Throughout the conduct of the various inquiries relating to Whitewater, Madison, and other matters relating to the Clintons, the White House engaged in a clearly discernible pattern of improper contacts, undue interference and, at times, outright obstruction with respect to the federal investigations.
The pattern of abuse began with attempts to use the resources of the White House, especially the White House Counsel's Office, to gather as much information as possible on the pending investigations. The Office of the White House Counsel, in effect, served as Clintons' private law firm defending their personal interests. Beyond the impropriety of such diversion of public resources, attempts by White House lawyers to obtain information compromised the integrity of the federal investigations.
The interests of the United States with respect to these investigations were potentially adverse to the private interests of the Clintons as witnesses or potential targets. Yet, whenever possible, White House lawyers obtained confidential information relating to the progress of the investigations and prospects for prosecution. The White House lawyers not only used the information to defend the private interests of the Clintons, but also shared the improperly obtained confidential information with the Clintons' private lawyers directly to assist in the coordinated defense effort. I.
White House Contacts Relating to Investigations of Madison and David Hale.
The White House receives information on the ongoing SBA investigation of Mr. Hale.
In early May 1993, SBA Associate Administrator Wayne Foren, a career SBA employee, contacted Erskine Bowles, President Clinton's nominee for SBA Administrator, to discuss the agency's ongoing investigation of Capital Management Services and David Hale.(604) According to Mr. Foren, he called Mr. Bowles on May 3, 4 or 5 -- right before Mr. Bowles' confirmation.(605) Mr. Foren contacted Mr. Bowles because Mr. Hale, the president of CMS, had claimed to have access to President Clinton, Governor Jim Guy Tucker, and Arkansas Senator Dale Bumpers, then the chairman of the Senate Small Business Committee.(606)
Mr. Foren realized the sensitivity of the matter and, accordingly, concluded that the only means to answer questions he had about the operations of CMS was to make "a referral to the Office of the Inspector General so that they could proceed on an investigation and in an attempt to obtain the information."(607) According to Mr. Foren, "[k]nowing that Erskine's confirmation hearing was imminent, I felt it was appropriate that he be briefed on this issue."(608) After Mr. Foren told Mr. Bowles about the case, Mr. Bowles "agreed that the transfer [of the case to the Inspector General] should occur prior to the confirmation and that he wanted a briefing paper."(609) Mr. Foren referred the matter to the Inspector General on May 5, 1993.(610)
At Mr. Bowles' instruction, Mr. Foren then prepared a briefing paper entitled "Capital Management Services, Inc, Little Rock, Arkansas, License No. 06/06-5207."(611) The document outlined David Hale's 1992 application for additional funds from the SBA and stated that the value of the donated assets Mr. Hale used to justify additional funds from the SBA was "questionable."(612) The briefing paper noted that "the matter has been referred to the Inspector General for investigation."(613) Mr. Foren provided the briefing paper to Kris Swedin, the SBA's Assistant Administrator for Congressional Relations.(614) In Mr. Foren's view, the Hale investigation was "very sensitive" and "very important."(615)
On May 7, 1993, Mr. Bowles was confirmed as SBA Administrator.(616) After Mr. Bowles' confirmation, Mr. Bowles advised Mr. Foren that he had briefed White House Chief of Staff, Thomas "Mack" McLarty, a longtime friend of the President, on the status of the CMS case.(617) Mr. Foren advised his deputy, Charles Shepperson, of Mr. Bowles' communication of information to Mr. McLarty.(618) Mr. Shepperson confirmed this account:
My recollection was that Wayne had come back from a meeting with Mr. Bowles on a subject I can't remember, he had come back and said that Erskine had taken him aside and indicated that he had spoken to Mr. McLarty, and that Mr. McLarty had indicated that we should just do what you normally do in situations like this.(619)
Mr. Bowles testified that he could not specifically deny Mr. Foren's and Mr. Shepperson's account, although Mr. Bowles could not recall Mr. Foren briefing him on CMS in May 1993.(620) He recalled that Mr. Foren and others briefed him at the Old Executive Office Building on SBA programs; he was not certain of the date, but believed that the briefing did not occur between May 4 and May 7.(621) He remembered at some point being told that the Hale/CMS matter had been referred to the Inspector General or the Justice Department.(622) He did not recall seeing the briefing paper that Mr. Foren used to brief him in May 1993.(623)
In addition, Mr. Bowles did not recall advising Mr. Foren that he had spoken with Mr. McLarty about the CMS referral.(624) Mr. Bowles recalled, however, that he saw Mr. McLarty on the morning of his confirmation hearing, when he visited the White House.(625) Indeed, Mr. McLarty's schedule for May 6, 1993, contained the following entry: "Erskine Bowles & his family will be touring the West Wing and will be stopping in very briefly to say hello some time around 8:45-9:00 a.m."(626)
More important, Mr. Bowles saw Mr. McLarty on May 7, 1993, the date of his confirmation. According to Mr. Bowles, "I saw Mack again, I believe on the 7th, the day I was actually confirmed by the Senate. And at that time, I went over there to get my marching orders, how should I go forward, how should I report, what do I do."(627) Mr. McLarty's schedule for May 7, 1993 confirmed that, at 1:00 p.m., he had a meeting with Mr. Bowles.(628) Yet, Mr. Bowles denied that he discussed not discuss CMS with Mr. McLarty. "I don't believe I've ever discussed Capital Management with Mack McLarty."(629)
On May 19, 1993, Mr. Foren again briefed Mr. Bowles on CMS, when the SBA initiated foreclosure and liquidation proceedings against Capital Management.(630) According to Mr. Foren, "[t]he event that occurred between the 5th and the 19th was an event where Capital Management defaulted on debentures, and we were then going to proceed to foreclose collateral and throw the company into liquidation."(631) Mr. Foren provided Mr. Bowles with a revised version of his earlier briefing paper, entitled "Capital Management Services, Inc, Little Rock, Arkansas, License No. 06/06-5207, May 19, 1993."(632)
On August 5, 1993, Mr. Shepperson received a copy of a draft indictment of Mr. Hale from the U.S. Attorney's Office in Little Rock.(633) He sent the draft indictment to Mr. Foren.(634) On August 9, Mr. Foren sent yet another memorandum to Mr. Bowles on the progress of the investigation and attached a copy of the draft indictment to the memorandum.(635) The memorandum, designated "Privileged and Confidential," was signed by Mr. Foren and Deputy General Counsel Martin D. Teckler and addressed to Erskine Bowles.(636)
Mr. Bowles did not recall receiving Mr. Foren's August 9 memorandum,(637) although "Wayne very well could have sent it to me."(638)
In September 1993, Mr. Foren provided another briefing to Mr. Bowles about the Hale/CMS investigation, this time to advise him that Mr. Hale's indictment was imminent.(639) Mr. Foren also provided Mr. Bowles with a memorandum,(640) dated September 21, 1993, advising that on September 20, 1993, the SBA had closed CMS's bank accounts and seized its assets.(641) The memorandum further advised that the U.S. Attorney's office is "scheduled to make a presentation to the Grand Jury on Tuesday, September 21, 1993, at 3:00 p.m. and [is] expecting indictments to be returned on Tuesday or Wednesday, September 21 or September 22, 1993 against Judge Hale and two other individuals."(642)
Mr. Bowles did not recall receiving multiple briefings or memoranda from Mr. Foren on the Hale/CMS investigation, although he admitted to receiving the May 1993 briefing and a later briefing by Martin Teckler, the Deputy General Counsel of the SBA.(643) According to Mr. Bowles, in September 1993, Mr. Teckler "told me that we were getting ready to indict Judge Hale down in Arkansas for defrauding the SBA, and said that I might want to call the White House and give them a heads-up."(644) Mr. Bowles asked Mr. Teckler to describe a "heads-up,"(645) and Mr. Teckler told him "it was simply notification in case they got some inquiries."(646) Mr. Bowles claimed that he questioned the propriety of such notification, and Mr. Teckler replied that "it was standard."(647) Although Mr. Bowles told Mr. Teckler he would give a "heads up" to the White House, Mr. Bowles maintained that he never called the "White House" about the case. He explained:
I was often asked to take things to the White House. I often said I'll take care of it. Sometimes I felt the right way to take care of it was to throw it in the trash can. Sometimes it was to call somebody lower down. Sometimes it was to call somebody higher up. Sometimes I did it, sometimes I didn't. I just made a judgment.(648)
In November 1993, Mr. Bowles claimed that he learned from news accounts that Mr. Hale alleged that, in 1986, then-Governor Clinton had pressured Mr. Hale into making an illegal SBA loan to Susan McDougal.(649) After hearing of this allegation, Mr. Bowles decided to recuse himself from the case. He communicated this decision orally to General Counsel John Spotila, but did not memorialize his recusal in writing until months later, on March 3, 1994.(650) In fact, Mr. Spotila continued to provide Mr. Bowles with information concerning the Hale/CMS investigation in the weekly SBA Administrator's report through June 27, 1994, more than six months after Mr. Bowles purportedly decided to recuse himself from the CMS/Hale matter.(651)
On April 11, 1994, Mr. Bowles responded to an inquiry by Congresswoman Jan Meyers, then the Ranking Member of the House Committee on Small Business, about his recusal from the CMS investigation.(652) Mr. Bowles advised that he had verbally recused himself from the matter in late fall 1993, and had memorialized this decision in writing on March 4, 1994.(653) Mr. Bowles specifically claimed: "I have never reviewed the Capital Management file."(654) The assertion was contradicted by Mr. Bowles' own admission that he was occasionally briefed on the CMS/Hale investigation.(655) Mr. Foren believed that Mr. Bowles, as a practical matter, was knowledgeable about what was in the file.(656) When asked about the seeming discrepancy between his letter to Congresswoman Meyers and his testimony, Mr. Bowles maintained that his statement to Congresswoman Meyers was accurate: "I hadn't reviewed the file. I hadn't studied the file. I hadn't spent a long time going over it."(657)
Mr. Hale's lawyers contact the White House about Mr. Hale's "mutual interest" with President Clinton.
On August 20, 1993, the Little Rock Field Office notified FBI Headquarters that the RTC planned to submit new referrals on Madison Guaranty.(658) Special Agent Steven Irons advised Headquarters that "Assistant United States Attorney assigned to the matter reported being told a Little Rock Attorney had traveled to Washington instant date to meet with unknown officials to attempt to have the investigation quashed." (659) Mr. Irons testified that Fletcher Jackson told him that Richard Mayes, a Little Rock attorney had traveled to Washington to get the Hale investigation quashed.(660) Mr. Irons advised FBI Headquarters to "be alert if someone within the Department asked some questions about the Hale case or the upcoming Madison referrals," and in particular a close associate of President Clinton, Webster Hubbell, now the third highest official in the Department.(661)
Mr. Hubbell had lunch or dinner with Mr. Mayes once or twice between January and September 1993.(662) Mr. Mayes denied that he talked to Mr. Hubbell about the David Hale investigation or indictment.(663)
On August 17, 1993, in the middle of the SBA's and the Justice Department's investigations into Capital Management and David Hale, Randy Coleman, Mr. Hale's attorney, called Associate Counsel to the President William Kennedy to advise the White House that the ongoing federal investigations might pose problems for President Clinton.(664) Mr. Coleman told Mr. Kennedy that he wanted to talk about "the mutual interests of our clients."(665)
The conversation was brief.(666) Mr. Coleman told Mr. Kennedy that the FBI had raided Mr. Hale's CMS office and confiscated records containing information on the Clintons, Governor Tucker, the McDougals, Whitewater and Madison.(667) Mr. Coleman told Mr. Kennedy that if Heidi Fleiss was the "madam to the stars, David Hale was the lender to the political elite in Arkansas."(668)
Mr. Kennedy's notes indicate that Mr. Coleman mentioned President Clinton and Governor Tucker.44
Mr. Kennedy was familiar with Madison and Whitewater from his work at Rose Law Firm and from his understanding of the Clintons' circle of friends.(669)
Mr. Coleman and Mr. Kennedy had different recollections of the conclusion of the conversation. Mr. Coleman testified that after outlining some of the names contained in Mr. Hale's files,(670) he informed Mr. Kennedy that he would be meeting with SBA officials in Washington, D.C., the next week and could also meet with Mr. Kennedy to discuss the matter further.(671) According to Mr. Coleman, Mr. Kennedy then asked him whether there was anything that he wanted him to do.(672) Mr. Coleman responded, "I said I'm just trying to figure out where everybody is on this matter, and he said that he would visit with his clients and get back to me.(673)
Mr. Coleman did not expect Mr. Kennedy to do anything "helpful" for Mr. Hale.(674) Instead, Mr. Coleman contacted Mr. Kennedy because the investigation might involve "folks other than just my client, and where that was the case it was always my habit to start making contact with attorneys for other people who might be involved to see where everybody stood and what the landscape looked like."(675) Mr. Coleman also believed that he might be able to confirm Mr. Hale's suspicion that "there were some folks in the executive branch that wouldn't be, oh, looking out for his best interests."(676) Mr. Coleman wanted to make a "provocative phone" call because White House officials "had shown a propensity to make an ill-advised phone call or two in times past." (677)
Mr. Kennedy had a different recollection of key elements of the phone call. First, he denied offering to do anything for Mr. Coleman.(678) Instead, he claimed that he was "uncomfortable" talking to Mr. Coleman because he thought that Mr. Coleman might be seeking improper involvement on the part of the White House.(679) Mr. Kennedy said that "I told him I wasn't sure I could talk to him, but I would inquire and get back to him."(680)
The last entry in Mr. Kennedy's notes of the telephone call, however, appears to corroborate Mr. Coleman's testimony: "*Ask for anything."(681) Mr. Kennedy claimed that he did not know what he meant by this entry.(682) Mr. Kennedy's notes do not indicate that Mr. Coleman was "looking" for something or expected Mr. Kennedy to do something "helpful" for Mr. Hale.(683)
Second, Mr. Kennedy denied saying that he had to get back to his "clients" -- presumably President and Mrs. Clinton.(684) But Mr. Coleman vividly remembered that Mr. Kennedy said "clients" in the plural because the reference struck him as odd since the entire discussion up to that point had been in terms of their respective individual clients.(685)
After the telephone call, Mr. Kennedy spoke to Mr. Nussbaum.(686) Mr. Kennedy claimed that he was concerned that it would be inappropriate for him to engage in any substantive discussion with Mr. Coleman.(687) Mr. Nussbaum agreed,(688) and instructed Mr. Kennedy to tell Mr. Coleman that the White House could not help him -- but, somewhat inconsistently, also to find out "a little more about what was going on."(689)
Two days later, on August 19, 1993, Mr. Kennedy contacted Mr. Coleman.(690) Mr. Kennedy asked Associate White House Counsel Beth Nolan to listen to the conversation.(691) According to Mr. Coleman, this conversation lasted five or ten minutes.(692) Mr. Coleman testified that Mr. Kennedy wanted to know more specific information about the investigation.(693) Mr. Coleman recalled that Mr. Kennedy particularly wanted to know whether Mr. Hale was trying to "negotiate" with the U.S. Attorney's Office(694) and would allege any "face-to-face meetings" with the President.(695)
Mr. Kennedy claimed that he essentially told Mr. Coleman at the beginning of the call that he could not assist him.(696)
But Mr. Kennedy's and Ms. Nolan's respective notes of the conversation clearly indicate that Mr. Kennedy was "engaged in a discussion during which [Kennedy] asked [Coleman] a series of questions including, among other things, what was the anticipation of what David Hale would be charged with, where was this going to go, a conversation in which among other names mentioned were Whitewater Development and Jim Guy Tucker with which were familiar."(697) Mr. Kennedy also admitted that he sought to obtain information about the extent to which Mr. Hale was connected to Madison.(698)
The notes of Ms. Nolan and Mr. Kennedy both indicate that Madison and Whitewater were discussed in detail.(699) Mr. Kennedy's notes appear as the following:
"Nature of Investigation - propriety of loans made
past few years
Informed that are loan transactions that relate
to Madison Guaranty
All records liquidation of SBIC
Both of them's names cropped up
Whitewater Development Corp.: not stopping
w/ David Hale
Castle Grande Water."(700)
BK: You mean Madison have parked bad loans w/ David?
RC: Yep. You bet .... The Madison deal is coming back to life.(702) Ms. Nolan's notes indicate that Mr. Coleman told Mr. Kennedy that "they're not stopping at Whitewater, I can guarantee you that." (703)
Mr. Kennedy offered no explanation for his returned call to Mr. Coleman other than to admit that he sought "to know a little bit more before" he definitively could decide the propriety of other discussions.(704) Mr. Kennedy explained, "I didn't think we would be able to help him, but I couldn't respond sort of fully until I knew a little bit more about what he was talking about, and he opened up a little bit."(705)
Although Mr. Kennedy claimed that he did not ask Mr. Coleman about plea negotiations or whether Mr. Hale would allege any "face-to-face meetings" with President Clinton,(706) Ms. Nolan's notes indicate that the U.S. Attorney's office is "going to know about mtgs. taking place."(707)
Mr. Kennedy's notes indicate that he discussed the President and Mrs. Clinton with Mr. Coleman: "All records liquidation w/SBIC [arrow] both of them's names cropped up Whitewater Development Corp.: Not stopping w/David Hale."(708) Ms. Nolan's notes also contain the following entry: "your C's name has cropped up [arrow] both of 'em, Whitewater Develop. Corp."(709) Mr. Kennedy denied that "both" refers to the President and Mrs. Clinton.(710)
Ms. Nolan's notes specifically indicate that at the end of the conversation Mr. Kennedy thanked Mr. Coleman for the "head's up."(711)
After the second telephone conversation, Mr. Kennedy again briefed Mr. Nussbaum.(712) Mr. Kennedy claimed that he told Mr. Nussbaum that he had never heard of "the stuff" in connection with Whitewater during the campaign and that, as a result, Hale's allegations were not credible.(713) Mr. Kennedy claimed that he did nothing other than to report Mr. Coleman's information to Mr. Nussbaum.(714) Mr. Kennedy maintained that Mr. Nussbaum took no further action.(715) Mr. Kennedy denied that he ever told President Clinton or Mrs. Clinton or anyone else at the White House.(716)
Bruce Lindsey, then Director of Presidential Personnel, claimed that he first learned of Mr. Kennedy's conversations with Mr. Coleman from New York Times reporter Jeff Gerth.(717) Mr. Lindsey then sought confirmation,(718) and Mr. Kennedy told Mr. Lindsey that Mr. Coleman had told him that he "had a client who had mutual interests" and suggested that they discuss the matter.(719) Mr. Lindsey understood the "client" to be President Clinton.(720)
The White House obtains more information about the Hale investigation.
In late August or early September, Mr. Kennedy advised then-Associate Attorney General Webster Hubbell of the Coleman phone call.(721) Mr. Hubbell's phone log indicates he had a ten-minute conversation with Mr. Kennedy on August 18th.(722) According to Mr. Hubbell, Mr. Kennedy wanted to know whether he had learned of any connection between Mr. Hale and Madison and James McDougal.(723) Mr. Hubbell mistakenly told Mr. Kennedy there was no connection; Mr. Hubbell later remembered that he had become aware of such a connection in the course of representing the RTC in litigation against Madison's former accountants.(724)
Mr. Kennedy claimed that in the course of a conversation with Mr. Hubbell about another matter, "I simply asked him had he heard the name David Hale in connection with Whitewater, and he said no, and that was the sum and source of it."(725) Mr. Kennedy claimed that he asked Mr. Hubbell about the Hale matter because he knew that Mr. Hubbell was familiar with the Whitewater issue from the 1992 presidential campaign.(726)45
On September 20, 1993, Jeff Gerth met with Senior White House officials Bruce Lindsey and Mark Gearan, and conveyed the same information.(727) Mr. Gerth told Mr. Lindsey and Mr. Gearan that Mr. Hale alleged that he had three meetings with then-Governor Clinton in 1985 and 1986. According to Mr. Gerth, prior to meeting with Governor Clinton, Mr. Hale had several meetings with Mr. Tucker and Mr. McDougal.(728) Mr. McDougal told Mr. Hale that Madison Guaranty was strapped for cash and scheduled to be audited, and that "friends in the political family needed help."(729)
At the first meeting, on the steps of the Arkansas Capitol, Governor Clinton allegedly approached Mr. Hale and said something like "are you going to be able to help Jim and I out? . . . I would really appreciate it."(730)
The second meeting allegedly took place at Mr. McDougal's trailer office at the Castle Grande land development.(731) Governor Clinton, who was dressed in a jogging outfit, and Mr. McDougal asked Mr. Hale to make a loan from CMS to "clean up the books" at Madison Guaranty.(732) Governor Clinton warned Mr. Hale that his name could not "show up anywhere," but that he might be able to provide security for the loan with some property in Marion County -- the county where Whitewater was located.(733)
Mr. Gerth then explained that Mr. Hale subsequently made a $300,000 SBA loan to Susan McDougal d/b/a Master Marketing on April 3, 1986.(734) Mr. Hale understood that some of the money would be advanced to Whitewater. Indeed, records show that a portion of the proceeds from the loan was used by Whitewater to purchase land from International Paper Corporation in 1986.(735)
At the third meeting, then-Governor Clinton allegedly saw Mr. Hale at a Little Rock shopping mall and asked him "Have you heard what that f------ w---- Susan has done with the money?"(736) Mr. Gearan and Mr. Lindsey both claimed that Mr. Gerth was the first to tell them of Mr. Hale's allegations against President Clinton.(737) Both senior White House officials further asserted that they learned for the first time of Mr. Kennedy's telephone calls with Mr. Coleman a month earlier.(738)
After the meeting with Mr. Gerth, Mr. Lindsey asked President Clinton about Mr. Hale's allegations. The President denied that any of the meetings occurred.(739)
On the same day, Mr. Lindsey called James Blair, the General Counsel of Tyson Food and a close associate of the President, twice to discuss Whitewater.(740) Mr. Lindsey's contemporaneous notes of the first conversation indicate that Mr. Blair had previously contacted Mr. Heuer, Mr. McDougal's attorney, to discuss whether Mr. McDougal would be implicated in any case against Mr. Hale. Specifically, the notes indicate that Mr. Heuer "asked Brent Bumpers [Assistant United States Attorney for EDAR] ...whether indictment against Hale, not McDougal."(741) Mr. Lindsey's notes of the second conversation shows: "Fletcher Jackson-in charge of case-immunity leaked. McDougal might become target. Blair Heard that $300,000 had been deposited in McDougal's account, jumped pretty high."(742) Mr. Lindsey could not interpret these entries in his notes, and particularly the notation "jumped pretty high."(743)
Mr. Blair had no recollection of speaking with Mr. Lindsey, but admitted that they may have discussed David Hale.(744)46 He also could not recall any conversation with Mr. Heuer about whether Mr. McDougal would be indicted along with Mr. Hale, but admitted "[t]hat's certainly a possibility. I have discussed with Heuer at times whether McDougal was actually going to be reindicted after his first acquittal."(745) When asked whether he relayed the results of any conversation with Mr. Heuer back to the White House or elsewhere, Mr. Blair carefully claimed, "I don't have any recollection of that. I'm not saying if I didn't hear something interesting, I might not have passed it on to Bruce Lindsey, but I have no specific recollection of that."(746)
When asked about any conversation between Mr. Heuer and Assistant U.S. Attorney Bumpers about the indictment of Hale, Mr. Blair professed that he did not "know anything about any conversations between Mr. Heuer and Mr. Bumpers."(747) Mr. Blair claimed that Mr. Lindsey's notes did not refresh his recollection.(748)
Although Mr. Bumpers did not recall Mr. Heuer asking whether Mr. McDougal would be indicted with Mr. Hale,(749) Mr. Bumpers may have had a brief conversation with another Assistant U.S. Attorney, Fletcher Jackson about Mr. Hale investigation prior to Mr. Hale's indictment.(750) Mr. Bumpers also may have learned of the imminent indictment at a staff meeting.(751)
The Special Committee was not able to depose Mr. Heuer because he was preparing for Mr. McDougal's criminal trial. Messrs. Blair and Bumpers could neither confirm nor deny that any of these conversations occurred. Mr. Lindsey's contemporaneous notes of his conversation with Mr. Blair immediately following Mr. Lindsey's conversation with Mr. Gerth about Mr. Hale's allegations against President Clinton indicate that Mr. Heuer received confidential information about the ongoing federal investigation of Mr. Hale, and that this confidential information was passed on to Mr. Blair and Mr. Lindsey.(752) After Treasury and RTC Officials improperly advised the White House about RTC Referrals mentioning President Clinton and Governor Tucker, President Clinton meets with Governor Tucker at the White House.
Attempts by senior White House officials to gather information about investigations touching on the Clintons went beyond contacts with potentially adverse counsel (Mr. Coleman) or with close associates (Mr. Blair). Senior White House officials undertook a concerted and highly improper effort to contact investigative agencies about the ongoing investigations into Madison and Whitewater.
During the period when the submission of the additional RTC referrals on Madison prepared by Ms. Lewis was being held up by the "legal review" by the RTC's Professional Liability Section, the White House received advance information on these referrals. At about the same time that the White House learned of Mr. Hale's allegations against President Clinton, on September 29, 1993, Jean Hanson, the General Counsel of the Department of Treasury, which oversaw the RTC and its investigations, informed White House Counsel Bernard Nussbaum and Associate White House Counsel Clifford Sloan of the existence of several RTC referrals involving Madison, Whitewater, and the Clintons.(753)
This improper transmittal of confidential RTC information to the White House violated clearly established RTC procedures. In a June 17, 1993 memorandum to all RTC attorneys and investigative staff on the handling of criminal referrals, RTC Director of Investigations James Dudine wrote: "All criminal referrals are sensitive and must be handled with appropriate confidentiality and care."(754) Mr. Dudine advised that criminal referrals derived from records of financial institutions are also subject to the restrictions of the Right to Financial Privacy Act, 12 U.S.C §3412.(755) William H. Roelle, the RTC Senior Vice President in charge of the Investigations Division,(756) testified that, based on his 25-years of experience with the FDIC and RTC, both the substance and the fact of a criminal referral are confidential.(757) There is no exception for press inquiries.(758)
The Treasury General Counsel, Jean Hanson, improperly conveyed the confidential RTC information about the Madison criminal referrals to the White House.(759) Specifically, Ms. Hanson advised Mr. Nussbaum that the President and Mrs. Clinton were identified as possible witnesses to the suspected criminal activities described in the referrals.(760) She further told Mr. Nussbaum that the referrals referenced possible improper campaign contributions from Madison to one of Mr. Clinton's gubernatorial campaigns.(761) Mr. Nussbaum admitted that Ms. Hanson provided him with nonpublic information about the referrals.(762)
The next day, on September 30, Ms. Hanson called Mr. Sloan to amplify on the confidential information she had provided to Mr. Nussbaum.(763) Mr. Sloan's notes of this conversation recorded the following:
"9 referrals--allegations re: Fulbright--
* Jim Guy Tucker
* attempt to divert funds."(764)
Mr. Sloan's notes further stated that the charges of conspiracy to divert funds were the "most serious allegation[s],"(765) that the referrals named the Clinton 1985 campaign as "co-conspirators,"(766) and, most important, that the "Clintons [were] mentioned in other charges as potential witnesses."(767)
Mr. Nussbaum instructed Mr. Sloan to relay Ms. Hanson's information to then-Director of Presidential Personnel Bruce Lindsey, who was not a member of the press office, but rather a "damage control" specialist.(768) Mr. Sloan did so on the same day, September 30, or shortly thereafter.(769) Inexplicably, Mr. Lindsey claimed that Mr. Sloan did not advise him that Governor Tucker was named in the referrals as a target.(770) Instead, Mr. Lindsey asserted that he did not learn that Governor Tucker was mentioned in the referrals until October 7 or 8, 1993.(771)
On October 4 or 5, 1993, Mr. Lindsey passed the confidential RTC information directly to the President.(772) When asked about the President's response, Mr. Lindsey claimed implausibly that "it was certainly nothing other than just sort of, `hmmmmmmm.'"(773)
Curiously, on October 6, 1993, President Clinton had a meeting at the White House with Governor Jim Guy Tucker.(774) Former Deputy Assistant to the President Keith Mason testified that he attended this meeting,(775) which was held late in the afternoon and lasted 30 to 45 minutes.(776) Mr. Mason asserted that no discussions occurred at the meeting about Whitewater, Madison or RTC criminal referrals.(777) Prior to the meeting, Mr. Mason escorted Governor Tucker to the office of White House Chief of Staff Mack McLarty.(778) Mr. Mason was present during part, but not all, of a meeting between Governor Tucker and Mr. McLarty.(779) Mr. Mason claimed that at least while he was present Governor Tucker and Mr. McLarty did not discuss Madison Guaranty, the RTC criminal referrals or Whitewater.(780)
Although Mr. Lindsey testified that he did not know that the criminal referrals mentioned Governor Tucker as of October 6 and therefore did not pass this information onto the President, such information hardly would have been necessary. Notes taken by Susan Thomases during the 1992 campaign indicate that President Clinton had clear knowledge of the link between Whitewater and Governor Tucker. In notes taken of a February 22, 1992 conversation relating to Whitewater, Ms. Thomases wrote:
"Have Gerth call Tucker
BC tell me to call Tucker"(781) On March 9, 1992, Jeff Gerth of the New York Times wrote to Ms. Thomases seeking additional information for his article on Whitewater and Madison. In the margin of the letter, Ms. Thomases had taken notes, apparently of a conversation with Bill Clinton.47 In one such note, next to Mr. Gerth's allegation that Mr. McDougal was subsidizing the Clintons' interest in the Whitewater investment, Ms. Thomases wrote: "Call Jim Guy Tucker."(782) Tellingly, as of the date of Ms. Thomases' notes, there had been no public allegation suggesting any link between Mr. Tucker and Whitewater, Madison, or Mr. McDougal.
The Special Committee did not obtain testimony from Governor Tucker because he, along with James and Susan McDougal, was a defendant in a federal criminal proceeding. The Whitewater-related charges prosecuted by Independent Counsel Kenneth Starr in the Tucker-McDougal trial stemmed directly from the RTC criminal referrals prepared by Ms. Lewis--the substance of which was conveyed from Ms. Hanson, through Mr. Sloan and Mr. Lindsey, to President Clinton. On May 28, 1996, an Arkansas jury convicted Governor Tucker of conspiracy and mail fraud in connection with transactions involving Mr. McDougal and Mr. Hale; President Clinton testified as a defense witness in the trial.(783)
On October 8, 1993, the RTC Professional Liability Section completed its legal review of the criminal referrals.(784) On the same day, the criminal referrals were transmitted to the U.S. Attorney's Office in Little Rock without any change from their original versions prepared by Ms. Lewis.(785)
On October 14, 1993, senior White House officials met again in Mr. Nussbaum's office with senior officials from the Department of Treasury to discuss the criminal referrals.(786) Mr. Lindsey, Mr. Nussbaum, Mr. Sloan, Associate White House Counsel Neil Eggleston and White House Director of Communications Mark Gearan met with Ms. Hanson, Department of Treasury Chief of Staff Joshua Steiner and Assistant Secretary of Treasury for Public Affairs Jack DeVore.(787) Mr. Devore testified that it "appear[ed] that someone in either Nussbaum's or Hanson's office called my secretary and asked her to schedule this meeting."(788) During the meeting, Mr. DeVore explained to the group that he had received press inquiries about the criminal referrals, and a detailed description of the criminal referrals ensued. In a memorandum to file, entitled "Whitewater Development Corporation,"(789) Mr. Lindsey indicated that one of the referrals "involved four cashiers checks -- each for $3,000, two made payable to the Clinton for Governor Campaign and two made payable to Bill Clinton."(790) Mr. Lindsey further wrote that "DeVore confirmed with the RTC that the referrals had been received in the Washington office, but had already forwarded on to the Little Rock U.S. Attorney's office."(791) III.
A Pivotal Event: The November 5, 1993 Meeting Between White House Officials and the Clintons' Private Lawyers.
November 5, 1993, armed with details of the confidential RTC criminal referrals and Mr. Hale's allegations against President Clinton, senior White House officials met with the Clintons' private lawyers. The stated purpose of this meeting was "to impart information to the Clinton's personal lawyers."(792) The White House officials in attendance were Mr. Eggleston, Mr. Lindsey, Mr. Nussbaum, and Associate White House Counsel William Kennedy.(793) The private lawyers were David Kendall of Williams & Connolly, Little Rock attorney Steven Engstrom, and James Lyons, the author of the Clinton campaign's 1992 Whitewater report.(794) According to Mr. Lindsey, who characterized the gathering as a legal defense meeting, "[t]he purpose of the meeting was Whitewater Development Corporation."(795)
Mr. Kennedy's notes of the meeting, which the Committee obtained after a protracted dispute with the White House,(796) indicated that the White House officials provided the Clintons' private lawyers with much of the information they possessed concerning Whitewater, including confidential information relating to ongoing investigations by the SBA, RTC, and Justice Department.(797) In essence, the White House officials used confidential information they gained by virtue of their positions of public trust to further the Clintons' private legal defense.
A significant part of the discussion related to the ongoing RTC investigation of Madison.(798) Among the principal topics of the meeting was the referral related to illegal contributions to Mr. Clinton's gubernatorial campaign.(799)48 Coincidentally, Mr. Lindsey, in his October 20 memorandum, appeared to be particularly concerned about one of the referrals, which "involved four cashier checks -- each for $3,000, two made payable to the Clinton for Governor Campaign and two made to Bill Clinton." Mr. Kennedy claimed, however, that Mr. Lindsey indicated during the meeting that the source of the information was press accounts: "Basically, that Bruce is outlining, sort of the allegations, that the press was reporting wherein the referrals."(800)
White House officials also discussed the fact that Governor Tucker was a target of the referrals. In two separate entries, Mr. Kennedy wrote "Could be that JGT is target of RTC referral"(801) and "RTC-people trying to get BC and JGT."(802) Mr. Lindsey testified that he first learned that Mr. Tucker was a target in the RTC investigation during the October 14 meeting with RTC officials: "I believe in the October 14th meeting that we had with certain people from the Treasury Department, that they indicated that Jeff Gerth had indicated that to them."(803) Notes taken by Susan Thomases indicate, however, that at least President Clinton identified Mr. Tucker with Whitewater in February and March 1992. In notes taken from a February 22, 1992 conversation relating to Whitewater, Ms. Thomases wrote:
"Have Gerth call Tucker
BC tell me to call Tucker"(804) Likewise, Ms. Thomases' notes, apparently of a conversation with then-Governor Clinton, taken on a March 9, 1992 letter from Mr. Gerth seeking information on Whitewater recorded: "Call Jim Guy Tucker."(805) Mr. Tucker's ties to the McDougal and to Madison had not been publicized at the time.
Another principal topic of discussion raised by Mr. Lindsey was Madison's retention of the Rose Law Firm and Mrs. Clinton's representation of Madison in connection with Madison's proposal for a preferred stock offering.(806)49 Mr. Kennedy testified that Mr. Lindsey "[i]s giving history, and it's basically that she has given authority for Madison to do both things, and Bruce is talking about, you know, the perception about Beverly Bassett."(807) Under "Beverly Basset," Mr. Kennedy wrote: "too much coziness."(808)
Although senior White House officials' claimed that they communicated only general background information concerning Whitewater and Madison during the November 5th meeting, Mr. Kennedy's notes detail the financing of the Clintons' investment in Whitewater. Almost four pages of Mr. Kennedy's notes relate to the reconstruction of the Whitewater loans and transactions.(809) The attendees were particularly interested, according to Mr. Kennedy's notes, in James Blair's involvement in the sale of the Clintons' interest in Whitewater in 1992,50 as well as Mr. Blair's possible involvement in Christopher Wade's payment of the outstanding bank loan on which the Clintons were guarantors.51 Mr. Blair had provided James McDougal with the $1000 to purchase the Clintons' Whitewater stock on December 22, 1992.(810) The senior White House officials and the Clintons' private lawyers also discussed tax issues related to the Clintons' investment in Whitewater,52 and the chain of custody of certain Whitewater records that were used during the 1992 campaign to piece together specifics of the Clintons' investment.53
Curiously, a notation at the bottom of the first page of Mr. Kennedy's notes suggested a possible link between the FBI's investigation of CMS, which allegedly made an illegal loan to James and Susan McDougal in 1986 at the request of then-Governor Clinton, and the death of President Clinton's friend and counsel, Vincent Foster. Mr. Kennedy wrote:
FBI issued subpena & took records of
municipal judge named Hale
Also the day that VF killed himself
Factor"(811) Mr. Kennedy claimed that "by factor" he meant: "Simply that the coincidence had become a factor in all of the intense speculation surrounding Vince's suicide."(812)
The November 5th meeting also concerned "a division of labor between personal and White House counsel for handling future Whitewater issues."(813)
In the middle of Mr. Kennedy's notes appears a cryptic reference to a remark by Mr. Kennedy that suggests the possibility of an effort to suppress critical evidence concerning Whitewater.(814) Mr. Kennedy wrote:
"Vacuum Rose law Files
WWDC Docs - subpoena
*Documents - never know go out
Mr. Kennedy claimed to the Special Committee that "vacuum" was used in this meeting as a noun, not a verb:
We were referring to at the meeting that there was an information vacuum, that when you tried [to] get your arms around Whitewater, in this case referring to the real estate investment, it is impossible to do. The records were a shambles. I had personal knowledge of that. You are dealing with an information vacuum. The Rose Law files, as they related to Whitewater documents, would--if you had gotten you hands on them, they would not have meant anything to you because of the condition of the records."(816)
Mr. Kennedy denied that the entry "WWDC Docs - subpoena" reflected the concern of senior White House officials over the possibility that Whitewater records might be subpoenaed.(817) Instead, Mr. Kennedy claimed:"The discussion was that if a subpoena were issued, files that had once been at the Rose Law Firm would no longer be there, with regard to Whitewater."(818) Mr. Kennedy asserted that "*Documents - never go out/Quietly(?)" actually referred to the handling of Rose Law Firm files during the campaign: "It relates to the fact that there is--as far as I know, still is--a mystery about how the Whitewater documents--again I wish to stress these are the corporate records and real estate records relating to Whitewater as an investment--got from the Rose Law Firm to the campaign in 1992."(819)
Regardless of whether "vacuum" is a verb or noun, records relating to Whitewater and Madison had been systematically removed from the Rose Law Firm during and after the 1992 campaign. After questions arose about the Clintons' investment with the McDougals in Whitewater and Mrs. Clinton's representation of Madison Guaranty before a state agency, Vincent Foster collected all the information he could on the Madison representation. At the conclusion of the campaign, the Madison files, which were by now the property of the RTC as conservator of Madison, as well as the files of other Rose clients for whom Mrs. Clinton had performed legal services, were secretly removed from the firm by Webster Hubbell. Mr. Hubbell removed these files, at times taking the firm's only copies,(820) without obtaining the consent of the firm or client.(821)
Also during the 1992 presidential campaign, Mr. Foster or Mr. Hubbell ordered the printing of billing records relating to the Rose Law Firm's representation of Madison Guaranty. These important records revealed the extent of Mrs. Clinton's legal work for Mr. McDougal's S&L, including her telephone call to Beverly Bassett Schaffer, the Arkansas Securities Commissioner appointed by Governor Clinton, about the troubled thrift's controversial proposal to raise capital by issuing preferred stock. The records also reflected Mrs. Clinton's work on the IDC or Castle Grande transaction, which federal regulators described as a series of fraudulent land flips.(822) The records contained the handwritten questions of Mr. Foster to Mrs. Clinton and notations by Mr. Hubbell.(823) Mrs. Clinton has recently stated through her lawyer that she may have reviewed the records during the 1992 presidential campaign.
After federal investigators began to look into matters relating to Madison Guaranty and Whitewater, a number of subpoenas were issued for these Rose Law Firm billing records. By then, however, the records were nowhere to be found. Despite extensive searches conducted by the law firm, neither the originals nor copies were discovered.(824) They were not in the firm computers, its client files, or the firm's storage facility.(825) The billing records, long lost, finally turned up in August 1995 in the Book Room of the White House Residence.
When asked about Mr. Foster's removal of documents from the Rose Law Firm, Mr. Kennedy admitted that he knew Mr. Foster had searched for Madison files during the 1992 campaign,(826) but claimed that he was not aware of whether Mr. Foster had removed the files from the Rose Law Firm.(827)
Mr. Kennedy also claimed that he wrote "quality," not "Quietly," in his notes, and was talking about the condition of "the Whitewater records that I once had in my possession, received from Ms. Clinton."(828) Mr. Kennedy admitted that the Rose Law Firm did not have custody of any Whitewater documents, but claimed that, "The Whitewater files were Rose files when they were in my possession when I was performing legal work for Ms. Clinton."(829)
Finally, Mr. Kennedy's notes recorded the following command: "Try to find out what's going on in Investigation,"(830) a directive that would inform the actions of White House officials throughout the Whitewater defense effort. IV.
The White House Obtains Confidential SBA Documents Relating to Mr. Hale and Capital Management.
At the November 5 meeting, senior White House officials and the Clintons' private lawyers discussed David Hale and his allegations against President Clinton. For example, under the heading "David Hale," Mr. Kennedy's notes reflect the following notations:
"Tunnel at Capitol--Clinton says McD will call you--DH--hope
you'll help em
145 Street Trailer - Jogging Shorts
Shopping Malls - Clinton says do you know what bitch Susan
did with money-sed."(831) The notations reflect Mr. Hale's allegation that he saw then-Governor Clinton three times in 1986. At the first meeting, on the steps of the Arkansas Capitol, Governor Clinton allegedly approached Mr. Hale and said that James McDougal would call Mr. Hale; Governor Clinton allegedly hoped that Mr. Hale would help Mr. McDougal.(832) The second meeting allegedly took place at Mr. McDougal's trailer office on 145th Street in Little Rock.(833) Governor Clinton, wearing a jogging outfit, asked Mr. Hale to make a loan to Mr. McDougal. Finally, in the third meeting, at a Little Rock shopping mall, Governor Clinton, agitated, allegedly asked Mr. Hale: "Do you know what that bitch Susan did with the money?"(834) Mr. Kennedy's notes recorded that:
"David Hale did make a $300,000 loan to Susan McD.
Jim McD says purchase land in Pulaski Co from IP
purchased in name of WW in 10/86."(835)
Three days after the November 5 Whitewater defense meeting, on November 8, Mr. Nussbaum directed Mr. Eggleston to a November 6 Washington Post story about a request from John LaFalce, Chairman of the House Committee on Small Business, to Mr. Bowles for information relating to CMS.54 (836) The report, according to Mr. Eggleston, noted that Chairman LaFalce asked for the requested information by November 15, 1995.(837)
Mr. Bowles responded to Chairman LaFalce's inquiry on November 15, 1993 in a four-page letter that provided a detailed summary of the investigation into CMS and responded to the specific questions set forth in Chairman LaFalce's November 4, 1993 letter.(838) More importantly, Mr. Bowles' letter was accompanied by twelve sets of attachments, which included, among other things, lists of all loans provided by CMS, all portfolio financing reports submitted by CMS in connection with its SBA loans, all eleven reports of SBA audits of Capital Management, Mr. Foren's May 5, 1993 referral of the case to the Inspector General, and the September 23, 1993 criminal indictment against David Hale.(839) In short, the attachments, "approximately a foot high,"(840) essentially comprised the entire SBA file on the operation, regulation, and investigation of CMS and David Hale.
On the morning of November 16, 1993, the day after Mr. Bowles replied to Chairman LaFalce, Mr. Eggleston called the SBA and spoke with the Office of Legislative Affairs.(841) The SBA directed Mr. Eggleston's inquiry to John Spotila, the SBA General Counsel. Mr. Spotila advised that the SBA had responded to Chairman LaFalce's request late the night before.(842) According to Mr. Eggleston, Mr. Spotila sent Mr. Eggleston via facsimile a copy of Mr. Bowles' letter to Chairman LaFalce at 11:20 a.m.(843) Mr. Spotila followed up with another facsimile at 3:20 p.m., enclosing an SBA press release about Mr. Bowles' response.(844) According to Mr. Eggleston, he then asked Mr. Spotila "whether it would be appropriate for the White House to have whatever had been provided to Congress."(845)
John Spotila was a classmate of President Clinton at Georgetown. According to Mr. Spotila, "I have known the President for quite a while. I was a classmate of his at Georgetown, and briefly at Yale, although my third year was his first year at the [law] school."(846) He also knew Mrs. Clinton.(847) Mr. Bowles testified that he selected Mr. Spotila as general counsel partly on Mrs. Clinton's recommendation.(848)
On November 16, 1993, Mr. Spotila testified that he "faxed a copy of the press release that had been done and then the cover letter."(849) After receiving the facsimiles, Mr. Eggleston asked Mr. Spotila whether he could have the attachments that accompanied Mr. Bowles' letter.(850) Mr. Spotila testified that he consulted with Mark Stephens of his staff, who erroneously told Mr. Spotila that "all of the documents were entirely routine and nonsensitive."(851)
In fact, at the top of the first page, Mr. Bowles' letter to Chairman LaFalce in bold type, contained the following notice:
The information contained herein has been determined to be confidential in nature and therefore not releasable to unauthorized parties. Disclosure of this information may violate Federal law (e.g., Privacy Act of 1974, the Right to Financial Privacy Act of 1978, and 18 U.S.C. § 1905). Utmost discretion should be exercised.(852) Beyond this, Mr. Spotila's one sentence transmittal letter to Mr. Eggleston also specified that the information was confidential: "Enclosed is a copy of Erskine's letter yesterday to Chairman LaFalce (with confidential attachments)."(853)
While Mr. Eggleston was seeking this confidential SBA information, he was also speaking with other senior White House officials. He left a message for Bruce Lindsey advising him of the confidential documents attached to the LaFalce letter:
Neil Eggleston said the additional information is at SBA and is approximately a foot high. He has a call in to SBA to find out if it contains reference to either the President or Hillary. He can obtain a copy of the documents if it appears necessary but does not believe it is problematic.(854) Mr. Eggleston did not recall talking with Mr. Lindsey on November 16 about the SBA documents. Indeed, Mr. Eggleston implausibly claimed the message he left for Mr. Lindsey message led him to believe that he did not talk to Mr. Lindsey: "I don't remember actually doing it, and this document leads me to conclude that I probably didn't, and that I communicated with Mr. Lindsey through his secretary, which happened fairly frequently because Mr. Lindsey is extremely difficult to get in touch with."(855) This testimony leaves open the obvious question of how Mr. Lindsey would have known what "additional documents" Mr. Eggleston was referring to in his message, if the two had not communicated previously about obtaining documents from the SBA.
That afternoon, November 16, Associate White House Counsel Eggleston personally went over to the SBA offices and picked up the "approximately a foot high"(856) set of attachments from Mr. Spotila. When he returned to the White House, he curiously left another message for Mr. Lindsey, at 4:58 p.m. The message -- captioned "important" by Mr. Lindsey's secretary -- stated: "Has some Whitewater documents to go over with you. Will come by about 6:00 p.m."(857)
Mr. Eggleston did not recall talking with Mr. Lindsey. "As I've said repeatedly, I don't actually remember that happening. This would certainly make it seem as if I had two communications with his secretary on that day with regard to these documents, and that makes a lot of sense. I mean, that's the reason I was getting these."(858) Mr. Eggleston claimed that he did not show documents to Mr. Lindsey:
I did not, as I recall, I never got to him with these documents. I don't remember whether he got back to me himself or through his secretary, but I recollect -- and again I don't know what Mr. Lindsey's recollection is -- but I recollect that I never showed him these documents.(859) Mr. Lindsey did not believe that he saw the records.(860)
Back at the SBA, Mr. Spotila met with Mr. Bowles and told him that he had provided the confidential documents to the White House.(861) Immediately, Mr. Bowles said, "I don't know if this is right or wrong, good or bad, up or down, but you better check with somebody with the Justice Department to see if it's okay."(862) Mr. Spotila instructed Mark Stephens to contact the Justice Department.(863)
The next day, November 17, 1993, Allen Carver, Principal Deputy Chief of the Justice Department's Fraud Section, called Mr. Stephens to obtain a copy of Mr. Bowles' November 15 response to Chairman LaFalce.(864) Mr. Stephens advised Mr. Carver of the transfer of the confidential SBA documents.(865) Mr. Carver and Mr. Stephens agreed to meet on November 18 at Mr. Carver's office with another attorney from the Fraud Section and an FBI agent working on the matter to discuss both Mr. Bowles report to Chairman LaFalce and the SBA's transfer of documents to the White House.(866)
At that time, the Justice Department instructed the SBA to retrieve from the White House the confidential documents and any White House materials analyzing those documents: "Carver said get docs back + get their notations as well as all copies + list of people w/ access to docs."(867) The notes also explained the reason for the Justice Department's objection: "Due to scope, they -- part of investigative body of material related to allegedly naming Pres. WH should not get docs or apprised of investigation."(868)
The next day, November 19, Mr. Carver talked with Mr. Stephens to ascertain the progress of the document retrieval. According to Mr. Carver's contemporaneous memorandum about the call, Mr. Stephens said that "he called and spoke with Neal Eggleston earlier in the day, about 1:55 p.m., and Mr. Eggleston said that he would discuss the matter with the Deputy Attorney General and would discuss the matter further with Mr. Stephens early the next week."(869)
Immediately, Mr. Carver called his supervisor, Fraud Section Chief Gerry McDowell, to advise him of Mr. Eggleston's conversation with Mr. Stephens. According to contemporaneous notes of the conversation, Mr. McDowell said, "I've got to believe the WH counsel have done an incredibly stupid thing!"(870) Mr. McDowell immediately notified the Associate Deputy Attorney General David Margolis.(871) Mr. McDowell also talked directly with the Deputy Attorney General Phillip Heymann, who agreed with Mr. McDowell that this "could be an influence type situation."(872)
According to contemporaneous notes, Mr. Eggleston called Mr. Heymann that day and talked to Mr. Nathan, Mr. Heymann's deputy. Mr. Nathan apparently conveyed Mr. Heymann's strong sentiment to Mr. Eggleston, who, after the conversation, "wanted to get the documents back to the SBA as soon as possible."(873) Curiously, White House Counsel Bernard Nussbaum, Mr. Eggleston's supervisor, called Associate Attorney General Webster Hubbell at 10:29 a.m. on November 19.(874)
Although Mr. Eggleston was instructed specifically by the Justice Department to return the confidential documents immediately, he inexplicably waited for several days.(875) Mr. Eggleston claimed that "[b]y that time, it was obvious that we would return the documents, but I had to talk to my supervisor before agreeing to do so."(876) After speaking with the Justice Department, Mr. Eggleston stated that he became "quite concerned, and spoke fairly quickly thereafter to Mr. Nussbaum and then worked hard to get the documents back as soon as I could."(877)
On May 21, Mr. Eggleston finally reached Mr. Stephens, and arranged for the return of the documents.(878) Mr. Stephens met Mr. Eggleston at the street corner in front of the SBA, where Stephens took back the box of SBA documents.(879)
Mr. Eggleston reviewed the SBA documents. He did not, however, "see any documents that I thought were particularly sensitive or that would have alerted me to the notion that Department of Justice might have had a problem."(880) The career Justice Department prosecutors, however, had a different view of the matter. Because the documents concerned a case involving allegations against the President, Mr. Carver believed that the White House had no right to any confidential documents or to be apprised of facts relating to the ongoing investigation.(881)
The Justice Department immediately commenced an investigation into the transfer of confidential information to the White House. On November 19, Mr. Carver discussed the investigation with the FBI. The FBI Chief of the Governmental Fraud Unit, Richard Wade, "expressed concern over the possibility that the White House-SBA action, however, well-intended, could look like White House intervention."(882) Mr. Carver recommended that the FBI interview Mr. Eggleston,(883) and also interview Mr. Kennedy concerning his conversations and contacts with Mr. Hale's attorney, Mr. Coleman, about the case.(884)
This matter is still under investigation by the Office of the Independent Counsel. V.
The White House Begins to Hold Whitewater Defense Meetings.
By late 1993, in the wake of new revelations, members of Congress and the national press began to call for the appointment of a special counsel to investigate Whitewater and Madison Guaranty. At that time, although the statute governing a judicial appointment of an Independent Counsel had lapsed, the Attorney General could appoint a special counsel to investigate the matter.
During the first weeks of January 1994, senior officials of the White House met twice daily in Whitewater Response Team meetings.(885) Present were Deputy Chief of Staff Harold Ickes, who was hired in part to coordinate the Whitewater defense effort; Chief of Staff Thomas Mack McLarty; White House Counsel Bernard Nussbaum; Deputy White House Counsel Joel Klein; Senior Advisor to the President George Stephanopoulos; Counselor to the President David Gergen; Associate White House Counsel Neil Eggleston; and Director of White House Communications Mark Gearan.(886) Significantly, Mrs. Clinton and her Chief of Staff, Margaret Williams, attended some of the meetings.(887)
During the Banking Committee hearings in the summer of 1994, senior White House officials provided evasive answers when asked to describe the purpose of the meetings.(888) Mr. Lindsey and Mr. Nussbaum both failed to mention any specific subject discussed other than the handling of press inquiries related to Whitewater.(889)
The Special Committee, however, obtained evidence this year that White House officials discussed far more than press inquiries at these twice daily meetings.(890) Contemporaneous and detailed notes of these meetings, prepared by Mr. Gearan reflect an extensive debate over whether an independent or special prosecutor should be appointed, and, if so, the scope and duration of such an independent investigation.(891) The notes also reflect the willingness of senior White House officials to attempt to interfere in ongoing investigations, particularly regarding former Arkansas Securities Commissioner Beverly Bassett Schaffer's regulation of Madison.(892) Finally, the notes indicate yet another instance of government lawyers providing private legal services to the President and Mrs. Clinton.
Senior White House officials debated the appointment of a Special Counsel.
Mr. Gearan's notes reflect considerable debate within the White House on the appointment of a special counsel versus independent counsel. At a January 4, 1993 meeting, Mr. Gergen observed that the difference between independent counsels, appointed by a panel of federal judges, and special prosecutors, appointed by the Attorney General, is that independent counsels "take on a life of their own."(893)
The next day, January 5, 1993, the debate continued. Mr. Nussbaum argued strenuously that no substantive difference existed between an independent counsel and a special prosecutor.(894) In Mr. Nussbaum's view, both an independent counsel and a prosecutor are "subject to no control [and] come [with the] desire to get someone."(895) Mr. Nussbaum expressed his "adamant" opposition to the appointment of any independent prosecutor.(896)
Mr. Gearan recalled that Mr. Nussbaum, again continuing to exhibit his concern about control, compared an independent or special prosecutor to "somewhat of an unguided missile."(897) To illustrate his point, Mr. Nussbaum envisioned two scenarios--the "good-hearted" prosecutor and the "bad-hearted prosecutor."(898) The "good hearted" prosecutor would conduct an investigation and simply document his findings.(899) In contrast, the "bad-hearted" prosecutor "goes in & decides a smell of corruption & can show some things of those people close around the principal."(900) According to Mr. Gearan, the "principal" was President Clinton.(901)
A significant, if not dominating, concern of the White House officials during the Whitewater defense meetings was Mrs. Clinton's opposition to the appointment of either an independent or a special prosecutor. Mr. Gearan's notes of January 4, 1994 show that Mrs. Clinton joined the meeting -- already in progress -- and said "this looks like a meeting I might be interested in."(902) Mrs. Clinton stayed for approximately 15 minutes,(903) and opposed the appointment of a special counsel.(904) After she left several officials expressed the view that it was pointless to debate the merits of an independent counsel versus a special counsel given Mrs. Clinton's steadfast opposition to the appointment of either type of prosecutor.(905)
On January 5, Mr. McLarty and Mr. Ickes both supported Mrs. Clinton's position.(906) Mr. McLarty advised that the group move off the discussion of a special prosecutor or counsel because "HRC and BC don't want it."(907) Harold Ickes stated that the discussion "was the biggest f------ waste of time."(908) Before the Special Committee, Mr. Ickes testified that, although he could not recall the specific meeting, "it was well known that Mrs. Clinton had very, very grave reservations" about the appointment of any type of prosecutor.(909)
On January 7, senior White House officials discussed attempting to persuade Mrs. Clinton to reverse her position on the appointment of a special counsel.(910) Mr. Ickes advised that Secretary of State Warren Christopher or attorney Robert Barnett might attempt to convince Mrs. Clinton that a prosecutor should be appointed.(911)
Ultimately, however, Mr. Ickes thought that it was "impossible" to "reopen" the discussion with Mrs. Clinton.(912) Mr. Gearan recalled that everyone in attendance at the meeting agreed that it would be "impossible" for anyone, including the President, to change Mrs. Clinton's mind.(913)
Later that day, Mr. Ickes again stated Mrs. Clinton's strong opposition to the appointment of any prosecutor.(914) Mr. Gearan's notes of this second meeting indicate that Mr. Ickes regarded Mrs. Clinton's "adamant oppos[ition]" as one of the major problems with calling for a special counsel.(915)
Senior White House officials and Mrs. Clinton feared that a special counsel might indict persons close to President Clinton. According to Mr. Gearan's notes of a January 7, 1993 meeting, Mr. Nussbaum said, "Indictments will be Betsy Wright."(916) Ms. Wright was Governor Clinton's former Chief of Staff in the 1980s and handled damage control for Whitewater and other Arkansas-related matters during the 1992 Clinton presidential campaign.(917) Mr. Gearan implausibly denied that any concern was expressed that Ms. Wright would be indicted: "[A]t no time was I present in any conversation where Mr. Nussbaum suggested that there is any basis for Ms. Wright to be charged with anything like this."(918) Mr. Gearan claimed that Mr. Nussbaum identified Ms. Wright as an extreme example of someone who might face prosecution by a special counsel investigating Madison Guaranty and Whitewater.(919)
In any event, senior White House officials were concerned about possible indictments. A White House document, entitled "Confidential: Second Draft, Summary of Arguments Re: Whitewater," dated January 10, 1994, lists reasons against the appointment of a prosecutor.(920) The memorandum specifically states that a special counsel investigation "may result in focus on friends and associates of the President, begin to squeeze them and may subject some to indictment."(921) Mr. Ickes admitted that there "may well have been" concern among White House officials over possible indictments,(922) and "a lot of names came up" in the discussion of persons who might be "squeezed" or "hurt" by an investigation.(923)
Evidently Mr. Nussbaum, too, believed that associates of the Clintons might be vulnerable to criminal prosecution.(924) Mr. Gearan's notes of a January 5, 1993 meeting indicate that Mr. Nussbaum believed it would be possible for a criminal prosecutor to detect "a smell of corruption and can show some things of those people close around the principal."(925) Mr. Gearan recalled this statement and admitted that "principal" referred to President Clinton.(926)
During the debate over the appointment of a special counsel, senior White House officials apparently attempted both to influence Attorney General Reno's decision on the matter and to negotiate the scope of an impending investigation. As early as the January 4 meeting, White House officials feared that Attorney General Reno would appoint an independent prosecutor without the White House's input on the matter.(927) Mr. Gearan's notes of the January 7 meeting indicate discussion about Attorney General Reno's decision,(928) and preference for "fewer [questions] to lessen the exposure."(929)
Later, that day, Mr. Gearan noted that all meeting participants agreed, except for Bernard Nussbaum, that "Reno is boxed once Ind[ependent] C[ounsel] starts."(930) Mr. Gearan confirmed that senior White House officials feared that after the Attorney General appointed an independent counsel, the matter would be "out of her hands" with regard to the duration and scope of the investigation.(931) The notes suggest that a problem with calling for a special counsel is that "Reno has shut the door."(932) Mr. Gearan denied that this entry referred to any rejection by Ms. Reno of attempts by the White House to influence her decision on the support of a special counsel.(933)
On January 8, 1994, Mr. Ickes expressed displeasure with regard to how career Justice Department prosecutors--Donald Mackay and Alan Carver--were handling the ongoing federal investigations of Madison Guaranty and Whitewater.(934) Mr. Ickes described Mr. Carver as a "bad guy" because he put the Clintons' private counsel, Mr. Kendall, on a speaker phone with two FBI agents and another prosecutor, Jim Nixon, on the other end.(935) Mr. Ickes believed that the career Justice Department prosecutors "are f----- us blue."(936)
Mr. Gearan claimed that Mr. Ickes' strong remarks were actually complimentary. Mr. Gearan asserted that his reference to "Those guys are f------ us blue" meant that the Justice Department officials were "tough" on the White House and had acted "independent[ly]."(937)
Mr. Ickes similarly claimed that "Those guys are f------- us blue" meant that "they were probably doing an effective job."(938) Mr. Ickes denied that his remarks reflected White House irritation with Justice Department officials for spurning White House attempts to influence their investigation.(939)
This testimony is contradicted, however, by handwritten notes of Roger Altman, Deputy Treasury Secretary and Interim CEO of the RTC. In fact, Mr. Altman's support the inference that certain White House officials sought to negotiate the scope of any investigation of Madison Guaranty and Whitewater, but that Attorney General Reno rebuffed their efforts.(940)
Mr. Altman's notes record two conversations that he had with Mrs. Clinton's Chief of Staff Margaret Williams during the same period in which the Whitewater Response Team meetings were taking place. According to Mr. Altman's notes, dated January 6, 1994, at or about that time, "Maggie's strong inference was that the White House was trying to negotiate scope of an independent counsel with Reno and having enormous difficulty."(941) Indeed, Ms. Williams told Mr. Altman that Mrs. Clinton herself did not want investigators "poking into 20 years of public life in Arkansas."(942) According to notes of January 11, 1994, Ms. Williams told Mr. Altman: "On Whitewater, HRC was paralyzed by it. If we don't solve this matter within the next two days, we don't have to worry about her schedule on Health Care."(943)
David Kendall, the Clintons' personal attorney, also participated in the White House discussions over the appointment of a special counsel, including whether the desirability of "attempting to impose limitations" on the investigation.(944) In fact, Mr. Kendall drafted the very letter that Mr. Nussbaum ultimately sent to the Attorney General Reno requesting the appointment of a special counsel.(945)
On January 12, 1994, after the President called for a special counsel, Attorney General Reno appointed Robert B. Fiske, Jr., to conduct the investigation into "whether any individuals or entities [had] committed a violation of any federal criminal or civil law relating to [the Clintons'] relationship with Madison Guaranty Savings & Loan Association, the Whitewater Development Corporation, or Capital Management Services, Inc."(946)
White House contacts with former Arkansas Securities Commissioner Beverly Bassett Schaffer.
Senior White House officials feared that Beverly Bassett Schaffer, the Arkansas Securities Commissioner who regulated Madison Guaranty in the mid-1980s, would contradict Mrs. Clinton's statements concerning the nature and extent of Mrs. Clinton's representation of Madison Guaranty before the state regulator -- as Ms. Schaffer did in testimony before the Special Committee. During the January 1994 Whitewater Response Team meetings, for example, senior White House officials recognized the importance of Ms. Schaffer's "story" and considered measures to ensure that she would continue to do a "good job" telling it.(947)
During the 1992 presidential campaign, Ms. Schaffer's regulation of Madison became an issue.(948) Ms. Schaffer allegedly ignored evidence of the S&L's insolvency and failed to close down Madison Guaranty.(949) News reports also claimed that Ms. Schaffer approved a novel proposal submitted by Mrs. Clinton and her law firm on behalf of Madison Guaranty to raise needed capital by issuing preferred stock.(950)
Questions also arose about whether Mrs. Clinton improperly benefitted from her representation of Madison.(951) Mrs. Clinton wrote to Ms. Schaffer on behalf of Madison Guaranty on the novel preferred stock issue.(952) Only two weeks later, in a letter to Mrs. Clinton addressed, "Dear Hillary," Ms. Schaffer approved the proposal.(953) Mrs. Clinton forwarded Ms. Schaffers' letter of approval to James McDougal, the Clintons' Whitewater business partner and the owner and operator of Madison Guaranty.(954)
These contacts between Mrs. Clinton and Ms. Schaffer, and Mrs. Clinton and Mr. McDougal, raised the issue of the propriety of the Governor's spouse attempting to influence a state regulator appointed by her husband on behalf of a client and business partner.
Mrs. Clinton and Ms. Schaffer both denied allegations that Madison Guaranty had received any special treatment. The Clinton campaign issued statements, attributed to Mrs. Clinton, expressly claiming that "she had done legal work for Madison Guaranty, but that it was not related to the Savings & Loan's dealings with state regulators."(955) Ms. Schaffer, with the assistance of the Clinton campaign, composed statements, including two memoranda to the New York Times, denying any special treatment for Madison Guaranty.(956)
In October 1993, the RTC sent a criminal referral to the U.S. Attorney's Office in Little Rock suggesting a connection between the preferred stock issue and campaign contributions to Governor Clinton.(957) The referral noted that during the same month that Mrs. Clinton wrote to Ms. Schaffer, several questionable $3,000 Madison Guaranty cashier checks were written to the Bill Clinton Campaign.(958) The referral stressed that Madison's preferred stock plan was approved quickly, and that Madison Guaranty's request to issue preferred stock occurred when Madison badly needed additional capital.(959) The referral identified both Hillary Rodham Clinton and Beverly Bassett Schaffer as possible witnesses to criminal misconduct.(960)
On September 29, 1993, the White House received a "heads up" about the substance of these referrals.(961) At the November 5, 1993 meeting at Williams & Connolly, senior White House officials and private attorneys for the Clintons discussed Mrs. Clinton's representation of Madison Guaranty before the Arkansas Securities Department,(962) particularly the "coziness" of the relationship.(963)
On December 20, 1993, the New York Times published an editorial, entitled "Open up on Madison Guaranty."(964) The editorial described the close relationship between the McDougals and the Clintons and stated: "Others, however, are mildly troubled by the fact that Mr. Clinton did not order his regulators to crack down on Mr. McDougal even after he was advised by his own banking commissioner in 1983 that the savings & loan operator was engaged in imprudent banking practices.(965) In the margin of the editorial, the President wrote: "This is important to be on top of. Bassett did a good job in [campaign] on this--can she now?"(966) The President then forwarded copies of the editorial containing his handwritten marginalia to Messrs. Lindsey and McLarty.(967)
One week later, President Clinton and Mr. Lindsey attended a basketball game at the University of Arkansas with Ms. Schaffer and her husband.(968) At the game, Mr. Lindsey asked Mr. Schaffer if she would be willing to answer press inquiries "with respect to her role and what she did and get that story out."(969) Mr. Lindsey could not recall whether the President participated in the conversation.(970)
On January 6, 1994, senior White House officials discussed Ms. Schaffer's role in connection with Madison's issuance of preferred stock.(971) Associate White House Counsel Neil Eggleston recalled discussions about the importance to the President and Mrs. Clinton of Ms. Schaffer's statements "about her role" during the mid-1980s in regulating Madison Guaranty.(972)
The next day, January 7, senior White House officials again discussed Ms. Schaffer. This time, White House officials considered sending Mr. Lindsey, Washington lawyer Michael Waldman, and Paul Berry, a former roommate of President Clinton, "to [Arkansas] to meet [with] Beverly Bassett."(973) Mr. Waldman recalled that the officials discussed "sending people down to talk to" Ms. Schaffer.(974) Mr. Berry, a lobbyist for Union National Bank of Little Rock, had instructed Harry Don Denton, the Bank's loan officer, to make a $20,000 Whitewater loan to Bill Clinton in 1978 because he was "an up and coming political star;"(975) Mr. Denton testified that he would not have made the loan absent Mr. Berry's urging.(976)
At a second January 7 meeting, senior White House officials expressed a sense of urgency about Ms. Schaffer's story beyond simple concern over a misperception in the press.(977) According to Mr. Gearan's notes, Mr. Ickes exclaimed: "[Beverly] Bassett is so f---- important. [I]f we f--- this up, we're done."(978) Mr. Ickes added, "[L]et's not talk it to death-let's just get it done."(979)
Mr. Ickes and Mr. Gearan both claimed that Ms. Schaffer's story "was so f------ important" because the White House did not want "to misstate anything."(980) Neither could recall the meaning of Mr. Ickes' comment "let's get it done."(981) Mr. Eggelston recalled, however, that "people recognize[d] that if [Ms. Schaffer] were suddenly to change what she had said publicly . . . and change her story about it, that would be a bad development."(982) Mr. Eggleston confirmed that senior White House officials were concerned that Ms. Schaffer would "change" her "story."(983)
After the discussion of Ms. Schaffer's importance, the senior White House officials again discussed sending an emissary to Ms. Schaffer.(984) Although Mr. Ickes rejected the earlier idea to send Messrs. Berry, Waldman, and Lindsey because "it will come out,"(985) he still wanted someone to go over her statement "item by item" to "make sure her story is [okay]."55 (986)
The senior White House officials feared that the press might discover that the White House had dispatched operatives to contact Ms. Schaffer and the appearance of impropriety.(987) Mr. Ickes was concerned that such a contact could "create an appearance that there was an effort to influence her."(988)
Both Mr. Ickes and Mr. Gearan denied that a decision was made to send someone to see Ms. Schaffer to "make sure her story is ok."56 (989) In the end, the White House decided not to "send people who were connected with the White House to talk to Ms. Schaffer."(990) Mr. Ickes claimed: "As far as I know, no one was sent from the White House to talk to Ms. Schaffer."(991)
Within a week of the January 9, 1994 meeting, however, at least two attendees reached out to Ms. Schaffer.57 According to an Associated Press article, Ms. Schaffer resisted pressure from Messrs. Lindsey, Begala, and Rutherford to hold a press conference in 1994 concerning her contacts on Madison's preferred stock offering.(992)
In January 1994, Ms. Schaffer spoke to John Tisdale, the Clintons' attorney in Little Rock, and he suggested that she help prepare a chronology for the White House.(993) In the second week of January 1994, Mr. Tisdale forwarded a series of memoranda to Mr. Lindsey.(994) It is unclear whether Mr. Lindsey had requested that these memoranda be prepared. A January 13, 1994 memorandum reflects communications between Mr. Tisdale's firm and Ms. Schaffer.(995) It includes the background of Ms. Schaffer's dealings with Mrs. Clinton and "is based on our discussions with [Ms.] Schaffer."(996)
Also in January 1994, Skip Rutherford, a public relations advisor to the White House on Whitewater-related matters, contacted Ms. Schaffer and her husband, Archie, to discuss the possibility that Ms. Schaffer might hold a press conference.(997) Ms. Schaffer stated that while Mr. Rutherford did not specifically indicate he was calling on behalf of the White House, she was aware that Mr. Rutherford was "helping" Chief of Staff McLarty in some capacity.(998) Deputy Chief of Staff Ickes denied knowledge of Mr. Tisdale's or Mr. Rutherford's contacts with Ms. Schaffer.(999)
At the same time that White House officials were meeting twice daily to coordinate the Whitewater defense effort, Betsey Wright, the 1992 Deputy Campaign Director and longtime associate of the President, travelled to Little Rock from Washington, D.C. Although Ms. Wright testified that she went to Little Rock to collect documents, she claimed that she was not asked by anyone at the White House to travel to Little Rock. Rather, Ms. Wright testified that she took it upon herself to collect these documents.
Ms. Wright contacted Mr. Lindsey, Mr. Podesta, and Mr. Kendall and informed them of her intention to travel to Little Rock,(1000) and that the purpose of her trip was to collect campaign finance records.(1001)
When asked why she went to Little Rock, Ms. Wright said, "I was trying to pull together - we kept getting the - the White House and I kept getting press questions about some campaign finance questions."(1002) Ms. Wright testified that the documents would be a "handy reference" and could be used in Washington to ensure that she was speaking with a higher degree of factual understanding.(1003)
While in Arkansas searching through the documents, which were under the control of the Democratic National Committee, she "located a box that when I opened it up it was Whitewater documents, and I brought it back to DC and gave it to Mr. Kendall."(1004) Ms. Wright also retrieved and made copies of the appointment files for Ms. Schaffer and gave those files to Mr. Kendall.(1005) In total, Ms. Wright testified that she had thirteen or fourteen boxes of documents shipped to her from Little Rock.(1006)
On January 6, after locating the documents at the storage facility, Ms. Wright called Mr. Lindsey.(1007) On January 6 or 7, Ms. Wright spoke with Mrs. Clinton.(1008) The First Lady said to Ms. Wright, "there is going to be an independent or special counsel. You need to get a lawyer. And that's how you should handle these documents." (1009)
The Whitewater Response Team assigns defense tasks to White House officials.
Records of the January Whitewater Response Team meetings reflected specific tasks assigned to the various members of the team.(1010)
Many of these assignments focused on the possible appointment of a special counsel, including the legal, historical, and practical aspects of appointing a special counsel. For example, a memorandum to the "Whitewater Group" from Mr. Ickes, dated January 10, 1994, assigned "2-3 page argument why no special counsel" to the White House Counsel's Office and Michael Waldman.(1011) In addition, however, there were a number of assignments related to the factual and legal issues involving Whitewater. Mr. Ickes claimed that this was all part of the White House effort to respond to press inquiries, but many of the tasks involved the Clintons' private legal defense issues. For example, "synopsis of Whitewater/Madison Guaranty matter" was assigned to the White House Counsel's office, Bruce Lindsey and Mr. Waldman, and "Memo re failure to take deduction on tax return for Whitewater losses" was assigned to Mr. Waldman.(1012) Mr. Ickes also tasked Mr. Waldman to contact Chris Wade, the Whitewater real estate agent, to obtain Whitewater documents.58
Finally, Mr. Ickes assigned to the White House Counsel's Office a legal memorandum on the statute of limitation for civil actions to be brought against Mrs. Clinton or the Rose Law Firm in relation to the legal representation of Madison Guaranty. Obviously, this legal memorandum did not relate to press inquiries nor did it relate to the White House Counsel's appropriate role in representing the United States Government. Rather, it was legal analysis to assist President and Mrs. Clinton. After Mr. Eggelston drafted the memorandum, Mr. Ickes forwarded it to Mrs. Clinton. VI:
The Retention and Investigation of Pillsbury Madison & Sutro.
In November 1993, Congress enacted the RTC Completion Act of 1993,(1013) which extended the statute of limitations period for the RTC to initiate civil suits against failed savings and loans to February 1994. The statute extended the limitations period only for claims arising from fraud, or from intentional misconduct resulting in unjust enrichment or in substantial losses to the institution.(1014)
On February 4, 1994, the RTC issued an Order of Investigation into potential civil claims against Madison Guaranty. This investigation was intended to determine whether the RTC could bring civil claims against "former officers, directors or others who provided services to, or otherwise dealt with, Madison Guaranty."(1015)
In January 1994, the RTC's General Counsel, Ellen Kulka, decided that the RTC should retain outside counsel to investigate any potential civil claims against Madison Guaranty,(1016) and she selected the law firm of Pillsbury, Madison & Sutro (the "Pillsbury Firm") as outside counsel.(1017) RTC Counsel told Ms. Kulka that Charles E. Patterson and Jay Stephens, former United States Attorney for the District of Columbia, were two of the three partners at the Pillsbury Firm whom they anticipated would handle the investigation.(1018)
The White House expresses concern over the retention of Jay Stephens.
By February 1994, senior White House learned that the RTC had hired the Pillsbury Firm and Mr. Stephens to investigate Madison Guaranty. On February 25, 1994, George Stephanopoulos, Senior Advisor to the President, and Joshua Steiner, Chief of Staff to Treasury Lloyd Bentsen, discussed the RTC's decision to hire Mr. Stephens.(1019) According to Mr. Steiner, Mr. Stephanopoulos was "angry" and raised his voice during the conversation.(1020) Mr. Stephanopolous told Mr. Steiner that Mr. Stephens should be disqualified from handling the matter because Mr. Stephens had been a critic of the Clinton Administration.(1021)
Jean Hanson, General Counsel to the Department of Treasury, testified that Mr. Steiner subsequently told her: "[D]o you believe those guys, they want to see if they can get rid of Jay Stephens."(1022) Ms. Hanson understood that "those guys" referred to various senior White House officials.(1023) Ms. Hanson further testified that on a separate occasion Mr. Steiner expressed the view that Ms. Kulka should be fired for hiring Mr. Stephens.(1024)
In his diary, Mr. Steiner described his conversation with Mr. Stephanopolous:
Simply outrageous that RTC had hired him [Stephens], but even more amazing when George then suggested to me that we needed to find a way to get rid of him. Persuaded George that firing him would be incredibly stupid and improper.(1025) Subsequently, Mr. Steiner disavowed his diary entry, claiming that he merged two conversations in one entry.(1026)
Mr. Stephens is removed from the RTC investigation.
Mr. Stephens was included in Pillsbury's initial proposal to the RTC as one of the three partners in charge of the matter.(1027) During the early stages of the investigation in February 1994, Mr. Stephens attended meetings and was in daily contact with the RTC.(1028)
However, after numerous press reports describing Mr. Steiner's conversation with Mr. Stephanopolous appeared in the third week of March 1994, Mr. Stephens' role "diminished substantially and probably by the summer of '94, [he] was virtually disengaged from the matter."(1029) Billing records of the Pillsbury Firm confirm that Mr. Stephens' work on the matter dropped off significantly.
After March 1994, Mr. Stephens was told that it was no longer necessary for him to attend meetings with the RTC in Washington, D.C.(1030) In addition, the documents relating to the investigation were moved from the Pillsbury Firm's Washington D.C. office, where Mr. Stephens resided, to its West Coast offices in Los Angeles and San Francisco.(1031)
After March 1994, Mr. Patterson, the partner in charge of managing the Madison Guaranty investigation, did not assign any further work to Mr. Stephens.(1032) Mr. Stephens did not draft the reports eventually submitted to the RTC and has no basis for either agreeing or disagreeing with any of the conclusions of the reports.(1033) Mr. Stephens did not attend any presentations to the RTC about the findings in the reports.(1034) Mr. Stephens conducted no depositions and no witness interviews, except for one interview relating to a request for documents.(1035)
Mr. Patterson spoke to Mark Gabrellian, Counsel to the RTC Legal Division, about Mr. Stephens' diminished role, but denied that anyone at the RTC asked him to remove Mr. Stephens from the case.(1036) He did, however, advise Bruce Ericson, the billing partner on the Madison investigation, that Ms. Kulka had disliked something that Mr. Stephens had said during a meeting. Mr. Patterson had the impression that "there was a personality conflict" between Mr. Stephens and Ms. Kulka.(1037) Mr. Gabrellian similarly testified that Ms. Kulka and Mr. Stephens "were not getting along all that well."(1038) Ms. Kulka admitted that she discussed Mr. Stephens with Mr. Patterson, but claimed that her only concern was with the quality of Mr. Stephens' work.(1039)
The White House makes inaccurate claims about the Pillsbury report.
Although Mr. Stephens was removed from the Madison Guaranty investigation, the RTC still wanted Mr. Stephens to review and approve the final version of the reports in December 1995. Mr. Stephens, however, refused to do so:
Well in fact the RTC asked me to read the reports when the reports were filed in December, I declined to do that because I had not been involved in the engagement, I thought it was improper and inappropriate for me to review those reports simply so the RTC could have my imprimatur on those reports.(1040) Mr. Ericson confirmed that Mr. Stephens had no involvement in the handling of the matter after the summer or at the latest fall 1994--over one year prior to the completion of the final reports.(1041)
Moreover, on May 17, 1996, in a hearing before the Special Committee, Mr. Patterson and Mr. Ericson both admitted that Mr. Stephens did not "head the inquiry." (1042) Both partners also agreed that statements indicating that the report was "written by Republican Jay Stephens" are entirely baseless and inaccurate.(1043) The following exchange occurred at the Special Committee's hearings with lawyers from the Pillsbury firm:
Senator D'Amato: Let me read to you from the Chicago Sun Times. . . . Dated January 21st  . . . Headline: Facts Fight Fiction Over Whitewater.
Mr. Patterson: Yes.
Senator D'Amato: What's the byline?
Mr. Patterson: Hillary Clinton.
Senator D'Amato: Let me take you down to the last sentence in the first page. You want to start reading that?
Mr. Patterson: Would you like me to read it Senator?
Senator D'Amato: Yes, please.
Mr. Patterson: Since most Americans never heard about this report, let me fill you in.
Senator D'Amato: This is referring to the report that your, this is the Pillsbury, Madison & Sutro report. Go ahead.
Mr. Patterson: It was conducted by the RTC by one of the nation's leading law firms, Pillsbury, Madison & Sutro. It took more than two years to complete and cost nearly $4 million. A prominent republican, former U.S. Attorney, Jay Stephens, headed the inquiry.
Senator D'Amato: Mr. Stephens, did you head this inquiry?
Mr. Stephens: No, I did not.
Senator D'Amato: Mr. Patterson, did he head the inquiry?
Mr. Patterson: No, he did not Senator.
Senator D'Amato: Mr. Ericson, did he head the inquiry?
Mr. Ericson: No.(1044)
Indeed, after Mr. Stephens was identified in public statements as the author of the reports, he raised the following concern:
On one or two occasions, I probably raised I believe most likely with Mr. Ericson, some concern that I had that the factual record wasn't clear or that I felt it was a little inappropriate that somehow or other either I was getting the credit or the blame for the reports, since I hadn't written the reports.(1045) However, "the sense was the client [the RTC] did not want to get involved in making public statements about the firm's involvement."(1046)
Contrary to White House claims, the final report of the Pillsbury firm did not exonerate the Clintons. The Pillsbury investigation focused only on the narrow question whether it would be cost-effective for the RTC to bring any civil lawsuits against Madison to recover damages arising from the S&L's failure.(1047) The authors of the Pillsbury report--Mr. Patterson and Mr. Ericson--testified that the reports do not exonerate anyone.(1048) As Mr. Ericson put it, "I don't think our reports exonerated anybody of anything."(1049)
After reviewing a draft of the supplemental Whitewater Report in November 1994,(1050) Mr. Stephens told Mr. Ericson that the report did not consider the "totality of the issues related to Madison because it was looking at Whitewater in isolation rather than looking at sort of the mosaic of real estate transactions that Madison was involved in and how Whitewater might tie in or relate to that."(1051)
I believe I made some general comment that in my reading through the report that it either didn't highlight or didn't focus on the potential liability that might arise from a difference of equity participation by the partners in the Whitewater venture. . .. And in doing that, the partners still maintain the same general equitable interest in the, or legal interest in the partnership, and as a consequence, one partner was benefitting substantially by the financial contributions of the other, and that there may be some issue that really raised a question about liability.(1052) Mr. Stephens further told Mr. Ericson the Pillsbury Firm should interview more witnesses who "might have added perspective or input in trying to understand those transactions."(1053) According to Mr. Stephens, the report was essentially "an accounting analysis."(1054)
Pillsbury never examined many witness. Some asserted their Fifth Amendment right not to testify: James and Susan McDougal, the Clintons' Whitewater business partners, Jim Guy Tucker, Chris and Rosalee Wade, Whitewater real estate agents.(1055) The OIC asked Pillsbury not to interview John Latham, President and CEO of Madison Guaranty, or David Hale, President of Capital Management Services, Inc.(1056)
Other witnesses who provided important testimony to the Special Committee, however, were simply not contacted by the Pillsbury firm.(1057) Because of the limited scope of Pillsbury's representation, there were a number of areas that they did not explore, and therefore a number of witnesses that the Pillsbury Firm did not interview. For example, the Pillsbury Firm did not interview many of the bankers involved in making or extending the Whitewater loans.59