewater project.
Unresolved, though, is the mystery of how to reconcile this image of
naivete in the world of high finance with Hillary Clinton's reputation as a
top corporate lawyer and board member of some of the nation's biggest
corporations.
The question being asked more openly in Washington and Arkansas is: How
could Hillary Clinton who one legal journal called one of the 100 most
influential lawyers in the United States be unaware of gross mismanagement at
a savings institution she represented as an attorney and neglect her family's
only substantial financial asset?
Those questions intertwine with a web of others as federal investigators
continue their inquiry.
Specifically, they are trying to determine whether, amid the careening
disorder in the runaway S&L and Whitewater, money from a federally guaranteed
thrift was diverted into Clinton's 1984 campaign coffers. Also, there is the
matter of whether the institution got favorable treatment from Arkansas
authorities that helped keep it in business before federal regulators finally
shut it down in 1989.
It is Hillary Clinton's role as a former attorney for the savings and loan
that has raised basic concerns about her actions.
When Madison Guaranty ran into financial trouble, McDougal decided to sell
stock to raise money. But that was not normal practice for savings and loans
in Arkansas and the proposal needed approval from the Arkansas Securities
Commission. So McDougal had Little Rock's Rose Law Firm and specifically
Hillary Clinton make his case for the stock sale to state regulators.
The White House acknowledges that Hillary Clinton, then on a $2,000 a
month retainer with Madison Guaranty, worked on the proposal in 1985. However,
senior presidential adviser Bruce Lindsey said her involvement was minimal and
that most of the legal work was done by a junior associate, Richard N. Massey,
then a 28-year-old first-year lawyer at the firm.
Schaffer, who had just been appointed securities commissioner by then-Gov.
Clinton when the case arose, said Massey handled meetings with her staff and
that Hillary Clinton was the only senior attorney at the Rose firm with whom
she or her staff communicated.
Repeatedly, Hillary Clinton has insisted that questions arising from
private matters a decade or more ago are not a fit subject for public
scrutiny. She has refused to respond to any detailed inquiries, including the
central one: whether it was proper to represent a business partner before a
state regulatory board run by
a personal friend and appointee of her husband.
Jack Pitney, a political scientist at Claremont McKenna College in
Claremont, Calif., said the first lady's response creates a credibility
problem. It is difficult, he said, to believe she would ignore a major family
investment and overlook a potential conflict of interest.
She can't just throw her hands in the air and say she doesn't understand
all this legal stuff. She can't claim ignorance of legal details, he said.
``It is not a credible defense. Her involvement is a fix of her own making.
Friends and associates said the two images of Hillary Clinton meticulous
lawyer and absent-minded investor are not mutually exclusive. While she was a
keen professional at work, she had little interest in acquiring wealth or
closely monitoring her family's finances, according to her defenders.
Another family friend's assessment is that neither of the Clintons was
interested in getting rich, concentrating through the 1980s on Clinton's
political career and his wife's policy crusades.
They don't know beans about business,' said this Arkansas friend who
asked to remain nameless.
(Optional Add End)
Nevertheless, in 1988, when Madison Guaranty clearly was on the verge of
failure and McDougal was suffering personal problems, records show that
Hillary Clinton wrote to McDougal to seek power of attorney over all
Whitewater-related business. She received that power but apparently did not
use it until 1992, when she authorized Rose firm law partner Vincent Foster
to work on Whitewater's delinquent tax returns.
And in an unrelated case, she took a distinctly active role in a family
investment involving much less money.
In 1983, she, Foster and Webster L. Hubbell, another law firm partner
formed an investment partnership called Mid-life Investors, with each
contributing an initial $15,000.
Roy P. Drew, a stockbroker who helped them set up the venture, said
neither Foster nor Hubbell later expressed much interest in the performance of
the partnership but that Hillary Clinton called frequently to inquire about
her investment, at times phoning him daily with questions and instructions.
The partnership eventually foundered, paying annual dividends of between
$2 and $20 from 1986 to 1992, according to the Clintons' income tax returns.
**** filed by:LAWP(--) on 01/16/94 at 02:39EST ****
**** printed by: (NLAT) on 01/16/94 at 10:30EST ****
A Truly Independent Counsel
House. The President and the Attor-
By Randy M. Mastro
Several safeguards are required to
investigators, are not very popular on
ney General favor the bill, but Speak-
prevent the White House from derail-
Capitol Hill. Republican lawmakers
and E1 B. Schnurer
er of the House Thomas Foley has yet
ing independent investigations
complained that Lawrence Walsh
to put it to a vote.
through Presidential prerogative. By
went too far in investigating the scan-
resident Clinton has fi-
Even reinstating this well-intended
law (or, if necessary, by constituional
dals of the Reagan and Bush Admin-
nally responded to calls
law, however, would fall short of cre-
amendment), the President should
P
istrations. Since regaining the White
for an independent in-
ating the best weapon against execu-
not be allowed to grant pardons in
House, Democrats have shown no de-
tive branch misdeeds. Congress and
vestigation of his real
such prosecutions before the counsel
sire to subject their President to that
the President should restructure the
estate dealings. On
completes an investigation. It would
same independent scrutiny. Still, we
office in several important ways to
Wednesday, he asked
also help if courts would more nar-
cannot leave the legislative branch
insure an effective and truly inde-
Attorney General Janet Reno to ap-
out of the process and can only hope
pendent counsel.
point a special prosecutor to investi-
to sway Congress to see the benefits
Instead of the appointment of a dif-
gate the matter and report back to
ferent investigator for each new scan-
her. Therein lies the problem.
A full-time
of a permanent counsel.
The cast of characters at the White
dal, there should be a single independ-
THE NEW YORK TIMES, SATURDAY, JANUARY 15, 1994
A prosecutor who reports to the
ent counsel in charge of a permanent
House may have changed, but a sit-
Attorney General, a member of the
office of experienced prosecutors to
office, always there
ting Attorney General still cannot
President's Cabinet, is hardly an "in-
handle all investigations. The counsel
dependent" investigator. No matter
when we need it.
credibly investigate the President he
or she serves. Under such circum-
should be appointed for a four-year
how qualified the counsel is, some
term (like a United States attorney)
stances, the public simply could not
people may still wonder whether the
and the office should consist of full-
be expected to believe uncritically
Whitewater investigation is a white-
time, skilled prosecutors and have a
what it was told.
wash.
fixed budget and staff. This would
rowly construe the scope of executive
Unfortunately, neither Republicans
There used to be an alternative:
insure continuity and professionalism.
privilege. Otherwise, the executive
nor Democrats appear to want scru-
the office of the independent counsel.
By holding the office to strict budg.
branch will continue to put road-
tiny from a truly independent investi-
Since 1978, independent counsels
etary and manpower constraints, it
blocks in the path of proper inquiry
gator. That alone should be reason
have served a vital, if sporadic, func-
would avoid the excesses of some
and then, if all else fails, grant 11th-
enough to preserve and strengthen
tion: investigating and prosecuting
past investigations, with their ever-
hour pardons, as George Bush did for
the independent counsel.
high-level executive branch officials.
expanding expenses and "scorched
several Iran-contra figures.
The Attorney General shouldn't di-
earth" mentality. Sure, there might
The counsel's appointment process
rectly oversee these inquiries be-
be slow periods, but we don't have to
should conform closely to that of oth-
cause of political conflict of interest
have a fire every day to know that we
er executive branch appointments.
(or at least the appearance of con-
need firefighters.
Critics of the past law complain, with
Note to Readers
flict). Nevertheless, few cries of
Most important, a permanent inde-
some justification, that having Fed-
alarm were heard when the statute
pendent counsel's office would take
eral judges select the independent
The Op-Ed page welcomes
unsolicited manuscripts. Be-
that created the office expired in De-
the Attorney General out of the pro-
counsels offended the separation of
cember 1992.
powers. There is a reasonable middle
cause of the volume of submis-
cess. In the past, the decision to ap-
A proposal to revive the independ-
point an independent counsel was
ground. The President could nomi-
sions, however, we regret that
ent counsel passed the Senate last
nate the independent counsel from a
we cannot acknowledge an arti-
solely that of the Attorney General,
month and another is pending in the
who was rarely eager to exercise that
list of candidates selected on merit by
cle or return it unless it is ac-
authority. With a permanent office in
the Supreme Court or another neutral
companied by a self-addressed,
Randy M. Mastro, a former Federal
body.
stamped envelope. If manu-
place, the Independent counsel would
prosecutor, is chief of staff to Mayor
The nominee would then be subject
scripts are accepted for publi-
decide whether or not to investigate
Rudolph W. Giuliani. Eric B.
an executive branch figure, and the
to Senate confirmation, like other
cution, authors will be notified
within two weers.
Schnurer is a constitutional lawyer in
public would be assured of a truly
Presidential nominees. Of course, in-
Philadelphia.
independent assessment.
dependent "unsels, like most ethics
THE WASHINGTON POST
SATURDAY. JANUARY 15. 1994
White House Sends Five More Boxes
On Whitewater to Attorney General
been trying to determine whether
By Dan Balz and Susan Schmidt
Washington Post Staff Writers
money contributed to the campaign
at that event was improperly di-
Five more boxes of President Clin-
verted from real estate and other
ton's and Hillary Rodham Clinton's
loans made to Madison borrowers. or
records detailing their investment in
was drawn on overdrawn accounts
an Arkansas land development firm
with the approval of bank officials.
were turned over to the Justice De-
Federal officials have a handful of
partment yesterday. Clinton pledged
$3,000 cashier's checks contributed
on Dec. 23 to give the department all
to Clinton at the fund-raiser, amounts
of the couple's files on the matter.
that may have exceeded the $1.500
The documents arrived at the Jus-
per election limit.
tice Department before Attorney
At least one of the known $3,000
General Janet Reno had a chance to
contributors. the son of a Madison
appoint a special counsel to investi-
director, said he made no such con-
gate the Clintons' involvement in the
tribution and knew nothing about a
Whitewater Development Corp. Re-
fund-raiser.
no. who was traveling out of town
Clinton campaign aides said they
yesterday. was said by a department
are dismayed if illegal contributions
spokesman to be reviewing possible
were made but that the candidate
candidates.
would have had no way of knowing
In a related development. the pres-
the source of the money given him.
ident of a small Arkansas bank that
BRUCE LINDSEY
The list of -contributors has disap-
loaned money to Clinton's guberna-
"box or less" of financial records
peared. and Wright has said she does
torial campaigns and to the land de-
not know what became of it.
velopment company confirmed that
"probably a box or less." although he
Investigators also are interested in
he had received a subpoena Wednes-
said they were not sequestered in
seeing records at the former Cherry
day from the FBI for bank records.
one carton.
Valley bank to see who benefited
And Betsey Wright, who was Clin-
Clinton agreed Wednesday to calls
from a number of checks written on
ton's chief of staff when he was Ar-
for a special counsel in the matter,
the Whitewater account at Madison.
kansas governor, told the Los Ange-
and a Justice Department spokesman
Those checks were sent to the Bank
les Times that the FBI had notified
said yesterday the special counsel
of Cherry Valley-to pay on at least
her that she would be subpoenaed.
could be appointed soon. The coun-
two separate loans, sources said. In
Wright told the newspaper that in
sel's investigation will cover White-
the latter half of 1984 and the first
anticipation of the subpoena she had
water and possibly its links to a failed
part of 1985. for example. three
moved several boxes of documents
insitution, Madison Guaranty Savings
checks totaling more than $15,000
from her office to her home so she
& Loan. that was owned by James
went from the Whitewater account to
could sort through the material this
McDougal. who with his ex-wife was
pay off loans at Cherry Valley.
weekend.
the Clintons' business partner in
Clinton aides and McDougal say
The Clintons' personal records
Whitewater.
there was one loan at the Cherry Val-
were turned over to the Justice De-
Among the questions about Mad-
ley bank related to their purchase of
partment several days ahead of
ison is whether it funneled money
Whitewater land. Smith also said
schedule by David E. Kendall. the
improperly to a Clinton gubernatorial
there was just one Whitewater loan
Clintons' personal attorney, accord-
campaign.
at his former bank and that it and
ing to a statement issued by White
Leon Foust. president of First
Clinton's campaign loan were repaid.
House senior adviser Bruce Lindsey.
Bank of Arkansas, formerly the Bank
Also yesterday. an official of the
Five other boxes of documents
of Cherry Valley, confirmed yester-
Federal Deposit Insurance Corp. told
were sent to Justice Department of-
day that he has received three sub-
Reuter news service that the agency
ficials last week. They were sub-
poenas from the FBI since Decem-
expects to conclude its examination
mitted under terms of a subpoena
ber. Foust. who joined the bank last
soon of whether Hillary Clinton's for-
negotiated between the Justice De-
year. said he has not been able to
mer law firm misled the agency about
partment and the White House de-
provide everything sought in the first
its ties to Madison.
signed to prevent the records from
two subpoenas. Some mid-1980s rec-
The Rose law firm was hired by
being released publicly.
ords are available on microfilm, he
the FDIC after the government took
Lindsey said the records include
said, but others have been discarded.
over Madison to help in a suit involv-
duplicates or triplicates of relevant
Clinton took out a personal loan for
ing the institution. Hillary Clinton
documents. work sheets. records
$50,000 from the Bank of Cherry
had previously represented Madison
from an inquiry conducted during the
Valley to put into his 1984 guberna-
before Arkansas bank regulators.
1992 campaign by a Denver lawyer
torial reelection campaign. At the
Meanwhile, House Banking Com-
hired by the Clintons and other cam-
time. the bank was owned by Mau-
mittee Chairman Henry B. Gonzalez
paign documents and news media
rice Smith. a Clinton campaign fi-
(D-Tex.) grudgingly approved addi-
inquiries about Whitewater from the
nance official. About $30,000 of that
tional money for a Republican staff
campaign.
debt was repaid from money raised
study of the Madison matter. The
Lindsey estimated that of the 10
by McDougal at an April 1985 fund-
money was requested by Rep. Jun
boxes delivered. actual financial rec-
raiser held at the Madison S&L.
Leach (R-lowa). who has called for a
ords on Whitewater account for
Sources said investigators have
congressional investigation.
26
BC-CLINTON-WHITEWATER-POLL
THIRD OF AMERICANS THINK WHITEWATER MINOR OFFENSE
NEW YORK, Jan 15 (Reuter) - Nearly a third of Americans think President
Clinton and First Lady Hillary Rodham Clinton are guilty of a minor offence
related to a failed land development project in Arkansas, a Newsweek poll said
Saturday.
The poll of 505 adults conducted Friday said another 14 percent think the
president and his wife are guilty of a serious offence related to the venture,
in which they were partners with the head of a savings bank that failed at a
cost of over $60 million to U.S. taxpayers.
Nearly one in five of the respondents, 19 percent, believe the Clintons
are not guilty of any wrongdoing in the affair.
The poll also found that 69 percent of Americans think the White House
would be in a better position in connection with the controversy if it had
been more open with information and files about the case.
The controversy revolves around the relationship of the Clintons with
Arkansas businessman James McDougal, former head of the failed Madison
Guaranty Savings and Loan Association.
They were partners in Whitewater Development, a vacation real estate
venture that the Clintons say lost them $69,000.
The White House Friday turned over to the Justice Department the rest of
the subpoenaed documents on Whitewater, and department officials said Attorney
General Janet Reno may be close to deciding on her selection of a special
counsel in the case.
Clinton on Wednesday yielded to mounting political pressure and asked
Reno to name a special counsel to take over the investigation.
The poll's margin of sampling error was plus or minus five percentage
points.
REUTER
**** filed by:RB--(--) on 01/15/94 at 14:26EST ****
**** printed by:WHPR(JEL) on 01/17/94 at 09:52EST ****
FRIDAY, JANUARY 14, 1994 *
The Washington Times
PAUL CRAIG ROBERTS
from personal use of state employees.
hat's the
It is possible that a discombobu-
"W
charge?,"
lated White House has been engaging
asks White
in a state-of-the-art coverup when
House
there is no crime. But if Whitewater
Press Sec-
is merely a political embarrassment
retary Dee
for the first couple, it could hardly be
Dee Myers. By asking this question,
worse than the disingenuous denials
Miss Myers is inviting us to guess
that are flowing from the White
what a special prosecutor might find
House. "Where is the evidence?," asks
in the files of the Whitewater Devel-
Clinton spokesman Stephanopoulos,
opment Corp., an Arkansas real estate
thus underlining the White House's
partnership between the Clintons and
prolonged withholding of it.
the McDougals.
In a misstatement of tax law and
These files have had a curious exis-
fact, Vice President Gore claimed in
tence. They were first said to be
front of a national TV audience that
"missing." Then they were purloined
the Clintons could not take their
from White House Deputy Counsel
$69,000 tax loss because they had no
Vincent Foster's office, which should
capital gains to set it against. The law
have been sealed. They have been
permits a $3,000 per year deduction
unavailable to investigators of Mr.
of a capital loss against ordinary
Foster's death and to investigators of
income and a carry forward of the
savings and loan irregularities in Lit-
remainder. Moreover, Lisa Schiffren
destroyed in anticipation of possible
tle Rock. They next turned up in the
proceedings. Moreover, the 1989
reports in the August 1993 American
safe of a white collar crime lawyer at
FIRREA Act in response to the S&L
Spectator that in 1988 the Clintons
Williams and Connolly, a noted crim-
crisis specifies that investigations by
realized a $42,000 profit from an
inal defense firm. Today they are
investment in Arkansas Cellular
the Resolution Trust Corp. are con-
being "catalogued," and possibly
Communications. A lawyer familiar
sidered "pending proceedings" under
culled, before being turned over to the
the obstruction of justice statute. The
with the deal says it was structured as
Justice Department under a negoti-
RTC is looking into Madison S&L,
a capital gain. A couple that itemizes
ated subpoena that protects the con-
deductions for used underwear is
and inappropriate handling of the
Whitewater files could constitute
fidentiality of the files.
unlikely to let pass a legitimate deduc-
The White House maintains that
obstruction of justice.
tion for capital losses.
the files are innocuous and merely
Sen. Pat Moynihan, New York
It is a good thing for the Clintons,
document a legitimate $69,000 busi-
Democrat, was right. The Clintons'
as well as the country, that they
ness loss that was never claimed on
apparently have reassessed the risk of
spin doctors got them deeper in trou-
tax returns. By stonewalling on the
ble without sparing them the scruti-
stonewalling.
release of the files, the White House
my of a special prosecutor.
The problem with coverups is that
built up demands for a special prose-
they can become obstruction of jus-
cutor to which it has finally acceded.
tice, a federal crime. Numerous fed-
According to newspaper reports,
eral courts have ruled that proceed-
Paul Craig Roberts, a columnist for
federal thrift investigators have found
ings do not have to be pending for
The Washington Times and the Scripps
evidence that money from Madison
obstruction of justice to occur if evi-
Howard News Service, is a distin-
Savings and Loan was diverted to
dence is concealed, altered or
guished fellow at the Cato Institute.
Whitewater and other McDougal
companies and listed the Clintons
among the possible beneficiaries.
Newspapers have also reported that a
possibly fraudulent Small Business
Administration loan was diverted, in
part, to the Whitewater partnership.
Newspapers have also reported that
there appear to be significant flows of
money in and out of Whitewater's
accounts that do not relate to real
estate transactions. Madison S&L and
Whitewater monies appear at times to
Prosecutor
have been commingled, and White-
water did not file income tax returns
for a number of years.
All of this has raised suspicions
that, however it began, Whitewater
became a slush fund for its partners.
It is the unspoken charge of experi-
pirouette
enced tax, campaign, and criminal
lawyers that the Clintons benefited
from money flows that violated cam-
paign, tax, and banking statutes.
These charges, should they be
Fandango
1/2
brought by the special prosecutor,
would be over and above any conflicts
of the files
of interest the Clintons may have
experienced in obtaining favorable
regulatory treatment for McDongal's
Madison S&L and any improprieties
112
The Washington Times
Your guide to Whitewater
hat is Whitewater?
W
The Whitewater Development Corp.
The partnership bought the land in 1978 for $203,000
change for $35,000 and a
with two loans - - one acquired, without collateral, from
win-engine Piper Seminole
was a real estate partnership formed in
airplane, which was value
1978 by Bill and Hillary Clinton and
a Little Rock bank and another using the land itself as
at about $30,000. The trans-
James and Susan McDougal. The ven-
collateral. It is not clear from the records who paid the
action was not reported on
e Clintons' 1985 tax returns,
$20,000 each year in combined principal and interest.
and it is not clear what ha
ened to the plane.
ture was conceived to build vacation
The Clintons, who claim
Mrs. Clinton borrowed $30,000 from a McDougal-
ney lost as much as $68,900
homes on 42 lots on a 203-acre property along the White
in the venture, sold their
owned bank to pay for a model home in the development.
share in Whitewater to Mr.
River in northern Arkansas.
Twenty-four Whitewater lots were sold in 1985 in ex-
McDougal for $1,000 in 19
It is not clear how much, if
anything, the Clintons invo
ed in Whitewater.
1/3
JANUARY 14, 1994 *
THE STORY so FAR
1978 - Bill and Hillary Rodham Clinton, along with James B. McDougal
and his wife, Susan, purchase 203 acres in the Arkansas Ozarks in a plan
to build vacation homes on 42 lots. They form a joint partnership known as
Whitewater Development Corp.
1984 and 1985 - The Clintons improperty deduct $5,133 on their
federal tax returns for interest paid on $30,000 in bank loans made through
Whitewater. The deductions save them about $1,000 in taxes.
1984 - Arkansas Securities Department targets Madison Guaranty
Savings and Loan Association, owned by McDougal, as being insolvent.
March 1984 Mrs. Clinton receives first payment of a $2,000-a-month
fee for helping Madison fight efforts by the Arkansas Securities Department
to close the S&L. The fee was paid by Mr. McDougal in a deal he said was
arranged by Mr. Clinton.
July 1985 Madison's accounting firm, Frost and Co., says the S&L is
solvent. The Frost report is used by Mrs. Clinton to help keep Madison in
October 1986 - Federal Home Loan Bank Board report faults thrift for
risky investments in real estate deals, low cash reserves and shoddy
December 1987 - Mrs. McDougal personally delivers Whitewater
records to the governor's mansion at the request of Mrs. Clinton.
November 1988 - Mrs. Clinton signs letter to Mr. McDougal requesting
power of attorney so she can extricate herself and her husband from the
March 1989 - Madison fails and is shut down by the federal government
July 1989 Mr. McDougal is indicted on fraud charges in connection with
March 1992 - The New York Times reports ties between Mr. McDougal
James M. Lyons saying the Clintons lost $68,900 in Whitewater. The report
March 1992 - Clinton campaign denies report in The Washington Times
administration officials and turned over to the Clintons' new lawyer, David
Police and FBI investigators from looking through Foster's personal papers
Oct. 31 - Whitewater controversy is renewed when The Washington Post
Nov. - The Washington Times reports the Clintons, who said they were
Nov. - Paula J. Casey, U.S. attorney in Little Rock, recuses herself from
Dec. 20 - The Washington Times reports White House officials removed
Sunday Sen. Daniel Patrick Moynihan of New York is first Democrat to
join Republicans in call for a special prosecutor or independent counsel,
making the issue bipartisan. Seven other Democratic lawmakers issue the
Whitewater-Madison affair. Reno says she will appoint a special counsel.
Sources The Washington Times. Associated Press House Republican Policy Committee. New York Times
business.
record-keeping.
Whitewater venture.
at cost of $50 million.
Madison. He later is acquitted.
and the Clintons, their connections to Whitewater and their illegal tax
March 1992 - Clinton campaign issues a report by Denver lawyer
also says missing records makes a complete study impossible.
saying Mrs. Clinton received a $2,000-a-month retainer to help Madison
fight state regulators. In November 1993, the White House confirms the
deductions.
retainer was paid to Mrs. Clinton.
December 1992 - The Clintons sell their half of Whitewater to Mr.
McDougal, and claim a $1,000 capital gain on their taxes. The sale was
arranged by Vincent W. Foster Jr., the Clintons personal lawyer.
July 20, 1993 - Foster commits suicide. Documents related to
Whitewater-Madison are among those secretly taken from his office by
July 22 - White House Counsel Bernard Nussbaum prevents U.S. Park
during search of his office.
reports federal regulators recommended to Justice Department that a
criminal investigation be conducted into Madison's failure.
"passive shareholders' in Whitewater, were active in the venture's
management and that Mrs. Clinton had sought power of attorney over it.
probe of Whitewater's ties to Madison and is replaced by Justice
Department prosecutor Donald Mackay. Republicans call on Attorney
General Janet Reno to nominate a special counsel to investigate the
Whitewater-Madison affair.
records on Whitewater from Foster's office after the deputy counsel's
Dec. 21 - White House admits that records were taken, but denies any
Dec. 23 - Mr. Clinton says he and his wife will
over to the Justice Department, but warn that process maym IGAG
Jan. White House reveals that subpoena has been issued for
Whitewater records under terms negotiated on Dec. 23 between
wrongdoing.
prosecutors and Kendall.
same demand within the next 48 hours.
Wednesday - - Bowing to pressure, Clinton asks a special counsel be
appointed to investigate the role he and his wife played in the
Kendall.
suicide.
weeks.
eye
FRIDAY, JANUARY 14, 1994
What might Clintons
have done wrong?
THE WASHINGTON TIMES
manding power of attorney for full
Federal investigators are probing
control of the venture.
several angles in the tangled White-
Why was Mrs. Clinton paid a
water-Madison case.
monthly retainer by Madison?
In 1985, Mrs. Clinton was paid
How much money was lost?
$2,000 a month for convincing state
President Clinton and his wife,
regulators appointed by her hus-
Hillary, said they lost $68,900 on the
band that Madison was solvent -
Whitewater Development Corp., a
despite federal bank reports to the
real estate venture with James B.
contrary - at a time when Mr.
and Susan McDougal, but they failed
McDougal was her business partner
to take legal tax deductions for capi-
in Whitewater. The payments were
tal losses that would have saved
made by Mr. McDougal in a deal ar-
them thousands of dollars. Mr.
ranged by Mr. Clinton.
McDougal was owner of the now-
Were there illegal money diver-
defunct Madison Guaranty Savings
sions to pay off campaign debts?
and Loan Association.
Shortly after his election as gov-
When Whitewater first surfaced
ernor in 1984, Mr. Clinton asked Mr.
as a 1992 presidential campaign is-
McDougal to "knock out a deficit" of
sue, Mr. Clinton said the couple had
$50,000 for a personal loan Mr. Clin-
lost $25,000.
ton took out to fund his campaign.
Was there an illegal loan?
Mr. McDougal held a fund-raiser
David L. Hale, a former municipal
for his business partner and retired
judge in Little Rock now under in-
at least $35,000 of that debt. At least
dictment for misdirecting Small
one of the checks from the fund-
Business Administration loans, said
raiser used to pay off Mr. Clinton's
Mr. Clinton pressured him during a
loan was signed by Kenneth Pea-
face-to-face meeting in 1986 to give
cock, who now denies ever donating
a questionable $300,000 loan to Su-
money to the Clinton campaign.
san McDougal. Mr. Clinton said he
Where are the Whitewater-
Republicans will seek appointment
When Congress returns Jan. 25,
authorized to seek indictments.
lic, but the counsel also may be
clude a report to the American pub-
date. The White House wants to in-
selection the boundaries of the man-
Miss Reno will negotiate with her
Whitewater-Madison affair.
skill to be special counsel in the
nized credentials of integrity and
governmental attorney with recog-
select within about a week a non-
Attorney General Janet Reno will
THE WASHINGTON TIMES
did not recall the meeting.
Madison records?
Was money diverted from fed-
Mrs. McDougal said she delivered
eral funds to Whitewater or the Clin-
Whitewater records to the Arkansas
ton campaign?
governor's mansion in December
Mr. McDougal used $110,000 of
1987, at Mrs. Clinton's request. The
the SBA loan to his wife to buy prop-
Clintons said the records were lost
erty for the Whitewater project. It is
before The Washington Times' Dec.
not clear if other money was di-
20 report that Whitewater records
verted from Madison to Whitewater
were secretly removed July 20 from
or to Mr. Clinton's 1984 gubernato-
the office of White House Deputy
rial campaign.
Counsel Vincent W. Foster Jr.
Were the Clintons more than
shortly after he killed himself.
been subpoenaed from the Clintons.
least five cartons of documents have
Madison-Whitewater, on which at
fraud, continues its investigation of
career lawyers who specialize in
Rock, Ark., under direction of three
federal judges.
of an independent counsel by three
arate law providing for appointment
swiftly finish enactment of a sep-
Whitewater case.
Next step: Naming special counsel
"passive shareholders"?
Now, the White House has turned
The Clintons described them-
over at least five boxes of White-
selves as "passive shareholders" in
water records to investigators under
the Whitewater development, but
terms of a subpoena worked out by
Mrs. Clinton wrote a letter to Mr.
the Clintons' lawyer and the Justice
A federal grand jury in Little
Congress also is expected to
both houses to look into the overall
of select investigating committees in
McDougal in November 1988 de-
Department to keep them secret.
Madison
Bull
Shoals
Lake
MISSOURI
story dates
ARKANSAS
5
201
to 1982
Mountain
Home
THE WASHINGTON TIMES
412
James B. McDougal, a friend and
business partner of Bill Clinton, took
235
over a tiny operation known as Madi-
101
son Guaranty Savings and Loan As-
Marion
Baxter
sociation, about 75 miles north of
14
County
County
Little Rock, Ark., in 1982. Within
Ozark
Whitewater
three years, Madison's assets grew
National
from $500,000 to more than $17 mil-
Forest
real
estate project
Mr. McDougal, from his new base
Area
MISSOURI
of operations in Little Rock, pros-
of detail
pered through a web of connections
OKLAHOMA
TENN.
and friendships that included Mr.
Clinton and his wife, Hillary But the
ARKANSAS
Federal Home Loan Bank Board in
a 1984 report already had noted
TEXAS
MISS.
Madison's "unsafe and unsound
LA.
lending practices."
The Washington Times
The Arkansas Securities Depart-
ment was asked to determine
whether the S&L should be closed.
band that Madison should remain in
Mrs. Clinton, a lawyer on a $2,000-a-
business. By 1989, the institution
month retainer from Mr. McDougal,
had a paper worth of $125 million.
argued successfully before state
But that year it finally was closed by
regulators appointed by her hus-
regulators, and taxpayers got a $50
million bill for its defaulted loans.
2/3
FRIDAY, JANUARY 14, 1994
THE WASHINGTON POST
Reno Begins Hunt
affair by independent counsel Law-
rence Walsh.
"In the history of these special
counsels, once they have an inch
For Special Counsel,
they take yards and miles," said
Terry Eastland, a former top aide
to Meese and now a fellow of the
Ethics and Public Policy Center.
Seeks Probe's Limits
"The central issue is going to be the
scope of the investigation."
On its face, the investigation into
Whitewater would appear to be fair-
By Michael Isikoff
the 1980s investigating alleged im-
ly simple: The Justice Department
Washington Post Staff Writer
proprieties involving then-Attorney
has already subpoeaned all docu-
General Edwin Meese III.
ments relating to Whitewater in the
As Attorney General Janet Reno
"My prediction is that this person
Clintons' posssession.
began reviewing possible candi-
[the special counsel] is going to feel
One possible charter for the new
dates to serve as special counsel
compelled to be thorough. And to
outside counsel would be a review
yesterday, Justice Department of-
be thorough where an investigation
of those records to determine
ficials were grappling with an equal-
is nourished by political consider-
whether the Clintons were aware of
ly significant issue: Defining the
ations, it could go on for quite a
any financial improprieties relating
scope of an investigation that could
long time."
to hundreds of thousands of dollars
become an open-ended inquiry into
Justice Department sources said
that appear to have passed through
Arkansas business affairs and hang
that Reno and her top aides, includ-
Whitewater's accounts.
over President Clinton for much of
ing Deputy Attorney General Philip
But the problem gets much
his first term.
B. Heymann and Jo Ann Harris, chief
stickier when matters branch out to
In requesting that Reno name an
of the criminal division, spent much
Madison. The thrift at one point
outside prosecutor, White House
counsel Bernard Nussbaum asked
of yesterday working on selection of
was represented by the Rose Law
only that the prosecutor investigate
a special counsel. Sources said a
Firm whose partners included Hil-
"the Whitewater matter"-a refer-
number of possible candidates were
lary Clinton, Associate Attorney
contacted and an announcement
General Webster Hubbell, and Vin-
ence to the real estate development
firm half owned by the president
could come in the next few days.
cent W. Foster, Jr., the deputy
and Hillary Rodham Clinton that
Under the expired independent
White House counsel who com-
bought and sold Ozark property
counsel law, which governed how
mitted suicide July 20. Foster, as
during the 1980s.
Stein and others operated, a three
personal attorney for the Clintons,
But Whitewater is only a slice of
judge federal panel set forth a man-
had handled matters relating to
a much broader, existing Justice
date based on a specific allegation
Whitewater before his death.
Department investigation underway
of a federal crime committed by a
An even more pressing problem
for months. It touches on a host of
high-level government official.
is the case of David Hale, the for-
related matters: the failed Madison
No such allegation has been made
in the case of Whitewater. Instead,
mer Arkansas municipal judge who
Guaranty Savings & Loan Associ-
ation owned by the Clintons' part-
there is a grab bag of suggested
is scheduled to go on trial March 28
improprieties by a wide assortment
on charges that he defrauded the
ner in Whitewater, the alleged di-
version of Madison money into a
of people, most prominently, James
Small Business Administration in
Clinton campaign account, question-
McDougal, the owner of Madison
the management of his federally
able loans to other state political
who had close ties to many Arkan-
backed small business investment
figures and the thrift's possible le-
sas political and business leaders.
firm. Hale has publicly alleged that
nient treatment by Arkansas reg-
"It can go in every conceivable dif-
Clinton and McDougal pressured
ulators during Clinton's tenure as
ferent direction," said Washington
him to make a $300,000 SBA-
governor.
lawyer James Mackay, the former
backed loan that ended up in White-
The initial assumption of Justice
independent counsel who prosecuted
water accounts. He also has
Department officials yesterday was
former Reagan administration official
charged that similar potentially im-
that the new special counsel would
Lyn Nofziger. "There's all sorts of
proper loans benefited among oth-
immediately take over all these
ramifications that are involved."
ers, Jim Guy Tucker, now governor
matters, now being handled by
At her news conference minutes
of Arkansas-allegations that
three career prosecutors in Little
after receiving Nussbaum's letter,
Tucker has denied.
Rock. But some former indepen-
Reno avoided all questions about
The issues in Hale's upcoming trial
dent counsels warned yesterday
the new prosecutor's mandate, say-
are wholly unrelated to Whitewater;
that such a broad charter was es-
ing she first wanted to consult with
one former federal prosecutor sug-
sentially opening a Pandora's box.
whomever she selected. But Reno
gested yesterday that a special coun-
"You've got an investigation that is
also said she wants the issues re-
sel who was only interested in get-
starting on an island, that is White-
solved "thoroughly" and "prompt-
ting to the bottom of Whitewater
water, that is going to find a cause-
ly"-an objective that has proven
would quickly seek a plea agreement
way to a continent known as Arkan-
difficult in the past, as demon-
with Hale and bring him before a
sas politics," said Jacob Stein, who
strated by the more than six-year
grand jury to hear what be has to say
served as independent counsel during
investigation into the Iran-contra
about the president.
Department officials said the im-
minent appointment of a special
counsel who would take over the
lems that could delay matters.
"There are various complications
that the attorney general had in
mind" when she initially opposed
appointment of an independent
counsel, said Carl Stern, the Justice
Department spokesman. "But ob-
viously, we'll do whatever we can to
get over what hurdles there are."
32
1
AY, JANUARY 14, 1994
THE
After Slow Start, Network TV Grabs
The media's pursuit of White-
that in the age of computer graph-
By Howard Kurtz
water comes almost two years after
ics, "there is no story that is too
Washington Post Staff Writer
it briefly erupted as a campaign is-
complicated for TV. The caution for
Throughout November and most
sue. In March 1992, Jeff Gerth of
us is to make sure we are not piling
of December, despite a spate of
the New York Times reported that
on, and that we have a story that
front-page stories and editorials in
the Clintons had entered into the
moves us forward and is not just
Whitewater
major newspapers, the Whitewater
Whitewater real estate venture
another incremental nag.
investigation was virtually invisible
with James McDougal, whose failed
"Remember, there is no evidence
on network television.
savings and loan was bailed out by
of wrongdoing in any of this. But
"It's one of the most difficult sto-
the White House has created the
ries to explain that I've ever en-
impression of the possibility of
countered," said Erik Sorenson, ex-
wrongdoing, and that has created
ecutive producer of the "CBS Eve-
"Journalists love a
pressures on the White House, and
ning News." "The networks do not
we are covering the pressures."
have the resources to pursue com-
coverup. The
James Carville, a Clinton political
plicated investigations like that on
intimations of
adviser, contended that Whitewater
an ongoing basis." In fact, said So-
is being overplayed because "the
renson, he had trouble explaining
Whitewatergate will
media is bored by the European trip
the story to his mother.
and the Brady bill. In the end, peo-
In the last three weeks, however,
bring the TV
ple will say it was a non-story."
ABC, CBS and NBC have jumped on
Clearly, much of the public is puz-
zled. A CNN-USA Today poll says
Whitewater night after night. On
cameras every
Wednesday, when President Clinton
71 percent of respondents are un-
agreed to the appointment of a spe-
time."
sure whether Clinton did anything
cial counsel to investigate the mat-
wrong.
- Robert Lichter,
The president clearly has grown
ter, the network anchors traveling
Center for Media and Public Affairs
impatient with the media clamor
with Clinton in Ukraine and Russia
over Whitewater. He cut short an
dealt with Whitewater before the
taxpayers. That article raised many
NBC interview with Jim Miklasze-
news of the trip itself.
of the questions-including Hillary
wski Wednesday after two ques-
"Journalists love a coverup," said
Clinton's representation of the
tions on Whitewater. "I'm sorry
Robert Lichter, director of the Cen-
S&L-that have reverberated in
you're not interested in the truth,"
ter for Media and Public Affairs.
recent weeks.
Clinton said. He also said that "the
"The intimations of Whitewatergate
The Clinton campaign snuffed out
press has editorialized and pressur-
will bring the TV cameras every
the story by releasing a batch of
ized the politicians" into demanding
time."
incomplete and confusing docu-
a special counsel and has practically
The story was not ready for
ments, and the news media moved
placed "the presumption of guilt" on
prime time until just before Christ-
on to other controversies in the
him. "It's a bizarre circumstance,"
mas, when White House aides ac-
hectic campaign atmosphere. "The
the president said.
knowledged they had removed
entire media, print included, copped
Clinton also refused Wednesday
Whitewater files from deputy coun-
out during the campaign," Sorenson
to talk with ABC's "Nightline," as
sel Vincent Foster's office after he
said. "All of us snooped around and
he had agreed to do each night this
committed suicide last summer.
frankly couldn't figure it out.
week for a series on the European
The focus of the story shifted from
We all gave up."
trip.
the decade-old financial dealings of
What put the story back in play
The good news for the White
the president and Hillary Rodham
was an Oct. 31 Washington Post
House is that the naming of a spe-
Clinton to a daily political drumbeat
report by Susan Schmidt that the
cial counsel will likely move the in--
about whether they were withhold-
Resolution Trust Corp. had asked
vestigation off the journalistic radar
ing evidence.
federal prosecutors to open a crim-
screen. "A special counsel puts the
Media analysts say no national
inal investigation into Madison
story on ice," said Fred Barnes,
scandal can reach critical mass until
Guaranty, the failed S&L. In No-
New Republic's White House re-
it becomes a television story. But
vember and December, The Wash-
porter. "It stops the bleeding. The
correspondents filing two-minute
ington Post ran 12 stories on
counsel works in private, doesn't
reports have struggled to explain
Whitewater, six of them on the
leak and the story goes away until
the possible wrongdoing in the tan-
front page. The New York Times
the counsel issues his or her re-
gled Arkansas dealings on which
ran seven stories, plus three edito-
port."
the Clintons say they lost $69,000.
rials with such headlines as "Re-
Once Republicans began demand-
lease the Whitewater Files." The
ing a special prosecutor, a simpler
Washington Times published 16
story line emerged. On Wednesday,
stories and the Los Angeles Times
ABC's Jim Wooten said that "what
six.
is at risk for the president here is
But except for a Nov. 11 NBC
nothing less than the erosion of his
story by Andrea Mitchell, television
political authority." CBS anchor
basically ignored the controversy.
Dan Rather declared Moscow
"There was no easy hook for TV
Lichter said. "TV
ton this entire trip."
needs something simple: removing
The coverage has been fueled by
files, withholding evidence, not
the administration's "stubborn re-
coming clean. This ties into our col-
fusal, against all known rules of
lective memory of Watergate."
modern politics, to just put all the
As for the story itself, Lichter
stuff on the table," said Alan Mur-
said: "It's my job to follow this stuff,
ray, the Wall Street Journal's Wash-
and I couldn't follow the story. It
ington bureau chief. "Why can't
was so convoluted and so dull."
they answer the questions? It's just
But Jeff Gralnick, executive pro-
mind-boggling."
ducer of "NBC Nightly News," said
33
FRIDAY, JANUARY 14, 1994
The Washington Times
TONY SNOW
because the facts available to the pub-
ernment.
lic raise the possibility that the pres-
*Violation of attorney-client priv-
ident and/or his friends bent the law
ilege: Vincent Foster Jr. solicited fed-
during his tenure as governor of
eral contracts to sue Madison Guar-
Arkansas. Here's a small, incomplete
anty on behalf of the Rose Law Firm
list of allegations.
of Little Rock. He failed to disclose
Illegal gratuity: Just before
the fact that Rose partner Hillary
becoming governor of Arkansas, Bill
Rodham Clinton had represented the
Clinton and his wife joined a real-
savings and loan. The solicitation at a
estate partnership with old friend
bare minimum threatened Madison's
James McDougal and McDougal's
attorney-client privilege with Rose.
then-wife, Susan. The Clintons put up
Obstruction of justice: White
less than 9 percent of the start-up
House counsel Bernard Nussbaum
money for the Whitewater Develop-
took several boxes of files from Vin-
Gimmicks
ment Corp. and got 50 percent of the
cent Foster's office after Mr. Foster's
stock.
suicide. He shipped the deceased
The arrangement is public record.
aide's personal diary and papers to
that failed
Does the discounted price of the part-
the Foster family lawyer, James
nership constitute an illegal gratuity?
Hamilton, and records regarding the
OIllegal campaign contributions:
Whitewater Development Corp. and
James McDougal threw a fund-rais-
other dealings to David Kendall, the
er on April 4, 1985,
Clinton family
he bluff didn't work. The
T
to help rescue Mr.
lawyer. He pre-
White House spent a week
Clinton from a
vented investiga-
besmirching Republicans
$50,000 personal
Administration
tors from looking at
who wanted a special prose-
loan. The party
cutor to look into what has come to be
stonewalling and
the documents.
raised $35,000.
These acts could
known as "Whitewatergate," but pub-
Federal investi-
name-calling have
have violated sev-
lic pressure finally forced the presi-
gators suspect that
eral
federal
dent to ask for one, anyway.
at least $12,000 of
The question now is whether the
transformed a
statutes, including
the donations were
laws that require
Clinton team will come clean or try to
siphoned from a
political nuisance into
the preservation of
manage the flow of information to
savings and loan
investigators. So far, it has employed
owned by McDou-
a potential disaster,
White House docu-
ments and prohibit
every trick in the book to foil inquisi-
gal. If so, the Clin-
tons received
and that is amazing.
the removal of
tors, including the cheesy use of the
records relevant to
president's late mother, Virginia Kel-
money taken from
an ongoing crimi-
ley, as a political human shield. Al
depositors of the
nal investigation.
Gore thumped the poor woman's cof-
Madison Guaranty Savings and Loan
The public deserves a full look at
fin four times on CBS's "Face the
- an institution that failed in 1989 at
all the weird strands of Whitewater-
Nation" last week, hoping her beloved
a cost to taxpayers of $47 million to
Madison, which means that Attorney
memory would hold the curious at
$60 million.
General Janet Reno must suspend
bay.
Conflicts of interest: When fed-
the statute of limitations for all relat-
These gimmicks haven't worked
eral regulators were recommending
ed civil and criminal infractions. (The
that Madison Guaranty mend its ways
statute on fraud and other civil viola-
or close its doors, McDougal con-
tions expires in March.) The attorney
cocted a plan to sell preferred stock to
general also needs to avoid placing
the public. He hired Hillary Rodham
undue restrictions on the prosecu-
Clinton as his lawyer in response to
tor's investigation. Otherwise, Con-
2/2
Bill Clinton's personal request for
gress will impanel Watergate-style
"help."
committees, which will make even
Mrs. Clinton asked a securities
the smallest Clinton peccadillo look
commissioner appointed by her hus-
like a crime against humanity.
band to approve a stock-sales plan
Administration stonewalling and
proposed by his (and her) business
name-calling have transformed a
partner, James McDougal- without
political nuisance into a potential
telling the Arkansas official about her
disaster, and that is amazing. As polit-
ties to the thrift operator.
ical scandals go, Whitewatergate
*Conspiracy: Former Arkansas
should have been small potatoes.
Judge David Hale made a $300,000
Rep. Jim Leach, Iowa Republican,
Small Business Administration loan
put it best in an interview the other
to a real-estate company owned by
day. "It's my own view that they
Susan McDougal. Half that money
should lay everything on the table,
found its way into the Whitewater
take responsibility, perhaps have a
Development Corp.
civil penalty or two (against people
Government investigators question
other than Clinton).
the propriety of the SBA loan, which
"Then this thing would be over," be
was minority-owned
said, snapping his fingers, "just like
Clinton and James McDougal pres-
sured him into giving the money to
Mrs. McDougal and says he has
records to prove it. If so, the president
Torry Snow is a Washington-based
and his friend may have engaged in a
editorial page columnist for the Detroit
conspiracy to defraud the federal gov-
News and is nationally syndicated.
The Washington Times
FRIDAY, JANUARY 14, 1994 *
Why didn't Clintons deduct losses?
By Jerry Seper
the Clintons legally could have de-
THE WASHINGTON TIMES
clared capital losses of up to
$3,000 a year over 23 years if they
Bill and Hillary Clinton rou-
lost $68,900 on Whitewater.
tinely claim $1 and $2 deductions
The tax deduction would have
for used underwear on their fed-
been limited to $3,000 a year and
eral tax returns but never took a
would have been taken against the
legal tax deduction for the $68,900
couple's ordinary income.
they claim to have lost on the
This analysis contradicts Paul
Whitewater Development Corp.
Begala, a senior presidential ad-
Federal investigators want to
viser, who said the Clintons could
know why.
have taken a deduction only in
Internal Revenue Service offi-
1992, when they sold their 14-year
cials, tax lawyers and others fa-
miliar with federal tax laws say
see TAXES, page A8
TAXES
Mr. McDougal, the focus of a Jus-
firm could not vouch for the accu-
tice Department investigation into
racy of its findings.
suspicions of illegal loans and cam-
The Lyons report, issued March
From page Al
paign fraud involving Whitewater
24, 1992, took no notice of the fact
half-interest in Whitewater to one of
and his now-defunct Madison Guar-
that Whitewater had failed to file
their partners, James B. McDougal,
anty Savings and Loan Association,
corporate tax returns from 1985 to
for $1,000.
has said he does not remember the
1987. When inquiries were made
Mr. Begala told the Wall Street
Clintons losing that much.
during the campaign, the Clintons
Journal last week that the Clintons
During an interview with The
said the Whitewater tax records
would have saved only $280 if they
Times in April 1992, he said he
were not available.
claimed losses to cancel out the
thought the Clintons lost "signifi-
The tax problem was resolved in
$1,000 gain and "it wasn't worth it
cantly less" than $68,900 in White-
December 1992 by White House
because of the hassle factor."
water.
Deputy Counsel Vincent W. Foster
Other White House officials have
In a Jan. 7 interview with the As-
Jr., who was the Clintons' personal
said no capital losses were declared
sociated Press, he said he recalled
attorney until he killed himself July
because documentation was so poor
the Clintons investing about $9,000
20. He filed returns showing that
that it was impossible for the Clin-
in the venture.
Whitewater had earned no income.
tons to prove their losses.
The New York Times reported in
The returns made no mention of any
Even if the Clintons were "passive
March 1992 that the Clintons had
capital losses.
shareholders" in Whitewater, as a
taken $5,133 in illegal tax deductions
IRS officials told The Times it is
spokesman has said, they could have
on their 1984 returns for a White-
not necessary for someone to have
legally claimed $3,000 annual deduc-
water loan that should have been de-
accumulated capital gains to declare
tions until the whole loss was written
ducted for the corporation.
capital losses.
off, the experts told The Washington
Times.
Mr. Clinton at that time told re-
They also said that if a taxpayer is
aware of the provision for the $3,000-
But the Clintons did not claim
porters the couple lost $25,000 on
per-year deduction, he must claim
these deductions at a time when
Whitewater.
the deduction on his federal income
Mrs. Clinton was routinely claiming
James M. Lyons, a Denver lawyer
tax returns. Failure to do so because
tax write-offs for donations of used
and longtime Clinton ally who was
of ignorance is not a violation of the
underwear, sweat shirts, tennis
called in by the campaign to write a
law.
shoes, socks, slippers, stockings,
report in response to the Whitewater
Richard Morris, a former IRS
mittens, bikinis and "Clinton for
disclosures, was the first to put the
agent who works as a tax preparer,
Governor" T-shirts.
Clintons' loss at $68,900. Mr. Lyons
said the capital loss deduction is a
Mr. and Mrs. Clinton were joint
prepared the report in conjunction
common one claimed by taxpayers
partners with Mr. McDougal and his
with the Denver-based accounting
and recommended by tax preparers
wife, Susan, in Whitewater, which
firm Patten, McCarthy & Associates.
as long as it is claimed within three
planned to build vacation homes on
Mr. Lyons later acknowledged -
years of the year in which the loss
42 lots on the White River in north-
and The Washington Times reported
occurred.
eastern Arkansas. The project
in November - that many of the
Three Washington-based tax law-
failed. The partnership appears to
Whitewater documents were miss-
yers who asked not to be named told
have been structured to enable the
ing and that he had never discussed
The Times there was "no logical rea-
Clintons to receive half the profits
the matter with the McDougals.
son" why the legal deductions were
with little or no investment.
The Wall Street Journal reported
not taken if the losses occurred.
The Clintons said during the 1992
yesterday that Patten, McCarthy &
"Sometimes a loss is a freebie in
presidential campaign that they lost
Associates in a March 1992 letter to
exchange for other considerations,
$68,900 in the venture, but questions
the Clintons said that "due to the na-
such as regulatory help through a
have arisen about the validity of that
ture of the engagements and incom-
government agency," one of the law-
figure.
plete or unavailable records,"
Probe of first lady expected
to write new chapters in law
By Nancy E. Roman
At
Paul Rothstein, a law professor at
For example, the accounting firm
THE WASHINGTON TIMES
Georgetown University, said execu-
Ernst and Whinney spent $5 million
tive privilege does not apply to per-
on a legal battle before it agreed to a
The unprecedented investigation
sonal information but it does apply
$2.5 million settlement of the Fed-
of a first lady for possible civil or
to information that might include
eral Deposit Insurance Corp.'s $100-
criminal wrongdoing in the White-
military secrets, for example.
million-plus lawsuit against it after
water-Madison affair unleashes a
"But it is conceivable to use ex-
the collapse of Franklin National
host of legal questions and strate-
ecutive privilege by promoting an
Bank.
gies, top defense lawyers said yester-
illusion that there is a danger in re-
In the case of the Rose Law Firm,
day.
vealing secret things," he said.
Mrs. Clinton and another partner,
The lawyers interviewed by The
Invoking any of the special privi-
Richard N. Massey, represented
Washington Times also said the pow-
leges will make the investigation
Madison before state regulators in
erful Rose Law Firm in Little Rock,
more difficult, Mr. Rothstein said.
1985, using an audit by Frost & Co.
Ark., for which Hillary Rodham
"But there will be available un-
to show that it was solvent. Four
Clinton worked, may be vulnerable
privileged material and witnesses
years later, the firm in a case han-
to lawsuits as the result of the de-
who will be able to provide a picture
dled by another partner, Webster L.
mise of Madison Guaranty Savings
of what happened," he said. "The
Hubbell, now associate attorney
and Loan Association, which cost
public's need to know will be satis-
general sued Madison for the Fed-
taxpayers $50 million.
fied, but it will take some time and
eral Deposit Insurance Corp., saying
The relationships between Madi-
some digging."
the Frost audit was bogus.
son, the Rose Law Firm, bank reg-
Mr. Lefcourt said that as the case
ulators, and friends and family of
progresses David Kendall, the Clin-
President Clinton raise so many ethi-
tons' personal attorney, may invoke
cal questions that Harvard law pro-
special privileges such as the
fessor Alan Dershowitz will begin
attorney-client privilege, which
this semester's legal ethics course
would protect certain documents
with an assignment to scrutinize
drafted by Mrs. Clinton as her hus-
their activities.
band's attorney.
"My nose as a legal professor
"As a defense attorney it would be
my goal to preserve any privileged
smells something suspicious in the
material. I would certainly look into
activities of the Rose firm," Mr.
it," he said. "You carefully screen all
Dershowitz said. "It is the kind of
documents and information to see
elite insensitivity that Harvard and
whether any privilege applies. I'm
Yale and other elite law school stu-
sure that's what would be done here."
dents should be particularly sensi-
The Clintons also might attempt to
tive about."
use marital privilege, Mr. Lefcourt
Mrs. Clinton, a partner asthe Rose
said. "Spousal testimonial privilege
prevents a spouse form testifying
Law Firm, represented Madison be-
against another spouse to preserve
the sanctity of a marriage," he said.
fore state banking regulators in the
Mr. Dershowitz, however, said it
1980s while her husband was gover-
would be outrageous to claim that
nor of Arkansas.
privilege.
"I cannot imagine the nation be-
see HILLARY, page A8
ing willing to accept the spousal
privilege from the president or the
first lady," he said. "The only real
HILLARY
privilege the president has is execu-
tive privilege, and that comes at a
From page Al
great political cost."
Mr. Dershowitz said he will ask
Questions have been raised about
his students to examine the role of
Madison's ties to Whitewater, a
the spouses of public officials.
northern Arkansas real estate ven-
"Since so many of my students -
ture jointly owned by the Clintons
men and women - will be married
and James B. McDougal, owner of
to important public officials, I want
Madison, and his wife, Susan.
them to look at the relationship be-
The lawyers who discussed with
tween practicing law and being an
The Times the first lady's potential
advocate," he said.
case noted several murky legal
So many powerful people are mar-
ried to each other that potential ethi-
areas:
Will executive privilege apply to
cal violations are bound to come up
Mrs. Clinton?
more frequently, Mr. Dershowitz
Because Mrs. Clinton rep-
said. "The purpose of my course is
resented Mr. Clinton in the White-
preventative, to make sure that no
water investment, is attorney-client
student of mine gets himself or her-
privilege applicable?
self into this Hillary mess," he said.
Will marital privileges, such as
Mr. Rothstein urged some le-
one that prevents one spouse from
niency in this area.
another, apply?
"Unless you want to say
ange
of
privi-
of an important man can never apply
leges spousal and executive priv-
her trade, you've got to be lenient on
ilege," said Gerald Lefcourt, a de-
that," he said. "You don't want to dis-
fense lawyer in New York. "It's
able professional wives from prac-
almost a joke, but their conversa-
ticing their trade."
tions are protected by more privi-
As for the legal vulnerability of
leges than any other couple in the
the Rose Law Firm, Mr. Rothstein
country's."
said the lawyers there would have to
Executive privilege originated to
have known of the shaky financial
protect the president and his staff
conditions of Madison and then to
from releasing information that
have actively helped the client cover
could jeopardize national security.
them up.
Lawyers agreed that executive
"I don't know if there was that
privilege would not apply to any of
kind of involvement," he said. "But
the Whitewater dealings because
his is a new, forefront area of the
they occurred long before Mr. Clin-
3W - to hold the lawyers and the
ton assumed the presidency. But Mr.
ccountants responsible of the
Dershowitz said executive privilege
vrongdoing of the managers of an
might apply to the allegations of a
&L"
Whitewater-Madison cover-up.
92
FRIDAY, JANUARY 14, 1994 USA TODAY
Says some of
She bought it in September
1988 for $8,000 and sold it two
her actions
months later for $28,000.
Hillary Clinton's involve-
were his idea
ment in Whitewater's manage-
ment, as described by Wade,
runs counter to the Clintons' ef-
By Judy Keen
forts to downplay their role.
and Dennis Cauchon
Still, says Wade, "Hillary
USA TODAY
Clinton didn't do anything
wrong nothing. Absolutely,
FLIPPIN, Ark. The man
and that's not a guess. That's a
who sold Whitewater lots says
fact. I know it"
he, not Hillary Rodham Clin-
Wade has turned over docu-
ton, was responsible for her
ments relating to Whitewater
role in two of several areas
to the FBI and says he expects
likely to be part of a special
to be subpoenaed by the spe-
counsel's probe of the deal.
cial counsel who will investi-
Chris Wade, who handled all
gate Whitewater.
sales at the Whitewater Devel-
Meanwhile, Beverly Bassett
opment Co. Inc. property, says
Schaffer, then the state super-
he initiated her active involve-
visor of savings and loans, says
ment, which critics have used
a letter she received from Hil-
to undermine the claim of
lary Clinton's law firm request-
President Clinton and Hillary
ing permission for Madison
Salesman details Hillary's role
Tours, ballet
Clinton that their participation
Guaranty to raise money from
for first lady
in the investment was minimal.
investors was routine and did
Most of the 42 lots have been
not imply pressure from then-
First lady Hillary Red-
sold in the 230-acre develop-
governor Clinton.
ham Clinton and daughter
ment along the White River.
Chelsea are in Moscow to-
Only a handful of homes have
been built.
On April 30, 1985, the Rose
day for the final stages of
Law Firm wrote to Schaffer's
President Clinton's trip to
Interviewed at his realty of-
fice here, Wade says, to his
agency seeking the go-ahead to
Europe and Russia
sell preferred stock to shore up
On her agenda: tours of a
knowledge, the Clintons never
Madison's net worth. The letter
Moscow hospital, the Krem-
visited the property.
asked state regulators to con-
lin and nearby sites, and and
"They were really passive
tact Hillary Clinton or her col-
other hospital tour in Minsk
investors," he says. That
league at Rose, Richard Mas-
Belarus, Saturday,
changed when he urged Hilla-
ry Clinton to become more ac-
sey, if they had questions.
She'll be in the audience
Two weeks later, Schaffer
when President Clinton
tively involved:
wrote a "Dear Hillary" letter
livers a speech from a
He suggested that Hillary
saying the plan "is not inconsis-
sian TV station and then
Clinton seek power of attorney
tent with Arkansas law." The
join him for an official
over Whitewater in November
appropriateness of Hillary
ner at the Kremlin
1988. That would have effec-
tively given her control.
Clinton's representation of
by Borts Veltsh
Wade says the Clintons' part-
Madison in the request -
The
Charons
made to an official appointed
the
night
ner in the deal, James McDou-
by her husband - also has
guests of
gal, was too busy with his fail-
been questioned.
leaving
ing Madison Guaranty Savings
and Loan to make routine busi-
Madison was owned by
for
Mind
Early
ness decisions.
ton have tour of
"That was my idea," Wade
McDougal, the Clintons' part-
followed by visit to the
says of the letter in which Hil-
ner in the Whitewater invest-
Kremlin and & lunch hösten
lary Clinton requested power
ment. The thrift failed in 1989
by Naina Yeltsin
of attorney. "I couldn't get
and cost taxpayers $47 million
Later, she tours St.
ahold of Jim because of the
to $60 million.
the Blessed's church in Red
Madison problems. Hillary and
"Nobody in my office would
Square before joining Presio
I were talking on the phone
have any problem saying 'no'
dent Clinton for his speech
and I told her she should get
(to the Rose Law Firm re-
and other events.
power of attorney so we could
quest) just because her name
In addition to the hospital
deal with some decisions on
was on it," Schaffer says. "No-
tour in Minsk, Hillary Clinic
Whitewater. I don't know that
body was going to get fired
she ever did get it."
over that. Bill Clinton was my
ton will attend a ballet per
formance.
Bruce Lindsey, a senior Clin-
boss, not Hillary Clinton."
ton adviser at the White House,
Wade says McDougal han-
says Hillary Clinton never ac-
died all of Whitewater's fi-
quired power of attorney.
nances while Wade handled
Wade suggested that Hilla-
the marketing of the vacation-
ry Clinton pay for a model
home lots, surveying of the
home on the property in 1981
property and the construction
to try to spur sales. To build the
of access roads.
three-bedroom, ranch-style
modular home on the 2.66-acre
Clinton borrowed
$30,000 from the Bank of
Kingston, Ark., in which
McDougal had an interest.
In 1988, Wade says, it was
also his idea that she buy back
the home from the estate of an
owner who went bankrupt be-
fore dying "Here we had a
loan on the house, nobody
making payments," says Wade.
"We had a problem. (Her
repurchase of the house) was
the only wav."
FRIDAY, JANUARY 14, 1994 USA TODAY
Moynihan an ally,
a tormentor as well
not bad advice. "There are issues
which Pat Moynihan has reason to be-
By Adam Nagourney
some quarters of the adminstration.
lieve he knows more about than any-
and William M. Welch
"He has this wonderful quality of
one helping Bill Clinton," says presi-
USA TODAY
being always provocative, often illu-
dential scholar Stephen Hess.
minating and - on very rare occasion
Said Analyst William Schnelder: "I
In the space of two months, Presi-
- impossible," Presidential Counsel-
think what Moynihan is trying to do is
dent Clinton flew to New York to raise
or David Gergen said.
save Clinton from himself."
$1 million for Sen. Daniel Patrick
"The relationship is very good," as-
Indeed, Moynihan remarked on
Moynihan. He lathered praise on the
serts Clinton senior adviser George
this when asked about his threat to
Senate Finance Committee chairman
Stephanopoulos, who spoke to Moyni-
hold health care hostage to force the
("Moynihan's got an IQ of 300," Clin-
han last Friday night in what other
administration to act on welfare: "I
ton exclaimed). He had the senator to
aides said was an attempt to push
think we have their attention."
dinner at the White House.
Moynihan into being supportive in his
This has been, from the start, a
But, in just the past week, Moynihan
Meet the Press appearance. Instead,
complicated and sometimes difficult
has ridiculed Clinton's commitment to
the senator called for a Whitewater
relationship, according to colleagues
welfare reform, saying he used it as
special counsel.
of both men. It was hurt badly when
"boob bait for bubbas" to revive lag-
Asked his reaction to Moynihan's
an anonymous White House aide was
ging political fortunes waned. He
remarks on the Sunday show, Ste-
quoted in Time after Election Day
questioned the need for Clinton's
phanopoulos, who had dinner with
saying the administration will "roll
health care reform, saying: "We don't
him again that evening, responded:
have a health crisis in this country."
"He's a very smart man who is often
right over" the new chairman.
And he led Democrats in calling for
misunderstood."
Clinton called to apologize; Moyni-
a special counsel to probe the Clin-
Moynihan's defenders say there's
han aldes say he accepted It. Yet, Ger-
tons' holdings in the failed Whitewater
no personal animosity.
gen noted that the event left "scar tis-
Development Co. - lighting a flame
"He's at a stage of life and career
sue that has since disappeared."
under the issue just as Clinton hoped
where he's going to say what he
If Moynihan really forgave Clinton,
to extinguish it with a European trip.
thinks, and thank God for that - he's
it was not immediately apparent: He
For anyone who has followed the
a virtuoso," says Sen. Joseph Lieber-
called Clinton economic estimates
quirky relationship between the ca-
man, D-Conn. "He disagrees with peo-
"fantasy" and berated the administra-
reer politician from Arkansas and the
ple he talks to from time to time from
tion consideration of Social Security
Harvard-professor-turned-politician,
the administration, but I don't think
cost-of-living cuts a "death wish."
this marks another in a year of memo-
there's personal animus here."
Mandy Grunwald, the political con-
rable, if sometimes tense, exchanges
Others insist Moynihan is deliber-
sultant who works for both Clinton and
between two pioneers of the Demo-
ately seeking to force Clinton to recog-
Moynihan, says she thought any con-
crats' moderate wing.
nize the political realities of the Sen-
cern about tensions was unfounded.
But as Clinton enters his second
ate Finance Committee, where
"President Clinton thinks that Pat
year, the relationship looms as per-
Democrats hold a thin 11-9 margin
Moynihan's one of the smartest people
haps the most important one Clinton
which requires the chairman to fash-
he ever met. And Pat Moynihan
has with any member of Congress.
ion compromises on such divisive is-
thinks President Clinton will be the
Moynihan, as chairman of the com-
sues as health care. And it doesn't hurt
best president he's ever served."
mittee that oversees health and wel-
for him to demonstrate some Indepen-
fare, has emerged as the president's
dence from the president.
most important ally and, potential-
Lawrence O'Donnell, Moynihan's
ly, his most troublesome tormentor.
closet adviser, says the senator's call
It is no wonder that White House of-
for a special counsel was meant only
ficials say they have invested more
as a help: "It comes from someone
energy in appeasing Moynihan -
who's been in Washington for 30 years
from presidential phone calls to get-
and seen a variety of things unfold. He
ting jobs for Moynihan's allies to fun-
gives his experience to the president
neling funds to New York - than al-
for free And that's what he first
most any of his colleagues.
came to Washington to do, to advise
Moynihan's recent remarks sent a
the president."
shiver through the White House. But
It is tempting to draw easy conclu-
in fact, they fit neatly into a pattern
sions about the relationship with Clin-
that began weeks after Clinton's elec-
ton and Moynihan. At first glance, It
tion, with Moynihan's tart observation
appears the result of friction between
that he could hear from Little Rock
someone who has spent a life being
the "clatter of campaign promises be-
schooled in Washington government
ing tossed out the window."
and a newcomer, 25 years' Moyni-
Moynihan declined repeated re-
han's junior, who succeeded by attack-
quests for an interview. White House
ing the institutions that have been
officials, anxious to avoid a rift, were
Moynihan's life.
intensely cautious in discussing some-
Many of the suggestions no mat-
thing that has caused resentment in
ter how undiplomatically put - are
1994
ene washington Cimes
Papers from Foster's office draw
missing media into Whitewater
cause it developed that a file relating
Clintons can thank the "Trooper-
By Joyce Price
to Whitewater had been removed
gate" scandal for "getting White-
THE WASHINGTON TIMES
from the office of White House coun-
water on television."
The Whitewater-Madison contro-
sel Vincent Foster after he commit-
Network reporters played down
versy, ignored by most of the media
ted suicide last July."
two Arkansas state troopers' accusa-
until recently. has become the hot-
The Washington Times' Jerry
tions of womanizing by President
test story around.
Seper broke the story Dec. 20 about
Clinton and pointed to the White-
It's on the front pages of daily
the removal of the Whitewater files
water-Madison controversy as an is-
newspapers, a staple on the nightly
from Mr. Foster's office. Media scru-
sue that warranted closer scrutiny,
network news shows, and the subject
tiny of Whitewater and Madison has
he said.
of lengthy articles in this week's is.
since intensified.
sues of Time and Newsweek.
"A story isn't really big until tele-
Mr. Graham dismissed argu-
But a month ago, a person would
vision picks it up. and television dis-
ments that the controversy's com-
have been hard pressed to find any
covered this story around Christ-
plexity was a major reason the me-
reports about the Whitewater Devel-
mastime," said Robert Lichter,
dia ignored it. "Iran-Contra was
opment Corp., a failed Arkansas
founder and co-director of the Cen-
complicated, but that didn't stop any-
land deal in which the Clintons in-
ter for Media and Public Affairs.
body," he said.
vested, or Madison Guaranty Sav-
He said most news organizations
Katherine McQuay, spokeswoman
ings and Loan Association, a failed
ignored the story because "it's com-
for NBC-TV, said her network aired
thrift owned by Whitewater partner
plicated and esoteric and it didn't
reports on Whitewater and Madison
James B. McDougal.
seem to lead anywhere."
"going back to September
but
no-
Before last month. only The Wash-
"What killed the story for many
body was paying attention."
ington Times and The Washington
news organizations was that they
(the Clintons) said they lost money
But Mr. Graham said he has
Post had reported regularly on the
growing controversy.
and nobody gained," he said.
tracked media coverage of White-
The Washington newspapers ex-
"So if nobody gained, why don't
water and Madison and that NBC
posed details in the matter after the
they want to talk about it? A cover-up
"did its first story on Whitewater No-
disclosure in October that the Res-
of higher-ups is suggested.
When
vember 11. That was 12 days after
olution Trust Corp., the federal
it became a White House cover-up
The Washington Post" reported the
agency that disposes of failed S&Ls,
story, television latched onto it"
RTC request for a probe of Madison.
had asked the Justice Department to
Like Time's Mr. Church, Mr. Lich-
It was also seven days after The
investigate Madison Guaranty.
ter said the report that files were
Times reported that the Clintons
As Time writer George Church
removed from Mr. Foster's office
were active partners in Whitewater's
says this week in "Searching for the
was the catalyst for wide coverage of
management and that Hillary Rod-
Missing Pieces," the magazine's
Whitewater and Madison.
ham Clinton had sought power of at-
four-page report: "The press and
Tim Graham, the associate editor
torney over the venture. The Clin-
television paid almost no attention
of MediaWatch. a conservative me-
tons had said they were only passive
until recently and then largely be-
dia watchdog newsletter, said the
partners in the deal.
99
THE WASHINGTON POST
FRIDAY, JANUARY 14, 1994
White House Redirects
Focus From Land Deal
To Rest of Its Agenda
By Dan Balz
"Things were getting done, but
Washington Post Staff Writer
probably not at the pace anyone
would have liked," said one aide.
After a frenzied week of White-
The growing clamor for a special
water damage control, the Clinton
counsel, which came not just from
White House on two continents
Republicans or the media but from
tried to affect an air of normalcy
Democratic senators this week,
yesterday.
pinned down top White House aides
In Moscow, White House officials
and created a sense of inevitability-
attempted to redirect interest to
even if it was slow in coming. Offi-
President Clinton's foreign policy
cials described Tuesday as tense,
and his meetings with Russian Pres-
Wednesday as simply chaotic.
ident Boris Yeltsin. In Washington,
Senior adviser George Stephano-
senior advisers who had spent the
poulos, new White House Deputy
week grappling with whether to ask
Chief of Staff Harold Ickes, senior
for a special counsel to investigate
adviser Bruce Lindsey and others
Whitewater happily took a renewed
who were left here to deal with the
vow of silence on the issue.
mess while Clinton and the bulk of
"I'm not going to answer any more
the staff headed for Europe had time
questions about it," one adviser said
for little other than Whitewater.
yesterday. Why not? "Special coun-
sel," he replied.
The process of decision-making
Even as the Justice Department
was complicated by time zone differ-
ences, Clinton's frenetic schedule of
searched for someone to head the
new investigation, the word "White-
meetings, speeches and photo oppor-
water" was virtually banned from the
tunities abroad-and by the reluc-
lexicon of White House aides. "Ev-
tance of the president and Hillary
erything is in the Justice Depart-
Rodham Clinton to accept the need
for a special counsel to examine their
ment's court," one official said.
The decision to seek a special
past financial affairs.
By Tuesday there was a consensus
counsel, however, did nothing to an-
swer the substantive questions sur-
in Washington that the president had
rounding the Clintons' partnership in
to change his opinion and ask Reno
the Whitewater Development Corp.
to appoint a special counsel, not be-
or the relationship between the land
cause they believed it was justified,
development firm and the failed
but in the words of one adviser, be-
cause "the distraction factor became
Madison Guaranty Savings & Loan,
which was owned by James McDou-
sufficient that you say the heck with
gal, the Clintons' business partner.
it." But Clinton was not ready to
It will take more than White
yield until Wednesday.
House talking points to put the issue
Clinton's irritation with White-
to rest, but Wednesday's decision by
water's intrusion on his first trip to
Clinton to ask Attorney General Ja-
Europe was evident Wednesday, first
net Reno to appoint a special counsel
when be upbraided an NBC reporter
provided the circuit breaker the
for asking only about Whitewater,
White House was looking for to shift
and later when he got a question
the focus of the story and prevent it
about the special counsel during a
news conference in Kiev.
from overwhelming everything else
Clinton is doing.
The questions won't go away, but
The official word yesterday was
White House officials believe for
that the White House was back
now, at least, they can point to some-
working at full speed on things like
one else to answer them.
health care. welfare
craveling
with Cinton in Moscow, contributed
of the Union Address.
to this report.
2c