Whitewater -- The Conspiracy of Silence

8/3/2019 Whitewater -- The Conspiracy of Silence

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Subject: SNET: [Fwd: WHITEW A TER: THE CONSPIRACY OF SILENCE]Date: Man, 18 Aug 199720:54:21 -0700From: Samuel Branfman Reply-To: [email protected]: [email protected]:

SearchNet's SNETNEWS Mailing ListPath: news.alt.net!news1.alt.net!su-news-hub1.bbnplanet.com!cpk-news-hub1.bbnplanet.From: [email protected]: alt.current-events.clinton.whitewater,alt.politics.clintonSubject: WHITEWATER: THE CONSPIRACY OF SILENCEDate: Mon, 18 Aug 1997 16:49:07 GMTOrganization: A~ USENET --http://www.Supernews.comMessage-ID: NNTP-Posting-Host:.156.46.122.239X-Newsreader: News Xpress 2.01X ref: news.alt.net alt.current-events.clinton.whitewater:194170 alt.politics.clinton

http://citizensunited.org/cu/ww/monograph/WHITEWATER: THE CONSPIRACY OF SILENCEA Citizens United Monograph

THE EARLY YEARS

The seeds of the Whitewater scandal were planted in the late 19705. InAugust 1978, Bill clinton, who was then Arkansas attorney general, andhis wife, Hillary Rodham, joined James McDougal and his wife, Susan, inpurchasing a 230+ acre tractof land located south of Crooked Creek andwest of the Whi4e River in Marion County, Arkansas.1 Jim McDougal andBill Clinton were long-time friends, having met when they workedtogether on Senator J. William Fulbright's (D-AR) staff in Washington,D.C. in the late 19605.2NO MONEY DOWN

The Clintons and McDougals purchased the Whitewater tract from 101River Development, Inc. for $202,611.20. The purchase was financed by a$186,611.20 mortgage through the Citizens Bank & Trust Company.3 Thebank's president, James Patterson, Jr., was also corporate secretary of101 River Development, Inc.4 The mortgage suggests the Clintons andMcDougals made a $20,000 down payment on the property. However, re~ordsindicate the down payment was financed by a $20,000 unsecured loan fromUnion National Bank of Little Rock which was personally signed for byBill Clinton and Jim McDougal.5In November 1978, Bill Clinton was elected to his first term asgovernor of Arkansas. Shortly after taking office, Clinton made JimMcDougal his top economic advisor.6

$48,000 PAPER PROFITIn June 1979, the Clintons and McDougals formed the WhitewaterDevelopment Company, Inc. (WDC) .7 The primary objective of WDC was"[t]o engage in the business of owning, selling, developing, managingand improving real property. "8 On September 30, 1979, the two couplessold their interests in the Whitewater land tr.act to their newly formedWDC.9 While the exact selling price has not been made public, real

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estate transfer tax payments suggest the price was in the neighborhoodof $250,000.10 This would indicate a capital gain of about $48,000 forthe Clintons and McDougals. However the gain appears to have been morea paper profit than a realized cash gain, as there are no publiclyavailable records indicating a cash transfer from WDC to the Clintonsand McDougals at the time of the property sale. In addition, theClintons and McDougals remained personally obligated for the mortgageon the tract.19805: DECADE OF GREED IN ARKANSAS

Although Bill Clinton was Arkansas' leading political figure throughoutthe 19805, his political career received a serious jolt when he losthis campaign for re-election during the Reagan landslide of 1980. Aswas the case with many Democrats, liberalism and high taxes were majorfactors in Clinton's humiliating defeat at the polls. After leavingoffice, Clinton joined the Little Rock law firm of Wright, Lindsey &Jennings where he practiced law and planned his political comeback.11With Bill Clinton out of office, Jim McDougal left state government togo into the banking business. He purchased Madison Bank & Trust ofKingston, Arkansas, which he later renamed Madison Bank & Trust.12UNUSUAL LAND TRANSACTIONS1980 also saw a series of unusual transactions involving the Clintonand McDougal-owned Whitewater Development Company.

October 14, Whitewater lot #7, which was described as "its bestof land," was sold to Chris V Wade &Associiites (a.k.a. OzarksCo.) for approximately $2,000. The next day, Chris V Wade &resold the lot for approximately $35,000,13 a profit of1,650 percent in just 24 hours.Adding to the intrigue of this series of transactions is Chris Wade'srelationship with the Clintons and McDougals. Wade was the real estateagent who represented the two couples in their Whitewater venture.14Moreover he has publicly disputed the Clintons' claim that they lostmoney on their Whitewater investment.15Another extraordinary transaction involved Hillary Clinton, then knownas Hillary Rodham. On December 16, McDougal's Bank of Kingston loanedHillary $30,000 to build what was called a "model home" on WDC lot#13.16 On December 28,lot # 13 was transferred from WDC to HillaryRodham.17 The next day, $30,000 was deposited in the WDC account at theBank of Kingston.18 While a home was eventually built on lot #13, itapparently was not a "model home." On November 10,1981, Hillary Rodhamsold lot #13 and the home to Mr. Hillman Logan for $27,500.19 It isu~clear from publicly available documents whether Hillary suffered anactual loss on this series of transactions or whether her paper losswas somehow covered by WDC. It is known that as late as January 8,1982, WDC made a $6,361.65 interest payment on Hillary's loan toMadison Bank & Trust (the Bank of Kingston having been renamed by JimMcDougal) .20 Hillary was receiving reimbursement for 1983 property taxpayments on the lots as late as November 1984.21 Additionally, bankrecords indicate that the $30,000 model home mortgage was not fullypaid off until October 19, 1983, almost two years after Hillary soldthelot.22 The mortgage pay-off was apparently made possible by a$20,800 personal loan to Bill Clinton from the Security Bank ofParagould. The check was made payable to Madison Bank & Trust and notedas "loan proceeds for Gov. BillClinton."23

JIM MCDOUGAL BUYS THE PIGG YBANK


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Hillary was not the only member of the Clinton household to receivecredit from McDougal's bank. On February 20, 1982 ,Bill Clinton wrote apersonal check for $20,744.65 to Madison Bank & Trust. A notation inthe lower left-hand comer of the check reads, "Re-payment of loan."24The Lyons report, issued by Bill Clinton's 1992 presidential campaignfor damage control, apparently included this loan as part of theClintons' Whitewater investment. It accounted for a large portion ofthe nearly $70,000 loss the Clintons were claiming. But during hisMarch 25, 1994 news conference, President Clinton said he now recallsthat the loan was actually for a cabin built for his late mother.25 Itis hard to imagine that someone who had been earning about $35,000before taxes would not remember making a $20,800 loan to his mother. Inany case, this particular loan had nothing to do with Whitewater andshould not have been listed as part of the Clintons' capitalinvestment.1982 was also the year Jim McDougal purchased Madison Guaranty Savings& Loan (Madison S&L), which should not be confused with the McDougal-owned Madison Bank & Trust.26 At the time, Madison S&L hadapproximately $6 million in liabilities. By 1985, however Madison S&Lliabilities had grown to more than $123 million, due largely tospeculative real estate loans.27 The S&L was shut down by federalregulators in 1989 at a cost to taxpayers of approximately $60million.28

CLINTON STAGES POLITICAL COMEBACKIn November 1982, Bill Clinton made his political comeback by winningthe governorship by a 55-45 percent margin, becoming the first Arkansasgovernor to regain the office after losing it in a prior election. ButJim McDougal was not so lucky. He lost his bid to win a seat inCongress to long-time GOP incumbent John Paul Harnrnerschmitt.By 1983, Capital Management Services, Inc. (CMS), a federally insuredsmall business investment company owned by judge David Hale, had begunmaking sizable loans to members of the Arkansas political elite andtheir friends. On September 16, a $50,000 loan was made to CountyCable, Inc., a company owned and operated by Jim Guy Tucker.29 OnNovember 30, an additional $50,000 CMS loan was issued to CountyCable.30The problem with these seemingly innocent loans is that CapitalManagement Services was licensed by the Small Business Administration(SBA). As such, it was limited to lending to businesses that weresocially or economically disadvantaged. A man of considerable personalwealth, Jim Guy Tucker was hardly qualified to receive these loans.Tucker is currently governor of Arkansas, having moved up from theposition of lieutenant governor following Bill Clinton's election tothe presidency. At the time of the CMS loans, Tucker was a partner inthe law firm of Mitchell, Williams, Selig, Jackson & Tucker,31 a lawfirm that also served as legal counsel to Madison S&L. The attorney whoperformed the bulk of the fires legal work for Madison was none otherthan Beverly Bassett Schaffer, whom Gov. Clinton would later appoint ashead of the Arkansas Securities Commission.32 In addition to the CMSloans, Tucker also secured business loans from Madison S&L.33

S&L, DEPOSITORS COVER WHITEWATER OVERDRAFTSBy 1984, WDC had begun running negative balances in its checkingaccounts at both Madison Bank & Trust and Madison S&L. According to

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Congressman Jim Leach (R-IA), ranking Republican on the House BankingCommittee, these overdrafts often resulted from payments on loans forwhich Bill and Hillary Clinton were personally liable.34 For example,on October 4, 1984, WDC made a $4,811.19 payment on a personal loan ofBill Clinton's from the Security Bank ofParagould.35 This was theunsecured personal loan used to payoff the balance on the Whitewaterlot # 13 mortgage for which Hillary Clinton was personally liable.Documents indicate that $2,811.19 of this payment was for interest,which the Lyons report concludes the Clintons inadvertently deductedfrom their personal taxes.36 Check stubs from the WDC account indicatethe payment resulted in an overdraft of more than $2,900.37 On November11, 1985, WDC made a$7,322.42 payment on a Bill Clinton loan fromSecurity Bank of Paragould. However this payment was drawn on WDC'saccount at Madison S&L, resulting in a $7,309.93 overdraft in theaccount. 38 The check was covered the following day bya $7,500 depositfrom Madison Marketing.39On paper, Madison Marketing was owned and operated by Susan McDougal.But in reality it appears that it was an arm of Madison S&L and itssubsidiary, Madison Financial Corporation.Like her husband, Susan McDougal served on the Madison S&L Board ofDirectors. In fact, Susan served as the S&L corporate secretary andtreasurer. 40 According to a 1986 report of the Federal Home Loan BankBoard (FHLBB),Madison Marketing was set up for the sole purpose ofhandling advertising for Madison S&L and Madison Financial Corporation,Madison Marketing's only clients.41 Beginning in 1983, more than $1.5million was funnelled through the S&L and its subsidiary.42Approximately $200,000 of this amount was for the so called services ofMadison Marketing, which, according to the FHLBB report, amounted tolittle more than adding its 15% fee to the bills of various advertisingvenders and passing them along to Madison S&L.43 Additionally, Rep.Leach says records on file with the Arkansas secretary of stateindicate that on July 26, 1986, Madison Financial Corporation filed anapplication for registration to do business under the name "MadisonMarketing." Rep. Leach contends it is likely that this filing wasprompted by the FHLBB report which cited Madison Financial Corporationfor having failed to register as doing business under a fictitiousname. 44 According to Rep. Leach, this interwoven relationship betweenMadison Marketing, Madison Financial Corporation, and Madison S&Lprovides an illustrative example of how Madison S&L depositor fundswere used to cover WDC overdrafts resulting from WDC's payments onloans for which the Clintons were personally liable.45

FEDERAL REGULATORS EYE MADISON S&LAs mentioned above, federal regulators issued their first report onJanuary 20, 1984, raising serious questions about the financialstability of Madison S&L. The FHLBB report concluded that:

The viability of the institution is jeopardized through theinstitution's current investment and lending practices in real estatedevelopment projects. There is a concentration of assets and loans inland and development type properties. Prudent investment practices havenot been utilized in development projects and poor loan underwriting ischaracteristic of loans originated. These long-term investments andloans have been funded with short-term brokered deposits.Substantial profits from the service corporation on the sale of realestate owned have been improperly recognized. Such profits wererecognized as a result of contract sales and submarket interest rates.Correcting entries will adversely affect the net worth and result inan insolvent position.46


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The report was especially critical of the S&L's management and itsBoard of Directors, citing its "limited savings and loan industrybackground. "47 The report pointed out that no one in the S&L topmanagement had any S&L experience prior to joining Madison. Federalauditors warned that the operations and activities of the S&L "warrantclose supervisoryattention."48HILLARY TO THEIRESCUE

Jim McDougal's ~ eaction to the FHLBB report was to seek help from hisfriends in high places. Hillary Rodham of the powerful Rose Law Firmwas eventually laced on a $2,000 per month retainer by Madison S&L.According to Mc ougal, this financial arrangement was made through Gov,Clinton, who st pped by the S&L during his morning jog through LittleRock. Hillary's :principal role was to deal with the state securitiescommission, whidh, by then, was scrutinizing the S&L finances.49There is anothe ~ side to this transaction. According to publishedreports, McDoug 1 claims that he put Hillary on retainer solely toaugment the Cli tons' financial situation: "I asked him how much heneeded, and Cli ton said 'about $2,000 a month'... I hired Hillarybecause Bil l ca e in whimpering they needed help. "50Meanwhile, Gov. Clinton needed an infusion of cash to finance his re-election campai n. Instead of turning to Madison S&L, which, at thetime, was under oing intense scrutiny, Clinton turned to his seniorcampaign aide, aurice Smith, who owned the Bank of Cherry Valley.Smith's bank 10 ned Clinton $50,000.51 In November 1984, Gov. Clintonwas easily re-e ected with 64% of the vote.In addition to he campaign loan, the Bank of Cherry Valley apparentlyloaned money to help underwrite the Clintons' and McDougals' Whitewaterinvestment. On ecember 4, WDC made a $3,276-18 loan payment to theBank of Cherry alley. WDC check stubs indicate the payment resulted ina $9,162.53 ove draft in the company's Madison Bank & Trust checkingaccount. 52

FRIENDS IN HIG~ PLACESOn January 16, ~985, while the Arkansas State Securities Commission wasinvestigating M~dison S&L, Gov. Clinton appointed his close friendBeverly Bassett ,Schaffer to serve as Arkansas State SecuritiesCommissioner. 53 !Ms. Schaffer had served as legal counsel for MadisonS&L when she wo~ked at the law firm of Mitchell, Williams, Selig,Jackson &Tucker.! McDougal claims that he recommended to Gov. Clintonthat Schaffer be appointed to this position.54On March 1, Mad'son S&L's accounting firm, Frost & Company, issued areport claiming the S&L was. actually solvent. The Frost report claimedthat as of Dece er 31, 1984, Madison had assets of $48,961,154 andliabilities of$48,818,206. The S&L was reported to have a net worth of$142,948.55 The Frost report was a major tool used by Hillary Clintonin persuading B verly Bassett Schaffer and the State SecuritiesCommission to a]low Madison S&L to remainopen.56 Coincidentally,Frost's chief a~ditor on the Madison project, James Alford, had twooutstanding loaqs at Madison at the time.Soon after the ~ rost report was issued, Gov. Clinton appointed MadisonS&L CEO, John L tham, to the state's Savingsand Loan Board.57 Theappointment fol owed a strong recommendation from Jim McDougal, whoreferred to Mr. Lathamas "a major contributor to your campaign."58 In1989, Latham pl aded guilty to falsifying Madison's records.59


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In 1985, Hillar Clinton and the Rose Law Firm were officially broughtin to represent Madison S&L with its proposal for a public stockoffering. 60 On pril 30, Hillary presented the S&L's recapitalizationproposal to Ms. Schaffer.61 Despite warnings of the S&L's impendingfailure from a tate Securities Commission member, on May 14 Ms.Schaffer inform d Hillary Clinton that the plan was approved, havingaccepted the Ro e Law Firm's legal analysis of the proposal.62 Howeverthe public stoc offering was never implemented.On April 3, JimlMcDougal withdrew approximately $30,000 from the WDCaccount at Madi~on S&L, calling it a "loan repayment." The withdrawalcaused a $28,00q overdraft in the WDC account.63 On April 17, Madison'sreal estate sub i idiary, Madison Financial Corporation, covered thedeficit by auth rizing the deposit of Jim McDougal's $30,000"annualbonus" to the W C account.64

MADISON DEPOS~TORS BAIL OUT CLINTON CAMPAIGNOn the day afte his withdrawal of $30,000 from WDC's account atMadison S&L, Mc ougal hosted a fund-raising event which raisedapproximately $ 0,000 to help Bill Clinton repay the balance on his1984 campaign 1 an from the Bank of Cherry Valley. 65 At least one ofthe reported co tributors to this fund-raiser denies having made thecontribution th t bears his name. According to Clinton campaignrecords, Rennet Peacock, then a 24-year-old college student, wascredited with a $3,000 contribution made in the form of a Madison S&Lcashier's check. 66 Mr. Peacock denies having made thiscontribution.67However, Mr. Pe cock's father Charles Peacock, who was a major borrowerat Madison S&L nd at onetime served on the S&L's Board of Directors,claims to have ade the loan in his son's name.68 Other contributionsthat have come nder scrutiny include a $3,000 contribution attributedto the late Dea Landrum, who was an employee of Charles Peacock, and a$3,000 contribu ion attributed to Jim McDougal's wife, Susan.69 TheWashington Post reported that the Resolution Trust Corporation (RTC)believes as muc as $60,000 in Madison S&L depositor funds was dive~tedto the 1984 Cli ton campaign.70On May 30, 1985lWhitewater's tangled web became even more complicated.WDC traded two ~ozen lots to Ozark Air Services, Inc. for an airplanepurportedly val ed at $35,000.71 It was actually Chris Wade who gainedpossession of t e lots and Jim McDougal who gained possession of theairplane. "I ha an airplane and no money, and they had the lots,"recalled Wade i a subsequent interview.72 McDougal eventually sold theairplane to a L'ttle Rock flying service. The following day, the flyingservice sold th plane to one of McDougal's employees, who reportedlyfinanced the pu chase through MadisonS&L.73 Citizens United has beenadvised that th McDougal employee who purchased the aircraft was SethWard. Mr. Ward's the father-in-law of former Associate AttorneyGeneral Webster Hubbell, who resigned facing damaging disclosuresrelated to his illing practices at the Rose Law Firm. Ward was also amember of the Bard of Directors of Madison Financial Corporation atthe time that H bbell, as a partner at the Rose Law Firm, representedthe RTC in reco ering depositor funds following the collapse of MadisonS&L.74

A NEW PIGGY ~K COMES INTO PLAYThe airplane sa ~ e was not the only possible sweetheart deal involvingSeth Ward or We ster Hubbell in 1985. Their Park-Q-Meter company (PQM)received a $2,750,000 loan through the newly-created ArkansasDevelopment and Finance Authority (ADFA) .75 ADFA was set up by Gov.Clinton as a bo d agency to generate funds for small business loans to

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create new jObS ~within the state of Arkansas.76 As one of the largestparking meter c mpanies in the nation, POM was clearly not a smallbusiness. ADFA ave many other such loans to business enterprises ofthe Clintons' f iends and associates, including Rose Law Firm attorneysand their famil'es.More than $2 mi ~ liOn in ADFA loans also went to Pine Bluff Warehouse,whose chairman as the father of former Rose ~aw Fir~ partner WilliamH. Kennedy III, who currently serves as Assoc1ate Wh1te HouseCounsel.77 Addi ionally, Rose Law Firm attorneys provided a largeportion of the egal work on many ADFA public bond offerings.78

JUDGE HALE TO ITHE RESCUEDavid Hale's ca , ital Management Services was similarly handing outtaxpayer-funded loans to business ventures associated with BillClinton's inner circle of friends and political allies.Judge Hale says ~ that he was first approached about helping the Clintonswith a loan in he latter part of 1985.79 Hale says Clinton laterrequested that MS loan money to Susan McDougal to help clean upMadison S&L's b oks prior to the scheduled visit from federalauditors. 80 iOn April 3, 198 ~ ' Judge Hale came through. CMS made a $300,000 SBA loanto Susan McDoug 1 and her newest business venture, Master Marketing,81which, accordin to a "Confidential Data" report, was a real estatebrokerage and 1 nd development firm.82 Mrs. McDougal received the SBAloan, which, as in the case of Jim Guy Tucker and County Cable, shouldhave been reser 1 ed for economically or socially disadvantagedbusinesses. Thr e months before applying for the loan, the McDougalsestimated their assets at over $3 million.83The funds were upposed to have been used for various real estatedevelopment projects, none of which were related to WDC or Madison S&Lfinancial probl ms.84 In fact, a large portion of the loans proceedswere used as a own payment by WDC to purchase a parcel of land fromthe Internation 1 Paper Company.85 WDC ultimately defaulted on thistransaction and International Paper repossessed the property.86 The$300,000 taxpay~r-guaranteed CMS loan was neverrepaid.87Meanwhile, the inancial problems of Jim McDougal and Madison S&Lcontinued to es alate. On March 4, 1986, the FHLBB issued a secondhighly critical report on the S&L's financial status. The reportaccused Mr. McD ugal of "divert [ing] substantial amounts of funds [fromprojects underw itten wit Madison S&L loans] to himself and others, whoare considered o be insiders {relatives of Mr. McDougal employees,relatives of em loyees and friends) ."88 In August, federal regulatorsissued a cease nd desist order directing the S&L to comply withfederal savings and loan regulations.89 Under pressure from federalregulators, Jim !McDougal was eventually removed from the S&L's Board ofDirectors. 90In November 198 ~ , Bill Clinton was elected to fourth term as governor.He would not ha e to see re-election again until1990, as the governor'sterm had been e tended from two years to four years.91

GIVE ME THOSE IRECORDS NOW!While 1987 was ~ relatively quiet year, there was at least onesignificant Whi 1 ewater-related development. According to Jim McDougal,at some point d ring the year Hillary Clinton demanded and was givenall WDC records. The McDougals say that the records were turned over to

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Hillary at the ~ overnor's mansion in Little Rock.92 But when theWhitewater stor first broke during the 1992 presidential campaign, theClintons claime they did not have any files. Yet, as The WashingtonPost reported, q few weeks later "Clinton aides had assembled enoughdocumentation t~ prepare a 'forensic accounting' of the venture anddeclare it a motiey-loser for the candidate and his wife."93Despite the fac 1 that Jim McDougal had been removed from the MadisonS&L Board of Di ectors, he and his wife were still the majoritystockholders in the S&L. However, on June 1, 1988 they signed a proxyfor the annual ~adison S&L stockholders meeting, giving their votes toDavid Hale's CMci.94 There is yet to be a public explanation for this

t O Iac J-on. i

On September 14, Bill and Hillary Clinton regained ownership ofWhitewater lot 13 from the bankruptcy trustee representing the estateof Hillman Loga .95 On October 31 they sold the lot to a couple that isin no way impli ated in the Whitewater scandal. 96 According to The NewYork Times, the Clintons paid the bankruptcy trustee approximately$8,000for the 1 t. But when they resold it six weeks later, theyreceived about 23,000 after deducting closing costs.97 Even assumingHillary Clinton lost $2,500 on her initial sale of the lot in 1981,publicly availa le documents indicate the Clinton household netted acapital gain of over $ 10,000 on all of their lot #13 transactions.The series of urlusual dealings surrounding lot #13 is one of the manymatters that ne~ds to be further investigated. These transactions notonly raise ques ~ ions as to the truthfulness of the Clintons' claim thatthey lost money on their Whitewater investment, but they also appear toundermine the c uple's assertion that they were merely passiveinvestors in WD.In late NOVembe~ , Hillary Clinton wrote to Jim and Susan McDougalrequesting that they grant her power of attorney for all mattersdealing with WD .98 There is no record of the McDougals having compliedwith this reque t. All the same, like the lot #13 transactions, thisrequest seems c~rious in light of the Clintons' assertion that theywere passive in~estors in the company.!On December 7, ~MS filed suit against Susan McDougal and her MasterMarketing compa y to recover its $300,OOOdefaulted loan. On February 6,1989 the court ntered judgment against Mrs. McDougal and hercompany. 99 Judg Hale says none of the loan proceeds were everrecovered. 100

FEDS SHUT DOWN THE PIGGYBANKIn March 1989 M~dison S&L was taken over by federal regulators andeventually shut 1 down.101 Later in the year, Jim McDougal was indictedon federal frau charges, but he was ultimately acquitted at trial. Asstated earlier, the S&L failure cost taxpayers an estimated $60million.Also in 1989, Rqse Law Firm attorneys Vince Foster and Webster Hubbellsought and obta ~ ned an FDIC contract to help recover lost depositorfunds that resu ted from failed Arkansas S&Ls. Their efforts earned thefirm over $400, 00.102Among the cases ~;handled by the Rose Law Firm was the government's $10million suit ag inst Madison S&L accounting firm, Frost & Co. Rosesettled the cas for less than $1 million.103Rose Law Firm a~torney Hillary Clinton had represented Madison S&L, and

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practices of CMS.112 Within hours of the warrant's signing, DeputyWhite House Counsel Vince Foster was found dead of an apparent suicidein Fort Marcy Park, just outside Washington, D.C.113 That evening,White House aides Patsy Thomasson and Margaret Williams, led by thenWhite House Counsel Bernard Nussbaum, secretly searched Foster's officeand removed key documents.114When u.s. Park Police and FBI agents initially sought to enter Foster'soffice as part of their investigation into his death, they wereprevented from doing so by Nussbaum.115 It was July 22, two days afterFoster's death, before law enforcement officials were allowed to enterFoster's office, and then only while escorted by Nussbaum and a Fosterfamily lawyer. At the time of the search, Nussbaum failed to disclosethat he had already entered the office and removed documents.116was buried in Hope, Arkansas on July 23. Nussbaum claims to have foundscraps of a possible suicide note while going through Foster's personalbelongings on July 26, six days after Foster's death. The note waswithheld from investigators for another two days.117 On August 10, thejustice Department concluded that Foster's death was a suicide.118

A FULL-FLEDGED SCANDAL

Throughout the month of September 1993, Judge Hale's attorney tried invain to negotiate a deal with federal prosecutors in which his clientwould assist the government in unraveling the facts of the Whitewaterscandal. 119 But Little Rock's newly appointed U.S. Attorney, PaulaCasey, who had studied law under Bill Clinton and had volunteered innumerous Clinton gubernatorial campaigns, refused all offers.120 Ms.Casey eventually recused herself from Judge Hale's prosecution, butonly after publicly indicting him and destroying his value as aprosecution asset. 121On November 9, all Republican members of the House Banking Committeesigned a letter to Committee Chairman Henry Gonzalez (D-TX) requestingCongressional hearings into the failure of Madison S&-L.122 Gonzalezrefused to call hearings. Instead, he designated limited staff tocollect information about the S&L.123On December 6, it was reported that Vince Foster received twopotentially important phone calls on the morning of his death. One callwas from Denver lawyer James Lyons, the author of the 1992 reportclaiming the Clintons lost nearly$70,OOO on their Whitewaterinvestment. 124 These second phone call was from Brantley Buck, a lawyerat the Rose Law Firm charged with investigating the billing practicesof Webster Hubbell.125It was not until December 21 that the White House publicly acknowledgedthat Whitewater-related documents had been removed from Vince Foster'soffice by White House staff.126 Two days later Clinton lawyer DavidKendall requested that the justice Department formally subpoena thesedocuments. 127 Under a subpoena, the documents became exempt from publicrelease under the Freedom of Information Act and thus were not subjectto media and public scrutiny.128On January 2, 1994,White House aide George Stephanopoulos announcedthat all Whitewater files had been turned over to the JusticeDepartment. The next day the White House was forced to retract thisstatement. 129 Three days later, it was revealed that the JusticeDepartment, pursuant to attorney Kendall's request, had previouslyissued a secret subpoena for the Whitewater-related documents. 130The unfolding of these increasingly suspicious events led the media and

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Congressional Republicans to call for the appointment of a specialprosecutor to investigate Whitewater. On January 12, President Clintonacceded to public pressure and asked Attorney General Janet Reno toname a special prosecutor.131 Eight days later, Ms. Reno named New Yorkattorney Robert B. Fiske, Jr. to the post.132Two days before Mr. Fiske took over the investigation, a federal grandjury issued a subpoena to Arkansas Governor Jim Guy Tucker seeking awide range of records on President Clinton and others implicated in thescandal. 133

THE SHREDDING BEGINSAnother bombshell hit in early March when it was revealed that acollege student employed by the Rose Law Finn had been instructed toshred a box of documents bearing the initials of the late VinceFoster. 134 According to news reports of the employee's grand jurytestimony, the shredding occurred around the time of Fiske'sappointment as special prosecutor.135Later, when asked to pinpoint thetime the shredding was done, the employee said it had taken place justafter Fiske's appointment and after Fiske had announced that he wouldbe investigating Vince Foster's death.136Just a few days later, The Washington Times reported that during the1992 presidential campaign, Hillary Clinton ordered Rose Law Firmemployees to shred papers that she was holding at the governor'smansion. Reportedly, the shredding began in March, soon after The NewYork Times broke the Whitewater story, and continued through theNovember election.1370nce again, there was a denial of any wrongdoing.The shredding is alleged to have begun at the very time McDougal sayshe gave Hillary Clinton all of his WDC records, which the Clintonsdeny.The mystery of the documents deepened when The Washington Timesreported on April 13, 1994 that former Clinton campaign workers statedthat the campaign gathered documentation detailing hundreds ofthousands of dollars in cash flow between Madison and Whitewater. Thecampaign workers stated that these documents were collected and thenhidden away. Again, the Clinton campaign had sprung into actionimmediately following the March 8, 1992 Whitewater piece in The NewYork Times.138Since the appointment of the special prosecutor, several key playershave resigned from their posts in the administration, and new detailscome to light on an almost daily basis.On March 5, 1994 White House Counsel Bernard Nussbaum resigned onlyhours after he and several other top White House aides receivedsubpoenas from a federal grand jury. The subpoenas followed revelationsthat these officials had held improper back-room meetings with federalWhitewater investigators.139 Less than two weeks later, AssociateAttorney General Webster Hubbell resigned following damagingdisclosures concerning his Rose Law Firm billing practices. 140On March 24, President Clinton held a press conference in which heannounced that he would release his tax returns from1977 and 1978.141Pressure to release this information had been growing since thepublication of a March 18 article by Jeff Gerth in The New York Times.In this piece, Gerth first broke the news of Hillary Clinton'sinvolvement in commodities trading which netted her almost $100,000 inless than one year.142 Citizens United investigators and legal expertsare currently reviewing these tax returns.

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Other key documents, however, remain unreleased. For example, on April1, the National Park Service, on behalf of the U.S. Park Police, denieda Freedom of Information Act request for documents relating to VinceFoster's death, citing concerns of the special prosecutor.143 To date,the information has not been released.CRIMES MAY HAVE BEEN COMMITTED

Throughout this developing scandal, President and Mrs. Clinton haverepeatedly asserted that there are neither allegations nor evidence ofcriminal wrongdoing on their part. This claim is absolutely false.Citizens United has released a report detailing 47 federal and statecriminal statutes that the Clintons may have broken. These possiblecrimes include but are not limited to: bank fraud;144 theft or briberyconcerning programs receiving federal funds;145 aiding or abetting inthe embezzlement of bank funds;146 corruption in public office;147willful violations of state campaign financing laws;148 violations offederal income tax code including tax evasion;149 violations ofArkansas income tax statutes;150 obstruction ofjustice; 151conspiracy;152 and racketeering.153

1 Warranty Deed recorded in Marion Co., Ark., 3 August 1978, Book 241,p. 320. A correction to this deed was filed on19 December 1979, Book260, p. 255.2 "Clinton Ex-Partner's Path to Bankruptcy; Arkansas Banker Mixedpolitics and Risk," Washington Post, 29 November1993, p. Al.3 Citizens Bank & Trust Co. mortgage recorded in Marion Co., Ark., 3August 1978, Book 240, p. 349.4 Compare Warranty Deed conveying Whitewater tract to Clintons andMcDougals, note I, with corporate documents for Citizens Bank & TrustCo. on file with Arkansas Secretary of State.5 Union National Bank promissory note, Loan #0004197, 19 June 1978.6 "Down the Whitewater Rapids; The McDougals Were on a Wild Ride. ThenThey Hit The Rocks," Washington Post, 13January 1994, p. C1.7 Whitewater Development Company, Articles of Incorporation (availablefrom Arkansas Secretary of State) .8 Ibid.9 Warranty Deed recorded in Marion Co., Ark., 28 December 1979, Book260, p. 282.10 Ibid

(1992-1993), p. 632.1 Who's Who in America, 47th ed12 "Clinton Ex-Partner's Path to Bankruptcy; Arkansas Banker MixedPolitics and Risk," Washington Post, 29 November1993, p. Al.13 Warranty Deeds recorded in Marion Co., Ark., Book 268, p. 392 andBook 270, p. 31. Wade disputes the public records, claiming he paid$32,000 for the lots.

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14 Warranty Deeds recorded in Marion Co., Ark., 3 August 1978, Book241, p. 320.15 "Clintons' Arkansas Land Venture Losses Disputed," Washington Post,19 December 1993, p. Al.16 Statement of Charles E. James, 4 March 1992. Mr. James performedaccounting services for Jim McDougal during the period in question. Hisduties included keeping records of accounts for WDC. See also noteevidencing $30,000 mortgag eon lot # 13, recorded on 12 January 1981,in Marion Co., Ark., Book 271, P. 125.17 Warranty Deed recorded in Marion Co., Ark., 22 January 1981, Book270, p. 371.18 WDC checking account statement, Bank of Kingston, reportingtransactions for December 1980.19 Sales Record, 10 November 1981.20 WDC check #130 to Madison Bank & Trust. Check was drawn of WDC'saccount at the same bank.21 Check stub for WDC check #125, dated 5 November 1984. Notationindicates check for $143.65 payable to Hillary Rodham Clinton for"Reimbursement for Lot 13 Whitewater Estates Real Estate Tax 1993.Check appears to have been drawn on WDC account at Madison Bank &Trust.22 Mortgage Release from Bank of Kingston d/b/a Madison Bank & Trust,recorded on 20 October 1983 in Marion Co., Ark., Book 290, p. 24 I.23 Security Bank check #12677, 30 September 1983; accompanying letterfrom bank Vice President Charles D. Campbell.24 Bill Clinton check #621, 20 February 1982, drawn on account at theWorthen Bank.25 "Transcript of President's New Conference on the Whitewater Affair,"Washington Post, 25 March 1994, p. A18.26 Report of Examination, Madison Guaranty Savings & Loan Assoc.,Office of Examinations and Supervision, Federal Home Loan Bank Board,March 1986. 4

27 Ibid28 "With Political Connections, Arkansas S&L Lived and Died,"Washington Post, 24 January 1994, p. Al.29 CMS check #1591, dated 16 September 1983, drawn on account at FirstState Bank of Plainview. Notation marked "Loan. "30 CMS check #1614, dated 30 November 1983, drawn on account at FirstState Bank of Plainview. Notation marked "Loan."31 "With Political Connections, Arkansas S&L- Lived and Died,"Washington Post, 24 January 1994, p. Al.32 Ibid33 Transcript of 24 March 1992 taped conversation between Jim McDouga1and Arkansas attorney Sheffield Nelson. Copy on file in offices of

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Citizens United34140 Cong. Rec. H1999, 20004 (dailyedRep. Leach) . 24 March 1994 (statement of

35 Check stub for WDC check #121, 4 October 1984, drawn on Madison Bank& Trust. Notation indicates payment to "Security Bank of Paragould,AR." The notation further indicates that the payment included $2,811.19in interest and $2,000 in principal.36 End-of-the-year interest statement from Security Bank of Paragouldto Bill Clinton applied this payment to Mr. Clinton's 30 September 1983loan from the bank. The interest notation corresponds exactly with thenotation of check stub #121. See note 37.37 Check stub for WDC check # 121, 4 October 1984, drawn on MadisonBank & Trust.38 WDC check #145, 11 November 1985, drawn on account at MadisonGuaranty S&L. According to the corresponding check stub the account hada balance of $12.49 when the check was written.39 Check stub for WDC check #14540 Report of Examination, Madison Guaranty Savings & Loan Assoc.,Office of Examinations and Supervision, Federal Home Loan Bank Board,20 January 1984.41 Report of Examination, Madison Guaranty Savings & Loan Assoc.,Office of Examinations and Supervision, Federal Home Loan Bank Board,March 1986. 4

42 Ibid4344140 Cong. Rec. H1999, 20004 (dailyed. 24 March 1994)Rep. Leach) . (statement of

4546 Report of Examination, Madison Guaranty Savings Loan Assoc., Officeof Examinations and Supervision, Federal Home Loan Bank Board, 20January 1984.47 Ib48 Ibid49 "Clinton Ex-Partner's Path to Bankruptcy; Arkansas Banker MixedPolitics and Risk," Washington Post, 29 November 1993, p. Al.

70 "Fallout From Collapse of S&L Shadows Clinton," Angeles Times,November 1993, p. Al 7.51 Compare "With Political Connections, II note 28, with "BusinessmanDenies Giving Donation," note 66.52 Check stub for WDC check # 127, 4 December 1984, drawn on MadisonBank & Trust. Notation indicates loan payment of $3,000 principal and$276.18 interest.53 "With Political Connections, Arkansas S&L Lived and Died

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Washington Post, 24 January 1994, p. Al54 "Head of Failing S&L. Helped Clinton Pay a $50,000 Personal Debt in1985, II New York Times, 15 December 1993, p. B8 .55 Report of Frost & Company, CPAS, to Madison Guaranty S&L Board ofDirectors, I March 1985.56 "With Political Connections, Arkansas S&L Lived and DiedWashington Post, 24 January 1994, p. Al.57 Ibid587 February 1985 Memorandum from Jim McDougal to Gov. Bill Clinton,quoted in 140 Cong. Rec. H1999, 20004 (daily ed. 24 March 1994)(statement of Rep. Leach) .59 "With Political Connections, Arkansas S&L Lived and Died,Washington Post, 24 January 1994, p. Al.60 Ibid

61 Ibid62 Ibid63 Notes of 2 February 1994 conversation between RTC Senior CriminalInvestigator L. Jean Lewis and FDIC attorney April Breslaw, quoted in140 Cong. Rec. H1999, 20004 (daily ed. 24 March 1994) (statement ofRep. Leach) .64 Ibid. at H2006 (Minutes of Meeting of Madison Financial CorporationBoard of Directors, 17 April 1985) .A chart attached to Rep. Leach'sstatement, which is not reproduced in the Congressional Record says thedeposit left the account with a balance of just $255.13. This chart isavailable at the offices of Citizens United.65 "With Political Connections, Arkansas S&L Lived and Died,"Washington Post, 24 January 1994, p. Al.

85 Clinton Fund-Raiser,"6 "Businessman Denies Giving Donation AtWashington Post, 16 December 1993, p. A6.67 Ibid68 Ibid

69 Ibid70 "84 Clinton Panel Named as a Suspect," Washington B=, 2 April 1994,p. Al.71 Warranty Deed recorded in Marion Co., Ark., 10 June 1985, Book 314,p. 130. The deed says WDC received $ 1.00and O.G.V.C. (Other Good andValuable Consideration) .72 "Clintons' Arkansas Land Venture Losses Disputed," Washington Post,19 December 1993, p. Al.73 Ibid74 "S&L Cases Earn Rose Firm $1 Million and Counting," WashingtonTimes, 4 March 1994, p. A15. See also "Regulators Say They Were Unaware

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Of Clinton Law Firm's S&L Ties," Washington Post, 3 November 1993,A4.75 Arkansas Development Finance Authority, statement of PrivateActivity Bonds, January 1984 January 1992. Copy of document on file atoffices at Citizens United.76 Arkansas Development Finance Act, Act No.1062, $ 28.00, 75thGeneral Assembly of the State of Arkansas, Code of Ark. $$ 15-5201, et seq.77 Arkansas Development Finance Authority, statement of PrivateActivity Bonds, January 1984, January 1992. Copy of document on fileat offices at Citizens United.78 E.g. $54,285,000 ADFA bond listing (18 November 1993); #37,930,000ADFA bond listing (20 June 1991) $22,845,000 ADFA bond listing(November 1990) .Copies of these and other listings are available fromthe offices of Citizens United.79 judge David Hale, interview by Floyd Brown on "Floyd Brown's TalkBack To Washington," 5 November 1993. Tape available at offices ofCitizens United.80 Ibid. See also "Clintons' Former Real Estate Firm Probed; FederalInquiries Focus on Financial Activities of Other Arkansans," WashingtonPost, 2 November 1993, p. A1.81 CMS check #458, 3 April 1986, in the amount of $300,000.00, drawn onPulaski Bank.82 Loan Agreement between Susan H. McDougal D/B/A Master Marketing andCapital-Management Services, Inc., 3 April 1986.83 "Clintons Understated Involvement in Venture," Washington Times,November 1993, p. Al.84 Loan Agreement between Susan H. McDouga1 D/B/A Master Marketing andCapita1-Management Services, Inc., 3Apri1 1986.85 "Clinton Ex-Partner's Path to Bankruptcy; Arkansas Banker Mixedpolitics and Risk," Washington E=, 29 November1993, p. Al.86 Ibid87 Ibid.88 Report of Examination, Madison Guaranty Savings & Loan Assoc.,Office of Examinations and Supervision, Federal Home Loan Bank Board, 4March 1986.89 Madison Guaranty S&L Assoc., FHLBB Resolution No.86-85 1,Stipulation and Consent to Entry of Order to Cease and Desist (FDIC 15August 1986) .90 "With Political Connections, Arkansas S&L Lived and Died,Washington Post, 24 January 1994, p. Al.91 Arkansas Constitution, amend 63, $ 192 "Questions That Linger In The Whitewater Matter," New York Times, 13January 1994.

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93 "An Ever-Growing Paper Trail; Clintons' Whitewater Records Go FromNothing To Volumes, II Washington B=, 8 January 1994, p. Al.94 Proxy signed by Jim and Susan McDougal, I June 1988.95 Warranty Deed recorded in Marion Co., Ark., 1 December 1988, Book347, p. 225.96 Warranty Deed recorded in Marion Co., Ark, 28 November 1988, Book347, p. 193.97 "Clinton Joined S&L. Operator in An Ozark Real-Estate Venture," NewYork Tunes, 8 March 1992, $ 1, p. 1.98 Letter from Hillary Rodham Clinton (written on Rose Law Firmletterhead) to Jim McDougal with accompanying Power of Attorney, 28November 1988.99 Capital-Management Services, Inc. v. Susan H. McDougal, No.88-7624(Cir. Ct., Pulaski Co., Ark. filed 7 December1988); Capital-ManagementServices, Inc. v. Susan H. McDougal, No.88-7624, slip opinion (Cir.Ct., Pulaski Co., Ark. 6 February 1989) .100 Judge David Hale, interview by Floyd Brown on "Floyd Brown's TalkBack To Washington," 5 November 1993. Tape available at offices ofCitizens United.101 'The Tangled Web," 24 January 1994, p. 31102 "Regulators Say They Were Unaware Of Clinton Law Finn's S&L Ties,"Washington Post, 3 November 1993, p. A4.103 "S&L Cases Earn Rose Firm $1 Million and Counting," WashingtonTimes, 4 March 1994, p. Al 5.104 Letter from Webster Hubbell (written on Rose Law Firm letterhead)to Gary Green, Re: Capital Management Services, Inc. vs. Susan H.McDougal d/b/a/ Master Marketing, a Sole proprietorship, and FrostCompany, dated 28 June 1989.105 Bill Clinton's Presidential campaign announcement, 3 October 1991,quoted in 140 Cong. Rec. H 1999, 20004 (daily ed. 24 March 1994)(statement of Rep. Leach) .106 "Clinton Joined S&L. Operator in An Ozark Real-Estate Venture," NewYork Times, 8 March 1992, $ 1, P. 1.107 Report of James M. Lyons, Denver, Colo., 23 March 1992.108 Transcript of 24 March 1992 taped conversation between Jim McDougaland Arkansas attorney Sheffield Nelson. Copy on file in offices ofCitizens United.109 "With Political Connections, Arkansas S&L Lived and Died,"Washington Post, 24 January 1994, p. Al.110 Letters from RTC Field Investigations Officer, L. Richard Iorio toSteve Irons, Supervisory Special Agent, White Collar Crime Unit,Federal Bureau of Investigation, I September 1992 and Charles A. Banks,U.S. Attorney, E. D. Ark., September 1992, quoted in 140 Cong. Rec.H1999, 20004 (daily ed. 24 March 1994) (statement of Rep. Leach) .111 "Clintons' Former Real Estate Firm Probed; Federal Inquiries Focus

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on Financial Activities of Other Arkansans,November 1993, p. Al. "Washington Post, 2

112 FBI Search Warrant issued by U.S. District Court, E.D. Ark., CaseNo. 93-M-4060, 1:35 p.m., 20 July 1993.113 Narrative Report, Fairfax Co., Va., Fire and Rescue Dept., 20 July1993.114 "Questions That Linger In The Whitewater Matter," New York Tunes,13 January 1994.115 "Foster's Note Reveals An Anguished Aide; Probe Concludes WithFinding Of Suicide," Washington Post, 11 August 1993, p. A1.116 "Questions That Linger In The Whitewater Matter," New York Times,13 January 1994.117 "Handling Of Foster Case Is Defended; White House OffersExplanation For 30-Hour Delay In Reporting Note, "Washington Post, 30July 1993, p. Al.118 "Foster's Note Reveals An Anguished Aide; Probe Concludes WithFinding Of Suicide, Washington Post, 11 Augustl993, p. Al.119 Letter from attorney for David Hale Randy Coleman to u.s. AttorneyPaula Casey, 15 September 1993; Letter from Mr. Coleman to Ms. Casey,20 September 1993; Letter from Mr. Coleman to Assistant U.S. AttorneyMichael Johnson, 20 September 1993.120 Letter from US. Attorney Paula Casey to Randy Coleman, 16 September1993; Letter from Ms. Casey to Mr. Coleman, 21 September 1993.

AB21 "Poison, Then Recuse," Wall Street journal, 4 March 1994, p122 Letter to Rep. Henry B. Gonzalez, Chairman, House BankingCommittee, 9 November 1993.123 Letter to Rep. Jim Leach from Rep. Gonzalez, 9 November 1993124 "S&L Scandal Shadows Foster's Last Days," Washington Times, 6December 1993, p. Al.125 "Conspiracy Theorists Find Foster Case Hard to Resist," WashingtonPost, 13 March 1994, p. A10.126 "Whitewater Files Were Removed In Foster's Office, White HouseConfirms, Washington Post, 22 December 1993, p.A16.127 "President's Lawyer Tried To Limit justice Dept. Use Of WhitewaterFiles," Washington Post, 8 January 1994, p. A9.128 Freedom of Information Act, 5 U.S.C. $ 552 (b) (5)129 "Subpoena Issued for Clinton Files; White House To Comply In S&LProbe, " Washington E=, 6 January 1994, p. A1.130 Ibid131 "Clinton Yields To Calls For Land Deal Probe; Reno PledgesIndependent investigator," Washington B=, 13 January 1994, p. A1132 "Whitewater Special Counsel Promises 'Thorough Probe," Washington

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Alost 21 January 1994, p133 "Subpoena of Gov. Tucker outlines Scope of Probe; Wide Range OfArkansas Relationships Pursued," Washington Post, 22 January 1994, pA3.134 "Grand jury Is Reportedly Told Of Shredding at Little Rock Firm,New York Times, 4 March 1994, p. A1135 Ibid136 "Rose Courier Now Says Shredding Took Place After Inquiry Was SetNew York Times, 9 March 1994, p. A1.137 "Rose Staffers Say Hillary Ordered Papers Shredded," WashingtonTimes, 7 March 1994, p. Al.138 "Clinton Campaign Hid Whitewater Files in P92,113 April 1994, p. A10 Washington Times,

139 "Fiske Turns Up The Heat; Nussbaum Bows Out," Washington Tunes, 6March 1994, p. Al.140 "Hubbell Resigns Post, Cites 'Distractions,"' Washington Times,March 1994, p. Al.141 "President Revises Whitewater Losses; To Reveal Tax Data,Washington Post, 25 March 1994, p. Al.142 "Top Arkansas Lawyer Helped Hillary Clinton Turn Big Profit;Commodities Trading in '70'5 Yielded $100,000," New York Times, 18March 1994, p. Al.143 Letter from National Capital Region Director of National ParkService to Citizens United Foundation Legal Director Michael Boos,April1994.14418 u.s.c. $

4518 u.s.c. $$ 23-34-10746 Code of Ark$$ 5-52-101, 102, 103, 104, 1077 Code of Ark

148 Code of Ark. $$ 7-6-203, 205, 20614926 u.s.c. $$ 7201, 7203, 7206, 7207

$$ 26-18-201, 202, 203, 20450 Code of Ark$$ 1505, 15105118 u.s.c

15218 u.s.c $ 371.15318 u.s.c. $ 1962

Copyright 1996, Citizens United-> Send "subscribe snetnews " to [email protected]> Posted by: Samuel Bronfman