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PAGE 15
LEVEL 1 - 6 OF 18 STORIES
Copyright 1994 The Washington Post
The Washington Post
February 17, 1994, Thursday, Final Edition
SECTION: FIRST SECTION; PAGE A1
LENGTH: 964 words
HEADLINE: Whitewater Investigation Outlined;
Counsel Tells Judge Clinton-Thrift Probe Could Take 1 1/2 Years
SERIES: Occasional
BYLINE: Susan Schmidt, Washington Post Staff Writer
BODY:
Special counsel Robert B. Fiske Jr. told a federal judge yesterday his
investigation of President Clinton's Whitewater real estate venture and ties to
a failed S&L may last 18 months, cover more than a million documents and involve
20 or more investigators.
After meeting with Fiske behind closed doors, U.S. District Court Judge
Stephen M. Reasoner in Little Rock, Ark., agreed to empanel a special grand jury
to exclusively handle the federal probe of Madison Guaranty Savings & Loan, and
the Whitewater Development Corp. real estate venture, a corporation jointly
owned by President and Hillary Rodham Clinton, Madison owner James McDougal and
his former wife, Susan.
"The duties of any grand jury investigating this matter are much more
extensive than the court had previously envisioned," Reasoner said in his order.
Early this week, Fiske's office served a subpoena seeking a wide range of
documents on the Rose Law Firm, where Hillary Clinton and several high-ranking
administration officials were once senior partners. They include Associate
Attorney General Webster L. Hubbell, assistant White House counsel William H.
Kennedy III, and Vincent Foster, the deputy White House counsel who committed
suicide last July. The scope of Fiske's work includes looking at how the
investigation into the Foster suicide was handled by the White House and law
enforcement officials.
Rose firm lawyers did legal work relating to Madison. Hillary Clinton
represented Madison during the mid-1980s when it sought regulatory approval for
a stock plan from state officials. McDougal, a longtime Clinton friend, has said
he placed the Rose firm on a $ 2,000-a-month retainer when then-Gov. Clinton
complained to him about his family finances.
Hubbell represented the government when it sued Madison's accountants for
malpractice in 1990. The Federal Deposit Insurance Corp. has been examining
whether Hubbell and the Rose firm properly disclosed possible conflicts of
interest in handling the case.
After his meeting with Reasoner, Fiske told reporters in Little Rock that it
was necessary to ask for a special grand jury "because of the importance of this
investigation and the importance of doing it as quickly and as thoroughly as
PAGE
16
The Washington Post, February 17, 1994
possible."
In his order, Reasoner said that even if the regular grand jury was asked to
extend its term until the end of the year, it would not be able to complete the
investigation. Those grand jurors, who have already begun work on the Whitewater
investigation, initially thought they could do the job, Reasoner wrote, but
believe it would be impossible now that the "actual scope and magnitude of the
duties that would be involved in such a task has become more apparent."
Reasoner asked James Burnett, the foreman of the grand jury, to attend his
meeting with Fiske. Burnett served as head of the National Transportation Safety
Board under President Ronald Reagan.
In addition to the criminal investigation going on in Little Rock, a special
civil task force assembled by the Resolution Trust Corp., the federal agency
charged with overseeing the S&L crisis cleanup, has been working feverishly in
Kansas City for the past several weeks.
RTC investigators and lawyers, as well as lawyers from the firm of
Pillsbury, Madison & Sutro hired under contract by the RTC, are poring over
Madison files to see if there are any civil claims that can still be brought
against Madison attorneys, officials or borrowers. The statute of limitations on
some potential civil claims expires on Feb. 28, five years to the day after
Madison failed and was taken over by the government.
The subpoena delivered this week to the Rose firm sought information on a 2
1/2-page list of entities and individuals, according to knowledgeable sources.
The list was similar to one contained in a subpoena served last month on
Arkansas Gov. Jim Guy Tucker (D), according to a source who has seen both
subpoenas. In addition to documents relating to Madison and Whitewater, the
Tucker subpoena sought materials on President Clinton, Hillary Clinton and
Clinton campaign funds.
Rose firm Managing Partner Ronald Clark could not be reached for comment on
the subpoena, but he said in an interview last week that the firm was collecting
documents in anticipation of one.
"We are investigating anything and everything that has to do with Madison and
Whitewater," said Clark.
Among the materials being prepared by the Rose lawyers and sought on the
Tucker subpoena were documents relating to P.O.M. Inc., a large parking meter
manufacturing firm that was owned until recently by Seth Ward, Hubbell's
father-in-law, and is now owned by Ward's son, Seth Ward II. Hubbell was
P.O.M.'s lawyer, and court documents show that Hillary Clinton did work for
P.O.M. as well.
P.O.M. was a Madison borrower, and Seth Ward was a Madison employee. In 1985,
P.O.M. was the first company to receive a special "private activity bond" under
a program initiated by Clinton when he was governor.
Other individuals and entities listed on the Tucker subpoena related to
partnerships and corporations created by Madison owner McDougal, several Madison
insiders and borrowers, and materials related to Capital Management Services
Inc., a venture capital company that received federal funds from the Small
PAGE 17
The Washington Post, February 17, 1994
Business Administration.
Capital Management's owner, David Hale, is facing a trial on criminal fraud
charges by Fiske's office this spring. Hale has alleged that Tucker and Clinton
pressured him to make SBA-funded loans to help Madison, including a $ 300,000
loan, part of which ended up financing a Whitewater land transaction. Tucker and
Clinton have denied pressuring Hale for the loans, and Clinton has said he
remembers no such conversations where such loans were discussed.
GRAPHIC: PHOTO, SPECIAL COUNSEL ROBERT B. FISKE JR. TALKS TO REPORTERS OUTSIDE
COURTHOUSE AFTER FEDERAL JUDGE AGREED TO EMPANEL GRAND JURY TO REVIEW
WHITEWATER. AP
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 17, 1994
shots in the health care system, and asked whether
seniors wanted ''the insurance companies and the HMOs that
they control to call the shots for the future.'
As far as the industry is concerned, Clinton warned,
access to insurance means something quite different.
'`They want to give you access just like everybody in
this room right now has access to a Mercedes, he said.
WHITEWATER PROSECUTOR SEEKS SPECIAL GRAND JURY
By Steve Barnes
LITTLE ROCK, Ark (Reuter) -- Special prosecutor Robert
Fiske asked Wednesday for a special grand jury to review
evidence in the Whitewater investigation he directs,
saying a separate panel was needed ''to do this
investigation quickly and thoroughly.'
Fiske met behind closed doors with the federal judge
who would authorize the grand jury and said afterward,
''We would like the grand jury empaneled as soon as it
reasonably can be, consistent with the procedures in this
district.
Fiske said Judge Stephen Reasoner, chief judge of the
Eastern District of Arkansas, indicated he would review
the request and decide within a few days whether to call a
grand jury.
''We felt it would not be fair to ask a grand jury
that was told it would meet only two times a month to sit
the additional time we think it will be necessary to do
this investigation quickly and thoroughly.
Fiske would not say how long he thought the probe
would take.
Fiske is investigating President Clinton's business
affairs while he was governor of Arkansas to determine if
depositor funds from the now-defunct Madison Guaranty
Savings and Loan were illegally diverted to campaign use
in 1984.
He is also checking whether the Whitewater real estate
development in north Arkansas, in which the Clintons were
investors, improperly benefited from a Small Business
Administration-guaranteed loan to the wife of Jim
McDougal, Whitewater's developer and the chairman of
Madison.
The savings and loan's failure in 1989 cost taxpayers
at least $46 million.
It was learned Wednesday that the foreman of the
present grand jury is James Burnett, an attorney and
Republican Party activist who served as chairman of the
National Transportation Safety Board at the appointment of
President Ronald Reagan.
''That was not a factor in our request for a new grand
jury,' Fiske said.
2/17/94
Fiske said he requested a special grand jury be
empaneled for the 18 months federal procedures allow.
Fiske would not comment on what materials his staff
may already have subpoenaed except to note that ''It's
fair to say a lot of documents are involved.' He would
not say if documents have been obtained from Little Rock's
Rose Law Firm, where Mrs Clinton was a partner.
In a letter to Judge Reasoner made public Tuesday,
Fiske suggested that the current grand jury's caseload
made questionable its ability to review evidence in the
Whitewater investigation ''in a prompt and through
manner.
In a written response to Fiske's request, Judge
Reasoner said Fiske's petition did not justify the expense
of a second grand jury and scheduled Wednesday's hearing
to allow Fiske to ''present and develop his position.
Reasoner's order closed the hearing to the public and
press, citing the potential for disclosures that '`could
very well
hinder the independent counsel's
investigation. REUTER
Reno pushes for administration's crime bill
By MICHAEL KIRKLAND
BALTIMORE (UPI) The administration's push for
President Clinton's crime bill went on the road again
Wednesday, with Attorney General Janet Reno calling for
its passage during a visit to a Baltimore neighborhood.
President Clinton sounded the same theme during a
Tuesday visit to London, Ohio.
Reno met with community leaders in the Greenmount
section of the city and said, 'We've got to get the crime
bill passed.''
Added Sen. Barbara Mikulski, D-Md., ''We need to have a
national outburst for Congress to get off its guidelines"
and pass the crime package.
Baltimore Mayor Kurt Schmoke, who escorted Reno to a
public discussion with community leaders, said later
"it's vitally important" to his city that the crime bill
passes because Baltimore needs more police officers and
drug treatment programs.
About 48,000 of Baltimore's 750,000 residents about
one in every 15 people is addicted to heroin or cocaine,
said Schmoke, but there are only about 5,500 spaces
available for treatment.
The Senate passed its version of the crime bill late
last year, but the House has not passed its proposal. Both
bills still have to be reconciled before a final version
could be passed and sent to Clinton.
The package would include money to help communities
hire 50,000 more police officers, build more prison space
and provide boot camps for young offenders.
BC-HILLARY national editors:1
FDIC says Hillary had no conflict of interest in bank case
By Gary Marx and William Gaines
Chicago Tribune
As a private attorney in the 1980s, First Lady Hillary Clinton represented
a government agency in a lawsuit against a family friend, but her actions in
the case didn't constitute a conflict of interest, federal banking regulators
said Tuesday.
The statement by officials of the Federal Deposit Insurance Corp. involved
a suit between the now defunct Federal Savings and Loan Insurance Corp.
(FSLIC) and an Oak Brook savings and loan.
The FDIC inquiry was triggered by a Feb. 3 report in the Chicago Tribune
about Hillary's role as an attorney for a federal agency that had sued Dan
Lasater, a friend and political benefactor of Clinton and her husband, who was
governor of Arkansas at the time.
The story reported that Clinton represented the government agency in the
case against her friend, a potential conflict of interest. The story also said
that Hillary, as an attorney for the government agency involved, helped settle
the suit, which initially sought $3.3 million in damages, for $200,000.
FDIC officials said their inquiry confirmed that Hillary was a lawyer
representing the FSLIC in the 1980s and that she actively participated in the
agency's litigation against Lasater.
But the agency said Hillary's involvement in the case was not extensive
enough to constitute a conflict of interest under rules governing the federal
regulation of savings and loans. The FDIC said that, under federal rules
existing at the time, Hillary didn't have to directly tell the government
about her friendship with Lasater.
FDIC officials said that their inquiry involved primarily a review of
court documents and the billing records submitted by the Rose Law Firm, where
Clinton was a partner.
Based on what our people found, Mrs. Clinton's involvement was confined
to two hours reviewing the amended complaint (against Lasater), said chief
FDIC spokesman Alan Whitney. Whitney said the investigators did not question
Hillary.
FDIC officials said Hillary Clinton signed an amended complaint in the
litigation that reduced from $3.3 million to $1.3 million the damages sought
against Lasater, a bond trader who was accused of making unauthorized
Treasury-bond trades that resulted in more than $361,000 in losses for First
American Savings and Loan Association of Oak Brook.
However, Whitney said FDIC officials believe that Hillary was not involved
in the final decision to actually settle the case against her friend for the
$200,000. He said the case was handled primarily by Vincent Foster, a Rose
attorney and close friend of the Clintons who committed suicide last July.
Law and accounting firms are generally barred from representing the
government in S&L cases if they have previously represented the thrift, or
have personal links to any officials or targets of the lawsuit.
As the primary FSLIC contactor that hired the Rose Law Firm, Hopkins &
Sutter, a Chicago law firm, was responsible for asking the Rose attorneys
whether they had any potential conflicts of interest in handling the suit
against Lasater, Whitney said.
An FDIC official familiar with the inquiry said that attorneys at Hopkins
& Sutter could not remember details of the case. But they told federal
officials that they have no records indicating that Hillary worked on any
aspect of the case beyond the amended complaint.
**** filed by: KR-F(--) on 02/15/94 at 22:25EST ****
**** printed by: (JEL) on 02/16/94 at 08:28EST ****
PM-IL--Hillary Illinois S&L, 390
FDIC Says Hillary Clinton Had No Conflict in Illinois S&L Case
sdmilchtfls
CHICAGO (AP) Hillary Rodham Clinton's representation of the government in
a lawsuit against a family friend did not constitute
a conflict of interest, federal banking regulators say.
The Chicago Tribune reported Feb. 3 that Mrs. Clinton, representing the
now-defunct Federal Savings and Loan Insurance Corp., helped settle a $3.3
million lawsuit for $200,000 in 1987, a year after her husband's ties with the
defendant had been a campaign issue in his re-election as Arkansas governor.
The Federal Deposit Insurance Corp. investigated the report, reviewing
court documents and billing records submitted by the Rose Law Firm of Little
Rock, Ark., where Mrs. Clinton worked.
Based on what our people found, Mrs. Clinton's involvement was confined
to two hours reviewing the amended complaint,'' chief FDIC spokesman Alan
Whitney said Tuesday.
That was not enough to constitute a conflict of interest under federal
savings-and-loan regulations, the Tribune reported today.
Investigators did not question Mrs. Clinton, Whitney said.
The lawsuit was against Dan Lasater, a convicted felon whose bond trading
firm played a part in the troubles of several savings and loans, including
First American Savings and Loan in the Chicago suburb of Oak Brook.
Former Illinois Gov. Dan Walker, who headed First American, accused
Lasater of trading Treasury bond futures with thrift funds without informing
the thrift's officers.
First American sued Lasater's bond firm, accusing it of mail, wire and
securities fraud.
First American was seized in 1986, before the case went to court, by
federal regulators who charged Walker with lending himself $1.4 million in
federally insured deposits. Walker was convicted of fraud and jailed.
About the same time, Lasater was convicted of cocaine distribution and
trafficking and jailed. But federal regulators decided to pursue First
American's lawsuit against Lasater, and hired the Rose firm to pursue the
case.
FDIC officials said Mrs. Clinton signed an amended complaint that reduced
the damages sought from Lasater from $3.3 million to $1.3 million. FDIC
officials believe Mrs. Clinton was not involved in the final settlement for
$200,000, Whitney said.
The case was handled primarily by Vincent Foster, the deputy White House
counsel who committed suicide last July, Whitney told the Tribune. Foster
worked with Mrs. Clinton at Rose.
**** filed by:APW-(IL) on 02/16/94 at 06:27EST ****
**** printed by: (JEL) on 02/16/94 at 08:27EST ****
**** 08:28:51 7° 02/19/94 uo (TEE) periuted ****
**** 02:19:51 72 02/16/94 uo filed ****
Passport Probe Develops Witness Trouble
C. Olson, have refused to discuss
deputy chief of the Czech commu-
By Walter Pincus
the matter.
nist internal security service was
Washington Pvv Staff Wnter
Berry had direct conversations
quoted as saying his agency in the
Independent counsel Joseph E.
during the files search with Janet G.
summer of 1992 was asked to look
diGenova, who is trying to conclude
Mullins, then assistant to President
for information about Clinton.
his 14-month investigation into the
George Bush for political affairs and
During the 1992 campaign Re-
1992 preelection search of Presi-
now the main subject of diGenova's
publicans criticized Clinton for his
dent Clinton's passport files, has
inquiry. One source said yesterday
trip to Prague early in 1970, 16
that the final outstanding issue for
months after the Soviets crushed
run into a legal roadblock attempt-
diGenova is the allegation that Mul-
the short-lived Czech revolt against
ing to compel sworn testimony from
lins made false statements to State
Moscow rule.
his final key witness.
Department investigators in 1992
Investigators also have found
As a result, sources said, di-
when the search first became pub-
that Bush adminstration officials
Genova is being forced to negotiate
lic.
searched files at the Veterans Ad-
for a voluntary appearance by Ste-
Mullins twice denied any "knowl-
ministration in 1992 in an unsuc-
ven K. Berry, former acting assist-
edge of, or participation in, the
cessful quest for any letters Clinton
STEVEN K. BERRY
ant secretary of state for legislative
search of Clinton's files," according
might have written about his draft
diGenova is seeking his testimon
affairs and one of two officials who
to a Bush Justice Department re-
status.
helped to instigate the two-day file
port made public in December
A source familiar with the inves-
fairs Elizabeth M. Tamposi. w.
search in archived records for in-
1992. According to that same re-
tigation said diGenova is working to
soon was asked to resign. Ber
formation to discredit Clinton.
port, credible sources said she was
tie up all the loose ends of the affair
was removed from his job and lat
U.S. District Judge John Garrett
"aware of the interest in Clinton's
because his final report, by law,
resigned.
Penn ruled secretly last year that
files before the search occurred and
must include reasons why he did not
An investigation by State Depai
because State Department opera-
that Mullins helped encourage and
bring prosecutions.
ment Inspector General Sherm:
tions center monitor had illegally
direct the search."
The passport search was first
M. Funk led Bush Attorney Gener
overheard Berry discussing the
Meanwhile, diGenova has been in
disclosed in news reports in the last
William P. Barr to find that the
passport file search, Berry did not
the Czech Republic investigating
weeks of the presidential campaign.
was credible evidence that Malli
new reports that Bush campaign
Once the matter became public,
and perhaps others in the Bu:
have to respond to a subpoena or
aides in 1992 asked Czech internal
notes taken earlier by State Depart-
White House had violated son
testify before a grand jury, accord-
police for information on Clinton's
ment operations center officials
criminal law.
ing to sources.
trip to that country 24 years ago,
were turned over to then-Deputy
Sources said diGenova's inqui
Berry is prepared to cooperate
when Clinton was a Rhodes scholar
Secretary of State Lawrence S.
has not turned up any credible e
with diGenova, who needs Berry's
at Oxford.
Eagleburger. The notes recorded
idence to link former White Hou
testimony, sources said. "But he
In an article published in a
the contents of monitored phone
chief of staff James A. Baker III
does not want to lose his rights,"
Prague newspaper last month
conversations about the passport
Margaret Tutwiler, former
one source said.
shortly before Clinton's first pres-
search between Berry and then-As-
ant to the president for commun
Berry and his attorney, Theodore
idential visit to that city, the former
sistant Secretary for Consular Af-
cations, to the passport matter.
House Joins Senate in Vote to Bring Back Independent Counsel
The House debate centered in-
Gekas described a scenario in
By Kenneth J. Cooper
No vote was taken on the Gek
Washington Post Staff Writer
stead on a partisan battle over how
which an attorney general of the
amendment, but a Democratic
to apply the independent counsel
same party could refuse to inves-
stitute was adopted, 230 to 18
The House yesterday voted over-
law, first adopted in 1978, to mem-
tigate a "high-ranking, powerful
that allows an attorney general
whelmingly to reinstate a post-Wa-
bers of Congress.
lawmaker
on whom the White
seek an independent investigatix
tergate law that authorized inde-
Republicans argued that accused
House might depend for clearance
of lawmakers if such a probe
pendent counsels to investigate al-
lawmakers ought to be covered au-
on bills near and dear to the heart"
found to be "in the public interest.
leged wrongdoing by top federal
tomatically, in the same manner as
of the president.
The Senate bill sets a differe
officials.
60 top officials in the executive
That scenario sounded similar to
standard. It explicitly permits :
The 356 to 56 vote cleared the
branch, including Cabinet officers,
the ongoing federal investigation of
independent investigation of
way for House and Senate negoti-
the vice president and president.
House Ways and Means Committee
makers if the attorney general
ators to resolve relatively minor
The attorney general must conduct
differences on a five-year reinstate-
Chairman Dan Rostenkowski (D-
there would be a conflict of inte
a preliminary investigation of cred-
III.), who has played a pivotal role in
Under the expired law, 13 ind
ment of the independent counsel
ible allegations against those offi-
law, which expired in December
Clinton's trade and health propos-
pendent counsels were appointe
cials and must, if "reasonable
als. That investigation began during
but none investigated a member
1992. The Senate passed its ver-
grounds" exist, ask the federal ap-
sion, 76 to 21, in November.
peals court to appoint an indepen-
the Bush administration and has
Congress. The law did not speci
ically mention lawmakers as F
Political pressures for House ac-
dent counsel.
continued under Clinton's.
ble targets of independent invest
tion on the matter eased after At-
Rep. George W. Gekas (R-Pa.)
Democrats argued that attorneys
gations, although Democrats
torney General Janet Reno decided
urged lawmakers to support his
general of both parties have proved
they were covered under its broa
last month not to wait for reenact-
amendment for mandatory cover-
to be energetic prosecutors of er-
language.
ment of the law and named Robert
age as "an advance into good gov-
rant lawmakers, whether Demo-
The law expired because Reput
B. Fiske Jr. as special counsel to
ernment" that would "make sure
cratic or Republican. "There has
licans, angry at independent (
investigate the Arkansas land in-
that members of Congress are put
been no hesitancy to prosecute
sel Lawrence E. Walsh's $35 mi
vestments of President Clinton and
under the same scrutiny as mem-
members of Congress," said Rep.
lion inquiry into the Iran-contra at
Hillary Rodham Clinton.
bers of the Cabinet."
John Bryant (D-Tex.).
fair, filibustered in the Senate.
FRIDAY, FEBRUARY 11, 1994 THE WASHINGTON POST
23
History Lesson for Macy's
Outcry Ends Black Memorabilia Display
By Kirstin Downey Grimsley
Washington Post Staff Writer
Michaela Cooper, a Depart-
Macy's Removes Black History Display
ment of Labor employee, was
browsing at the R.H. Macy &
MACY'S, From A1
the items were being offered for sale
Co. department store at Penta-
by Macy's.
gon City last Friday when she
events organized by Macy's to cele-
Andrew Frank was still disturbed by
stumbled across something that
brate Black History month.
the exhibit five days after seeing it.
she said left her in "shocked dis-
Macy's officials apologized for their
Frank, a sales associate at Blackberry,
belief."
failure to include explanatory materi-
a store at the mall that specializes in
Cooper, who is African Ameri-
als. "Those pieces were displayed
African American objects, said, "I
can, said the glass display cases
without proper signage, and people
think we've come too far to even look
at the store contained such dis-
didn't understand what the artifacts
back at images likes that."
turbing items as a "Mammy"
and memorabilia were doing in the
Some problems can arise because of
cookie jar, a ceramic figure of a
cases," said Macy's spokeswoman Glo-
context, and the site where the item is
ria Kreisman.
black man with a white woman
She said that Macy's intention was
displayed, specialists said. For exam-
sitting on his knee and liquor
to create a display that would highlight
ple, modern-day Mammy cookie jars
bottles that depicted dark-
similar to those in the exhibit are on
the rich history of black Americans,
skinned men tap-dancing.
and that no offense had been intended.
display for sale at the black-owned
She was furious, as were oth-
"Our motivation was of the highest
Blackberry store, where they have at-
er customers and Macy's em-
level," she said.
tracted little controversy.
ployees who saw the exhibit of
Macy's does not plan to restore the
"If a black company had put it up, it
black historical memorabilia and
exhibit, substituting a display of an-
wouldn't have been so offensive, Saun-
collectibles. Macy's had orga-
tique photographs of black Americans,
ders said. "The bottom line is it was
nized the display as part of a
playbills and concert programs.
Macy's."
Black History Month display in-
But its decision to withdraw the col-
Lewis, the owner of the collection,
tended to honor black Ameri-
lection aroused criticism and disap-
said he laughed when he learned of the
cans-but many saw it instead
pointment among several specialists in
outcry because such displays often stir
as a painful reminder of the
black collectibles, who said that critics
Steven Lewis put together the
strong emotions.
country's Jim Crow past.
reacted negatively to things they
controversial Macy's exhibit.
"Blacks see the images and become
Shocked at the strongly nega-
didn't understand and were unable to
spastic," he said. "Blacks need to be re-
tive response, Macy's hurriedly
keep in proper historical perspective.
endured in earlier eras, they said. Oth-
minded of the harshness of what
removed the exhibit, banishing
"I think it's terrible it had to be re-
er objects can be viewed now as repre-
America has done to us as a people."
all traces of it to a back room by
moved," said Malinda Saunders, owner
senting the hurdles that black people
But he said he feels partially to
Friday evening, less than 24
of a black collectibles shop called That
have overcome and the achievements
blame, because he assembled the
hours after it went up.
Certain Place in Hyattsville, who said
that many have attained, they said.
items, which are staples of his exten-
similar displays often attract contro-
The Mammy cookie jar, for exam-
The problem arose, the com-
sive personal collection of memorabil-
versy. "It's [caused] by a lack of under-
ple: Saunders said that while some
pany said, because the exhibit
ia, wrote up the commentary and left
standing of black memorabil-
viewers would see it as a demeaning
town for a lecture tour without double-
was mistakenly and prematurely
ia.
People are ashamed but it's part
depiction of the black woman as a do-
checking how the display was being
displayed without commentary
of our history," said Saunders, who,
mestic, she sees it as honoring black
mounted. Lewis said that Macy's had
articles prepared for it by promi-
like the other specialists interviewed,
women who provided for their children
not intended anything offensive.
nent District-based black memo-
is black.
by doing housework.
"There was nothing racist about it,"
rabilia collector Steven Lewis.
"Macy's is giving in to their custom-
Among the items that were dis-
Lewis'said. "There was nothing in-
He put together the exhibit,
ers," said Jeannette Carson, chief ex-
played at Macy's, some were positive
tended to be derogatory."
which is one of about two dozen
ecutive of Black Ethnic Collectibles
depictions, some were negative and
There might have been an outcry
See MACY'S, A10, Col. 1
Corp., which publishes a magazine on
some were neutral. Among the Valen-
even if the explanatory text had been
the subject. "They're looking like
tines from earlier eras, for example,
displayed, said black collectibles ex-
they're guilty of something by with-
some were sweetly romantic and in-
pert Carson. "Sometimes people don't
drawing it."
tended for a black market. Others fea-
even look at those cards," she said.
Black collectibles have attracted in-
tured racist stereotypes of black peo-
creasing interest in the past decade,
ple. Also on display were topsy-turvy
Macy's spokeswoman Kreisman
and there are about 10,000 collectors
dolls, where one side was black and
said some company officials were tak-
of such memorabilia, most of them
the other white.
en aback by the criticism, particularly
black, in the United States. Items of
Also exhibited were old-fashioned
because the exhibit had been suggest-
interest include comic books, dolls,
hair-grooming products targeted to a
ed by a black employee.
paintings, photographs, household
black market, painted liquor bottles
"It was really designed for black
goods, concert programs and the pack-
and a ceramic figurine that depicted a
pride and enjoyment of their own rich
aging of goods available for sale in ear-
white child and black child sitting side
background," said Kreisman, who is
lier decades.
by side, with the inscription, "Let's Do
white. "The sensitivity of people of all
To enthusiasts of black collectibles,
Business Together."
kinds is at such a pitch now that
these items shed light on the past, and
The reactions from shoppers and
there's almost nothing you can do-
are valuable for the information they
some store employees made clear that
even something the most benign-
impart on how African Americans
racist images from the past still have
that someone won't object to."
viewed themselves in earlier eras, and
the power to evoke intense emotions.
Black collectibles expert Saunders
how they were viewed and depicted by
One caller to radio station WKYS.
said it was appropriate that some
white people.
Beverly Obanian, was so dismayed
items still have such power to shock.
The difficulty, all involved said, is
that she suggested on air that the
"It reflects the past, where we've
how things are viewed through the
store should be boycotted.
been," she said. "By seeing the deroga-
prisms of perspective and time. Some
"That's nothing I want thrown in my
tory items, we become stronger be-
things intended then to be offensive
face," said Obanian this week, adding
cause we've overcome those derogato-
still are offensive now, and serve as
that some of the people gathered
ry things. We need to look at it as our
useful reminders of what black people
around the glass display cases thought
strength."
FRIDAY,
FEBRUARY
11.
1994
THE
WASHINGTON
POST
27
THE WASHINGTON POST FRIDAY. FERRI ARY 11. 1994
Media Notes
ABC News Plunges
Into Whitewater
By Howard Kurtz
Washington Post Staff Writer
"W
orld News Tonight" blew off most of the
world Wednesday night.
In a highly unorthodox move, the ABC
newscast devoted 18 of its 22 minutes to the White-
water scandal, a story spectacularly ill-suited to televi-
sion. "We are going to attempt something ambitious
this evening," anchor Peter Jennings announced,
"which is to try to explain in one fell swoop the White
water jam that Bill and Hillary Clinton seem unable to:
get themselves out of."
What followed was a primer that broke little new
ground but tried to unravel for a national audience the
tangled dealings between the Clintons and their Ar-
kansas business partner, James McDougal, whose sav-
See MEDIA NOTES. B4, CoL 3
Whitewater Torrent
ti-Jewish and anti-white slurs by OTH
of his chief spokesmen could not be
construed as racism because it wa:
only words.
MEDIA NOTES, From B1
a young Gov. Clinton and his wife with
In his apology, Erwin Potts, chief ex
shots of the Whitewater vacation prop-
ings and loan went belly-up. The re-
ecutive of McClatchy Newspapers
erty and pictures of some of the
ports by Jennings, Jim Wooten and
which owns the Bee, said: "The car-
checks. In one newsworthy disclosure,
Mark Potter also featured the first ex-
toon was intended to be a reaffirmation
ABC obtained a $20,744 canceled
tended TV interview with McDougal.
of our stand against bigotry. Unfortu-
check that the Clintons say paid for
"Most people, and I include myself
nately, that anti-racism message has
part of their losses on the land deal.
among them, didn't really understand
been lost in the ensuing controversy.
But the check was written to a
the Whitewater deal," said Rick Kap-
And for that we are sincerely sorry."
McDougal bank as repayment of a per-
lan, who replaced Emily Rooney last
Renault, however, said there was
sonal loan, and McDougal says it had
month as the newscast's executive pro-
"no doubt" that the paper had bowed to
"nothing at all to do with Whitewater."
ducer. "It just didn't make sense to do
"an organized effort" of community
Christopher Isham, head of the in-
it as a bunch of four-minute pieces."
pressure. "There should have been an
The sudden immersion in White-
vestigative unit, said off-air reporter
absolute, strong statement that we
Chris Vlasto persuaded McDougal to
water, which was primarily a newspa-
stand behind this cartoon," he said.
talk by hanging out with him at the
per story until recent weeks, carried
"And for those sincerely bothered by
Western Sizzlin' steakhouse in Arka-
echoes of 1972, when CBS anchor
the word-which has appeared in
Walter Cronkite stunned the Nixon
delphia. "We beat the bushes, went
quotes 50 times in this newspaper
White House by devoting most of one
through files searched court records,"
Isham said. White House officials de-
since January 1992, on everything
night's newscast to the little-under-
from rap groups to white racist
stood Watergate scandal. Kaplan was a
clined to appear on camera.
groups-you say we're sorry, but this
junior staffer on that broadcast. A for-
Kaplan dismissed suggestions that
cartoon would run tomorrow just like it
mer executive producer of "Nightline,"
the segment might have been related
did today."
he also admits to a fondness for the Big
to media criticism of his long friendship
with Clinton. "It's immaterial," he said.
But Nate White, president of the
Story approach.
Sacramento NAACP, said Renault's
"With two minutes here and one
"I'm a journalist. This is what I do for a
use of "the N-word" was "offensive to
minute there you think, 'My eyes glaze
living."
black people. On the verge of Black
over, no one's going to understand
Bee Gets Stung
History Month, it was in poor taste.
this,' Kaplan said. "I said look, the on-
You're referring to a group of people,
ly way to follow this is to do it all at
The Sacramento Bee, under pres-
and that's wrong. We have called for
once."
sure from the black community, has
people to drop their subscriptions.
Media analyst Robert Lichter called
apologized for a political cartoon that
They waited too long to apologize."
it "a very good piece of explanatory
was meant to ridicule racism.
Editorial Page Editor Peter Schrag,
journalism" that "tells other journalists
The paper published three separate
who also apologized, said about 90 per-
this is important and tells the White
apologies in recent days after 955
cent of the calls to the paper have sup-
House that journalists aren't going to
readers canceled subscriptions, most
ported Renault, "including from some
ignore the story because of the special
black Bee staffers denounced the car-
black people.
I don't think we
counsel's investigation." But in a recent
toon and the local NAACP called for a
caved in on the principle. We stuck by
Times Mirror poll, only 13 percent of
boycott. A black city council member
the message of the cartoon. We said
those surveyed said they were follow-
also introduced a resolution assailing
we're sorry for offending those people
ing Whitewater very closely.
the paper.
who were offended."
"It's a gamble," said Erik Sorenson,
Last week's editorial page cartoon
executive producer of the "CBS Eve-
by Dennis Renault showed two Ku
Tonya Watch
ning News." While crediting ABC's ef-
Klux Klansmen reading a statement
fort, he said, "the downside is you run
by Nation of Islam leader Louis Farra-
Number of stories mentioning Ton-
the risk of depriving people of news
khan that said: "You can't be a racist
ya Harding since rival skater Nancy
they may be expecting to get. You
by talking-only by acting."
Kerrigan was attacked Jan. 6:
didn't get the news of the day from
In the caption, one Klansman said:
USA Today: 122
ABC."
"That nigger makes a lot of sense."
New York Times: 111
ABC took pains to introduce the cast
The cartoon was referring to Far-
Los Angeles Times: 101
of characters, interspersing footage of
rakhan's comments last week that an-
Washington Post: 95
THE WASHINGTON POST FRIDAY. FERRI ARY 11. 1994
White House Reporter
Frank Cormier Dies
Associated Press
Frank Cormier, 66, who covered
five presidents as White House cor-
respondent for the Associated
Press, died Feb. 9 at Common-
wealth Care Center in Fairfax. He
had a neurological disorder.
Before his retirement in 1980
due to illness, Mr. Cormier was the
senior wire service correspondent
at the White House and therefore
designated to close all presidential
news conferences. Countless Amer-
icans heard the strapping New Eng-
lander's booming: "Thank you, Mr.
President."
As White House correspondent
for nearly 20 years, Mr. Cormier
covered John F. Kennedy, Lyndon
B. Johnson, Richard M. Nixon, Ger-
ald R. Ford and Jimmy Carter.
He reported on the Kennedy as-
1973 PHOTO
sassination in 1963 from Dallas and
FRANK CORMIER
wrote four books, including a per-
sonalized account of the Johnson
administration.
A native of Worcester, Mass.,
Mr. Cormier graduated from the
Medill school of journalism at
Northwestern University. He joined
the AP in Chicago in 1951 and
transferred to Washington three
years later. After a stint covering
the Treasury Department, he be-
came White House correspondent
in 1962.
CORRECTIONS
Mr. Cormier continued freelance
President Clinton's drug-policy an-
operation to protect Kurds in northern
writing after his retirement. He
nouncement was incorrectly described
Iraq.
was a former president of the White
in an article yesterday. The proposed
House Correspondents Association
$13.2 billion anti-drug spending level
CLARIFICATION
and a member of the Gridiron Club
for fiscal 1995 represents a 9 percent
and Sigma Delta Chi, an honorary
increase from the current level.
The Marine Toys for Tots Founda-
journalism society. His honors in-
tion is cooperating in a federal investi-
=
cluded the alumni achievement
gation into whether its former president
award of the Medill school of jour-
The U.S.-led operation to airdrop
diverted money from the charity. The
nalism.
food to besieged Bosnian towns is called
foundation is not the target of that
Survivors include his wife of 41
Provide Promise. A report from Sara-
probe. An article yesterday misstated
years, Margot Bumiller Cormier of
jevo yesterday mistakenly called it Pro-
the foundation's role in the investiga-
Fairfax: four children, Elizabeth
vide Comfort, which is the name of the
tion.
Heinz of Jenkintown, Pa.; John Cor-
mier of Fredericksburg, Va., Wil-
tiam Cormier of Mexico City and
Michael Cormier of Washington;
and eight grandchildren.
bc-counsel times - a1730
(ATTN: National editors) (Includes optional trims)
House Votes to Resume Probes by Independent Counsels (Washn)
By Michael Ross= (c) 1994, Los Angeles Times=
WASHINGTON The House, capping a highly partisan two-day debate, voted
overwhelmingly Thursday to renew the Watergate-inspired law that authorizes
investigations of senior administration officials by independent counsels.
The measure, approved 356-56, would re-establish for five years
a mechanism for insulating investigations from the political pressures that
could be brought to bear when the Justice Department looks into alleged
criminal wrongdoing by top officials of the same administration.
The legislation passed only after a test of wills in which Democrats beat
back a Republican attempt to apply the law equally not only to the president
and other senior executive branch officials, but also to members of Congress.
Hoping to draw Democratic votes from the ranks of reform-minded freshmen,
GOP leaders argued that the low esteem in which Congress is held by voters
would be further depressed if the lawmakers did not vote to also apply the law
equally to themselves.
Here's your chance
to reform the way this place works, Rep. Henry
J. Hyde, R-Ill., said in an appeal to the chamber's 110 freshmen lawmakers.
The American people want us to be covered by this law.
Democrats denounced the Republican proposal as a thinly disguised attempt
to politicize the statute and render it unworkable. They defeated a substitute
bill offered by Hyde, 230-188.
Like the expired law it replaced, the new legislation would require the
Justice Department to conduct a preliminary investigation if the attorney
general receives specific and credible'' information alleging criminal
wrongdoing by any of 60 senior executive branch officials, including the
president.
If the investigation finds reasonable grounds'' to believe that further
investigation is necessary, the attorney general is required to ask a special
three-judge panel of the U.S. Court of Appeals to appointment an independent
counsel.
Also like the old law, the measure would allow but not require
the attorney general to seek appointment of an independent counsel to
investigate members of Congress.
The House bill must now be reconciled with similar legislation passed by
the Senate last November, but the differences between the two bills were minor
and should pose no obstacle to final passage, sponsors of the legislation
said.
(Optional add end)
First approved in 1978 in the wake of the Watergate scandal that drove
former President Nixon from office, the independent counsel law was meant to
circumvent the conflict of interest that an attorney general might face if
called upon to investigate the president, vice president or other senior
officials.
Since then, there have been 13 independent counsel investigations,
although few convictions. The most famous case independent counsel Lawrence
Walsh's $37 million probe into the Iran-contra affair proved to be the law's
undoing, however. Angered by what they charged was a partisan probe, Senate
Republican blocked a renewal of the independent counsel law when it expired in
December 1992.
But President Clinton's election, and questions subsequently raised about
his involvement in the troubled Whitewater Development Corp., focused new
attention on the need for an independent counsel statute. Republican
objections diminished.
You can believe that we want a strong independent council's office
now that the folks from Arkansas are in charge, Hyde said.
In the debate over fully including Congress, Democrats argued that
expanding coverage was unnecessary because the Justice Department can and has
investigated members of Congress without raising conflict of interest
concerns.
quake-recover - a1941
(ATTN: National editors) (Includes optional trims)
California Gov. Proposes Borrowing to Pay Quake Bill (Sacremento)
By Daniel M. Weintraub and Dan Morain= (c) 1994, Los Angeles Times=
SACRAMENTO, Calif. California Gov. Pete Wilson proposed Thursday that the
state borrow money to pay most of its $1.9 billion share of the Jan. 17
Southern California earthquake recovery costs to avoid raising taxes.
Wilson's plan would manage the state's end of the recovery with
a loan from the federal government, a state bond issue, and unspecified cuts
in existing state spending. Wilson's proposal attracted some initial support
from legislative leaders but was harshly criticized by his Democratic
opponents for governor.
Taxes should be a last resort and not a first response, Wilson told
the news in his office after a meeting with legislative leaders. The facts
show that the state's general fund exposure can be financed without raising
taxes.
Wilson said that, unlike after the Loma Prieta earthquake, which struck
the San Francisco Bay area in 1989, the state's economy cannot absorb a tax
increase.
Legislators enacted a quarter-cent, temporary increase in the sales tax to
raise $761 million after the Loma Prieta earthquake.
We really can't afford an earthquake recovery plan that threatens an
already fragile economy, Wilson said.
He said the state's unemployment rate is nearly twice what it was in 1989
and that personal income, which was growing at a 7.7 percent annual rate then,
is nearly stagnant today. Wilson also noted that both the sales and gasoline
tax have been raised significantly since 1989.
Wilson's three-point plan includes elements that will need approval from
the voters, the federal government and the state Legislature.
The largest part of it would be the proposed $1.05 billion bond issue,
essentially a 20-year mortgage taken out by the state. Wilson wants to seek
voters approval for the measure in June.
About half of the amount raised by the bond issue would go toward costs
that are already being incurred for the state's share of freeway repair and
for the reconstruction of local government buildings and schools.
The other half would be spent on low-interest loans to homeowners to
supplement the program run by the federal Small Business Administration. That
portion $575 million will not be spent unless the bond measure is approved,
Wilson said.
The second part of Wilson's plan calls for the federal government to allow
California to delay payment of the estimated $334 million the state will owe
as matching funds for federal disaster aid. The state would pay the money in
three annual installments beginning on July 1, 1995.
The governor said that he had spoken by phone with Leon Panetta, director
of the federal Office of Management and Budget, and that Panetta said the
Clinton administration would be open to the idea of the loan.
They certainly did not reject it out of hand, Wilson said.
(Optional add end)
The final part of the plan would require at least $290 million in cuts to
the existing state budget to make up for the loss of tax revenue and to pay
the state's share of grants to individuals and families.
Another $80 million would have to be cut to make the first of the annual
payments on the bond measure if it is approved. Wilson did not say where he
would make those cuts in a budget that already is $3 billion out of balance.
It is part of the challenge we will face in dealing with the budget gap in
general, he said.
The state would lose another $225 million over the next 10 years as people
use their property damage losses as deductions to reduce their taxes.
The Jan. 17 earthquake caused an estimated $13 billion to $20 billion in
damage. The tab for federal, state and local governments is estimated at $11.6
billion. President Clinton has proposed that the federal government pay $9.5
billion of that amount.
House Votes to Restore Independent Counsel Law
By ADAM CLYMER
guage of the original bill. under which
Sper in The New York Times
Wide support for
the prosecutor was directed to explain
WASHINGTON. Feb. 10 - The
his investigations. whether or not they
House voted overwhelmingly todav to
a vestige of the
led to charges.
Much of the previous Republican an-
put the independent counse: law. first
enacted in the attermath 01 the Water-
Watergate era.
ragonism was directed at Lawrence E
Walsh. whose investigation of the Iran-
gate scandal, back on the statute books.
Contra case lasted seven years and
The new measure. which provides
cost more than $35 million. The new
for prosecutors appointed by a panel of
Democrats. arguing that the Justice
version of the bill includes some new
Federal judges in cases involving high-
ranking Administration officials. The
Department had no problem investi-
cost controls and financial reporting
old bill was not renewed in 1992. when
gating members of Congress without
requirements.
Senate Republicans voted against re-
judicially appointed prosecutors, held
The Clinton Administration support-
enacting it.
out for a provision that would allow the
ed re-enactment 01 the law. under
Today's House vote to restore inde-
Attorney General to ask for an inde-
which the Attorney General can act on
pendent counsels - who would not be
pendent counsel if she thought it neces-
her own or must either seek the ap-
subject to Justice Department direc-
sarv to avoid a conflict of interest That
pointment of a counsel or explain whv
non - was 350 to 56. with 112 Reputal-
not :: majorary U: either the Repunn-
cans voting in favor along with 243
pired. and was never used.
can or Democratic members of the
Democrats and one independent. while
Representative George Gekas, Re-
Judiciary Committee in either the Sen-
54 Republicans and 2 Democrats voted
publican of Pennsylvania. said the At-
ate or the House.
against the bill.
torney General should not have the
ability to disregard an accusation
House-Senate Conference
against a "high-ranking, high-profile
This vote sent the measure to a
member of Congress.
Shuttle Crew Prepares
House-Senate conference. The Senate
passed the bill last November. with 25
But Representative John Bryant.
Republicans joining 51 Democrats in
Democrat of Texas. asked. "Are you
To End Joint Mission
voting for passage.
not aware that members of Congress
are under investigation today?' He
Though the bill may become law by
urged Republicans to look at daily
the end of the month. it is not expected
CAPE CANAVERAL. Fla., Feb. 10
newspapers if they wanted to make
to be invoked in the inquiry into Presi-
(AP) - Discovery's crew packed to-
sure.
dent and Mrs. Clinton's connections to
day to come home after a mission that
The House voted 230 to 188 to make it
was the first American-Russian shuttle
the Whitewater Development Compa-
optional with the Attorney General
ny. There weeks ago. Attorney General
partnership but that achieved mixed
whether to invoke the statute in the
Janet Reno appointed a special prose-
results on its scientific goals.
case of members of Congress. The ma-
cutor. Robert B. Fiske Jr., to investi-
jority included 227 Democrats. 2 Re-
Bad weather threatened to disrupt
gate that case. Under the existing regu-
publicans and anindependent.
the National Aeronautics and Space
lations she used to appoint him. he
Member Under Indictment
Administration's plans for the shuttle
could be dismissed only for "good
landing. Forecasters said rain, low
cause" or physical infirmity. and she
On the losing side were 2 Democrats
clouds and high wind were possible at
would be required to explain her action
and 167 Republicans. including Repre-
the Kennedy Space Center, any one of
to Congress.
sentative Joseph M. McDade, the only
which could prevent Discovery from
Before passing the independent
member of the House now under indict-
landing as scheduled at 12:44 P.M.
counsel bill today, the House went
ment. He is the senior Republican on
Eastern time on Friday.
through a bitter partisan battle over
the House Appropriations Committee,
and was indicted for briberv in 1992.
Flight directors said they would con-
sending Discovery to Edwards
that the Attorney
essary.
Another
be required to consider Senators and
ersion does not require inc counsei to
Representatives on the same basis as
discuss cases that were investigated
option would be to delay the landing
Cabinet members. That means she
but not prosecuted in a final report.
until Saturday but only if meteorolo-
would have to apply to the judges 10
Senator Bob Dole of Kansas, the Re-
gists thought the Florida weather
publican leader. sought the change ai-
would improve by then.
name a prosecutor If she thought there
ceredible evidence against them.
ter contending that innocent people
Five Americans and the first Rus-
and she would not be able to Keep their
were untairly subject to attack in final
sian to fly on a United States shuttle.
prosecution within the Justice Depart-
reports. such as the Iran-contra report.
Sergei K. Krikalev, have been in orbit
ment.
The House version retained the lan-
since Feb. 3.
THE NEW YORK TIMES. FRIDAY, FEBRUARY 11. 1994
USA TODAY FRIDAY FEBRUARY 11. 1994
WASHINGTON
Independent
nunsel
law wins House OK
ELSEWHERE IN THE WORLD
The House voted Thursday to revive the independent
counsel after questions about President Clinton's land deal-
ings in Arkansas brought Republican converts to the idea.
Group: U.S. firms violate
The House bill, similar to a Senate-passed version, would
again allow court-appointed
trade
embargo
on
counsels to investigate top government officials. It now goes
to a conference for final clearance.
At least 50 U.S. firms are violating a U.N. embargo
The old law expired in December 1992 after Senate Re-
against Haiti - including some companies doing business
publicans, angry over the $37 million Iran-contra investiga-
with supporters of the coup that toppled president Jean-Ber-
tion by Lawrence Walsh, killed it with a filibuster.
trand Aristide, a coalition of Haitian advocates said Thurs-
Lawyer Robert Fiske was named a special counsel to in-
day. They also accused the U.S. Agency for International
vestigate Clinton's Whitewater dealings. But he will report
Development of partially funding a Haitian humanitarian
directly to Attorney General Janet Reno.
organization controlled by a group loyal to the coup leaders.
AID denied the charges. "This is just shocking and it sends
'THREE STRIKES': A pro-
the wrong message to the Haitian coup leaders," said
posed "three strikes and you're
Charles Kernaghan of the National Labor Committee, one
out" law should guard against turn-
of the groups.
ing prisons into "a geriatric ward at
age 75 or 80 for people who are no
RUSSIAN POLITICS: Yegor
longer dangerous," Attorney Gen-
Gaidar, the champion of Russia's
eral Janet Reno said. President
market reforms, said he wants to
Clinton supports the idea of putting
create a new political party to
three-time violent offenders in
avoid another defeat of reformers,
prison for life. Legislation passed
who lost December's legislative
by the Senate would impose a man-
elections.
datory life term without parole for
Gaidar, now in parliament, said
people convicted of three violent
RENO: Some exclu-
reformers need a well-oiled cam-
or drug-related crimes, when the
sions to the law
paign machine to succeed in the
third conviction was in federal
1996 presidential race and other
court The administration wants a law to focus on putting
AP
elections. Gaidar was the principal
truly dangerous offenders away "for all of their crime-pro-
GAIDAR: Wants to
architect of the free-market
ducing life," Reno said. Some could be excluded, such as
create new party
changes that began in early 1992.
someone who "gets in a barroom brawl and is charged with
a violent felony at 18, and then at 40 does something else,
BRIBE CLAIMS:
Russian ultranationalist Vladimir Zhir-
and then at 50 does something else," she said.
inovsky claims he's been the object of many bribery and
murder attempts, including a $100 million offer from
CRIME/DISABILITY:
The
Senate
voted
to
block
crimi-
"American Zionists" to get out of politics.
nals from receiving federal disability payments by counting
their ill-gotten gains as assets. It would change current law
MIDEAST
PEACE:
Israel
said
it
needs
at
least
one
that requires individuals to show they are unable to per-
month to reach final agreement to turn over the Gaza Strip
form gainful activity to be eligible for disability benefits. A
and Jericho to the Palestinians. Israeli Prime Minister Yitz-
recent report released by Sen. Bill Cohen, R-Maine, showed
hak Rabin said there would be no prisoner releases or Is-
the government paid $1.4 billion in benefits last year to
raeli troop withdrawal until then. PLO leader Yasser Arafat
250,000 addicts, many who then bought drugs and alcohol.
and Israeli Foreign Minister Shimon Peres signed an agree-
ment Wednesday resolving key issues in the transfer.
HEALTH
OVERHAUL:
Sens.
Harris
Wofford,
D-Pa.,
and Edward Kennedy, D-Mass, major supporters of Presi-
KIDNAPPINGS: Somalian gunmen freed two British
dent Clinton's health-care plan, don't think it goes far
lawmakers and a charity worker, 24 hours after they and
enough in providing long-term care benefits. They intro-
three others were abducted in northern Somalia. The other
duced a bill to provide a government-run nursing home in-
hostages were released earlier. The British Foreign Office
surance program. Clinton's plan promises adult day care
said there was no ransom demand and that the kidnappings
and home care for seniors and the disabled, but it doesn't
resulted from a dispute between two clans.
cover extended nursing home care. Polls show seniors want
long-term care as part of the Clinton reform program in
GUERRILLA DIES: Victor Phama, commander of the
return for supporting it. Wofford said his plan would guar-
biggest black guerrilla group still waging war against white
antee families have a choice of nursing home plans and
rule in South Africa, was killed in a car crash in Tanzania.
protection "from going bankrupt from the cost of care." In-
Phama was commander in chief of the Azania People's Lib-
dustry officials dismissed it as not properly financed.
eration Army, the military wing of the radical Pan African-
Also, the American College of Surgeons endorsed the
ist Congress, based in Tanzania.
concept of nationalized health insurance, saying a tax-sup-
ported system like Canada's would do more to preserve pa-
tients' choice of doctors than other health-care proposals,
including Clinton's.
Pat Robertson's Christian Coalition said it was launching
a $1.2 million campaign against Clinton's health-care plan, a
blitz that will include up to 30 million postcards to be sent to
members of Congress from churches across the country.
Judi Hasson
JUSTICE SUPPORT:
The Congressional Black Caucus,
seeking to blunt any right-wing attack on President Clinton's
latest nominee to head the Justice Department's civil rights
division, strongly endorsed Boston lawyer Deval Patrick for
the job Thursday. "We like his credentials," said Rep.
Kweisi Mfume, D-Md. "Those who will seek to define him
by using other terms and misinformation should know they
will confront us at every turn." The caucus also called for
Justice Department intervention in lawsuits that threaten to
dissolve minority congressional districts.
The Washington Times FRIDAY, FEBRUARY 11. 1994
RICO
the White House?
PAUL CRAIG ROBERTS
Whitewater
ASSOCIATED
t avail
n recent days the White House
DAMAGE
I
must have thought it was sitting
on top of the San Andreas
CONTROL
Fault. On Jan. 27, the New York
WING
Post reported that the ambu-
lance driver and paramedics
DOMESTIC
who picked up Deputy White House
POLICY
Counsel Vincent Foster's body doubt
WING
that it was suicide, and their baffie-
ment has been echoed by various law
enforcement officials.
The aftershocks were even more
severe. On Feb. 3, the New York Post
reported that recently ousted FBI
Director William Sessions charged
that the investigation of Mr. Foster's
death was compromised from the
beginning by political operatives in
the White House and Justice Depart-
ment. Unidentified FBI agents have
FOREIGN
told the press that they were called in
POLICY
for cover but were not permitted to
really investigate.
WING
On Feb. 4, the New York Times
reported that the U.S. Park Police are
critical of the White House for imped-
general to a conspiracy to destroy
ture with the McDougals.
edly an independent federal agency
ing their investigation of Mr. Foster's
evidence.
Mrs. Clinton has additional legal
empowered to make law enforcer
c
h.
Similar obstruction of justice
problems because of conflicts of inter-
decisions concerning the Clintons'
And on Feb. 9, The Washington
charges could arise from the reve-
est while a lawyer at the Rose Law
entanglement in the Madison S&L scan-
Times reported that employees of the
lation that Clinton political opera-
Firm. In the Madison S&L case, she
dal, has been without a director for a
Rose Law Firm have said Whitewater
tives removed files from Mr. Foster's
represented herself and her hus-
year. A Clinton executive branch
documents were shredded by the law
office, which should have been
band's business partner, James
appointee to the Treasury De
t
firm during the first week of Febru-
sealed following his death, and with-
McDougal, before a state regulatory
has been running the independent
ary. A spokesperson for the law firm
held them from investigators.
board appointed by her husband. In
agency on an acting basis.
denies the story.
Mr. Clinton could be implicated in
an Illinois S&L case, she represented
To complete his control over the
Whatever the Clintons hoped to
S&L fraud. Republican investiga-
regulators in a suit against her hus-
investigative arms of the government
achieve by withholding from the pub-
tors for the House Banking Com-
band's political ally and contributor, Dan
Mr. Clinton is pushing Ricki Tigert, his
lic the Whitewater documents and
mittee claim to have established that
Lasater.
nominee to head the FDIC, through
the police report on Mr. Foster's
Madison S&L funds were diverted
These conflicts of interest are a legal
ate confirmation, along with a
tr
1, the result has been growing
through the Whitewater Develop-
problem for Mrs. Clinton, because it is
concentrate regulatory powers over
suspicions, fueled by damaging leaks
ment Corp. to pay off a Clinton loan.
an omission of a material fact - and,
financial institutions in her hands.
and speculations, that they have much
This is more problematic for Mr.
therefore, a violation of the criminal
While the Whitewatergate coverup
to hide.
Clinton than instances of Madison
code - not to disclose such conflicts of
advances apace, little people are being
Not even Richard Nixon dared to
directly diverting its funds to pay
interest to federal regulators. If she has
hauled off to jail under obscure f
destroy the incriminating tapes in his
his campaign debts, because as a
twice omitted material facts, she also
and false statement provisions of the fed
possession. If special prosecutor
partner in Whitewater he cannot
could be subject to prosecution under
eral criminal code. People who bor
Robert Fiske fails to thoroughly inves-
reasonably plead ignorance of the
the RICO racketeering statute.
rowed money from family or friends to
tigate the report of shredding, he will
transaction.
But don't hold your breath. The law
make downpayments on homes, an
confirm New York Times columnist
Mr. Clinton could also be impli-
enforcement arms of the government
failed to report the loans on their
William Safire's surmise that he was
cated in Small Business Adminis-
are being politicized in a way that would
gage applications, are being sent to
chosen as special prosecutor for his
tration loan fraud. David Hale, who
never be permitted for a Republican
prison for five years. So are estat
"political malleability."
has been indicted, says Mr. Clinton
administration about which there were
agents, if they had knowledge of th
The following is a summary of the
pressured him to make a $300,000
so many grounds for doubts.
informal loans that facilitated hom
Clintons' legal problems and their
loan to Mrs. James McDougal, a
Congressional Democrats refuse to
ownership.
maneuvers to control the law enforce-
business partner of the Clintons who
conduct hearings.
God help America when there is
arms of the government.
was not qualified for the loan. Part
Deputy Attorney General Philip Hey-
law for the strong and one
for th
It is obstruction of justice - a
of this money showed up in the
mann, who took exception to the White
weak.
felony - to destroy documents relat-
Whitewater account.
House's handling of the Foster investi-
ing to an investigation. If documents
Various tax experts who have
gation, has been abruptly terminated.
have been shredded as reported, a
examined the Clintons' tax returns
Speculation is that he will be replaced
Paul Craig Roberts, a distinguishe
single telephone call to the Rose Law
have concluded that deductions
with Jamie Gorelick, who has close ties
fellow of the Cato Institute and for
Firm from the White House or Web-
were taken for interest payments on
to the embattled lawyers in the White
assistant secretary of the U.S. Treasur
ster Hubbell is sufficient to link the
loans that were paid by Whitewater
House.
is a columnist for The Washingto
Clintons and/or the associate attorney
Development Corp., their joint ven-
The Resolution Trust Corp., suppos-
Times and is nationally syndicated.
STEFAN HALPER
MONA CHAREN
ussia today is a wake-up call
encroachment on Europe. (Our con-
R
for the "mega-thinkers"
Moscow's
cerns on Russia's Central Asian and
laboring late into the night on
southern borders run principally to
Sketching real welfare reform
the State Department's sev-
ensuring stability). The first issue is
enth floor, including Mr. Strobe Tal-
best addressed by the IMF and the
bott, soon to be the deputy secretary
World Bank, who have, together, dis-
of state. The debacle unfolding in
unfolding
harles Murray proposes the
Is the point of welfare reform to
bursed $1.8 billion of the $4.1 billion
promised for short-term currency
ing projects, like the reconstruction of
stabilization. The rest will be
C
following "thought experi-
Unless we do
force recipients to work? Mr. Murray
Moscow tells us that while engineer-
ment": Suppose you knew
is skeptical. Unless we do something
released when Russia meets lower
that tomorrow your children
something to
to discourage people from getting on
a nation, can be an object of our diplo-
debacle
inflation targets previously agreed
would become orphans. You have the
welfare in the first place, we will do
macy, they cannot be the measure of
to. The Group of Seven Industrial
option of placing them with one of two
its success. Today's complexities
discourage people from
little to reverse the social calamity
exceed those in 1947, for example,
Democracies (G-7) have also helped
families. The first is very poor. Your
that welfare has spawned.
when Europe, supine and eager for
by providing $6.2 billion in export
children will be poorly clothed and
getting on welfare in
Mr. Murray is suitably cautious
credits that allows the purchase of
will even sometimes be hungry. On
the Marshall Plan, was spoon-fed its
the first place, we will
about his own proposal. Understand-
goods and technical assistance on
the other hand, the poor couple have
ing the law of unintended conse-
future by the Allied High Command.
dialects, ethnic groups and factions
credit to revamp the economy. U.S.
worked hard all their lives, will make
do little to reverse the
quences better than most, he would
The Russian failure, if we can call
- is not now nor ever has been ours
financial help, when it arrives, will
sure your children go to school and
like to see a single state experiment
it that, is salutary. It invites us to look
to lose.
support the growth of small busi-
study, and will teach your children
again at what is practical, what is
social calamity that
with such a reform before the rest of
How did we come to think other-
doable and in our interest as the
nesses, provide training to those
that independence is a primary value.
the nation adopted it. Tb its credit, the
wise?
In its first year the Clinton admin-
transitioning from the public to the
The other couple has never worked
welfare has spawned.
Clinton administration has approved
The Washington Times FRIDAY. FEBRUARY 11. 1994
world's most powerful, but not only
powerful, nation. It directs us to Lord
istration, with loose and shifting
private sector, and facilitate defense
and is incapable of overseeing your
each state request for waivers to
objectives, ma. aged to cashier our
conversion - and, though not deci-
children's education. Still, they have
experiment with welfare reform.
Salisbury,the remarkable British for-
good clothes and plenty to eat all
eign secretary who, at the turn of the
welfare system for able-bodied, work-
prestige through nation building
sive, that is all to the good.
Pending the Murray millennium,
provided by others.
ing-age people. He would eliminate
achievable welfare reform would
century, told us the secret of the 100-
adventures that were oversold for
year British imperium: "British for-
he second objective is best met
Which couple would you choose?
Aid to Families with Dependent Chil-
include ending the housing subsidy
political gain. Haiti and Somalia
eign policy is to drift lazily down-
come to mind, but Russia has been
T
by a NATO invitation to inter-
Most people would unhesitatingly
dren, Medicaid, food stamps, unem-
for unwed mothers. Today, having a
ested Eastern European
choose the first couple a fact that
ployment insurance, worker's com-
baby is a way to get your own apart-
stream throwing out the occasional
more damaging. Mr. Clinton's cheer
sheds interesting light on debates
pensation, subsidized housing,
ment. This is folly squared. Unwed
boat hook to avoid collision."
leading and election-style cam-
nations to join, and a clear statement
about reforming the welfare system.
disability insurance and the rest.
mothers should know they will be
Today's world of regional powers
paigning on the streets of Moscow
by Washington on the absolute
Far too much condescension has
and global organizations replaces
requirement that Russia withdraw
What would people do without the
required to live in group homes, with
did little but caricature America's
all remaining troops from Europe
infected welfare policies to date
hammock that the social safety net
chores, rigid curfews, roommates and
both the balance of power politics of
commitment to market-democracy.
This display, together with the
and the Baltics. The projection of
much belief that some people should
the century's first half, and the bipo-
has become? Well, some, probably a
child-care classes. If a mother
military power by Moscow on Rus-
receive handouts because (a) they,
administration's pushy diplomacy
great many, would find jobs. Others,
declines to live in such a setting but
lar competition of the Cold War. And
it is the effective use of the authority
and its effort to pass a multibillion-
sia's eastern and southern borders
unlike us, are incapable of making
Mr. Murray argues, would revert
will not support herself and her child,
their way in the world on their own;
and resources of the multilateral
dollar Russian aid bill, somehow
will soon be a factor in the region's
back to traditional sources of help.
her parental rights should be termi-
institutions- the United Nations, the
caused us to believe that Russia's
diplomacy. There is little Washing-
and (b) they deserve a free ride after
Pregnant women would turn to their
nated. If she becomes pregnant while
all of the abuse their ancestors suf-
International Monetary Fund, NATO,
trial was a test of our strength as an
ton can do about it, or should so
families and churches for help. Those
on welfare, her stipend should not
fered.
the European Union in support of
enlightened democracy. In that
long as stability is maintained.
institutions would then put pressure
increase.
Meanwhile, we might consider
As Mr. Murray has pointed out in
sense, losing Russia meant losing
on young males to either marry and
Unwed fathers should be identified
our policy objectives that should be
the prime measure of success. That is
something of ourselves an artifi-
the notion that if the Russian boat
a recent Wall Street Journal piece, the
support their children or refrain from
and forced to pay child support. If
rate of white illegitimacy is now ris-
not to suggest that we avoid commit-
cial predicament constructed by an
runs aground, we "throw out the
premarital sex. Faced with the eco-
unemployed, they should be required
ting our prestige or resources to sup-
administration that smoothly mixes
occasional boat hook" but not wrap
ing so fast that we will soon see the
nomic consequences of sexual
to perform community service.
our destiny in Russia's future..
emergence of a white underclass. As
port our interests-economic, politi-
license, America would undergo a
True welfare reform must impose
ideals with objectives, and possibil-
frightening as this is for the health of
cal etc. We must. But we must define
ities with necessities.
"desexualization" of adolescence.
real consequences for the anti-social
our goals narrowly and clearly
the republic, it does provide a fresh
It is also quite possible that the
behavior of bearing illegitimate chil-
What to do. There are two main
erring, if necessary, on the side of too
opportunity to talk honestly about
first result of such a reform would be
dren. Work requirements, medical
sets of policy objectives in the U.S.
welfare reform.
little rather than too much.
Russia relationship. The first is to
a surge in the number of abortions.
coverage and job training have been
Stunned by the slow motion train
encourage Russian internal democ-
Stefan Halper is a former
Surely, when we set about revising
"People often conclude," Mr. Murray
tried. They failed. It's time for more
wreck in Moscow, some now say
White House and State Depart-
the welfare system, our aim should be
ratic and market reform. The sec-
says, "that what is economically nec-
stick and less carrot.
"Maybe Russia was never ours to
ment official and a nationally
to do as much for the poor as we
ond is to limit Russian imperialist
essary is also morally right." Alas,
lose." Indeed, Russia 11 time zones,
-
syndicated columnist.
would do for our own hypothetically
tendencies
particularly
such rationalization could lead not to
orphaned children.
160 million people, countless
the "desexualization" Mr. Murray
Mr. Murray has made a persuasive
hopes for but rather to an even more
Mona Charen is a nationally syndi-
case for abolishing the entire federal
robust enthusiasm for abortion.
cated columnist.
Pruden on
Politics
Not only that, he said at nightfall, the Rose firm
"has actively made every effort to preserve all the
By Wesley Pruden
files that would have any connection with the
Whitewater-Madison matter or any other matter
which may be reviewed by the Independent Coun-
A tale of Li'l Abner
sel. The firm will continue to see that all such files
are securely maintained."
The italics describing the biggest loopholes of all
and Daisy May
are mine. Was this an admission that some
Whitewater documents were destroyed, but none
that mattered? How would anyone at the Rose Law
Nobody plays the rube country boy better than
Firm know which records the Independent Counsel
the rube country boys, as a glance at the White
may want to review? Unless, of course, Webb Hub-
House reminds you.
bell, who was the managing partner of the Rose
But they've got some artful lawyers down in Ar-
Law Firm until he was brought to Washington to be
kansas, too, who can draw up loopholes as conve-
the managing partner of the Justice Department,
nient and as commodious as the loopholes drawn by
thinks he has Robert Fiske's investigation wired,
any lawyer in Philadelphia.
too.
James McDougal, who went partners with Bill
This sort of "denial" is from the Racehorse
and Hillary Clinton in that infamous Whitewater de-
Hanes School of Criminal Law, originated by the
velopment on the White River, confesses that he just
famous Houston lawyer that every guilty man wants
can't understand what all the fuss is about. They
to defend him. "If you sue me because my dog bit
were just a bunch of good ol' boys sittin' around
you," Mr. Hanes once explained to a group of aspir-
"tradin" mules," that's all.
ing Blackstones, "I will deny that I even have a dog.
This is the line that Bill Clinton peddles often,
If you prove I have a dog, I will argue that my dog is
whenever he feels himself in a tight place, biting his
always kept on a leash. If you prove that he was off
lower lip and playing off the stereotype of Arkansas
the leash, I'll argue that my dog doesn't bite."
as Dogpatch, populated by hayseeds and rednecks
The Racehorse Hanes denial only works on some-
who can't keep their shoes on, their hair greased
one who wants it to work; maybe the jury likes the
down and their pants zipped up.
way the defendant bites his lower lip, or the cut of
In Mr. Clinton's case, it's not entirely an act, but if
the cloth of his suit, or the way he slouches in his
nobody is likely to mistake the Country Club of Lit-
chair.
tle Rock for Buckingham Palace, or Oaklawn Park
That's why the Racehorse Hanes denial has al-
for Ascot, it's nevertheless true that the Clintons
ways worked for Bill Clinton, who has perfected it to
and the Rose Law Firm have dealt unkindly with the
a degree not often seen in U.S. politics. Li'l Abner,
reputation of an elegant and sophisticated little
Daisy May and their friends have so far sold the
jewel of a city where folks with the right stuff are
notion that working bank scams by day, and making
as aghast as the rest of us by what is being done in
out in pickup trucks with Astroturf in the back by
their name by this passel of cousins of the late
night, is just the way they do things down home, so
Flem Snopes.
what are you goin' to do with a good ol' boy like
Mule traders or not, when the Rose Law Firm got
Bill?
caught shredding Whitewater documents the man-
aging partner, after declining an opportunity to
squelch the story with a believable denial before
publication, went into the Philadelphia loophole
mode.
The very idea that a law firm as reputable as
Rose would do such a naughty thing - lawyers have
ethics, don't they? - was "totally false," he said. "To
my knowledge, we have no documents in the firm's
possession related to Whitewater." Then he added:
"If we do, we are accumulating them in a single lo-
cation awaiting the appro-
priate time that they will
be examined." Loopholes
1, 2 and 3.
By early afternoon, Ron
Clark, the managing part-
ner, had revised his revi-
sions, saying that Rose
had no "significant"
Whitewater documents,
but they were being held
anyway "in anticipation"
that they might be re-
quested by federal author-
ities, though the firm had
Managing partner
so far not received sub-
poenas or requests for the records.
The Washington Times FRIDAY, FEBRUARY 11, 1994
The Washington Times FRIDAY, FEBRUARY 11. 1994 *
A budget deficit that can
obligations to the baby boomers in the
next century. In 1985, the Social Secu-
rity trust fund was moved "off-budget,"
never be taken away
ostensibly to protect its growing sur-
pluses and to remove Social Security
from political play.
In reality, the "off-budget" sur-
By David Dickson
pluses in the trust fund were used by
projects that the economy will be near
Congress and the president to reduce
full employment during most of this
the growing "on-budget" deficits dol-
G
iven governmental gridlock
five-year period (a highly question-
lar for dollar. In effect, the trust
during the Reagan-Bush era,
able assumption that disavows the
money was being squandered to mask
federal budgets submitted by
business cycle), the average actual
the size of the "on-budget" federal
the administration to Congress were
deficit approximates the average
deficit. At first, annual trust-fund sur-
customarily greeted as "dead on
structural deficit, which is $170 bil-
pluses were relatively small, averag-
arrival." With the end of gridlock, the
lion per year.
ing less than $5 billion in 1984 and
life expectancy of budgets has bare-
According to Joseph Stiglitz, a
1985. By 1988, the "off-budget" sur-
ly improved, increasing from zero to
member of the president's Council of
plus was $39 billion, and it reduced
30 hours.
Economic Advisers, "Most econo-
the "on-budget" deficit by a like
That is how long it took the Con-
mists believe that a government is fis-
amount. Finally, Mr. Moynihan, who
gressional Budget Office to torpedo
cally responsible so long as there is no
was then chairman of the Senate
the deficit projections in President
full-employment (structural) deficit."
Finance subcommittee on Social
Clinton's fiscal 1995 budget. Born at
Yet, based on the newly issued budget,
Security, blew the whistle on the scam
8:00 a.m. Monday, the budget was
the structural deficit for each of the
in December 1989.
killed 2:00 p.m. Tuesday when CBO
next five years will exceed 2.1 percent
In 1990, he observed, "We are
Director Robert Reischauer con-
of Gross Domestic Product. Adopting
abusing a trust. We are taking mon-
firmed what Senate Finance Com-
the president's health package would
eys given for retirement benefits, for
mittee Chairman Daniel Patrick
increase the structural deficit to more
widows and orphans and for the dis-
Moynihan asserted last year - to wit,
than 2.3 percent of GDP, according to
abled, and we're using it as if it were
the health care-expenditure estimates
the CBO.
general revenue." Mr. Moynihan, who
of Hillary Clinton were "fantasy."
Ostensibly, this deficit level com-
was tutored about the intricacies of
Rather than reducing the federal
pares favorably to the average struc-
trust-fund accounting by former
budget deficits by $59 billion over
tural deficit achieved by Mr. Reagan
Social Security chief actuary Robert
five years, as the Clintons claimed,
(3.1 percent of GDP). But two impor-
Myers, has long advocated "a tough
their health care plan would instead
tant caveats need to be considered.
combination of budget cuts and tax
add $74 billion to the national debt,
First, spending an average of 6.2
increases to move us quickly to a bal-
according to the CBO. (Take no solace
percent of GDP on national defense,
anced operating budget." In turn,
from Mr. Reischauer's prediction that
Mr. Reagan fought, and the U.S. sub-
according to the senator in 1992, "The
the president's plan "could potential-
sequently won, the Cold War. Mr. Clin-
largest revenue stream in the history
ly reduce the deficit" by 2004. In 1965,
ton, having inherited the fruits of that
of public finance would immediately
the last time the government bull
victory, will spend 3.3 percent of GDP
begin buying down the privately held
entered the health-care china shop,
on national defense. (Here's a little-
public debt with a corresponding
government analysts every bit as
known, and never-reported, fact: From
increase in the savings rate for the
authoritative as the CBO predicted
1981 to 1986, President Reagan spent
economy as a whole, leading to the
that the federal expenditures of the
$55 billion less on national defense
higher investment levels that would in
newly enacted Medicare and Medic-
than Jimmy Carter sought in his last
turn produce the extra income need-
aid programs would together total
budget and eventually deployed 1,500
ed when the baby boomers then pay-
less than $20 billion by 1990, when in
fewer MX-missile warheads than Mr.
ing the retirement trust fund would
fact they exceeded $135 billion.)
Carter demanded.)
begin drawing out of it"
To see why, the differences among
Thus, if Mr. Clinton were com-
During Mr. Reagan's tenure, the
the actual deficit, the cyclical deficit,
pelled to fund national-security pro-
government "embezzled" (Mr.
the structural deficit, and the on-bud-
grams at the level deemed essential
Moynihan's word) $137 billion from
get deficit and off-budget surplus
by the Carter-Reagan buildup, and if
the trust fund, an average of $17.2 bil-
must be understood. As the presi-
Mr. Clinton further sought to main-
lion per year, and reduced the "on-
dent's budget explains, "When there
tain a structural deficit no higher than
budget" deficits by corresponding
is slack in the economy, receipts are
Mr. Reagan's average of 3.1 percent,
amounts.
lower than they would be if resources
he would need to obtain additional
According to Mr. Clinton's budget,
were fully employed, and outlays for
budget cuts and tax increases
$392.1 billion will be "embezzled"
unemployment-sensitive programs
totalling more than $160 billion per
over five years, reducing the "on-bud-
(such as unemployment compensa-
year. Absent such action, Mr. Clinton's
get" deficits by an average of $78.4
tion and food stamps) are higher. As
budget projections would reflect
billion per year.
a result, the deficit is higher than it
structural deficits nearly twice the
Mr. Reagan's "on-budget" deficits
would be at full employment. The
level of his present budget forecasts
averaged $192.7 billion per year.
portion of the deficit that can be
and greater than 5 percent of GDP.
According to Mr. Clinton's five-year
traced to such factors is called the
The second caveat - and the one
forecast, his "on-budget" deficits will
cyclical deficit. The remainder, the
that sends Mr. Moynihan to Fantasy-
average $256.9 billion per year. The
portion that would remain at full
land concerns the squandering of
Clinton budget offers the technical
employment (consistent with a 5.5
the Social Security surplus that is
point that some interfund transfers
percent unemployment rate), is called
purportedly accumulating in the
cancel one another, but the main
the structural deficit." The actual
Orwellian-named trust fund. Here,
thrust of Mr. Moynihan's "embezzle-
deficit is the sum of the cyclical and
an understanding of the distinction
ment" charge is true.
structural deficits.
between on-budget and off-budget
In fact, in February 1990, when asked
From 1995 to 1999, actual deficits
accounting is needed.
about Mr. Moynihan's "embezzlement"
are forecast to average $179 billion
In 1983, when Social Security was in
charges, the chairman of the House
per year. Because the administration
danger of running a large deficit, pay-
Budget Committee said, "It begins to
roll taxes were drastically increased,
raise in really large letters the question
assuring that huge surpluses would
of equity." His name? Leon Panetta, Mr.
David Dickson is a research librar-
accumulate in the Social Security trust
Clinton's director of the Office of Man-
ian at The Washington Times
fund in order to pay the retirement
agement and Budget.
The Washington Times FRIDAY, FEBRUARY 11, 1994
*
R.EMMETT TYRRELL JR.
Little Rock
have been other unexplained deaths
silencing Arkansas associates of the
Clintons. Last year, the former head
of security for the Clinton-Gore cam-
labyrinth
paign headquarters in Little Rock,
Jerry Parks, was shot dead while dri-
ving along a country road. It was not
a random killing. The gunman took
the trouble to stop his own car and fire
id you know that last week
a few more rounds into Mr. Parks' life-
D
was "the worst week of
less body. Then there was the death of
scandal for the Clintons
Vincent Foster on the same day that
since they moved into the
the FBI was issued a search warrant
White House"? This is the judgment
to enter Mr. Hale's offices. Mr. Foster
of Ambrose Evans-Pritchard, the
was a Clinton family lawyer who had
Washington correspondent for Lon-
assisted the Clintons in dealings with
don's Sunday Telegraph, which is
Mr. McDougal, in handling the Clin-
where he deposited this judgment.
tons' blind trust, and in various other
Much more so than the American
matters. Troopers guarding the Clin-
media, the British media are alive
tons during Bill Clinton's governor-
with reports on the Clintons' scandals;
ship attest that Mr. Foster and Hillary
and Mr. Evans-Pritchard, who is
Clinton were lovers.
equal parts scholar, journalist, and
The troopers also have attested that
adventurer, has been particularly
Mrs. Clinton took control of telephone
tireless in examining those scandals.
logs from those days and had at least
Last week he based his judgment on
some destroyed. The destruction of
the fact that "allegations of unethical
evidence continues to be a problem in
practice, conflict of interest, and out-
Little Rock to this very day, notwith-
right criminality rained down from
standing the arrival of federal inves-
all quarters."
tigators. According to The Washing-
Mr. Evans-Pritchard, whose soli-
ton Times, as Mr. Evans-Pritchard
tary missions to report on leftist guer-
walked the streets of that town in pur-
rillas in jungle hideaways and on
suit of his story, shredders were abuzz
urban terrorists in their European
over at the infamous Rose law firm.
lairs, had spent the week in sordid Lit-
tle Rock. In the course of his investi-
gations there, he laid hands on copies
B
efore that a fire had broken out
on the 14th floor of the Worthen
of checks from the mysterious
Tower, gutting some of the
Whitewater Development Corp. to Bill
offices of an accounting firm that in
and Hillary Clinton. The Arkansas
1986 audited Mr. McDougal's soon-to-
development company was jointly
be bankrupted Saving and Loan.
owned by the Clintons and James and
"Security personnel at the Worthen
Susan McDougal of Madison Guar-
Tower waited for 25 minutes before
anty Savings and Loan fame. The
calling" in their alarm, Mr. Evans-
checks for $7,322.42 and $6,361.65,
Pritchard reports. When he tried to
allegedly paid off personal bank loans
discover why, the chairman of the
contracted by the Clintons. Ameri-
Worthen Bank telephoned him and
cans, if they live in the greater D.C.
shouted to our British visitor, "You've
area, perhaps read of this in The
got a twisted mind." The bank played
Washington Times. Otherwise, I
a large role in financing the Clinton
guess you had to be in London.
presidential campaign.
While in Little Rock Mr. Evans-
It is arresting to reflect on all the
Pritchard had tea with a former
scandals, subsumed under the
Arkansas Supreme Court Justice, Jim
rubrics of Troopergate and Whitewa-
Johnson. Mr. Johnson is a friend of
tergate, that are now swirling around
David Hale, who authorized a
Bill and Hillary Clinton. I do not
$300,000 loan of dubious legality to
believe that any president in this cen-
Bill Clinton's friends the McDougals.
tury has been the focal point of so
Mr. Hale insists that Mr. Clinton as
many rumors and allegations at one
governor put him up to it. Mr. John-
time. Why all this controversy? The
son says Mr. Hale has the documents
Clintons' party controls the federal
to prove "Bill Clinton conspired to
government and both houses of Con-
defraud the government of the Unit-
gress. There has been much sympa-
ed States. He stretched the rules and
thy for them in the press, at least
he committed a felony." The judge
until recently. Next week I shall spec-
goes on to say "I look for Clinton to
ulate as to what it is all about. Mr.
resign. I don't think he would dare go
Evans-Pritchard is going on vacation
through the impeachment process
because it would destroy the Democ-
ratic Party."
Now back in Washington, Mr.
Evans-Pritchard expresses fears for
R.Emmett Tyrrell is editor-in-chief
Mr. Hale's life. He notes that there
of the American Spectator.
The Washington Times FRIDAY, FEBRUARY 11, 1994 *
Big government, Big Labor
G
etting back in Big Labor's good graces is turn-
although a union may have won the right to repre-
ing into a full-time job for President Clinton
sent this or that group of federal workers, the latter
these days. Sure, he quickly eliminated Pres-
don't actually have to become union members and
ident Bush's executive order prohibiting union-only
they don't have to pay union dues. In short, you don't
contractors from winning federal contracts. His call
have to join a union to work for the government.
to American Airlines chief Robert Crandall helped
It's an important distinction. The American Fed-
settle an airline attendants' strike on their terms.
eration of Government Employees, for example,
And, yes, he helped gut Hatch Act reforms that lim-
represents some 665,000 federal employees whether
ited Big Labor's control of federal workers.
they like it or not. But only about 150,000 of them are
But he also backed the North American Free
dues-paying members. Likewise the National Fed-
Trade Agreement and made some decidedly nasty
eration of Federal Employees represents about
cracks about Big Labor's opposition along the way.
140,000 workers, but only about 22,000 are members.
Now he's supporting a General Agreement on Tar-
By forcing all workers represented by unions to
iffs and Trade accord, which unions rightly under-
pay fees to them, the Clinton administration could put
stand would add to the competition in labor markets
an extra $200 million into union coffers, by some esti-
supplying U.S. firms. So about now the president
mates. Of course, a fair amount of that $200 million
ranks right up there with arch-foe Frank Lorenzo in
would turn into 1996 Clinton re-election apparatus
terms of union boss approval.
in the form of "non-partisan" vote drives, phone
That's where "reinventing government" comes in.
banks and so on.
It seems that one of the major proposals from Vice
Now, obviously federal workers themselves aren't
President Al Gore's much-touted National Perfor-
crazy about turning over part of their paychecks to
mance Review was the creation of a new bureau-
the unions. Otherwise they would voluntarily do SO.
cracy known as the National Partnership Council.
The public isn't thrilled about the idea either. In April
Last week, it popped up with a warm, fuzzy report
1993 the Marketing Research Institute surveyed
guaranteed to get out the union vote in 1996.
1,000 people on the following question: Do you favor
Its goal is a federal workplace where "[u]nions and
or oppose arrangements requiring public employees
agencies work together as partners to transform the
to support a union in order to work for the govern-
way organizations are structured, work is performed
ment? Roughly 23 percent either answered yes or
and services are delivered." And how would the
didn't know. More than 77 percent said no.
administration achieve that best of all possible
This, then, is the state to which organized labor has
worlds? Well, by giving federal workers more voice
fallen in the 1990s. Unable to grasp the notion of pro-
in determining how they do their work and in deter-
viding workers service of the kind that would encour-
mining how others should judge their work, says the
age them to join voluntarily, union officials are
report. They might, for example, decide it would be
reduced to dragooning them at regulatory gunpoint.
nice to have cash bonuses or non-cash awards like
This is "service"?
days off for good work.
Not to most federal workers, and certainly not to
Just to make sure unions understand what's at
most citizens. If political payoffs are what the Clin-
stake here, the report also calls for federal workers
ton administration means by "reinventing govern-
now represented by unions to pay some kind of dues
ment," the unreinvented kind is going to start look-
or "fair share" fee. That's important because
ing better and better.
Please, no more crying wolf on Bosnia
I' would be good news for the people of Sarajevo,
commander of American forces.) On earlier occa-
as well as for the rest of us, if the NATO allies
sions, we have tried to bully the Serbs to withdraw
actually have arrived at a decision not to tolerate
their artillery under threat of military action. We
the slaughter and barbarity in Bosnia any longer. The
have on occasion claimed success when they have
war, which has been allowed to fester for almost two
withdrawn a few pieces, only to bring them back the
years, has made a mockery of European protesta-
moment the threat has receded. This has seriously
tions of political unity, of NATO protestations of
undermined American credibility as an interna-
future relevance, of American protestations of con-
tional power.
cern for European stability, human rights and inter-
And there is the serious consideration of what will
national responsibilities. It's hard to accept that it took
happen next. What happens if our bombings don't
the death and dismemberment of 68 civilians
scare the Serbs? Will we get dragged further into the
the wounding of 200 more - in the market place in
conflict? Will we have to commit ground troops?
Sarajevo to bring about some kind of agreement
What kind of end game do we have in mind? And
among the allies that this state of affairs is intolera-
what will the Russians say?
ble, but there it is.
These are all good questions that our planners
This is not to say that the ultimatum that was issued
must consider if we are to become engaged. How-
Wednesday is without its problems. It gives the Ser-
ever, the inescapable truth at this time is that it will
bian forces 10 days (why not 48 hours?) to withdraw
take the leadership of NATO - of the United States
their heavy artillery and guns from the hills around
- to end this crisis and prevent it from spreading.
the city, from which vantage point they have been lob-
What is needed here clearly is a balance of power,
bing shells and grenades at hospitals, bread lines,
the absence of which has so far meant the rape of the
markets and sledding children. From NATO, the
weaker party, Bosnia, by the stronger ones, Serbia
United Nations, the European Community, the U.S.
and (more recently) Croatia. And what is also need-
government and other assorted organizations, ulti-
ed is a credible external guarantor of whatever
matums have been flowing fast and furious with no
agreement may eventually be reached between
action to back them up.
them.
As The Washington Times has reported, our gov-
Ending the siege of Sarajevo will be an important
ernment has reversed its position no fewer than 10
first step. It ought not be an impossible task. NATO
times. If President Clinton does not want to be the
pilots have been flying over the terrain over and over
laughingstock of every thug and tin-pot dictator in
- to the huge distress of the people below -and
the world, he has to follow through this time on the
ought to know it like the back of their hand. Serbian
threat. (Equally important, he ought not to leave deci-
artillery positions ought to have been pin-pointed by
sions that are properly his in the hands of U.N. Sec-
now. Relieving the city will show good faith on our
retary General Boutros Boutros-Ghali. Mr. Boutros-
part. And good faith has been absent in our dealings
Ghali is not - and should never be - the
with Bosnia for far too long.
WHITE HOUSE TV NEWS ANALYSIS
Monday, February 14, 1994
Produced by the Office of News Analysis (162 OEOB, 6-7151)
ABC WORLD NEWS
1. U.S. and Japanese trade issues remain unresolved.
2. Unfair trading practices in Japan plague U.S. firms.
3. 30 day weather forecast announced.
4. Cease fire holds in Sarajevo.
5. Dan Jensen falls, failing to win a medal in speed skating.
6. Kennedy loses control of his sled, failing to win a medal.
7. Tonya Harding prepares to leave for Olympic Games.
8. Michael Jackson testifies that he did not steal lyrics.
9. Corning and others set up fund to pay implant victims.
10. Delinquent farm loans cost tax payers $5 billion.
11. Chrysler recalls 1994 luxury sedans.
12. Dow Jones up in moderate trading.
13. President Clinton promises $400 billion loan to Kazakhstan.
14. Chevron invests in Kazakhstan.
15. Chaos breaks out at political rally in Durban, South Africa.
16. British firm develops luggage container to withstand bombs.
17. Exhibit honors first all Black calvary unit.
CBS EVENING NEWS
1. U.S. will respond to Japan's refusal to open its markets.
2. Truce holds in Sarajevo for another day.
3. Severe weather will have enormous economic costs.
4. Health care companies settle losses in breast implants case.
5. Tonya Harding will skate in Olympics in Norway.
6. Olympic skater Dan Jansen loses; skiier Tommy Moe wins gold.
7. Zulu leader demands independent state in South Africa.
8. Terrorist attacks on the rise in Egypt.
9. Iran rejects appeal to lift sentence against Salman Rushdie.
10. Senator Packwood asks appeals court to keep diaries secret.
11. Reality Check: the cost of welfare reform.
12. Eye on America: Aushwitz survivor fighting for reparations.
NBC Nightly News
1. Economic gains overshadowed by trade dispute with Japan.
2. Truce holds in Sarajevo; U.N. is ready with threat of bombs.
3. Child neglect is up 50% since 1985.
4. Cal State-Northridge begins classes 4 weeks after earthquake.
5. Three leading makers of breast implants settle damage claims.
6. Chrysler recalls luxury cars.
7. Crowds take over Olympic Village.
8. Economic opportunities open to Gold Medalist Tommy Moe.
9. The rate of Sudden Infant Death Syndrome is down.
10. America Close-Up: Treatment program for female child abusers.
11. Perfume options for Valentine's Day.
PHOTOCOPY
PRESERVATION
the Christian Science
Monitor
Tuesday Feb 15, 1994
V
Profits in Clintons' Whitewater
T
HE money-losing Arkansas real estate venture that has
entangled the first family in a federal investigation began
generating a small income months before president and
Mrs. Clinton sold their interest.
The Clintons decided not to take any of the money before
ending their 14-year relationship with Whitewater Development
Corp. in December 1992, one of their lawyers told The Associ-
ated Press,
In May 1992, Whitewater paid off its remaining loans, en-
abling it to begin making a little money. Since then, those pro-
ceeds - which total less than $200 a month - have gone to the
Clintons' former business partner, James McDougal.
The Clintons have said they invested and lost nearly $69,000
during their years as co-owners of Whitewater.
They formed the venture in 1978 with Mr. McDougal and his
then-wife, Susan, to build a bustling vacation and retirement com-
munity on the banks of the White River in northern Arkansas's
Ozark Mountains.
The venture is now a focus of a federal investigation into a
failed Arkansas savings and loan owned by McDougal and other
business dealings with ties to the Clintons.
The Clintons sold their half of Whitewater to McDougal in
December 1992 for $1,000. They have said they never made any
money on their investment. During most of the Clintons' involve-
ment in Whitewater, revenues from the venture went to pay off
principal and interest on the original $203,000 mortgage the two
:
couples used to buy the property.
- Associated Press
PHOTOCOPY
PRESERVATION
'Tough' federal lawyer went
soft on Hubbell in S&L case
By Frank J. Murray
THE WASHINGTON TIMES
Al
HUBBELL
ing Mr. Ward or his son in the future
concerning any matter relating to
A government lawyer considered
From page Al
Madison Guaranty," Mr. Hubbell
wrote to Mr. Paulson.
a hard-liner against law-firm con-
flicts of interest took relaxed stands
against Frost, whose audit was used
FDIC investigators also are look-
on the role of the Rose Law Firm's
by the Rose firm to persuade state
ing into whether Mr. Foster, the
Webster L. Hubbell in a $10 million
regulators to allow the failing thrift
White House deputy counsel who
to stay open.
committed suicide July 20, con-
lawsuit to recoup taxpayer losses
While Mr. Hubbell, Rose's manag-
cealed the Rose firm's representa-
from Madison Guaranty Savings
ing partner, and Miss Breslaw ap-
tion of Madison in order to take over
and Loan Association.
Little Rock's Rose firm whose
pear to know each other only
the Frost case and its $400,000 fee.
partners included Mr. Hubbell, Hil-
through a prior case Rose handled
Mr. Foster's nine-page letter on
lary Rodham Clinton and the late
for the FDIC, documents show that
Feb. 28, 1989, soliciting the case said
Vincent W. Foster Jr. handled the
she:
in part "the Firm does not represent
Madison-related case despite its ear-
Brushed aside repeated internal
any savings and loan association in
challenges to Mr. Hubbell's loyalty to
state or federal regulatory matters"
lier efforts to keep the Arkansas
thrift afloat and Mr. Hubbell's fam-
FDIC with personal assurances he
and listed what he called previous
would not disclose confidential in-
specialized matters that did not in-
ily ties to Madison.
Rose took over the $10 million law-
formation to family members with
clude representation by Hillary
suit against Madison's auditors,
ties to Madison.
Rodham Clinton, then a Rose part-
Frost and Co., from a Memphis law
Vouched in writing for the Rose
ner, before a state regulatory agency.
firm, moving the case out of state
firm's performance in the other
In that case, Rose lawyers relied
courts and into federal court. The
FDIC Corning Bank/Manatt.
heavily on Frost audits, which they
Federal Deposit Insurance Corp.
And inexplicably approved a $1
later attacked in the FDIC lawsuit.
(FDIC) accused Frost of being re-
million settlement with Frost, al-
The current investigation looked
sponsible for heavy taxpayer losses
though it had $3 million in liability
into Rose's claim the information
in Madison.
insurance.
was given orally, which FDIC law-
April Breslaw, as an FDIC staff
Miss Breslaw, 33, whose duties
yers don't recall. But the federal
lawyer known for her toughness on
were switched in 1992 from the
agency asserts it "would not be
conflict of interest, intervened on
FDIC to the Resolution Trust Corp.
viewed as a disqualifying conflict"
behalf of Mr. Hubbell in 1989, ac-
(RTC), which handles the S&L bail-
even if it were known.
cording to FDIC records.
out, did not respond to requests to
When Miss Breslaw went to bat
Mr. Hubbell, a close friend of
both agencies for interviews.
for Mr Hubbell in 1989, she fended
President Clinton's, is now associate
Through an RTC spokesman, she
off challenges from within the FDIC
attorney general and the No. 3 of-
said yesterday she vouched for Mr.
questioning his loyalty to FDIC and
ficial at the Justice Department.
Hubbell because she "was assured
Rose conflicts.
to her satisfaction" that he had no
FDIC investigators may shed
"Another thing to keep in mind is
conflicts of the type that led her to
some light when they report, per-
that our primary attorney in the
instantly remove the case from a
haps today, on a probe of two possi-
Frost matter is Rick Donovan, not
Memphis law firm, Gerrish and
Webb Hubbell.
Some of his 'in-
ble conflicts of interest in the Rose
McCreary, the attorney of record
firm's takeover of the FDIC's suit
laws' think that we owe them money
hired by Madison.
and one of his law firm partners has
"That is one of our biggest no-
see HUBBELL, page A10
become our attorney. On these facts,
nos," a senior FDIC official said yes-
I am not inclined to take a
terday, speaking about the case on
$10,000,000 case away from counsel
the condition of anonymity.
that has obtained fine results for me
Mr. Hubbell's father-in-law, Seth
on other matters," she wrote in a let-
Ward, was an officer of a Madison
ter to an FDIC official who wanted
real estate subsidiary, Madison Fi-
Mr. Hubbell's firm taken off the
nancial Corp., at the time Mr. Hub-
case.
bell agreed to handle the FDIC case.
Despite Miss Breslaw's assertion
Mr. Ward's involvement with Madi-
that Mr. Donovan was the FDIC's
son Guaranty, sources say, was well
lawyer, Rose bills showed Mr.
known then.
Donovan's billings only a bit higher
Mr. Ward defaulted on more than
than those of Mr. Hubbell, who re-
$587,000 in Madison Guaranty loans
peatedly charged the government
and was considered by the govern-
for phone conferences with Miss
ment to be a prime offender in the
Breslaw.
abuse of Madison funds, according
Rose telephone logs from March
to Federal Home Loan Bank Board
27 to June 27, submitted with bills,
records. He was in litigation with the
show no discussion on matters of
The Washington TUESDAY. FEBRUARY 15, 1994
failed thrift when the government
conflict. Despite firm government
took it over on March 2, 1989, at a
policy banning payment for resolv-
cost to taxpayers of $50 million. He
ing conflicts, however, Miss Breslaw
later settled the case.
approved Mr. Hubbell's billing for
"She [Miss Breslaw] said Mr.
writing a letter doing exactly that.
Hubbell stated in writing at some
Another billing for a consultation
point that he would not and did not
between Mr. Hubbell and David L.
represent Seth Ward," the RTC
Hale, a former Little Rock judge
spokesman said.
who has since implicated Mr. Clinton
The general concern about Mr.
in obtaining and channeling an im-
Hubbell, originated by Madison liti-
proper $300,000 Small Business Ad-
gation coordinator Sue Strayhorn, is
ministration loan.
that he might pass on confidential
Other records obtained by The
information from a bank strategy
Washington Times show Mr. Hubbell
book to Mr. Ward, or his son Seth
as the attorney of record in the Frost
Ward II, who had a separate lawsuit
suit.
pending.
The conflict issue was raised
In a June letter to David Paulson,
anew on Aug. 10, 1989, by FDIC
managing agent of the Madison con-
credit specialist Ken Schneck.
servatorship, Miss Breslaw dis-
"I would like someone with a
missed the risk and said: "For one
wider scope of authority to review
thing, Hubbell does not represent
the situation and possibly eliminate
Ward" and would not do so in the
this conflict," Mr. Schneck wrote, ap-
future.
parently to no avail.
Mr. Hubbell never made such a
An official familiar with govern-
broad promise, and his letter prom-
ment attempts to get the caretaking
ising not to represent Mr. Ward or
function in motion during multiple
his son in matters involving Madison
savings and loan collapses in the late
was written five days after Miss
1980s suggested the fault in han-
Breslaw passed along the assur-
dling the Madison case lay with that
ances she now says are based on that
confusion and not with Miss Bres-
letter.
law.
"I have no intention of represent-
"It was chaos," the official said.
82
The Four Musketeers'
By Geordie Greig
and Mark Skipworth
Al
dividends, but their own incestu-
ous cronyism. As Mrs. Clinton be-
LONDON SUNDAY TIMES
came first lady and moved to
Washington, she took along her
LITTLE ROCK, Ark. - They
former law partners, Webster L.
were known by their fellow law-
Hubbell, Vincent W. Foster Jr. and
yers as the Four Musketeers.
William Kennedy III. All were re-
When it came to business, it was
warded with top jobs in the Clin-
one for all and all for one, and this
ton administration.
pact, between Hillary Rodham
It was no surprise to anyone in
Clinton and her three best friends
Little Rock: It was always the way
at the Rose Law Firm, lasted all
business had been done in this
the way from Little Rock to the
one-time fur trapper post on the
White House.
banks of the Arkansas River.
It was not so much the lucra-
Take the time in June 1981
tive, small-town deals they had
spun together that paid such high
see ROSE, page A10
ROSE
sight it appeared to be a suicide.
from speaking fees and $65,000 for
Others are not so sure: The para-
sitting on several boards; these in-
medics who attended the scene were
cluded Wal-Mart, the giant retail
From page Al
struck by the absence of blood and
group, and TCBY ("The Country's
the position of the body, lying
Best Yogurt"). Both of these Arkan
when Mrs. Clinton and the other
straight "as if in a coffin." There are
sas-based companies were Rose cli-
Rose partners, including Mr. Hub-
growing suspicions he might have
ents and substantial funders of her
bell, then Little Rock's mayor, signed
been murdered.
husband's political campaigns.
a contract for a $2 million tax-free
The Rose Law Firm, housed in an
Critics are quick to suggest her
loan to refurbish their offices. In the
imposing three-story red brick
success in Little Rock would not
heat of the Arkansas summer, no-
building at 120E. Fourth St. in down-
have been so rapid without her at-
body paid attention to the sweet-
town Little Rock, is the oldest legal
torney general husband. "There was
heart deal, except John Harkey, an
business west of the Mississippi. It
no way she would have been hired
alert local judge, who was surprised
enjoyed rapid growth after Mrs.
without that tie-in," sniped a Little
that taxpayers' money was being
Clinton joined as a litigation lawyer
Rock lawyer.
used for private purposes from a
in 1977. Mr. Clinton was then the Ar-
The second musketeer was Mr.
fund authorized by Gov. Bill Clinton
kansas state attorney general and
Kennedy, now associate counsel in
in 1980.
was soon to become governor.
the White House, a powerful position
"Hell, they were, in effect, using
that makes him No. 3 in line when the
public money to decorate Hillary's
office," Judge Harkey said.
THE SUNDAY TIMES
president needs legal advice. He
was the hard man who had a reputa-
Once, such intimate details were
tion for his aggressive business
written off as Southern ways; today
As his wife and as a woman twice
manner.
they are being held up to a different
voted one of the top 100 lawyers in
America, Mrs. Clinton was a key as-
The third was Mr. Hubbell, now
standard.
Bill and Hillary Clinton face scru-
set. Within two years, she had be-
associate attorney general and
come the firm's first female partner,
widely regarded as the man who
tiny in their back yard and on their
front lawn. An investigation has
known as the Dragon Lady for her
really runs the Justice Department.
been launched into the couple's links
fierce temper as well as her empire-
He was the mixer who knew how to
with Whitewater Development
building.
milk political opportunities. A for-
Corp., a real estate venture selling
Mrs. Clinton was the "rainmaker"
mer college football player for the
who brought in the business deals
Arkansas Razorbacks, he concealed
land for cabins and vacation homes
in the Arkansas Ozarks.
but was rarely seen in court. For her
a quick brain behind a shambling,
husband, she was also the main fam-
oafish demeanor.
In Washington, Mr. Foster, one of
ily earner.
The final musketeer was Mr. Fos-
the musketeers and the Clintons'
While the governor's income
ter, the deputy White House counsel
personal lawyer, was found shot
stayed flat at about $35,000 a year,
and a man both personally and pro-
dead last July next to a cannon at the
Mrs. Clinton's soared from $50,000
fessionally close to the Clintons. He
Civil War entrenchments across the
in 1981 to nearly $180,000 a decade
was the cleanup man, the brains be-
river in Virginia. A 1913 Colt re-
later. Most of it came from Rose, but
hind Rose, the quiet executive in the
volver was still in his hand; at first
she also raked in more than $5,000
brown suit and the office with brown
carpet and brown walls, a man
whose hobby was making pasta.
They were well matched in Little
Rock, a town as introverted and in-
cestuous as you can get.
The claustrophobic geography of
Little Rock (population 170,000)
lends itself to cronyism.
Just one block from the Rose firm
is the Worthen Bank, which in 1992
The Washington Times TUESDAY. FEBRUARY 15, 1994
provided Mr. Clinton's presidential
campaign with $3.5 million credit. In
the same building are the offices of
Wright, Lindsey and Jennings, the
law firm where Mr. Clinton worked
when he was briefly voted out as
governor and where Bruce Lindsey,
another White House aide, was a
partner.
On nearby Fourth Street is First
Commercial Bank, where Frank
White (who whipped Mr. Clinton in
the 1980 gubernatorial race] works
- close to the Stephens Building,
where the president has his Arkan-
sas "White House" office.
"It was like brothers marrying
sisters and made for back scratch-
ing at every level," said Roy P. Drew,
an independent stock analyst who
once advised the Rose partners
about their investments. "They were
a powerful clique, used to getting
their own way."
Mr. Drew's campaign to root out
cronyism has cost him dearly. Little
Rock's leading firms and banks have
tried to squeeze him out of business.
"Nobody likes the apple cart to be
rocked, especially when it is loaded
with the truth," he says ruefully.
&
PM AR- Whitewater-Check, 400
Lawyer, McDougal Recollect Whitewater Check Differently
EDS: first moved for AMs. bcsphfon
LITTLE ROCK (AP) A $20,744 check in February 1982 from Bill Clinton to a
bank was counted as part of the president's investment in Whitewater
Development Co. Inc., according to an attorney who says it was proper to do
so.
Questions have been raised as to whether the check was included in
Clinton's 1992 presidential campaign report and whether it should have been
included. The report said the former Arkansas governor and his wife lost
$68,900 in the land development corporation.
James Lyons of Denver, who arranged for an accounting firm to do the 1992
analysis of the Clintons' Whitewater costs, said the check was a payment on a
Whitewater-related loan that James B. McDougal obtained from his own bank.
``I have no memory of anything like that, McDougal said when questioned
about Lyons' account of the check.
McDougal, Clinton's partner in Whitewater in 1978-92 and owner of 40
percent of the stock in the Bank of Kingston in 1980-83, said the check wasn't
for a Whitewater loan but a campaign loan Clinton had received from the bank.
A bank official declined to give information about any loans, including
those involving the Clintons, McDougal, or Whitewater. McDougal's partner in
the Kingston bank, Steve Smith, said he did not recall Clinton getting a
campaign loan from the bank at the time, although McDougal said he thought
Clinton was working with Smith then on bank transactions.
A special prosecutor is investigating whether the Whitewater land
development corporation or Clinton or others benefited improperly from a
savings and loan that McDougal bought in 1982, as well as other matters. The
S&L failed in 1989.
Lyons was uncertain of the details, but said he thought the amount of the
loan was about $27,000 and that it was probably obtained in 1981 or 1982.
Clinton paid on the loan as a partner in Whitewater, Lyons said.
The Bank of Kingston became Madison Bank and Trust, the institution to
which Clinton's check was made.
The loan was separate from a $30,000 loan the Bank of Kingston made to
Hillary Rodham Clinton in 1980 for the development of a lot in the Whitewater
project. That loan was repaid in 1983 with a loan from a bank in Paragould, a
White House spokesman has said.
****
filed by:APW-(AR) on 02/14/94 at 08:04EST ****
**** printed by: WHPR (NLAT) on 02/14/94 at 09:11EST ****
MAUREEN
DOWD
THE NEW York TIMES MAGAZINE
SUNDAY, FEBRUARY 13, 1994
On Washington
need a special counsel investigating Whitewater. But as
we in this Administration now know all too well, it is
appearance and perception that count in this crazy,
A CAUTIONARY FABLE
cannibalistic Washington culture that doesn't give a lick
for civility or truth or feelings.
fterward, when all
"I retain the utmost confidence in Hillary's integrity,
A
Washington was a-
but we both agree that her ability to work on the very
goals she wishes to achieve has been gravely damaged.
buzz with talk of
"The Hillary Clinton I know is a person of strong
the President's as-
character, great intellect and a superb legal record. I
think that she is one of the ablest First Ladies I have
tonishing, audacious gamble to
ever met. And I want all of you to know that if this
thing could be fought out on her character or her
shed his Whitewater baggage,
record as First Lady, as opposed to this business
the pundits agreed that they
should have seen it coming.
down in Arkansas, I would stay with it to
As soon as those headlines hit, 2 jittery
the end. It is not the warnings of my
White House had begun its usual damage
political advisers or the fear of defeat in '96
control.
that has prompted this decision; it is the
First, David Gergen, the President's coun-
certainty that the battle would be fought
selor, filled the ears of friendly reporters with mur-
on a ground that I, as President, could not
murs that poor Bill had no head for numbers, and that
defend.
Hillary was the brains on household financial matters.
"I am well aware that this will upset many
Then came a series of trial balloons, floating above
people in this country who believe in Hillary
the West Wing like big, pillowy clouds: Donna Shalala
and had hoped that she would continue to
would be taking a larger role on health care; Felix
transform the role of First Lady. But as some
Roharyn was going to assume responsibility for the
feminists have pointed out, First Ladies who
First Family's tangled finances. ("Big Mac II," the
seek the glory must also take the conse-
President was heard to quip, as he passed the ketchup.)
quences if they are called to account. I can
The final devastating signal came when the Vice
only pledge that I will continue to work, as I
President appeared on "Meet the Press" and offhand-
have for nearly 20 years, for the cause of
edly referred to the Whitewater affair as "Hillarygate."
women, and that I want an Administration
Still, no one anticipated the President's ploy, and his
second to none in its dedication to women's
Rose Garden news conference on that torrid summer
rights.
afternoon of 1994 was a stunner.
"I will be consulting promptly with my
He walked with slow, measured steps to the podi-
chief of staff, Mack McLarty, with Congres-
um. With his wife standing still and solemn beside
sional leaders and with women's groups
him, he stared down at the statement in his hands for a
about a replacement for Hillary. I hope to
long time. Then he looked up, bit his lower Lip and
have an announcement in the next few days.
began.
"Hillary," the President concluded, look-
"I come here today to announce to the American
ing over at his wife, who stared straight
people the most painful decision I have ever had to
ahead, her face frozen, "I share your pain."
make," he said. "I love my wife dearly and we will
remain life partners, sharing our hopes and dreams
HE REPORTERS IN THE ROSE GARDEN
for this country. But this morning, with deep regret,
T
were speechless for a moment. Then a few
I accepted Hillary Rodham Clinton's request to be
called out questions:
relieved of her official duties as First Lady. I am very
Q: "Is there any truth to the rumor that
grateful that she has agreed to remain at her post
Mrs. Clinton will be named Ambassador to Belarus?"
until Dec. 1, so that we can effect a smooth
Q: "Mr. President, aren't you afraid that you're
transition in the East Wing. Hillary has been a close
playing into the hands of the American Medical
adviser and a wife of mine for a long time. I have
Association?"
valued her wise counsel as a key member of my team.
Q: "Did you break the news to Mrs. Clinton,
She has made invaluable contributions on health care
yourself, or did George?"
and broken new ground in equality for First Ladies.
The President would only say, before leaving: "I
And I have told her that after she takes the break she
am sure this extraordinary and able person will have a
has requested, I very much hope that she will consider
rich and successful career."
other assignments for this Administration.
Now, six months after that historic news confer-
"At the time that she took over the job of First
ence, with the 1996 election cycle already underway,
the Whitewater investigation dragging on and the
Lady, I had not gone over the Whitewater files. In
President's poll numbers precarious, the fallout over
retrospect, I wish I had. I trusted that she would
Bill Clinton's decision to push the First Lady off the
Presidential sled continues.
exercise full and careful judgment in the handling of
these matters, and I must confess that I paid little or
As in any split, the town is divided between "Bill
no attention to supervising her in this area. Last
people" and "Hillary people." Bill people argue, as
George
Stephanov
a matter of fairness to her, I read the files
again in good detail, keeping in mind the high ethical
snow,
LIMIT
standards I have set for my Administration. I have
kind," and that jettisoning the First Lady was essen-
to tell you that, had I gone over these records before
tial to the success of her own dearest dream, 2
the inauguration, I would not have brought Hillary
national health care plan.
to Washington with me.
Hillary people cry sexism and counter that the
"I acknowledge that the vetting procedure for the
health bill that eventually passed the Moynihan-
First Lady was inadequate. This process is in no way
Cooper-Gramm Omnibus Health, Welfare and
a reflection on her. It was my personal responsibil-
Crime Reform Act of 1994 was hardly the sort of
ity. But we were trying to make an inaugural
legislation Mrs. Clinton had in mind.
deadline, which was probably my error, again. In
After much fevered speculation about whom the
retrospect, what I should have done is basically
President would appoint to the post of First Lady,
delay the whole thing for a couple of days and look
Bill Clinton has recently announced that the ceremo-
into it in greater depth.
nial duties would pass to a trusted adviser who had
"And I want to make it clear that that is not to say
already perfected the art of standing by his man and
that I agree with all the attacks on her. Hillary has been
gazing approvingly: Al Gore.
subject to 2 vicious series of willful distortions. Like
most Americans. even T cannot sav for sure what
Nation
Star Tribune
Saturday
February 12/1994
7A.
FDIC finds Hillary Clinton's role in suit was mino
Greg Gordon
said.
Illinois savings and loan, was originally filed
the complaint before it was filed, but stressed
William Wernz, former chairman of the Mro-
Washington Bureau Correspondent
in 1985 by the First American Savings and
that the $200,000 ultimately recovered ac-
nesota Lawyers Responsibility Board, and
Whitney said Clinton signed the document
Loan Association of Oakbrook EL It charged
counted for more than half the $361,000 in
that whether Clinton could be accused
Washington, D.C.
months before the settlement was negotiated.
that Lasater's Arkansas bond trading compa-
actual damages claimed by the government.
ethical improprieties would hinge on whesher
Federal regulators have found "no evidence"
"Based upon our review, we see no evidence
ny had defrauded the thrift of more than
The rest of the money sought was for puoi-
her legal work was affected by her and,
that First Lady Hillary Rodham Clinton had
that a conflict existed," he said.
$361,000 by making unauthorized U.S.
tive damages, which are difficult to recover,
husband's relationship with Lasater.
a conflict of interest when she represented the
Treasury bond trades.
they said.
government in a lawsuit against a longtime
However, Clinton still may have created an
American Bar Association Model Rules
he
friend and political benefactor of her and
appearance problem by signing the amended
After the Federal Savings and Loan Insur-
President Clinton.
Patrick Goss, a Little Rock lawyer who repre-
said, define as a conflict of interest instances
complaint, which reduced to $1.3 million the
ance Corp. scized the thrift in 1986, the
sented United Capital Corp., Lasater's bond-
wher it is likely à Lawyer "might pull a
damages being sought from a firm beaded by
Arkansas-based Rose Law Firm, where Clin-
trading firm, said that be assumed that Foster
punc because be has some relationship with
Officials at the Federal Deposit Insurance
the Clintons' friend Dan Lasater.
ton and Foster worked, was hired as an
reduced the punitive damages sought in the
the er side or some third party of inter-
Corp. (FDIC) said that, contrary to published
agency subcontractor to take over the litiga-
amended complaint because he "was embar-
st"
reports, Clinton was not involved in settling
The agency's brief inquiry was triggered by a
tion.
the $3.3 million suit for $200,000 in 1987,
rassed by its overreaching."
Feb. 3 report in the Chicago Tribune assert-
DI
pokesman David Barr said the agency
said chief FDIC spokesman Alan Whitney.
ing that Clinton joined her longtime friend
Agency officials said they have not yet ascer-
At the time of the settlement, Lasater was
"has
1 been able to turn up any records or
and law partner, the late Vincent Foster, in
tained from other lawyers in the case whether
serving a prison sentence for cocaine traffick-
note
as to what was disclosed about Glvt
"Our review reflects that her involvement in
secretly settling the racketeering suit.
Clinton, who signed. the amended complaint
ing and his firm's assets were being managed
on'
lationships with Lasater and Thomas-
the litigation was very limited - two hours"
on May 8, 1987, because Foster was away
by Patsy Thomasson, now the director of
pcnt reviewing an amended complaint, he
The suit, stemming from the collapse of an
that day, made any substantive changes in
the White House Office of Administration.
F rst
y continued on page 10A
FEB
14
WHSHINGTON
BURERO
First Lady
Continued from page 7A
son before a Chicago law firm hired
firms." he said.
the Rose firm as a subcontractor.
Meanwhile, the U.S. Park Police re-
Goss said that be "never saw (Clin-
port on Foster's suicide does not
ton's] face or heard her
in that
mention Whitewater Development
lawsuit." He said that during the suit,
Corp., the Clintons' failed Arkansas
Foster was "aggressive, hard-nosed,
real estate deal, a police official said
smart and effective."
yesterday.
The controversy may also underscore
"Nothing in there talks about White-
the perils lawyers can face when they
water," said Park Police Maj. Robert
sign documents on behalf of col-
Hines. "No one we Interviewed men-
leagues.
tioned it."
The Chicago Tribune reported that
The Park Police interviewed Foster's
Thomas Marr, a junior member of
family and friends and concluded
the Rose firm who had worked with
that he was depressed about his
Foster and Clinton, assisted them in
White House work. Atythe time of
the First American suit against La-
Foster's suicide, July 20, Whitewater
sater's firm. It said Marr then left the
was not of major public interest. Sub-
firm and represented United Capital
sequently, it was learned that some
Corp., helping to negotiate a
Whitewater files found in Foster's
$250,000 settlement of a similar, $4.6
office were transferred by White
million suit by Home Federal Sav-
House Counsel Bernard Nussbaum
ings and Loan of Centralia, IIL The
to the Clintons' personal attorney
report suggested that Marr may also
without being shown to Park Police
have had a conflict of interest.
investigators.
In a phone interview, Marr said that
The files have since been turned over
while at the Rose firm, he had "no
to the Justice Department. and spe-
involvement in the merits or the
cial counsel Robert Fiske has been
strategy" of the First American suit
named to look into the Clintons' fl-
but that he may have signed a court
nancial dealings with Whitewater
pleading on Foster's behalf when he
and with the failed Madison Guaran-
was out of town "That is an accepted
ty Savings & Loan in Arkansas.
practice in other major, respected law
PAGE 18
LEVEL 1 - 7 OF 18 STORIES
Copyright 1994 The Washington Post
The Washington Post
February 10, 1994, Thursday, Final Edition
SECTION: FIRST SECTION; PAGE A7
LENGTH: 453 words
HEADLINE: Alleged Whitewater Shredding to Be Probed
SERIES: Occasional
BYLINE: Susan Schmidt, Washington Post Staff Writer
DATELINE: LITTLE ROCK, Ark., Feb. 9
BODY:
Special counsel Robert B. Fiske Jr. will investigate allegations that
employees at the Rose Law Firm here have shredded documents relating to
Whitewater Development Corp. Rose officials today denied the claim.
The Washington Times, quoting an unnamed Rose employee, said law firm
documents on the real estate investment of President Clinton and his wife
Hillary, a former Rose partner, were shredded last Thursday.
A spokeswoman for Fiske said "the alleged shredding will be investigated by
this office."
Ronald M. Clark, managing partner of the Rose firm, said, "We categorically
deny shredding any documents relating to Whitewater or any other matter reported
in the press.
Clark said the firm expects to receive a subpoena from Fiske and has been
pulling together documents the counsel might want.
"We anticipate producing those documents at the appropriate time, but there
is absolutely no destruction of documents going on," he said.
Fiske is investigating the Clintons' Whitewater investment and their ties to
Madison Guaranty Savings & Loan, the Arkansas thrift owned by the couple's
Whitewater business partner, James McDougal. Clark said the firm has few
documents on Whitewater because its legal work for the company was limited.
He said Rose lawyers also were compiling documents relating to former Rose
lawyer Webster L. Hubbell's representation of the government in its malpractice
suit against Madison's accountants; files pertaining to Hubbell's father-in-law,
Seth Ward, and the parking meter company formerly owned by Ward and now owned by
his son; and records of the Rose firm's representation of Madison before state
regulators in the mid-1980s.
McDougal hired the firm in 1985 for $ 2,000 a month to help push an unusual
stock plan before regulators appointed by then-Gov. Clinton. Hubbell, now
associate attorney general, was a senior partner at the Rose firm along with the
late deputy White House counsel Vincent Foster, who committed suicide in July.
PAGE 19
The Washington Post, February 10, 1994
Clark said Rose lawyers also are searching files for others named on a
subpoena of another figure in the Madison-Whitewater probe, Arkansas Gov. Jim
Guy Tucker (D).
In Washington, the Senate voted unanimously to extend the statute of
limitations covering civil actions by the Resolution Trust Corp. for fraud and
gross negligence until the end of 1995. The current RTC statute of limitations
expires Feb. 28.
Sen. Alfonse M. D'Amato (N.Y.), ranking Republican on the Senate Banking
Committee, had been pushing an extension to keep from closing the books on civil
actions to recoup taxpayer losses from the Madison S&L collapse. Democrats went
along on condition that the extension apply to all civil actions before the
RTC.
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 10, 1994
WORLD
The Washington Times
FRIDAY, FEBRUARY 11, 1994 PAGE A19
After air strikes, 'no guarantees' on what's next
By Martin Sieff
war and that it carries the risk of
ship agreed to place its heavy weap-
this decision has been taken in re-
gun positions around Sarajevo if that
U.S. officials also acknowledged
THE WASHINGTON TIMES
escalation if the Serbs defy the
ons under U.N. monitoring and so far
sponse to those TV pictures," a
became necessary.
that there was nothing to prevent the
NATO threat or attack U.N. peace-
has honored a cease-fire.
senior European defense official
"It is
difficult to find those ar-
Serbs from pulling their heavy artil-
After a year and a half of tough
keepers elsewhere.
The hardening Western resolve is
said.
tillery pieces. They're easy to hide,"
lery away from Sarajevo and using
talk but no action, the Western allies
U.S. and European defense
a direct result of TV coverage of the
If the ultimatum does succeed in
Deputy Undersecretary of Defense
it against other Bosnian cities.
- reflecting mounting public
sources said the Western allies this
suffering in Sarajevo, particularly
breaking the siege, the sources said,
Walter Slocombe told a Pentagon
The ultimatum "only addresses
humanitarian concern finally ap-
time are serious and will carry out
the carnage caused when a 120 mm
the reasons will be more political
briefing.
removing the heavy weaponry from
pear ready to use air strikes to break
their threat to use air strikes if they
round crashed into a marketplace
than military.
Don Snider a military analyst with
the exclusion zone that's been de-
the siege of Sarajevo.
are needed to halt the shelling of
Saturday, killing 68 persons.
"If the Serbs really want Sara-
the Center for Strategic and Interna-
fined by NATO or, as an alternative,
The decision could end or ease the
Sarajevo.
The sources said it was the public
jevo, this is a complete waste of time,
tional Studies, was more skeptical.
submitting it to control
by
the
city's plight, mili-
Both the Serbian government and
outcry over that incident that
but they may decide that taking it is
"This decision is not enforceable.
United Nations," State Department
NEWS
tary experts say,
the Bosnian Serb leadership seem to
prompted President Clinton and
not worth it," the European source
Its military usefulness should not be
spokesman Mike McCurry said.
but they warn
be taking the threat seriously, the
ANALYSIS
British Prime Minister John Major
said.
overrated," he said. "Finding a mor-
"There's nothing that prevents
that it may be dif-
defense sources said. Even before
to agree to NATO air strikes in spite
Clinton administration officials
tar in that terrain within a 12-mile
them from redeploying elsewhere.
ficult to imple-
Wednesday's ultimatum was an-
of their previous reluctance.
acknowledged that it would not be
radius is like looking for a terrorist
ment, that it will not end the larger
That is correct," he said in response
nounced, the Bosnian Serb leader-
"The problem is, every aspect of
easy to conduct air strikes against
in Northern Ireland."
to a question.
Lawmaker seeks Clinton's answers on Whitewater
By Jerry Seper
Deputy Counsel Vincent W. Foster
Madison Guaranty Savings and
the Whitewater-Madison affair. In a
moral, dishonest or unethical"-
Jr's office following his July 20
venture in the Arkansas Ozarks that
THE WASHINGTON TIMES
Loan Association and the White-
letter, he said there were "serious
death.
he would not make the same offer for
eventually failed.
water real estate project, also has
The ranking Republican on the
questions about the Department of
Mrs. Clinton.
"In the Whitewater matter, infor-
Mr. McDougal also said it never
focused on an SBA loan to Susan
House Committee on Small Busi-
Justice's ability to prosecute wrong-
"I don't know Mrs. Clinton well
mation has been dribbling out piece
occurred to him that having Mr. Clin-
McDougal, wife of Madison's owner,
doing that may have occurred."
ness late yesterday introduced a res-
by piece," Mrs. Meyers said. "The
enough to give that broad a guar-
ton - the governor - as a business
James B. McDougal.
The requests come amid new con-
olution calling on President Clinton
SBA has provided numerous doc-
antee," he told host Ted Koppel.
partner was a political advantage.
David L. Hale, owner of Capital-
cerns about records in the White-
to answer questions about his pur-
uments to Congress, while other
In the "Nightline" interview, Mr.
"There was absolutely nothing, at
Management Services Inc., a Little
water-Madison affair - some of
ported involvement in a question-
agencies have refused to provide
McDougal said, "Everybody under-
that point, that the governor of Ar-
Rock SBA-backed lending company,
able $300,000 SBA loan now under
which an employee at Hillary Rod-
any."
stands that the president's abso-
kansas could have done for me," he
has told investigators Mr. Clinton
ham Clinton's old law firm said were
federal investigation.
lutely blameless, and I think there's
said.
"Recent news reports alleging
and Mr. McDougal pressured him
shredded on Feb. and comments
Rep. Jan Meyers of Kansas wants
that the Rose Law Firm in Little
some controversy about Mrs. Clin-
In a related matter, the House yes-
for the loan - $110,000 of which
details on the April 1986 loan and
by Mr. McDougal on ABC-TV that
Rock has been destroying doc-
ton's role. But in my mind there's no
terday evening approved a two-year
went to the Whitewater acount. The
seeks communication records be-
suggested he could not vouch for
uments concerning the Whitewater
doubt that she is completely inno-
extension of the government dead-
McDougals and Clintons were
tween the White House and the
Mrs. Clinton's credibility.
Development Corp. heighten my
cent of having done anything illegal,
line for pursuit of civil charges
Whitewater partners at the time.
Small Business Administration.
concerns," she said.
In an interview on ABC's "Night-
immoral."
against failed savings and loans such
Meanwhile, Rep. Lamar Smith,
She also called for an accounting
Special Counsel Robert B. Fiske
line" Wednesday, Mr. McDougal said
He acknowledged, however, that
as Madison.
Texas Republican, yesterday asked
of events surrounding the removal
Jr., who is looking into allegations of
he could pass a polygraph examina-
he had no question that Mrs. Clinton
The Senate on Wednesday ap-
House Judiciary Committee Chair-
tion on his claims that Mr. Clinton
of records from White House
financial irregularities involving
was aware of what was going on with
proved extending the deadline
man Jack Brooks to hold hearings on
had never done anything "illegal, im-
Whitewater, the $203,000 real estate
through Dec. 31, 1995.
Tailhook accuser quitting Navy
Cites ordeal as 'frightening'; identified wrong attacker
groped and grabbed her in the Las
who said he was elsewhere at the
By Rowan Scarborough
Vegas Hilton's third-floor hallway.
Hilton when the gantlet attack hap-
THE WASHINGTON TIMES
Her story led to the firing of at
pened and was not wearing the color
Lt. Paula Coughlin, who was mo-
least three admirals and an exten-
of clothing that Lt. Coughlin said her
lested at the infamous Tailhook con-
sive Defense Department investiga-
assailant wore.
vention and blew the whistle on the
tion that concluded that 83 women
Since going public with her
scandal, is quitting the Navy.
were the victims of indecent as-
charges, Lt. Coughlin has been the
In her letter of resignation, Lt.
saults at the convention.
brunt of jokes and ridicule from
Coughlin cited emotional stress
Despite the Pentagon inspector
some fellow male aviators.
from the attack and alluded to ad-
general forwarding 140 cases to the
Her resignation came the day be-
verse treatment from fellow fliers.
Navy and Marine Corps for disci-
fore a Navy judge in Norfolk dis-
She said she could no longer per-
plinary action, no officer has been
missed the last Tailhook criminal
form at the high standards she ex-
court-martialed and more than half
cases.
pects of herself.
the cases were dismissed for insuffi-
In dropping charges against three
Stationed at the Norfolk Naval Air
cient evidence.
officers, Capt. William Vest Jr. ac-
Station, Lt. Coughlin submitted her
The dismissals included the case
cused Adm. Frank B. Kelso II, chief
resignation on Monday to the com-
of an officer whom Lt. Coughlin ac-
of naval operations, of having a per-
manding officer of her unit, Helicop-
cused of assaulting her.
sonal interest in the case because
ter Combat Support Squadron 2.
The Marine Corps dropped the as-
investigators suspected he had wit-
Lt. Coughlin reported to the unit a
sault charge against Capt. Gregory
nessed bawdy behavior at Tailhook
year ago and has received superb
Bonam after a pre-trial hearing at
and did not stop it.
performance evaluations, her col-
which Lt. Coughlin acknowledged
The judge said Adm. Kelso should
leagues said.
she initially picked out the wrong
not have appointed the admiral who
The letter of resignation is mov-
man in a photo lineup.
has overseen all Tailhook prosecu-
ing up the Navy's chain of command
tions and punishments.
before reaching the desk of Navy
She testified her ordeal was "very,
Secretary John Dalton.
very frightening
I had the feeling
That officer, Vice Adm. J. Paul
The 32-year-old helicopter pilot
things were going very badly for
Reason, is expected to decide today
was the first Navy woman to go pub-
me."
whether to appeal Capt. Vest's opin-
ion to the U.S. Court of Military Ap-
lic with charges that a gantlet of
Capt. Bonam, an F-18 fighter-
peals or drop the cases. He could
Navy fliers at the 1991 convention
bomber pilot, produced witnesses
refer the cases to Mr. Dalton.
Dole rips Clinton on foreign policy
By Ralph Z. Hallow
access" to health care to oppose the
George Bush were around, people
THE WASHINGTON TIMES
government-required coverage for
slept pretty well at night, knowing
every American that Mr. Clinton has
that from a foreign policy stand-
President Clinton's conduct of for-
demanded from Congress under
point, we had real leaders in the
eign affairs threatens to rob the
threat of veto.
White House," he said.
United States of global preemi-
"We [Republicans] are about the
Mr. Dole called for the United
nence, respect and the ability to pro-
maximum amount of choice for the
States to lift unilaterally the arms
tect its national interests, Senate Mi-
maximum amount of people," Mr.
embargo against the Bosnian gov-
nority Leader Bob Dole said
Dole told about 700 people in the Re-
ernment to "allow the Bosnian peo-
yesterday.
gency Ballroom of the Omni Shore-
pie [to] defend themselves against
"Unfortunatley, our image and po-
ham Hotel. "We're about helping
the ongoing slaughter."
sition abroad is on the same down-
people gain access to the best health
He said he does not intend "to sug-
ward spiral as during the Carter
care system in the world [through]
gest for one moment that we in
years, when the United States was
universal access."
America have an obligation" to inter-
feared by none, respected by few
The Republican leader, who
vene in every messy situation in the
and ignored by many," Mr. Dole told
shared the dais with Democratic
world and clean it up, "unless there
the 21st annual Conservative Politi-
Rep. Timothy J. Penny of Minnesota,
is a clear national interest."
cal Action Conference (CPAC) yes-
dominated the first day of the three-
Mr. Dole welcomed the NATO
terday.
day conference.
deadline for Bosnian Serbs to pull
American Conservative Union
He belittled Mr. Clinton's serial ul-
back their artillery from Sarajevo,
timatums on the Bosnia conflict.
(ACU) Chairman David A. Keene
but he hoped "it is not just more talk.
said the conference drew a record
The bottom line is that America,
"Last night, the president an-
nounced he was giving the Serbs ten
2,000 paid registrants from across
under the Clinton administration, is
more days," Mr. Dole said with a
the country. ACU is the event's chief
abdicating leadership - at the
shrug. "And if that doesn't work, he'll
sponsor.
United Nations, at NATO, and
give them ten more days."
Mr. Dole, who is expected to seek
around the globe."
the presidency in 1996, pounded Mr.
Displaying the biting humor
He also challenged the president's
Clinton on the one policy area that
many in the audience had come to
insistence on universal health care
Republicans say he hasn't suc-
hear, Mr. Dole introduced the for-
insurance.
ceeded in stealing from them for-
eign policy part of his speech this
The Kansas Republican instead
eign policy.
way: "I want to say one thing about
endorsed voluntary "universal
"When Ronald Reagan and
foreign policy. We don't have any."
The Washington Times FRIDAY, FEBRUARY 11, 1994
The firm
I
t was more than a little entertaining yesterday to
couple years intervened before the firm switched
follow the evolving position of the Rose Law
sides. Mr. Clark's blatant contradiction develops
Firm's managing partner, Ronald M. Clark, on the
over the course of a comma.
question of document shredding at the firm last
By afternoon, Mr. Clark had a rather different tale
Thursday. The Washington Times' Jerry Seper
to tell. AP quoted him saying that the report of
reported yesterday that Rose employees shredded
shredding Whitewater documents was "totally false
records from the Whitewater Development Corp.
I am absolutely sure." Apparently he arrived at
Calls from The Washington Times to Mr. Clark on
his position of absolute certitude only sometime
Tuesday had gone unreturned. Wednesday, however,
after his first statement. This certitude now included
Mr. Clark was full of things to say.
the statement quoted by AP that his firm had "no
In a morning dispatch, the Associated Press quotes
significant documents" on Whitewater. And he said
Mr. Clark calling The Times' account "totally false."
the firm had kept documents on Madison "in
In response to a specific question from AP on
anticipation they will be requested" by Independent
whether Whitewater-related documents were
Counsel Robert Fiske.
shredded, Mr. Clark is quoted as saying: "Absolutely
He also is quoted as saying, "I am extremely
not. To my knowledge, we have no documents in the
upset that somebody would allege this." No doubt.
firm's possession related to Whitewater, and if we do,
Destruction of documents as described in The
we are accumulating them in a single location
Times' story is clearly criminal.
awaiting the appropriate time that they will be
We now know, by Mr. Clark's admission, that the
examined."
Rose firm has documents relevant to Mr. Fiske's
Get it? The firm has no documents- if it does,
probe. It would be prudent, under the circumstances,
they are being gathered in a safe place.
for the independent counsel to obtain them forthwith.
That is quite an example of arguing in the
Also, given the circumstances, it would be prudent
alternative. One hopes that it is not indicative of the
for him to determine exactly what did happen last
kind of legal argument Mr. Clark's firm crafts for its
Thursday. Given Mr. Clark's evidently nuanced sense
clients. Of course, the Rose firm did represent
of the truth, perhaps Mr. Fiske's team would best
Madison Guaranty Savings and Loan in its effort to
begin by sitting everyone from the Rose Law Firm
avoid being shut down and then went on to represent
down in separate rooms, swearing them, and
the federal government in its effort to shut down
beginning the interviews with a reading of the federal
Madison, so who knows? In that case, however, a
statute on perjury.
Can Mr. Clinton go to Vietnam?
T
he president's words rang woefully hollow last
people believe that; American companies want to
week when he declared the lifting of the
have a share of a market now dominated by the
decades-old embargo against Vietnam. He was
Japanese and the South Koreans, the British, the
taking this step, Mr. Clinton said, because he had con-
French and the Dutch, one that shows the potential
cluded that it would provide the best opportunity for
for growth enjoyed by other Asian nations if only its
determining the fate of the 1,647 American service-
communist regime would allow its people to pursue
men still missing in Vietnam.
it. If the president finds that such considerations out-
"This decision today, I believe, renews that com-
weigh any scruples about dealing with a regime
mitment in our constant, constant effort never to for-
whose human rights record is a among the worst in
get those until our job is done," Mr. Clinton solemn-
the world, he ought to make the case.
ly intoned as he spoke before an audience packed
If he believes that business and contacts with the
with veterans of the war that Mr. Clinton himself so
outside world will help improve conditions for the
artfully had dodged.
Vietnamese people (as opposed to funding and per-
On the question of Vietnam's trade status, of
petuating a viciously repressive regime), maybe he
course, the president's views have undergone a bit
should have made that case.
of an evolution. During the campaign, when Vietnam
If he believes that bygones can be bygones with
War draft dodging was one of those very pesky
people who tortured, maimed and incarcerated cap-
charges facing candidate Clinton, he had only harsh
tured American soldiers, then perhaps Mr. Clinton
words for the hopefuls in Hanoi who were con-
ought to have spoken to that issue. In other words,
vinced that a Clinton presidency would mean good
the president did not address these tough questions,
news for them. Any normalization to get information
presumably because his own actions during the war
on POWs was "backwards," Mr. Clinton believed in
prevent an open and honest discussion of them. But
October 1992. "I don't think we should normalize and
it is foolish to put much faith in the honest intentions
then get accounting. I think we ought to know where
of a government that, only four days after the lifting
our people are. That's putting the cart before the
of the embargo, rewarded us with the remains of 12
horse."
Americans. A small thanks for a big favor.
Somewhere along the way, that precondition was
But now that Mr. Clinton has made "full account-
downgraded to a goal, and the cart and the horse
ing" the standard by which our future relations with
reversed positions. That may not surprise those who
Hanoi are to be measured, he shall be held to it. We
have kept tabs on the Mr. Clinton's trail of broken
should expect to see results from new searches in
campaign promises. But the cynicism of using the
Vietnam, and we should expect Mr. Clinton to direct
POW/MIA issue as a cover for what is very obviously
the Pentagon to cease the policy of automatically
a decision to humor the U.S. business community
seeking to debunk any account of Americans left
(which is clamoring to join what it believes to be a
behind alive after 1973, of any perhaps still alive. Mr.
Vietnamese gold rush) is awfully distasteful.
Clinton has done nothing to deserve a presumption
It may be that Mr. Clinton thinks he has good finan-
of good faith on this matter. He will have to earn it
cial reasons to up for trade with Vietnam. A lot of
by his follow-up actions.
The Bashington Times THURSDAY, FEBRUARY 10. 1994
Fatal
Congi
told us. Since Mr. North
Both troopers, in fact, will be in
assigning a representative 10 115
d
it
an environmental rec-
Washington tomorrow, along with
ten to every speech" on campus and
"Coma" author Robin Cook's new
ord to attack, Mr. Holton said his
attorneys, Cliff Jackson
"report to me immediately on the
best-selling novel, "Fatal Cure," ex-
group is settling for "dishonesty."
BELTWAY
and Lynn Davis. Among other ap-
content of the speech"; invite a
amines a health care system that
pearances, they'll be holding a
member of any "targeted group to
rises above the best interest of the
'Star wars' victory
news conference at the Omni
esent a counterview immediately
patient. What an awful scenario,
Shoreham.
lowing the speech"; and asking
thought Republican Sens. Orrin
Exiled Russian author Alexander
Hatch of Utah and Connie Mack of
Solzhenitsyn, who 20 years after
By John McCaslin
a attorney general "10 explore
legal options related to the is-
Florida.
his expose of communist terror is
Fighting back
of free speech" and how the
finally preparing to return home,
At his news conference last
school can "protect our college
That's why the senators person-
tells New Yorker magazine that
ally sent Bill and Hillary Clinton a
Ronald Reagan, not Mikhail Gorba-
emancipator?" writes Frederick
week, Nation of Islam leader Louis
ommunity from speakers who un-
chev, should be given credit for
Farrakhan noted that Kean College
Jermine our mission."
copy of the thriller - "for some
Drum Hunt of Bethesda, upset be-
good nighttime reading," Mr. Hatch
ending the Cold War.
cause he was told President Clin-
President Elsa Gomez was herself
told us yesterday. And the senators
ton, for the second straight year,
a minority and was apparently wor-
The envelope, please
But what about Mr. Gorbachev's
didn't stop at the White House.
decided against laying a wreath at
ried about being forced from her
decision to withdraw from the
the Lincoln Memorial on Saturday,
post because of Khalid Abdul
Rep Curt Weldon, Pennsylvania
They distributed copies to every
lawmaker on the Hill 535 in all.
arms race?
President Lincoln's 185th birthday.
Muhammad's hate speech on the
Republican, made this unusual an-
"He really understood that the
New Jersey campus.
no incement yesterday on the
There's still hope, Mr. Hunt. Jer-
do use floor:
country was in such a difficult eco-
emy Gaines, one of the president's
Political statement
Inside the Beltway has since ob-
nomic situation that sustaining the
press aides, told us yesterday that
tained a two-page letter sent by Ms.
"Mr Speaker, today we find out
The help-wanted ad in Sunday's
tension of the old rivalry with the
"it's possible" Mr. Clinton will
Gomez to alumni of the college. In
in nominees for the Academy
Washington Post read: "Campaign
West was no longer possible," Mr.
honor the 16th president after all.
it, we find no hint she's worried.
Wards in Hollywood I thought I
to Defeat Oliver North. Entry level
Solzhenitsyn told writer David
"Hate speech visited Kean Col-
uld take the hberty of present-
and leadership staff needed to de-
Remnick in an interview at his Ver-
the Academy Awards for the
lege on Nov. 29, 1993 and when it
feat Oliver North, who is the
mont home.
The other Roger
left three hours later, it left behind
gest-running comedy in Wash-
leading candidate to be Virginia's
;ton
"The Cold War was essentially
Watch out, Mr. President, Rog-
what hate speech always tries to
next U.S. Senator. Paid for by
won by Ronald Reagan when he
er's coming to town.
create: irrational hatred, pervasive
"Best actor in a full-scale
Clean Up Congress, not by any can-
embarked on the 'star wars' pro-
No, not your brother. Roger
fear and a justification for vio-
ver-up: Bill Clinton, who has in-
didate."
gram and the Soviet Union under-
Perry. You remember, the Arkansas
lence," Ms. Gomez writes. "In this
si ted for months he knew nothing
Wait a minute, we thought Clean
stood that it could not take this next
state trooper from your gubernato-
particular case, it also left some-
out a land deal that lost him
Up Congress was an environmental
step," the Nobel Prize-winning au-
Alexander Solzhenitsyn identifies
rial security detail, who with fellow
thing else, something the
$ 9,000.
group, concerned with environmen-
thor said. "Ending the Cold War
who really shut down the Cold War.
trooper Larry Patterson charged in
hatemonger fully intended to leave.
"Best actress in a full-scale
tal records of public officials.
had nothing to do with Gorbachev's
newspaper, magazine and television
Kean College was shaken to its
ver-up: Hillary Clinton, who re-
generosity; he was compelled to
interviews that they stood watch as
foundations."
"This is the first exception,"
Old Abe
I tembered to deduct every pair of
end it. He had no choice but to dis-
you
well, you know the rest of
As a result, Ms. Gomez an-
Lill's used underwear but somehow
The Washington Times THURSDAY. FEBRUARY 10. 1994
Woody Holton, director of Clean Up
arm."
"Why not recognize the great
the story.
nounced several steps, including
forgot to declare a $69,000 tax loss."
FDIC nominee told to widen Whitewater recusal
By Paul Bedard
sonal capacities."
of Arkansas."
of the FDIC.
WASHINGTON TIMES
Her foes on the Senate Banking
Sen. Lauch Faircloth fired off a letter to Ms.
He also called on Ms. Tigert to
He fears that even with her
Committee have said the recusal is
recuse herself from specific in-
too "narrow" and opens the door to
Tigert demanding she expand her pledge.
recusal, Ms. Tigert will find it hard
Ricki Rhordarmer Tigert's nomi-
volvement in any probe of financial
to forget her long personal relation-
nation to run the Federal Deposit In-
her involvement in FDIC probes into
institutions linked to the Whitewater
ship with the Clintons when it comes
surance Corp. was put in jeopardy
Whitewater-related financial institu-
"It is your unfortunate fate to have
Mr. Faircloth is concerned that
Development Corp., a real estate
to FDIC probes of Whitewater
yesterday amid new concerns that
tions in which the Clintons either
been nominated to a post which has
Ms. Tigert will stay away only from
deal in which the Clintons were part-
related financial institutions.
Ms. Tigert a longtime friend of
weren't specifically named or were
direct jurisdiction over aspects of
probes of deals involving the Clin-
ners with Madison President James
Time magazine this year de-
the Clintons' hasn't fully recused
named, but in their official capacity.
the emerging scandal involving a se-
tons by name not the mass of
B. MacDougal and his wife, Susan.
scribed the Tennessee native as a
Herself from FDIC probes into
Sen. Lauch Faircloth, North Caro-
ries of improprieties that have col-
Whitewater-related cases involving
The FDIC is investigating Madi-
close friend of first lady Hillary
Whitewater-Madison
lina Republican, yesterday fired off
lectively come to be known as
many other Arkansas institutions
son loans to Whitewater. Madison
Rodham Clinton, whose role in
A key Tigert opponent on the Sen-
a letter to Ms. Tigert demanding she
'Whitewater' "Mr. Faircloth wrote in
that may also involve the Clintons.
failed in 1989, costing taxpayers $50
Whitewater-Madison is under scru-
ate Banking Committee yesterday
expand her pledge to stay away from
the letter to Ms. Tigert.
In his letter, Mr. Faircloth called
million.
tiny In a story about the annual Re-
demanded that the Clinton nominee
the agency's investigation of Madi-
"Because the [Democratic] lead-
on Ms. Tigert to "expand your
Ms. Tigert's secretary at the law
n/ issance Weekend in Hilton Head,
enhance her promise to stay out of
son Guaranty Savings & Loan and
ership in Congress has chosen not to
recusal from merely those matters
firm of Gibson Dunn & Crutcher
S.C. Time said Mrs. Clinton's favor-
Whitewater-related FDIC investiga-
other institutions in the Whitewater
exercise its oversight responsibility
concerning president and Mrs. Clin-
said her boss is refusing to talk to
it activity was "hanging out with
tions, even if the probes do not spe-
case.
into this matter, those members who
ton in their personal capacities to
reporters until after she is con-
FDIC nominee Rickie Tigert."
cifically target the Clintons.
If he doesn't get an answer this
are serious about finding the truth
also include their capacities either
firmed by the Senate.
"ince Mr. Faircloth first aired his
So far, Ms. Tigert has said only
morning, the senator has threatened
in this matter have no choice but to
directly or indirectly as partners in
Mr. Faircloth has so far led the
opposition, friends of the Clintons'
that she will rect
I from
to delay Ms. Tigert's confirmation
exercise
I
scrutiny of
firms,
in their capacities ei-
opposition to putting Ms. Tigert, a
who attended the Renaissance
FDIC business "concerning Presi-
vote in the Banking Committee to-
appoi
that do have jurisdic-
ther directly or indirectly as govern-
former Federal Reserve and Trea-
Meekend have lobbied the senator on
dent or Mrs. Clinton in their per-
day, according to committee aides.
tion," he
1.
officials, such as the governor
sury Department official, in charge
if of Ms. Tigert.
W
REVIEW & OUTLOOK
FOB Regulation
Today the Senate Banking Com-
Meanwhile. Rep. Jim Leach is won-
mittee will vote on Ricki Tigert as
dering about Deputy Treasury Secre-
head of the FDIC. she having agreed
tary Interim RTC CEO Roger Altman.
to recuse herself from issues involving
The Congressman wrote last week
the Clintons and Whitewater. Let us
also seeking recusal commitments in
all pause to see who is running the rest
matters involving the RTC's investi-
of the bank regulatory apparatus.
gation of Madison's collapse and rela-
Why, Deputy Treasury Secretary
tionship to Whitewater. Mr. Leach's
Roger Altman. a presidential ap-
tone is cordial. but he thinks the in-
pointee as well as Georgetown friend.
herent conflicts need to be faced:
is running the ostensibly independent
"I have high regard for your per-
Resolution Trust Corp. And Eugene
sonal integrity. but as you know. from
Ludwig. another college Buddy of Bill.
the beginning, it has been an awkward
has been installed as Comptroller of
situation to have a presidentially ap-
the Currency.
pointed and confirmed officer of the
Why, the FOBs are taking over fi-
Treasury Department also head an in-
nancial regulation. lock. stock and
dependent federal agency. the RTC.
barrel. They haven't quite got the Fed-
When this prospect was first sug-
eral Reserve yet, but they have a reg-
gested at the beginning of the Clinton
ulatory reform proposal that would
Administration. it did not strike the
take care of that. The Clinton folks
Minority as overly unreasonable for a
aren't content to relegate cronies and
month or two given the fact that no
pals to harmless backwaters like Com-
RTC head had been selected.
merce or Postmaster General or the
"However, it has been over a year
alter ego of a presidential Counselor.
since the administration has been in
They learned back in Arkansas that it
office and it can only be described as
was convenient to have a Beverly Bas-
structurally unseemly for a political
sett Schaffer sending "Dear Hillary"
appointee of an Executive branch de-
letters waving through a new capital-
partment to make what are, in effect,
ization plan for a financial institution.
law enforcement decisions for an in-
We're glad to see that a couple of
dependent federal agency as they may
courageous Republicans are blowing
touch upon the President."
the whistle.
Finally, we have Mr. Ludwig, ap-
North Carolina's Senator Lauch
pointed by Mr. Clinton to head the
Faircloth. unlike some of his col-
comptroller's office, which regulates
leagues on Don Riegle's banking com-
and examines national banks. They
mittee, isn't willing to let the matter
attended Oxford and Yale together.
THE WALL STREET JOURNAL THURSDAY. FEBRUARY 10, 1994
drop with Ms. Tigert's recusal. In the
and remain close. Just how close the
FDIC nominee's first appearance be-
American Banker described in its Jan.
fore the committee, the Senator raised
31 edition, reporting on a videotape
the issue of how someone who says
taken at a Renaissance Weekend by
she's known the Clintons for eight
someone from "Saturday Night Live"
years and been a Renaissance Week-
who was also there: "The tape fea-
end regular could convincingly head
tured Mr. Clinton. But it was hard to
an agency with an active investigation
miss Mr. Ludwig in a bright blue
of the Madison S&L collapse. Ms.
sweater and white shorts. Almost
Tigert weasled, but later sent Senator
every shot of the President showed the
Faircloth a recusal statement. which
beaming comptroller at his shoulder."
she said was written after consulting
So we have three Friends of Bill or
FDIC's ethics office. She promised
Hillary calling signals, amid a bliz-
she'll recuse herself from matters
zard of recusals. at three traditionally
"concerning President or Mrs. Clinton
independent bank regulatory agen-
in their personal capacities."
cies. Surely by now enough is known
While consoling Ms. Tigert on the
of the Clinton political mores to agree
"unfortunate fate" surrounding her
that we're past the point of simply
nomination. Senator Faircloth is now
passing all this through as of no con-
wondering about the caveat "per-
sequence. After the Savings and Loan
sonal." Does that remind you of
scandal. BCCI. the Keating Five and
"didn't inhale" or "no price controls?"
now whatever Whitewater is, it ought
Sen. Faircloth now wants Ms. Tigert to
to be at least clear that federal finan-
"expand your recusal" from matters
cial regulators should be held to a Cae-
involving the "personal" activities of
sar's wife standard of propriety and
President and Mrs. Clinton to include
independence. Instead, we get this.
their public activities. More pointedly,
We're quite used to the Clinton
he asks: "Will you recuse yourself
White House stonewalling or deriding
from matters concerning Webster
anyone's inquiries or doubts about its
Hubbell. Vincent Foster. Dan Lasater.
behavior. But we're glad that Senator
Frost and Company, Madison Guar-
Faircloth and Rep. Leach are persist-
anty Savings and Loan. the Worthen
ing with their questions about the ad-
Bank Corporation" and onward
ministration's appointment practices.
through all the financial institutions
As we run the numbers, Renaissance
now running under the Whitewater
Weekend plus Whitewater plus the
flag? How did we end up with an FDIC
RTC plus the Comptroller plus the
head going in recusing herself from
FDIC plus regulatory independence
the agency's most sensitive business?
does not compute.
Paper-shredding
added to probe
Rose denies destroying Whitewater files
By Jerry Seper
THE WASHINGTON TIMES
PAPERS
funds were routed, in violation of the
Special counsel Robert B. Fiske
Time extended
law, to the Whitewater account.
Jr. expanded his Whitewater-Madi-
From page A1
At the time, the Clintons, Mr.
son inquiry yesterday to include a
connection" to the investigation, or
for S&L probe
McDougal and his wife, Susan, were
statement by an employe at Little
partners in the Whitewater venture,
Rock's Rose Law Firm that White-
which files the independent counsel
THE WASHINGTON TIMES
a $203,000 development project
water Development Corp. doc-
might seek to review.
along the White River in the Arkan-
The Senate yesterday unan-
uments pertaining to President and
The Times had called Mr. Clark
sas Ozarks. The project later failed.
imously approved an effort by
Mrs. Clinton, were shredded.
three times on Tuesday, when an ac-
The McDougals are divorced.
Sen. Alfonse M. D'Amato to ex-
One law enforcement official in
count of the shredding was being
tend the statute of limitations
The Resolution Trust Corp.
Little Rock, who asked not to be iden-
prepared for publication, and left
for civil actions tied to the sav-
(RTC), which oversees failed S&Ls,
tified, said an accusation by a Rose
specific and precise questions with
ings and loan bailout.
investigated allegations that Mr.
employee-f reported yesterday
his secretary about the shredding.
McDougal diverted Madison funds
The vote was 95-0.
in The Washington Times that the
He did not respond to the calls.
The New York Republican
to Mr. Clinton using overdrawn ac-
Whitewater documents were de-
Neither did Mr. Clark respond to
sought to extend the statute
counts and thrift-approved I S.
stroyed last week has been for-
two telephone inquiries from this
The RTC also asked whether Madi-
from Feb. 28 to Dec. 31, 1995. so
warded by Mr. Fiske's office to inves-
newspaper yesterday.
the Resolution Trust Corp.
son funds had been illegally diverted
The Times reported in yesterday's
to Whitewater and then routed into
tigators.
would have ample time to inves-
editions that an employee of the
tigate questions about Presi-
Mr. Clinton's successful 1984 guber-
"It's certainly part of the record
Rose firm had confirmed the
and something that will be looked
dent and Mrs. Clinton's involve-
natorial campaign.
shredding of Whitewater records
ment in Arkansas' Whitewater
One of those campaign contribu-
into very seriously," the official said.
showing Bill and Hillary Clinton's in-
Development Corp. and its fi-
tions included money collected at a
The managing partner at the Rose
volvement in the north Arkansas
nancial ties to the failed Madi-
$35,000 fund-raiser Mr. McDougal
Law Firm, Ronald M. Clark, in state-
real estate venture, which is now un-
son Guaranty Savings and Loan
hosted at Madison's offices in April
:S to other media outlets, yester-
der federal investigation.
Association.
1985. The proceeds were 1
to
denied that any documents had
The employee, who requested
The statute of limitations on
help the Clintons retire a $50,000
been shredded. saying he was "abso-
anonymity, said there was "abso-
the Whitewater-Madison affair
personal loan they took from an Ar-
lutely sure" the allegation was "to-
lutely no doubt" that Whitewater
expires on Feb. 28.
kansas bank for the 1984 gubernato-
tally false."
records had been destroyed and that
In a compromise with Sen.
rial campaign.
However, the language of the de-
some people at the firm, including
Howard M. Metzenbaum, Ohio
The Fiske investigation also will
nial by Mr. Clark changed through-
one employee who did the shred-
Democrat, Mr. D'Amato agreed
include a review of the circum-
out the day.
ding, thought "that this could be
to extend the statute of limita-
stances of the Foster death, the
In the early morning, he de-
very bad."
tions for all pending civil cases
Whitewater documents secretly
scribed The Times' report as "to-
Identified as the one who de-
for the RTC until Dec. 31, 1995,
taken from his office after his
h,
tally false," saying, "To my knowl-
stroyed the documents, the second
or until the Federal Deposit In-
and a look at a $300,000 Small Busi-
edge, we have no documents in the
employee declined comment in a
surance Corp. takes over the
ness Administration-guaranteed
firm's possession related to White-
telephone interview, although he de-
savings and loan bailout.
loan to Susan McDougal. A
water." Then he added: "If we do, we
clined an invitation to say that the
Since the House did not ap-
$110,000 of the loan eventually found
are accumulating them in a single
shredding incident had not taken
prove similar language, the
its way into the Whitewater account.
location awaiting the appropriate
place.
D'Amato amendment faces an
Mr. McDougal, who was indicted
time that they will be examined."
"I'm not going to comment." he
uncertain future. To become
in 1989 for fraud in connection with
In early afternoon, Mr. Clark told
said. "I'm not going to say anything
law, it must remain in the con-
Madison and later acquitted, has de-
the Associated Press that the Rose
about what happened. I would just
ference bill, which will include
nied any wrongdoing.
firm had no "significant" documents
prefer not to say anything about this
provisions approved by the
Mr. Clinton has said that he and
at all."
House and Senate.
his wife did "nothing improper" with
concerning Whitewater. Disputing
It is not clear which documents
"The clock is ticking," Mr.
regard to Madison or Whitewater.
the first assertion of early morning,
were destroyed, although former
D'Amato said.
The Rose firm was founded in
he said the Rose firm did, after all,
White House Deputy Counsel Vin-
1820 and is one of the oldest
of
hold Whitewater documents, and
cent W. Foster Jr., a partner in the
the Mississippi River. One of its orig-
said they being held "in anticipation
law firm, handled Whitewater legal
problems he uncovered in De-
inal members, U.M. Rose, was the
they will be requested" by federal
matters for the Clintons.
cember.
founder of the American Bar Asso-
authorities.
Mr. Foster's body was found July
Mr. Clark told the Associated
The special counsel, a former U.S.
ciation. Six of its partners have
20 in a Virginia park in what federal
attorney in New York, was named
served on the Arkansas Supre
Press that the Rose firm had not yet
authorities said was a suicide.
Jan. 20 by Attorney General Janet
Court, three as chief justice.
received subpoenas or requests for
Neither was it clear yesterday
Reno to investigate accusations of
The firm has 28 senior part
$
the records.
whether the shredding violated state
and 24 associates. According to the
In a statement sent via facsimile
financial irregularities involving
or federal law. An FBI agent and a
James B. McDougal and his defunct
Martindale-Hubbell Law Directory,
to The Times last night, Mr. Clark
former high-ranking Justice De-
d, the Rose Law Firm has
Madison Guaranty Savings and
its specialities include civil litiga-
partment official said various inter-
Loan Association, which was closed
tion, products liability law, tax
i,
categorically denied that it has de-
pretations of federal statutes show
by federal banking regulators in
corporate law, banking and securi-
stroyed any documents relating to
that the Rose firm could be held
1989 after it cost taxpayers $50 mil-
ties regulations, labor law, and dis-
the Whitewater investigation."
criminally liable if the incident is
lion.
crimination lawsuits.
The statement continued, "The
substantiated by the special counsel.
Mr. McDougal, a longtime Clinton
Its clients have included Wal-Mart
firm has actively made every effort
Former Rose firm partners also
business associate who bought Mad-
Stores Inc., Tyson Foods Inc., TCBY
to preserve all the files that would
include first lady Hillary Rodham
ison in 1982, is suspected of manipu-
have any connection with the
Enterprises Inc., and Stephens Inc.,
Clinton and Associate Attorney Gen-
lating $250,000 in loans through
all Arkansas-based, and the Pruden-
Whitewater-Madison matter or any
eral Webster L. Hubbell.
Madison and diverting other money
other matter which may be reviewed
tial Insurance Company of America,
As the Clintons' personal lawyer,
to the campaigns of several powerful
PaineWebber Inc., New York Life In-
by the Independent Counsel. The
Mr. Foster handled, among other
Arkansas politicians, including Mr.
firm will continue to see that all such
surance Co., MCI Telecommunica-
Whitewater matters, the sale of the
Clinton.
tions Corp., General Electric Co. and
files are securely maintained."
couple's half share of the develop-
The inquiry also has focused on
However, in the absence of a sub-
the Federal Desposit Insurance
ment in November and corporate tax
allegations that some of the S&L's
Corp.
poena or request for records, it was
not clear how the Rose firm deter-
mined which files would have "any
see PAPERS, page A8
The Washington Times THURSDAY, FEBRUARY 10, 1994
93
Today's debate: INVESTIGATING WHITEWATER
Scandals need clean broom
of independent investigator
To avoid the appear-
that baggage.
OUR VIEW
ance of a white-
To measure the value of indepen-
wash, the White House needs an
dence, one need only remember the Sat-
urday Night Massacre of Watergate.
outside Investigator.
President Nixon fired the special prose-
One way exists to learn the unvar-
cutor and the attorney general. The fall-
nished truth - and end the spreading
out led Congress to authorize indepen-
rumors — about the Clintons' role in the
dent prosecutors to probe allegations of
Whitewater mess. It's an independent
impropriety by high officials.
prosecutor - appointed by judges be-
The law died because Republicans,
holden to neither political party.
tired of being investigated in the Rea-
Today the House, following the Sen-
gan-Bush years, threatened to filibuster
ate, can take a step toward providing
its renewal. Now that they smell blood
one. It can vote to revive the Indepen-
on the Clintons' hands, they're eagerly
dent Counsel Act authorizing such pros-
changing position.
ecutors. And it should do so.
Rumors linking Clinton to an Arkan-
With the act renewed, a three-judge
sas scandal known as Whitewater, which
panel could appoint an independent
cost taxpayers $60 million to bail out a
counsel to investigate the Clintons' in-
savings and loan, refuse to go away. This
volvement in the Whitewater fiasco.
week a Washington, D.C., newspaper,
The investigation is now in the hands
quoting an anonymous source, spread
of Robert Fiske, a special prosecutor ap-
the rumor that Hillary Rodham Clin-
pointed by Attorney General Janet
ton's Little Rock law firm shredded
Reno. If he finds Clinton guilt-free, Re-
Whitewater-related papers.
publicans will scream "whitewash" until
The public deserves to have the ru-
the '96 votes are counted.
mors confirmed or debunked - prefer-
An independent counsel — be it Fiske
ably by someone other than a lawyer
or someone else would carry none of
hired by Reno.
Reject this broom of smears
OPPOSING VIEW
History of In-
these special prosecutors' work was ei-
dependent
ther corrupted or unable to evoke public
counsels is history of unfair at-
confidence that no official, even a presi-
dent, is above the law.
tacks without adequate evidence.
Moreover, while enjoying absolute
By Bruce Fein
immunity from defamation suits, some
Congress should keep the Office of In-
independent counsels recklessly prac-
dependent Counsel as dead as the Span-
ticed character assassination. One pub-
ish Inquisition. In the office's short but
licly damned former attorney general
THURSDAY, FEBRUARY 10, 1994 USA TODAY
villainous 14-year life, independent
Edwin Meese as a two-time tax felon.
counsels defamed individuals, including
Lawrence Walsh, either directly or
two presidents, as criminals, despite the
through innuendo, pronounced more
lack of criminal indictments. It proved
than a half-dozen unindicted or acquit-
the greatest menace to fairness and repu-
ted individuals guilty of Iran-contra
tations since cowardly Sen. Joe McCar-
crimes, leaving their reputations perma-
thy smeared multitudes while hiding be-
nently scarred in violation of Justice De-
hind his congressional immunity.
partment and American Bar Association
Independent counsels are not neces-
ethical standards and the Supreme
sary to ensure uncompromised investi-
Court's teachings on due process.
gations of high-level executive officials.
To revive the Office of Independent
Before 1978, the Justice Department
Counsel is to scorn attorney Joseph
had regularly employed outside special
Welch's chilling indictment during the
prosecutors to pursue credible charges of
Army-McCarthy hearings: "Have you
misconduct by executive-branch Brah-
no sense of decency, sir, at long last?
mins - the Whiskey Ring, Teapot
Have you left no sense of decency?"
Dome, the Truman administration tax
scandals, Watergate and Jimmy Carter's
Bruce Fein is a former associate deputy at-
peanut business, to name a few.
torney general and was research director for
Republican members of the House Iran-contra
No credible evidence suggests that
Committee.
WASHINGTON
Report: Whitewater
ELSEWHERE IN THE WORLD
papers shredded
U.S. troops in Colombia
First lady Hillary Rodham Clinton's former law firm de-
nies it shredded documents last week related to the White-
ignite political firestorm
water land deal controversy that has preoccupied the White
A political fight over the presence of U.S. soldiers in Co-
House for weeks. Ronald Clark, managing partner of Little
lombia burst wide open on Wednesday when President Ce-
Rock's Rose Law Firm, said in response to a Washington
sar Gaviria angrily rejected a commission's finding that in-
Times story alleging papers were shredded, "We categori-
viting the troops was unconstitutional and violated
cally deny destroying any documents."
Colombia's sovereignty.
Special investigator Robert Fiske said he'll look into the
About 130 soldiers, mostly combat engineers from Fort
report. The newspaper, quoting an unidentified Rose em-
Rucker, Ala., are in the Pacific coastal city of Juanchaco on
ployee, said papers related to the Clintons' investment in
what has been billed as a humanitarian mission to build a
the Arkansas vacation home venture were destroyed last
school and clinic and improve a road. The mission raised
Thursday. But Clark said the firm has "actively made every
suspicions because it is 45 miles west of Cali, home of the
effort to preserve all files" connected with the matter.
world's biggest cocaine cartel. Other U.S. soldiers maintain
Fiske is probing whether Clinton business partner James
a U.S.-built radar system that has netted drug-trafficking
McDougal illegally diverted funds from his failing Madison
flights, and others train Colombian soldiers to better fight
Guaranty Savings & Loan into Whitewater Development
drug traffickers and guerrillas.
Co., a firm in which the Clintons had a 50% interest.
Gaviria said Colombia needed all the help it could get to
McDougal, appearing Wednesday night on ABC's Night-
fight its powerful cocaine traffickers.
line, told Ted Koppel he would take a lie detector to show
his faith in President Clinton's honesty.
"
DENG APPEARS: Looking
let's apply all those same tests to Mrs. Clinton," Kop-
gaunt and frail, China's 89-year-old
pel said. "Would you give the same answer?"
paramount leader Deng Xiaoping
"I don't know Mrs. Clinton well enough to give that broad
appeared on state TV for the first
of a guarantee," McDougal replied. (Today's debate, 10A)
time in more than a year. Support-
PAPER
CRUNCH:
Virginia
GOP
Senate
candidate
Oli-
ed on both sides by his daughters,
ver North, who once destroyed so many Iran-contra docu-
Deng, the architect of China's eco-
ments in a White House shredder that it jammed, is now
nomic reforms, walked slowly into
shredding documents of a different sort.
a reception in Shanghai to mark
According to records filed with
the start of the Lunar New Year.
the Federal Election Commission,
Deng's TV appearance has be-
North's campaign paid $120 in No-
AP (1985 photo)
come an annual event on Lunar
vember to a firm called Document
DENG: First TV ap-
New Year's eve to dispel chronic
Destructor for "waste disposal."
pearance in a year
rumors that he is on his deathbed.
North spokesman Mark Merritt
said the company makes a weekly
CANADA STRIKE:
Picket lines came down at Canada's
pickup at campaign headquarters
west coast ports after a 12-day longshoremen's strike that
to protect against snooping report-
paralyzed shipping and left grain piled up in warehouses.
ers and dirty tricksters from other
campaigns. "Any time a piece of
CUBA CLAIM: Cuba accused the United States of creat-
paper comes out with Ollie's name
ing a "bottleneck" for Cubans seeking to travel to the USA,
on it, people think it's some top-se-
By J. Scott Applewhite, AP
saying U.S. officials denied visas last year to 70,000 of
cret thing" Merritt said.
NORTH: $120 for
100,000 people who sought one. It said that while so many
Carol Kopelman, a co-owner,
waste disposal
Cubans who legally apply are turned down, Washington
said Document Destructor pulver-
gives red-carpet treatment to all Cuban refugees who enter
izes confidential records for numerous clients, including the
the USA illegally after crossing the Straits of Florida in
US. government. "People are constantly saying, 'Ollie North
small boats, rafts and inner tubes.
should know about you.''
Leslie Phillips
ALSO:
Nicaragua declared an immediate truce with the
WAR
AILMENTS:
Sen. Don Riegle, D-Mich., suggested
last remnants of the contra rebels.
More
than
20,000
sup-
that mysterious illnesses afflicting Persian Gulf war veter-
porters of Poland's Solidarity trade union marched through
ans were caused by Iraqi use of biological weapons devel-
Warsaw demanding that the government ditch its tight
oped from cultures sent from the USA. He said he was trou-
budget and spend more. The Vatican blasted a Europe-
bled that the United States had permitted export of
an Parliament resolution that homosexual couples should
biological cultures to a country "with a known biological
be allowed to marry and adopt children, saying, "No man
warfare program." Hundreds of service personnel who
can take the place of a natural mother."
served in the 1991 war with Iraq have complained of severe
flu-like symptoms. Despite traces of chemical agents found
in northern Saudi Arabia three years ago, the Pentagon has
said it has no evidence that Iraq used chemical or biological
arms. Riegle said an investigation had disclosed that in the
1980s a U.S. firm received U.S. licenses to export to Iraq.
PLEA FOR HELP: The United States has a moral obliga-
tion and economic interest in aiding South Africa's develop-
ment, the country's top foreign affairs representatives said.
"We deserve special attention," Ambassador Harry
Schwarz said at a USA TODAY International breakfast.
"For every dollar you put in South Africa, you'll get a better
return than from the Russian Federation or anywhere
else." The group discounted the influence of the Freedom
Alliance, a coalition of blacks and white conservatives that
has vowed to boycott the elections. "They don't have a sym-
pathetic population," and will not alter the direction of the
April 26 elections, said Councilor John Barratt.
THURSDAY. FEBRUARY 10. 1994 USA TODAY
CORRECTION: The source of the "Top 10 targets for
Clinton's cuts" that ran Monday was incorrect. The infor-
mation came from USA TODAY research.
36
The Clinton Two vs. the Keating Five
DAVID I. THOMPSON
timately settled for several million dollars.
but any first-year law student knows that
As one who lived through the myriad in-
Mr. McDougal went Mr. Keating one
fraud can arise when one omits material
vestigations launched as a result of the
better. taking a belt-arfd-suspenders ap-
facts necessary to make a statement not
failure of Charles Keating's Lincoln Sav-
proach to the state regulatory process. Not
misleading-i.e.. that the law firm had
ings in 1989. I have more than a passing in-
content with the knowledge that a Friend
represented Madison in the extremely re-
terest in the allegations surrounding the
of Bill's was now the securities commis-
cent past. Lincoln's lawyers got sued for
Clintons' involvement with Whitewater
sioner. he went to Hillary Rodham Clinton
hundreds of millions of dollars: Madison's
Development Corp. and Madison Guar-
for his legal representation. placing her on
lawyers not only got off scot-free. but also
anty Savings & Loan.
a monthly retainer. Mrs. Clinton's assign-
collected a $400.000 fee for suing the ac-
The Clintons and their defenders re-
ment was to represent Madison before the
countants and "winning" a paltry S1 mil-
peatedly argue that because the Clintons
Arkansas securities commissioner after
lion settlement.
(allegedly) suffered a loss on their invest-
the Federal Deposit Insurance Corp. is-
Moreover. if it can be established that
ment in Whitewater. they could not have
sued its report of Madison's "unsafe and
Whitewater or its partners received one
engaged in any wrongdoing. Yet even if
unsound" practices. Mrs. Clinton's lobby-
dollar of benefit from Madison. indirectly
the Clintons did lose money on the specific
ing apparently succeeded: Armed with an
or directly, diverted any business opportu-
Whitewater investment. the relationship
independent audit. she persuaded her
nity rightfully belonging to Madison. or
they developed with their business partner
friend the state regulator to keep Madison
otherwise profited at Madison's expense.
and Madison owner. Jim McDougal. prof-
open. During the next year. Madison more
then a whole new area of investigation
ited them handsomely in terms of cam-
than doubled in size and left a bigger
opens wide, with possible prohibited affili-
paign contributions, handshake loans and
crater for the taxpayers to fill when it was
ate transactions of the kind that were fatal
access to powerful people. More impor-
finally seized.
to Mr. Keating.
tant, the cozy relationship between the
Misleading the regulators. One of
It must be noted that the contributions
Clintons and Madison may have kept
Charlie Keating's biggest sins was al-
to the Keating Five. the cozy relationships
Madison alive longer than it should have.
legedly misleading the regulators by "file-
with state supervisors. the employing of
magnifying the bill to the taxpayers.
stuffing"-creating documents that, al-
influential law firms. and so on. did not. di-
Indeed, many of the issues that appear
though created after the fact, were written
rectly, convict Charles Keating. But those
relevant to Madison and Whitewater are
in the present tense to leave the impres-
things did focus such widespread attention
identical to those scrutinized so exhaus-
sion that loan and real-estate underwriting
on Lincoln and its operations that the full
tively with respect to Lincoln. Here are a
was thorough and complete at the time a
power and wrath of the U.S. government
few comparisons that merit scrutiny by
particular transaction was entered into. In
eventually came down on Mr. Keating's
the special counsel appointed by Janet
the Keating case, such conduct involved
head.
Reno to investigate the case:
criminal penalties, since making "false
It would seem only logical that when
Unfair influence. Charlie Keating was
entries" and misleading the regulators are
the same. or more extreme, indicators of
pilloried for his generous donations to
strictly forbidden.
questionable conduct are present in a case
politicians. including the "Keating Five"
Yet Hillary Rodham Clinton's law firm.
involving the highest elected official in the
in the Senate. who went to bat for him in
which had represented Madison for sev-
country. the same standards of scrutiny be
dealing with zealous regulators. Without
eral years before it failed. flagrantly mis-
applied. Let's be fair: Applying the Lin-
diminishing the significance of the politi-
led the FDIC after the agency seized Madi-
coin test to Madison will show that we do
cal pressure those senators could impose
son in 1986. The FDIC elected to sue the ac-
have a government of laws. not men.
upon the regulators, ultimately it was only
counting firm that had pronounced Madi-
pressure they could bring; the Keating
son healthy and whose report Mrs. Clinton
Mr. Thompson is a Cincinnati attorney
Five had no direct control over Lincoln's
had vouched for in arguing for Madison's
who was a vice president and corporate coun-
supervision. and the regulators eventually
continued existence.
sel for Lincoln Savings from 1985 to 1989.
triumphed over both Lincoln and the sena-
The FDIC lawsuit against the accoun-
tors. ruining a few careers in the process.
tants should have been a big deal: Madi-
In contrast, Bill Clinton as governor
son's failure cost $60 million against re-
had the power to hire and fire the
ported total assets of $120 million, mean-
Arkansas securities commissioner. re-
ing that 50 cents of every dollar held by
sponsible for supervising all state-char-
Madison and allegedly examined by the
tered thrifts. In 1985, shortly after Madison
auditors was phony. As with Lincoln's ac-
had received a negative regulatory audit
countants. Madison's accounting firm rep-
noting its "unsafe and unsound" prac-
resented a deep pocket with which to cover
tices. and shortly after Mr. McDougal
some of the losses to the taxpayers. Amaz-
raised $35,000 to "knock out" a personal
ingly. Mrs. Clinton's law firm bid for and
debt Bill and Hillary Clinton owed from the
was awarded the representation to sue the
latest gubernatorial race. Mr. Clinton
accounting firm.
fired the sitting commissioner and re-
How could a law firm that only a year
placed him with a longtime friend and po-
earlier had used the accountants' report to
litical supporter.
help keep Madison alive now sue the ac-
Thus, Mr. Clinton had life-and-death
countants for the report? Normally. in the
power over the bureaucrat with life-and-
S&L carnage that resulted from deregula-
death power over Madison. Never mind
tion and then reregulation. legal counsel to
the Clintons' small investment with White-
institutions that failed as spectacularly as
water. Mr. McDougal had just proved his
Madison (at least equal. on a percentage-
usefulness to Mr. Clinton in other ways.
of-assets basis, to Lincoln's failure) ex-
How useful would he be if his S&L were
pected to find themselves on the receiving
taken over? The Clintons at the very least
end of major litigation almost as a matter
had an incentive to provide as sympathetic
of course. Mrs. Clinton's law firm. in fact,
an ear as possible to Mr. McDougal and
was an institution-affiliated party" as de-
Madison. and they seem to have done it.
fined in section 901 of FIRREA, and thus
Cronyism. Another of Mr. Keating's
its own dealings with Madison should have
actions that outraged the public was the
been scrutinized closely.
hiring, on a monthly retainer. of a Cali-
Mrs. Clinton's law firm escaped such a
fornia law firm whose senior partner
fate the old-fashioned way, apparently fla-
was one of Gov. George Deukmejian's
grantly misrepresenting prior ties to
closest political advisers. This firm rep-
Madison. Late White House Deputy Coun-
resented Mr. Keating's interests before
sel Vincent Foster. Mrs. Clinton's partner
the California Securities Commission.
at the law firm. wrote to the FDIC in an ef-
headed by a lawyer formerly employed
fort to get the representation against the
THE WALL STREET JOURNAL THURSDAY, FEBRUARY 10, 1994
by the same firm. After Lincoln was
accounting firm. stating, in pertinent
seized. the firm and its lawyers were ac-
part: "the firm does not represent any sav-
cused of using their connections with the
ings-and-loan association in state or fed-
Deukmejian administration to prop up a
eral regulatory matters."
tottering institution. They, along with
The present tense chosen by Mr. Foster
other Keating lawyers. were sued and ul-
makes the statement literally accurate,
White House Acts Swiftly to Ward Off
Civil-Rights Post Nominee's Adversaries
By JOE DAVIDSON
All this has paid off for the White
Staff Reporter of THE WALL STREET JOURNAL
House. So far, Mr. Patrick hasn't encoun-
WASHINGTON - The battle to define
tered substantial opposition in Congress.
Deval Patrick began even before he was
"Nobody has given any indication of pick-
officially nominated to be President Clin-
ing up the cudgel on this particular
ton's assistant attorney general for civil
individual." says one GOP Senate staffer.
rights.
Of course. Mr. Patrick's nomination
The day before the nomination. Clint
has been helped by the fact that, while he
Bolick, the conservative legal gadfly who
has participated in some important civil-
led the successful assault on Lani Guinier,
rights cases, he lacks an extensive paper
Mr. Clinton's first nominee for the job,
trail numerous published articles - that
sent news organizations a news release
opponents can cite to attack his ideas.
labeling Mr. Patrick a "stealth Guinier."
The administration presented him as a
Two days later. Mr. Bolick followed with
modern-day success story. a young jazz
an op-ed piece in The Wall Street Journal
whose headline called Mr. Patrick a
lover and a good cook who came from a
"quota clone." A Journal headline on an
broken home and surmounted welfare.
earlier Bolick broadside against Ms. Guin-
poverty and turmoil growing up on Chi-
ier had dubbed her a "quota queen."
cago's South Side. He once described his
But this time the administration, learn-
childhood as "a life of want, of deeply
ing from past mistakes, moved just as
segregated and ill-equipped schools, of
swiftly to prevent the nominee from being
gang violence and limited hope." From
placed in a box designed by adversaries.
there, he went to the exclusive Milton
Officials introduced the 37-year-old Boston
Academy in Massachusetts and then to
lawyer to reporters prior to his first meet-
Harvard University, where he played
ing with the president. Later, they feted
squash and earned an undergraduate de-
him with a reception attended by civil-
rights activists and members of Congress.
gree in literature and a law degree.
And within an hour of his White House
Mainstream Thinking
nomination ceremonies, they took him to
Supporters promote Mr. Patrick as well
Capitol Hill to meet Democratic and Re-
within the mainstream of civil-rights
publican legislators. Sen. Edward Ken-
nedy (D., Mass.) introduced him to law-
thinking. a member of a blue-chip law firm
makers as they came off the Senate floor.
and someone even Republicans can sup-
port. In a June commencement address at
Signal of New Approach
Milton, he lamented the lack of a national
Mr. Clinton himself signaled the ad-
consensus on civil rights. The nation is
ministration's new, more aggressive ap-
proach. The nominee's critics "never be-
"trapped in a pattern of neglect and
lieved in the civil-rights laws, they never
retrenchment," he said, because of a "fail-
believed in equal opportunity, they never
ure of will, a lack of leadership and fear
lifted a finger to give anybody of a minor-
Indeed, we seem to have abandoned
ity race a chance in this country," he said.
any sense of the possibility of national
"If they attack his record, it means just
community."
exactly what we've all suspected all along:
Mr. Bolick decries an argument Mr.
They don't give a riff about civil rights.
Patrick made against the death penalty:
Well, those of us who care about civil rights
the nominee had argued unsuccessfully
were elected by the American people to
before the Supreme Court that the death
take care of them, and that's what we
intended to do."
penalty is unconstitutional because it is
used disproportionately against black
men. Mr. Bolick says the case indicates
Mr. Patrick believes that otherwise fair
procedures are racist if they produce une-
Counsel to Study Report
qual outcomes. Equality of opportunity.
On Document Shredding
not equality of results, should be the civil
THE WALL STREET JOURNAL THURSDAY. FEBRUARY 10, 1994
rights touchstone, Mr. Bolick argues.
By a WALL STREET JOURNAL Staff Reporter
The conservative critic also makes
WASHINGTON - The special counsel
much of Mr. Patrick's association with the
investigating the Whitewater affair will
look into a published report alleging that
National Association for the Advancement
Hillary Rodham Clinton's former law
of Colored People Legal Defense and Edu-
firm shredded documents related to the
cational Fund: the nominee worked for
matter.
that group after graduating from law
The Rose Law Firm yesterday denied
school, and currently serves on its national
an account in the Washington Times
board and New England steering commit-
quoting an unidentified employee of the
tee. Mr. Bolick contends that the organiza-
Rose Law Firm as saying he had partici-
tion relentlessly pushes racial quotas, bus-
pated in destroying Whitewater docu-
ing and laws guaranteeing minority com-
ments last Thursday. The Little Rock,
panies government work.
Ark., law firm represented Madison
Guaranty Savings & Loan. which is at the
But few have bought the notion that the
center of the Whitewater affair because
organization and Mr. Patrick are radical
its owner was a partner of the Clintons in
civil-rights outsiders. Supporters point to
the failed real estate development deal
the number of federal and state judges.
now under investigation by Special Coun-
law deans and university presidents who
sel Robert B. Fiske Jr.
came from Legal Defense Fund ranks. and
Ronald M. Clark. the managing part-
note that Solicitor General Drew Days
ner of the Rose Law Firm. said yesterday
worked for the group.
that "there has been no destruction of
Indeed, this time it's civil-rights lead-
documents to my knowledge." He said
the law firm has been systematically
ers and Mr. Clinton who are attempting to
"accumulating and then safe keeping"
cast Mr. Bolick as outside the mainstream.
any documents related to Madison. "To
On public television's MacNeil-Lehrer
my knowledge," he added. the firm has
NewsHour, Legal Defense Fund Executive
"no substantial documents whatsoever
Director Elaine Jones got Mr. Bolick to
with respect to Whitewater."
admit that even the late Supreme Court
Mr. Clark also said that last month the
Justice Thurgood Marshall probably. in
Rose Law Firm retained Vinson &
Ms. Jones' words. "could not pass the Clint
Elkinsta 530-lawyer Houston law firm to
Bolick test."
represent it in "anything and everything
that arises out of this matter."
THE WASHINGTON POST
Spending Battle Holds Up Earthquake Relie
Kerrey-Brown Proposal in Senate Tries to Link Deficit Reduction to Disaster Assistance Bill
By Helen Dewar
Washington Post Staff Writer
The Senate plunged into its first
big budget war of the year yester-
day as a bipartisan group of anti-
deficit "hawks" attempted to piggy-
back $94 billion worth of spending
cuts over five years onto a bill con-
taining $8.6 billion in emergency
aid to earthquake victims in South-
ern California.
The House has passed the spend-
ing bill, and the Senate is hoping to
wrap up work on it in time for final
enactment before Congress leaves
for its week-long President's Day
recess-just short of a month since
the disasterous Los Angeles temblor.
But the rush to approve relief for
California's earthquake victims
slowed for a daylong debate over a
SEN. BOB KERREY
SEN. ROBERT C. BYRD
SEN. HANK BROWN
long list of spending cuts that Sens.
cuts would fund quake "generosity"
"claimed savings are nonexistent"
plan would cut $94 billion in five
Bob Kerrey (D-Neb.) and Hank
Brown (R-Colo.) proposed in what
Kerrey described as an effort to
cuts, Sen. Barbara Boxer (D-Calif.)
came big targets for Senate Appro-
are nonexistent," Byrd declared.
continue the momentum started by
said Kerrey's proposal threatened
priations Committee Chairman
"Try as we might, we cannot have it
the deficit reduction plan approved
to delay relief for California and
Robert C. Byrd (D-W.Va.), who de-
both ways" in counting money both
last year.
begged him to withdraw it.
scribed them as illustrative of what
for deficit reduction and popular
Also pending was a Republican
Kerrey turned aside the request,
he described as the illusionary qual-
spending programs such as anti-
proposal to cut spending by enough
saying the real "driving force" behind
ity of the Kerrey-Brown proposals.
crime initiatives, he added.
to offset costs of the spending bill,
the rush was Congress's hope to re-
Medicare savings are essential to
The bill before the Senate totals
along with a larger plan to be con-
cess on time. Besides, he said, "when
the financing of every major health
$11 billion, including money to cov-
sidered later in the year to cut def-
it comes time to spend money, we
care proposal before Congress and
er a variety of funding shortfalls as
icits by $50 billion over five years.
can do things in record time."
thus cannot be counted as savings,
well as the $8.6 billion in emergen-
The Kerrey-Brown proposal called
Deficit reductions are necessary
he argued. Nearly all of the savings
cy aid and longer-term housing,
for 57 separate spending cuts that
to create an economy strong
from work force cuts have been
highway and business assistance for
would save $7 billion this year-or
enough to support the kind of na-
claimed in financing the huge anti-
Southern California.
roughly double the $3.4 billion in
tional "generosity" that the earth-
crime bill passed by the Senate last
At Clinton's request, the Senate
cuts that President Clinton proposed
quake-relief measure epitomizes,
year and thus cannot be counted
is adding $250 million to the $435
and the Senate Appropriations Com-
Kerrey argued.
again, he added. As for agency
million that the House approved to
mittee wrote into the bill to partially
The Kerrey-Brown proposal
overhead costs, Clinton has made
help clean up after the midwestern
offset the disaster spending.
called for elimination, consolidation
most of the savings by executive
floods last summer. Also at Clin-
Their proposal was similar to the
and reduction of a wide variety of
order, Byrd added.
ton's request, offsetting spending
five-year. $90 billion savings plan
programs, with the biggest savings
Byrd did not stop with the big
cuts were increased by $880 million
proposed last year in the House by
coming from Medicare ($30.5 bil-
items, however. Some of the
to $3.4 billion.
Reps. Timothy J. Penny (D-Minn.)
lion). cutting the federal work force
smaller savings claimed by Kerrey
The bill also includes $1.2 billion
and John R. Kasich (R-Ohio) and nar-
by 252,000 jobs ($26.7 billion) and
and Brown were appropriations that
for peacekeeping operations in So-
rowly defeated after a heavy lobby-
cutting back on the growth of trav-
were never approved or spending
malia, Bosnia, Iraq and Haiti as well
ing campaign by the White House.
el, communications and other over-
that already has been rescinded, he
as $315 million to help rebuild a
While Kerrey denied he was try-
head costs of federal agencies ($21
contended.
freeway damaged by the 1989
ing to hold the relief measure hos-
billion).
As a whole, "the overwhelming
Loma Prieta earthquake in the San
tage to passage of the spending
But these big-ticket items be-
percentage of these claimed savings
Francisco Bay area.
Alleged Whitewater Shredding to Be Probed
By Susan Schmidt
any other matter reported in the
against Madison's accountants; files
Washington Post Staff Writer
press."
pertaining to Hubbell's father-in-
Clark said the firm expects to
law, Seth Ward, and the parking
LITTLE ROCK. Ark., Feb. 9-
receive a subpoena from Fiske and
meter company formerly owned by
Special counsel Robert B. Fiske Jr.
has been pulling together docu-
Ward and now owned by his son;
will investigate allegations that em-
ments the counsel might want.
and records of the Rose firm's rep-
ployees at the Rose Law Firm here
"We anticipate producing those
resentation of Madison before state
have shredded documents relating
documents at the appropriate time,
regulators in the mid-1980s.
to Whitewater Development Corp.
but there is absolutely no destruc-
McDougal hired the firm in 1985
Rose officials today denied the
tion of documents going on," he
for $2,000 a month to help push an
claim.
said.
unusual stock plan before regula-
The Washington Times, quoting
Fiske is investigating the Clin-
tors appointed by then-Gov. Clin-
an unnamed Rose employee, said
tons' Whitewater investment and
ton.
law firm documents on the real es-
their ties to Madison Guaranty Sav-
Hubbell, now associate attorney
tate investment of President Clin-
ings & Loan, the Arkansas thrift
general, was a senior partner at the
THURSDAY, FEBRUARY 10, 1994 THE WASHINGTON POST
ton and his wife Hillary, a former
owned by the couple's Whitewater
Rose firm along with the late dep-
Rose partner, had been shredded
business partner James McDougal.
uty White House counsel Vincent
last Thursday.
Clark said the firm has few doc-
Foster, who committed suicide in
A spokeswoman for Fiske said
uments on Whitewater because its
July.
the office is aware of the Times sto-
legal work for the company was
Clark said Rose lawyers also are
ry, and "the alleged shredding will
limited.
searching files for other individuals
be investigated by this office."
He said Rose lawyers also were
and entities named on a subpoena
Ronald M. Clark, managing part-
compiling documents relating to
the FBI issued several weeks ago to
ner of the Rose firm, said, "We cat-
former Rose lawyer Webster L.
another figure in the Madison-
egorically deny shredding any doc-
Hubbell's representation of the gov-
Whitewater probe, Arkansas Gov.
uments relating to Whitewater or
ernment in its malpractice suit
Jim Guy Tucker (D).
30
FDIC Choice Pledges
Whitewater Recusal
GOP Senators Question Tigert's Clinton Ties
By Jerry Knight
Washington Post Staff Writer
D'Amato warned yesterday that the government is
running out of time to take action against Madison of-
President Clinton's nominee to
ficials to recover damages for the S&L's failure.
head the Federal Deposit Insurance
Dragging a huge "Whitewater Countdown" calen-
Corp. has promised to keep away
dar onto the Senate floor, D'Amato said the statute
from the agency's investigation of
of limitations for suing Madison officials expires Feb.
Madison Guaranty Savings & Loan,
THE WASHINGTON POST WEDNESDAY, FEBRUARY 9, 1994
28.
the failed Arkansas thrift that fi-
nanced Whitewater Development
The government could keep the case open by ask-
Corp.
ing Madison officials to sign voluntary agreements
Washington attorney Ricki R. Tig-
extending the deadline, D'Amato said, but he com-
ert issued the pledge Monday after
plained that RTC officials have refused to disclose
Senate Republicans threatened to
whether they have taken that action.
hold up her nomination because of
The RTC referred the investigation of Madison to
what they contend are conflicts of in-
the Justice Department in October 1992, because of
terest stemming from her friendship
possible criminal violations, and usually in such cases
with the president and Hillary Rod-
ham Clinton.
the government files civil lawsuits to try to get some
In a letter released yesterday by
of its money back, D'Amato pointed out.
Sen. Alfonse M. D'Amato (N.Y.), the
Senate Banking Committee's rank-
ing Republican, Tigert denied any
TODAY IN CONGRESS
conflicts exist but said she would
avoid the Madison investigation be-
SENATE
Act. 2128 RHOB.
cause "I am extremely sensitive
Meets at 10 a.m.
Budget-10 a.m. President's proposed
about even the appearance of any
Committees:
FY95 budget. OMB Director Leon Panetta.
conflict of interest."
Appropriations-2:30 p.m. Closed.
210 Cannon House Office Bldg.
D'Amato said Tigert's decision to
Foreign operations subc. Russia & Ukraine.
Education & Labor-9:30 a.m. Mark up
219 Hart Office Bidg.
Elementary & Secondary Education
recuse herself from the Madison
Armed Services-9:30 a.m. Pending
Amendments. 2175 RHOB.
matter was "helpful to disposing of
military nominations. 222 Russell Office
Energy & Commerce-10 a.m. Energy &
questions raised about her indepen-
Bidg.
power subc. Emergency energy responses
dence at a time when the FDIC is
Budget-10 a.m. President's proposed
to extreme weather conditions. 2218
FY95 budget. Treasury Sec. Lloyd Bentsen.
RHOB.
conducting investigations into mat-
608 Dirksen Office Bidg.
Energy & Commerce-10 a.m.
ters involving President and Mrs.
Commerce, Science &
Telecommunications & finance subc.
Clinton."
Transportation-9:30 a.m. Nomination of
National Communications Competition &
Ann Brown to be chairman of Consumer
Information Infrastructure Act. focusing on
The FDIC took over Madison at a
Product Safety Commission. 253 ROB.
local competition. 2123 RHOB.
cost to the taxpayers of $48 million
Finance-10 a.m. Congressional Budget
Energy & Commerce-11 a.m. Oversight
after it failed in 1989. The FDIC,
Office analysis of president's health care
& investigations subc. Fraudulent hospital
reform plan. 215 DOB.
billing practices. 2322 RHOB.
the Resolution Trust Corp. and the
Finance-No set time. Nomination of Mary
Energy & Commerce-2 p.m. Health &
Justice Department are investigat-
Ellen Withrow to be treasurer of the United
the environment subc. Mark up to amend
ing possible violations of banking law
States. 215 DOB.
Health Service Act to revise & extend
Foreign Relations-10:30 a.m. Pending
programs relating to health of minorities.
and regulations at Madison, includ-
nominations, including nomination of Strobe
2359 RHOB.
ing the thrift's loans to finance
Talbott to be deputy secretary of state. 419
Foreign Affairs-9:30 a.m. Foreign and
Whitewater, a residential real estate
DOB.
reform & mark up regarding establishment
Foreign Relations-2 p.m. International
of a nuclear free zone in South Pacific &
development in which the Clintons
economic policy, trade, oceans & the
expressing sense of Congress with regards
were partners along with Madison
environment subc. Foreign aid reform
to South Pacific region. 2172 RHOB.
President James MacDougal and his
proposal. 419 DOB.
Foreign Affairs-1 p.m. Closed. Western
wife, Susan.
Foreign Relations-3 p.m. East Asian &
Hemisphere affairs subc. Briefing on
Tigert said neither her appoint-
Pacific affairs subc. Post-embargo status of
humanitarian relief efforts in Harti. 2255
Vietnam. 216 HOB.
RHOB.
ment by Clinton to head the agency
Judiclary-10.30 a.m. Formulating an
Foreign Affairs-2 p.m. Western
nor her acquaintance with the Clin-
effective response to gangs. 226 DOB.
Hemisphere affairs subc. Humanitarian
tons would prevent her from con-
Labor & Human Resources-11 a.m.
relief efforts in Haiti. 2172 RHOB.
Occupational Safety & Health Act reform.
Government Operations- a.m.
ducting an independent inquiry. She
Labor Sec. Robert Reich. 430 DOB.
Information, Justice, Transportation &
said both the Office of Government
Veterans' Affairs-2 p.m. VA participation
Agriculture subc. Review Farmers Home
Ethics and the ethics officers of the
in state health care programs. 418 ROB.
Administration loan portfolio. 2247 RHOB.
Judiciary-10.30 a.m. Civil &
HOUSE
constitutional rights subc. Reauth. of U.S.
TIGERT, From C1
Meets at noon.
Commission on Civil Rights 2226 RHOB
FDIC assured her that "no actual conflict of interest
Committees:
Merchant Marine & Fisheries-1 30 p.m.
Appropriations-9 Apriculture
Individual
is involved. given the casual nature of my friendship
amons."
- wwgel
risnery Conservation & Management Act.
At Tigert's confirmation hearing last week, Sen.
overview & Office of Inspector General
1334 Longworth House Office Bidg
overview 2362A Rayburn House Office
Public Works & Transportation-9 30
Lauch Faircloth (R-N.C.) portrayed her as a longtime
Bidg
am. Aviation subc Adequacy of commuter
intimate of the Clintons, but Democratic sources said
Appropriations-10 a m. Intenor & related
artine safety standards 2167 RHOB
she had met them fewer than a dozen times over a
agencies SUDC. FY95 approps for
Rules- 10 a.m. Legislative Reorganization
Commission on Fine Arts Advisory Council
Act H 313 Cap
period of several years.
on Historic Preservation & Woodrow Wilson
Science. Space & Technology-10 a
Faircloth repeatedly pressed Tigert to explain how
international Center for Scholars B-308
With House Permanent Select intelligence
she could oversee an investigation of people she had
RHOB
Committee Commercial remote sensing in
Appropriations-10 a m.
post-Coid War era 2318 RHOB
known personally.
Labor-HHS-Education subc. FY95 approps
Science. Space & Technology-1
Yesterday. Faircloth aides said the senator was not
for miscellaneous programs under its
Technology environment & ariation sux
satisfied with her response. "It's not the most airtight
jurisdiction 2358 RHOB
Present & future of Malcom Ba drige
Appropriations-2 pm Commerce
National Qua Award & its relationship to
recusal." a Faircloth spokesman said, predicting Re-
Justice. State & the judiciary subc FY95
standards 2325 RHOB
publicans would continue to use Tigert's nomination
approps for Federal Maritime Commission
Ways & Means-10 a Health SUDC
to raise questions about Madison and Whitewater.
& Marine Mammai Commission H-310
American Health Security Act MediPian
Cap
Act & other health care reform
Armed Services-1 30 p.m. Pentagon
proposats 1100 LHOB
acquisition reform Defense Sec William
Ways & Means-10 Select revenue
Perry 2118 PHOB
Banking Finance & Urban Affairs-10
12
bc-whitewater
SENATE BACKS MEASURE EXTENDING
STATUTE ON WHITEWATER S&L
5
By JOHN MACHACEK=
Gannett News Service=
WASHINGTON Sen. Alfonse D'Amato, R-N.Y., Wednesday won his four-week
battle to protect the government's right to recover civil damages from a
failed Arkansas thrift that financed the Whitewater Development Corp.
Rather than single out the savings and loan involved in the White Water
affair, the D'Amato measure approved 95-0 extends to Dec. 31, 1995, the
statute of limitations on all thrifts that failed because of `fraud and gross
negligence.''
Initially, D'Amato was concerned that the government take action in the
case of Madison Guaranty Savings and Loan Association, charged with illegally
using government loans to finance the Whitewater real estate development in
which President Clinton and Hillary Clinton were once partners with Madison
executives.
He complained again Wednesday that the Resolution Trust Corp. the
government agency charged with cleaning up the savings and loan scandal had
not specifically said what action it was taking against Madison before the
statute of limitations on the case expired Feb. 28.
But D'Amato agreed to a measure to extend the statute for all failed
savings and loans in cases of fraud and negligence after Sen. Howard
Metzenbaum, D-Ohio, accused him of playing politics with the Madison case.
Metzenbaum charged that D'Amato and other Republicans had opposed his
efforts last year to extended the statute of limitations for thousands of
failed savings and loans, including Madison.
``He (D'Amato) raises the possibility of (extending) the statute of
limitations in just one case,' Metzenbaum said on the Senate floor Tuesday.
Is that because the senator from New York knows that the president's name
has been mentioned in connection with the case.
However, D-Amato said Wednesday night that he was content with a broad
extension.
``We have worked out a fair compromise, D'Amato said Wednesday night.
``This broad-based extension (of the statute) would only go after the
intentional wrongdoers'' at the failed banks.
**** filed by:GN-F(--) on 02/09/94 at 21:43EST ****
**** printed by:WHPR(JEL) on 02/10/94 at 08:52EST ****
AM AR-Whitewater-Rose Firm, 1100
First Lady's Former Law Firm Expects Records To Be Sought
3
By DAN SEWELL= Associated Press Writer=
LITTLE ROCK, Ark. (AP) The law firm where first lady Hillary Rodham
Clinton was a partner broke its customary silence Wednesday, emphatically
denying a published report that it had recently shredded files related to the
Whitewater land development corporation.
Ronald M. Clark, managing partner of the Rose Law Firm, said the firm
expects federal investigators to want to review documents the firm has
regarding an investigation related to the north Arkansas real estate venture
in which President and Mrs. Clinton were partners with James B. McDougal and
his then-wife Susan.
The Washington Times, which quoted an unidentified Rose employee about the
shredding, said it stood by Wednesday's story.
``I am extremely upset that somebody would allege this,' Clark said,
adding that Rose had ``no significant documents'' concerning the Whitewater
development, ``and we have searched definitely.
Many Whitewater documents belonged to Mrs. Clinton and have not been in
the Rose firm building since 1992, said two sources who asked not to be named.
Clark, in a rare interview, also rebutted accusations of unethical
conflicts now under investigation. He said the firm has assembled files
related to its representation of the McDougal-controlled Madison Guaranty
Savings Loan Association and federal regulators Rose represented after Madison
failed.
``We are accumulating those files in anticipation that they will be
requested, Clark said, adding that ``as of this moment'' there has been no
subpoena or other records request from federal investigators.
The Little Rock office of Special Counsel Robert B. Fiske Jr., appointed
Jan. 20 to probe Whitewater and related matters, said the report of shredding
would become part of its investigation.
``Mr. Fiske is aware of The Washington Times report on shredding of
documents. That will be investigated by his office, said a staff assistant
who would identify herself only as Joyce.
Among issues Fiske will investigate is whether savings and loan funds were
illegally diverted to Whitewater or Clinton's gubernatorial campaign. Madison
failed in 1989.
Destroying records to prevent their discovery in legal proceedings could
be construed as obstruction of justice.
Clark said the Rose firm has kept its files concerning its earlier
representation of Madison and the now-questioned lawsuit it handled for the
Federal Deposit Insurance Corp. against an accounting firm accused of a
fraudulent audit of Madison.
The firm, which has called itself the nation's oldest west of the
Mississippi dating to 1820, has been under fire because of Madison-related
representation involving former Rose partners Mrs. Clinton, Associate
Attorney General Webster L. Hubbell and the late White House Deputy Counsel
Vincent Foster Jr.
``We feel like we adequately disclosed all the potential conflicts,' said
Clark. Legal scholars say potential conflicts of interest are usually
acceptable if clients have been fully informed.
Madison retained the Rose firm at $2,000 a month in 1985. McDougal has
said he did so after a discussion with Clinton.
Clark said Rose's representation involved very isolated services'' and
he said Mrs. Clinton didn't do the majority of work on Madison matters.
After 15 months, Clark added, Rose decided ``the matters we did for them
didn't warrant that retainer. The firm rebated some $6,400 to Madison in
1986, he said.
Clark also said Rose properly disclosed two conflicts to the FDIC before
handling a $6 million lawsuit against the Frost and Co. accounting firm.
In 1985, a Rose associate gave state regulators an optimistic assessment
of Madison's financial health. Clark said Wednesday that ``to the extent that
regulators, shareholders and taxpayers were misled by incorrect audits, so was
4
the Rose Law Firm.'
Foster had solicited FDIC business. He wrote that Rose was not then
representing any savings institutions, but didn't mention its earlier work for
Madison.
In a briefing memo prepared two months in anticipation of questions from
congressional investigators, the FDIC said its attorneys don't remember
whether Rose disclosed the earlier work.
`While we have no reason to believe we were misled by the Rose, the legal
division is investigating the matter further, the FDIC memo said.
It said regardless, the prior work wouldn't have disqualified Rose because
it wasn't substantially related to the Frost lawsuit.
``In a state like Arkansas with few firms large enough to pursue
a large (public liability suit), most of the firms will have brushed against
the institution or some of its directors in the past, the memo said.
The memo said another potential conflict was disclosed by Hubbell that
his father-in-law, Arkansas businessman Seth Ward, had extensive dealings with
Madison.
Rose earned $400,000 for the lawsuit against Frost, which it settled for
$1 million.
There was ``a very emotional reaction'' at the Rose firm Wednesday to the
latest allegation, of document shredding, Clark said.
`This is a difficult situation for the members of our firm, a difficult
situation on our families, he said.
No attorneys or legal staff members knew of any such shredding incident,
Clark said. He talked to the staffers who handled routine shredding of
unneeded documents Wednesday, he said.
The Washington Times quoted the unnamed Rose employee as having
absolutely no doubt that the records destroyed last Thursday were those the
firm had on Whitewater. It said another employee who declined to discuss
the matter was said by friends to be fearful of Rose retribution.
Clark said there's ``no gag order'' at Rose about commenting on
Whitewater, but the firm has discouraged comment by its attorneys and
staffers as potentially breaching attorney-client confidentiality.
``We have nothing to hide,' said Clark.
Of six other Rose attorneys contacted Wednesday, none would comment. One
said the lawyers had agreed to speak with one voice, Clark's, to avoid giving
confusing messages.
The company which picks up trash at the Rose law firm said a truck picked
it up on Friday and took it to the company's landfill, where it was compacted
and covered with at least a foot of dirt. One company employee said it would
be almost impossible to find out exactly where that load was buried, but
another said the landfill manager would know.
**** filed by:APW-(AR) on 02/09/94 at 21:17EST ****
**** printed by:WHPR(JEL) on 02/10/94 at 08:52EST ****
AM-TV-ABC-Whitewater,0192
ABC Devotes Half Of Evening News Show To Whitewater
2
NEW YORK (AP) ABC's `World News Tonight' dedicated nearly all its
Wednesday evening broadcast to an examination of the Whitewater case and
President Clinton's role in it.
Arnot Walker, a spokesman for ABC News, said the segment took about 18 of
the 22 minutes in the broadcast, not counting commercials.
World News Tonight' felt there was no way to tell this story completely
without doing a complete report, Walker said. They felt it was best to do
it this way rather than to tell it over numerous nights in smaller reports. "
The report broke little new ground but provided a comprehensive picture of
what is known of the complex deals involving the president, first lady Hillary
Rodham Clinton and their business associates in Arkansas.
Robert Fiske, a Justice Department special prosecutor, is looking into
ties between the failed Madison Guaranty Savings and Loan, an Arkansas thrift,
and the Whitewater Development Corp.
Madison was owned by James McDougal who, with his wife, was the Clintons'
partner in Whitewater, an Arkansas real estate development company.
**** filed by:APE-(--) on 02/09/94 at 23:25EST ****
**** printed by: WHPR (JEL) on 02/10/94 at 08:51EST ****
PM Senate-Whitewater, 370
Senate Votes to Extend Deadline on S&L Fraud Actions
By LARRY MARGASAK= Associated Press Writer=
WASHINGTON (AP) Spurred on by Republicans, the Senate agreed to give the
government two additional years to pursue civil charges against failed savings
and loans including the institution central to the Whitewater case.
The Senate voted 95-0 Wednesday to extend, through Dec. 31, 1995, the
deadline for pursuing civil fraud and gross negligence actions against
officials of numerous failed institutions.
But Republicans were primarily interested in one failed Arkansas
institution, Madison Guaranty Savings and Loan. The statute of limitations
for the Resolution Trust Corp. to file civil enforcement actions in the
Madison case is Feb. 28.
Madison is linked in several ways to the Whitewater Development Corp., a
real estate venture that was owned by Bill and Hillary Clinton, along with
the owner of Madison and his wife at the time.
Sen. Alfonse D'Amato, R-N.Y., has been badgering Democrats daily to extend
the deadline, arguing that pursuing civil actions would not affect an ongoing
criminal probe of Whitewater and Madison.
He didn't have much luck until Wednesday, when Sen. Howard Metzenbaum
proposed extending the deadline for a number of failed institutions not just
Madison. D'Amato agreed.
The extension was attached to legislation that is certain to pass quickly,
an $8.6 billion relief bill for victims of the Los Angeles earthquake.
The overall bill will go to a House-Senate conference, and D'Amato urged
his Senate colleagues to fight any attempt there to delete the extension.
``This sends a strong signal that those responsible for bilking the
taxpayers will not be able to hide behind the calendar, said D'Amato, who
was accused by Democrats of caring only about Madison for political gain.
In passing legislation to provide additional funds to the RTC late last
year, the Senate deleted language that would have extended the statute of
limitations from three years to five years in civil matters.
The statute clock begins ticking on the day the failed institution is
taken over by federal regulators. After it expires, no charges can be brought.
Acting RTC chief Roger Altman assured D'Amato, in a letter dated Jan. 25,
that the agency would pursue any appropriate civil matters against Madison.
**** filed by:APW-(AR) on 02/10/94 at 06:50EST ****
**** printed by:WHPR(JEL) on 02/10/94 at 08:49EST ****
2
bc-whitewater
McDOUGAL MAY HAVE HIDDEN
OWNERSHIP IN WHITEWATER
By DENNIS CAUCHON=
and DEBBIE HOWLETT=
USA TODAY=
James McDougal, President Clinton's business partner in Whitewater
Development Co. Inc., may have illegally hidden his ownership in Whitewater
when he filed for bankruptcy in September 1991, court records show.
McDougal claimed his only assets were $300 worth of clothes when he filed
for bankruptcy in Los Angeles, records show.
But his lawyer, Sam Heuer, confirmed McDougal has been co-owner of
Whitewater from its formation in 1978 until now.
The revelation has prompted the bankruptcy court to take another look.
``I'm investigating his potential failure to disclose material assets,' said
bankruptcy trustee Steven Smith.
The probe could leave the Whitewater Development Co. Inc. in the hands of
unexpected owners: U.S. taxpayers.
Reason: The government is McDougal's biggest creditor.
The bankruptcy filing showed McDougal owes money to:
Resolution Trust Corp., the federal bailout agency. Debt: $612,560.
McDougal owned the once high-flying Madison Guaranty Savings and Loan, whose
failure cost taxpayers at least $47 million.
Internal Revenue Service for failure to pay income tax. Debt: $195,000.
State of Arkansas, $16,536 for failure to pay income tax.
President Clinton isn't liable for any of McDougal's personal debts, nor
is he a focus of the the bankruptcy probe.
However, the Whitewater shares Clinton once owned might be seized if the
court finds McDougal improperly shielded his assets. McDougal paid $1,000 to
Bill and Hillary Clinton in December 1992 for their 50 percent share of
Whitewater Development.
McDougal and his ex-wife, Susan, have owned the other 50 percent since the
beginning.
The Clintons and McDougals were partners in the company, which bought 230
acres on the White River in north Arkansas.
Heuer, McDougal's attorney, said he did not know why McDougal did not
report his ownership of Whitewater in his bankruptcy filing.
``I'm not a bankruptcy lawyer. Maybe it's because it had a negative value
of $100,000,' he said.
But several bankruptcy lawyers say they can't think of a reason why
Whitewater would not be listed as an asset.
'You are obligated to report absolutely everything you own, even if it's
just one share and even if you've lost money on it, says lawyer Andy Cain of
the American Bankruptcy Institute.
``If you don't accurately report everything, you run the risk of being
charged with a crime or not getting the discharge (of debts) that you went to
court for, Cain said.
Whitewater still produces money and has value, even though the McDougals
and Clintons may not recover their full investment an amount which remains
unclear.
Whitewater assets had a net worth of $42,190 on May 31, 1991 four months
before the bankruptcy filing, according to a report prepared for Clinton by
attorney James Lyons.
Also, Arkansas land records indicate Whitewater Development gets income
every month from people who bought lots financed by the company. The records
show Whitewater completed the sale of one lot for $12,000 on April 15, 1993,
and another for $12,500 on June 23, 1993. James and Susan McDougal signed the
deeds.
Creditors say they still want their money.
We haven't collected anything. We consider it an open case,' said RTC
THE WALL STREET JOURNAL WEDNESDAY, FEBRUARY 9, 1994
A15
New Independent Counsel Law Should Apply to First Lady
Today Congress will resume debate
tion. But this preference poses a problem
with the responsibility of formulating and
more sensitive issues than cases involving
over the lapsed independent counsel law,
that goes beyond Whitewater.
implementing the most far-reaching policy
other top presidential aides and advisers.
and the arguments no doubt will be col-
The independent counsel statute has
initiative of his administration, health
In fact, an attorney general would
ored by President and Mrs. Clinton's
never explicitly covered the president's
care reform, and she recently testified be-
likely recoil in horror from the idea of
controversial financial dealings in White-
spouse, and neither the House nor the Sen-
fore five congressional committees on the
targeting and pursuing the boss's spouse
water Development Corp. I am against
ate proposals pending in Congress would
president's plan. The first lady also re-
in connection with a criminal inquiry.
reauthorization of the statute in any
do so either. The statutory mandate for an
portedly played a key role in choosing the
Members of Congress (and some merti-
form. but since it soon may be reautho-
independent counsel has always applied
president's cabinet, including Attorney
bers of the press) cannot even, bring
rized, Congress might as well ensure
only to certain specifically identified high-
General Reno.
themselves to ask Mrs. Clinton tough pol-
that the statute fulfills its asserted pur-
ranking executive-branch officials, Includ-
During the recent Senate hearings con-
icy questions. This makes it especially
THE WALL STREET JOURNAL WEDNESDAY. FEBRUARY 9. 1994
poses and applies in a fair and consis-
ing the president. Neither the first lady
cerning reauthorization of the indepen-
difficult to imagine the attorney, general
tent manner.
nor any other executive-branch spouse has
dent counsel statute, Ms. Reno testified:
and career prosecutors tenaciously Inves-
Congress thus ought to resolve a ques-
ever been included.
"The reason I support the concept of an In-
tigating or bringing charges against à
tion of increasingly pressing importance:
Whitewater shows why this makes no
dependent Counsel, with statutory inde-
first lady.
Should a president's spouse be covered by
sense. As virtually everyone must know by
pendence, is that there is an inherent con-
Except in the most extreme circurif-
the independent counsel statute? In light
now, the Whitewater controversy, fairly or
fliet whenever senior Executive Branch of-
stances, such factors would also create
of Whitewater, and Hillary Rodham Clin-
unfairly, focuses as much on Mrs. Clinton
ficials are to be investigated by the De-
enormous political and practical obstacles
as on the president. According to Time
partment of Justice
for the attorney general that would rule
Rule of Law
magazine, "compared with the President,
and its appointed
out the discretionary appointment of an in-
the First Lady was a central player." Both
head, the Attorney
dependent counsel to prosecute a first
were investors in the failed land deal. Mrs.
General.
The In-
lady. Only mandatory coverage will fulfill
By Theodore J. Boutrous Jr.
Clinton's conduct also allegedly included:
dependent
Counsel
the purposes offered to justify the inde-
her securing of a $30,000 loan to purchase
Act was designed to
pendent counsel law.
a model home for the development prop-
avoid even the ap-
As a matter of principle, any new in-
ton's deep involvement in the politics and
erty and the subsequent sale of the home;
pearance of impro-
dependent counsel law should apply to
policy of her husband's presidency, the an-
her legal representation of Madison Guar-
priety in the consid-
presidential spouses (and Congress), or It
swer to that question is clearly yes.
anty S&L; the involvement of her law part-
eration of allegations
should not be passed at all. Mrs. Clinton's
Everyone now seems to agree that
ners in various other Whitewater events;
of misconduct by
role as policy and political adviser to the
special procedures are necessary in
and her 1988 letter asking for power of at-
high-level Executive
president is not likely to be an isolated Irl-
cases involving possible claims of high-
torney for the company.
Branch officials."
cident in the history of the presidency.
level, executive-branch wrongdoing.
The position of first lady no longer
I believe that the
Hillary Clinton
Nor can mandatory application of the.jp-
Whitewater is such a case. Republicans.
can be characterized as simply ceremo-
Justice
Department
special-counsel
dependent counsel law to presidential
led by Senate Minority Leader Bob Dole
nial-particularly since the office's pol-
process is fully adequate to address these
spouses be challenged by the Democrats
and joined by numerous Senate Democ-
icy-making function has now been made
concerns. But if one agrees with the attor-
as a partisan issue.
rats, persuaded the White House to re-
explicit. In its recent decision concerning
ney general's assertions, I do not see any
Sen. Dole has fully endorsed Mrs. Clirt-
quest that Attorney General Janet Reno
the legal status of Mrs. Clinton and the
way to dispute that the president's spouse
ton's policy activities as entirely appropri-
appoint an outside "special counsel"-
Health Care Task Force over which she
should be subjected to mandatory cover-
ate. He often remarks amiably that he
who will be insulated by Justice Depart-
presided, the federal appeals court in
age under any new independent counsel
plans to fulfill a similar role when his wife,
ment regulations from political pres-
Washington had little trouble concluding
statute.
Elizabeth, is elected president. What bet-
sures-to investigate the Whitewater af-
that the "President's spouse acts as the
The "inherent conflict" and appear-
ter reason could there be for the Democrá-
fair.
functional equivalent of an assistant to
ance problems identified by Ms. Reno
tic Congress to vote to ensure that the pres-
Even as she announced the appoint-
the President" and that the first lady is
would exist just as clearly if the attorney
ident's spouse is covered by the indepen-
ment of Robert Fiske, however, Ms. Reno
a "full-time officer or employee of the
general and her subordinates retained re-
dent counsel law?
reiterated her position that only a truly in-
government."
sponsibility for investigating allegations
dependent counsel appointed by the courts
Mrs. Clinton has been repeatedly char-
of misconduct against a first lady. More-
Mr. Boutrous is an attorney in Washing-
pursuant to the statute would instill public
acterized as the president's closest ad-
over, investigation and prosecution of a
ton who has represented parties in indepen-
confidence in the Whitewater investiga-
viser. She was charged by the president
first lady would, in many ways, raise far
dent counsel matters.
PM-Whitewater-Shredding, 1st Ld-Writethru, a0490,
Rose Law Firm Denies Published Report It Shredded Whitewater Records
EDS: INSERTS 5th graf, ``Ronald M. Clark XXX with Rose flat denial; SUBS last
two grafs with one new graf, `Clark said XXX with assertions that employees
not barred from talking
WASHINGTON (AP) The Rose law firm where first lady Hillary Rodham
Clinton was a partner shredded documents last week relating to Whitewater
Development Corp., The Washington Times reported today.
The paper cited as its source an unidentified Rose employee who said the
documents included material showing the involvement of President and Mrs.
Clinton, along with James B. McDougal and his then-wife Susan, in the Arkansas
real estate venture.
Special counsel Robert B. Fiske Jr., appointed Jan. 20 by Attorney General
Janet Reno, is looking into among other things whether McDougal improperly
diverted funds from the Madison Guaranty Savings Loan Association, which he
controlled, to Whitewater and Clinton gubernatorial campaigns.
The Times said it was not clear whether the reported shredding would
violate sate or federal laws.
In Little Rock, Ronald M. Clark, managing partner of the Rose firm, today
called the report totally false. Asked specifically whether any documents
related to Whitewater were shredded, Clark said: Absolutely not. To my
knowledge, we have no documents in the firm's possession related to
Whitewater, and if we do, we are accumulating them in single location awaiting
the appropriate time that they will be examined.'
Associate Attorney General Webster L. Hubbell and the late White House
Deputy Counsel Vincent Foster Jr., also were partners in the Little Rock law
firm with Mrs. Clinton before moving to Washington to serve in the Clinton
administration.
Foster committed suicide and the White House has acknowledged that papers
relating to Whitewater and other matters were taken from his White House
office last July after his death and turned over to the Clinton's personal
lawyer in Washington before they could be examined by officials investigating
his death.
There's absolutely no doubt that the records destroyed last Thursday
were those the firm had on Whitewater, the Times quoted the Rose employee as
saying. There were a lot of papers and the process took quite a long time.
A bunch of the stuff was there to be read and it was felt that this
could be very bad, the paper quoted the employee as saying.
It reported that a second Rose employee who took part in the shredding
would not talk about it, but declined to say the incident had not occurred.
I'm not going to comment, the paper quoted the second employee as
saying. ``I'm not going to say anything about what happened. I would just
prefer not to say anything about this at all.
But the Times said the employee who declined to discuss the matter had
confided to friends that the shredding had taken place and that he was
scared to death'' about it.
The paper quoted an unidentified female friend of the second employee as
saying he told her there was anxiety over the possibility Rose employees could
be fired because the shredding had become known.
Clark said the firm's employes ``are under no gag order or anything else
so they can speak freely.
**** filed by:APE-(--) on 02/09/94 at 07:33EST ****
**** printed by:WHPR (JEL) on 02/09/94 at 08:35EST ****
2
Coi iba troops to
I OI se like y 0 OK
stay in Somalia
special counsel bill
until ry last'
By Leslie Phillips
the last reauthorization in 1987
USA TODAY
and then blocked renewal in
By Steve Komaro
1992.
USA TODAY
The House today is expected
The GOP was livid over the
to approve a bill requiring
Iran-contra investigation con-
The chairman
Joint Chiefs of Staff said
court-appointed, independent
ducted by Lawrence Walsh.
Tuesday a large
per of U.S. troops will be
counsels to investigate wrong-
Republicans said, during the
kept in Somalia un
1st before their March 31
doing among high government
course of his seven-year, $37
exit deadline to er
their own safety.
officials.
million probe, Walsh lived ex-
"We are experie
ng a continuing high level
The measure would revive a
travagantly at the Watergate
of lawlessness" in
capital of Mogadishu, Gen.
1978 law passed in response to
Hotel and leased expensive of-
John Shalikashvili
the Senate Armed Ser-
the Watergate scandal.
fices instead of less costly gov-
vices Committee.
have to be particularly
The law expired last year
ernment space. And they took
watchful that this
sn't get out of hand as we
and was not in
particular um-
get closer and clos
to withdrawing."
place when ques-
brage at the indict-
Shalikashvili said he
tions arose about
ment of former
has ordered "the maxi-
President and Mrs.
secretary of De-
mum number of com-
Clinton's Arkansas
fense Casper
bat troops
stay there
real estate deals.
Weinberger.
WEDNESDAY. FEBRUARY 9. 1994 USA TODAY
until the very last."
By Sayyid Azim, AP
Under political
Independent
Roughly 3,000 more
TAKING POSITION: A Somali National Alliance
pressure, Attorney
counsels have
U.S. troops must be
gunman walks a Mogadishu street Tuesday.
General Janet
been appointed for
evacuated in the next
Lawlessness still plagues the war-torn capital.
Reno appointed
13 separate inves-
six weeks. U.S. forces
special counsel
tigations, at a total
were bolstered in So-
The problems in Somalia, and especially the
Robert Fiske to in-
cost of about $55
malia after an October
prospects of U.S. involvement in the war in the
vestigate.
million to U.S. tax-
firefight in which 18
former Yugoslavia, nearly overshadowed the
Fiske's integrity
WALSH: Iran-contra
payers.
AP
U.S. soldiers died. Pres-
purpose of Tuesday's hearing: President Clin-
is unchallenged.
probe took 7 years
GOP objections
SHALIKASHVILI:
ident Clinton then set a
ton's new military budget.
But he's account-
to the bill were
'Have to be watchful'
March 31 deadline for
Sen. Robert Byrd, D-W.Va, chairman of the
able to the attorney general.
based on "intrusion on execu-
U.S. withdrawal.
Senate Appropriations Committee, expressed
Some have argued his findings,
tive power, when it was their
Shalikashvili also alluded to the threat posed by
his growing impatience with U.S. troops and dol-
no matter what they are, will
president," says Wake Forest
anti-aircraft weapons believed to be in the hands
lars going toward what he called U.N. "adven-
be subject to conflict of interest
University politics professor
of the warring Somalia militias, although he
turism."
charges.
Katy Harriger. "They're sing-
didn't explicitly say what they might be.
"Are we going to be continually presented
"People have more confi-
ing another tune now."
"We have directed that all major troop trans-
with emergency (budget) requests to finance
dence in the result" of an inde-
The new proposal, however,
ports out of Mogadish from now on go by ship
foreign military actions under the auspices of
pendent counsel investigation,
contains controls such as re-
instead of plane so e don't have to face the
the United Nations?" he asked Defense Secre-
says Rep. Henry Hyde, R-Ill.,
quiring quarterly financial
tragedy of an airpla full of our soldiers being
tary William Perry.
because the counsel is account-
statements and annual audits.
shot down," he said.
Perry said there were two other options: say-
able only to the courts.
Hyde will offer a proposal
"But," he said, "m) nain concern is to see that
ing "no" when the world community calls for
The Clintons' problems have
requiring the counsel to seek
Mogadishu itsel
doesn't disintegrate into
U.S. participation, or having the U.S. military
lent momentum to the bill, es-
funding every two years. And
chaos, because that
uld make the withdrawal
carry out such operations on its own.
pecially among some of the 84
Rep. George Gekas, R-Pa.,
that much more diff
:-
"And that would cost even more," he said.
Republicans who voted against
wants Congress to be covered.
Rose firm shreds
Whitewater records
Employee says papers detailed Clintons' involvement
ethical concerns about the couple's
By Jerry Seper
Al
PAPERS
personal business deals. The task
THE WASHINGTON TIMES
was not accomplished until six
From page Al
months after Mr. Clinton took office
Little Rock's Rose Law Firm
and three days before Mr. Foster's
where first lady Hillary Rodham
day seeking comment about the de-
death.
Clinton, Associate Attorney General
struction of the documents.
Webster L. Hubbell and former
The Fiske investigation will in-
It's not clear whether the shred-
White House Deputy Counsel Vin-
clude a review of the Foster suicide.
ding violated state or federal laws,
cent W. Foster Jr. were partners be-
Whitewater documents were se-
but a high-ranking Justice Depart-
fore they came to Washington last
cretly taken from his office by White
ment prosecutor in an earlier admin-
week shredded Whitewater Develop-
House officials after his body was
istration said that under certain in-
ment Corp. records held in its pos-
found.
terpretations of federal law, the
session, The Washington Times has
Last month, after The Washington
shredding could be considered ob-
Times reported that records had
learned.
struction of justice.
The records, according to an em-
been removed from Mr. Foster's of-
ployee of the firm, included doc-
"This is outrageous," he said. "If
fice, the White House turned over to
what happened was not illegal, and
uments showing President and Mrs.
the Justice Department 10 boxes of
there is a question about that, then it
what it said were Whitewater doc-
Clinton's involvement, along with
certainly was highly unethical."
partners James B. McDougal and
uments. The delivery came in
An officer of the FBI describes it
his then-wife, Susan, in the north Ar-
response to a federal grand jury sub-
as a "curious thing to do at this
kansas real estate venture now un-
poena the White House had negoti-
point," particularly since the Rose
der federal investigation.
ated with the Justice Department to
firm had to be aware that White-
Special counsel Robert B. Fiske
keep the documents sealed from
water was part of an ongoing federal
Jr., appointed Jan. 20 by Attorney
public view.
General Janet Reno, is looking into
probe.
It was not clear whether other
"It certainly is no secret White-
allegations that Mr. McDougal, for-
records held by the Rose firm per-
water is under investigation it's
mer owner of Madison Guaranty
taining to the Clintons had also been
been on the front page every day," he
Savings and Loan Association, ille-
shredded.
said. "Maybe they have taken the po-
Several federal law enforcement
gally manipulated S&L loans and im-
sition that it's privileged information
authorities have been concerned
properly diverted money to several
and want to protect their client.
about a possible conflict of interest
powerful Arkansas politicians, in-
"But if they shredded the records
involving Mrs. Clinton's ties to an in-
cluding Gov. Clinton.
with the intent of preventing their
vestment group and about a stock
Mr. Foster, whose body was found
July 20 in a Virginia park in what
discovery, that might be a different
partnership involving Mr. Foster
federal authorities said was a sui-
thing."
and Mr. Hubbell.
Others recalled that shredding
Specifically, these concerns in-
cide, was the Clintons' personal law-
yer and represented the couple for
documents during his tenure at the
volve:
National Security Council proved
Value Partners, an investment
the Rose firm in the Whitewater
costly to Marine Lt. Col. Oliver
group that "sold short" on several
matter.
health care stocks after the Clintons
"There's absolutely no doubt that
North. He was convicted in May
moved into the White House.
the records destroyed last Thursday
1989 and sentenced to two years' pro-
were those the firm had on White-
bation, 1,200 hours of community
By the time of the sale, Mrs. Clin-
ton had actively taken charge of the
water," said the employee, who asked
service and a $150,000 fine. The sen-
not to be named. "There were a lot of
tence was overturned on appeal in
president's health care task force.
July 1990 by a federal appeals court.
Selling short is the practice of sell-
papers, and the process took quite a
ing shares not held for future deliv-
long time.
The Fiske inquiry includes a re-
ery in anticipation of buying the
"A bunch of the stuff was there to
view of money said to have been fun-
shares later at a reduced price.
be read, and it was felt that this could
neled by Madison to the Whitewater
In December 1992, Value Part-
be very bad," the employee said.
project, including a $300,000 Small
ners had $1.2 million invested in 10
A second Rose employee who took
Business Administration loan ob-
health care stocks, or about 13 per-
part in the shredding declined com-
tained by Mrs. McDougal.
cent of its total portfolio. The con-
ment. In a telephone interview, he
David L. Hale, a former Little
flict focused on allegations that, as
would not say if he had shredded
Rock municipal judge now under in-
the head of the health care task
Whitewater documents or witnessed
dictment on unrelated SBA fraud
force, Mrs. Clinton's public state-
their destruction, but he declined to
charges, said Mr. Clinton, then the
ments about health care and price
say the incident had not occurred.
governor, and Mr. McDougal pres-
controls depressed the price of
"I'm not going to comment," said
sured him to authorize the loan.
shares in health care stocks, making
the employee, who earlier had con-
About $110,000 of it eventually found
the shares available at a reduced
fided to friends that the shredding
its way into the Whitewater account.
price.
had taken place and that he was
Mr. McDougal has denied any
Midlife Investors, a partnership
"scared to death" about it.
wrongdoing.
set up in 1983 by Roy P. Drew, a
The Bashington Times WEDNESDAY, FEBRUARY 9, 1994
"I'm not going to say anything
Federal authorities have said the
broker working at the time at the E.F.
about what happened. I would just
Clintons are not "targets" of the
Hutton office in Little Rock.
prefer not to say anything about this
Whitewater-Madison probe, al-
According to the Clintons' joint
at all."
though Mr. Fiske has said he intends
tax returns, Mrs. Clinton was a part-
A friend of this employee, who
to question both of them under oath.
ner in Midlife from 1983 until at
also requested anonymity, con-
They also have denied any impropri-
least the end of 1991. The address
firmed the conversation in which he
eties.
listed for the partnership is the Rose
said he was frightened. She said she
It was not clear which specific
firm.
was told there was concern at the
Whitewater documents would have
Mrs. Clinton, Mr. Hubbell and Mr.
Rose firm about what had happened
Foster each put up $15,000, naming
and
Jthers not their spouses - as
employees could be fired because
Whitewater matter for the Clintons,
beneficiaries
the matter had become known to The
including:
The Clintons' tax returns show the
Washington Times
The December sale of the cou-
partnership never yielded much tax-
Ronald M. Clark, managing part-
ple's half-share of Whitewater
able dividend income. a finding that
ner at the Rose firm. did not return
Mr. Foster met with Mr. McDou-
surprised Mr. Drew, now a private
telephone calls to his office yester-
gal in November 1992 to sell the cou-
consultant. He said it would be "a
ple's partnership interests for $1,000
stretch of the imagination" to be-
see PAPERS, page A10
and later arranged for it to be taken
lieve the venture did not yield divi-
as a capital gain on the Clintons' per-
dends. based on its stock purchases,
sonal tax returns
which included Firestone Tire and
Whitewater's failure to file cor-
Diamond Shamrock
porate income tax records for a
The Clintons and McDougals
three-year period
were joint partners in Whitewater
The omission was discovered
and planned to build vacation homes
after Mr. Foster met with Mr.
on 42 lots along the White River in
McDougal to execute the White-
the Arkansas Ozarks The project
water sale In December 1992, Mr.
failed
Foster filed corporate tax returns
According to records at the Mar-
for the Clintons claiming White-
ion County Courthouse in Yellville,
water had earned no income
Ark., the partnership appears to
have been structured to enable the
84m
Mr Foster also was responsible
3
spokesman Mike Fulwider.
``We'll follow up and file a lien if we find out he has any assets, " said
Mike Leathers, commissioner of the Arkansas Department of Finance and
Administration.
**** filed by:GN-F(--) on 02/06/94 at 19:27EST ****
**** printed by:WHPR(JEL) on 02/07/94 at 08:34EST ****
AM-Clinton-Whitewater, Ark Bjt,
The Frustrated GOP Effort to Make Whitewater a Whitewatergate
Eds: Also moving on national wire
An AP News Analysis
By WALTER R. MEARS= AP Special Correspondent=
WASHINGTON (AP) The chart looks like a maze names linked by lines that
interlock and overlap in all directions, with President Clinton in the
middle. Republicans call it the Whitewater family tree in their unrelenting
but so far frustrated effort to make the case a cutting issue.
The very complexity of their diagram, 50 names in a maze of lines, is one
reason.
They've got no arena in which to pursue and dramatize questions raised
about the investments the Clintons say they made and lost in the failed Ozark
land deal.
Nor is there a villain they can cast as the heavy. The financier involved
in this case is not a haughty fat cat; he's broke, sick, and already tried and
acquitted of fraud.
None of that dispels the questions Republicans have raised as grounds for
the congressional investigations that majority Democrats are refusing. But it
will take more than questions to make Whitewater into Whitewatergate, the
label some House Republicans want applied.
Indeed, while that argument has been going on, Clinton's approval ratings
have been going up, to 58 percent in a poll a week ago. That Gallup survey for
CNN and USA Today showed no significant change in the number of people who see
the president as honest and trustworthy, 52 percent.
The Clintons have emphatically denied doing anything wrong.
The president has grudgingly agreed to have a special counsel look into
the case of Whitewater Development Co. and the later failure of a savings and
loan run by the Clintons' partner in the Whitewater land deal.
The questions involve the possibility of regulatory favors while Clinton
was governor, suggestions that S&L money might have been diverted to pay off
campaign debts, and the involvement of Hillary Rodham Clinton as a Little
Rock lawyer.
Rumor and innuendo, says House Speaker Thomas S. Foley.
Serious questions of possible wrongdoing,' says a memo of suggested
speechmaking points from the Senate Republican Policy Committee.
Either way, with a former Republican U.S. attorney from New York
investigating as special counsel, the Democrats have a ready rebuttal to
continued Republican demands for a congressional inquiry. Let him do his job,
they say. There'll be time for hearings later if need be.
The counsel, Robert B. Fiske Jr., said he almost certainly would question
the president and Mrs. Clinton under oath as part of his investigation.
Congressional investigators couldn't.
And while the White House hadn't wanted a special counsel, having one
enables the administration to deflect persistent Whitewater questioning.
To that extent, it helps now. Whether it hurts later depends on Fiske's
findings, and there's no telling when he'll be done.
Republican congressional leaders had proposed a special joint committee to
investigate, but dropped that when the special counsel was appointed, a step
they also had urged.
Now the GOP pressure is for hearings in the House and Senate banking
committees. Both chairmen have refused to conduct Whitewater-S&L hearings, but
there apparently will be committee sessions on the management of the agency
that overseas the savings and loan bailout. Those are supposed to be held
twice a year, and they are overdue.
For Republicans, that will offer a way into the Whitewater case; they will
be able to raise questions about Madison Guarantee Savings & Loan, shut down
by the government in 1989 and bailed out at a cost of more than $47 million.
In the House committee, Republicans have a right to call witnesses, and Rep.
Jim Leach of Iowa, who has had his own investigators at work, said he intends
9
to do just that.
still, the opening would be brief, not the long, close look Republicans
have demanded.
And not enough to make suspicions into issues that would resound
politically if, indeed, that can be done at all.
That's particularly irksome to Republicans, who saw their administrations
under frequent investigation over 12 years in the White House. Sen. Bob Dole,
the Republican leader, said that happened at least 18 times.
But Democrats won't investigate Democrats, he complained, although that is
hardly a surprise ending.
=
EDITOR'S NOTE Walter R. Mears, vice president and columnist for The
Associated Press, has reported on Washington and national politics for more
than 30 years.
**** filed by:APW-(AR) on 02/05/94 at 13:30EST ****
**** printed by:WHPR(JEL) on 02/07/94 at 08:35EST ****
PM-Whitewater-Mrs McDougal, 250
Susan McDougal Says No Wrongdoing in Whitewater
WASHINGTON (AP) Susan McDougal, the former wife of the key figure in the
investigation of the first family's Arkansas business dealings, says she is
certain that no criminal charges will be brought in the matter.
Speaking publicly for the first time about the controversy involving
President Clinton and Hillary Rodham Clinton, Mrs. McDougal told The
Associated Press on Friday that she has done nothing wrong.
I am absolutely confident that there's no wrongdoing in the Whitewater
case, said Mrs. McDougal.
She also said that she did not expect to be charged with any crimes
connected with Whitewater.
I'd be shocked to hear that there would be any criminal charges, said
Mrs. McDougal, who now lives in the Los Angeles area. She refused to discuss
any details of her involvement in the case.
Her comments came after a brief court appearance related to felony charges
that she forged checks from her former employer.
Mrs. McDougal is the former wife of James McDougal, who owned the failed
Madison Guaranty Savings and Loan Association.
The McDougals were partners with the Clintons in Whitewater Development
Corp., a company they set up to develop a resort in the Ozarks. The real
estate partnership is part of a criminal probe by special counsel Robert
Fiske.
Fiske is trying to learn whether any of Madison's funds were diverted to
Whitewater or used to help retire Clinton's 1984 gubernatorial campaign debt.
**** filed by:APE-(--) on 02/05/94 at 00:18EST ****
**** printed by: WHPR (JEL) on 02/07/94 at 08:35EST ****
16
BC-FOSTER national editors:GL
Clintons end a tough week of Whitewater innuendos
By John Aloysius Farrell
Boston Globe
WASHINGTON If President Clinton and his aides thought they had won a
respite from the Whitewater scandal by requesting the appointment of a special
prosecutor, this past week proved them wrong.
Gleeful Republicans and some newspapers hammered away at the White House,
advancing theories about Bill and Hillary Rodham Clinton's business dealings
in Arkansas, and about the death of their friend and lawyer, Vincent Foster.
Chasing a report by the New York Post, editorial writers at The Wall
Street Journal suggested that Foster, a deputy White House counsel who the FBI
and U.S. Park police say committed suicide last July, may have been murdered,
or his body dumped or tampered with.
Foster was a longtime friend of the Clintons who handled many of their
personal and business affairs, including some work on the Whitewater
development, an unsuccessful real estate project they once owned in the
Ozarks with James McDougal, the head of a failed savings and loan. Foster was
found dead in a park near here.
The Journal also filed suit in U.S. District Court to demand access to a
note written by Foster shortly before his death, which its editors suggested
might be a forgery. The New York Times, quoting anonymous law enforcement
sources, said unnamed investigators shared The Journal's concerns about the
note.
Republicans on Capitol Hill showed that the appointment of a special
counsel in the Whitewater case had not stemmed the political pressure for
public hearings. The GOP won a few procedural victories from skittish
congressional Democrats that could lead to a public airing of the Whitewater
affair.
Shoved back into the spotlight to face 6-month-old allegations of
stonewalling was Bernard Nussbaum, the White House counsel who was Foster's
boss and friend, and whose supervision of FBI and police investigators
angered law enforcement officials.
Nussbaum's actions in the hours and days following Foster's suicide have
led to charges of a cover-up, and to this week's unsubstantiated allegations
of forgery or obstruction. Ironically, Nussbaum worked for the House Judiciary
Committee during its impeachment inquiry into President Nixon's attempts to
cover up the Watergate scandal. He supervised Hillary Clinton, who was also on
the committee staff
Foster's body was discovered at around 6 p.m. on July 20. Although White
House Chief of Staff Thomas S. McLarty ordered Foster's office sealed, a guard
was not posted until the following day. In the interim, the White House says,
three aides made cursory searches of Foster's office, but removed nothing.
When police and FBI investigators arrived 'to examine Foster's papers,
Nussbaum was there to conduct the search, describing the contents of each file
or drawer without letting them see what he was handling. When asked at the
time if investigators had to rely on his characterization of everything,'
White House press secretary Dee Dee Myers replied, That's correct.''
An FBI agent who tried to get a better look at what Nussbaum was
categorizing was reprimanded by a White House aide in the room, said Myers,
until Nussbaum intervened to ease the tension. When, a few days later, an
aide to Nussbaum discovered the torn-up pieces of a note at the bottom of
Foster's briefcase, the White House kept the note for 30 hours as officials
discussed its import before giving it to the police.
When asked about Nussbaum's protective zeal about Foster's office and
note, Park Police Chief Robert Langston said in August, ``we certainly weren't
pleased at the way that was conducted. Our investigators would like to have
seen that briefcase and would like to have examined the
files.
But a senior White House aide who was present when Foster's office was
searched said that the Park Police never complained about the process, and
17
that no investigator ever expressed an interest in the Whitewater files.
Nussbaum's actions were a legal and `reasonable'' exercise of two legal
privileges, the FBI concluded: the attorney-client privilege that covers
communications between Foster and the Clintons, and an executive privilege
that lets White House aides protect their work in progress.
``It is not as if this was a criminal investigation," said Carl Stern, a
spokesman for the U.S. Justice Department. `That is why it was handled with
totally different standards. "
Nussbaum's handling of the Foster investigation reveals, some critics
said, a tin ear for politics and the way that appearances can be twisted by
enemies for political advantage.
**** filed by:KR-F(--) on 02/05/94 at 18:52EST ****
**** printed by: WHPR (JEL) on 02/07/94 at 08:34EST ****
18
Clintons' Whitewater Case: Anatomy of a
Land Deal That Turned Sour
By STEPHEN ENGELBERG
with JASON DePARLE
Raising the Money
specialic The New York Leve
FLIPPIN, Ark. - The Ozark air
Among the topics that Mr. Fiske will
There remained an important ques-
tion: How would the Clintons and the
smelled of easy profits on Aug. 2. 1978.
confront is the Clintons' claim that they
when Arkansas's hottest young politi-
and their partners lost $160.000 on a
McDougals raise the $203,000 they
cian walked into a tiny bank here and
$203,000 land purchase. The prosecutor
needed to buy their piece of the It d?
set in motion what has become one of
has also said he will range far beyond
As a public official, Mr. Clinton had a
the most closely examined sets of fi-
Arkansas to events since Mr. Clinton
big name but a small purse. His job as
nancial transactions in the state's his-
became President, including the sur-
Attorney General paid only $26,500 a
tory
cide of a longtime friend and top White
year; his elevation to governor would
the
House aide. incent M. Foster Jr.
raise that only to $35,000. His wite who
midst Us the campaign that a few
had kept her maiden name 01
months later would make him the na-
Interviews with several dozen people
Rodham, had only recently begun
tion's youngest governor. With a mea-
and a review of land documents, mort-
working at Little Rock's prestigious
gages, and other records provide only
Rose Law Firm. Officials of Citizens
ger salary, few assets and no business
experience, he was scarcely in a posi-
partial answers to the questions about
Bank and Trust said the couple had few
tion to ride a land boom, even one that
the venture's finances.
financial assets.
seemed to promise lucrative returns at
But what does emerge clearly is a
"Clinton himself couldn't have got-
low risk.
deal born in a boom that quickly fiz-
ten the loan," Mr. Sanders said.
But Mr. Clinton arrived with a finan-
zied, and that had its origins in the kind
"McDougal was the guarantee of the
cially impressive partner, James B.
of interplay of personal, political and
resource here," Mr. Sanders recalled,
McDougal, a former Congressional
governmental interests that has be-
and Mr. Burge agreed.
aide turned land developer. It was Mr,
come synonymous with the words
McDougal's personal wealth, bank offi-
Whitewater Development Company.
That loan covered all but a down
cials said, that allowed them to ap-
payment of $20,000. Mr. Burge said he
prove the $183,000 loan taken out by
A Prime Opportunity
then believed that the couples were
Mr. Clinton; his wife, Hillary; Mr.
In the summer of 1978, the small
putting up their own money, as is cus-
McDougal and his wife, Susan, to buy
the land.
business circles of Marion County were
tomary. But the Clinton campaign ac-
abuzz with word of the largest land
knowledged in 1992 that the couples
Signing on Dotted Line
deal in the county's history. A 3,200-
had taken out a $20,000 loan from an-
Frank Burge, a bank officer who was
acre parcel of riverfront property was
other Arkansas bank, meaning that the
present for the closing, recalls Mr.
about to become available after years
entire land purchase was financed with
Clinton and his wife being surprisingly
of being tied up in an Oklahoma bank-
borrowed money.
"uninquisitive" as they took on what, to
ruptcy court.
Some local real estate agents con-
that point, was their largest financial
It was viewed as a particularly ripe
tend that the couples paid an unusually
liability. After a cursory look, the four
opportunity, since the picturesque
high price for the land. Just 19 days
partners signed the papers that
Ozark county, about a three-hour drive
before the Clinton purchase, the entire
brought them 230 acres of Ozark prop-
north of Little Rock, had recently be-
3,200-acre tract had been bought by 101
erty that day, and a Federal investiga-
gun to attract prosperous retirees flee-
River Development for $1.4 million, an
tion 15 years later.
ing Illinois and other wintery states.
average of $440 an acre. The land was
"The crux of the whole deal was
Land that had recently sold for $75
then resold by the company to the 15
McDougal was trying to do something
an acre was suddenly fetching $500,
purchasers or partnerships.
to help Bill," said Mr. Burge, who was
The Clintons and McDougals paid
then senior vice president at Citizen's
and some people thought that develop-
$880 an acre for their land, making it
Bank and Trust of Flippin. "They all
ment might even surpass ranching and
the most expensive single parcel of the
thought they were going to be rich."
15. Several 101 River partners said the
That did not happen. Today only a
dairy as the county's economic life-
high price was justified by the Clinton
handful of small homes dot the hilly
blood. "A lot of people who were
tract's view of the White River and
land that the couples bought at the
Crooked Creek.
shrewd investors found out it was easi-
juncture of Crooked Creek and the
er to graze Yankees than to graze
Others land agents wondered, insist-
White River.
cattle," Mr. Burge said. "Everyone
ing that at these prices, access to the
Last month, a special prosecutor be-
was doing it."
river was more important than the
gan setting up shop in Little Rock to
Six Marion County businessmen
view. "I know what land values are,"!
look into a host of questions. Many
joined to capitalize on the bankruptcy
said Bobby Joe Baker, a local real
arise directly from the venture's tan-
sale, forming a corporation called 101
estate agent who had helped begin the'
gled finances, in particular whether
River Development. The partners in-
land boom with some well-placed ad-
Mr. McDougal improperly diverted
cluded a real estate agent, Terry
vertisements in Chicago newspapers.
money from his savings and loan, Mad-
Wood; the president of Citizen's Bank,
"They paid three times what that land
ison Guaranty, to shore up or benefit'
was worth."
James N. Patterson, and the man who
the Clintons. The prosecutor, Robert B.
was running Mr. Clinton's campaign.
Fiske Jr., will also examine whether
for governor in Marion County, Kear-
Forming a Company
Mr. Clinton showed favoritism to Mr.
nie Carleton.
Mr. Clinton won the November elec-
McDougal in later years as Madison
tion easily, took office as Governor in
moved toward collapse.
Politician In the Deal
January 1979, and soon brought Mr.
Before going through with the $1.4
McDougal into the state government as
White
million purchase, the group lined up 15
an economic development aide.
Flippin
In 1979, in Mr. Clinton's first term as
River
sets of buyers for parcels of the 3,200
Governor, the Clintons and McDougals
Summit
acres. One was the Clintons and
formed the Whitewater Development
McDougals. The inclusion of the Demo-
62
Crooked Creek
cratic nominee for governor seemed to
Company and transferred the land to
it. The company officers were James
bode well for Marion County, and its
hopes of spurring development.
and Susan McDougal; the Clintons
Yeliville
were shareholders, entitled to half the
"You do things for a guy, you get him
company's profits and obligated for
MO.
Di
indebted to a degree," said Steven
half its debt.
Sanders, who was then a director of
Area of
Land records valued the property at
Detail
Citizens Bank and Trust. "At least you
Site of
$250,000. In a 1992 interview, Sam
get access."
Ozark
MARION COUNTY
Mr. Sanders said the addition of Mr.
Heuer, Mr. McDougal's lawyer, said
property
the increase reflected his client's addi-
ARKANSAS
Clinton, who was Arkansas Attorney
General at the time and considered a
tional investment of $46,000 for roads,
Little
shoo-in for governor, also lent the deal
surveying and subdividing the land.
Rock
a form of subtle élan.
Whitewater was ready to sell, but the
Arkansas
Miles
"You bring in one of these politicians
local land market was already souring.
River
0
just to use their name," Mr. Sanders
The size of the original 3,200-acre deal
The New York Times
said. "You say, 'Oh, the Governor's
meant that many lots were coming up
involved in this deal.'
for sale simultaneously, while rocket-
An inquiry into the Clintons' fi-
ing interest rates discouraged buyers.
nances focuses on 230 acres they
bought in the Arkansas Ozarks.
1/2
THE NEW YORK TIMES. MONDAY, FEBRUARY 7. 199
where Are the Buyers:
carol Woca,
20
tract
of
Lind.
time
A Road Runs Near It
the
DVJASON DePARLE
of
Several months after the Chn-
agency involved
me
tons bought land in the Ovarks. the
in a recent interview Mr. Ward
almost
etse
à
partners in the company that sold
aid the project might have be-
J in buving the 101 River land
it to them began negotiations that
come politically contested if the
broke even or made money. ac-
eventually led the state to pave a
proximity of Mr. Clinton's land
Fording to Mr. Wood
two-mile road to the company S
had been known He said that if he
the Clintons sav they did not come
property. at a cost of more than
had known of their holdings. he
cause As of May 1980. according to a
$150,000.
could have brought that fact to the
summary of Whitewater's finances re-
The road passes about a naif
ommission's attention though he
leased in 1392 by the Clinton campaign.
mile from the Whitewater prop.
savs ne Delieves the matter would
of lots had been sold.
erty that the Clintons owned. mak-
have been approved anyway.
And of the $60,500 in sales, only $10,000
ing both parcels easier to reach.
As part of the project. the 101
collected with the rest ned up
and therefore. real estate experts
River partners gave the Game and
contracts
say, more valuable.
Fish Commission two lots. worth
The negotiations between the
in exchan
House
state and the company, 101 River
the commission agreed in matali a
squeeze. out the
Development, stretched on, inter-
boat ramp and parking lot that
partners disagree about who kept the
mittently, for more than four
would be open to the public.
company afloat.
years and included the two-year
Then in 1982. the company do-
In a 1992 interview, Mr. McDougal
stretch, from 1981 to 1983, when
nated a third lot to the commis-
said: "I put money into it. Money was
Mr. Clinton was out of office.
sion, in exchange for the agree-
owed me. I don't remember them
There is no evidence that Mr.
ment to pave the two-mile road
putting anything in."
Clinton discussed the project with
leading to the property. The com-
Bruce Lindsey, a senior White House
anyone in the state government
mission paid 30 percent of the con-
official, said the Clintons made $22,000
and the officials in charge say they
struction costs and the county paid
in interest payments on the bank loan
had no idea he owned land nearby.
the remaining 70 percent, using
in 1978 and 1979. The Clintons have
'An Excellent Project'
state aid money.
declined to release copies of the checks
Mr. Ward said the road made it
or their tax returns for those years.
"It was an excellent project on
easier for fishermen and state
Trying to increase sales in 1981,
its own merit," said Fletcher
trout-stocking trucks to reach the
Whitewater built a modest house on
Ward, the head of the real estate
river. He said both the public and
division at the Arkansas Game
one of the lots, to help buyers envision
the developers benefited from the
what their own might look like. Mrs.
and Fish Commission, the lead
deal.
Clinton borrowed $30,000 for the house,
in her name, not Whitewater's, from:
the Kingston Bank and Trust, a bank:
owned by Mr. McDougal, who had by
then left government work. Regulators
frown upon bank executives making,
loans to their own corporations.
Whitewater made payments on the
$30,000 loan, but the Clintons improper-
212
ly deducted the interest on it from their
personal taxes, the campaign acknowl-
edged in 1992.
Scrambling to Pay Bills
By mid-1985, Whitewater still had 24
lots on its hands. At the end of May that
year, the company transferred all of its
remaining property to Chris Wade, the
Flippin real estate agent who was Mad
ison's chief sales agent. Mr. Wade said
that in return he gave Whitewater an
airplane worth $35,000 that was used by
Madison and eventually sold to Mr.
McDougal, and agreed to repay $35,000
of the $100,000 the company still owed
on the original loan from Citizen's
Bank and Trust.
The grand dream of a developed
community along the banks of the
White River never materialized. Mr.
McDougal lost control of his savings
and loan in 1986 and later was tried and
acquitted on Federal bank fraud
charges. The collapse of his savings
and loan cost taxpayers $60 million and
left him bankrupt; he lives today on a
pension.
Federal investigators are now por-
ing over bank records and other docu-
ments to determine whether Mr.
McDougal improperly diverted money
from his savings and loan to Mr. Clin-
ton's campaign for governor or to
Whitewater, or in any other way that
might have benefited the Clintons.
Since the case arose as a national
political issue, the Clintons have been
reluctant to make public the underly-
ing documents and records that would
dispel questions about Whitewater's fi-
nances.
They handled a similar inquiry very
differently in 1979, when a reporter for
The Arkansas Democrat found out
about the land deal and began pressmg
for details.
Mr. Burge, the banker, said he told
the reporter that such information was
private. A few days later, he said, Mr.
Clinton telephoned him to waive his
privacy rights.
"He said, Tell them the truth; I've
got nothing to hide,' Mr. Burge said.
THE NEW YORK TIMES, MONIDAY. FEBRUARY 7, 1991
"So I just told them what they wanted,
and right after that the story died."
7
25
THE CLINTONS' WHITEWATER GUIDE
As the First Couple: Attorney: David Kendall Is Varigating Some Trickv Currents
and loan and the apparent suicide of
Setuor presidential adviser George
By Lloyd Grove
deputy White House counsel and Clin-
Stephanopoulos. meanwhile. says Ken-
Washington Post Staff Writer
ton intimate Vincent Foster.
dall represents both Bill and Hillary-a
A
recent issue of the National En-
"If there's a lesson from every public
situation that could prove awkward.
quirer featured a detailed account
investigation in Washington. D.C.,
several legal experts argue, if it turns
of marital strife between Bill Clin-
since Watergate, it's that the key to
out that their roies in Whitewater and
ton and Hillary Rodham Clinton. brim-
success has two major component
Madison were sharply different. Anoth-
parts," says an attorney who knows
er open question IS how and at what
ming with tear-streaked ultimatums and
spoke on condition of ano-
rate Kendall will be paid While wit
hints of intidality
nymity. "Une is, get out in front of the
liams & Connolly has been known to
It is one of life's more intriguing tro-
story. Two is, never be seen to be
bill its time as expensively as $400 an
nies that Washington lawyer David Ken-
stonewalling or covering up."
hour, Kendall can charge the Clintons
dall-who for years has headed the legal
Already, the Clinton White House
pretty much anything he thinks fair.
team retained by the Enquirer to scrub
has run atoul of these lessons with hap-
Will the Clintons' supporters start a le-
its stories for libel-has also served for
hazard leaks, erroneous public state-
gal defense fund? Stephanopoulos
the past SIX months as the Clintons' per-
ments and much embarrassing back-
won't say. "He's going to bill them and
sonal attorney.
tracking. Kendall, meanwhile, aroused
they're going to pay him," the aide al-
It's the sort of ethical maze that law-
suspicion last December when he ne-
lows.
yers like Kendall negotiate skillfully ev-
gotiated a controversial subpoena for
Although he earns more than the
ery day: the proverbial walk in the park.
the Clintons' financial records that ef-
president of the United States, litigat-
"He would recuse himself on any article
fectively shielded them from congres-
ing and advising the likes of General
on anyone that he represents-that's
sional and public disclosure. It made
Electric and "America's Most Wanted,"
par for the course," says Enquirer editor
matters worse, from a public relations
Kendall has never been seen worship-
lain Calder, stating a simple rule that ap-
standpoint, that Kendall, according to
ing at the altar of Mammon. Rather, he
plies not only to Calder's publication but
news reports, had tried and failed to
betrays a highly developed social con-
also to The Washington Post, another
restrict the department's internal use
science instilled by a Quaker upbring-
of the documents.
client of Williams & Connolly, the high-
ing in rural Indiana and is proud of his
Iowa Rep. Jim Leach. ranking Re-
powered law firm in which Kendall is a
modest criminal record. He keeps
publican on the House Banking Com-
framed in his office a yellowing traffic
partner.
mittee, calls Kendall's tactics "unusual,
citation from the Marshall County,
By comparison, the job of represent-
if not unprecedented," suggesting that
Miss., sheriff's office, which jailed him
ing the president and First Lady in "Whi-
the Clintons might have something to
for three days and fined him $35 when
tewatergate"-the nickname for the
hide. "Kendall's role as the president's
he was a civil rights worker in the sum-
Clintons' tangled Arkansas business
attorney is to limit embarrassment,
mer of 1964, claiming he lacked prop-
dealings that may or may not amount to
and he's employing the quiet tactics of
er registration for his red Volkswagen
a scandal-is a legal and political chal-
a careful attorney in a suitable way for
Beetle. That was the same summer
lenge akin to traversing hot coals on
his client," Leach says. "Whether that's
that Kendall's onetime roommate, An-
n
skis: tricky, strenuous and potentially
drew Goodman, was murdered with
painful.
two co-workers by white segregation-
Inquiring minds want to know: Who is
ists.
David Kendall? A determinedly soft-
Kendall's role as
Kendall was a star student at Indi-
spoken man who displays a mania for dis-
ana's Wabash College, a small men's
cretion, Kendall, 49, won't say which of
the president's
school, and won a Rhodes scholarship
to Oxford in 1966. At Yale Law School,
his prestigious clients he knew better,
attorney is to limit
where he matriculated in the fall of
Bill or Hillary, when all three were stu-
embarrassment, and
1968, he actively opposed the Vietnam
dents at Yale Law School in the early
War. coauthoring a handbook on draft
1970s. He won't talk to reporters-at
avoidance, but nonetheless enlisted in
least, not on the record-about his life
he's employing the
the Army-because he couldn't be in-
and times as a civil rights activist, a
death penalty opponent. a libel lawyer
quiet tactics of a
tellectually honest and call himself a
pacifist, Anne Kendall says. He spent
and a corporate litigator, preferring to
let them leaf through legal briefs, news
careful attorney."
his early professional years after New
Haven, where he was an editor of the
KENDALL, From C1
-Rep. Jim Leach
law review, clerking for Supreme
Court Justice Byron White and then
clippings and law journal articles in a
the best public interest may be debat-
specializing in death penalty appeals for
Williams & Connolly conference room.
able." Leach's Republican committee
He won't even pose in his office for a
staff has been investigating Madison
photograph, insisting on appearing (as
Guaranty, the failed Arkansas savings
if by chance) on a downtown street
and loan from which federally insured
1/2
corner wearing a mysterious-looking
deposits were apparently diverted in
trench coat.
the 1980s to Whitewater Development
"He will do what he has to do, I'm
Corp., the Clintons' losing real estate
sure, SO that the Clintons will be well
investment.
represented," says Washington psycho-
"I know David well enough to know
therapist Anne Kendall, his wife of 25
that he's probably learned the lessons
years. "My concern is that I see this
of the last 10, 15 years," the anony-
special counsel setting up shop with
mous lawyer says. "But I cannot know
this incredible war machine, and it's a
what his advice has been, and how
little lopsided.
Goodness, he's one
much he has been listened to."
person, and it feels like David versus
Kendall, for his part, refuses to shed
Goliath. But I suppose that's just a
any light on his work for the Clintons,
wife's view."
and the White House has been equally
It's Kendall's task, presumably. to
uncommunicative. White House coun-
protect the First Couple's interests
sel Bernard Nussbaum-who has offi-
while special counsel Robert B. Fiske
cially distanced himself from the case
MONDAY. FEBRUARY 7. 1994 THE WASHINGTON POST
Jr., along with a team of lawyers and
with the argument that it's a personal
federal agents, pursues a wide-ranging
financial matter not involving the presi-
investigation that will include, Fiske
dency-is "unavailable" for a discus-
has vowed. grilling the Clintons under
sion of Kendall's role, a spokesman
oath. Kendall must also be concerned
says. The reason? "Lack of availability."
with various congressional probes of
the complex case involving a defunct
real estate investment, a failed savings
29
24
the NAACP Legal Defense Fund in
Kendall put rumself through the horror
with such a high-profile case. But Ken-
New York City, which he left in 1978
of watching his chent die. Anne Kendail
dall. for all hrs legal expertise. wise
to join Williams & Connolly.
theorizes: "It was because of the depth
counsel and moral fervor. IS an un-
By then Kendail had managed to ob-
of his loyalty to John. John had asked
known quantity in the rarefied realm of
tain at least one landmark Supreme
him to be there
David's fairly
political chess-a game in which any
Court ruling. prohibiting the death pen-
thorough. so it's also very much in
lawyer for a president must be well
alty as a punishment for rape. As a law-
keeping: He was going to see it
versed.
yer he was known for intense prepara-
through to the end."
tion and a near-compulsiveness about
Whitewater. of course. is not an IS-
"It's a hybrid sort of job," says Bos-
uny points that others would gladly
sue of life and death. By the lights of
ton lawyer James St. Clair. noting that
overlook.
official Washington. it's even more um-
representing a president requires not
"I remember getting a call from Da-
portant: It might end up being about
only legal but also a political and public
vid one day in the mid-'70s. saying. 'I
the life and death of a presidency.
relations skill. St. Clair gained fame as
need your advice.' says New York en-
Kendall took over the Clinton ac-
President Nixon's attorney during the
trepreneur Barry Forman. a friend of
count from his partner Robert Barnett,
Kendall's since they were both Rhodes
Watergate investigation (though, un-
who felt compelled to give up the Clin-
scholars at Oxford's Worcester Col-
tons as chents when CBS News as-
like Kendall. he was paid and given a
lege. "So I went over to his Legal De-
signed his wife, Rita Braver, to cover
staff and office space by the federal
fense Fund office. which was cramped.
the White House. Bamett. 2 langtime
government. 'It's not the nur of the-
cluttered and stacked with legal briefs.
player on the Democratic Party scene,
mill representation, and there are very
We shook hands and he said, 'Well,
is just the sort of savvy political opera-
few people walking around who can
here's my dilemma.' Then he showed
tor that one expects to be associated
help you very much."
me several small chessboards sitting
around the room where he had various
games in progress. T'm playing chess
with six of my clients on death row,
and I'm afraid that if I do badly they'll
lose confidence in me as their attorney.
Do you mind going over the posi-
tions?'
Forman, a chess maven, complied.
But Kendall, at his wife's insistence,
TODAY IN CONGRESS
eventually gave up playing chess with
his clients; the games seemed to worry
SENATE
him to distraction.
Meets at 10 a.m.
Kendall continued toiling to save cli-
Committee:
Foreign Relations-10
ents from the death penalty after he
Nominations of Robert be
arrived at Williams & Connolly-nota-
assistant sec. of state for near eastern
bly an escaped convict and drifter
affairs & Wesley Egan to be
ambassador to Jordan. 419 Dirksen
named John Spenkelink who was sen-
Office Bldg.
tenced to the electric chair for a 1973
murder in Florida. Kendall worked fe-
HOUSE
verishly to prevent Spenkelink's execu-
Meets at noon.
Committees:
tion, pleading with then-Gov. Bob Gra-
Education & Labor-10 a.m. Single-
ham for clemency and mounting five
payer health care reform plans. 2175
appeals to the Supreme Court before
Rayburn House Office Bldg.
Energy & Commerce-9:15 a.m.
MONDAY, FEBRUARY 7. 1994 THE WASHINGTON POST
his client was electrocuted in May
Health & the environment subc. Health
1979. Kendall-who later bitterly as-
effects of exposure to environmental
sailed Graham for alleged failure of
tobacco smoke. EPA Administrator
Carol M. Browner & Surgeon/General
"political courage" and compared the
Joycelyn Elders. 2123 RHOBA
governor's action to "a Roman emper-
Public Works & Transportation-1
or's thumbs-up in the Colosseum"-
p.m. Economic development subc.
was on hand to witness the execution.
Empowerment & enterprise zones.
2167 RHOB.
The ordeal clearly took a lot out of
Ways & Means-1:30 p.m. Health
him. Greg Craig, one of Kendall's law
subc. Health care service delivery in
partners, recalls that Kendall, already
inner-city & rural communities. 1100
Longworth House Office_Bldg.
thin, lost 15 pounds during the case.
Anne Kendall says her husband rapidly
aged.
"He changed, he perceptibly
changed over the course of the John
Spenkelink case," she says. Asked why
U.S. Funds Found to Feed Drug Habits
Senate Report Faults Programs Meant to Aid Addicts, Alcoholics
Reuter
the practice of paying cash under the Social Security Dis-
Hundreds of millions of dollars in federal disability pay-
ability Insurance program and other programs to the ad-
ments meant to help recovering drug addicts and alcohol-
dicts and alcoholics.
ics are instead being used to help feed their habits, a Sen-
It said far too few protections were in place to prevent
ate report said yesterday.
tax dollars from going directly to perpetuate rather than
The report by the minority staff of the Senate Special
treat addiction.
Committee on Aging and Congress's General Accounting
Some of the benefits being spent on drugs or alcohol
Office found that last year more than 250,000 drug ad-
were harming or even killing the recipients, the report
dicts and alcoholics got $1.4 billion in cash from Social
said. Persons appointed to handle benefits for abusers
Security programs.
were at times themselves addicts or alcoholics who mis-
But only 78,000 of the beneficiaries were subject to any
used disability payments.
controls or monitoring of the money received-and those
Cohen-the committee's senior Republican, who ini-
were so loose they invited widespread abuse, the report
tiated the investigation in response to reports of wide-
said.
spread abuse-said Congress should consider switching
"Hundreds of millions of scarce federal dollars are flow-
benefits from cash payments to food vouchers or stamps
ing directly to drug addicts, who are turning around and
or direct payments to treatment facilities.
buying heroin, cocaine and other illegal drugs on the
The report quoted the director of a Denver homeless
street the very same day," said Sen. William S. Cohen (R-
shelter as saying that one program in effect was "suicide
Maine).
on the installment plan" because it provided cash to ad-
The report concluded that major problems existed in
dicts and alcoholics with no requirement for treatment.
,
30
34
Tax Specialists Believe Clintons
Likely Took Improper Deductions
Continued From Page A3
tewater effectively assumed the loans and
Clintons total loss of $68,900 on Whi-
eclipsed the Clintons as the primary bor.
Tax Experts Believe
tewater. a real-estate venture they under-
rower on the loans. The Clintons. even
took in 1978 with James McDougal. owner
though they were still guarantors of the
of now-defunct Madison Guaranty Savings
loans and made some payments. couldn't
Clintons Likely Took
& Loan in Little Rock. Ark. Robert Fiske.
claim any deductions for interest that they
the newly appointed special counsel. is
paid for Whitewater. according to the
Improper Deductions
investigating. among other things.
experts.
whether Madison Guaranty funds were
"It's like a father helping his son on
illegally diverted into the
home-loan payments for a couple of
Whitewater Estates development or into
months. says Mr. Bankler. "Just because
Analysis Concludes That IRS
the campaign coffers of then-Gov. Clinton
he makes the payments. he can't take the
or other politicians.
intere
Where Mr. Lindsey and the tax experts
To buttress nis argument, Bankler
Actions on Whitewater
disagree is on the crucial question of
cites an enormous body of case law dating
whether the Clintons were entitled to de-
from a 1935 Supreme Court decision in
duct interest payents on Whitewater-re-
the landmark Gregory vs. Helvering case,
By BRUCE INGERSOLL
lated loans that were in their names but,
which asserts that the "substance" of
Staff Reporter of THE WALL STREET JOURNAL
by all appearances, had been assumed by
transactions takes precedence over the
WASHINGTON - Four tax experts
Whitewater.
"form."
agree that Bill and Hillary Rodham Clinton
In August 1978, the Clintons and the
Mr. Lindsey contends that even though
appear to have taken nearly $20,000 in
McDougals bought 230 acres on the White
"Whitewater made payments to banks, it
improper interest deductions during the
River for $203,000. They financed the pur-
doesn't change the nature of transac-
1980s on loans related to Whitewater Devel-
chase with a $20,000 down payment from
tions." He insists that Whitewater didn't
opment Co.
Union National Bank of Little Rock and a
assume the loans from the Citizens, Union
After analyzing the Clintons' income-
$183,000 mortgage from Citizens Bank of
and Security banks.
tax returns and other financial documents.
Flippin, Ark. The first loan was in the
There was "no assumption." he says.
the tax experts concur that the Internal
names of Messrs. Clinton and McDou-
"There is no evidence that Whitewater was
Revenue Service could probably challenge
gal and the second in the names of
the primary obligator on those loans."
the Clintons' personal tax deductions for
both couples.
Mr. Lindsey also dismisses the argu-
$19,598 in interest paid on corporate loans
In June 1979, they formed Whitewater
ment that the first couple erred in not
that the White House acknowledges were
and transferred the land to the corpora-
following the form of the Whitewater
Whitewater liabilities. By one expert's
tion. Four years later, Mr. Clinton bor-
financial setup.
calculations, the deductions reduced the
rowed $20,800 from Security Bank of Para-
Mr. Gallagher, the professor of accoun-
Clintons' taxes by more than $8,700.
gould. Ark., to pay off a high-interest $30,-
tancy who specializes in taxes, agrees with
In addition. the experts say, IRS audi-
000 note that his wife had obtained from a
Mr. Bankler that the Clintons would face
tors could probably object to a $1,275
McDougal-owned bank to put a model
"an uphill fight" arguing against the cus-
deduction that the Clintons took on their
home on a lot in Whitewater Estates. Both
tomary IRS position that substance "con-
1988 returns for paying Whitewater's real-
notes were considered Whitewater liabili-
trols" form.
estate taxes.
ties, according to Mr. Lindsey.
Mr. Gallagher cites the authoritative
Bruce Lindsey, a senior White House
The 1979 land transfer was "subject to
textbook "Fundamentals of Corporate
official, angrily denied that the Clintons
the existing mortgage," which means that
Taxation: Cases and Materials" as saying
had taken any improper deductions. He
the Clintons could deduct Whitewater in-
that the courts long have been willing to set
argued that the Clintons have documenta-
terest payments on their personal tax re-
aside the formal documents, such as mort-
tion to show that they were entitled to all
turns, but only if they also listed as income
gages and leases, and evaluate the sub-
the deductions in question.
whatever interest Whitewater paid on the
stance of transactions. "The courts," ac-
The Wall Street Journal had Steven
loans. The loans were designed in a way
cording to the textbook, "are not inhibited
Bankler, a certified public accountant
that the Clintons would have no net in-
from examining the arrangement and re-
from San Antonio, Texas, analyze the
crease or decrease in their taxable income,
structuring it for tax purposes to comport
Clintons' tax returns from 1980 through
if Whitewater were making its payments
with economic reality."
1992 to assess how they treated tax issues
on time.
arising from their Whitewater investment.
All but one of the experts agree with
A group of four other tax experts- former
Mr. Bankler that the Clintons erred in fall-
senior IRS executive, a partner in a major
ing to report any interest income from
accounting firm. a senior tax manager
Whitewater during the years that
with a Big Six accounting firm, and Mi-
Whitewater was making the payments on
chael Gallagher, a George Washington
the notes.
University professor of accountancy-
The Journal's analysis assumes that all
were sounded out on Mr. Bankler's
the deductions listed on the Clinton's tax
analysis. Only the senior tax manager
returns were accurate. However, Mr.
could conceive of a tax approach that
McDougal told Time that the only money
might allow the Clintons to claim the
the Clintons ever contributed to Whi-
deductions in question: he says he
tewater was $13,350 in interest paid in 1980.
wouldn't like to defend that approach to
The White House denies this allegation.
IRS auditors. (Of those participating in the
Journal's analysis, Messrs. Bankler and
Under the original financial plan for
Whitewater. the Clintons and McDougals
Gallager were the only ones willing to be
identified.)
were to borrow money for the corporation
Questions have arisen in recent weeks
and reloan it to Whitewater. The corpora-
about the Clintons' interest deductions,
tion was to pay them back with interest
and as a result the Journal asked for a
and they in turn were to pay the banks.
Had the partners adhered to the "form" of
thorough analysis. The Journal inquiry
that plan. the Clintons' tax returns would
focused on the 1980s. Time magazine is
show interest income from Whitewater
reporting in this week's edition that ques-
and interest expense paid to the banks.
tionable interest deductions reduced the
The net result: Income interest would
Clintons' tax liability by as much as $11,000
in 1978, 1979 and 1980.
cancel out interest expense.
Where the Clintons erred, the tax ex-
The Clintons have acknowledged tak-
perts concur, is they never followed the
ing about $40,000 in Whitewater-related
"form" of the Whitewater financial plan.
interest deductions, which the White
Instead, Whitewater paid the banks di-
House has said made up part of the
rectly, without the Clintons or McDougals
Please Turn to Page A6, Column 3
acting as financial intermediaries, for
several years.
In SO doing. under case law, W u-
THE WALL STREET JOURNAL MONDAY. FEBRUARY 7. 1994
42
40
Clinton pal's
filing probed
Bankruptcy fails to list Whitewater
By Dennis Cauchon
$16,636 to Arkansas for failure to
and Debbie Howlett
pay income tax.
for," Cain said.
USA TODAY
President Clinton isn't liable for any
Whitewater still produces money and
of McDougal's personal debts, nor is he
has value, even though the McDougals
James McDougal, President Clinton's
a focus of the the bankruptcy probe.
and Clintons may not recover their full
business partner in Whitewater Devel-
But the Whitewater shares Clinton
investment - an amount that remains
opment Co. Inc., may have illegally hid-
once owned might be seized if the court
unclear.
den his ownership in Whitewater when
finds that McDougal improperly shield-
Whitewater assets had a net worth of
he filed for bankruptcy in September
ed his assets. McDougal paid $1,000 to
$42,190 on May 31, 1991. four months
1991, court records show.
Bill and Hillary Clinton in December
before the bankruptcy filing, according
McDougal said his only assets were
1992 for their 50% share of Whitewater
to a report prepared for Clinton by law-
$300 worth of clothes when he filed for
Development.
yer James Lyons.
bankruptcy in Los Angeles, records
McDougal and his ex-wife, Susan,
Also, Arkansas land records indicate
show.
have owned the other 50%
Whitewater Development gets income
But his lawyer. Sam
since the beginning.
every month from people who-bought
Heuer, confirmed McDou-
The Clintons and
lots financed by the company. The rec-
gal has been co-owner of
McDougals were partners
ords show Whitewater completed the
Whitewater from its forma-
in the company, which
sale of one lot for $12,000 on April 15,
tion in 1978 until now.
bought 230 acres on the
1993, and another for $12,500 on June
The revelation has
White River in north Ar-
23, 1993. James and Susan McDougal
prompted the bankruptcy
kansas.
signed the deeds.
court to take another look.
Heuer, McDougal's law-
Creditors say they still want their
"I'm investigating his po-
yer, said he did not know
tential failure to disclose
money.
why McDougal did not re-
"We haven't collected anything We
material assets," said bank-
port his ownership of
consider it an open case," said RTC
ruptcy trustee Steven
Gannett News Service
Whitewater in his bank-
spokesman Mike Fulwider.
Smith.
SUSAN McDOUGAL:
ruptcy filing. "I'm not a
"We'll follow up and file a lien if we
The probe could leave
Ex-wife also owner
bankruptcy lawyer. Maybe
find out he has any assets," said Mike
the Whitewater Develop-
it's because it had a nega-
Leathers, commissioner of the Arkan-
ment Co. Inc. in the hands of unexpect-
tive value of $100,000," he said.
sas Department of Finance and Admin-
ed owners - U.S. taxpayers - because
But several bankruptcy lawyers say
istration.
the government is McDougal's biggest
they can't think of a reason why White-
creditor.
water would not be listed as an asset.
The bankruptcy filing showed that
"You are obligated to report abso-
McDougal owes:
lutely everything you own, even if it's
$612,560 to Resolution Trust Corp.,
just one share and even if you've lost
the federal bailout agency. McDougal
money on it," says lawyer Andy Cain of
owned the once high-flying Madison
the American Bankruptcy Institute.
Guaranty Savings and Loan, whose fail-
"If you don't accurately report every-
ure cost taxpayers at least $47 million.
thing you run the risk of being charged
$195,000 to the Internal Revenue
with a crime or not getting the dis-
Service for failure to pay income tax
charge (of debts) that you went to court
Bentsen: Open Foster's death report to public,
Treasury Secretary Lloyd Bent-
Foster was murdered.
questions about the Park Police in-
sen said Sunday the public should
"I have no doubts at all on that
vestigation into Foster's death. Sev-
be allowed to see the Bureau of Al-
one," Bentsen said when asked if he
eral media agencies have sought re-
cohol Tobacco and Firearms report
doubted if Foster killed himself.
lease of reports on his death.
on tests performed after White
The U.S. Park Police, which in-
Foster, a longtime friend of the
House deputy counsel Vince Foster
vestigated Foster's death July 20,
Clintons, was the personal lawyer
died last July.
said he committed suicide.
for President Clinton and first lady
"I don't see a problem with that,"
Foster's body was found with a
Hillary Rodham Clinton in the cou-
said Bentsen, who supervises the
gun in one hand in a park across the
ple's dealings in a failed Arkansas
agency. But Bentsen said on NBC's
Potomac River from Washington.
real estate venture, Whitewater De-
Meet the Press there is no evidence
But news reports have raised
velopment Co. Inc.
MONDAY. FEBRUARY 7. 1994 USA TODAY
06
NATIO AFFAIRS
The Source of
by resentment and thwarted
ambition, is pursuing a vendet-
ta-a charge Nelson denies.
Whitewater
The son of an itinerant laborer
from Brinkley, Ark., he caught
the eye of investment-banking
patriarch Witt Stephens as a
Little Rock: Pursuing a
college student. Stephens gave
vendetta, or the truth?
him a job as a management
trainee at Arkla, Inc., the natu-
ral-gas utility he controlled.
Within 10 years Nelson was
ITTLE ROCK ATTORNEY SHEFFIELD
president of the company. Once
Nelson says he was "just a polite listen-
JOHNSTON-AP
a Democrat, he wanted to run
Ier" when James McDougal came to see
'Extremely bitter': Nelson in his Little Rock office
for governor in 1986 but was
him in early 1992. McDougal, owner of
asked by the incumbent Clinton
the failed Madison Guaranty Savings &
cial prosecutor to examine the Clintons' in-
to wait until 1990. When Clinton ran for a
Loan, was angry at two prominent for-
vestment in Whitewater and its possible
fourth term, Nelson felt betrayed and
mer business partners: Gov. Bill Clinton
links to Madison's failure.
switched to the GOP. That year, an investi-
and Lt. Gov. Jim Guy Tucker. Nelson says
Nelson expects that the substance of his
gation Clinton ordered reportedly found a
that at a series of meetings over the next
discussions with McDougal will be part of
1982 Arkla gas-lease sale "imprudent." Nel-
few months, McDougal made accusations
Fiske's investigation. He says he taped at
son "is extremely bitter about Clinton,"
against both men. He also discussed an un-
least one of their conversations. A 38-page
says Tucker, now governor.
successful Ozark vacation-home develop-
transcript-authenticated by Nelson but
Some Clinton sources believe Nelson is
ment he co-owned with Bill and Hillary
obtained by NEWSWEEK from independent
even financing the legal defense of David
Clinton called Whitewater. "He wanted the
sources-quotes McDougal saying that the
Hale, a former Little Rock judge under fed-
materials passed on to others," Nelson
Clintons were not truthful about their
eral indictment for fraud charges. Hale
said last week. He says McDougal told him:
Whitewater losses. "I could sink [the claim
alleges that he was pressured by Clinton
"Just get them into the hands of some peo-
of a $69,000 loss] quicker than they could lie
and McDougal into lending $300,000 to
ple in the press."
about it
And Bill Clinton knows it,"
McDougal's wife to prop up Madison. Nel-
McDougal had the right man. Nelson, a
McDougal says, according to the transcript.
son denies any role in Hale's defense. But
wealthy former utility executive and Clin-
McDougal's attorney did not respond to
Clintonites are still wondering how far Nel-
ton's 1990 Republican gubernatorial oppo-
requests for comment.
son will go to settle an old score.
nent, is the president's most formidable po-
Clinton aides say that Nelson, motivated
MARK HOSENBALL in Little Rock
litical enemy in Arkansas-and
widely reputed to be an impor-
tant source of the anti-Clinton
documents, tips and raw gossip
McDougal: A Look Into the Hillary Papers
constantly circulating through
Little Rock. Like Cliff Jackson,
AS HILLARY RODHAM
another local lawyer and an ex-
W
former state official familiar
Clinton more deeply
with the records confirmed
Oxford chum of Clinton's who
involved in legal work
last week that the letter
has steered the press to allega-
for Whitewater partner James
contained Hillary Rodham
tions of draft avoidance and
McDougal than she has previ-
Clinton's full name.
womanizing, Nelson gets fre-
ously acknowledged? In 1985,
The White House says the
quent visits from out-of-townre
McDougal hired the Rose law
letter does not suggest a wider
porters. From his 34th-floor
firm to represent his ailing
role for Mrs. Clinton in her
office in the TCBY building,
savings and loan, Madison
representation of McDougal
Whitewater sprang to life as a
Guaranty, in dealings with
than previously disclosed. "I
national news story.
state regulators. Mrs. Clinton
LESTER NEWSWEEK
don't think any of that is new
Story disappears: Soon after
asked state securities commis-
New records: First Lady
information," says Bruce
Nelson says he began meeting
sioner Beverly Bassett (an ap-
Lindsey, one of President
with McDougal, Whitewater hit
pointee of her husband) to al-
Clinton has said that her per-
Clinton's senior advisers.
the national newspapers. When
low a novel plan that would
sonal involvement in the mat-
Regulators were not
an attorney hired by Clinton's
have permitted Madison to
ter was "minimal."
enthusiastic about the
presidential campaign showed
raise cash by selling preferred
But NEWSWEEK has discov-
brokerage scheme, though
that the Clintons had lost
stock. Bassett subsequently re-
ered additional correspond-
they never flatly rejected
$69,000 in the venture, the story
plied to the firm in a "Dear
ence linking Mrs. Clinton to
it. They only insisted that
disappeared. But late last year
Hillary" letter indicating her
state regulators. In state files,
Madison be recapitalized
federal investigators began to
consent. The letter raised the
her name is also on a 1985
through the stock sale first.
look into allegations that Madi-
possibility that McDougal re-
Rose firm letter asking
Neither plan was fol-
son had diverted depositor
ceived favorable treatment for
approval for Madison to set up
lowed. Buckling under
funds into Whitewater and Clin-
Madison because of his rela-
a brokerage subsidiary. A copy
millions in bad loans,
ton's 1984 gubernatorial cam-
tionship with the Clintons.
of the letter from files is only
Madison needed more than
paign. On Jan. 20. Attorney Gen-
Bassett denies extending any
partly legible; just the name
Mrs. Clinton's clout to keep it
eral Janet Reno named New
special consideration. Mrs.
"Clinton" is visible. But a
from failing in 1989.
York attorney Robert Fiske spe-
18 NEWSWEEK FEBRUARY 7. 1994
doubt she has authoritative qualifica-
tions. Just because she has a thought, that
doesn't make it true or even important
Power
enough to print. Of book reviewer Roma-
no, she says, "He wants me as a violated
woman with her legs spread. He needed
me there before he could address my
work." Am I reading a paperback? I find
MacKinnon too angry, antimale and
Players.
much too confined in her own views.
Bart C. Hood
Cupertino, California
Muddywater of Whitewater
I HAVE A HARD TIME SEEING THE FIRE
behind all the smoke being raised about
the Clintons' involvement in the so-
called Whitewater scandal [THE WHITE
HOUSE, Jan. 17]. No one has yet proved
any wrongdoing on the part of the Presi-
dent or the First Lady, who apparently
tried to fulfill her obligations as an attor-
Don't Rain on Her Parade
For Barbra
Streisand some
folks might think
that having a bad
day would be
making less than a
million bucks. Not
so. For Streisand
and some 16 of
her fans, our item
"Streisand: The
Year in Tantrums" was enough to
spoil things [CHRONICLES, Jan. 17].
John Graham of Belleville, Illinois, via
America Online, notes, "Barbra
Streisand doesn't need to answer to
anybody. She is the greatest
BE A POWER PLAYER. Join the team of To
theatrical talent of the past 500
years." In her defense, Christopher
The Contrary: They're hot, they're hip, they're
Morrison of Linden, Virginia,
sometimes outrageous-and they're all women.
comments, "Leave Barbra alone. She
does not denounce, snap or become
Noted Washington commentator Bonnie Erbe
angry. However, she just might
occasionally insist, but like 'buttah.'
and opinion leaders, congresswomen, former
Streisand herself reacted to TIME'S
cabinet officials and journalists analyze the news
Item with a sense of humor. She
writes: "What a bad day I'm having.
each week on PBS, from a powerful perspective.
First I had to fire my chambermaid
(the third one this month!) because
she didn't have warmed towels
To THE CONTRARY
waiting for me this morning. Then my
bagel got stuck in the toaster.
It's contrary to anything else on TV.
Naturally, I threw the toaster out the
window and hit the gardener in the
head, causing him to quit in a huff.
Call your local PBS station for airtime. A national production
That's O.K.-I always suspected him
of MARYLAND PUBLIC TELEVISION, nationally underwritten by:
of being a closet Republican. But
nothing prepared me for your mean-
TOYOTA
SUN
spirited attack. And to think I'm old
enough to remember when TIME had
"I love what you do for me"
HOME OF SUNOCO FUELS
real reporting."
8
TIME. FEBRUARY 7, 1994
EDI
EDI
EDI
ney to her client. Too many people in
TIN
CH
Washington and in the media aren't in-
PRI
terested enough in the truly important
AWED
issues affecting the U.S., like the budget
and health care.
Andrew K. Jacobson
For
San Jose, California
MA
AOL: AKJake
DEI
AS:
KEEP DIGGING. WHY TAKE FILES FROM
SEI
R
the office of Vince Foster, the Clintons'
AR
personal lawyer and White House coun-
sel, if there was nothing to hide? Maybe
14th National
you should call this affair Muddywater
instead of Whitewater.
Wallace Kane
Conference
Santa Maria, California
ST
AOL: WeK8891710
for Women
No Knowledge of Wright
I STRONGLY OBJECT TO THE INACCURATE
in Business
report about the Wexler Group and my
colleague Betsey Wright [CHRONICLES,
Jan. 17]. Wright has no "ties" to the Inter-
national Paper Co. [which TIME said sold
FRIDAY & SATURDAY MARCH 18 & 19
land to Whitewater development], as you
MARRIOTT MARQUIS, NYC
would have learned had you bothered to
ask us. Here are the facts: the Wexler
Group does perform public affairs work
for the American Forest and Paper As-
Over 350 Speakers, 100 Workshops,
sociation, of which International Paper
is a member. But the association re-
3 Networking Receptions and
tained our firm without knowing Wright
worked here, and she does not handle its
8 nationally-acclaimed Keynote Speakers
account. She did once telephone the
White House to help schedule a meeting
to inspire, entertain and challenge you
for the group's executives, but to assert
a link between one of the association's
to new levels of business success.
more than 450 members, Wright and a
land-development deal in Arkansas that
occurred almost 10 years earlier is ludi-
crous and unworthy of your publication.
KEYNOTERS INCLUDE:
Anne Wexler, Chairman
The Wexler Group
Sally Jessy Raphael
Washington
Kay Koplovitz, President, Founder
LETTERS TO THE EDITOR should be addressed to:
& CEO, USA Television Networks
TIME Magazine Letters
Time & Life Building Rockefeller Center
New York, New York 10020
Fax number: (212) 522-0601
Sheryl Leach
Letters may also be sent via the America Online
computer network.
Letters should include the writer's full name,
Creator of "Barney"
address and home telephone,
and may be edited for purposes of clarity or space.
Linda Fairstein,
Chief Sex Crimes Prosecutor, DA's Office, NYC
Subscription Renewals?
Gift Subscriptions?
Dr. Ruth Westheimer
Address Changes?
Tomima Edmark,
Creator of TopsyTail Hair Accessory
TIME
is ready to make time for you.
(800) 222-2933
Call toll-free
1-800-843-TIME
The American Woman's Economic Development Corp., a non-profit organization,
has helped women succeed in business through training and counseling for over 18 years.
PM-Mrs Clinton-S&L, 2nd Ld-Writethru, 650
Mrs. Clinton's Role in Lawsuit Settlement Questioned
EDS: Edits throughout to tighten.
CHICAGO (AP) Hillary Rodham Clinton represented federal thrift regulators
in a $3.3 million lawsuit against a Clinton friend and political ally and
ultimately settled the case for $200,000, the Chicago Tribune reported today.
President Clinton's personal and political connections to Dan Lasater have
been widely reported. But the Tribune report, based on court records, was the
first that Mrs. Clinton had represented the Federal Deposit Insurance Corp. in
a lawsuit accusing Lasater of fraud in the failure of a savings and loan.
Thomas Scorza, a former assistant U.S. attorney who teaches legal ethics
at the University of Chicago, said Mrs. Clinton's position raises questions
about her professional conduct.
A lawyer is required to represent the interest of their client
zealously, he said. There is a substantial question about whether an
attorney was representing a client zealously if the opponent of the client is
someone with whom the attorney had a political, financial and personal
relationship.
FDIC spokesman David Barr told the Tribune that FDIC attorneys are trying
to find records on the case to learn whether the Rose Law Firm, the Little
Rock, Ark., firm for which Mrs. Clinton worked, notified the federal agency of
any potential conflict of interest.
The first lady's press office did not immediately return a call today
seeking comment. The Tribune reported Mrs. Clinton's office declined to
respond specifically about the case but issued a general statement defending
her legal ethics.
Our view is that Hillary Clinton, when a lawyer at the Rose Law Firm,
acted with the utmost integrity and professionalism. I have no reason to
believe otherwise, press secretary Lisa Caputo told the Tribune.
It is the second time conflict of interest question have been raised
regarding the Rose firm's work for federal regulators.
In the other case, the firm's senior partner Webster Hubbell, now the No.
3 official at the Justice Department, was paid by the government in 1989 to
settle litigation against an accounting firm accused of negligence in the
failure of Madison Guaranty Savings and Loan in Arkansas.
The firm, including Mrs. Clinton, had done legal work for the S&L before
its failure.
FDIC officials have launched a formal investigation into whether Rose
failed to properly inform regulators of the potential conflict.
In the Lasater case, the settlement was reached in 1987. Whether Lasater
got off cheaply at the expense of taxpayers depends on his assets at the time
and the strength of the evidence against him.
Lasater is a convicted drug dealer who ran a bond trading firm. He signed
deals with several thrifts, including First American Savings and Loan in the
Chicago suburb of Oak Brook, to trade Treasury bond futures.
First American eventually sued Lasater's bond firm, accusing it of fraud.
First American was seized by federal regulators in 1986, before the
lawsuit went to court, and the head of the S&L, former Illinois Gov. Dan
Walker, was himself convicted of fraud. About the same time, Lasater was
convicted of cocaine trafficking and jailed.
Federal regulators decided to pursue First American's lawsuit. The FDIC
hired the Rose Law Firm to handle its cases in Arkansas.
Most of the law firm's S&L legal work was handled by Hubbell. But the firm
assigned the Lasater case to Mrs. Clinton and Vincent Foster, the White House
lawyer who committed suicide in July, the Tribune reported.
Mrs. Clinton and Foster negotiated the confidential settlement, the report
said.
Clinton's ties to Lasater were personal and political.
In the summer of 1985, Clinton successfully lobbied the Arkansas
Legislature to approve a contract for Lasater to sell $30.2 million in bonds
for the state police radio system. The contract earned Lasater's firm
$750,000.
In the early '80s, Lasater helped Clinton's half brother, Roger Clinton,
pay off drug debts. He also encouraged his workers to contribute to Clinton's
gubernatorial campaigns.
**** filed by:APW-(AR) on 02/03/94 at 11:20EST ****
**** printed by:WHPR(JEL) on 02/04/94 at 08:47EST ****
P-ED
The Washington Times
THURSDAY, FEBRUARY 3, 1994 / PAGE A17
tons' own personal lawyer, was killed
months later there's still no autopsy
The amazing world of Arkansas politics
by gunshot in a deserted park near
report, which police authorities say is
the nation's capital. He left a note,
highly unusual.
with the remark: "Here ruining peo-
The paramedics who picked up the
ple is considered sport." The death
body say it was lying neatly, the .38
n administration flack tore into a
with business before one of her hus-
the House Banking Committee, it was
Gennifer Flowers. If the president
was ruled a suicide, and nobody asked
caliber pistol gripped tightly in the
Washington columnist at an
band's regulator's.
"unseemly" and "inappropriate." At
wanted to be chivalrous toward his
questions.
right hand, with only a trickle of blood
inside-the-Beltway cocktail
"You ought to be ashamed of your-
least. And it still is.
wife in the face of Jerry Brown's accu-
The remark about the sport of
at
the
mouth. The paramedics say
arty not long ago when she asked a
self for jumping on my wife," said Mr.
Mr. Leach, who heads the House
sations, more power to him.
ruining people appealed to Washing-
this
highly unusual, too. Such gun-
ood question about his boss and
Clinton. "You're not worth being on
Republican inquiry into Whitewater-
George Bush also declined to pur-
ton's sense of power and hubris, but
shot
vounds usually leave "a real
/hitewater: "How can you keep
the same platform
Madison and who is widening his
sue Whitewater, for different reasons.
in the note went almost unnoticed,
mes:
Pathologists agree, adding that
ringing up Whitewater, undermin-
as my wife." It was
probe to include the selling of tax-
Either he was too much the gentle-
and in light of unfolding events some-
after
ich severe trauma to the mouth
all the good the Clintons want to
an odd rebuttal
exempt state development bonds in
man to fight with the Arkansas street
thing else in the note may be much
and
ad the gun is nearly always
for this country?"
from a man who
Arkansas, is more concerned about
fighter, or he didn't want to be seen as
more important: "The public will
four
I considerable distance from
His reply was not meant to intim-
had once cam-
the larger picture of "insider deals"
abusing the power of his presidency
never believe the innocence of the
the
'y, so great is the reflex of the
late so much as express rage and
paigned with his
and the general way Bill Clinton con-
to assign the Justice Department to
Clintons and their loyal staff." Do the
arm:
ewilderment by a Clinton true
wife on the slogan,
ducted the people's business in
pursue a criminal investigation, how-
Whitewater documents taken from
N.
of these questions have been
eliever: Impugn the motives of the
"Buy one, get one
Arkansas.
ever legitimate.
the Foster office by "loyal staff" just
addr
ed by the White House. There
uestioner. Attack with indignation
free."
"What you have is a picture of
Besides that, Whitewater was so
hours after his body was found shed
may
very good answers to all the
ather than answer the question.
Nevertheless, it
Milkenesque economic entangle-
complicated almost nobody under-
light on that?
ques
ns, but until there are, the
That's the method Bill Clinton used
worked. Almost
ments, in microcosm, in the state of
stood it.
We don't know. The White House
que:
is, like the white water on the
hen Jerry Brown asked a Whitewa-
everybody, other
Arkansas," he says, invoking the
Then Vince Foster, the deputy
won't say. We don't know a lot of things
Whi
iver deep in the Ozarks, won't
question in a 1992 campaign
Suzanne
candidates and
dread name of Michael Milken, the
White House counsel and the Clin-
about how Mr. Foster died because six
go a
ebate, suggesting a conflict of inter-
Fields
most reporters,
Wall Street junk bond dealer who
it between the governor's office and
withdrew from
served a prison sentence for fraud.
ie work Hillary Rodham Clinton had
asking questions
The underlying psychological the-
one for clients of the Rose law firm
about Whitewater. But the first lady's
ory, if not logic, for the lack of inves-
role as defender of Madison Guaran-
tigative reporting into Whitewater-
ty Savings and Loan Association,
Madison during the presidential
Suzanne Fields, a columnist for The
owned by her partner in Whitewater
campaign is simple. Most reporters
ashington Times, is nationally syndi-
land development, was more than
were tired of George Bush, and
sted Her column appears here Mon-
questionable. According to Rep. Jim
thought Bill and Hillary had suffered
ly and Thursday.
Leach, the ranking Republican on
enough, enduring the accusations of
Conflict-of-interest probe of Hillary's Arkansas law fir nears end
By Jerry Seper
viously represented the S&L.
business partner of President and
ton. She was paid $2,000 a month by
charged that Madison and
F
st
sub-
Mr. Hubbell has recused himself
THE WASHINGTON TIMES
The FDIC is looking into accusa-
Mrs. Clinton, is the focus of an on-
Mr. McDougal over a 15-month pe-
mitted a faulty audit in su
ort
of
from the current case and declines
tions that Rose lawyers Webster L.
going Justice Department investiga-
riod to offer a preferred stock plan
arguments that enabled M:
son to
comment. A Justice Department
Federal banking regulators say it
Hubbell, now associate attorney
tion into suspicions of illegal loans
as a means of reorganizing the thrift
remain in business. It was
same
spokesman has said the associate at-
will take "10 days to two weeks" to
general, and Vincent W. Foster Jr.,
and campaign fraud.
to keep it in business.
audit the Rose firm had f
four
torney general recalls the firm's rep-
end an ongoing probe into a possible
the deputy White House counsel
The FDIC launched a formal in-
The plan was based on audit find-
years earlier in its defense
Madi-
resentation of Madison was re-
conflict of interest involving a failed
who killed himself July 20, made
vestigation in December into allega-
ings by Frost & Co., a Little Rock
son before state regulators
vealed. An FDIC official said no
Arkansas thrift and first lady Hil-
false statements to regulators - a
tions that Rose had misled federal
accounting firm. The plan was never
Raising further conflict
cerns
written record of Mr. Hubbell's ex-
lary Rodham Clinton's former Little
criminal offense that could result in
regulators about the firm's dealings
put into operation, but Madison
are court records showing
Mr.
change with the agency has been
Rock law firm.
the firm being banned from future
with Madison.
wasn't closed by federal banking
Hubbell's father-in-law, Se
Ward,
found.
David Barr, spokesman for the
government work.
"Our legal division is looking into
regulators until 1989, at a cost to tax-
was an officer of a Madiso
es-
The FDIC suit initially sought to
Federal Deposit Insurance Corp.,
Law firms representing the FDIC
whether we were misled by the Rose
payers of $50 million.
tate subsidiary at the time
Hub-
recover $10 million in damages on
said investigators were "tying up
are required by law to establish po-
Law Firm back in 1989," Mr. Barr
In 1989, the Rose firm solicited
bell agreed to handle the FI
case.
five separate counts. It was settled
loose ends" in an inquiry that bank-
tential conflicts of interest before
said at the time. "We're looking into
legal work from the FDIC. Mr. Fos-
Mr. Ward's involvement wi
Madi-
out of court in 1991 for $1 million,
ing regulators had said they were on
agreeing to represent the govern-
all aspects of our dealings with Rose,
ter told FDIC officials in a letter that
son, sources say, was well
wn at
less than the insurance coverage
the verge of completing last month.
ment. The Rose firm was paid
and nothing has been resolved yet."
"the firm does not represent any sav-
the time.
held by Frost at the time.
The probe is aimed at determin-
$400,000 by the government for su-
Arkansas records show Mrs. Clin-
ings and loan associations in state or
Mr. Ward defaulted on m
than
Mr. McDougal, his then-wife, Su-
ing whether the Rose Law Firm told
ing Madison in 1989, four years after
ton represented Madison in 1985
federal regulatory matters."
$587,000 in Madison loans
d, ac-
san, and the Clintons were partners
federal regulators during a 1989
it had represented the thrift before
when the S&L was threatened with
The lawsuit, aimed at the Frost
cording to records, was cor
dered
in Whitewater Development Corp. at
government lawsuit against Madi-
state regulators.
being closed as insolvent by state
audit, was handled personally by Mr.
by the government to be a p
me of-
the time of Mrs. Clinton's represen-
son Guaranty Savings and Loan As-
Madison, owned by James B.
banking regulators who answered
Hubbell, now the No. 3 official at the
fender in the abuse of
1
idison
tation of Madison before state bank-
sociation that the firm had pre-
McDougal, a longtime friend and
to her husband, then-Gov. Bill Clin-
Justice Department. The FDIC suit
funds.
ing regulators.
The Washington Times
THURSDAY. FEBRUARY 3. 1994
BC-USA-HILLARY 1STLD
NEW ETHICS TANGLE MAY SMUDGE U.S. FIRST LADY
(Eds: adds FDIC comment on agency involved, 10th para, revises para 9 and
11,
By Irwin Arieff
WASHINGTON, Feb 3 (Reuter) - A new ethical tangle involving Hillary
Rodham Clinton may further smudge her sparkling image as the model of a modern
activist first lady.
Testifying last fall before congressional committees on her plan for
health care reform, Mrs Clinton awed lawmakers -- and hogged headlines around
the world -- with her polished presentation and mastery of the complex issues
at hand.
Now, just a few months later, her blueprint for reform is crumbling and
federal authorities are probing possible ethical lapses during her career as
an influential lawyer while her husband served as Arkansas governor.
Since sending his wife's plan to Congress, President Clinton has
distanced himself from the proposal, stating repeatedly that all but one of
its provisions -- a guarantee of universal access to care -- was open to
compromise.
In addition, federal investigators have been probing her role in the
president's complex ties to Whitewater Development Corp, which are now under
investigation by special counsel Robert Fiske.
Mrs Clinton and her Rose Law Firm pursued on behalf of federal banking
regulators a suit against an affiliate of the failed Madison Guaranty Savings
and Loan institution after earlier representing Madison Guaranty before a
state regulator appointed by her husband.
The Federal Deposit Insurance Corp (FDIC) is reviewing whether Mrs
Clinton or her firm misled the government about its previous ties to the
savings and loan institution, commonly known in the United States as a
`thrift.
Now, new questions involving Mrs Clinton's ethics as a private lawyer
have surfaced in Thursday's Chicago Tribune.
In a matter with strong parallels to the Madison case, the newspaper
reported that she may have concealed a conflict of interest in pursuing, also
on behalf of federal banking regulators, a legal settlement with a family
friend and associate, Arkansas businessman Dan Lasater.
While the Tribune's report identified the federal agency pursuing the
suit as the FDIC, FDIC officials said it had been the now-defunct Federal Home
Loan Bank Board.
On the board's behalf, Mrs Clinton and her law firm in 1987 settled a
lawsuit against Lasater's bond trading firm stemming from its dealings with
the failed First American Savings and Loan Association in Oak Brook, Illinois.
While initially filed for $3.3 million, the suit was confidentially
settled for $200,000.
Lasater was a personal friend of the Clintons' and of the president's
mother, the newspaper said, adding that he had raised money for Clinton's
campaigns for governor, lent him his private airplane for campaigning and lent
money to Clinton's brother Roger, allegedly to settle a cocaine debt.
The report questioned whether Mrs Clinton should have informed the FDIC
of her ties to Lasater before working on the case, and whether the settlement
was fair.
Lisa Caputo, Mrs Clinton's spokeswoman, told Reuters the ethics questions
were being thrown up as diversions'' and said: ``The first lady and this
administration are not going to be diverted from the president's agenda.
A spokesman for the FDIC said he was looking into the matter and would
have no immediate comment.
REUTER
****
filed by:RB--(--) on 02/03/94 at 17:37EST ****
**** printed by:WHPR(JEL) on 02/04/94 at 08:46EST ****
BC-CLINTON-HILLARY 2NDLD
SECOND CASE MAY ATTRACT CLINTON INVESTIGATION
(Els: adds FDIC comment on agency involved, 4th para)
CHICAGO, Feb 3 (Reuter) - Hillary Clinton may not have disclosed her
close ties to a family friend when she settled a government lawsuit against
him involving a failed Illinois savings and loan, the Chicago Tribune
reported Thursday.
The report also raised questions about the fairness of the confidential
$200,000 settlement of the original $3.3 million lawsuit arranged against the
friend, Dan Lasater, in 1987 by Hillary Clinton and Vincent Foster while
acting as attorneys for
a federal banking agency.
The newspaper suggested that the Illinois case could prove as troubling
to the Clintons as the Whitewater development investigation if the special
prosecutor recently appointed to scrutinise that case makes good on his pledge
to publish a report on the Clintons' pre-White House business and political
relationships.
The Tribune identified the federal agency pursuing the suit as the
Federal Deposit Insurance Corp, but FDIC officials said it had been the
now-defunct Federal Home Loan Bank Board.
Lasater, an Indiana-born restauranteur who founded the Ponderosa
restaurant chain, underwrote millions of dollars worth of bonds for Arkansas
while Bill Clinton was governor and was a strong supporter and financial
contributor to Clinton's Arkansas campaigns, the newspaper said.
The report described Lasater as a high-flying figure on the Little Rock
social circuit who made friends with Clinton's mother Virginia Kelley at the
racetrack. He was convicted in 1986 of possession and distribution of cocaine.
He also loaned $8,000 to Clinton's brother Roger, allegedly to settle a
cocaine debt, and gave the younger Clinton a job at his Florida horse farm,
the report said.
The case involving Lasater raises further questions about potential
conflicts of interest while Bill Clinton was governor of Arkansas and his wife
was an attorney at the politically-connected Rose Law Firm in Little Rock, the
Tribune said.
Asked about the first lady's conduct while at the law firm, Mrs Clinton's
spokeswoman Lisa Caputo told Reuters, ``Our view is that Mrs Clinton, while a
lawyer at the Rose Law Firm, acted with the utmost integrity and
professionalism.'
Special prosecutor Robert Fiske recently began an investigation into the
defunct Whitewater land development in which the Clintons' partner was James
McDougal, another Little Rock businessman and Clinton supporter who led the
Madison Guaranty Savings and Loan into bankruptcy that cost taxpayers $47
million.
Court records reviewed by the Tribune disclosed the confidential
settlement of the lawsuit with Lasater, who allegedly made unauthorised and
losing trades in highly risky Treasury bond futures contracts for the First
American Savings and Loan, located in the Chicago suburb of Oak Brook, the
report said.
The savings and loan, which was run by former Illinois governor Dan
Walker, lost $361,572 in Lasater's futures transactions and was seized by
federal regulators in 1986.
The government decided to pursue the savings and loan's $3.3 million suit
against Lasater and enlisted Hillary Clinton's law firm, it added.
Webster Hubbell, now the number three official at the Justice Department,
handled most of the firm's work on savings and loans, but Hillary Clinton and
Vincent Foster were assigned to the. suit against Lasater, the newspaper said.
Foster was White House counsel when he committed suicide last July.
The amount of the $200,000 settlement was discovered by the Tribune in a
letter Foster wrote to federal regulators, the newspaper said.
The newspaper quoted legal experts as saying the amount of the
out-of-court settlement may or may not have been justified, depending on
Lasater's assets and the strength of the evidence against him.
But Hillary Clinton's participation on behalf of the government may have
represented a conflict of interest, the experts said.
Commenting on the report, Cornell University ethics law professor Charles
Wolfram told Reuters there was not enough information available to know if
there was a true conflict of interest on Hillary Clinton's part.
He said the amount of the settlement may have been perfectly reasonable
and just because Lasater had a relationship with Bill Clinton does not mean
the same applied to the first lady.
The situation, he said, was perfectly opaque.
REUTER
**** filed by:RB--(--) on 02/03/94 at 19:03EST ****
**** printed by: WHPR (JEL) on 02/04/94 at 08:46EST ****
bc-whitewater
NEXT WHITEWATER CHAPTER:
WILL THERE BE HEARINGS?
UPDATE: Fixing wording of efforts to reach Levy in 17th graph)
By JOHN HANCHETTE=
Gannett News Service=
WASHINGTON The ride seems about to get rougher for the White House in the
Whitewater affair.
Only a few days ago, the Republican push for a congressional hearing on
the complicated Arkansas realty venture involving the Clintons appeared dead.
But it is gaining strength, despite ferocious political infighting and a
vigorous game of parliamentary hot potato among Democratic leaders on Capitol
Hill.
The administration though unwilling to say so publicly does not want
congressional hearings with their lengthy televised sessions, lack of control
over witnesses, and probably dozens of news leaks daily from staff and
members.
The White House would prefer a quiet, forget-about-it probe by Robert
Fiske Jr., the special counsel Attorney General Janet Reno appointed two weeks
ago.
The push for Whitewater hearings before the House Banking Committee gained
new strength Thursday from two developments:
A report in the Chicago Tribune that Hillary Clinton represented the FDIC
in a $3.3 million suit against bond broker Dan Lasater, a friend, fiscal
supporter and political ally of her husband. Hillary and law partner Vince
Foster, the deputy White House counsel who apparently committed suicide in
July, settled the case in 1987 for $200,000. Lasater, a convicted drug dealer,
had helped pay off drug debts of Clinton's younger half-brother Roger. In
1985, then-Gov. Clinton successfully urged state lawmakers to approve a no-bid
$30 million contract with Lasater for state police radios. Lasater got
$750,000 in fees.
A report in the New York Post that former FBI director William Sessions,
fired by Clinton, now claims FBI agents were held back from the probe of
Foster's mysterious suicide because of an internal Justice Department power
struggle in which the Foster had been involved. The FBI role in investigating
Foster's gunshot death was compromised from the beginning, Sessions is
quoted. The U.S. Park Police conducted the probe because Foster was found in a
federal park. The Park Police report still is kept secret by the White House.
Foster had represented the Clintons in tidying up tax matters relating to
their participation in the Whitewater realty venture with business partner
James McDougal, owner of Madison Guaranty Savings & Loan. The thrift failed in
1989 at a bailout cost of $60 million to taxpayers.
Much of the Capitol Hill maneuvering involves House Speaker Thomas Foley
of Washington and the feisty veteran chairman of House Banking, Rep. Henry
Gonzalez, D-Texas.
Bottom line: Gonzalez says the hearings are Foley's decision. Foley says
the hearings are Gonzalez's decision.
The ball really is in the Democratic leadership's court, Gonzalez
spokesman Julie Black said Thursday. The chairman is not going to do
anything until the leadership decides.
Foley: ``As far as hearings are concerned, that's a matter for committees
to determine. I don't set up hearing schedules. I don't determine hearings by
committees.
Gonzalez has a reputation for pursuing with full committee hearings the
slightest whiff of any banking scandals, regardless of partisan connections.
But he steadfastly has refused to call a hearing on Whitewater and Madison
Guaranty, despite pressure to do so from ranking Republican Jim Leach of Iowa.
On Tuesday, however, Gonzalez was ambushed in debate on the House floor
with a surprise barrage of questions from Rep. Robert Walker, R-Pa., deputy
GOP whip. Walker insisted on knowing if Whitewater hearings would be
scheduled. Gonzalez appeared to promise, unequivocally, they would.
The answer is yes, he said at one point, when asked if they would come
before congressional adjournment at the end of 1994. ``Oh, long before that.
Then Wednesday, Gonzalez met privately with other Democratic committee
chairmen, and participants told colleagues the subject was how to limit the
questioning from Republicans on various Whitewater matters.
Reports in Newsweek that Gonzalez is `under pressure from aides to
Treasury Secretary Lloyd Bentsen to block an inquiry or risk the loss of his
chairmanship'' were vigorously denounced Thursday by House Banking Committee
staffers. Other Capitol Hill aides said the Bentsen message has been delivered
frequently by the Treasury Department's assistant secretary for legislative
affairs, Michael Levy, who was not immediately available for comment.
Levy talks with us all the time, said Gonzalez spokesman Black. ``But
the chairman has vehemently denied allegations that he was somehow counseling
us not to hold Madison hearings. No one at Treasury or the White House has
told the chairman what to do. He says he's had more contact with the Bush
White House than the Clinton White House.
Black said Gonzalez long has planned to hold `oversight''' hearings into
the Resolution Trust Corp., the agency cleaning up the S&L mess. Those
hearings, required by law every six months, had been inked in for Jan. 26 and
Feb. 1, but Bentsen, a member of the RTC oversight board, has had other
business.
Black says Foley has been asked to interpret a long-standing House
parliamentary rule that would permit Republicans to call any witnesses they
want in an RTC oversight hearing even relating to Whitewater so long as 11
of the 20 GOP members of the panel agree.
`Foley has to decide, said Black. ``Gonzalez has asked him to make the
call.
**** filed by:GN-F(--) on 02/03/94 at 20:09EST ****
**** printed by:WHPR(JEL) on 02/04/94 at 08:46EST ****
BC-CLINTON-PROSECUTOR
ARKANSAS AWAITS WHITEWATER COUNSEL
By Steve Barnes
LITTLE ROCK, Ark, Feb 3 (Reuter) - The city President Clinton called
home for the past 18 years is awaiting the return of the special counsel who
will investigate him.
Special Counsel Robert Fiske has made only one visit to Little Rock, on
January 25, since his appointment to investigate the Whitewater case, and it
was not known when he planned to return to begin work.
The General Services Administration has signed a three-year lease for
several thousand feet of space for the special counsel in the building that
also houses the Little Rock offices of the FBI.
They ought to bring a lot of money with them, remarked a hopeful
cocktail waitress at a trendy west Little Rock restaurant only blocks from the
office building where Fiske and his staff will be headquartered.
Fiske, a former U.S. prosecutor, was named independent counsel in the
so-called Whitewater case last month.
The investigation centres on whether the failed Madison Guaranty Savings
& Loan in Arkansas improperly funnelled money into Clinton's 1984 re-election
campaign for governor, and on the Clintons' relationship with businessman
James McDougal.
Fiske has said he plans to question Clinton and his wife Hillary under
oath.
The Chicago Tribune reported Thursday that a second case involving
business ethics in the private dealings of the Clintons may draw Fiske's
attention.
The case involves a confidential settlement negotiated by lawyer Hillary
Clinton in 1987 in a court case in which she represented the federal
government in a suit against Arkansas businessman Dan Lasater, a Clinton
family friend, according to the newspaper.
Meanwhile, Little Rock is beginning to take on the atmosphere it had when
Clinton was running for president.
Media junkies are atwitter anew with the famous faces in the Capitol
Hotel bar and the expense account American Express cards are again on fire at
Does, said Max Brantley, editor of the weekly Arkansas Times, referring to
two Little Rock establishments popular with reporters and campaign staff
members during 1992.
It's like the campaign all over again,' said Brantley.
REUTER
**** filed by:RB--(--) on 02/03/94 at 21:25EST ****
**** printed by:WHPR(JEL) on 02/04/94 at 08:45EST ****
FRIDAY
FEBRUARY
4
1994
USA
TODAY
Whitewater
Lot 7: Originally
Whitewater
reserved for Clinton
Mo.
retirement home
paper trail
Jonesboro
Tenn
40
Little
40
Okla
Rock
Miss
a muddy one
White River
30
Ark
N
0
75
Texas
La.
miles
By Dennis Cauchon
came from Madison Market-
USA TODAY
ing. And Madison Marketing
got all its money from Madison-
YELLVILLE Ark. - If the
S&L whose failure cost taxpay-
devil is in the details, the spirit
ers at least $47 million. Madi-
of Whitewater may reside on
son Marketing was owned by
Whitewater Estates
Lot 13 on County Road 666.
Susan McDougal, James
Located on a dirt road, Lot
McDougal's wife.
13 is a 2.7-acre wooded plot
White House aide Bruce
where Hillary Rodham Clinton
Lindsey says it's irrelevant
Lot 13: Where Hillary Rodham
built a model home to spark
whether the money came from
Clinton had model home built
sales of Whitewater lots.
a McDougal personal account
Nothing illegal has been
or Madison Marketing.
By Marty Baumann, USA TODAY
found in its handling, but the
"There's nothing improper
paperwork is so sloppy that
about it" he says. Other quirks:
seemingly simple transactions
Bank of Kingston, owned
News report questions
are clouded in mystery.
by James McDougal, loaned
Land and mortgage records
Hillary Clinton $30,000 on Dec.
are an inconsistent mish-mash
16, 1980 - 10 days before she
first lady's role in sui
of dates, dollars and owners.
owned Lot 13, which was used
The imprecise paperwork is
as collateral.
all the more unusual because it
It is unusual - but not a
By Dennis Cauchon
professionalism." Of the allega-
was done by a banker, James
USA TODAY
crime - for a bank to ican first
tions, she said: "These things
McDougal; a respected lawyer,
and get the collateral later.
are thrown up as a diversion."
Hillary Clinton; and a veteran
Hillary Clinton got Lot 13
The Chicago Tribune report-
In other Whitewater news,
real-estate agent, Chris Wade.
without paying for it. She paid
ed Thursday that Hillary Rod-
Rep. Jim Leach, R-Iowa. asked
"The whole Whitewater
ham Clinton worked for feder-
no income taxes for getting the
Thursday for a ruling on
thing smacks of very poor
property, worth about $3,000.
al regulators in a lawsuit filed
whether the head of the Reso-
bookkeeping." says Thomas
The White House says the lot
against Clinton friend and in-
lution Trust Corp. should re-
Ochsenschlager, a Washington
vestment banker Dan Lasater.
and home were effectively
move himself from all White-
tax lawyer and accountant
Her law firm settled a $3.3
owned by Whitewater.
water-related decisions.
"From what I can tell, no
Hillary Clinton loaned the
million suit against Lasater &
RTC acting chief Roger Alt-
one was trying to do anything
$30,000 back to Whitewater in
Co. for $200,000. The case in-
man, Clinton's college room-
wrong but it is acutely embar-
"a mirror loan," says Lindsey,
volved First American Savings
mate, is deputy Treasury sec-
rassing for a partner in the
and Whitewater made the loan
and Loan, an Oak Brook, III.,
retary. He has been filling in as
most prestigious law firm in
S&L that failed in 1986.
payments. But no public docu-
head of the independent agen-
Arkansas to be involved in
ments reflect a mirror loan.
Lasater, a Little Rock busi-
cy because the job is vacant.
something with such unusually
"It's pretty hard to construct
nessman, was a political sup-
Leach, who is leading the
sloppy paperwork."
a scenario where Hillary
porter of Gov. Bill Clinton. He
Whitewater investigation. said
If the Clintons did nothing
doesn't have some tax liability
also employed Roger Clinton,
the probe puts Altman in "an
wrong, the Whitewater story
on the property," Ochsensch-
the president's half-brother.
awkward position" because
has lingered in part because of
lager says. Most likely she
Lasater and Roger Clinton
Madison Guaranty Savings &
poor paperwork that might be
should have reported the value
pleaded guilty to cocaine
Loan - a failed thrift owned
interpreted as nefarious.
of the property as a dividend
charges that were related.
by Clinton's Whitewater part-
Lot 13 perfectly illustrates
from Whitewater, he says.
The suit was handled prop-
ner James McDougal - is at
the Clintons' paper problems.
The Clintons bought Lot 13
erly, says Lisa Caputo, Hillary
the center of the controversy.
The story of Lot 13 should be
again in November 1988, ac-
Clinton's spokeswoman. "Mrs.
Altman had no immediate
simple: Hillary Clinton bor-
cording to county land and
Clinton, when she was a lawyer
comment. "It's being re-
rowed $30,000, built a modular
at the Rose Law Firm, acted
bankruptcy court records.
viewed," said Treasury spokes-
home and sold it to a Mississip-
Their taxes show they owned
with the utmost integrity and
man Howard Schloss.
pi man. The man went broke.
the property in March 1987.
The Clintons got the property
The Clintons' tax returns
back from bankruptcy court
show the property was sold for
and resold it.
$23,758. County land and asses-
But the paperwork at the
sor records say it was $28,000.
courthouse here and else-
Those discrepancies don't
where is full of quirks.
prove wrongdoing, but they il-
For example, the Clintons
lustrate why questions persist.
recorded selling the property
The White House has an-
for the second time on Nov. 28,
swers for most questions.
1988 - three days before they
For example, the Clintons
recorded buying it back.
rely on Denver attorney James
out it is odd.
Lyons' report to show they lost
The most serious problem
$68,900 on Whitewater, al-
for Clinton is that Lot 13 pro-
though they haven't claimed
vides a link between the failed
the full loss on their taxes.
Madison Guaranty Savings and
The Lyons report details the
Loan and the Clintons.
Clintons' Whitewater finances
Records show that in No-
from 1980 through 1991 - ex-
vember 1985, Whitewater De-
cept for 1990, which is omitted
velopment Co. Inc. made a
without explanation.
$7,322 payment on a loan taken
Lindsey says there was no
out by Bill Clinton on Lot 13.
accountant worksheet for 1990,
The problem: Whitewater's
so the information was merged
money to pay Clinton's loan
with 1991.
96
PM-Mrs Clinton-S&L, 770
First Lady Settled Government Case Against Family Friend
By RICHARD KEIL= Associated Press Writer=
WASHINGTON (AP) For the second time in a month, conflict-of-interest
issues have been raised over the work of the Rose Law Firm, where Hillary
Rodham Clinton and Associate Attorney General Webster Hubbell were partners.
On Thursday, it was disclosed that Mrs. Clinton represented the government
in an Illinois savings-and-loan case involving a family friend and political
supporter, settling the lawsuit against him for less than a dime on the
dollar.
The government now is trying to determine whether Mrs. Clinton provided
regulators the required notification of a potential conflict of interest, and
if so, how she got the contract anyway.
In that case, Mrs. Clinton settled a $3.3 million suit for $200,000
against Dan Lasater, who had personal and political connections to President
Clinton.
David Barr, a spokesman for the Federal Deposit Insurance Corp., said the
FDIC is now searching its Chicago office to find out if it has any written
record of a conflict-of-interest disclosure.
Law and accounting firms generally are barred from representing the
government in S&L cases if they have previously represented the S&L, or have
personal ties to any officials or targets of the lawsuit.
They are required to notify the federal agency in Mrs. Clinton's case the
now-defunct Federal Savings & Loan Insurance Corp. (FSLIC) of any conflicts
before getting such contracts.
Lisa Caputo, the first lady's press secretary, said Thursday she did not
know whether Mrs. Clinton had supplied FSLIC officials with the required
notification. But she offered a broad defense of Mrs. Clinton's legal work.
``Our view is that Mrs. Clinton, while she was a lawyer at the Rose firm,
acted with the utmost integrity and professionalism,' Caputo said.
Officials at the Rose firm in Little Rock, Ark., did not return
a call Thursday seeking comment.
The FSLIC, for which Mrs. Clinton settled the lawsuit, was dissolved in
1989 during a reorganization of federal banking agencies, and its records were
turned over to the FDIC.
FDIC spokesman Barr said the agency suspects the Lasater case records are
at its Chicago office, but they had not been located as of late Thursday.
In another case, Hubbell, the Rose firm's senior partner, was paid by the
government in 1989 to settle litigation against an accounting firm accused of
negligence in the failure of Madison Guaranty Savings and Loan in Little Rock.
The firm, including Mrs. Clinton, had done legal work for the S&L before
its failure.
FDIC officials have launched a formal investigation into whether Rose
failed to properly inform regulators of that potential conflict.
The Lasater case was settled in 1987. The question of whether such a
settlement was lenient often revolves around the defendant's ability to pay
and the degree to which he or she can be blamed for the thrift's financial
woes.
Lasater, a convicted drug dealer, ran a bond trading firm. He signed deals
with several thrifts, including First American Savings and Loan in the Chicago
suburb of Oak Brook, to trade Treasury bond futures.
First American eventually hired the Rose firm to sued Lasater's bond
company for fraud, Barr said.
First American was seized by federal regulators in 1986, before the
lawsuit went to court, and the head of the S&L, former Illinois Gov. Dan
Walker, was himself convicted of fraud. About the same time, Lasater was
convicted of cocaine trafficking and jailed.
Federal regulators decided to pursue First American's lawsuit, and FSLIC
stuck with the Rose firm in its dealings with Lasater, Barr said.
Most of Rose's S&L work was handled by Hubbell. But the firm assigned the
whitewater a1843
TTN: National editors) (Includes optional trims)
ederally Insured Deposits Helped Pay Off Clinton Loan (Washn)
By Sara Fritz= (c) 1994, Los Angeles Times=
WASHINGTON Federally insured deposits were diverted from Madison Guaranty
Savings & Loan of Little Rock, Ark., in 1985 to make a $7,300 payment on a
personal bank loan owed by then-Gov. Bill Clinton and his wife, Hillary, as
part of their investment in the Whitewater real estate development, according
to congressional investigators.
James McDougal, owner of the thrift and the Clintons' business partner in
the Whitewater real estate venture, used the Madison funds to make the payment
on a loan the Clintons had obtained to build a model home on the site of the
development, Republican staff investigators said.
If corroborated by the ongoing broad federal inquiry into the Whitewater
deal, the payment would be evidence that federally insured funds were used to
subsidize the Clintons' controversial, ill-fated real estate venture with
McDougal and his former wife, Susan.
And the transaction provides a further indication that matters involving
Whitewater were not always handled in arms-length, by-the-book fashion.
The $7,300 was not a formal loan to the Clintons, investigators indicated,
but rather an informal payment that helped them at a time when Whitewater was
experiencing difficulties. The development eventually failed and Madison was
later closed by federal regulators in a bailout that cost the U.S. Treasury
more than $47 million.
The Clintons, who became business partners with the McDougals in 1978,
have said they were purely passive investors in Whitewater and were unaware of
any improper or illegal actions McDougal may have made involving Whitewater.
Republicans on the House Banking Committee, however, are pressing for a
full public accounting of what they believe was a cozy business relationship
between the then-governor and McDougal that may have permitted Madison to
operate without strict state regulatory oversight.
This is clear evidence of a small amount of fire amidst the smoke,
said Rep. Jim Leach, R-Iowa, ranking Republican on the House Banking
Committee, whose staff uncovered the evidence.
Given the above circumstances, said a memo written to Leach by his
staff, it would appear that federally insured deposits, which, with the
later failure of Madison, became, in effect, taxpayer obligations, were
transferred for the direct personal benefit of the former governor.'
Both the Clintons and Whitewater took a tax deduction for paying interest
on the loan. White House aides have said it was an accidental double
deduction. However, this new information may raise the question of whether
the Clintons also failed to report the payment on their tax return as
personal income.
(Optional add end)
As the memo to Leach noted: What remains unclear is the larger question
of whether the funds provided by Madison to reduce the Clintons' liability
were proper or properly reported as income for income tax purposes
....
If Madison provided any direct or indirect assistance to Whitewater,
presumably half the value of such (assistance) would redound to the advantage
of each of the half-owners. In any regard, the above money transfer
underscores that then-Gov. Clinton has personal liabilities reduced by a
payment from Madison.
Such payment presumably carries ethical as well as tax implications and
is part and parcel of the $47 million to $60 million estimated taxpayer loss
at Madison.
McDougal, who became a friend of Clinton in the late 1960s, when both men
worked for Sen. J. William Fulbright, D-Ark., was removed from control of
Madison in 1986 after federal regulators concluded he had followed unsound
practices. He was tried and acquitted on charges of bank fraud.
**** filed by: LAWP on 02/04/94 at 02:34EST ****
**** printed by: (162) on 02/04/94 at 03:22EST ****
NATION
Hillary represented
FDIC against friend
Paper cites 'glaring conflict of interest'-
CHICAGO (AP) - Hillary Rod-
trying to find records on the case to
ham Clinton represented federal
learn whether the Rose Law Firm,
thrift regulators in a $3.3 million
the Little Rock, Ark., firm for which
lawsuit against a Clinton friend and
Mrs. Clinton worked, notified the
political ally and ultimately settled
federal agency of any potential con-
the case for $200,000, the Chicago
flict of interest.
Tribune reported yesterday.
The first lady's press office did
President Clinton's personal and
not immediately return a call yester-
political connections to Dan Lasater
day seeking comment. The Tribune
AP
have been widely reported. But the
reported that Mrs. Clinton's office
The Clintons attend a prayer
Tribune report, based on court rec-
declined to respond specifically
breakfast yesterday in Washington.
ords, was the first to reveal that Mrs.
about the case but issued a general
Clinton and the late Vincent Foster
statement defending her legal eth-
had represented the Federal Deposit
ics.
In the summer of 1985, Mr. Clin-
Insurance Corp. in a lawsuit accus-
"Our view is that Hillary Clinton,
ton successfully lobbied the Arkan-
ing Mr. Lasater of fraud in the fail-
when a lawyer at the Rose Law Firm,
sas legislature to approve a contract
ure of a savings and loan.
acted with the utmost integrity and
for Mr. Lasater to sell $30.2 million
"The Illinois S&L case suggests
professionalism. I have no reason to
in bonds for the state police radio
that Hillary Clinton, as a private at-
believe otherwise," press secretary
system. The contract earned Mr.
torney, had a glaring conflict of in-
Lisa Caputo told the Tribune.
Lasater's firm $750,000.
terest," it said. "As an attorney for the
The story described entangled re-
It is the second time conflict-of-
FDIC she helped negotiate a secret,
lations among those close to the Clin-
interest questions have been raised
out-of-court settlement that ended
tons in Arkansas, and now serving in
regarding the Rose firm's work for
the government's suit against a fam-
the White House, and Mr. Lasater. It
federal regulators.
ily friend and an influential benefac-
noted that in 1987, when Mr. Lasater
tor of her husband."
was sent to prison, he gave legal
In the other case, the firm's senior
authority for managing his assets to
partner, Webster Hubbell, now the
Thomas Scorza, a former assis-
tant U.S. attorney who teaches legal
Patsy Thomasson, a key Clinton sup-
No. 3 official at the Justice Depart-
ethics at the University of Chicago,
porter in Arkansas.
ment, was paid by the government in
said Mrs. Clinton's position raises
Miss Thomasson, now director of
1989 to settle litigation against an
questions about her professional
the White House Office of Admin-
accounting firm accused of negli-
istration, was one of three White.
gence in the failure of Madison
conduct.
House employees who entered Mr.
Guaranty Savings and Loan in Ar-
"A lawyer is required to represent
kansas.
the interest of their client zealously,"
Foster's office three hours after his
he said. "There is a substantial ques-
death last summer and oversaw the
The firm, including Mrs. Clinton,
tion about whether an attorney was
removal of documents relating to
had done legal work for the S&L be-
representing a client zealously if the
Whitewater and other matters he
fore its failure.
opponent of the client is someone
was working on when he died.
In the Lasater case, the settle-
with whom the attorney had a politi-
The Tribune story also noted that
ment was reached in 1987. Whether
cal, financial and personal relation-
Mr. Lasater contributed to Mr. Clin-
Mr. Lasater got off cheaply at the
ship."
ton's gubernatorial campaign, spon-
expense of taxpayers depends on his
FDIC spokesman David Barr told
sored fund-raisers, and lent Roger
assets at the time and the strength
the Tribune that FDIC attorneys are
Clinton $8,000 to pay off a drug debt.
of the evidence against him.
The Washington Times
FRIDAY, FEBRUARY 4, 1994 PAGE A9
SPECIAL REPORT
Parties split on issue of hearin
By J. Jennings Moss
Al
million.
Democrat, does not favor congres-
THE WASHINGTON TIMES
Investigators are questioning
sional hearings on Whitewater "be-
whether Mr. McDougal spent funds
cause he doesn't want to do anything
House and Senate members broke
from Madison on Whitewater and
that would muck up the work of the
along largely partisan lines when
whether he funneled Madison
special counsel," his spokesman
asked by The Washington Times
money to Mr. Clinton's gubernatorial
John Devereaux said.
whether Congress should hold hear-
campaigns. They also are looking
"Look at Oliver North. His convic-
ings into the Whitewater-Madison
into a $300,000 SBA loan Mrs.
tion was overturned because of in-
affair.
McDougal received.
terference by a congressional com-
Joining the 177 Republicans who
Even though Whitewater-Madison
mittee," Mr. Devereaux said. Mr.
said they would support hearings
surfaced during the 1992 pres-
North was a key figure in Iran-
were nine Democrats - including
idential campaign, it did not explode
Contra who testified before Con-
one committee chairman, Rep. Dan
as an issue until last fall.
gress only after receiving immunity
Glickman of Kansas, who heads the
After repeated calls by the GOP
for his comments.
Intelligence Committee.
and, ultimately, some senior Demo-
Rep. Henry Hyde, an Illinois Re-
Several senior Democrats and
crats, Mr. Clinton finally agreed to
publican who backs hearings, also
committee chairmen said privately
the naming of a special counsel to
invoked Mr. North's name but did so
that hearings were inevitable and
handle the case. Attorney General
to argue that Democrats were al-
that postponing hearings could hurt
Janet Reno appointed Robert J.
ways eager to investigate potential
them.
Fiske Jr., a Republican, to the job.
problems in the administrations of
Meanwhile, 120 Democrats and
Senate Minority Leader Bob Dole
Ronald Reagan and George Bush.
11 Republicans and one independent
of Kansas and House Minority
"When Oliver North was the prey,
who chose to answer a telephone sur-
Leader Robert H. Michel of Illinois
it was full steam ahead. But now it's
vey by The Washington Times said
then proposed creating a select con-
a case of foot-dragging," Mr. Hyde
hearings were not necessary at this
gressional committee to investigate
said.
time. But many held out the prospect
but then settled for asking for the
For some of the Democrats who
that a review of the matter could be
regular committees of jurisdiction
support hearings, they said they
warranted in the future.
to handle the job.
were concerned about the structure
In the survey to all 539 senators,
Republicans want three commit-
of the hearings. Some, like Rep. J.
representatives and delegates, 190
tees to look into the matter the
Roy Rowland of Georgia, said they
Democrats and 31 Republicans ei-
Banking, Small Business and Judi-
had no objection to hearings "to
ther had no comment or did not re-
ciary panels. Democratic chairmen
clear the air."
spond. There is one vacancy in the
in the House and Senate, so far, have
Many Democrats who told the
House.
said no.
Times that they did not favor hear-
The partisan break is not surpris-
"There should be a congressional
ings now said that they could change
ing, as the issue revolves around
inquiry into Whitewater for the same
their minds depending on the spe-
business dealings President Clinton,
reason that Sam Ervin conducted
cial counsel's report.
a Democrat, had while he was gov.
one into Watergate at the same time
"Holding hearings now would be
ernor of Arkansas during the 1980s.
that a special prosecutor was also
a waste of taxpayers' money. It
involved. Congress should not be left
But some Democrats are becom-
would be like spending money on a
in the dark for months or years
private investigator when police are
ing increasingly nervous about the
awaiting the findings of a special
already on the case. People deserve
potential fallout their stand against
counsel," said Sen. Frank Murkow-
to have their questions answered,
hearings could have as some Repub-
licans are using every opportunity to
ski, Alaska Republican.
Rep. Tim Hutchinson of Arkan-
try to force the issue.
"Some say Madison S&L should
sas, one of the few Republicans who
not be singled out, just because the
told The Times they would not sup-
"Holding hearings
port hearings now, said through a
now would be a waste
new president may have been in-
The Machington Times FRIDAY, FEBRUARY 4, 1994
spokesman that the special counsel
volved. But that's precisely why we
should be allowed to do his job.
of taxpayers' money."
should. Special scrutiny is neces-
If hearings are held, they would
sary whenever a high public official
Rep. Blanche Lambert
be televised, Hutchinson spokesman
is involved. even when lesser-known
Arkansas Democrat
Brian O'Neel pointed out. "The con-
persons may have done similar
gressman feels that what comes out
things and escaped the glare of pub-
of those televised hearings could
lic attention," said Rep. Ernest Jim
jeopardize prosecutorial efforts,"
but I don't think they want their tax
Istook, Oklahoma Republican.
Mr. O'Neel said.
dollars spent on overkill," said Rep.
But most Democrats argue that
One congressional investigation
Blanche Lambert, Arkansas Demo-
hearings are either not needed or
used by both sides to draw parallels
crat.
would be premature because the
to the Whitewater-Madison issue is
Rep. Terry Everett, Alabama Re-
special counsel appointed to probe
the high-profile series of hearings in
publican, said the special counsel
the matter for possible criminal ac-
1987 into the Reagan administra-
was only looking into possible crim-
tivities has just begun his work. The
tion's sale of arms to Iran and its aid
inal activity and not any civil mis-
Republican clamor for a congres-
sional probe, they say, is largely a
to the Contra rebels in Nicaragua.
conduct.
political ploy to hurt the president.
"The congressman believes
"This is an egregious oversight,
"Whitewater deals with allega-
Whitewater should be pursued in the
and it is incumbent upon the Con-
same manner as Iran-Contra
gress to thoroughly investigate all of
tions concerning activities that took
place long before Bill Clinton be-
What's good for the goose is good for
[sic] aspects of possible wrongdoing
came president," said Rep. Bill Wise,
the gander," said Paul Marcone,
in the Whitewater-Madison case. No
West Virginia Democrat. "If it's a
spokesman for Rep. James A.
one should be above the law, not even
Traficant, an Ohio Democrat who
the president," Mr. Everett said in a
Republican strategy to hold hear-
supports hearings.
statement.
ings with the idea of embarrassing
Bill Clinton, I think it may backfire."
Rep. Tim Johnson. South Dake:
Rep. Corrine Brown. a Florida
The matter, which has become
said singling out Madison for con-
known in Washington shorthand as
gressional scrutiny is wrong.
Whitewater-Madison, involves an in-
"Why are we just targeting this
vestment Mr. Clinton and first lady
S&L? This is the kind of stuff for
Hillary Rodham Clinton made in the
campaigns. Lets address the issues
Whitewater Investment Corp., a real
the American people elected us to
estate development in the Ozarks.
do. If we're going to investigate this
The Clintons' business partners in
one S&L, we should investigate them
the venture were James B. McDou-
all," she said.
gal and his wife at that time, Susan
Major Garrett, Ronald Taylor,
McDougal. Mr. McDougal was the
Cheryl Wetzstein, Ruth Larson, Da.
president of Madison Guaranty Sav-
vid Coia and Joyce Price contributed
ings and Loan Association. which
to this report.
the federal government seized in
1989 and which cost taxpayers $50
112
Madison S&L funds
paid Clinton loan
Whitewater channeled money,
Leach shows with documents
By Paul M. Rodriguez
THE WASHINGTON TIMES
Al
LOAN
also head an independent federal
Funds from the faltering Madison
agency, the RTC," Mr. Leach said in
From page Al
his letter to Mr. Altman.
Guaranty Savings and Loan Associ-
ation were funneled through White-
"When this prospect was first
water Development Corp. to make a
that should be closely scrutinized.
suggested at the beginning of the
payment on a loan to Gov. Bill Clinton
He said he based his conclusion
Clinton administration, it did not
in 1985, according to documents re-
on a Banking Committee Republican
strike the [GOP] minority as overly
leased yesterday by the ranking Re-
staff memorandum, which was re-
unreasonable for a month or two
publican on the House Banking
leased yesterday along with a letter
given the fact that no RTC head had
Committee.
to Roger C. Altman, the interim head
been selected," his letter said.
The money transfer "underscores
of the Resolution Trust Corp. (RTC),
"However, it has been over a year
that then-Gov. Clinton had personal
urging his recusal from any probe of
since the administration has been in
liabilities reduced by a payment
the Whitewater-Madison affair.
office and it can only be described
from Madison," Iowa Rep. Jim Leach
The undated staff memo to Mr.
as structurally unseemly for a politi-
said in an accompanying statement.
Leach said that, "based on documen-
cal appointee of an executive branch
"Such payment presumably car-
tary evidence available to the minor-
department to make what are in ef-
ries ethical as well as tax implica-
ity, it appears that Madison Market-
fect, law enforcement decisions for
tions and is part and parcel of the
ing served, in at least one instance,
an independent federal agency as
$47 [million] to $60 million esti-
as a conduit of funds from Madison
they touch upon the president," Mr.
mated taxpayer loss at Madison," he
Guaranty to Whitewater and Gover-
Leach wrote.
said.
nor Clinton."
The Iowa Republican has been
The White House declined to com-
"If this is correct, it would appear
pushing for hearings into the
ment yesterday.
that insured funds from the failed
Whitewater-Madison affair over the
Mr. Leach, who has been probing
Madison Guaranty were diverted
objection of House Democrats. He
the Whitewater-Madison matter
and directly benefitted the governor
also has been trying unsuccess-
since last year, said he was releasing
and his investment in Whitewater, a
fully so far to get relevant doc-
the material to underscore his con-
claim Clinton had denied," the memo
uments on Whitewater-Madison
cerns about continued stonewalling
said.
from federal agencies, such as the
by federal bank regulators who have
According to a 1987 article in Ar-
RTC.
declined thus far to cooperate with
kansas Business, a Little Rock publi-
House Democrats have appeared
his investigation.
cation, Madison Marketing was ac-
in recent days to be softening their
The documents establish for the
tually a fictitious name for Madison
opposition to hearings on White-
first time the source of a previously
Financial Corp. (MFC), Madison
water-Madison as part of a manda-
reported but still unexplained
Guaranty's real estate operation.
tory oversight review of the RTC re-
payment of $7,322.42 on the Clinton
Mrs. McDougal also ran Master
quired every six months.
loan by Madison owner James B.
Marketing, a sole proprietorship
Mr. Leach said in his letter that he
McDougal. Mr. McDougal and his
whose office originally was at 1310
was still trying to work out arrange-
wife, Susan, were partners with Bill
Main St., the office of MFC, Arkan-
ments with banking agencies to get
and Hillary Clinton in Arkansas'
sas Business reported.
documents, and hoped the RTC is at
Whitewater Devlopment Corp.
Mrs. McDougal, as the head of
least pursuing all leads involving
The source, the documents reveal,
Master Marketing, was the recipient
Whitewater-Madison, including any
was a $7,500 deposit in a Whitewater
of a $300,000 Small Business Admin-
White House documents turned over
account from Madison Marketing, a
istration loan, a third of which ulti-
recently to the Justice Department
subsidiary of the S&L that was run
mately ended up in Whitewater. The
by the White House.
by Mrs. McDougal. Madison Guar-
loan, which was never repaid, was
These White House documents
anty failed in 1989 at a cost to tax-
illegally obtained, according to for-
have not been released by the Jus-
payers of about $50 million.
mer Little Rock Judge David L. Hale
tice Department because they are
The documents show:
who says he was pressured by Mr.
covered by a federal subpoena and
On Oct. 31, 1985, Whitewater
McDougal and Mr. Clinton to direct
thus are protected by strict secrecy
had a bank balance of $12.49, and yet
the loan to Mrs. McDougal.
rules.
a check signed by Mr. McDougal for
Mr. Hale, under indictment for de-
Some of these documents are be-
$7,322.42 was written on Nov. 7, 1985,
frauding the SBA on unrelated loans,
lieved to include confidential re-
on the Whitewater account to Secu-
said all three were aware that Mrs.
ports prepared by White House
rity Bank of Paragould, Ark., as a
McDougal was not qualified for the
Deputy Counsel Vincent W. Foster
payment on Mr. Clinton's loan.
loan but knew that she could qualify
Jr., a friend and personal lawyer to
That Clinton loan, made in 1983 in
for it on paper - as a female ap-
the Clintons, who committed suicide
the amount of $20,800, was used to
plicant.
in July.
pay off the remaining balance of
Mr. Leach in his strongly worded
"If the White House chooses to
$30,000
TO
se the Justice Department to shield
Madison Bank and Trust in 1980 to
ume also raised ethical issues about
Whitewater documents not only
build a modular home at Whitewater.
having a top Treasury Department
from the public and Congress, but
On Nov. 8, the day after the
official heading the RTC investiga-
from other government agencies,
McDougal-Whitewater check for
tion of Whitewater-Madison while
such as the RTC, which have legiti-
$7,322.42 was written, a $7,500 de-
serving as a political appointee of
mate public law enforcement re-
posit in the Whitewater account was
President Clinton.
sponsibilities. it is hard to believe a
made by Madison Marketing to
The RTC is the lead independent
responsible resolution of the issues
The Mashington Times FRIDAY, FEBRUARY 4. 1994
cover the check Mr. McDougal had
federal agency responsible for in-
involved can be made by regulatory
sent as a loan payment for Mr. Clin-
vestigating failed savings and loans.
authorities," Mr. Leach said.
ton. A Federal Home Loan Bank
"I have high regard for your per-
He also said that "time is clearly
Board exam said Madison Market-
sonal integrity, but as you know,
of the essence for the RTC to make
ing was largely a sham corporation
from the beginning, it has been an
judgments" about any investigation
owned by Mrs. McDougal until 1986.
awkward situation to have a presi-
because the statute of limitations for
Mr. Leach said he would not char-
dentially appointed and confirmed
certain kinds of civil penalities will
acterize these transactions as illegal
officer of the Treasury Department
be running out at the end of Feb-
but as a "possible" diversion of tax-
ruary.
payer funds "on a deferred basis
see LOAN, page A8
Comp ex bus'ness dea ings dog c intons
President Clinton and Hillary Rodham Clinton are under
In Whitewater Development Co. Whether they were guilty of
Investigation for their relationships with James McDougal,
anything except bad judgment will be decided by special
owner of Madison Guaranty Savings and Loan and their partner
counsel Robert Flake. The tangled web:
WHERE THE QUESTIONS BEGAN (1978-'92)
A plan for a budget
recreational development
WHITEWATER
has mushroomed into a tale
The Clintons, James McDougal and his then-wife
of friendship and business
Susan McDougal bought 230 acres of Ozark
relationships gone awry. It
has sparked the
WHITEWATER
Mountain property on the White River in northem
Arkansas in 1978. They borrowed the full $203,000
appointment of a special
price, put in roads and subdivided the property into
counsel and raised calls
44 vacation-home lots. They called the venture
from Capitol Hill for an
Whitewater Development Co. Inc. After 14 years, the
Investigation.
Clintons sold their interest to James McDougal for
$1,000 and say they invested a total of $68,900
and made no profit.
USA TODAY FRIDAY FEBRUARY 4 1994
Hillary
A partner in the
Bill
A longtime friend of
Susan
Gave the Ozarks
James
Friend of Bill Clinton's
Clinton
prestigious Rose Law
James McDougal, he
development its
since the late 1960s.
Firm, she handled the
Clinton
was Arkansas
McDougal
name, Whitewater,
McDougal
A real estate
family's Whitewater
attorney general
marketed Madison's
developer, he briefly
investment, borrowed
when Whitewater was
land investments and
served in Clinton's
$30,000 to build a
purchased and later,
was a partner in her
first administration as
model home on the
as governor,
husband's many
an economic
property and in 1988
appointed the state
businesses. They
development aide
sought power-of-
official who regulated
divorced in 1991.
before becoming a
attorney to manage
all state S&Ls.
high-flying S&L
the Whitewater
including McDougal's
operator.
venture. It was never
Madison Guaranty
granted.
Savings and Loan.
AP
AP
Democrat-Gazette
Democrat-Gazette
David Hale
MADISON GUARANTY
BANK OF KINGSTON
Named to municipal judgeship by Clinton. In 1986,
The McDougals bought a small
A bank in Kingston, Ark., partly-
his firm gave Susan McDougal a $300,000 Small
S&L in 1982, renamed it Madison.
owned by James McDougal loaned
Business Association-backed loan, part of which
The S&L grew rapidly, making
$30,000 to Hillary Clinton for the
went to Whitewater. Hale claims he was pressured
high-risk real-estate investments,
model home on a 3-acre Whitewater
by Bill Clinton to make the loan; James McDougal
before failing in 1989 at a cost to
lot that was transferred to her. No
and Clinton deny his charge.
taxpayers of at least $47 million.
price was recorded on the deed.
Did James McDougal give the Clintons a
Did the Clintons
How much did the Clintons
Have the Clintons been
sweetheart deal by making them half
pressure David Hale
Invest in Whitewater? How
forthright in describing their
THE ESTIONS
owners of Whitewater when their financial
to loan $300,000 to
much money did the
roles as merely passive
contribution was less than 50%?
Susan McDougal?
Clintons make or lose?
Whitewater investors?
LAW FIRM CONNECTIONS (1985-'89)
Business and politics frequently entwine. But the relationships of a governor, his appointees
and his wife - who practices before those appointees - raise some ethical questions.
AP
AP
Democrat-Gazette
Democrat-Ga.zette
Hillary
Bill
Susan
James
Clinton
Clinton
McDougal
McDougal
ROSE LAW FIRM
CAMPAIGN FINANCE
MADISON
Hillary Clinton, Vincent
In 1985, McDougal hosted a
GUARANTY
Foster and Webster
fund-raiser at Madison
Hubbell were partners in
headquarters to offset
Under almost constant
this large, powerful Little
Clinton's $50,000
fire from federal S&L
Rock firm. Foster
gubernatorial campaign debt.
examiners for shaky
became White House
Questions have been raised
finances, excessive
deputy counsel and
about the source of funds for
payments to insiders
committed suicide in July
some contributions.
and risky loans, it was
1993. Hubbell is now No.
shut down in 1989.
3 official in the Justice
James McDougal was
Department.
removed in 1986. Before
Beverly Bassett-Schaffer
he was ousted. he drove
ON RETAINER
a Bentley and his wife
The firm was on $2,000
A Clinton appointee who regulated
retainer with Madison for
Arkansas S&Ls. her firm had once
drove a Jaguar - both
owned by Madison.
17 months while the S&L
represented Madison.
James McDougal was
was under pressure from
acquitied in 1990 of
regulators. James
bank fraud charges
McDougal says he gave
the firm some business
Vincent Foster
stemming from the
S&L's failure.
at Bill Clinton's request;
Because Whitewater
the White House denies
documents were in
DOING A FAVOR?
his claim.
his office, questions
James McDougal says
have been raised
he gave the Rose Law
THE STOCK DEAL
about links between
Firm some business at
Hillary Clinton and other
the land deal and his
Bill Clinton's request: the
Rose firm lawyers asked
death. Had close
White House denies his
Beverly Bassett-Schaffer,
personal
claim.
a state S&L regulator
White House
relationships with
appointed by Bill Clinton,
both Clintons.
whether it was legal for
Madison to sell preferred
stock. Bassett said it was
in a letter that began
Webster Hubbell
"Dear Hillary."
A former Rose partner, he handled
MADISON SUIT
FDIC case against Madison's
Foster later negotiated a
accountants. His father-in-law, Seth
Democrat-Gazette
deal to represent the
Ward. was an officer in a Madison
Federal Deposit
THE SETTLEMENT
subsidiary.
Insurance Corp. in a suit
Rose was paid $400,000
against Madison's
out of a $1 million
accountants.
settlement from
Madison's accountants.
THE QUESTIONS
Did state regulators go
Was it ethical for
Was it ethical for
Were Madison funds
easy on Madison
Hillary Clinton to
the Rose Law
diverted to Clinton's
because of the Clintons'
represent Madison
Firm to represent
gubernatorial campaign?
friendship and business
before a state
federal regulators
Is Vincent Foster's
relationship with the
regulator appointed
after it had done
suicide related to
McDougals?
by her husband?
work for Madison?
Whitewater?
THE WHITEWATER CHRONOLOGY
and
acres
for
budget
at
development
salesman;
Cinion, now
aide:
Clintons,
Rose Law Firm to
Development Co. Inc. and transfer lend.
Medison's accountants.:
2/3
19801-Mary Clinton borrows $30,000 from another
1990 McDougal acquitted of bank fraud.
MoDosgel bank to build a model home at Whitewater.
1992 Denver lawyer James Lyons asked by Cinton
1992 Out of government, James McDougal buys
presidential campaign to review and concludes
state-regulated savings and loans
Clintons lost $68,900. Cintons sell out to McDougal for $1,000.
1984 Federal S&L examiners heavily criticize Madison's
Vincent Foster handles sale.
fast-and-loces operations.
1993 Vincent Foster, now White House deputy counsel,
1999 Dougsi holds a fund -raiser at Madison to help
commits suicide injuly. White House counsel Bemard
Nussbaum removes Whitewater files from Foster's office. In
Citizen pay off a $50,000 campaign debt. Hillary Clinton and
Rose Law Firm represent Madison in stock sale plan before
December, Clintons agree to give all Whitewater files to Justice
a Clinton-eppointed regulator. CARLEND
Department.
1986 Federal and state regulators remove McDougal from
1994 Clintons' lawyers acknowledge they arranged for
Madison.
Whitewater documents to be subpoenaed, preventing their
public release. Special counsel Robert Fiske is named by
1987 Susan McDougal says Whitewater records are sent to
Attorney General Janet Reno to investigate Whitewater,
Clintons, who say records were incomplete.
Foster's suicide and related matters.
Source: USA TODAY research by Dennis Cauchon and Judy Keen: coordinated by Warren Springer
98
PAPER TRAIL ('87 to present)
The state and content of Whitewater financial
records as they move through various hands,
and why they're important:
James McDougal
Primarily responsible for
Whitewater's financial
decisions and records.
Susan McDougal says
Whitewater's financial
records were sent to the
governor's mansion in 1987
at the Clintons' request. The
Democrat-Gazette
Clintons say they have only
incomplete records.
Bill and
James Lyons
Hillary
Denver lawyer and a
Clinton
Clinton friend who was
asked by Clinton's 1992
In 1988, Hillary
presidential campaign to
Clinton sought
document the Clintons'
power-of-
Whitewater investments.
attorney over
He reported the Clintons
Whitewater,
lost $68,900, but his
she did not
accountants qualify their
receive it.
opinion because they had
incomplete records.
Vincent Foster
Arranged sale of the Clintons'
interest to James McDougal in
USA TODAY FRIDAY. FEBRUARY 4, 1994
1992. As White House deputy
counsel. he continued to
handle Whitewater. Lyons
called him on the day he
committed suicide but the two
did not talk.
White House
Bernard Nussbaum
Foster's boss, he removed
Whitewater documents
from Foster's office after the
suicide, first sorting them in
the presence of U.S. Park
Police and Justice
Department officials.
USA TODAY
David Kendall
The Clintons' private lawyer, he negotiated the
Justice Department subpoena for Whitewater
documents, ensuring they wouldn't be released
to the public.
Robert Fiske
A Republican New York
lawyer and former federal
prosecutor named
Whitewater special counsel
last month by Attorney
General Janet Reno. Has
signed a three-year lease for
office space in Little Rock.
By Jeff Mitchell
THE QUESTIONS
3/3
Might some Whitewater records have
been destroyed?
was appropriate
sbaum to remove
newater papers from Foster's office?
Does Lyons' report accurately represent the
Clintons' Whitewater investment?
Did the Clintons violate tax laws?
Did Justice Department officials act property
when they allowed the Clintons' lawyer to
negotiate the terms under which the
Whitewater papers would be subpoenaed?
By Stephen Conley. USA TODAY
шл.
when
Nagging questions over the Clintons' business relationships have spawned Justice Department and
congressional, inquiries, which now face the daunting task of distinguishing between what was improper or
merely gave the appearance of impropriety in the close-knit culture of Little Rock during the 1980s.
By Judy Keen
and Dennis Cauchon
USA TODAY
LITTLE ROCK - In the 1980s, ev.
eryone who mattered knew every-
one else here, and they all knew
or wanted to know - their dashing
young governor, Bill Clinton, and his
lawyer wife, Hillary.
Everyone shopped at the same
grocery stores out in the Heights or
Hillcrest, where they lived and spent
their evenings at the same political
Arkansas Democrat Gazette
AP
events and charity fund-raisers.
BASSETT-SCHAFFER:
LINDSEY: Elite move in
LEACH: Questioned
So when the April 30, 1985, letter
State S&L regulator
the same circles
the Clintons' ties
from Little Rock's Rose Law Firm
arrived at the Arkansas Securities
McClellan and J. William Fulbright
high interest rates to attract deposit
Department, no one batted an eye.
and in 1982 won a Democratic con-
and making high-interest loans to
The letter asked whether it was le-
gressional primary.
risky borrowers.
gal for Madison Guaranty Savings &
McDougal, cerebral and energet-
"If you had to pick the typical
Loan to sell preferred stock It was
Ic, had known Clinton since Ful-
failed S&L, Madison would fit the
an unusual request by owner Jim
bright's 1968 campaign when
profile," says consultant Bert Ely. an
McDougal, a business partner of the
McDougal assigned Clinton to drive
S&L expert. "It had every symptom:
Clintons whose thrift was already the
Fulbright. A shared passion for poli-
low capital, rapid growth, non-tradi-
subject of a scathing bank examin-
By Jeff Mitchell
tics grew Into friendship.
tional investments, excessive com-
ers' report, but it was no big deal.
MODEL HOME: In 1980, Hillary Rodham Clinton borrowed $30,000 to have this house built on Lot 13 of the Whitewa-
Little Rock's late- 70s boom "was
pensation for its officers, etc."
The letter listed Hillary Rodham
ter development. It reportedly was built to help make the development more appealing to potential investors.
sort of like Wall Street in the '80s,"
Ely says even its connection to pol-
Clinton as a contact at the high-
says Lindsey. "McDougal was In the
Iticians was common: "There was a
powered Rose firm, but even though
former partner of Hillary Clinton
"Arkansas" history is a small elite,
ernment In Arkansas was not run in
real-estate market at the right time,
mutual attraction between politi-
she was the governor's wife, she was
who became White House deputy
virtually no middle class and a Jarge
a shady fashion or any sort of crony-
he made money," and it was only
cians and S&Ls. A lot of S&Ls were
just another lawyer. No big deal.
counsel - linked to Whitewater?
number of poor people," says Arkan-
Ism that has been transported to
natural he sought out his friends
looking for political cover, politicians
A copy of the letter was sent to
As Fiske dissects the Whitewater
sas political scientist Robert Savage.
Washington, D.C. That's not the way
when he decided to make Whitewa-
were looking for money. But outside
Beverly Bassett, then Arkansas' chief
saga, he'll focus on the tangled ties
"The elite in this state has looked
things happened at all.
We can't
ter a budget vacation paradise.
of that, many S&L execs were politi-
S&L regulator. She was a Clinton ap-
between the Clintons and McDougal,
after itself for sure self-interest is
help it that you keep running into the
"If you go out and you find a piece
cally active people anyway."
pointee and her own law firm had
whose Madison S&L failed in 1989
the nature of all groups - but it's
same people, but
there was no ef-
of property that you think has poten-
Eventually, McDougal's we d un-
done work for McDougal. But this
and cost taxpayers at least $47 mil-
also made an honest and dedicated
fort to protect political friends."
tial and you don't want to carry the
raveled, ending in Madison's inilure
was Little Rock, so it was no big deal.
lion. Some connections are clear:
effort to bring up the whole state,"
But some say the cozy, casual blur-
entire risk, you're going to
pitch
and his 1989 indictment to bank
But that letter - and Bassett's
Clinton made McDougal a first-
says Willard Gatewood, a historian
ring of business and social bound-
that piece of property to people that
fraud. He was later acquilted. uring
"Dear Hillary" reply two weeks later
term economic aide. McDougal and
of the South and former chancellor
aries created a climate ripe for
you are friendly with," Lindsey says.
that time, his ties to the Clin 5 re-
- have come to symbolize the club-
his ex-wife, Susan, were partners
of the University of Arkansas.
abuses that veered into Impropriety.
McDougal's myriad banking and
mained Intact: Hillary Clinto even
by. Insular Little Rock where a few
with the Clintons in Whitewater.
Basselt, now Beverly Bassett-
"The government of Arkansas was
real-estate deals grew and attracted
sought, but did not receive, pr " of
dozen power elite were entwined po-
McDougal raised money for Clin-
Schaffer, says all the talk of elitist
too close to the power elite," says
investments from the state's VIPs:
attorney over Whitewater.
litically, socially and financially.
ton's campaign. McDougal hired Hil-
mutual back-scratching is overstat-
Rep. Jim Leach, the Iowa Republi-
current Arkansas Gov. Jim Guy
The next chapter played 0 after
No wonder that Robert Fiske, spe-
lary Clinton's firm.
ed. She never met McDougal, she
can whose questions about the Clin-
Tucker: Seth Ward. the father-In-law
Foster's suicide. Whitewate ocu-
cial counsel named by Attorney Gen-
Bruce Lindsey, a senior Clinton
says, and never knew the Clintons
tons' ties to McDougal, Madison and
of top Justice Department official
ments were removed from his ffice
eral Janet Reno to probe Madison,
adviser who was then a partner in
were partners in Whitewater.
Whitewater propelled the old rela-
Webster Hubbell, a former law part-
days later. A cryptic, torn su :ide
the Clintons, McDougal, and their
another big Little Rock law firm,
As for Hillary Clinton's represen-
tionships Into a national Issue. "Madi-
ner of Hillary Clinton; Fulbright; Dal-
note raised more questions a. cut his
Whitewater Development Co. Inc.,
says it's the same everywhere. "I un-
tation of Madison, Dassett-Schaffer
son was run as a private piggy bank
las Cowboys owner Jerry Jones.
motivations than It answered
calls Little Rock "the center of gravi-
derstand how this can look to people
says she was not impressed to see the
for insiders as well as some of the Ar-
But regulators' reports show
Leach says the tale of the C ons,
ty." Those sometimes incestuous
who think we all are married to our
governor's wife's name on it. "Not
kansas political establishment."
McDougal was a careless manager,
their ambitious business part
and
links have become a very big deal.
second cousins," he says, but it's in-
one bit. She was just this other
In Little Rock's new-money uni-
especially when it came to Madison.
Whitewater boils down to a St
are-
The questions facing Fiske: Did
evitable that power brokers move in
person at the law firm. If we didn't
verse of the late 1970s and early '80s,
During his tenure as owner, its
solved question of ethics.
they evolve into illegal or unethical
the same circles.
have an answer she liked, that was
McDougal was a self-made player in
$6 million in deposits and tiny loan
"Leadership is all about Iss: es and
conduct by either Clinton? Were
Although Arkansas is home to
just too bad."
a baby-blue Bentley. His clout was
portfolio ballooned to deposits of
moral authority and how 1 two
Madison funds improperly diverted
plenty of big firms, like TCBY and
Although Bassett-Schaffer ac.
realized in the exploding banking
$123 million. Loans to officers, direc-
conjoin," he says. "It comes ya 1 to
or used to pay political or personal
Wal-Mart, Little Rock's tight elite is
knowledges Little Rock's Insiders
and real estate boom, but it was
debts of prominent Arkansans, in-
tors and related parties swelled from
public trust. Ultimately, the la for Is-
especially common in the South and
"weren't as vigilant about appear-
borne of politics: He worked for the
$500,000 to $17 million.
sue here may end up relating oo now
cluding the Clintons? Was the July
dates back to 19th-century planta-
ances at the time," she says, "I want
1993 suicide of Vincent Foster - a
presidential campaign of John F.
1
kind of rapid growth is
the executive branch
y
dis-
tion's class system, historians say.
to allay everybody's concerns. Gov-
Kennedy and the staffs of Sens. John
gerous, Indicating an S&L is offering
closure and accountability."
Lessons from Lillehammer
Before the 1994 Winter Olympics began in
impressed with the Norwegians' good humor
Lillehammer, sports lovers wondered whether
while accommodating enormous crowds. Lille-
the Games would be ruined by controversies
hammer, with a population of about 23,000,
and commercialism.
cheerfully hosted some 160,000 people on any
They feared the Harding-Kerrigan hype
given day.
would overshadow stories about athletic
The Norwegians were able to handle the
achievements. Many also worried that the
Games largely because the venues were com-
attention being given to TV ratings and corpo-
pleted last year. That gave organizers plenty of
Vice president and general manager
JOHN C. MELLOTT
rate endorsements would douse the Olympic
time to focus on coordinating the volunteers.
DENNIS BERRY
flame. And, sure enough,
Atlanta, host of the
Publisher
there was plenty of obnox-
1996 Summer Games,
ious hype this year about
The Winter Games
should not forget that les-
money-making and
son. The faster the struc-
knee-bashing.
were a success because
tures can be completed,
But there was some-
the more time we'll have
JAMES M. Cox, Chairman M. Cox JR., Chairman 1957-74
-THE ATLANTA CONSTITUTION
thing more. The Winter
of the hospitality of
for organizing volunteers.
Olympics turned out to be
The Norwegians also
a largely uplifting event
the Norwegians:
managed to make their
because so many wonder-
For 125 Years the South's Standard Newspaper
ful athletes gave so much
They cheered for all
weather - best described
as cold! - into a charm-
of themselves - their
the champions; they
ing feature. Hot bever-
Managing Editor
JOHN W. WALTER JR.
hearts as well as their
ages were shared, and
muscles.
camped on frozen
warm smiles abounded.
Few Americans will
forget the sight of speed-
hillsides to watch
Though it was freezing
outside, no one seemed to
skater Dan Jansen taking
skiers; they applauded
mind.
a victory lap with his
We Georgians know
baby in his arms. Even
RON MARTIN
the coldest heart had to
every anthem while
that the weather here in
August is best described
Editor
be warmed by the shining
proudly waving their
as hot! we'll have to
eyes of Bonnie Blair as
she picked up her fifth
own flags
stir up plenty of iced
in the summer. of 1996
gold medal for speedskat-
But visitors will not hate
Editorial Page Editor
CYNTHIA TUCKER
ing. Figure skater Nancy
our weather if it's
Kerrigan's 1,000-klowatt smile as she com-
bearable by good humor
pleted her silver-medal performance was
The Norwegians also boosted their reputa-
enough to outshine the northern lights.
tions as hosts by making their country as multi-
And it wasn't just American athletes who
lingual as possible. While Atlantans don't have
brightened the Olympics. Norway's champion
much time to learn second languages, certainly
skater Johann Olav Kass called attention to the
our hotels and residus has au obligation to
suffering in Sarajevo - she of the 1984 Winter
start displaying signs añd menus In different
Olympics - by raising money for the people
languages and hiring multilingual staff.
there.
Finally, Norwegians made a good impression
More than anything, though, the 1994 Winter
on others by being so united. Their flag was
Games were a success because of the wonder-
waved proudly everywhere.
ful hospitality of the Norwegians. They cheered
Sadly, we Georgians have a flag that divides,
for all the champions; they camped on frozen
rather than unites, us. Getting rid of that divi-
hillsides to watch skiers; they applauded every
sive symbol will go a long way toward making
anthem while proudly waving their own flags.
this state a united community, ready to open its
Journalists and tourists were thoroughly
arms to each other and all people
Give special prosecutor a chance
There may be less to the Whitewater contro-
mounted for an independent investigation.
versy than meets the eye. But from the way the
They finally caved in, allowing Attorney Gen-
White House has been mishandling the investi-
gation, no one could be blamed for suspecting a
eral Janet Reno to name Robert Fiske as spe-
cial counsel.
major scandal.
Altman's disclosure to the committee came
This is the latest fumble by the Gang that
just as special counsel Fiske, a Republican
Couldn't Shoot Straight: Last week, Deputy
former federal prosecutor with impeccable
Treasury Secretary Roger Altinan admitted to
credentials, was getting his criminal investiga-
a Senate committee that he had briefed White
tion off the ground. Fiske is looking into
House aides on the Resolution Trust Corp.'s
whether funds from Madison, whose failure
probe of Madison Guaranty Savings and Loan
Madison is the failed S&L that is central to
will cost taxpayers at least $47 million,
investigations into President and Mrs. Clinton's
either diverted to a failed real estate develop-
Arkansas financial dealings.
ment called Whitewater or used to help pay
Clinton's political campaign debts.
The problem with Altman's passing infor-
Altman's clearly inappropriate briefing of
mation about the probe on to the White House
White House staff members gave Republican
is that he is acting head of the Resolution Trust
critics another opening. With Sen. Alfonse
Corp., which is supposed to be an independent
D'Amato (R-N.Y.), declaring, "Something
federal agency. Altman announced later that
smells rotten in Little Rock," the Republicans
he was removing himself from the RTC's in-
are renewing their calls for Watergate-style
vestigation of the Whitewater affair. But the
congressional hearings into Whitewater.
political damage was done.
Given the continued bungling from the
The White House seems to have a tin ear.
White House, congressional hearings may
when it comes to Whitewater. The Clintons,
sound appropriate. In fact, they would just get
in the way of Fiske's criminal probe.
who say they have done nothing wrong, dith-
Fiske ought to be given a chance to do his
ered for weeks earlier this year as calls
job.
134
AMERICANS SHRUG OFF CLINTON'S FINANCIAL DEALINGS
Release at 6:30 p.m. EST (2330 GMT)
NEW YORK, Feb 16 (Reuter) - President Clinton's
controversial Arkansas real estate dealings do not
interest most Americans, even though many believe he
probably committed illegal or unethical acts and tried to
cover them up, a poll released Wednesday said.
Only 60 percent of adult Americans have seen, read or
heard anything about the president's involvement in the
Whitewater Development Corp, the failed Arkansas real
estate firm now under investigation in which Clinton was a
partner, the Harris poll said.
And among those who have heard about Whitewater, a
full 83 percent said that it had not changed how they felt
about Clinton, according to the poll of 1,252 adults
surveyed between February 2 and February 6.
Thirty-five percent of those who have heard about
Whitewater believe the president and first lady Hillary
Rodham Clinton probably did something illegal, however,
and 47 percent said they probably did something unethical
or morally wrong, the poll said.
Forty-six percent of those same respondents believe
that the president has probably tried to cover up wrongs
that were committed, it added.
The survey has a four point margin of error.
Special counsel Robert Fiske was named in January by
Attorney General Janet Reno to mount an independent probe
of the Clintons dealings in Whitewater, a planned
community of vacation homes that failed.
Their partner in the development, James McDougal, ran
Little Rock's now-defunct Madison Guaranty Savings and
Loan Association, which was closed down by U.S. regulators
and had to be bailed out at a cost to taxpayers of over
$50 million.
Among other things, Fiske is looking into allegations
that McDougal illegally arranged loans from the bank and
that some funds may have wound up in Clinton's campaign
war chest.
REUTER
AM-NY--Cuomo-Crime,0290
Cuomo Attacks Clinton Call For Death Penalty; Supports
Three Strikes Plan
ALBANY, N.Y. (AP) President Clinton's call for the
death penalty in the killing of police officers sends
''exactly the wrong message," New York Gov. Mario Cuomo
said Wednesday.
But Cuomo, during a weekly radio interview, stood
behind Clinton's proposal to send violent criminals to
prison for life if they have three violent felony
convictions. Cuomo said criminals convicted of three
violent felonies were probably guilty of many more.
shots in the health care system, and asked whether
seniors wanted ''the insurance companies and the HMOs that
they control to call the shots for the future.
As far as the industry is concerned, Clinton warned,
access to insurance means something quite different.
''They want to give you access just like everybody in
this room right now has access to a Mercedes,' he said.
WHITEWATER PROSECUTOR SEEKS SPECIAL GRAND JURY
By Steve Barnes
LITTLE ROCK, Ark (Reuter) -- Special prosecutor Robert
Fiske asked Wednesday for a special grand jury to review
evidence in the Whitewater investigation he directs,
saying a separate panel was needed ''to do this
investigation quickly and thoroughly.'
Fiske met behind closed doors with the federal judge
who would authorize the grand jury and said afterward,
''We would like the grand jury empaneled as soon as it
reasonably can be, consistent with the procedures in this
district."
Fiske said Judge Stephen Reasoner, chief judge of the
Eastern District of Arkansas, indicated he would review
the request and decide within a few days whether to call a
grand jury.
''We felt it would not be fair to ask a grand jury
that was told it would meet only two times a month to sit
the additional time we think it will be necessary to do
this investigation quickly and thoroughly."
Fiske would not say how long he thought the probe
would take.
Fiske is investigating President Clinton's business
affairs while he was governor of Arkansas to determine if
depositor funds from the now-defunct Madison Guaranty
Savings and Loan were illegally diverted to campaign use
in 1984.
He is also checking whether the Whitewater real estate
development in north Arkansas, in which the Clintons were
investors, improperly benefited from a Small Business
Administration-guaranteed loan to the wife of Jim
McDougal, Whitewater's developer and the chairman of
Madison.
The savings and loan's failure in 1989 cost taxpayers
at least $46 million.
It was learned Wednesday that the foreman of the
present grand jury is James Burnett, an attorney and
Republican Party activist who served as chairman of the
National Transportation Safety Board at the appointment of
President Ronald Reagan.
''That was not a factor in our request for a new grand
jury, Fiske said.
Fiske said he requested a special grand jury be
empaneled for the 18 months federal procedures allow.
Fiske would not comment on what materials his staff
may already have subpoenaed except to note that ''It's
fair to say a lot of documents are involved. He would
not say if documents have been obtained from Little Rock's
Rose Law Firm, where Mrs Clinton was a partner.
In a letter to Judge Reasoner made public Tuesday,
Fiske suggested that the current grand jury's caseload
made questionable its ability to review evidence in the
Whitewater investigation "in a prompt and through
manner.''
In a written response to Fiske's request, Judge
Reasoner said Fiske's petition did not justify the expense
of a second grand jury and scheduled Wednesday's hearing
to allow Fiske to ''present and develop his position.
Reasoner's order closed the hearing to the public and
press, citing the potential for disclosures that ''could
very well
hinder the independent counsel's
investigation." REUTER
Reno pushes for administration's crime bill
By MICHAEL KIRKLAND
BALTIMORE (UPI) The administration's push for
President Clinton's crime bill went on the road again
Wednesday, with Attorney General Janet Reno calling for
its passage during a visit to a Baltimore neighborhood.
President Clinton sounded the same theme during a
Tuesday visit to London, Ohio.
Reno met with community leaders in the Greenmount
section of the city and said, 'We've got to get the crime
bill passed.
Added Sen. Barbara Mikulski, D-Md., ''We need to have a
national outburst for Congress to get off its guidelines"
and pass the crime package.
Baltimore Mayor Kurt Schmoke, who escorted Reno to a
public discussion with community leaders, said later
''it's vitally important'' to his city that the crime bill
passes because Baltimore needs more police officers and
drug treatment programs.
About 48,000 of Baltimore's 750,000 residents about
one in every 15 people is addicted to heroin or cocaine,
said Schmoke, but there are only about 5,500 spaces
available for treatment.
The Senate passed its version of the crime bill late
last year, but the House has not passed its proposal. Both
bills still have to be reconciled before a final version
could be passed and sent to Clinton.
The package would include money to help communities
hire 50,000 more police officers, build more prison space
and provide boot camps for young offenders.
bc-whktewater-schaffer - a2156
(ATTN: National editors)
Former Securities Regulator Drowning in Whitewater (Fayetteville)
By James Risen= (c) 1994, Los Angeles Times=
FAYETTEVILLE, Ark. At 2:30 each afternoon, Beverly Bassett Schaffer
leaves her downtown law offices to pick up her 6-year-old daughter, then the
two of them go home to watch children's shows on the Nickelodeon cable
channel. For Schaffer, a figure in the political affair known simply as
Whitewater, it's a way to briefly shut out the world.
'It's how I deal with the stress, she says.
It hasn't really worked. Schaffer moved to this college town in
northwestern Arkansas in part to escape the pressures of her former life as a
public official. But now she can't hide from the flood of press calls, the
camera crews, the constant questions about her actions nine years ago as a
top securities regulator in Bill Clinton's state government.
During that time, she approved a petition by Madison Guaranty Savings and
Loan to sell preferred stock to raise enough money to satisfy the capital
requirements of the Federal Home Loan Bank Board. The lawyer retained by
Madison owner James B. McDougal to submit the plan was Hillary Rodham Clinton,
a partner in the Rose law firm in Little Rock, Ark. The Clintons were partners
with McDougal in the Whitewater land development company.
Madison's condition deteriorated so rapidly that it never took advantage
of Schaffer's ruling, and was closed in 1989 by federal regulators.
Nevertheless, Schaffer is part of the widening circle of people from
Clinton's past who find themselves increasingly on the spot as the White
House public relations machinery moves to insulate the first family from the
controversy and shift attention to other issues.
With the Clintons deciding not to open their records on the affair to the
public or provide a detailed public accounting of it, this group in Arkansas
bankers who loaned Clinton money, state officials who had banking oversight,
contributors to Clinton's campaigns are being pressed to fill in the vacuum
with what they know of what happened.
For some, like Schaffer, the frustration of this position is growing.
don't have any spin doctors, she says.
In an effort to defend herself and her actions as commissioner of the
Arkansas Securities Department, Schaffer is now preparing her own personal
white paper on Whitewater.' She says that she wants to lay out her side of
the story and get the country off her back.
The central questions in the Whitewater affair include whether the
Clintons, as half-owners of the land development venture, were aware that
their partner may have been mingling funds from his savings and loan in the
land business' accounts. Also raised is whether political influence helped
keep that high-rolling savings and loan open longer than it would otherwise
have been, increasing the cost to the federal government of its eventual
federal bailout. Robert B. Fiske Jr., the special counsel appointed by
Attorney General Janet Reno, will take over the federal investigation.
The Clinton acquaintances in Arkansas are increasingly complaining that
their pieces of the puzzle are receiving exaggerated attention because the
Clintons, at center stage, have not been forthcoming with theirs.
Schaffer insists that her place falls in the category of guilt by
association or, more precisely, guilt by false assumption. People don't
understand Arkansas,' she said. This is a small state, and everybody knows
everybody else.'
For Schaffer, the connections in question were with the Clintons and with
Madison Guaranty.
While working as a securities lawyer at a Little Rock law firm in the
summer of 1984, Schaffer says, she was assigned by one of the firm's partners
to complete some paperwork for Madison Guaranty. The Arkansas Securities
Commission, then run by Lee Thalheimer, had questions about Madison's
far-flung and heavily leveraged real estate ventures, so Schaffer said she
wrote a cover letter accompanying Madison owner McDougal's response. The
Whitewater project was not included; most of the regulatory questions
concerned McDougal's plan to build an island resort complex off the coast of
Nova Scotia.
Schaffer insists the assignment was so routine she didn't think to mention
it to Clinton
en Clinton appointed her
to succeed Thalheimer a few months later.
But the assignment left behind a paper trail that would haunt Schaffer
when Whitewater finally blew up. The questions only intensified when McDougal
alleged in press interviews that Clinton appointed Schaffer as securities
commissioner as a favor to him.
Schaffer, who held the securities post for six years, angrily denies the
allegation, insisting that she had never met or talked to McDougal. I still
wouldn't know the man if he was in the same room with me,'' she said.
She says she judged the Madison proposal strictly on its merits and
wonders why the Clintons have not come forward to help stand up for her, or
why Mrs. Clinton herself has not been more forthcoming about her own role.
I don't know why she hasn't been more open,'' Schaffer says. In the end,
she said, the people left behind in Arkansas are bearing the brunt of
this.
132
**** filed by:LAWP(--) on 02/03/94 at 03:11EST ****
Congress still unsure who will get Whitewater reports
By MICHAEL KIRKLAND=
WASHINGTON (UPI) Whitewater special counsel Robert Fiske will have to
report to Congress, Capitol Hill officials said Wednesday, but added they
still haven't figured out who in Congress will get the reports.
One source, who spoke under conditions they not be named, said the reports
could end up going to the clerks of the House and Senate, where they would be
available to everyone in Congress.
The reports would be separate from any possible congressional hearings on
Whitewater.
Fiske was appointed by Attorney General Janet Reno on Jan. 20 to
investigate the failed Whitewater Development Corp. real estate venture,
involving President Clinton, his wife, Hillary Rodham Clinton, and their
friend James McDougal. Fiske also will look into McDougal's failed Arkansas
thrift and its possible connections to Whitewater.
The regulations under which Fiske was appointed say he ``shall report to
Congress statements or reports on the activities of the (special counsel) .
but do not say how or how often that should be done.
One Capitol Hill official, who spoke under conditions of anonymity, said a
logical destination for Fiske's reports would be the Senate Governmental
Affairs Committee, where they would have gone if the independent counsel
statute had not expired, or the panel's subcommittee on government management.
But he said the reports also could be made to the Senate Judiciary
Committee or Senate Majority Leader George Mitchell's office.
Another official involved in the matter said since the regulations simply
say ``Congress'' should get the reports, the special counsel may just give
them to the clerks of each chamber.
The official added that such a move means the reports also would be
available to Republicans, who may try to make political hay out of the matter.
But the official said the Senate Judiciary Committee would be the logical
choice for the reports, since Fiske's office was appointed by the Justice
Department.
On the issue of hearings, House Speaker Thomas Foley said after a
leadership meeting Wednesday that the ``minority'' could bring up Whitewater
under strict limits during hearings on the Resolution Trust Corporation and
the public bailout of failed savings and loans.
But Foley said, ``I don't think there is any evidence that would justify
any hearings in view of the inquiry by the special prosecutor.
**** filed by:UPI-(us) on 02/02/94 at 14:59EST ****
**** printed by:WHPR(JEL) on 02/03/94 at 08:29EST ****
PM IL--Hillary Illinois S&L, 670
Rodham Clinton Legal Dealings Questioned
hmilchtsdmwdc
CHICAGO (AP) Hillary Rodham Clinton represented federal regulators in a
suit against a Clinton family friend and political ally accused of
contributing to the failure of an Illinois savings and loan, the Chicago
Tribune reported today.
Citing court records, the Tribune said Mrs. Clinton settled the $3.3
million suit for $200,000 in 1987 a year after her husband's ties with the
defendant had been a campaign issue in his re-election as Arkansas governor.
The case involved Dan Lasater, a convicted felon whose bond trading firm
played a part in the troubles of several savings and loans.
Lasater also helped Clinton's half brother, Roger Clinton, pay off drug
debts and encouraged his workers to contribute to Clinton's gubernatorial
campaigns.
After being elected governor, Clinton successfully lobbied the Arkansas
legislature to approve a contract for Lasater to sell $30.2 million in bonds
for the state police radio system. The contract earned Lasater's firm
$750,000.
Clinton's personal and political connections to Lasater have been widely
reported. But the Tribune report was the first that Mrs. Clinton had
represented the Federal Deposit Insurance Corp. in
a suit against him or anyone else.
Lasater signed deals with several thrifts, including First American
Savings and Loan in the Chicago suburb of Oak Brook, to trade Treasury bond
futures.
Former Illinois Gov. Dan Walker, who headed First American, later realized
his savings and loan was losing money and accused Lasater of trading bonds
with thrift funds without informing the thrift's officers.
First American sued Lasater's bond firm, accusing it of mail, wire and
securities fraud.
First American was seized in 1986, before the case went to court, by
federal regulators who charged Walker with lending himself $1.4 million in
federally insured deposits. Walker was convicted of fraud and jailed.
About the same time, Lasater was convicted of cocaine distribution and
trafficking and jailed. But federal regulators decided to pursue First
American's $3.3 million lawsuit against Lasater.
The Federal Deposit Insurance Corp. hired the Rose Law Firm in Little
Rock, Ark., where Rodham Clinton worked, to handle its cases in Arkansas.
Most of the Rose firm's savings and loan legal work was handled by Webster
Hubbell, now the number three official in the Justice Department. But the firm
assigned the Lasater case to Rodham Clinton and Vincent Foster, the deputy
White House counsel who committed suicide last July, the Tribune reported.
Rodham Clinton and Foster negotiated the confidential settlement, the
report said.
Whether Lasater got off cheaply at the expense of taxpayers depends on his
assets at the time of deal and the strength of the evidence against him.
Thomas Scorza, a former assistant U.S. attorney who teaches legal ethics
at the University of Chicago, said Rodham Clinton's decision to represent the
government in the case raises questions about her professional conduct.
``A lawyer is required to represent the interest of their client
zealously,'' he said. There is a substantial question about whether an
attorney was representing a client zealously if the opponent of the client is
someone with whom the attorney had a political, financial and personal
relationship.''
Robert Fiske, former U.S. attorney in New York, has been appointed special
prosecutor to investigate the Clintons' business and political dealings.
Fiske will look into the failed Madison Guarantee Savings & Loan and
whether government-insured depositors' money was diverted illegally from
Madison to Whitewater Development Corp., a planned project of vacation homes.
The president and first lady owned half of Whitewater. Madison's owner, James
McDougal, and his then-wife, Susan, owned the other half.
Foster also represented the FDIC in a government suit against an
accounting firm used by Madison. FDIC officials in Washington have said they
are looking into whether the Rose law firm improperly failed to disclose
potential conflicts of interest in that case.
FDIC spokesman David Barr told the Tribune that FDIC attorneys are trying
to find records on First American to see whether the Rose Law Firm notified it
of any potential conflict of interest.
**** filed by:APW-(IL) on 02/03/94 at 05:01EST ****
**** printed by:WHPR(JEL) on 02/03/94 at 10:27EST ****
PM-Mrs Clinton-S&L, 0495
Mrs. Clinton's Role in Lawsuit Settlement Questioned
CHICAGO (AP) Hillary Rodham Clinton represented federal thrift regulators
in a $3.3 million lawsuit against a Clinton friend and political ally and
ultimately settled the case for $200,000, the Chicago Tribune reported today.
President Clinton's personal and political connections to Dan Lasater have
been widely reported. But the Tribune report, based on court records, was the
first that Mrs. Clinton had represented the Federal Deposit Insurance Corp. in
a lawsuit accusing Lasater of fraud in the failure of a savings and loan.
Thomas Scorza, a former assistant U.S. attorney who teaches legal ethics
at the University of Chicago, said Mrs. Clinton's position raises questions
about her professional conduct.
``A lawyer is required to represent the interest of their client
zealously, he said. There is a substantial question about whether an
attorney was representing a client zealously if the opponent of the client is
someone with whom the attorney had a political, financial and personal
relationship.'
FDIC spokesman David Barr told the Tribune that FDIC attorneys are trying
to find records on the case to learn whether the Rose Law Firm, the Little
Rock, Ark., firm for which Mrs. Clinton worked, notified the federal agency of
any potential conflict of interest.
The settlement came in 1987. Whether Lasater got off cheaply at the
expense of taxpayers depends on his assets at the time and the strength of the
evidence against him.
Lasater is a convicted drug dealer who ran a bond trading firm. He signed
deals with several thrifts, including First American Savings and Loan in the
Chicago suburb of Oak Brook, to trade Treasury bond futures.
First American eventually sued Lasater's bond firm, accusing it of fraud.
First American was seized by federal regulators in 1986, before the
lawsuit went to court, and the head of the S&L, former Illinois Gov. Dan
Walker, was himself convicted of fraud. About the same time, Lasater was
convicted of cocaine trafficking and jailed.
Federal regulators decided to pursue First American's lawsuit. The FDIC
hired the Rose Law Firm to handle its cases in Arkansas.
Most of the law firm's S&L legal work was handled by Webster Hubbell, now
the No. 3 official in the Justice Department. But the firm assigned the
Lasater case to Mrs. Clinton and Vincent Foster, the White House lawyer who
committed suicide in July, the Tribune reported.
Mrs. Clinton and Foster negotiated the confidential settlement, the report
said.
Clinton's ties to Lasater were personal and political.
In the summer of 1985, Clinton successfully lobbied the Arkansas
Legislature to approve a contract for Lasater to sell $30.2 million in bonds
for the state police radio system. The contract earned Lasater's firm
$750,000.
In the early '80s, Lasater helped Clinton's half brother, Roger Clinton,
pay off drug debts. He also encouraged his workers to contribute to Clinton's
gubernatorial campaigns.
**** filed by:APW-(AR) on 02/03/94 at 06:36EST ****
**** printed by:WHPR(JEL) on 02/03/94 at 10:27EST ****
Possible Clinton role in collapsed Illinois thrift
CHICAGO (UPI) The special counsel appointed to investigate the Clintons'
role in a failed Arkansas land deal also is looking into Hillary Clinton's
participation in a settlement involving a collapsed Illinois thrift, it was
reported Thursday.
The Chicago Tribune said special prosecutor Robert Fiske is trying to
determine whether there was a conflict of interest because at the time Hillary
Clinton negotiated a settlement on behalf of the savings and loan, she was an
attorney for the Federal Deposit Insurance Corp.
The case involves convicted bond trader Dan Lasater and the First American
Savings and Loan Association of Oak Brook, Ill., headed by former Illinois
Gov. Dan Walker, who was convicted of using the institution to enrich himself.
Lasater, founder of the Ponderosa steak house restaurant chain, became
friends with Clinton's mother Virginia Kelley and his brother, Roger, at the
Oaklawn Park racetrack in Hot Springs, Ark., the newspaper reported.
Lasater was a heavy contributor to the president's campaign and his
brokerage firm handled some of Arkansas' bond underwriting business. He also
reportedly lent Roger Clinton money to pay off a drug debt.
Court records show First American lost at least $361,572 in Treasury bond
futures trades promoted by Lasater. Walker sued Lasater for fraud for using
First American funds in unauthorized trades.
When First American failed, the FDIC pursued Walker's $3.3 million suit.
In the meantime, Lasater had been convicted of drug dealing, the newspaper
said.
The suit was assigned to Hillary Clinton and Vincent Foster, the White
House counsel who committed suicide last July.
The first lady and Foster negotiated a confidential settlement in 1987,
providing for Lasater to pay the government $200,000 in return for dismissal
of the suit, the Tribune reported. The first lady has denied any wrongdoing.
**** filed by:UPI-(us) on 02/03/94 at 10:26EST ****
**** printed by:WHPR(JEL) on 02/03/94 at 10:27EST ****
BC-CLINTON-HILLARY
SECOND CASE MAY ATTRACT CLINTON INVESTIGATION-REPORT
CHICAGO, Feb 3 (Reuter) - A second case involving business ethics in the
private dealings of President Clinton and wife Hillary may draw the attention
of a special prosecutor looking into the Clintons ties with the defunct
Whitewater land deal, the Chicago Tribune reported Thursday.
The case involves a confidential settlement negotiated by lawyer Hillary
Clinton in 1987 in a court case in which she represented the Federal
government in a suit against Arkansas businessman Dan Lasater, a Clinton
family friend, according to the Chicago Tribune.
Lasatar, sued by the Federal Deposit Insurance Corporation for $3.3
million to cover what it said was Lasatar's improper use of funds belonging to
a failed Oak Brook, Illinois, savings and loan association, paid the
government $200,000 to have the suit dismissed, the newspaper said.
``As in Whitewater, the Illinois case places the president and his wife
once again in an association with an unsavory wheeler-dealer who had strong
personal ties to the Clintons, it said.
Attorney Robert Fiske was named as a special prosecutor January 20 to
look into the Clintons' business relationship with James McDougal, head of an
failed Arkansas savings and loan and
a partner in the Whitewater land development.
In the Lasatar case, the FDIC had hired the Rose Law Firm of Little Rock
as its representative. Rose assigned Hillary Clinton, a leading lawyer at the
firm, and Vincent Foster to pursue the Lasatar suit. Foster, later a White
House counsel for Clinton, committed suicide last July.
The newspaper said Hillary Clinton's office declined comment on the
Lasatar case but defended her legal ethics.
Our view is that Hillary Clinton, when a lawyer at the Rose Law Firm,
acted with the utmost integrity and professionalism,' her press secretary
Lisa Caputo said.
REUTER
REUTER
**** filed by:RB--(--) on 02/03/94 at 10:23EST ****
**** printed by: WHPR (JEL) on 02/03/94 at 10:28EST ****
PM-Mrs Clinton-S&L, 0495
Mrs. Clinton's Role in Lawsuit Settlement Questioned
CHICAGO (AP) Hillary Rodham Clinton represented federal thrift regulators
in a $3.3 million lawsuit against a Clinton friend and political ally and
ultimately settled the case for $200,000, the Chicago Tribune reported today.
President Clinton's personal and political connections to Dan Lasater have
been widely reported. But the Tribune report, based on court records, was the
first that Mrs. Clinton had represented the Federal Deposit Insurance Corp. in
a lawsuit accusing Lasater of fraud in the failure of a savings and loan.
Thomas Scorza, a former assistant U.S. attorney who teaches legal ethics
at the University of Chicago, said Mrs. Clinton's position raises questions
about her professional conduct.
``A lawyer is required to represent the interest of their client
zealously, he said. There is a substantial question about whether an
attorney was representing a client zealously if the opponent of the client is
someone with whom the attorney had a political, financial and personal
relationship.'
FDIC spokesman David Barr told the Tribune that FDIC attorneys are trying
to find records on the case to learn whether the Rose Law Firm, the Little
Rock, Ark., firm for which Mrs. Clinton worked, notified the federal agency of
any potential conflict of interest.
The settlement came in 1987. Whether Lasater got off cheaply at the
expense of taxpayers depends on his assets at the time and the strength of the
evidence against him.
Lasater is a convicted drug dealer who ran a bond trading firm. He signed
deals with several thrifts, including First American Savings and Loan in the
Chicago suburb of Oak Brook, to trade Treasury bond futures.
First American eventually sued Lasater's bond firm, accusing it of fraud.
First American was seized by federal regulators in 1986, before the
lawsuit went to court, and the head of the S&L, former Illinois Gov. Dan
Walker, was himself convicted of fraud. About the same time, Lasater was
convicted of cocaine trafficking and jailed.
Federal regulators decided to pursue First American's lawsuit. The FDIC
hired the Rose Law Firm to handle its cases in Arkansas.
Most of the law firm's S&L legal work was handled by Webster Hubbell, now
the No. 3 official in the Justice Department. But the firm assigned the
Lasater case to Mrs. Clinton and Vincent Foster, the White House lawyer who
committed suicide in July, the Tribune reported.
Mrs. Clinton and Foster negotiated the confidential settlement, the report
said.
Clinton's ties to Lasater were personal and political.
In the summer of 1985, Clinton successfully lobbied the Arkansas
Legislature to approve a contract for Lasater to sell $30.2 million in bonds
for the state police radio system. The contract earned Lasater's firm
$750,000.
In the early '80s, Lasater helped Clinton's half brother, Roger Clinton,
pay off drug debts. He also encouraged his workers to contribute to Clinton's
gubernatorial campaigns.
**** filed by: APW- (AR) on 02/03/94 at 06:36EST ****
**** printed by: WHPR (JEL) on 02/03/94 at 10:29EST ****
PAGE 20
LEVEL 1 - 8 OF 18 STORIES
Copyright 1994 The Washington Post
The Washington Post
February 2, 1994, Wednesday, Final Edition
SECTION: FIRST SECTION; PAGE A6
LENGTH: 406 words
HEADLINE: Hill Democrats Promise Hearings on Thrifts
SERIES: Occasional
BYLINE: Susan Schmidt, Washington Post Staff Writer
BODY:
Democratic chairmen of the House and Senate banking committees agreed
yesterday to schedule savings and loan oversight hearings that Republicans vowed
to use as forums for inquiries about the Whitewater Development Corp. and
Madison Guaranty Savings & Loan.
Under pressure from Republicans, Sen. Donald W. Riegle Jr. (D-Mich.) and Rep.
Henry B. Gonzalez (D-Tex.) said they will hold hearings in the coming month on
the agency disposing of failed S&Ls, the Resolution Trust Corp. The RTC's
investigation into Madison's 1989 failure led to the ongoing federal criminal
probe into the Whitewater real estate development and President and Hillary
Rodham Clinton's ties to the failed S&Ls. Investigators also are examining the
Clintons' Whitewater real estate venture, the financial dealings of Arkansas
Gov. Jim Guy Tucker (D) and other prominent Arkansans.
Riegle and Gonzalez refused, however, to hold full-fledged hearings on
Madison. They have contended that the investigation should be left to newly
appointed special counsel Robert B. Fiske Jr.
But with Congress just back from winter recess, it was clear yesterday that
Republicans intend to use any chance to raise the Madison issue, creating
uncomfortable situations for administration banking officials.
Jonathan Fiechter, acting director of the Office of Thrift Supervision, who
has so far refused to release Madison documents to congressional Republicans,
was questioned sharply about it during a banking subcommittee hearing yesterday.
Ricki Tigert, a friend of the Clintons and the president's nominee to head the
Federal Deposit Insurance Corp., promised during her confirmation hearing
yesterday to be "extremely sensitive to issues of potential conflicts of
interest or any appearance of conflicts of interest" in the FDIC's handling of
any matters involving Madison.
Sen. Alfonse M. D'Amato (N.Y.), ranking Republican on the banking committee,
reminded Riegle from the Senate floor that RTC officials had not been before
the committee for an oversight hearing since last March, though they are
supposed to appear every six months. He also expressed his frustration about the
RTC's delay in responding to concerns raised by Republicans that civil
recovery actions against anyone implicated in Madison's failure will soon be
barred unless the time to file claims is extended.
PAGE 21
The Washington Post, February 2, 1994
Staff writers Charles R. Babcock and Helen Dewar contributed to this report.
GRAPHIC: PHOTO, SEN. ALFONSE M. D'AMATO
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 2, 1994
Gonzalez flip-flops on
Whitewater hearings
Al
ing," Mr. Gonzalez said during one
By Paul M. Rodriguez
Tests were done
THE WASHINGTON TIMES
point of the early afternoon colloquy.
House Banking Chairman Henry
on gun with Foster
At another point, Mr. Gonzalez
promised to hold separate oversight
B. Gonzalez promised yesterday to
The Bureau of Alcohol, Tobacco
hearings by the end of February on
hold hearings soon on the White-
and Firearms yesterday said it
the Resolution Trust Corporation
water-Madison affair, then seem-
found gunpowder traces on the
(RTC),the federal agency that over-
ingly changed his mind as several
gun discovered with Deputy
sees failed S&Ls.
powerful House Democrats called
White House Counsel Vincent
Almost immediately after his
for a meeting this week to deal with
Foster's body and gave the U.S.
statements, some of Mr. Gonzalez
the burgeoning political mess.
Park Police a report saying its
staffers said he did not mean to im-
The White House yielded to pres-
findings were "consistent" with
ply he would approve of hearings to
sure from Congress and asked for a
suicide. Last week an ATF
probe the Whitewater-Madison af-
special prosecutor, but Republican-
official said the bureau had not
fair.
led efforts have forged ahead to get
conducted tests on the gun.
"He only meant to say that he
congressional hearings on President
PAGE A3
would, as required by law, conduct
and Hillary Rodham Clinton's in-
oversight hearings into the oper-
volvement in Arkansas' Whitewater
ations of the RTC," said an aide who
Development Corp. and its ties to the
The turnabout came during an ex-
asked not to be named. "If Repub-
failed Madison Guaranty Savings
change on the House floor with Re-
licans want to ask questions about
and Loan Association.
publicans, led by Pennsyvlania Rep.
matters that fall within the RTC's
Mr. Gonzalez, Texas Democrat,
Robert S. Walker, with Mr. Gonzalez
authority, such as Madison, then that
has been successfully fighting GOP
responding to a battery of questions
would be allowed," the aide added.
efforts for Whitewater hearings, but
about whether Congress would hold
Democratic leaders, obviously
after mounting criticism in the
hearings on the matter this year.
concerned over Mr. Gonzalez' state-
press, pledged to proceed with
"Yes, of course, long before that.
Banking Committee hearings.
Of course we're going to have a hear-
see HEARINGS, page A14
HEARINGS
hearings and is conducting a GOP
"When that next RTC Oversight
probe of his own - said the Repub-
Board hearing takes place, any
From page Al
licans' desire to have Congress in-
member of the committee may, of
vestigate Whitewater "will be
course, ask any question of concern
ments, moved quickly to a strategy
tested" in the RTC hearings.
involving the RTC," Mr. Riegle said
session.
Mr. Leach told reporters that if
in a statement.
"This is a circus," said a visibly
Democrats continue to stall on hold-
In a letter yesterday, Roger C. Alt-
irritated senior Democratic law-
ing separate hearings on the matter,
man, the interim chief of the RTC,
maker when told that Gonzalez
he plans to invoke a little used rule
assured Sen. Alfonse M. D'Amato,
staffers had reversed course on Mr.
in the House that permits the minor-
the New York Republican demand-
Gonzalez's apparent pledge to hold
ity party to call witnesses on its own.
ing hearings in the Senate, that the
Banking Committee hearings.
"That is something that we will
cleanup agency would "vigorously
Under Republican pressure, and
consider," said Mr. Leach, ranking
pursue all appropriate" civil rem-
GOP promises of daily news confer-
edies against Madison, owned by
ences on a Whitewater-Madison
James B. McDougal, a longtime
"cover-up," some senior House
Democrats called for a special meet-
"House leadership
friend of the Clintons' and their part-
ner in Whitewater.
ing of their leadership to discuss the
will not allow this to
Mr. Altman said the RTC could
Whitewater-Madison affair.
become a televised
seek agreements to extend the stat-
"As long as we stand united,
ute of limitations beyond the Feb. 28
there's not going to be any hearings,
soap opera."
expiration, a move that Mr. D'Amato
period," said a second source.
had requested.
"The House (Democratic) leader-
On the Senate floor, Mr. D'Amato
ship will not allow this to become a
held up a poster-size enlargement of
televised soap opera to embarrass
Republican on the Banking Commit-
the month of February and marked
this president," the source said.
tee.
through yesterday's date. "I will con-
"It could do serious harm to the
The meeting among senior Demo-
tinue to bring this calendar to the
committee process if suddenly ev-
crats, which could occur today, is to
floor every day so that everyone will
ery ranking member started to use
review the rules of the House per-
be aware that precious time is slip-
this rule," said one Democrat who
taining to possible Whitewater-
ping away," he said.
heads a House subcommittee. He
related witnesses called by Republi-
Democratic officials said yester-
said that while it would be difficult
cans in any upcoming Banking
day that the biggest challenge to
to block all such GOP special hear-
Committee hearings.
staving off a full-fledged congres-
ing calls, most could be stopped.
"The speaker has said he wants no
sional probe of Whitewater-Madison
"We must not appear to waiver on
hearings, period, and that's what
was in the Senate.
this," said another source familiar
we're going to try to make sure hap-
"If anybody breaks down, it's go-
with the behind-the-scenes debate
pens, nothing," said one senior
ing to be Riegle," a Democratic law-
among senior Democrats. "Nobody
Democrat. "I'm just following or-
maker said in reference to other sen-
can control Henry from doing what
ders."
ators who broke Democratic ranks
he thinks is right, but at least we can
Sen. Donald W. Riegle Jr., Mich-
and sided with Republicans in call-
all give him support to stay the cur-
igan Democrat and chairman of the
ing for the appointment of a special
rent course."
Senate Banking Committee, also
counsel.
Rep. Jim Leach, Iowa Republican
said yesterday that he would hold
"They're the ones who we've got
- who has asked Mr. Gonzalez for
oversight hearings on the RTC.
to watch out for," the lawmaker said.
The Washington Times WEDNESDAY, FEBRUARY 2. 1994
92
4A WEDNESDAY, FEBRUARY 2. 1994
USA TODAY
WASHINGTON
A QUICK LOOK AT WHAT'S GOING ON IN THE NATION'S CAPITAL
House banking panel
ELSEWHERE IN THE WORLD
to probe Whitewater
Bosnia peace hopes dim;
House Banking Committee Chairman Henry Gonzalez, D-
U.N. chief backs air strikes
Texas, said on the House floor Tuesday that he would hold
hearings this year on the Whitewater scandal. "Of course
Opposing sides in Bosnia-Herzegovina displayed little in-
we're going to have a hearing," he said when pressed by
terest in peace Tuesday, as the West grappled with ways to
Republicans. He had rejected GOP demands for hearings
solve the 22-month civil war through negotiation and avoid
on the failure of an Arkansas thrift linked to President Clin-
the carnage many fear will take place if fighting intensifies.
ton's investment in the Whitewater land deal, citing the spe-
U.N. Secretary-General Boutros Boutros-Ghali on Tues-
cial counsel's separate investigation. "I applaud his willing-
day backed the use of air strikes in the former Yugoslav
ness to address this controversial issue," said Rep. Jim
republic to open airports and aid airlifts and to protect U.N.
Leach, R-Iowa. But Gonzalez's staff said he had been agree-
peacekeepers. But he also told all parties in the Balkans
ing only to hearings on the Resolution Trust Corp. Congress
that negotiations were the only way to end the disastrous
must report twice a year on the RTC, which oversees dis-
war that flared after Bosnia's Muslim government declared
posal of failed savings and loans. RTC hearings will give
independence from Serb-dominated Belgrade.
Republicans a chance to raise questions about Whitewater,
Bosnian President Alija Izetbegovic said he would not ac-
but key witnesses in the case probably will not testify.
cept an unfair peace to end the war, adding to fears that
talks will fail and fighting will intensify.
BROWN PROBE: Justice De-
Raising the stakes further, up to 5,000 Croatian soldiers
partment lawyers have cleared
were reported by aides to Boutros-Ghali to have entered
Commerce Secretary Ron Brown
Bosnia to reinforce their kin fighting a revitalized Muslim
of allegations that he accepted
army. Croatia denied this.
money in exchange for working to
lift the U.S. trade embargo on Viet-
VENEZUELA LEADER: Vene-
nam, Reuters news agency report-
zuelan President-elect Rafael Cal-
ed. It said the Justice Department
dera unveiled a politically inde-
is expected to inform Brown's at-
pendent Cabinet of economists,
torney of his exoneration today.
businessmen and diplomats to help
Brown was accused of accepting
him lead the oil-exporting nation
$700,000 from a Vietnamese busi-
USA TODAY
out of financial and social crisis.
nessman before he became Com-
BROWN: Cleared of
Caldera, 78, takes office today for a
merce secretary.
allegations
five-year term. He inherits an
economy in recession, inflation at
EMBARGO RUMORS:
The White House denied reports
its highest level in years - 45% an-
that President Clinton plans to lift the 19-year-old U.S. trade
By Diego Giudice, AP
nually - a worrisome budget defi-
embargo against Vietnam this week, but it hinted such a
CALDERA: Begins
cit and high interest rates that
decision could come at any time. Responding to a CBS
five-year term today
throttle new investment.
News report that Clinton will end sanctions Friday, White
House spokeswoman Dee Dee Myers said: "No decision has
NORTH
KOREA
CRUSADE:
Evangelist
Billy
Graham
been made. That is definitive." But National Security Coun-
arrived in Hong Kong after a four-day visit to officially athe-
cil spokesman Calvin Mitchell said Clinton will make the
ist North Korea, where he preached at a new church and
decision "in the near future."
delivered a personal message from President Clinton to
President Kim Il Sung. The United States and North Korea
GUN BUYBACK: The U.S. government should encour-
are at odds over Pyongyang's refusal to allow international
age people with guns to turn in their weapons by giving
nuclear agency inspectors full access to suspected weapons
states and cities cash for buy-back programs, Senate Repub-
sites. Meanwhile, Republican senators urged Clinton to re-
lican leader Robert Dole said. He told governors he will
sume joint military exercises with South Korea and deploy
propose legislation to provide $30 million in federal funds
defensive Patriot missiles in the south.
over two years to states and localities that match the feder-
al contributions for buying back guns.
S.AFRICAN TOWNSHIPS:
South
African
President
F.W. de Klerk announced plans to send the army into trou-
FOSTER DEATH: The gun found on deputy White House
bled black townships to help curb continuing unrest, as
counsel Vince Foster's body last summer was tested by a
April's first all-race elections near.
federal agency, and the powder burns were consistent with
forensic evidence that he killed himself, The Associated
COLOMBIA FLOODS:
Floodwaters and mudslides up
Press reported. It quoted a law enforcement official. speak-
to 30 feet high swept away 1,400 homes in parts of south-
ing on condition of anonymity, as saying the match of pow-
western Colombia, killing at least 19 people, leaving dozens
der burns on Foster's hand and the .38-caliber weapon
missing and thousands homeless, officials said.
found with his body were instrumental in leading U.S. Park
Police investigators to conclude Foster pulled the trigger
THAILAND
EMERGENCY:
A
Singapore
Airlines
himself. The powder burns, the way Foster's body was posi-
Boeing 747 returned to Bangkok airport minutes after take-
tioned and the indentation of the gun's trigger on his finger
off, when one of its engines caught fire, air traffic control
made suicide the logical conclusion, it said. The Park Police
officials said. No injuries were reported.
ruled last summer Foster's death was a suicide.
ALSO
A French journalist was killed and an Austra-
CORRECTION: The Office of National Drug Control Poli-
lian journalist seriously wounded in an attack in Algiers
cy, headed by Lee Brown, should have been included in a
A man fired shots outside the shrine to Ayatollah Ruhollah
listing of Cabinet-level offices in Monday's paper.
Khomeini in Tehran as Iran's head of state gave a speech
marking the start of the 1979 Islamic revolution.
WEDNESDAY FEBRUARY 2. 1994
USA TODAY
86
USA TODAY WEDNESDAY, FEBRUARY 2. 1994
THE NATION
Korean War finally ends for N.Y. woman
By Steve Komarow
more than 8,100 "unaccounted
the wake of Vietnam. There
and Juan J. Walte
for" to be identified since the
USA TODAY
war ended in 1953.
Korean War left 8,177 MIAs
are reports from Russia some
Korean MIAs may have been
"You can imagine how I
in the wars of this century, the Korean War ranks behind World
taken there for interrogation.
Frank Morales' widow re-
felt," when the Army called
War II as the conflict that left the most U.S. personnel missing
A study ordered by the Pen-
members the day in 1950 when
last week, said M. Morales of
in action. Numbers missing in action, by conflict:
tagon said last month as many
her 37-year-old husband, a
New York, who wanted her full
as 50 captive U.S. servicemen
World War II veteran, was sent
name withheld for fear of un-
off to fight his second war for
wanted attention. "Or how I
World War II
78,750
may have been taken from Ko-
rea to the Soviet Union and
the United States.
feel now. Oh, my God!"
never returned. It's possible
"He was the oldest man in
M. Morales, is the first, but
others in North Korean POW
the battalion," M. Morales re-
not last, widow to face such
Korean War
8,177
camps were never re
called in a telephone interview.
shock. The Army expects to
"We know that there are
"And we thought it didn't
identify several more remains
World War I
3,350
some that are still alive," said
seem quite right that he was
soon - but only a fraction of
Dolores Alfond, head of the
taken to the front and then di-
the missing.
National Alliance of Families
rectly into battle" in Korea.
Col. Michael Spinello, direc-
Vietnam War
2,266
For the Return of all America's
Before the year was out, he
tor of the Army's Casualty and
Missing Servicemen.
was missing in action, thought
Memorial Operations Center,
The United States should
to be one of more than 600 U.S.
said 194 coffins have been re-
Source: Center for Military History
By Marty Baumann, USA TODAY
squeeze the North Koreans for
soldiers killed when the 8th
turned by the Korean People's
information, and any captives,
Cavalry was surprised, sur-
Army since 1990.
Officials can't say how many
stroyed critical dental records.
before time runs out, she
rounded and routed in China's
Enough of Morales' remains
remains were returned. Identi-
New genetic techniques may
Sgt. Morales' time ran out
devastating rush to North Ko-
and personal effects, including
fications "will not come in
be useful but "not all remains
long ago, if not his journey.
rea's defense.
dog tags, were together to
large numbers for the foresee-
yield DNA," Spinello said.
M. Morales says her late hus-
Now, more than 43 years lat-
make identification possible so
able future," he said.
Still, Tuesday's news offered
band, who would be 80, will be
er, his widow has been given
soon after their Nov. 30 return.
The passage of time has
hope to some families.
buried this spring "probably
another shock.
Other coffins revealed only
made identification difficult,
With the end of the Cold
in May" - in his place of birth,
Morales' remains have been
puzzles. Some "contained the
and not only because of the in-
War, new information has
the small Puerto Rican town of
identified by Army technicians
remains of more than one indi-
evitable deterioration. A 1973
been made available about Ko-
Naguabo, about 25 miles south-
in Hawaii - the first of the
vidual," Spinello said.
fire in a St. Louis repository de-
rean MIAs, almost forgotten in
east of San Juan.
Take the gun out of Irish politics
Adams urged
campaign vow to name a U.S.
envoy for Northern Ireland
was overtaken by the Dec. 15
0 make good
Anglo-Irish peace initiative.
Adams, president of Sinn
on peace talk
Fein, the IRA's legal political
arm, was invited to join in that
pact. He declined. saying be
By Keith Greenberg
needed "clarifications."
and Tom Squitieri
Instead, Adams urged Lon-
USA TODAY
don to resume the secret talks
it had conducted with the IRA
NEW YORK - Call Gerry
over the past three years.
Adams a terrorist and the head
"I have no problem with to-
of the Irish Republican Army's
morrow sitting down with the
political wing offers his defini-
man who pressed the trigger
tions of the word: George
and tried to kill me to make
Washington. Nelson Mandela.
peace," Adams said. He was
"George Washington was de-
wounded in the neck and
picted by the British as a ter-
shoulder in a 1983 attack.
rorist and I think that is a com-
John Alderdice, head of a
mon ailment that afflicts
moderate Northern Ireland
anyone who opposes colonial-
party, questioned Adam's sin-
ism," Adams told USA TODAY.
cerity and demanded he tell
Black nationalist leader
the IRA to lay down its arms.
Mandela spent years in prison,
While Adams maintains he
was later freed and won the
has no influence with the IRA,
Nobel Peace Prize for his ef-
By Richard Drew, AP
British officials regard him as
forts to reconcile South Afri-
*PREPARED TO GO EXTRA MILE': Gerry Adams, head of the Irish Republican Army's political
a de facto IRA leader.
ca's blacks and whites.
wing, talks to reporters in New York. Adams was granted a visa to attend a peace conference.
"Sinn Fein acts as an apolo-
Adams, who has used a 48-
gist for the IRA." Alderdice
hour visit to the USA to try to
"We are committed to taking
ern Ireland, seeking unifica-
dress through this peaceful
said. "If Mr. Adams had
convince people he also seeks
the gun out of Irish politics, but
tion with the Republic of Ire-
route," said Sen. Christopher
the opportunity to perhaps an-
peace, was jailed by the British
we need the cooperation of the
land. The 24-year struggle has
Dodd, D-Conn., who supported
nounce a cease-fire, then it
several times during the 1970s.
British government."
left more than 3,000 dead.
the Adams visit.
would have been a progressive
"It's easy to make peace
While Adams has offered no
Adams was granted a limit-
Adams wanted Washington
development."
with your friends, but the situa-
specific ideas to advance the
ed visa to attend a peace con-
to take a stronger role in the
Major also challenged Ad-
tion here is needing to make
peace process, his message is:
ference Tuesday in New York.
conflict. That hope was dashed
ams to make good on
:
e with our enemies. I am
We're not as bad as you think;
He must leave the USA today.
Tuesday by President Clinton.
talk: "All the words, all the pre-
quite prepared to go the extra
the British government is
"We want him to continue on
"The people that have to re-
varications, all the evasions of
mile with (British Prime Minis-
worse than you've heard.
this path, to go back and say
solve this are the Irish and the
Sinn Fein will be utterly and
ter) John Major to bring that
The paramilitary IRA is
there is a broader base of sup-
British," Clinton said.
completely hollow until they
about," Adams said Tuesday.
fighting British rule in North-
port (for peace) if they seek re-
Clinton also said his 1992
end violence."
WEDNESDAY FEBRUARY 2. 1994 USA TODAY
87
G.O.P. Attacks on Clinton Land Deal
By MICHAEL WINES
floor, the chairman of the House Bank-
Special to The New York Times
The minority in
ing Committee, Henry B. Gonzalez of
WASHINGTON, Feb. 1 - The Re-
Texas, agreed to hold hearings on the
publicans today renewed their calls for
Congress looks
bailout "as soon as it is reasonable to
hearings into the links between Presi-
get everybody together."
dent Clinton and a failed Arkansas
for a scandal.
Mr. Gonzalez refused to say when
savings and loan, and they won the
that might be, but he indicated that it
Democrats' assent to take at least a
could be before the end of the month.
brief look into the matter.
Hopes That Faded
How deep, for how long and when
project, and whether Mr. Clinton's
were matters that the Democrats stu-
Republicans had hoped for separate
close ties to Madison's owner led regu-
diously left unclear. For now, it ap-
hearings into Whitewater, but those
lators to delay closing the savings and
pears that Republicans will at most be
hopes faded when a special prosecutor
loan. That would have increased the
was named to look into the affair earli-
allowed to question officials at the Fed-
taxpayers' cost of paying off the insti-
eral agency that in 1989 bailed out the
er this month. Many legislators wor-
tution's depositors, an amount that to-
bankrupt Arkansas institution, the
ried that a formal inquiry with immu-
tals at least $47 million.
Madison Guaranty Savings and Loan
nized witnesses could impede a crimi-
Association.
What the Republicans won today,
nal investigation, just as 1987 hearings
Still, it was the first time Democrats
after a day of polite requests and angry
on the Iran-contra affair hamstrung
had shown any willingness to explore
accusations, was a Democratic prom-
subsequent trials in that scandal.
the affair in which Mr. Clinton and his
ise that the House and Senate Banking
Since then, the Republicans have fo-
wife joined Madison's owner in an in-
Committees will soon hold hearings on
cused on forcing the two banking com-
the management of the Resolution
mittees to look into Madison, either in
vestment in a Arkansas resort project
- the Whitewater Development Com-
Trust Corporation, the agency that ad-
special hearings or through their over-
pany - which, like Madison itself, went
ministers the nationwide savings-and-
sight of the bailout.
belly-up.
loan bailout, closing down the failed
Both the Senate and House hearings
institutions and liquidating their as-
that were agreed to today are essen-
Among many other things, Republi-
sets.
tially meetings with the Resolution
cans want to know what happened to
The law requires that such hearings
Trust Corporation's own oversight
the money that Madison loaned to the
be held twice a year, but none has been
board, which is headed by Treasury
held for nearly a year, and until today
Secretary Lloyd Bentsen and includes
it was not certain that any would be
other top Federal officials like Alan M.
held in 1994.
Greenspan, the chairman of the Fed-
Judge Says Riot Victim
But in meetings of the House and
eral Reserve Board.
Senate banking panels this morning,
The rules in the House allow Republi-
Can Sue Angeles
Republicans made it apparent that
cans on the banking committee to call
they would continue to press for a
their own witnesses as well, but it was
public airing of the questions involving
not clear today who might be sum-
LOS ANGELES, Feb. 1 (AP) - A
Madison Guaranty wherever possible,
moned.
Federal district judge cleared the way
and Democrats quickly indicated that
hearings on the trust corporation was
Republican Strategy
for a trial in a lawsuit against the city
by Reginald O. Denny, the truck driver
the best way to do it.
The Republicans are hoping that
who was severely beaten in rioting that
The head of the Senate panel, Donald
their call for hearings by the end of the
broke out after four white police offi-
W. Riegle Jr., Democrat of Michigan,
month will force the trust corporation
pledged to hold oversight hearings on
to begin civil claims against Madison
cers were acquitted in the beating of
the whole scope of the bailout agency
- and thus recover any further money
Rodney G. King.
The judge, William Matthew Byrne
after another committee member, Sen-
- before the deadline for doing so, Feb.
Jr., ruled on Monday that Mr. Denny
ator Alfonse M. D'Amato, Republican
28, the fifth anniversary of the institu-
and three other riot victims could sue
of New York, suggested that the agen-
tion's takeover.
on the ground that they were deprived
cy was dodging its duty to keep the
The acting head of the bailout agen-
of their constitutional right to equal
Senate informed about its activities
cy, Roger C. Altman, told Senator D'A-
and the Madison affair.
mato in a letter that he was mindful of
protection under the law.
the approaching anniversary. He stat-
They contend that the police pulled
Mr. Riegle later issued a written
ed that his agency would "vigorously
out of the South-Central area, where
statement omitting any mention of
pursue all appropriate remedies" to
the riots began in April 1992, because
Madison but noting that "any member
recover more money from Madison,
the area is composed of mostly black
of the committee may, of course, ask
including seeking an extension of the
and Hispanic residents.
any question of concern" involving the
civil statute of limitations, if grounds to
Mr. Denny and the others, Takao
agency's activities.
do so existed.
Hirata, Fidel Lopez and Wanda Harris,
It was uglier in the House banking
Mr. D'Amato in turn promised to
said they had been left defenseless. To
panel. In hearings of its general over-
keep reminding Mr. Altman of his
collect damages, they would have to
sight subcommittee today, Representa-
pledge. On the Senate floor today, he
prove their contention at a trial.
tive Toby Roth, Republican of Wiscon-
displayed for cable-television cameras
sin, was ruled out of order when he
a huge February calendar with the 28th
tried to ask the Comptroller of the
circled, and the words "Whitewater
Currency, Eugene Ludwig, about Madi-
Countdown" across the top.
Don't miss Sunday's Times Magazine.
son and Whitewater.
"The clock is ticking," Mr. D'Amato
"Stop stonewalling," Mr. Roth
said as he scratched a line through
snapped. And hours later, on the House
Feb. 1.
THE NEW YORK TIMES, WEDNESDAY, FEBRUARY 2, 1994
9
Billions in Fraud, Waste and Abuse
Breaking Down the Default Rate
A High Cost
Defaults are the largest
The cost of Guaranteed Student
single area of losses on the
Loans entering default each year.
Guaranteed Student Loan
program. Out of 2.4 million
$4.0 billion
borrowers scheduled to
18%
18 percent
begin repayment in
entered default.
1991*
3.0
36%
Default rates at different types of
2.0
institutions in 1991.*
16%
15%
1.0
PUBLIC
/
<<<<<<<<<<<<<<<<<<<<<<<<<
Private
//
0.0
"Last year for which detailed numbers are available.
'80
'85
'90
'93
Source: Department of Education
Source: Education Department
The New York Times
Signs of Financial Trouble at Colleges
Under the Higher Education Act of 1992, the Federal Government has developed a
review process to help prevent fraud and abuse of Federal aid money. The review,
which would be conducted by the states, would be triggered if a college has one or
more of these characteristics.
A default rate of 25 percent or more on Federally-guaranteed student loans.
A default rate of 20 percent or more, when more than two-thirds of the students
receive Federal student aid, or when two-thirds or more of the college budget
comes from Federal student aid.
Federal student aid was suspended or cut off in the last five years.
The college, after an audit, must repay more than 5 percent of its student aid
funds.
The college fails to submit audits to the Education Department in a timely way.
Claims for Federal student aid fluctuate significantly year to year.
The college fails to meet standards of financial responsibility.
A change in ownership of the college results in a change of control.
A private institution has been in the Federal student aid program for less than five
years.
There is a pattern of student complaints relating to management of Federal
student aid programs or to misleading or misappropriate advertising.
3/3
THE NEW YORK TIMES, WEDNESDAY, FEBRUARY 2, 1994
4A WEDNESDAY, FEBRUARY 2. 1994 USA TODAY
WASHINGTON
A QUICK LOOK AT WHAT'S GOING ON IN THE NATION'S CAPITAL
House banking panel
ELSEWHERE IN THE WORLD
to probe Whitewater
Bosnia peace hopes dim;
House Banking Committee Chairman Henry Gonzalez, D-
U.N. chief backs air strikes
Texas, said on the House floor Tuesday that he would hold
hearings this year on the Whitewater scandal. "Of course
Opposing sides in Bosnia-Herzegovina displayed little in-
we're going to have a hearing," he said when pressed by
terest in peace Tuesday, as the West grappled with ways to
Republicans. He had rejected GOP demands for hearings
solve the 22-month civil war through negotiation and avoid
on the failure of an Arkansas thrift linked to President Clin-
the carnage many fear will take place if fighting intensifies.
ton's investment in the Whitewater land deal, citing the spe-
U.N. Secretary-General Boutros Boutros-Ghali on Tues-
cial counsel's separate investigation. "I applaud his willing-
day backed the use of air strikes in the former Yugoslav
ness to address this controversial issue," said Rep. Jim
republic to open airports and aid airlifts and to protect U.N.
Leach, R-Iowa. But Gonzalez's staff said he had been agree-
peacekeepers. But he also told all parties in the Balkans
ing only to hearings on the Resolution Trust Corp. Congress
that negotiations were the only way to end the disastrous
must report twice a year on the RTC, which oversees dis-
war that flared after Bosnia's Muslim government declared
posal of failed savings and loans. RTC hearings will give
independence from Serb-dominated Belgrade.
Republicans a chance to raise questions about Whitewater,
Bosnian President Alija Izetbegovic said he would not ac-
but key witnesses in the case probably will not testify.
cept an unfair peace to end the war, adding to fears that
talks will fail and fighting will intensify.
BROWN PROBE: Justice De-
Raising the stakes further, up to 5,000 Croatian soldiers
partment lawyers have cleared
were reported by aides to Boutros-Ghali to have entered
Commerce Secretary Ron Brown
Bosnia to reinforce their kin fighting a revitalized Muslim
of allegations that he accepted
army. Croatia denied this.
money in exchange for working to
lift the U.S. trade embargo on Viet-
VENEZUELA LEADER: Vene-
nam, Reuters news agency report-
zuelan President-elect Rafael Cal-
ed. It said the Justice Department
dera unveiled a politically inde-
is expected to inform Brown's at-
pendent Cabinet of economists,
torney of his exoneration today.
businessmen and diplomats to help
Brown was accused of accepting
him lead the oil-exporting nation
$700,000 from a Vietnamese busi-
USA TODAY
out of financial and social crisis.
nessman before he became Com-
BROWN: Cleared of
Caldera, 78, takes office today for a
merce secretary.
allegations
five-year term. He inherits an
economy in recession, inflation at
EMBARGO RUMORS:
The White House denied reports
its highest level in years - 45% an-
that President Clinton plans to lift the 19-year-old U.S. trade
By Diego Gludice, AP
nually - a worrisome budget defi-
embargo against Vietnam this week, but it hinted such a
CALDERA: Begins
cit and high interest rates that
decision could come at any time. Responding to a CBS
five-year term today
throttle new investment.
News report that Clinton will end sanctions Friday, White
House spokeswoman Dee Dee Myers said: "No decision has
NORTH KOREA CRUSADE: Evangelist Billy Graham
been made. That is definitive." But National Security Coun-
arrived in Hong Kong after a four-day visit to officially athe-
cil spokesman Calvin Mitchell said Clinton will make the
ist North Korea, where he preached at a new church and
decision "in the near future."
delivered a personal message from President Clinton to
President Kim Il Sung. The United States and North Korea
GUN BUYBACK: The U.S. government should encour-
are at odds over Pyongyang's refusal to allow international
age people with guns to turn in their weapons by giving
nuclear agency inspectors full access to suspected weapons
states and cities cash for buy-back programs, Senate Repub-
sites. Meanwhile, Republican senators urged Clinton to re-
lican leader Robert Dole said. He told governors he will
sume joint military exercises with South Korea and deploy
propose legislation to provide $30 million in federal funds
defensive Patriot missiles in the south.
over two years to states and localities that match the feder-
al contributions for buying back guns.
S.AFRICAN TOWNSHIPS:
South
African
President
F.W. de Klerk announced plans to send the army into trou-
FOSTER DEATH: The gun found on deputy White House
bled black townships to help curb continuing unrest, as
counsel Vince Foster's body last summer was tested by a
April's first all-race elections near.
federal agency, and the powder burns were consistent with
forensic evidence that he killed himself, The Associated
COLOMBIA FLOODS:
Floodwaters and mudslides up
Press reported. It quoted a law enforcement official, speak-
to 30 feet high swept away 1,400 homes in parts of south-
ing on condition of anonymity, as saying the match of pow-
western Colombia, killing at least 19 people, leaving dozens
der burns on Foster's hand and the 38-caliber weapon
missing and thousands homeless, officials said.
found with his body were instrumental in leading U.S. Park
Police investigators to conclude Foster pulled the trigger
Singapore
Airlines
himself. The powder burns, the way Foster's body was posi-
Boeing 747 returned to Bangkok airport minutes after take-
tioned and the indentation of the gun's trigger on his finger
off. when one of its engines caught fire, air traffic control
made suicide the logical conclusion, it said. The Park Police
officials said. No injuries were reported.
ruled last summer Foster's death was a suicide.
ALSO
A French journalist was killed and an Austra-
CORRECTION: The Office of National Drug Control Poli-
lian journalist seriously wounded in an attack in Algiers
cy, headed by Lee Brown. should have been included in a
A man fired shots outside the shrine to Ayatollah Ruhollah
listing of Cabinet-level offices in Monday's paper.
Khomeini in Tehran as Iran's head of state gave a speech
marking the start of the 1979 Islamic revolution.
NEDNESDAY FEBRUARY 2
1994
USA TODAY
7L
BC-CLINTON-WHITEWATER-NOMINEE
CLINTON FDIC PICK PLEDGES SENSITIVITY ON WHITEWATER
By Roger Fillion
WASHINGTON, Feb 1 (Reuter) - A friend of President Clinton and Hillary
Rodham Clinton vowed Tuesday that if she is confirmed as a top bank regulator,
she would be sensitive to conflicts of interest involving the Clintons' role
in the Whitewater real estate deal.
But under questioning from Senate Republicans, Washington lawyer Ricki
Tigert declined to promise that as chairman of the Federal Deposit Insurance
Corp she would disqualify herself from FDIC dealings in the Whitewater matter.
The agency is reviewing whether the First Lady's former law firm misled
the government about its work for a now-failed Arkansas savings institution
with ties to the Whitewater land deal.
I will be extremely sensitive to issues of potential conflicts of
interest or any appearance of conflicts of interest, Tigert told the Senate
Banking Committee during a hearing on her confirmation as head of the FDIC.
Tigert, who is expected to be approved by the full Senate, vowed to
consult with ethics officials on any matter involving a possible conflict.
And she pledged to take the necessary steps to ensure the credibility
of the regulatory and enforcement process.'
Tigert, who is 48 and a partner in the Washington law firm of Gibson,
Dunn & Crutcher, was nominated to the FDIC post by the president in November.
If confirmed, she would become the first woman to head the 60-year-old
agency, which insures deposits up to $100,000 per account in banks and savings
institutions.
The FDIC has been without a permanent chairman since the death of William
Taylor in August 1992.
As a personal friend of the president and Mrs Clinton, Tigert has
participated in the Renaissance Weekends the Clintons have attended in Hilton
Head, South Carolina. The New Years' gathering brings together various
professionals who work both in and out of government.
During the hearing, Republicans pressed Tigert on that friendship and
whether it would make it difficult for her to oversee any FDIC involvement in
Whitewater.
Senator Lauch Faircloth, a North Carolina Republican, called it an
``almost impossible situation.
And New York Republican Alfonse D'Amato asked Tigert point blank whether
she would disqualify herself, adding: ``I couldn't see how you could get
around this.'
The FDIC is checking its records to see if the Rose law firm of Little
Rock, Arkansas, told regulators it represented Madison Guaranty Savings and
Loan Association before it was hired by the government for another Madison
case.
The firm has insisted it did.
The review is expected to be completed in the next 10 days to two weeks,
said acting FDIC Chairman Andrew Hove.
On other matters, Tigert:
-- supported the Clinton administration's plan to merge the regulatory
duties of the four existing bank agencies into a single Federal Banking
Commission.
-- backed annual regulatory exams for banks.
-- supported efforts to combat lending discrimination, but wants to study
further the idea of the FDIC using ``testers'' to check for possible lending
bias at banks. The Comptroller of the Currency is implementing such a plan.
REUTER
MORE
**** filed by:RB--(--) on 02/01/94 at 17:36EST ****
**** printed by:WHPR(JEL) on 02/02/94 at 08:27EST ****
WHAT HAPPENED WHEN
WHITE
WATER
Cartoonists & Writers Syndicate
Cummings, Winnipeg Free Press, Winnipeg, Canada
A Whitewater Chronology
Summer, 1978 - Bill
1992 - President-elect
Clinton, the Arkansas
Clinton and his wife sell
state attorney general,
their share of Whitewater to
and his wife, Hillary, a
McDougal, claiming they
Little Rock attorney,
lost $68,900 on the venture.
become 50-50 partners
1993 - In July, Deputy
with James and Susan
White House counsel
Wellesley College Photo
McDougal to buy 230
Vincent Foster shoots him-
The Clintons in 1979
acres along the White
self in an apparent suicide.
River in northern Arkansas, planning to profit by
The Clintons' records on
selling lots as vacation home sites.
Reuter Photo
Whitewater are removed
1979 - In January, Clinton sworn in as Arkansas
McDougal
from Foster's office and sent
governor for two-year term. The four partners form
to his personal lawyer.
the Whitewater Development Corp. Due to high
These records are later surrendered to the Justice
interest rates, land sales are poor.
Department.
1982 - McDougal buys Madison Guaranty Savings
1994 - On Jan. 12 and under public pressure,
and Loan. Clinton loses re-election for governor.
Clinton asks Attorney General Janet Reno to name
1984 - Federal regulators say Madison Guaranty is
a special counsel to investigate the Whitewater mat-
in trouble because of McDougal's unsound lending
ter. On Jan. 20, she names New York attorney
practices. Hillary Clinton's Little Rock law firm is
Robert B. Fiske, a Republican with a reputation for
hired to represent Madison. Clinton wins back gov-
integrity.
- George DeWan
ernorship.
1985 - McDougal hosts a political fund raiser to
pay off Clinton cam-
paign debt. Federal
He'll Question the
BEARANTY
investigators are now
trying to determine
Clintons
whether some of the
$35,000 raised came
Whatever is found in the Whitewater investi-
illegally from Madison
gation by the newly appointed special counsel,
AP Photo (Democrat-Gazette)
Guaranty, disguised as
Robert B. Fiske, the public is likely to believe it.
Madison Guaranty Savings
private contributions.
Fiske, a 63-year-old, Brooklyn-born
and Loan in Little Rock.
Hillary Clinton later
Republican, has a rock-solid reputation for
represents Madison
integrity on both sides of the political fence. A
Guaranty before a Clinton-appointed state regula-
Yale graduate with a law degree from the
tor, seeking permission for an unusual stock offer-
University of Michigan, he had two stints as a
ing to provide much-needed cash for the shaky sav-
public prosecutor with the U.S. Attorney's
ings and loan. Permission granted, but the stock
office in New York, where he had a 95 percent
offering is never made.
conviction rate in more than 4,000 indictments
1986 - David Hale, the head of an agency funded by
and criminal charges, including the case of drug
the federal Small Business Administration to help
dealer Nicky Barnes. But Fiske has logged more
minority businesses, lends $300,000 of SBA money
time as a high-profile defense attorney in the
to Susan McDougal. Some of that money is used to
prestigious Wall Street law firm of Davis, Polk
buy land that ended up in Whitewater Development
and Wardwell. A resident of Darien, Conn., he
Corp.
has three grown children, is an avid fisherman
1989 - Madison Guaranty is declared insolvent and
and sails on Long Island Sound.
taken over by the federal government.
WRITE US: What's your impression so far on the Whitewater affair?
PAGE RESEARCH: LYNDA RU
PHOTOCOPY
PRESERVATION
20
THE WHITEWATER AFFAIR
NY
Investigating
The Clintons
By George DeWan
STAFF WRITER
W
hat is Whitewater? And why is it causing
President Bill Clinton such anguish?
Once, in the summer of 1978, Whitewater
was just a simple Arkansas real estate invest-
ment for Clinton - then state attorney general - and
his wife, Hillary. But now, with the recent appoint-
ment of a special counsel by the justice department to
investigate possible wrongdoing surrounding that in-
vestment, Whitewater is not SO simple anymore.
Clinton has not been charged with anything, and
he denies that he or Hillary did anything wrong.
Questions about Whitewater were raised during the
1992 presidential campaign. But the issue was
dropped after the Clintons produced evidence that
they lost $68,900 in the investment.
New interest in Whitewater developed out of the
apparent suicide last July of White House deputy
counsel Vincent Foster, who also handled the Clin-
tons' personal legal affairs. It was not learned until
December that the Clintons' records on Whitewater
- now in the hands
of the Justice Depart-
ment - were re-
moved from Foster's
office before investi-
gators probing his
death had a chance to
examine them.
If Clinton did noth-
ing wrong, the public
is now asking, why
did he give the im-
pression of trying to
hide something?
Whitewater is
about the complicat-
ed intertwining of
politics and business
Reuter Photo
in the small town,
Fiske
everybody-knows-ev-
erybody atmosphere
of Little Rock, the Arkansas state capital. Both
1973 Yale Law School graduates, Hillary in 1978
was a partner at the Rose Law Firm in Little Rock,
while Bill Clinton was running for governor. (See
chronology at right.)
The Whitewater affair arose out of the Clintons
involvement with James B. McDougal, an old friend.
McDougal was a politically connected wheeler-dealer
who parlayed a small real-estate business into a high-
flying 1980s banking operation that later went bust.
McDougal bought Madison Guaranty Savings and
Loan in 1982 and it failed in 1989. It was like many
other savings and loans that failed in the '80s after
engaging in what the government calls "unsafe and
unsound lending practices," throwing huge amounts
of money into risky land and commercial develop-
ments that failed. McDougal was indicted on bank
fraud charges (unrelated to Whitewater or Clinton),
but was acquitted in 1990.
The continuing question is how much the Clintons
were tarred by the association with McDougal. There
are many unanswered questions that presumably the
special counsel will be able to sort out:
When Clinton was Arkansas governor, did his
regulatory agencies give special treatment to McDou-
gal's failing savings and loan association?
Did McDougal illegally divert depositor funds into
Clinton's gubernatorial campaign?
Should Hillary Clinton have represented McDou-
gal's bank before a state securities regulator appoint-
ed by her husband?
Did Bill Clinton intervene to secure a Small Busi-
NEW YORK NEWSDAY, TUESDAY, FEBRUARY 1. 1994
ness Administration loan to McDougal's wife, Susan?
Was there any link between Whitewater and Vin-
cent Foster's death?
The special counsel, Robert B. Fiske, will investi-
gate whether any federal criminal law was violated in
the Clintons' relationships with any of these organi-
zations. The investigation will take at least a year.
"It's important for the country to get this done and
get it done as quickly and as thoroughly and as fairly
PHOTOCOPY
as possible," Fiske said. As for Bill Clinton? "I want
to get on with the business of my presidency," he said
PRESERVATION
when he agreed to ask Attorney General Janet Reno
to appoint a special counsel.
TO 0
: Your F
ack
the
Gonzalez flip-flops on
Whitewater hearings
By Paul M. Rodriguez
Al
ing," Mr. Gonzalez said during one
Tests were done
THE WASHINGTON TIMES
point of the early afternoon colloquy.
House Banking Chairman Henry
on gun with Foster
At another point, Mr. Gonzalez
promised to hold separate oversight
B. Gonzalez promised yesterday to
The Bureau of Alcohol, Tobacco
hearings by the end of February on
hold hearings soon on the White-
and Firearms yesterday said it
the Resolution Trust Corporation
water-Madison affair, then seem-
found gunpowder traces on the
(RTC),the federal agency that over-
ingly changed his mind as several
gun discovered with Deputy
sees failed S&Ls.
powerful House Democrats called
White House Counsel Vincent
Almost immediately after his
for a meeting this week to deal with
Foster's body and gave the U.S.
statements, some of Mr. Gonzalez
the burgeoning political mess.
Park Police a report saying its
staffers said he did not mean to im-
The White House yielded to pres-
findings were "consistent" with
ply he would approve of hearings to
sure from Congress and asked for a
suicide. Last week an ATF
probe the Whitewater-Madison af.
special prosecutor, but Republican-
official said the bureau had not
fair.
led efforts have forged ahead to get
conducted tests on the gun.
"He only meant to say that he
congressional hearings on President
PAGE A3
would, as required by law, conduct
and Hillary Rodham Clinton's in-
oversight hearings into the oper-
volvement in Arkansas' Whitewater
ations of the RTC," said an aide who
Development Corp. and its ties to the
The turnabout came during an ex-
asked not to be named. "If Repub-
failed Madison Guaranty Savings
change on the House floor with Re-
licans want to ask questions about
and Loan Association.
publicans, led by Pennsyvlania Rep.
matters that fall within the RTC's
Mr. Gonzalez, Texas Democrat,
Robert S. Walker, with Mr. Gonzalez
authority, such as Madison, then that
has been successfully fighting GOP
responding to a battery of questions
would be allowed," the aide added.
efforts for Whitewater hearings, but
about whether Congress would hold
Democratic leaders, obviously
after mounting criticism in the
hearings on the matter this year.
concerned over Mr. Gonzalez' state-
press, pledged to proceed with
"Yes, of course, long before that.
Banking Committee hearings.
Of course we're going to have a hear-
see HEARINGS, page A14
HEARINGS
hearings and is conducting a GOP
"When that next RTC Oversight
probe of his own said the Repub-
Board hearing takes place, any
From page Al
licans' desire to have Congress in-
member of the committee may, of
vestigate Whitewater "will be
course, ask any question of concern
ments, moved quickly to a strategy
tested" in the RTC hearings.
involving the RTC," Mr. Riegle said
session.
Mr. Leach told reporters that if
in a statement.
"This is a circus," said a visibly
Democrats continue to stall on hold-
In a letter yesterday, Roger C. Alt-
irritated senior Democratic law-
ing separate hearings on the matter,
man, the interim chief of the RTC,
maker when told that Gonzalez
he plans to invoke a little used rule
assured Sen. Alfonse M. D'Amato,
staffers had reversed course on Mr.
in the House that permits the minor-
the New York Republican demand-
Gonzalez's apparent pledge to hold
ity party to call witnesses on its own.
ing hearings in the Senate, that the
Banking Committee hearings.
"That is something that we will
cleanup agency would "vigorously
Under Republican pressure, and
consider," said Mr. Leach, ranking
pursue all appropriate" civil rem-
GOP promises of daily news confer-
edies against Madison, owned by
ences on a Whitewater-Madison
James B. McDougal, a longtime
"cover-up," some senior House
Democrats called for a special meet-
"House leadership
friend of the Clintons' and their part-
ner in Whitewater.
ing of their leadership to discuss the
will not allow this to
Mr. Altman said the RTC could
Whitewater-Madison affair.
become a televised
seek agreements to extend the stat-
"As long as we stand united,
ute of limitations beyond the Feb. 28
there's not going to be any hearings,
soap opera."
expiration, a move that Mr. D'Amato
period," said a second source.
had requested.
"The House [Democratic] leader-
On the Senate floor, Mr. D'Amato
ship will not allow this to become a
held up a poster-size enlargement of
televised soap opera to embarrass
Republican on the Banking Commit-
the month of February and marked
this president," the source said.
tee.
through yesterday's date. "I will con-
"It could do serious harm to the
The meeting among senior Demo-
tinue to bring this calendar to the
committee process if suddenly ev-
crats, which could occur today, is to
floor every day so that everyone will
ery ranking member started to use
review the rules of the House per-
be aware that precious time is slip-
this rule," said one Democrat who
taining to possible Whitewater-
ping away," he said.
heads a House subcommittee. He
related witnesses called by Republi-
Democratic officials said yester-
said that while it would be difficult
cans in any upcoming Banking
day that the biggest challenge to
to block all such GOP special hear-
Committee hearings.
staving off a full-fledged congres-
ing calls, most could be stopped.
"The speaker has said he wants no
sional probe of Whitewater-Madison
"We must not appear to waiver on
hearings, period, and that's what
was in the Senate.
this," said another source familiar
we're going to try to make sure hap-
"If anybody breaks down, it's go-
with the behind-the-scenes debate
pens, nothing," said one senior
ing to be Riegle," a Democratic law-
among senior Democrats. "Nobody
Democrat." 'I'm just following or-
maker said in reference to other sen-
can control Henry from doing what
ders."
ators who broke Democratic ranks
he thinks is right, but at least we can
Sen. Donald W. Riegle Jr., Mich-
and sided with Republicans in call-
all give him support to stay the cur-
igan Democrat and chairman of the
ing for the appointment of a special
rent course."
Senate Banking Committee, also
counsel.
Rep. Jim Leach, Iowa Republican
said yesterday that he would hold
"They're the ones who we've got
- who has asked Mr. Gonzalez for
oversight hearings on the RTC.
to watch out for," the lawmaker said.
Feb.
Feb.25
The Washington Times WEDNESDAY, FEBRUARY 2, 1994
1994
92
Justice rankles Bush-era State officials,
won't charge Clinton-era file searchers
By Michael Hedges
AI
The report has been held con-
the Justice Department and that
THE WASHINGTON TIMES
fidential pending a Justice Depart-
they were considering filing a civil
ment decision on whether to accept
lawsuit in the matter.
The Clinton Justice Department
its recommendations or decline to
Neither Justice nor State yester-
will not prosecute State Depart-
prosecute.
day would release the letter declin-
ment appointees on charges that
Mr. Funk was said to have been
ing to prosecute, but officials from
they searched the private files of
surprised by the Justice Depart-
both departments confirmed the
former Bush administration offi-
ment's refusal to prosecute in the
decision not to proceed with a
cials, rejecting the State Depart-
case. "We are going to be raising
criminal case.
ment inspector general's report.
hell," predicted a staff member in
Mr. Funk had found evidence of
Sherman M. Funk, the inspector
the inspector general's office.
illegal searches and leaks of infor-
general who filed the report in No-
Also upset were former Bush ap-
mation from the files after several
vember detailing offenses that
pointees who believe that their pri-
weeks of investigation last fall.
could have led to criminal prosecu-
vacy was violated. A group of for-
The day his findings were for-
tions, planned to release his find-
mer State Department officials
warded to the Justice Department
ings "in the next day or so," a
said yesterday that the decision
spokeswoman said yesterday.
was an attempted "stonewall" by
see FILES, page A10
FILES
administration does not want an-
other scandal," he said. "This is noth-
ing but stonewalling."
From page Al
Mr. Mitchell said he and other
Bush appointees at State will pursue
in a confidential report, two State
other options to see the matter re-
Department appointees were fired
solved. "We are looking at other
by Secretary of State Warren Chris-
measures, perhaps a civil suit," he
topher.
said.
Joseph Tarver, former director of
The controversy began in early
the White House liaison office at the
September with a gossipy tidbit in
State Department, and Mark Schul-
The Washington Post's Federal Page
hof, an assistant to Tom Donilon, as-
column, which noted what had been
sistant secretary of state for public
found in the files of Bush appointees
affairs, were ordered dismissed by
when they were rummaged by of-
an "angry and disappointed" Mr.
ficials in the White House liaison's
Christopher, who had "lost confi-
office at the State Department.
dence in them," according to a
spokesman.
The files searched included those
Both men had worked on the
of Elizabeth Tamposi, a former assis-
Clinton-Gore campaign. Mr. Tarver,
tant secretary of state who had been
a GS-15, had worked for Bob Farmer,
involved in the search of Bill Clin-
who was the Clinton campaign's
ton's passport file, and Jennifer Fitz-
chief fund-raiser. Mr. Schulhof, a
gerald, also a former Bush State De-
GS-11, was a close adviser to Mr.
partment official, who had been
Donilon, who is considered one of
linked romantically with Mr. Bush in
the top advisers to Mr. Christopher,
unsupported accounts.
officials said.
State Department officials later
The dismissals came after Mr.
said about 160 files had been pulled
Christopher received an oral brief-
from storage and searched.
ing by Mr. Funk describing his find-
Republican senators, led by Mitch
ings and conclusion that officials
McConnell of Kentucky, requested a
probably had broken the law, accord-
special prosecutor to review the
ing to sources.
case, as Democrats had asked in the
Yesterday, former Bush officials
case involving President Clinton's
expressed their anger and disap-
passport file.
pointment over the Justice Depart-
ment decision.
That request was ignored by At-
"I think this is outrageous," said
torney General Janet Reno.
Mike Mitchell, a former State De-
In late 1992, the outgoing Bush
partment appointee who thinks that
Justice Department appointed a spe-
his confidential personnel file was
cial prosecutor, former State's At-
among those searched.
torney Joseph diGenova, to conduct
"In the wake of Whitewater, in the
a criminal probe into the passport-
wake of 'Travelgate' it is obvious the
file case.
The Washington Times WEDNESDAY, FEBRUARY 2, 1994
93
USA TODAY FRIDAY. FEBRUARY 4 1994
Whitewater
Lot 7: Originally
Whitewater
reserved for Clinton
Mo.
retirement home
paper trail
Jonesboro
Tenn
40
Little
40
Okla.
Rock
Miss
a muddy one
White River
30
Ark
N
0
75
Texas
La.
miles
By Dennis Cauchon
came from Madison Market-
USA TODAY
ing And Madison Marketing
got all its money from Madison
YELLVILLE, Ark. - If the
S&L, whose failure cost taxpay-
devil is in the details, the spirit
ers at least $47 million. Madi-
of Whitewater may reside on
son Marketing was owned by
Whitewater Estates
Lot 13 on County Road 666.
Susan McDougal, James
Located on a dirt road, Lot
McDougal's wife.
13 is a 2.7-acre wooded plot
White House aide Bruce
Lot 13: Where Hillary Rodham
where Hillary Rodham Clinton
Lindsey says it's irrelevant
Clinton had model home built
built a model home to spark
whether the money came from
sales of Whitewater lots.
a McDougal personal account
Nothing illegal has been
or Madison Marketing.
By Marty Baumann, USA TODAY
found in its handling, but the
"There's nothing improper
paperwork is so sloppy that
about it," he says. Other quirks:
seemingly simple transactions
Bank of Kingston, owned
News report questions
are clouded in mystery.
by James McDougal, loaned
Land and mortgage records
Hillary Clinton $30,000 on Dec.
are an inconsistent mish-mash
16, 1980 - 10 days before she
first lady's role in suit
of dates, dollars and owners.
owned Lot 13, which was used
The imprecise paperwork is
as collateral.
By Dennis Cauchon
professionalism." Of the allega-
all the more unusual because it
It is unusual - but not a
USA TODAY
tions, she said: "These things
was done by a banker, James
crime- for a bank to Ican first
are thrown up as a diversion."
McDougal; a respected lawyer,
and get the collateral later.
The Chicago Tribune report-
In other Whitewater news,
Hillary Clinton; and a veteran
Hillary Clinton got Lot 13
ed Thursday that Hillary Rod-
Rep. Jim Leach, R-Iowa. asked
real-estate agent, Chris Wade.
without paying for it. She paid
ham Clinton worked for feder-
Thursday for a ruling on
"The whole Whitewater
no income taxes for getting the
al regulators in a lawsuit filed
whether the head of the Reso-
thing smacks of very poor
property, worth about $3,000.
against Clinton friend and in-
lution Trust Corp. should re-
bookkeeping," says Thomas
The White House says the lot
vestment banker Dan Lasater.
move himself from all White-
Ochsenschlager, a Washington
and home were effectively
Her law firm settled a $3.3
water-related decisions.
tax lawyer and accountant.
owned by Whitewater.
million suit against Lasater &
RTC acting chief Roger Alt-
"From what I can tell. no
Hillary Clinton loaned the
Co. for $200,000. The case in-
man, Clinton's college room-
one was trying to do anything
$30,000 back to Whitewater in
volved First American Savings
mate, is deputy Treasury sec-
wrong, but it is acutely embar-
"a mirror loan," says Lindsey,
and Loan, an Oak Brook, III,
retary. He has been filling in as
rassing for a partner in the
and Whitewater made the loan
S&L that failed in 1986.
head of the independent agen-
most prestigious law firm in
payments. But no public docu-
Lasater, a Little Rock busi-
cy because the job is vacant
Arkansas to be involved in
ments reflect a mirror loan.
nessman, was a political sup-
Leach, who is leading the
something with such unusually
"It's pretty hard to construct
porter of Gov. Bill Clinton. He
Whitewater investigation. said
sloppy paperwork."
a scenario where Hillary
also employed Roger Clinton,
the probe puts Altman in "an
If the Clintons did nothing
doesn't have some tax liability
the president's half-brother.
awkward position" because
wrong, the Whitewater story
on the property," Ochsensch-
Lasater and Roger Clinton
Madison Guaranty Savings &
has lingered in part because of
lager says. Most likely she
pleaded guilty to cocaine
Loan a failed thrift owned
poor paperwork that might be
should have reported the value
charges that were related.
by Clinton's Whitewater part-
interpreted as nefarious.
of the property as a dividend
The suit was handled prop-
ner James McDougal is at
Lot 13 perfectly illustrates
from Whitewater, he says.
erly, says Lisa Caputo, Hillary
the center of the controversy.
the Clintons' paper problems.
The Clintons bought Lot 13
Clinton's spokeswoman. "Mrs.
Altman had no immediate
The story of Lot 13 should be
again in November 1988, ac-
Clinton, when she was a lawyer
comment. "It's being re.
simple: Hillary Clinton bor-
cording to county land and
at the Rose Law Firm, acted
viewed," said Treasury spokes-
rowed $30,000, built a modular
bankruptcy court records.
with the utmost integrity and
man Howard Schloss.
home and sold it to a Mississip-
Their taxes show they owned
pi man. The man went broke.
the property in March 1987.
The Clintons got the property
The Clintons' tax returns
back from bankruptcy court
show the property was sold for
and resold it.
$23,758. County land and asses-
But the paperwork at the
sor records say it was $28,000.
courthouse here and else-
Those discrepancies don't
where is full of quirks.
prove wrongdoing, but they il-
For example, the Clintons
lustrate why questions persist.
recorded selling the property
The White House has an-
for the second time on Nov. 28,
swers for most questions.
1988 three days before they
For example, the Clintons
recorded buying it back.
rely on Denver attorney James
4 out it is odd.
Lyons' report to show they lost
The most serious problem
$68,900 on Whitewater, al-
for Clinton is that Lot 13 pro-
though they haven't claimed
vides a link between the failed
the full loss on their taxes.
Madison Guaranty Savings and
The Lyons report details the
Loan and the Clintons.
Clintons' Whitewater finances
Records show that in No-
from 1980 through 1991 - ex-
vember 1985, Whitewater De-
cept for 1990, which is omitted
velopment Co. Inc. made a
without explanation.
$7,322 payment on a loan taken
Lindsey says there was no
out by Bill Clinton on Lot 13.
accountant worksheet for 1990,
The problem: Whitewater's
so the information was merged
money to pay Clinton's loan
with 1991.
96
FDIC Choice Pledges
Whitewater Recusal
GOP Senators Question Tigert's Clinton Ties
By Jerry Knight
Washington Post Staff Writer
D'Amato warned yesterday that the government is
running out of time to take action against Madison of-
President Clinton's nominee to
ficials to recover damages for the S&L's failure.
head the Federal Deposit Insurance
Dragging a huge "Whitewater Countdown" calen-
Corp. has promised to keep away
dar onto the Senate floor, D'Amato said the statute
from the agency's investigation of
of limitations for suing Madison officials expires Feb.
Madison Guaranty Savings & Loan,
THE WASHINGTON POST WEDNESDAY, FEBRUARY 9, 1994
28.
the failed Arkansas thrift that fi-
nanced Whitewater Development
The government could keep the case open by ask-
Corp.
ing Madison officials to sign voluntary agreements
Washington attorney Ricki R. Tig-
extending the deadline, D'Amato said, but he com-
ert issued the pledge Monday after
plained that RTC officials have refused to disclose
Senate Republicans threatened to
whether they have taken that action.
hold up her nomination because of
The RTC referred the investigation of Madison to
what they contend are conflicts of in-
the Justice Department in October 1992, because of
terest stemming from her friendship
possible criminal violations, and usually in such cases
with the president and Hillary Rod-
the government files civil lawsuits to try to get some
ham Clinton.
of its money back, D'Amato pointed out.
In a letter released yesterday by
Sen. Alfonse M. D'Amato (N.Y.), the
Senate Banking Committee's rank-
ing Republican, Tigert denied any
TODAY IN CONGRESS
conflicts exist but said she would
avoid the Madison investigation be-
SENATE
Act. 2128 RHOB.
cause "I am extremely sensitive
Meets at 10 a.m.
Budget-10 a.m. President's proposed
about even the appearance of any
Committees:
FY95 budget. OMB Director Leon Panetta.
conflict of interest."
Appropriations-2:30 p.m. Closed.
210 Cannon House Office Bldg.
D'Amato said Tigert's decision to
Foreign operations subc. Russia & Ukraine.
Education & Labor-9:30 a.m. Mark up
219 Hart Office Bidg.
Elementary & Secondary Education
recuse herself from the Madison
Armed Services-9:30 a.m. Pending
Amendments 2175 RHOB.
matter was "helpful to disposing of
military nominations. 222 Russell Office
Energy & Commerce-10 a.m. Energy &
questions raised about her indepen-
Bidg.
power subc. Emergency energy responses
dence at a time when the FDIC is
Budget-10 a.m. President's proposed
to extreme weather conditions. 2218
FY95 budget. Treasury Sec. Lloyd Bentsen.
RHOB.
conducting investigations into mat-
608 Dirksen Office Bldg.
Energy & Commerce-10 a.m.
ters involving President and Mrs.
Commerce, Science &
Telecommunications & finance subc.
Transportation-9:30 a.m. Nomination of
National Communications Competition &
Clinton."
Ann Brown to be chairman of Consumer
Information Infrastructure Act. focusing on
The FDIC took over Madison at a
Product Safety Commission. 253 ROB.
local competition. 2123 RHOB.
cost to the taxpayers of $48 million
Finance-10 a.m. Congressional Budget
Energy & Commerce-11 a.m. Oversight
after it failed in 1989. The FDIC,
Office analysis of president's health care
& investigations subc. Fraudulent hospital
reform plan. 215 DOB.
billing practices. 2322 RHOB.
the Resolution Trust Corp. and the
Finance-No set time. Nomination of Mary
Energy & Commerce-2 p.m. Health &
Justice Department are investigat-
Ellen Withrow to be treasurer of the United
the environment subc. Mark up to amend
ing possible violations of banking law
States. 215 DOB.
Health Service Act to revise & extend
Foreign Relations-10:30 a.m. Pending
programs relating to health of minorities.
and regulations at Madison, includ-
nominations, including nomination of Strobe
2359 RHOB.
ing the thrift's loans to finance
Talbott to be deputy secretary of state. 419
Foreign Affairs-9:30 a.m. Foreign aid
Whitewater, a residential real estate
DOB.
reform & mark up regarding establishment
Foreign Relations-2 p.m. International
of a nuclear free zone in South Pacific &
development in which the Clintons
economic policy, trade, oceans & the
expressing sense of Congress with regards
were partners along with Madison
environment subc. Foreign aid reform
to South Pacific region. 2172 RHOB.
President James MacDougal and his
proposal. 419 DOB.
Foreign Affairs-1 p.m. Closed. Western
wife, Susan.
Foreign Relations-3 p.m. East Asian &
Hemisphere affairs subc. Briefing on
Pacific affairs subc. Post-embargo status of
humanitarian relief efforts in Harti. 2255
Tigert said neither her appoint-
Vietnam. 216 HOB.
RHOB.
ment by Clinton to head the agency
Judiciary-10.30 a.m. Formulating an
Foreign Affairs-2 p.m. Western
nor her acquaintance with the Clin-
effective response to gangs. 226 DOB.
Hemisphere affairs subc. Humanitarian
Labor & Human Resources-11 a.m.
relief efforts in Haiti. 2172 RHOB.
tons would prevent her from con-
Occupational Safety & Health Act reform.
Government Operations-10 a.m.
ducting an independent inquiry. She
Labor Sec. Robert Reich. 430 DOB.
Information, Justice, Transportation &
said both the Office of Government
Veterans' Affairs-2 p.m. VA participation
Agriculture subc. Review Farmers Home
Ethics and the ethics officers of the
in state health care programs. 418 ROB.
Administration loan portfolio. 2247 RHOB.
Judiciary-10.30 a.m. Civil &
HOUSE
constitutional rights subc. Reauth. of U.S.
TIGERT, From C1
Meets at noon.
Commission on Civil Rights 2226 RHOB
FDIC assured her that "no actual conflict of interest
Committees:
Merchant Marine & Fisheries-1.3 p.m.
Appropriations-9 30 a m. Agriculture
subc.
Individual
is involved, given the casual nature of my friendship
wouget
namery Conservation & Management Act.
At Tigert's confirmation hearing last week, Sen.
overview & Office of Inspector General
1334 Longworth House Office Bidg
overview 2362A Rayburn House Office
Public Works & Transportation-93
Lauch Faircloth (R-N.C.) portrayed her as a longtime
Bidg
a Aviation subc Adequacy of commuter
intimate of the Clintons, but Democratic sources said
Appropriations-10 a Intenor & related
airline safety standards 2167 RHOB
she had met them fewer than a dozen times over a
agencies subc. FY95 approps for
Rules-10 a.m. Legislative Reorganization
Commission on Fine Arts: Advisory Council
Act H 313 Cap
period of several years.
on Historic Preservation: & Woodrow Wilson
Science, Space & Technology-10 a
Faircloth repeatedly pressed Tigert to explain how
International Center for Scholars B-308
With House Permanent Select Intelligence
she could oversee an investigation of people she had
RHOB
Committee Commercial remote sensing in
Appropriations-10 a m.
post-Cold War era 2318 RHOB
known personally.
Labor-HHS-Education subc. FY95 approps
Science, Space & Technology-1 pm
Yesterday, Faircloth aides said the senator was not
for miscellaneous programs under its
Technology environment & aviation subc
satisfied with her response. "It's not the most airtight
jurisdiction 2358 RHOB
Present & future of Malcolm Baldrige
Appropriations-2 p.m. Commerce
recusal," a Faircloth spokesman said, predicting Re-
National Quality Award & its relationship to
Justice State & the judiciary subc FY95
standards 2325 RHOB
publicans would continue to use Tigert's nomination
approps for Federal Maritime Commission
Ways & Means-10 a m Health subc
to raise questions about Madison and Whitewater.
& Marine Mammal Commission H-310
American Health Security Act MediPian
Cap
Act. & other single payer health care reform
Armed Services-1 30 p.m. Pentagon
proposals DOLHOB
acquisition reform Defense Sec William
Ways & Means- Select revenue
Perry 2118 RHOB
measures subc Selected tax
Banking Finance & Urban Affairs-10
REVIEW & OUTLOOK
FOB Regulation
Today the Senate Banking Com-
Meanwhile. Rep. Jim Leach is won-
mittee will vote on Ricki Tigert as
dering about Deputy Treasury Secre-
head of the FDIC. she having agreed
tary/Interim RTC CEO Roger Altman.
to recuse herself from issues involving
The Congressman wrote last week
the Clintons and Whitewater. Let us
also seeking recusal commitments in
all pause to see who is running the rest
matters involving the RTC's investi-
of the bank regulatory apparatus.
gation of Madison's collapse and rela-
Why, Deputy Treasury Secretary
tionship to Whitewater. Mr. Leach's
Roger Altman. a presidential ap-
tone is cordial. but he thinks the in-
pointee as well as Georgetown friend.
herent conflicts need to be faced:
is running the ostensibly independent
"I have high regard for your per-
Resolution Trust Corp. And Eugene
sonal integrity. but as you know, from
Ludwig, another college Buddy of Bill,
the beginning, it has been an awkward
has been installed as Comptroller of
situation to have a presidentially ap-
the Currency.
pointed and confirmed officer of the
Why, the FOBs are taking over fi-
Treasury Department also head an in-
nancial regulation, lock, stock and
dependent federal agency. the RTC.
barrel. They haven't quite got the Fed-
When this prospect was first sug-
eral Reserve yet, but they have a reg-
gested at the beginning of the Clinton
ulatory reform proposal that would
Administration, it did not strike the
take care of that. The Clinton folks
Minority as overly unreasonable for a
aren't content to relegate cronies and
month or two given the fact that no
pals to harmless backwaters like Com-
RTC head had been selected.
merce or Postmaster General or the
"However, it has been over a year
alter ego of a presidential Counselor.
since the administration has been in
They learned back in Arkansas that it
office and it can only be described as
was convenient to have a Beverly Bas-
structurally unseemly for a political
sett Schaffer sending "Dear Hillary"
appointee of an Executive branch de-
letters waving through a new capital-
partment to make what are, in effect,
ization plan for a financial institution.
law enforcement decisions for an in-
We're glad to see that a couple of
dependent federal agency as they may
courageous Republicans are blowing
touch upon the President."
the whistle.
Finally, we have Mr. Ludwig, ap-
North Carolina's Senator Lauch
pointed by Mr. Clinton to head the
Faircloth, unlike some of his col-
comptroller's office, which regulates
leagues on Don Riegle's banking com-
and examines national banks. They
mittee, isn't willing to let the matter
attended Oxford and Yale together,
THE WALL STREET JOURNAL THURSDAY. FEBRUARY 10, 1994
drop with Ms. Tigert's recusal. In the
and remain close. Just how close the
FDIC nominee's first appearance be-
American Banker described in its Jan.
fore the committee, the Senator raised
31 edition, reporting on a videotape
the issue of how someone who says
taken at a Renaissance Weekend by
she's known the Clintons for eight
someone from "Saturday Night Live"
years and been a Renaissance Week-
who was also there: "The tape fea-
end regular could convincingly head
tured Mr. Clinton. But it was hard to
an agency with an active investigation
miss Mr. Ludwig in a bright blue
of the Madison S&L collapse. Ms.
sweater and white shorts. Almost
Tigert weasled, but later sent Senator
every shot of the President showed the
Faircloth a recusal statement. which
beaming comptroller at his shoulder."
she said was written after consulting
So we have three Friends of Bill or
FDIC's ethics office. She promised
Hillary calling signals, amid a bliz-
she'll recuse herself from matters
zard of recusals, at three traditionally
"concerning President or Mrs. Clinton
independent bank regulatory agen-
in their personal capacities."
cies. Surely by now enough is known
While consoling Ms. Tigert on the
of the Clinton political mores to agree
"unfortunate fate" surrounding her
that we're past the point of simply
nomination. Senator Faircloth is now
passing all this through as of no con-
wondering about the caveat "per-
sequence. After the Savings and Loan
sonal." Does that remind you of
scandal, BCCI. the Keating Five and
"didn't inhale" or "no price controls?"
now whatever Whitewater is, it ought
Sen. Faircloth now wants Ms. Tigert to
to be at least clear that federal finan-
"expand your recusal" from matters
cial regulators should be held to a Cae-
involving the "personal" activities of
sar's wife standard of propriety and
President and Mrs. Clinton to include
independence. Instead, we get this.
their public activities. More pointedly.
We're quite used to the Clinton
he asks: "Will you recuse yourself
White House stonewalling or deriding
from matters concerning Webster
anyone's inquiries or doubts about its
Hubbell, Vincent Foster, Dan Lasater,
behavior. But we're glad that Senator
Frost and Company, Madison Guar-
Faircloth and Rep. Leach are persist-
anty Savings and Loan, the Worthen
ing with their questions about the ad-
Bank Corporation" and onward
ministration's appointment practices.
through all the financial institutions
As we run the numbers. Renaissance
now running under the Whitewater
Weekend plus Whitewater plus the
flag? How did we end up with an FDIC
RTC plus the Comptroller plus the
head going in recusing herself from
FDIC plus regulatory independence
the agency's most sensitive business?
does not compute.
Grand Jury
To Review
THE WASHINGTON POST THURSDAY. FEBRUARY 17, 1994
Whitewater
Special Counsel Says
Rose firm Managing Partner
Clinton-Thrift Probe
Ronald Clark could not be reached
for comment on the subpoena, but
Could Take ½ Years
he said in an interview last week
that the firm was collecting docu-
ments in anticipation of one.
By Susan Schmidt
Al
"We are investigating anything
Washington Post Staff Writer
WHITEWATER, From A1
and everything that has to do with
Special counsel Robert B. Fiske
special grand jury "because of the
Jr. told a federal judge yesterday his
importance of this investigation and
investigation of President Clinton's
the importance of doing it as quickly
We are
Whitewater real estate venture and
and as thoroughly as possible."
ties to a failed S&L may last 18
In his order, Reasoner said that
investigating
months, cover more than a million
documents and involve 20 or more
even if the regular grand jury was
investigators.
asked to extend its term until the
anything and
After meeting with Fiske behind
end of the year, it would not be able
closed doors, U.S. District Court
to complete the investigation.
everything that has
Judge Stephen M. Reasoner in Lit-
Those grand jurors, who have al-
to do with Madison
tle Rock, Ark., agreed to empanel a
ready begun work on the White-
special grand jury to exclusively
water investigation, initially
and Whitewater."
handle the federal probe of Madison
thought they could do the job, Rea-
Guaranty Savings & Loan, and the
soner wrote, but believe it would be
-Ronald Clark,
Whitewater Development Corp.
impossible now that the "actual
Rose firm managing partner
real estate venture, a corporation
jointly owned by President and Hil-
scope and magnitude of the duties
Madison and Whitewater," said
lary Rodham Clinton, Madison own-
that would be involved in such a
Clark.
er James McDougal and his former
task has become more apparent."
Among the materials being pre-
wife, Susan.
Reasoner asked James Burnett,
pared by the Rose lawyers and
"The duties of any grand jury in-
the foreman of the grand jury, to
sought on the Tucker subpoena
vestigating this matter are much
attend his meeting with Fiske. Bur-
more extensive than the court had
were documents relating to P.O.M.
nett served as head of the National
previously envisioned," Reasoner
Inc., a large parking meter manu-
Transportation Safety Board under
said in his order.
facturing firm that was owned until
President Ronald Reagan.
Early this week, Fiske's office
recently by Seth Ward. Hubbell's
In addition to the criminal inves-
served a subpoena seeking a wide
father-in-law, and is now owned by
range of documents on the Rose
tigation going on in Little Rock, a
Ward's son, Seth Ward II. Hubbell
Law Firm, where Hillary Clinton
special civil task force assembled by
was P.O.M.'s lawyer, and court doc-
and several high-ranking adminis-
the Resolution Trust Corp., the fed-
uments show that Hillary Clinton
tration officials were once senior
eral agency charged with oversee-
did work for P.O.M. as well.
partners. They include Associate
ing the S&L crisis cleanup, has
P.O.M. was a Madison borrower,
Attorney General Webster L. Hub-
been working feverishly in Kansas
and Seth Ward was a Madison em-
bell, assistant White House counsel
City for the past several weeks.
William H. Kennedy III, and Vin-
ployee. In 1985, P.O.M. was the
RTC investigators and lawyers,
cent Foster. the deputy White
first company to receive a special
as well as lawyers from the firm of
House counsel who committed sui-
"private activity bond" under a pro-
cide last July. The scope of Fiske's
Pillsbury, Madison & Sutro hired
gram initiated by Clinton when he
work includes looking at how the
under contract by the RTC, are
was governor.
investigation into the Foster suicide
poring over Madison files to see if
Other individuals and entities
was handled by the White House
there are any civil claims that can
listed on the Tucker subpoena re-
and law enforcement officials.
still be brought against Madison
lated to partnerships and corpora-
Rose firm lawyers did legal work
attorneys, officials or borrowers.
tions created by Madison owner
relating to Madison. Hillary Clinton
The statute of limitations on some
represented Madison during the
McDougal, several Madison insid-
potential civil claims expires on
mid-1980s when it sought regula-
ers and borrowers, and materials
Feb. 28, five years to the day after
tory approval for a stock plan from
related to Capital Management Ser-
Madison failed and was taken over
state officials. McDougal, a long-
vices Inc., a venture capital com-
time Clinton friend, has said he
by the government.
pany that received federal funds
placed the Rose firm on a
The subpoena delivered this
from the Small Business Adminis-
$2,000-a-month retainer when
week to the Rose firm sought infor-
tration.
then-Gov. Clinton complained to
mation on a 21/2-page list of entities
Capital Management's owner,
him about his family finances.
and individuals, according to knowl-
David Hale, is facing a trial on crim-
Hubbell represented the govern-
edgeable sources. The list was sim-
inal fraud charges by Fiske's office
ment when it sued Madison's ac-
ilar to one contained in a subpoena
this spring. Hale has alleged that
countants for malpractice in 1990.
served last month on Arkansas Gov.
The Federal Deposit Insurance
Tucker and Clinton pressured him
Jim Guy Tucker (D), according to a
Corp. has been examining whether
to make SBA-funded loans to help
source who has seen both subpoe-
Hubbell and the Rose firm properly
Madison. including a $300,000
nas. In addition to documents re-
disclosed possible conflicts of inter-
loan, part of which ended up financ-
est in handling the case.
lating to Madison and Whitewater,
ing a Whitewater land transaction.
After his meeting with Reasoner.
the Tucker subpoena sought mate-
Tucker and Clinton have denied
Fiske told reporters in Little Rock
rials on President Clinton, Hillary
pressuring Hale for the loans, and
that it was necessary to ask for a
Clinton and Clinton campaign funds.
Clinton has said he remembers no
See WHITEWATER, A15, CoL 1
such conversations where such
loans were discussed.
25
THE WALL STREET JOURNAL TUESDAY. FEBRUARY 22. 1994
REVIEW & OUTLOOK
Arkansas Forbearance
So the Federal Deposit Insurance
the advent of Hillary buddy Ricki
Corp. has determined that Webb
Tigert. So it only seems fair that
Hubbell and the Rose Law firm vio-
everyone caught up in the S&L mael-
lated no conflict-of-interest rules
strom of the 1980s gets the benefit of
when they worked both sides of the
these new. more forgiving Arkansas
street regarding Madison Guaranty
standards of ethics.
S&L of Little Rock in the 19S0s. The
A different set of rules applied to
FDIC's eight-page opinion makes
law firms that had represented way-
some facts clear: Rose had previously
ward S&Ls. remember, before FOBs
represented Madison before state se-
started turning up in headlines. Can-
curities regulators. In doing so it had
didate Clinton proclaimed in his 1991
presented audits prepared by Frost &
announcement speech that. "When
Co. Then Rose and Mr. Hubbell
the ripoff artists looted our S&Ls. the
signed up to represent the govern-
president was silent. In a Clinton Ad-
ment in a suit against Frost over its
ministration, when people sell their
Madison audits. There is no record
companies and their workers and
that Rose told the
their country down the river. they'll
FDIC about its pre-
get called on the carpet."
vious representa-
And indeed. word of a new, relaxed
tion of Madison.
Mr. Hubbell and
standard has spread slowly. The day
before the FDIC exonerated Rose over
another Rose part-
ner say they re-
Madison, the Resolution Trust Corp.
member oral dis-
filed a $400 million suit against Streich
closures. but the
Lang. a prominent Phoenix law firm
FDIC personnel in-
that had represented Western Savings
volved have no rec-
and Loan Association. Some of its
ollection of them.
Webster Hubbell
partners, the RTC alleged, personally
The FDIC verdict: No conflict here.
profited from the fake sale of some of
its properties. The firm's managing
When Rose offered the Frost audit
director pointed out that the RTC has
to regulators in 1985. the FDIC opin-
sued "some of the finest law firms
ion says, "There is no indication in
across the country," and that the
the records, or based on our review,
Phoenix suit "is consistent with the
that the Firm did anything more with
government litigation strategy re-
respect to the audit in question than
garding RTC takeovers."
take it at face value." And "there is
no evidence that the Firm had a close
The granddaddy of these cases
relationship with the S&L:" (To judge
concerned Kaye, Scholer, a New York
by the opinion, the Whitewater part-
firm that represented Charlie Keat-
nership between Rose partner Hillary
ing's Lincoln S&L: It was coerced into
a S41 million settlement in 1991 when
Clinton and Madison owner James
McDougal escaped the notice of the
the government froze its assets. The
FDIC's legal eagles.) And since in
Kaye, Scholer case raised interesting
1985 Rose represented the S&L. and in
questions in how far a firm can go in
1989 represented the conservator who
making representations for a client
took over the S&L after seizure, the
the firm does not itself believe. Regu-
lators believe the firm lied to them,
interests in the two cases are not "di-
rectly adverse."
but a disciplinary committee of the
New York bar has since looked into
Somehow it seems to us the inter-
the case and found no evidence that
ests of a conservator trying to clean
any Kaye, Scholer partner violated
up a mess are pretty much adverse to
ethical rules. Yet the firm was not al-
the interests of the folks responsible
lowed to defend itself. John Feerick,
for making the mess. Indeed. who
dean of Fordham School of Law, says
needs a legal opinion to explain what
the asset seizure was a "gross abuse
is clearly a conflict on its face? Hav-
of power." This action. he adds, "ef-
ing been involved itself. Rose might
fectively took away the ability of the
have an interest in bailing out its for-
law firm to defend itself and forced it
mer business associates; Rose in fact
into a settlement."
settled the suit against Frost in 1991
Now that the FDIC has cleared the
for $1 million, according to several re-
Rose Firm and Webb Hubbell, we hope
ports much less than the limit of
it plans to give Kaye, Scholer its
Frost's insurance. Alternatively, Rose
money back. Otherwise the lesson of
might have an interest in protecting
the FDIC memo is that Arkansas for-
itself by blaming other parties for all
bearance applies only to firms that in-
mistakes. If this isn't a conflict of in-
cluded the Associate Attorney General
terest, what is?
and the First Lady. But the same old
But we guess that Arkansas rules
ferocious rules will apply to ordinary
now apply at the FDIC, even before
mortals.
66
RTC Hearings to Give GOP a Chance
To Grill Clinton Aides About Thrift
By ALBERT R. KARR
to hold a similar hearing. where Rep. Jim
Staff Reporter of THE WALL STREET JOURNAL
Leach (R., Iowa) plans to raise Madison
WASHINGTON Congressional hear-
questions. Messrs. Riegle and Gonzalez
ings this week will give Republican law-
had rebuffed GOP demands for broader
makers their first chance to grill Clinton
hearings into the Whitewater-Madison is-
administration officials about legal issues
sue itself.
related to a failed Arkansas thrift.
The Senate Banking Committee sched-
Mr. Altman. a college classmate of the
uled a hearing for Thursday on the per-
president and a longtime friend of the
formance of the Resolution Trust Corp..
Clintons. is expected to get special GOP
which is a Treasury Department unit and
attention Thursday. "We intend to fully
the government's savings-and-loan
explore the actions of the RTC and its
cleanup agency. Republicans. led by Sen.
interim leader in the Madison/Whitewater
Alfonse D'Amato of New York. promise to
controversy. including the delayed and
delve into how the RTC is handling an
incomplete responses to congressional re-
investigation into any wrongdoing linked
quests for information as well as the
to failed Madison Guaranty Savings &
Loan.
question of Mr. Altman's recusal." Sen.
Various news accounts and GOP allega-
D'Amato said. Sen. D'Amato has called for
tions have linked Madison. which failed in
Mr. Altman to remove himself from over-
1989. to helping Bill and Hillary Rodham
seeing matters involving Madison.
Clinton finance their investment in Whi-
Sen. D'Amato, the banking panel's
tewater Development Co., an Arkansas
ranking Republican. also has accused the
land-development venture. and to fund-
RTC of dragging its heels in the probe. Mr.
raising for Mr. Clinton's gubernatorial
Altman has said the RTC is conducting a
campaign debts. An independent counsel
vigorous investigation.
is investigating such claims.
Statute of Limitations
The GOP will get a crack at witnesses
including Treasury Secretary Lloyd Bent-
The Senate and House, by 95-0 and 390-1
sen: Deputy Treasury Secretary Roger
tallies. have voted to extend the RTC's
Altman, who is also interim RTC chief:
statute of limitations for fraud and gross
acting Federal Deposit Insurance Corp.
negligence in civil claims against S&L
Chairman Andrew Hove: and Jonathan
wrongdoers. The statute of limitations,
Fiechter, acting head of the Office of Thrift
which would otherwise run out for Madison
Supervision. The FDIC and OTS also have
and several hundred other thrifts on Mon-
S&L regulatory powers.
day. will be extended until the end of 1995,
Hearings Are Scheduled
when the RTC itself expires.
Under GOP pressure. Banking Commit-
Sen. D'Amato said Banking Committee
tee Chairman Donald Riegle (D., Mich.)
Republicans also will question last week's
set the Thursday hearing to receive a
FDIC report that exonerated the Rose Law
report of the Thrift Depositor Protection
Firm in Arkansas, where Mrs. Clinton and
Oversight Board. which monitors the RTC.
several administration officials were part-
Mr. Bentsen is chairman of the oversight
ners, of violating any conflict-of-interest
board. and Messrs. Altman, Hove and
rules in its dealings with Madison. Some
Fiechter are among its members. Rep.
have called the report a "whitewash,"
Henry Gonzalez (D., Texas). chairman of
Sen. D'Amato said.
the House Banking Committee, has agreed
About two weeks ago. Ricki Tigert, the
THE WALL STREET JOURNAL TUESDAY, FEBRUARY 22, 1994
president's nominee to head the FDIC,
U.S. Antitrust Inquiry
recused herself from matters involving the
Clintons and Madison. Ms. Tigert, also a
Praised by Small Bankers
friend of the Clintons, faced possible GOP
By a WALL STREET JOURNAL Staff Reporter
efforts to block Senate confirmation of her
WASHINGTON Small bankers are
nomination.
delighted that the Justice Department
has launched an investigation into
whether the networks that link auto-
U.S. Reserve Assets
mated teller machines are limiting their
systems solely to banks that purchase
Increased in January
other services from the networks.
Attorney General Janet Reno dis-
closed the antitrust investigation in a
By a WALL STREET JOURNAL Staff Reporter
speech to the Independent Bankers Asso-
WASHINGTON U.S. reserve assets
ciation of America at its annual meeting
rose $801 million in January to $74.24
in Orlando. Fla. If the department finds
billion from $73.44 billion in December, the
evidence of antitrust activity. she said. it
Treasury reported.
will press the case in court.
January's rise followed a $600 million
"We were very pleased to hear the
decline in December.
attorney general cite this as something
U.S. reserve assets consist of foreign
they are looking into," said Diane Casey
currencies. gold, special drawing rights at
of the bankers association. a trade group
the International Monetary Fund and the
of small banks. "Our bankers need ac-
U.S. reserve position at the IMF. In Janu-
cess to those systems."
ary 1993, they totaled $71.96 billion.
The Justice Department opened the
The Treasury said holdings of foreign
antitrust investigation after receiving
currencies rose $682 million from Decem-
complaints that ATM networks were
ber to $42.21 billion, while the gold stock
pressuring bankers to purchase other
was unchanged at $11.05 billion. The re-
services from the networks. Banks, for
serve position - the ability to draw foreign
instance, could allow their customers to
currency- at the IMF increased $88 million
pay bills by telephone or through per-
to $11.91 billion and holdings of IMF special
sonal computers. if the bank purchased
drawing rights were up $31 million to $9.07
the service through the network.
billion.
53
Feb 1994
w/o name
to be
Filed
PAGE
4
LEVEL 2 - 2 OF 2 STORIES
The Associated Press
The materials in the AP file were compiled by The Associated Press. These
materials may not be republished without the express written consent of The
Associated Press.
February 24, 1994, Thursday, AM cycle
SECTION: Washington Dateline
LENGTH: 856 words
HEADLINE: Senate Republicans Get Chance to Air Whitewater Case
BYLINE: By RICHARD KEIL, Associated Press Writer
DATELINE: WASHINGTON
BODY:
Senate Republicans mounted a furious attack Thursday on the Whitewater
affair, accusing Democrats of failing to vigorously pursue the case and raising
questions about possible political interference.
Under questioning by GOP members of the Senate Banking Committee, the acting
head of the savings and loan cleanup agency acknowledged he recently briefed top
White House officials on his agency's investigation of a failed Arkansas thrift
at the center of the controversy.
Roger Altman, acting chief executive of the Resolution Trust Corp., said he
used the meeting three weeks ago to explain to White House Counsel Bernard
Nussbaum how the agency commonly proceeds when the deadline for filing charges
in a case is approaching.
At the time, the deadline for filing civil claims in the case of Madison
Guaranty S&L was set to expire at the end of February. Congress has since
extended the deadline for another two years.
"It was solely to be sure that he understood the legal and procedural
framework in which the RTC was working." Altman said of his meeting with
Nussbaum.
Altman stressed that such briefings are typical with actual and potential
targets of such probes. He characterized the session with Nussbaum, "a very
stiff conversation."
Much of the hearing, originally designed to review the RTC's work in general,
was dominated by political sniping over the investigation into President and
Mrs. Clinton's Whitewater investment and their ties to the failed S&L.
Republicans accused Democrats of failing to vigorously pursue the case.
Democrats fired right back, contending that any congressional action on
Whitewater could jeopardize a criminal investigation now being conducted by
special counsel Robert Fiske.
PAGE
5
The Associated Press, February 24, 1994
They also accused the GOP of ignoring the S&L crisis until they could use it
for political gain by embarrassing the president.
"We're not talking about where the $ 150 billion in the S&L crisis went,"
said Sen. John Kerry, D-Mass. "This is why the taxpayers get so fed up - all we
do is dig into politics."
As this played out, high-powered witnesses like Federal Reserve Chairman Alan
Greenspan and Treasury Secretary Lloyd Bentsen sat and waited.
Sen. Alfonse D'Amato of New York, the panel's ranking Republican, set the
tone, criticizing the RTC for not delivering until Wednesday evening a set of
documents related to the failure of Madison Guaranty Savings and Loan.
Then he assailed an RTC report into possible conflicts at the Rose Law Firm
in Little Rock, Ark., because regulators did not contact "former and current"
lawyers at the firm who were knowledgeable about the matter.
"This is really one heck of a thorough report," he said sarcastically.
The firm, including Mrs. Clinton, worked for Madison during the mid-1980s
when the troubled S&L sought state approval for a plan to raise new capital.
Later, after Madison's failure, the Rose firm was hired by regulators to sue the
S&L's accountants. The S&L was owned by James McDougal, a partner with the
Clintons in the Whitewater Development Corp., a real estate venture.
Democrats were having none of it.
Kerry, long an RTC critic, came armed with charts showing 193 thrift failures
that each cost taxpayers more than the $ 47 million bailout attached to Madison.
He also said GOP committee members took little interest in those failures or
other problems within the RTC, including when agency whistleblowers testified in
a hearing last fall that waste, fraud and incompetence run rampant in the
agency.
"Not one Republican cared enough to come
when those whistleblowers were
here to talk to us," Kerry said.
"Can we talk about a coverup?" D'Amato shot back, zeroing in on
Whitewater. "It's a whitewash."
Recently, Federal Deposit Insurance Corp. officials investigated whether Rose
adequately disclosed potential conflicts, including its prior work for Madison
and the fact that the father-in-law of one of its senior partners, Justice
Department official Webster Hubbell, had extensive financial dealings with the
thrift.
The FDIC ruled last week there was insufficient evidence to take action,
saying that the applicable conflict of interest rules weren't enacted until
after Rose got the contract.
Sen. Lauch Faircloth, R-N.C., sharply criticized the FDIC report, saying it
suffered from "memory lapses" and amounted to "an eight-page plea of insanity."
PAGE
6
The Associated Press, February 24, 1994
Regulators heatedly reminded him that under the rules applicable then, only a
clear conflict of interest, not simply the appearance of one, would prevent a
prospective contractor from working for the government.
Republicans contended that Democrats would have vigorously pursued such a
case had it involved a Republican administration, recalling the congressional
inquiries into a failed S&L tied to former President Bush's son, Neil.
Sen. Don Riegle, D-Mich., the committee chairman, said a congressional
investigation into Whitewater was unnecessary because Fiske has already begun
his probe.
"Any effort to undertake a full-blown inquiry would be time consuming and
conflict with the legal process," Riegle said. "I don't think we can justify
doing that."
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 25, 1994
PAGE
1
LEVEL 2 - 1 OF 2 STORIES
The Associated Press
The materials in the AP file were compiled by The Associated Press. These
materials may not be republished without the express written consent of The
Associated Press.
February 25, 1994, Friday, PM cycle
SECTION: Washington Dateline
LENGTH: 777 words
HEADLINE: Altman Admits Briefing White House On Procedures in Madison S&L
Probe
BYLINE: By RICHARD KEIL, Associated Press Writer
DATELINE: WASHINGTON
BODY:
A Clinton administration official acknowledges he briefed White House aides
on the progress of a probe into a failed Arkansas savings and loan with ties to
the first family.
In addition, a top federal regulator asked his inspector general today to
examine whether Hillary Rodham Clinton's former law firm had "any conflicts of
interest or other improprieties " when it helped the government sue S&L
wrongdoers.
Andrew C. Hove Jr., acting chairman of the Federal Deposit Insurance Corp.,
wrote that "because of the serious nature of this matter, please try to complete
your investigation ... within 90 days." The letter to Inspector General James
Renick was released by Sen. Alfonse D'Amato, R-N.Y.
At a Senate Banking Committee hearing Thursday, Roger Altman, acting head
of the Resolution Trust Corp., revealed that he and a top Treasury Department
official briefed White House counsel Bernard Nussbaum and other top
administration aides on the procedures the RTC was using to investigate the
failure of Madison Guaranty Savings and Loan.
Altman said he initiated the meeting three weeks ago nearly a month after
a special counsel began a criminal probe of Madison's failure - to explain how
the agency commonly proceeds when the deadline for filing civil charges in a
case is approaching. Also attending the session were Margaret Williams, Mrs.
Clinton's chief of staff, and White House attorney Harold Ickes, Altman
revealed.
Madison was owned by James McDougal, who along with his then-wife Susan, was
a co-investor with the Clintons in the Whitewater Development Corp., a real
estate venture. Special Counsel Robert Fiske has launched a criminal probe into
whether funds from Madison, whose failure will cost taxpayers at least $ 47
million, were either diverted to Whitewater or used to help pay Clinton's
political campaign debts.
PAGE
2
The Associated Press, February 25, 1994
"It was solely to be sure that he understood the legal and procedural
framework in which the RTC was working," Altman said of his meeting with
Nussbaum. "It was a heads-up."
At the time, the deadline for filing civil claims in the case of Madison
Guaranty S&L was set to expire at the end of February. Congress has since
extended the deadline for another two years.
Under questioning from Sen. Alfonse D'Amato, R-N.Y., Altman conceded that
the session was awkward.
"It was a very stiff conversation," Altman added.
Meanwhile, in Little Rock, Ark., the State Bank Department acknowledged it
received a subpoena last month for documents involving several Arkansas banks,
including four where President and Mrs. Clinton took out loans for his campaign
or their Whitewater venture.
The Jan. 13 subpoena was requested by federal prosecutors who did the initial
work in the probe of Whitewater and Madison before it was turned over to
Fiske.
Altman's admission came in a hearing where Republicans repeatedly claimed
the White House has been unable to remain impartial on the matter or open it up
to public scrutiny.
"Give the public the information that the public desperately wants,' said
Sen. Phil Gramm, R-Texas. "I believe that if the president does that, he can
free himself of a very heavy burden, and free us too."
GOP lawmakers also won assurances from Hove that the agency's inspector
general will review how the agency concluded that the Rose Law Firm of Little
Rock, Ark., had not violated conflict of interest rules when it helped sue
Madison's former accountants.
Rose had previously represented the S&L when it sought approval from state
regulators for a recapitalization plan - and relied in part on the accounting
firm's audits.
The FDIC concluded last week in an 8-page report that it could find no
written record indicating whether Rose attorney Webster Hubbell, now the No. 3
Justice Department official, notified regulators about the firm's prior work for
Madison.
But acting FDIC chairman Andrew Hove pledged to D'Amato that the agency's
inspector general would review the matter to make sure it was handled
appropriately.
The pledge by Hove - a holdover appointee from the Bush administration - came
even though the FDIC has made clear in the past week that the strict
conflict-of-interest regulations that now govern the conduct of agency
contractors were not in place when Rose sought work in the Madison failure.
"At that time, we were looking only at actual conflicts of interest," Hove
said. "NOW, we're required to look at the appearance of a conflict as well."
PAGE 3
The Associated Press, February 25, 1994
"I find your response totally unacceptable," D'Amato told Hove in
criticizing the report.
The RTC concluded on Feb. 8 that it found no evidence that Hubbell or others
at Rose revealed the possible conflicts.
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 25, 1994
PAGE
12
LEVEL 1 - 5 OF 18 STORIES
Copyright 1994 The Washington Post
The Washington Post
February 25, 1994, Friday, Final Edition
SECTION: FIRST SECTION; PAGE A9
LENGTH: 962 words
HEADLINE: Agencies Accused of 'Whitewash' on Whitewater
SERIES: Occasional
BYLINE: Susan Schmidt, Washington Post Staff Writer
BODY:
In a sometimes heated debate over the Whitewater investigation, Senate
Republicans yesterday questioned top officials of two federal banking agencies
whether they are allowing partisan politics to interfere with the inquiry.
In a hearing before the Banking Committee, Sen. Alfonse M. D'Amato (N.Y.),
the panel's ranking Republican, lambasted the Federal Deposit Insurance Corp.
chairman for his agency's recent report clearing the Rose Law Firm of conflicts
of interest, calling it "an incredible whitewash." The Rose firm, whose former
partners included Hillary Rodham Clinton, represented the failed Madison
Guaranty Savings & Loan before state regulators when Bill Clinton was governor
of Arkansas. Acting FDIC Chairman Andrew C. Hove Jr. agreed to have his
inspector general investigate the origins of the report.
Republicans also sharply questioned Deputy Treasury Secretary Roger C.
Altman, the appointed acting chief of the Resolution Trust Corp., on his
meeting three weeks ago with White House counsel Bernard Nussbaum and other
Clinton aides to brief them on the RTC's procedures should it decide to file
civil claims in the Whitewater investigation.
Altman said he initiated the meeting to give the White House a "heads up" on
how the agency would proceed on potential civil claims arising out of the
Madison's failure, which cost taxpayers an estimated $ 60 million. Clinton and
his wife were joint owners of the Whitewater real estate venture with Madison
owner James McDougal, and the Rose Law Firm, where Hillary Clinton was a
partner, representing the S&L in the mid-1980s.
Altman said in a meeting with Nussbaum, Hillary Clinton's chief of staff
Margaret Williams and White House deputy chief of staff Harold Ickes, he
outlined various courses the RTC could take as it approached a Feb. 28
deadline for filing civil claims against Madison officers, directors and
lawyers. Since then, Congress has extended the deadline to the end of 1995.
Altman said he told the White House aides the RTC would have to decide
whether there was a basis to bring civil claims and, if so, whether to file suit
immediately or seek a voluntary extension of the deadline from possible
defendants.
"It was solely to be sure that [Nussbaum] understood the legal and procedural
framework," Altman told the committee. He said he felt a briefing was
PHOTOCOPY
PRESERVATION
PAGE
13
The Washington Post, February 25, 1994
justified because he had been giving such information to inquiring members of
Congress.
D'Amato, who praised some aspects of the RTC's Madison investigation
yesterday, had urged Altman to recuse himself from the Whitewater probe because
it involves the president, who named Altman to his job.
Present at yesterday's session, nominally an oversight hearing on the RTC,
were the five top-level officials on a board that oversees the agency. In
addition to Altman and Hove, they included Treasury Secretary Lloyd Bentsen and
Federal Reserve Chairman Alan Greenspan.
Republicans used the session to turn a harsh light on the Whitewater inquiry
and complain about the Democratic majority's refusal to hold hearings on the
issue. Democrats, led by Sen. John F. Kerry (Mass.), argued Republicans were
engaged in "very partisan singling out of one institution."
They maintained Congress does not need to hold hearings because Whitewater
and Madison are subjects of an extensive investigation by Robert B. Fiske Jr.,
the special counsel appointed by Attorney General Janet Reno.
Much of the hearing was devoted to discussion of a report on the Rose Law
Firm released last week by the FDIC's legal division, which examined whether
Rose lawyers properly disclosed involvement with Madison when they were hired by
the government in 1989 to press a lawsuit against Madison's former accountants.
The FDIC legal division, which originally hired the firm, found there was no
conflict of interest. It reached that conclusion despite evidence the firm never
disclosed it represented Madison before state regulators, and had cited the
accountant's audit work in seeking certain regulatory approvals. Hillary Clinton
was one of the attorneys representing Madison.
The FDIC lawyers also decided they would have preferred to know that Rose's
lead attorney on the case -- Webster L. Hubbell, now associate attorney general
-- had relatives involved in litigation with the government over hundreds of
thousands of dollars in Madison loans and commissions. But, they said, under
their relatively lax 1989 rules, Hubbell's actions did not constitute a
conflict.
"This is the most incredible whitewash," D'Amato told Hove. "I mean, are you
serious?"
The RTC has prepared a separate report on the conflicts question that was
released by D'Amato. It found the Rose firm failed to disclose potential
conflicts of interest, and the study has been sent to the RTC general counsel
for review.
The FDIC report said there was not a conflict because Rose lawyers imposed an
internal "fire wall" to keep Madison information from Hubbell about his
father-in-law, Seth Ward. "That's an Arkansas fire wall," said Sen. Lauch
Faircloth (R-N.C.). "You could strike a match behind it, hear the scratch, see
the glow and feel the heat."
Hove reluctantly agreed to seek an inspector general's investigation of the
report and the handling of another case involving Hillary Clinton. In that
PHOTOCOPY
PRESERVATION
PAGE 14
The Washington Post, February 25, 1994
case, also an S&L matter, she signed court documents on behalf of her partner
and the lead attorney on the case, former deputy White House counsel Vincent
Foster, a leading Rose attorney. The case was against Dan Lasater, a Clinton
friend and supporter.
Hillary Clinton signed an amended complaint that reduced damages sought by
the government from $ 3.3 million to $ 1.3 million. She was not involved in the
final $ 200,000 settlement, according to the FDIC.
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 25, 1994
OTOCOPY
RVATION
bc-whitewater times addend a2041
(Risen, Times) (National)
XXX the issue.
In another development at the hearing Thursday, Altman acknowledged that
he had met privately with White House officials three weeks ago to brief them
on an aspect of the RTC's Whitewater investigation. He said the purpose of the
meeting was to inform the White House about the RTC's options in view of the
impending expiration of statutes of limitation on civil lawsuits involving
Whitewater- and Madison Guaranty-related issues.
Some Republicans raised the question of whether the meeting was improper,
given his role as acting chairman of the RTC, which is supposed to be an
independent regulatory agency.
It was solely to be sure that (White House counsel Bernard Nussbaum)
understood the legal and procedural framework, Altman told the committee. He
said he felt a briefing was justified because he had been giving such
information to inquiring members of Congress.
**** filed by:LAWP(--) on 02/25/94 at 02:28EST ****
**** printed by:WHPR(162) on 02/25/94 at 03:12EST ****
128
^BC-CLINTON-WHITEWATER 1STLD (SCHEDULED) <
^U.S. REGULATORS TO REOPEN ROSE LAW FIRM PROBE<
(Eds: Recasts lead, adds quotes, details) < By Roger Fillion<
WASHINGTON (Reuter) - Under fire from Republican
lawmakers, U.S. regulators agreed Thursday to reopen their probe
of First Lady Hillary Rodham Clinton's former law firm and its
dealings with a failed Arkansas savings bank linked to the
Whitewater affair.<
The head of the Federal Deposit Insurance Corp said he
would turn over to the FDIC's top investigator a report issued
last week clearing the Rose law firm of conflict-of-interest
violations. Republicans have branded the report a ''whitewash.
A separate report issued Thursday by the U.S. savings
and loan cleanup agency found that the Little Rock, Arkansas
-based law firm failed to disclose its work for Madison Guaranty
Savings and Loan, the bank linked to President and Mrs Clinton's
money-losing Whitewater land deal.<
It was the first time the cleanup agency, the Resolution
Trust Corp (RTC), revealed it had looked into possible conflict
of interest by Rose -- where Hillary Clinton and other
administration officials were partners -- when the firm was
working for the RTC.
Republicans have accused Clinton adminstration officials
overseeing the RTC of stalling the government's probe of
Madison's 1989 failure.<
''Does the RTC think that there is a special category of
people who are above the law?'' Republican Senator Alfonse
D'Amato of New York asked during a banking committee hearing on
the cleanup agency. <
While Democrats favor full prosecution of any wrongdoers
in the multi-billion savings and loan disaster, they accused
Republicans of using the Madison case as a political football.<
''There is this outrage directed at one particular
situation, and it is so obvious why,'' said Senator Barbara
Boxer, a California Democrat.<
Boxer and other Democrats said the Madison affair should
be left to the special counsel probing the case.<
But Republicans used the banking panel hearing to grill
Clinton officials about the government's probe of Madison, which
was run by a close associate of then-Governor Bill Clinton.<
The associate, James McDougal, also was a partner with
Clinton and his wife in the Whitewater land development deal.<
Madison and Whitewater are under suspicion of having
been used to hide Clinton's 1984 campaign debts from his campaign
for governor. <
The FDIC's acting chairman, under pressure from
Republicans, agreed to hand over the agency's report on the Rose
firm to the FDIC inspector general. Republicans want to ensure
the report is unbiased and complete.<
Andrew Hove, the chairman, also agreed to broaden the
FDIC's search of government documents to determine Mrs. Clinton's
involvement in dealings stemming from the failure of a Chicago
savings and loan.<
^ (ndy) (ATTN: National editors) (Includes optional trims)
^White House Was Briefed on Whitewater Probe (Washn)
^By Timothy M. Phelps= ^ (c) 1994, Newsday=
WASHINGTON Deputy Treasury Secretary Roger Altman said Thursday
under questioning by Senate Republicans that he held a private meeting with
White House officials three weeks ago to brief them on one aspect of the
Whitewater investigation.
Altman, a close friend of President Clinton and his wife,
Hillary Rodham Clinton, said he requested the meeting to talk about the
then-approaching deadline for a civil suit against the Clintons, Hillary
Clinton's former law firm or others concerning Whitewater.
Altman is also the acting head of the Resolution Trust Corp.,
which is conducting a review of the Whitewater affair to see if any civil
laws were violated. A separate criminal investigation has been under way for
the past month.
Attending the meeting from the White House, Altman said, were
White House Counsel Bernard Nussbaum; Harold Ickes, the president's political
troubleshooter on Whitewater; and Margaret Williams, Hillary Clinton's chief
of staff.
Sen. Alfonse D'Amato, R-N.Y., the ranking Republican on the
Senate Banking Committee, said afterward that the meeting should not have
occurred.
"It is totally inappropriate for an appointed head of the RTC to
go over and brief the White House, D'Amato said. "It certainly has all the
appearances of a cover-up.'
Altman described the session as a '`heads up'' meeting to inform
the White House of the RTC's investigation of Madison Guaranty Savings and
Loan, a failed Arkansas thrift headed by James McDougal that it took over at
a cost of $47 million of taxpayers' money. Part of that investigation
includes looking into the alleged diversion of depositor funds from Madison
Guaranty to Whitewater, an Arkansas development in which the McDougals and
Clintons were partners, or to a Clinton gubernatorial campaign. The RTC also
is looking into the possibility of conflicts of interest by the Rose Law Firm
or its partners, who included Hillary Clinton and Webster Hubbell, now the
associate attorney general.
^(Optional add end)
At the time the statute of limitations for any civil lawsuit
against Rose or its partners was less than a month away, and Altman said he
told the officials that among the RTC's options were filing
a civil suit before the Feb. 28 deadline or asking those involved to waive
the statute of limitations. Either one would have caused renewed
embarrassment for the White House.
After that meeting, Democrats in the Congress acceded to
D'Amato's demand that the statute of limitations be extended until 1995.
Thursday's testimony by Altman and other administration officials
came at an oversight hearing of the Banking Committee on the RTC. But
committee Republicans turned it into a hearing on Whitewater.
^Distributed by the Los Angeles Times-Washington Post News
Service=
The Chicago Tribune has reported that the First Lady may
have concealed a conflict of interest in pursuing -- on behalf of
federal banking regulators -- a legal settlement with a family
friend and associate, Arkansas businessman Dan Lasater. <
Meanwhile, Deputy Treasury Secretary Roger Altman, the
RTC's acting chief executive, said he will turn over the savings
and loan cleanup agency's findings on the Rose firm to its
inspector general. <
"It would guarantee the integrity of the review, said
D'Amato, the senior Republican on the banking committee. <
The RTC probe found Rose did not disclose previous work
for Madison when the law firm was working for the agency. <
It also said Rose did not disclose possible conflicts
involving the brother-in-law and father-in-law of Webster
Hubbell, a Rose partner who is now the third-ranking official in
the Justice Department. Both had sued Madison.<
The RTC report, dated February 8, did not make any
recommendations or state whether Rose acted inappropriately.<
The House Banking Committee is expected to hold an RTC
hearing next month. <
PAGE
9
LEVEL 1 - 4 OF 18 STORIES
Copyright 1994 The Washington Post
The Washington Post
February 26, 1994, Saturday, Final Edition
SECTION: FIRST SECTION; PAGE A7
LENGTH: 1084 words
HEADLINE: Senior Official Steps Aside in Probe of S&L Linked to Clintons'
Venture
SERIES: Occasional
BYLINE: Susan Schmidt, Charles R. Babcock, Washington Post Staff Writers
BODY:
Deputy Treasury Secretary Roger C. Altman, a political appointee serving as
temporary chief of the federal thrift cleanup agency, recused himself yesterday
from any further action on the investigation of an Arkansas savings and loan
with ties to President Clinton and Hillary Rodham Clinton.
Altman announced he was taking the step one day after revealing during
congressional questioning that he recently briefed White House officials on how
his agency would proceed with potential civil claims growing out the failure of
Madison Guaranty Savings & Loan. Altman's disclosure, under questioning from
Republican senators, was criticized as evidence that the White House is
improperly interfering in a case that directly affects the Clintons.
Altman also said he will step down as interim head of the Resolution Trust
Corp. at the end of March. The administration is expected to nominate a
permanent chief soon for the RTC, which by law is supposed to be an
independent federal agency. Treasury officials said Altman did not believe the
Madison investigation presented a conflict for him but realized there was the
appearance of conflict and decided to recuse himself for that reason.
The RTC is disposing of failed S&Ls and pursuing civil and criminal cases
against officers, directors, lawyers, accountants, borrowers and others. Hillary
Clinton and her former associates at the Rose Law Firm in Little Rock, Ark.,
represented Madison before state regulators in the mid-1980s.
Altman told the Senate Banking Committee that he contacted White House
counsel Bernard Nussbaum about three weeks ago and offered to meet with him to
explain what the RTC would do as the deadline for filing civil claims in the
Madison probe neared. That deadline was Feb. 28, but Congress has extended it
until the end of 1995.
Altman said he met with Nussbaum; Margaret Williams, Hillary Clinton's chief
of staff; and the president's deputy chief of staff, Harold Ickes, who has been
assigned the task of damage control in the Whitewater probe.
White House officials yesterday defended the meeting. "There's nothing
improper about it," said White House press secretary Dee Dee Myers. "He
basically informed the White House -- as he did Congress, as he did the press.
It was strictly a procedural briefing. There was nothing available that was
PAGE 10
The Washington Post, February 26, 1994
not available to members of the press or Congress."
Altman said he told White House aides during the meeting that if the RTC
found a claim was warranted, it would either file a lawsuit or ask potential
defendants to voluntarily sign agreements extending the deadline. He said he
already had given such information to inquiring Republican members of Congress.
Meanwhile, Rep. Jim Leach (Iowa), the ranking Republican on the House Banking
Committee, yesterday released portions of a taped conversation in which the
Clintons' former business partner, James McDougal, disputes their accounting of
their investment in their joint Whitewater land venture. McDougal said in the
1992 conversation that the Clintons never made a $ 9,000 interest payment that
they claimed on their 1980 federal income taxes and that they used corporate
assets to pay off a personal loan.
In a memo to minority committee members, Leach said McDougal's comments
"appear to indicate that the Clintons lost no money in Whitewater" and "suggest
that the tax consequences which emanate from this venture merit careful
scrutiny."
Leach, who has been gathering documents for hearings he plans to hold next
month on the Whitewater matter, said in an interview yesterday that he
considered McDougal's comments important because, "he is sitting down with book
ledgers, which lends it great credibility." The tape was made during a talk
McDougal had in the spring of 1992 with Sheffield Nelson, who ran for governor
against Clinton in 1990 and was himself an investor in a project financed
through the McDougal-owned Madison Guaranty Savings & Loan.
The Clintons claimed in their 1980 federal tax returns that they made $ 9,000
in interest payments to McDougal related to the Whitewater venture. "They didn't
pay me.
... They have never paid me a penny's interest," McDougal said.
In recent weeks, McDougal has said that he could recall the Clintons putting
about $ 13,500 into Whitewater, not the 68,900 they claimed when the
investment became an issue in the 1992 presidential primaries and since.
Referring to the 1992 taped conversation, Bruce Lindsey, a senior White House
aide, said yesterday, "I think he [McDougal] is confused. He has said he is
relying on his memory with these amounts, and his memory is mistaken."
Lindsey said in an earlier interview that he believed the Clintons paid
McDougal $ 9,000 in 1980 to compensate him for interest he had paid on a joint
loan used to finance the Whitewater venture.
Special counsel Robert B. Fiske Jr. is now trying to sort out Whitewater's
finances as part of an intense Justice Department investigation.
In the taped conversation with Nelson, apparently just after the Clinton
campaign released a report about the Whitewater investment, McDougal said: "I
could sink it [the $ 68,900 figure] quicker than they could lie about it if I
could get in a position so I wouldn't have my head beaten off. And Bill knows
that."
In the transcript, McDougal said the Clintons personally sold "a corporate
asset" for which Whitewater had made all the payments. He was referring to a
PAGE 11
The Washington Post, February 26, 1994
lot and model home on the Whitewater property. Lindsey said the Clintons made
some payments on the lot.
Last night, McDougal said a transcript read to him "sounds fabricated. " He
told the Associated Press, "I'm reserving any further comment until whatever
Republican prepared the transcript makes the original tape available."
In another development, Sen. Alfonse M. D'Amato (R-N.Y.) accused Democratic
National Committee Chairman David Wilhelm of using "political intimidation
tactics" in a letter criticizing D'Amato for leading the GOP charge on
Whitewater.
In the Feb. 25 letter, Wilhelm said D'Amato's own actions "present a clear
pattern of conflict of interest over savings and loans and other business
interests." As one example, he cited a Senate ethics committee probe of
D'Amato's conduct in permitting his brother Armand to send letters under his
name to the Pentagon to lobby for a contract.
D'Amato's reply said the letter "reconfirms my suspicion that something is
rotten in Little Rock."
Staff writer Ruth Marcus contributed to this report.
LANGUAGE: ENGLISH
LOAD-DATE-MDC: February 25, 1994
Whitewater spurs raucous
debate at Senate hearing
GOP charges 'coverup'; Democrats question motives
By Richard Whittle
created to clean up the savings and
Washington - of The Dallas Morning News
loan collapse to attack the administra-
WASHINGTON Republicans pro-
tion's response to congressional ques-
voked a verbal brawl over the White
tions on Whitewster.
water affair at a Senate hearing Thurs
But committee chairman Sen. Don-
day, hurting charges of a Clinton
ald Riegle of Michigan and other Dem-
administration "coverup" while Dem-
ocrats argued that a congressional in-
ocras questioned GOP motives.
quiry could Interiere with the work of
"H seems to me that this committee
independent counsel Robert B. Fiske
has an obligation to get out all the
Jr.
facts," said Sen. Alfonse D'Amato, R.
"1 don't think we can justify doing
N.Y., who launched the debate at a
that," Mr. Riegle said.
Senate Banking Committee hearing by
Mr. Fiske is to examine allegations
raising the issue of past business deal-
of improper financial dealings and fa-
ings in Arkansas of President Clinton
voritism in connection with the falled
and his wife, Hillary Rodham Clinton.
Madison Guaranty Savings & Loan.
T see a coverup here. I see & white-
The Arkansas S&L collapsed in 1989 at
wash here," said Mr. D'Amato, using a
& cost to taxpayers of $47 million On
routine hearing on the federal agency
Please see PARTISAN on Page 22A.
Partisan debate erupts
time the FDIC hired the Rose firm,
making it impossible for Mr. Hubbell
to exploit any inside knowledge
over Whitewater affair
gained
Mr. D'Amato was also critical of the
RTC. which he castigated for getting
documents to him late Wednesday
C
inued from Page IA.
that be said had been available for
publicans were distagenuous to use
treatment accorded in the past to
delivery since Feb. 8.
Wednesday, Mr. Fiske named a team
the hearing on the Resolution Trust
members of their party, such as for.
of eight lawyers who will work in
Corp. to launch their salvos.
"Ever. if you took an Evelyn Wood
mer President George Bush's son,
Treasury Secretary Lloyd Bentsen,
speed-reading course you'd have trou-
Washington and Little Rock, Ark., on
Neil. whose involvement in a Denver
the investigation.
Federal Reserve Chairman Alan
ble getting through it," he said, de
savings and loan prompted bearings.
Greenspan and other senior officials
scribing the material as "boxes" of
Mudison was run by James McDou-
The only concession the Republi-
gal, the Clintons' business partner in a
called to testify on the RTC's progress
documents "That's not fair to us and
cans won was a promise from the
money-losing resort venture called
in selling off assets of failed S&Ls had
it's not fair to the American people."
head of the FDIC to have the agency's
to sit through the 90-minute fight on
Republicans will try to focus the
Whitewater Development Corp. Mr.
inspector general examine a recent
Clinton was governor of Arkansas at
the Whitewater issue before they
report on the role of Mrs. Clinton's
spotlight again on Whitewater next
the time, which has prompted charges
spoke.
former law firm
month when the House Banking Com-
of favoritism and questions about
Mr. Bentsen was never asked about
The Rose law firm of Little Rock, in
mittee holds a similar hearing on the
whether money from the S&L might
Whitewater. Mr. Greenspan, who with
which Mr. Poster and Associate Attor-
RTC
have been improperly funneled to his
Mr. Bentsen sits on a committee that
ney General Webster Hubbell were
Committee chairman Henry B.
gubernatorial campaign.
oversees the RTC, was asked by Mr.
also partners, represented Madison
Gonzalez D-San Antonio, has rejected
In addition, & Little Rock law firm
Riegle whether be was satisfied with
when it was failing and wanted a state
calls for special hearings on White
in which first lady Hillary Rodham
the agency's work on Madison. He said
agency's approval of a plan to raise
water But the ranking Republican on
Clinton and several other top adminis-
he had "not followed it in any manner
more capital. The law firm later was
the committee, Rep. Jim Leach of 30
tration officials were partners did le-
which would allow me to respond."
hired by the FDIC to sue Madison's
wa, has been among the most vocal
gal work for Madison, raising conflict
Mr. Kerry noted the cost of Madi-
accounting firm.
critics of the administration's
of-interest questions.
son's failure to the federal govern-
PDIC officials recently questioned
dling of the affair.
The special counsel, appointed last
ment made it 194th among failed S&Ls,
whether the law firm adequately dis-
Also on Thursday Rep. Bill Clinger
month, is also investigating the death
"and that's the only one they're asking
closed the fact that Mr. Hubbell and
of Pennsylvania ranking Republican
of deputy White House counsel Vince
questions about."
Mrs. Clinton had done legal work for
cr. the House Government Operations
Foster, a friend of the Clintons who
He said the Republicans would be
Madison and that Mr. Hubbell's father-
Committee, announced that his staff
had worked on Whitewater matters
asking about bigger S&L failures if
in-law had sued Madison over his fi-
Authorities ruled his death a suicide.
they were sincerely interested in poll-
nancial dealings with the S&L
would review federal agencies' han-
Mr. D'Amato and the committee's
cy rather than just trying to wound
An FDIC report Issued last week,
dling of the investigation of White
other Republicans contended that the
Mr. Clinton
however, found that while the Rose
House aide Foster's death
Federal Deposit Insurance Corp. had
Sen. Phil Gramm of Texas said he
firm would have been in violation of
Mr. Foster, whose work at the
resisted their efforts to pursue a sepa-
and other GOP members of the com-
current confiict-of-interest rules. the
White House had included fillag a set
rate inquiry into the tangled tale of
mittee simply wanted to "clear the air"
regulations in effect at the time were
of delinquent tax returns for White
Madison and Whitewater.
by getting out information that "the
more lenient
water Development Corp., was found
Sen. John Kerry, D-Mass, adopted
American public desperately wants."
Mr. D'Amato called that report "the
dead of a gunshot wound to the
the role of the administration's chief
Mr. Gramm contended that the
most incredible whitewash of White
last July in a Potomac River park. The
defender, accusing the Republicans of
Democrats would have created a spe-
watergate that I've seen." Sen. Lauch
investigation was conducted by the
"piling on in a partisan fashion" de
cial congressional investigating com-
Faircloth, R-N.C., said it was "ao eight-
US Park Police.
spite the appointment of the special
mittee if similar issues had been
page plea of insanity."
The administration has acknowl-
counsel
raised about former President Ronald
FDIC Acting Chairman Andrew
edged that White House aides
"This has nothing to do with feder-
Reagan.
Hove countered that the lawsult
searched Mr. Foster's office after his
al policy on savings and loans" Mr.
Other Republicans argued that
against Madison by Mr. Hubbell's
death and removed some documents
Kerry said, complaining that the Re-
they were asking for the same kind of
father-in-law had been decided by the
related to Whitewater
Dallas Morning News
2-25-94
146
106
GOP persuades regulators
to reopen probe of Rose
eral policy on savings and loans,"
Sen. Lauch Faircloth, North
By Tony Munroe
THE WASHINGTON TIMES
said Sen. John Kerry, Massachu-
Carolina Republican, called the
setts Democrat. "What we're do-
FDIC report "an eight-page insan-
Under pressure from Republi-
ing now is piling on in a clearly
ity plea."
can lawmakers, U.S. regulators
partisan fashion."
Acting FDIC Chairman Andrew
agreed yesterday to reopen their
High-level officials, including
C. Hove explained that under the
probe of Hillary Rodham Clinton's
Treasury Secretary Lloyd Bentsen
rules at the time Rose was
former law firm and its dealings
and Federal Reserve Chairman
awarded the contract, only clear
with a failed Arkansas savings
Alan Greenspan, sat and watched
conflicts of interest, not apparant
bank linked to the Whitewater-
the partisan sparring for 90 min-
conflicts, were investigated.
Madison affair.
utes before they were called on to
Mr. D'Amato asked that the
The acting head of the Federal
speak.
agency's inspector general investi-
Deposit Insurance Corp. said he
Mr. D'Amato chided the Res-
gate the matter, to which Mr. Hove
would turn over to the FDIC's top
olution Trust Corp. (RTC) for its
agreed.
investigator a report issued last
eight-page report examining
Sen. Richard C. Shelby, Ala-
week clearing Little Rock's Rose
whether there was a conflict of
bama Democrat, said that while
Law Firm of conflict-of-interest
interest involving Mrs. Clinton
unanswered questions remain,
violations.
and the Rose firm, where she was
Robert B. Fiske Jr., the special
Republicans branded that re-
a partner.
counsel appointed by Attorney
port a "whitewash" during a con-
Rose represented Madison
General Janet Reno to look into the
tentious, 41/2-hour hearing in
Guaranty Savings and Loan Asso-
Whitewater-Madison affair, will
which they lit into their Demo-
ciation before it failed, then rep-
handle them.
Photo by Ruth Fremson The Washington Times
cratic counterparts for not pursu-
resented the government in a suit
Leading the Democrats' coun-
Treasury Secretary Lloyd Bentsen appears weary of waiting to testify before the Senate Banking Committee.
ing the matter.
that accused Frost & Co., Madi-
terstrike, Mr. Kerry made a show
Minutes after the opening gavel
son's accounting firm, of negli-
of charts listing 193 failed thrifts
in what was scheduled as a routine
gence in failing to detect Madi-
that cost taxpayers more than the
and asked for the appointment of
March when the House Banking
sought to close it because of insol-
hearing on the savings and loan
son's troubles.
$50 million it cost to bail out Madi-
a Senate committee to investigate
Committee plans to hold a hearing
vency. She presented a stock pre-
cleanup, Sen. Alfonse M. D'Amato,
In its report, the RTC said: "In-
son, which was seized by federal
Whitewater-Madison.
on the RTC cleanup job.
ferred plan based on an audit by
New York Republican, accused
terviews of current and former
regulators in 1989.
Democrats responded that a
Mr. Fiske is investigating Madi-
the Frost firm. The government
federal regulators of "stone-
Rose Law Firm attorneys who may
Mr. Kerry also recalled hear-
Senate investigation would be re-
son and its financial ties to
said four years later that the plan
walling" Republicans in their ef-
be knowledgeable on this matter
ings held last year on fraud and
dundant, and any findings could
was fraudulent.
were not conducted."
mismanagement at the RTC, when
prejudice the investigation al-
Whitewater Development Corp.,
forts to determine what happened
Mr. McDougal, who bought
in the Whitewater-Madison case.
ready in progress under Mr. Fiske.
an Arkansas land partnership in-
"This is really one heck of a
there was "no hue and cry from
Madison Guaranty in 1982, is un-
"I see a cover-up here. I see a
thorough report," a sarcastic Mr.
my colleagues across the aisle."
"It seems to me we put the mat-
volving President and Mrs. Clin-
der investigation by federal
ton and Madison owner James B.
whitewash here," he said.
D'Amato said at yesterday's hear-
But Sen. Pete V. Domenici, New
ter where it ought to be put," said
authorities for accusations that he
Democrats countered that the
ing.
Mexico Republican, cited hear-
Sen. Paul S. Sarbanes, Maryland
McDougal and his wife, Susan.
manipulated $250,000 in loans
Republicans were using President
Mr. D'Amato also blasted the
ings called by Democrats when
Democrat.
In 1985, Mrs. Clinton was being
through the S&L and diverted
Clinton's Whitewater real estate
FDIC report, calling it "soph-
President Bush's son, Neil, was in-
Republicans on the House side
paid $2,000 a month by Mr.
other money to the campaigns of
investment for political profit.
omoric, legalistic mumbo-jumbo
volved in the failure of Denver-
will get a crack at Whitewater
McDougal to represent the failing
several Arkansas politicians, in-
"This has nothing to do with fed-
that doesn't hold water."
based Silverado Savings & Loan,
Madison during the third week of
S&L before state regulators, who
cluding Mr. Clinton.
The Washington Times FRIDAY, FEBRUARY 25, 1994
88
USA TODAY FRIDAY, FEBRUARY 25. 1994
By Agence France-Presse
BROWN: Government alone
can't solve problem
son. recovering from home-
lessness and drug addiction,
told summit participants
there's no time to waste. "As
long as veterans are out there
on the street," he said,
"they're going to keep dying"
GOP makes hay on Whitewater
He said he discussed RTC
policy on a legal deadline that
$150 billion S&L bailout.
He pi ig hor e ess veterans
Summit seeks ways to help estimated 250,000 on the street
an, driven to the streets by
some combination of bad
luck. joblessness, substance
abuse, war-related stress and
Housing and Urban Devel-
opment's Andrew Cuomo told
the summit, "We want to get
the money out of Washington,
back to the community" -
but stopped short of specify-
ing increased HUD spending
for homeless vets.
Brown noted VA spending
on the homeless had risen
from $50 million to $70 mil-
lion since last year - and
that for the first time, the VA
has $5.5 million to award to
S&L hearings in Senate
non-government vets groups.
Bronx veteran Joseph Wil-
required all Madison-related
By Dennis Cauchon
during what was to be a routine
lawsuits to be filed by Feb. 28.
USA TODAY
hearing on the status of the
Congress later extended the
deadline, giving the RTC more
WASHINGTON - Senate
Sen. John Kerry, D-Mass.,
time to file suits against the
mental illness.
Republicans hijacked a savings
asked the Republicans why
Clintons, if appropriate.
and loan hearing Thursday and
they only show up for S&L
David Kendall, the Clin-
turned it into a forum on the
hearings when they want to put
tons' personal lawyer, called
Whitewater controversy.
on a political show.
the Federal Deposit Insurance
In the process, the Republi-
"This is why the taxpayers
Corp. on Feb. 16, said FDIC of-
cans uncovered new details on
get so fed up, because all we do
ficial Alan Whitney, who took
Whitewater and scored some
is dig into politics," Kerry said.
the call. Kendall wanted to
political points.
know if the FDIC had Issued a
appear we're making any
But at the two-day summit
"We're not talking about where
that concludes today, Brown
warned that "no government
program can solve this prob-
lem alone." He said the VA
should funnel more money
and responsibility to local
governments and vets-help-
For the VA to solicit pri-
vate groups' help to solve the
problem "is a phenomenal
breakthrough," said Richard
Fitzpatrick, executive direc-
tor of the National Coalition
for Homeless Veterans. "It's a
An estimated one in three
homeless U.S. men is a veter-
Led by a loud and aggressive
the $150 billion went."
statement responding to a Chi-
Sen. Alfonse D'Amato, R-N.Y.,
The Whitewater controversy
cago Tribune article on Hillary
the Republicans won an agree-
involves a wide range of ques-
Clinton's role representing the
ing-vets programs.
ment by savings and loan regu-
tion centering on a vacation
government in a suit against a
major first step."
lators to have two more gov-
property called Whitewater.
By John Duricka, AP
Clinton family friend. Whitney
ernment watchdogs look into
President Clinton and his
CITES 'COVER-UP': Sen. Alfonse D'Amato, R-N.Y., left, ques-
said the call lasted just seconds.
progress."
aspects of Whitewater.
wife, Hillary, were partners in
tions a witness Thursday. At right is Sen. Don Riegle, D-Mich.
The RTC and FDIC
In addition, the regulators
the property with James
agreed to have their inspec-
acknowledged they had recent-
McDougal, owner of the failed
acknowledged he met three
Nussbaum, White House depu-
tors-general probe whether
ly discussed Whitewater with
Madison Guaranty Savings.
weeks ago with top White
ty chief of staff Harold Ickes
Hillary Clinton and Justice De-
top White House officials, al-
Special prosecutor Robert
House officials to discuss the
and Hillary Clinton's chief of
partment official Web Hubbell
though the contacts appear to
Fiske is investigating if the
RTC probe of Madison.
staff, Margaret Williams. "I de-
broke conflict of interest rules.
be minor and not improper.
Clintons did anything wrong.
The RTC is the agency that
scribe it as a heads-up and a
Hillary Clinton and Hubbell
By Patricia Edmonds
USA TODAY
WASHINGTON - At an
unprecedented federal "sum-
mit meeting" on homeless
veterans, top Clinton adminis-
tration officials said govern-
ment must do more for the
estimated 250,000 veterans
homeless on any given night.
"We've used that number
of 250,000 for five or ten
years, and the VA's been
spending maybe $50 million a
year and I have to ask my-
self, what are we doing?" said
Veterans Affairs Secretary
Jesse Brown. who convened
the summit of about 700 vet-
erans' advocates. "It doesn't
"We're talking about a cov-
At the Senate hearing:
handles failed S&Ls.
very stiff conversation," said
were partners in the Rose law
er-up," D'Amato replied.
Resolution Trust Corp. act-
Altman said he met with
Altman, who is also deputy
firm, which represented both
The Whitewater fight came
ing chairman Robert Altman
White House Counsel Bernard
Treasury secretary.
Madison and S&L regulators.
THE WASHINGTON POST
FRIDAY, FEBRUARY 25, 1994 A9
Agencies Accused of 'Whitewash' on Whitewater
The FDIC lawyers also decided they would have pre-
ferred to know that Rose's lead attorney on the case-
Webster L. Hubbell, now associate attorney general-had
relatives involved in litigation with the government over
By Susan Schmidt
proceed on potential civil claims arising out of the Mad-
Present at yesterday's session, nominally an oversight
hundreds of thousands of dollars in Madison loans and
Washington Post Staff Writer
ison's failure, which cost taxpayers an estimated $60
hearing on the RTC, were the five top-level officials on a
commissions. But, they said, under their relatively lax
million. Clinton and his wife were joint owners of the
board that oversees the agency. In addition to Altman and
1989 rules, Hubbell's actions did not constitute a conflict.
In a sometimes heated debate over the Whitewater in-
Whitewater real estate venture with Madison owner
Hove, they included Treasury Secretary Lloyd Bentsen
"This is the most incredible whitewash," D'Amato told
vestigation, Senate Republicans yesterday questioned top
James McDougal, and the Rose Law Firm, where Hil-
and Federal Reserve Chairman Alan Greenspan.
Hove. "I mean, are you serious?"
officials of two federal banking agencies whether they are
lary Clinton was a partner, representing the S&L in the
Republicans used the session to turn a harsh light on
The RTC has prepared a separate report on the con-
allowing partisan politics to interfere with the inquiry.
mid-1980s.
the Whitewater inquiry and complain about the Democrat-
flicts question that was released by D'Amato. It found the
In a hearing before the Banking Committee, Sen. Al-
Altman said that in a meeting with Nussbaum, Hillary
ic majority's refusal to hold hearings on the issue. Dem-
Rose firm failed to disclose potential conflicts of interest,
fonse M. D'Amato (N.Y.), the panel's ranking Republican,
Clinton's chief of staff Margaret Williams and health care
ocrats, led by Sen. John F. Kerry (Mass.), argued Repub-
and the study has been sent to the RTC general counsel
lambasted the Federal Deposit Insurance Corp. chairman
advisor Harold Ickes, he outlined various courses the RTC
licans were engaged in "very partisan singling out of one
for review.
for his agency's recent report clearing the Rose Law Firm
could take as it approached a Feb. 28 deadline for filing
institution."
The FDIC report said there was not a conflict because
of conflicts of interest, calling it "an incredible white-
civil claims against Madison officers, directors and law-
They maintained Congress does not need to hold hear-
Rose lawyers imposed an internal "fire wall" to keep Mad-
wash." The Rose firm, whose former partners included
yers. Since then, Congress has extended the deadline to
ings because Whitewater and Madison are subjects of an
ison information from Hubbell about his father-in-law,
Hillary Rodham Clinton, represented the failed Madison
the end of 1995.
extensive investigation by Robert B. Fiske Jr., the special
Seth Ward. "That's an Arkansas fire wall," said Sen. Lauch
Guaranty Savings & Loan before state regulators when
Altman said he told the White House aides the RTC
counsel appointed by Attorney General Janet Reno.
Faircloth (R-N.C.) "You could strike a match behind it,
Bill Clinton was governor of Arkansas. Acting FDIC
would have to decide whether there was a basis to bring
Much of the hearing was devoted to discussion of a re-
hear the scratch, see the glow and feel the heat."
Chairman Andrew C. Hove Jr. agreed to have his inspec-
civil claims and, if so, whether to file suit immediately or
port on the Rose Law Firm released last week by the
Hove reluctantly agreed to seek an inspector general's
tor general investigate the origins of the report.
seek a voluntary extension of the deadline from possible
FDIC's legal division, which examined whether Rose law-
investigation of the report and the handling of another
defendants.
Republicans also sharply questioned Deputy Treas-
yers properly disclosed involvement with Madison when
case involving Hillary Clinton. In that case, also an S&L
"It was solely to be sure that [Nussbaum] understood
ury Secretary Roger C. Altman, the appointed acting
they were hired by the government in 1989 to press a.
matter, she signed court documents on behalf of her part-
the legal and procedural framework," Altman told the
lawsuit against Madison's former accountants.
chief of the Resolution Trust Corp., on his meeting
ner and the lead attorney on the case, former deputy
committee. He said he felt a briefing was justified because
The FDIC legal division, which originally hired the firm,
White House counsel Vincent Foster, a leading Rose at-
three weeks ago with White House counsel Bernard
he had been giving such information to inquiring members
found there was no conflict of interest. It reached that
torney. The case was against Dan Lasater, a Clinton
Nussbaum and other Clinton aides to brief them on the
of Congress.
conclusion despite evidence the firm never disclosed it
friend and supporter.
RTC's procedures should it decide to file civil claims in
D'Amato, who praised some aspects of the RTC's Mad-
represented Madison before state regulators, and had
Hillary Clinton signed an amended complaint that re-
the Whitewater investigation.
ison investigation yesterday, had urged Altman to recuse
cited the accountant's audit work in seeking certain re-
duced damages sought by the government from $3.3 mil-
Altman said he initiated the meeting to give the
himself from the Whitewater probe because it involves
gulatory approvals. Hillary Clinton was one of the attor-
lion to $1.3 million. She was not involved in the final
White House a "heads up" on how the agency would
the president, who named Altman to his job.
neys representing Madison.
$200,000 settlement, according to the FDIC.