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Constellation Of Crimes Orbiting Whitewater

Whitewater gets interesting only when you understand why it is boring. It is boring by design, like a New York Times editorial. The reason the constellation of crimes orbiting Whitewater seems tedious and complicated is the reason all pyramid schemes seem tedious and complicated: The fraudulent transactions are purposely structured in an extremely complex manner in order to keep government regulators in the dark for as long as possible. In the case of the "Whitewater" scandals there were multiple loans criss-crossing one another as down-payments. It is not necessary to comprehend the precise form these transactions took to understand the scandal known as Whitewater. In fact, it is probably an impediment.

Whitewater is about two very simple things: stealing and lying-stealing from taxpayers and lying to prosecutors, judges, and juries. The "failed land deal" that Whitewater Independent Counsel Kenneth W. Starr has supposedly spent $40 million investigating has already led to the convictions or plea agreements of fourteen people, including the Clintons' partners in Whitewater-James and Susan McDougal, and the former sitting governor of Arkansas, Jim Guy Tucker, who succeeded Bill Clinton.

The heart of Whitewater is Madison Guaranty Savings and Loan, operated by the Clintons' friend and business partner James McDougal, and insured by the government. The Madison-McDougal-Tucker-Clinton scandals are collectively known as "Whitewater" because the shady Whitewater land deal happened to be the first of the overlapping scandals that directly implicated the Clintons to surface in the news. But, as with Copernicus's discovery, the Whitewater universe makes sense only when it is understood that Whitewater revolved around Madison, not Madison around Whitewater.

McDougal was looting the federally backed Madison Guaranty he is said to have called his "candy store.", McDougal used Madison depositors' money to gamble on high-risk real-estate ventures such as Whitewater. In case his real-estate gambles didn't pay off, McDougal also directly defrauded his own S&L in a variety of sham transactions to ensure that he and his friends would make money out of his operation of Madison Guaranty2 He made bad loans to friends, business partners, and other insiders, knowing the loans would not be repaid, and knowing that the government, through deposit insurance programs, would be left holding the bills.

Everyone involved in these deals benefitted, save the American taxpayers - who were still on the hook for the $60 million McDougal had given away. Eventually, the government caught up with McDougal and shut down Madison Guaranty.

McDougal and his wife, Susan, were, it seems, crooks. On May 28, 1996, James McDougal was convicted on eighteen felony counts related to bad loans by Madison, including conspiracy, fraud, and making false statements. That same day, Susan McDougal was convicted on four felony counts, including mail fraud, making false statements, and misapplication of funds. He was sentenced to three years in prison, she to two years in prison, plus community service. Between them they were ordered to pay more than $4.5 million in restitution and fines, still far short of the $60 million they stole.

But James and Susan McDougal, of course, weren't the president and first lady. Associating with crooks may have been enough for James Madison to impeach a president, but it is unlikely to be enough today. The Clintons' apparent wrongdoing stemming from the McDougals' $60 million swindle, however, goes deeper than mere friendship. There are reasons to believe that the Clintons may have been among the friends who benefitted from McDougal's crimes, whether or not those reasons rise to the level of proof beyond a reasonable doubt.

The Clintons deny any role in Madison Guaranty's fraudulent loans. In the abstract, it might have been just a coincidence that Mr. Clinton was governor and Mrs. Clinton performed legal work for Madison while McDougal was looting the S&L. But both of the Clintons have more direct involvement in some of the known crimes surrounding Whitewater.

First, the Clintons were equal partners with James and Susan McDougal in Whitewater, the failed Arkansas land deal. Some of the fraudulent loans issued by McDougal on behalf of Madison went to prop up the ailing Whitewater Corporation. The Clintons and their flacks repeatedly note that they "lost money" on the Whitewater land deal. While it is possible the Clintons were completely innocent of criminal intent with regard to the Whitewater venture, the fact that they lost money on the deal has absolutely nothing to do it. McDougal was stealing from Madison to prop up Whitewater: If Whitewater had succeeded, the Clintons stood to make a large profit, having put little of their own money down. Mrs. Clinton's defense - repeated incessantly - that they "lost money" is the equivalent of stealing money to buy a lottery ticket and then saying no theft occurred because the lottery ticket didn't win.

Second, wherever the Clintons' full share of Whitewater payments were coming from, they were not coming from the Clintons. Even if the Clintons knew nothing of McDougal's financial double-dealing with Madison, they had to know they were not paying their fair share in the Whitewater partnership, raising the possibility that McDougal was using his Whitewater partnership with the Clintons to bribe the young attorney general and then sitting governor. There is a reason the thieving owner of a corrupt S&L might have wanted to bribe the governor.

The Clintons have maintained that they were merely passive investors uninvolved in the day-to-day details of the Whitewater venture. Thus, their story is, if they were being bribed, they didn't know it. At least one Resolution Trust Corporation (RTC) officer investigating Whitewater doubts the Clintons' purported naivete. And, as the New York Times has noted, Mrs. Clinton must have been at least vaguely familiar with the workings of Madison Guaranty since she was one of its lawyers.

Third, if McDougal thought he was paying bribes, he got all he could have wanted out of Clinton. The Senate Whitewater Committee turned up a series of favors Mr. Clinton performed for Madison Guaranty while he was governor of Arkansas, concluding that "substantial evidence supports Mr. McDougal's claims that he had `clout' with the governor." These included sending valuable state leases to Madison, and signing special interest legislation intended to benefit Madison. While backscratching is nothing new to politics, most politicians could expect to see their presidential aspirations dashed for such back-scratching with a crook.

Governor Clinton cast a crucial veto in June 1987, striking down legislation that was designed to help Madison Guaranty, Jim Guy Tucker, and Tucker's business partner.s But prior to casting the veto, Clinton was unaware of the bill's intended effect on Madison. Members of his "political family" did not waste time in bringing this detail to the governor's attention by leaving a message for Mr. Clinton, asking whether the veto would stand and "mention[ing] a meeting between [Clinton], Tucker, and Jim McDougal a couple years ago which involved $33,000.” As the governor's secretary noted on the phone message, the caller was "pretty cryptic:" A few weeks later, Clinton reversed his veto, and the bill became law.

At one point, the governor's wife was lobbying the governor's appointee on behalf of Madison - a matter in which the governor had a financial interest. The Clinton appointed securities commissioner, Beverly Bassett Shaffer, approved some of Mrs. Clinton's requests on behalf of Madison, though apparently not for any nefarious purpose. Interestingly, however, top White House aides were not confident about that. According to notes taken by then-White House Communications Director Mark Gearan at a January 1994 White House meeting on Whitewater, Clinton's top aides were extremely concerned about what Shaffer might say. Harold Ickes, Clinton's deputy chief of staff, was quoted in the notes saying: "Bassett is so f-ing important, if we f- this up, we're done." Of course, as Clinton would later say of shady contributors to his presidential campaigns, "I don't believe you can find any evidence of the fact that I had changed government policy solely" out of political patronage.

Fourth, Madison's legal work was performed by the once prestigious, now infamous, Rose Law Firm. McDougal said that, under pressure from the governor, he arranged for his S&L to pay the Rose Law Firm a monthly retainer simply as a personal favor to Hillary. He admitted this even while still trying to "protect" the president, on crossexamination during his 1996 trial. McDougal's claim is supported by contemporaneous notes James Blair took of a conversation with Mr. McDougal in 1992. Blair is the longtime Clinton back-scratcher who helped Mrs. Clinton place her fabulously lucrative cattle futures trades. The Clintons deny McDougal's claim.

Finally, whether or not McDougal's retainer payments to the Rose Law Firm were intended as a bribe, the arrangement led to the peculiar situation of the governor's wife lobbying the governor's appointees on behalf of Madison Guaranty. The retainer also gave Hillary the opportunity to perform much of the legal work that enabled McDougal to pass bad loans, bankrupting the S&L and costing the taxpayers $60 million. The transaction at the heart of Castle Grande - one of Madison's most fraudulent schemes - hinged on a legal document drafted by Hillary Clinton.

It is undisputed that Mrs. Clinton drafted a document used to defraud the RTC. But a prosecutor would have to prove that she did so knowing that the document would be used to defraud. The only thing that stands between Hillary and a prison cell for her work on this document is the possibility that instead of being a criminal lawyer, she is an incompetent lawyer.

That's "Whitewater" without the bank ledgers. But two Whitewater-related deals involving the Clintons deserve closer review: Castle Grande and Friend Of Bill David Hale's Small Business Administration (SBA) loan. Castle Grande was one of McDougal's most corrupt Madison ventures, becoming the fulcrum of his last loan-swapping fraud in the dying days of Madison Guaranty. Mrs. Clinton drafted one of the documents central to the Castle Grande fraud.

McDougal had been looting Madison Guaranty for years. By 1984 federal regulators were nipping at his heels. As part of a scheme to pad Madison's accounts in order to keep bank examiners at bay a little longer and to keep the inside deals flowing, McDougal hired Seth Ward, Webb Hubbell's father-in-law, to scout out new deals that would pump up Madison's books. (Hubbell – Bill’s friend and Hillary's law partner-served in Clinton's Department of justice before going to jail.)

Ward recommended "Castle Grande," as McDougal would later christen a thousand acres of swampland south of Little Rock. In an intentionally complex transaction, Madison bought the land, using Ward as the purchaser on paper, or the "straw man" purchaser. Castle Grande was then used as a huge Ponzi scheme, benefitting Ward, McDougal, Jim Guy Tucker, and various other Madison insiders.

In a deposition taken by the Federal Deposit Insurance Corporation, H. Don Denton, a senior officer at Madison County, said Mrs. Clinton had called him to ask for notes when she was drafting the option agreement. Denton testified that at that time he raised the legal problems of such an option agreement with Mrs. Clinton, noting that the notes "constituted in effect a parent entity fulfilling the obligation of a subsidiary." Mrs. Clinton "summarily dismissed" his concerns, he told investigators. He recalled that she said something to the effect that "he would take care of savings and loan matters, and she would take care of legal matters.” She was, after all, one of the country's top one hundred lawyers.

As she had once denied performing any work on Castle Grande, Mrs. Clinton denied having any such conversation with Mr. Denton. Perhaps she knew him by a different name. The White House immediately questioned Mr. Denton's motives, fingering him as a political enemy of the White House. But, as the New York Times has noted (prominently on page B-9), this "was the first time a figure not under threat of indictment or imprisonment ha[d] given such damaging information" against the Clintons. As such, the article observed, it was a "further dent" in the White House incompetence defense portraying Mrs. Clinton as "a mere technical adviser, not an insider in the deal.”

In May 1996 an Arkansas jury returned a series of guilty verdicts against Jim and Susan McDougal and Governor Jim Guy Tucker, finding that they had defrauded not only Madison Guaranty but also the federal SBA. The guilty counts involving the SBA found that the three conspired to get a $300,000 loan for Susan McDougal through a small business investment company owned by David Hale. Some of the money from that fraudulent loan ended up in Whitewater accounts.

The prosecution's chief witness at trial was former municipal judge David Hale, who had already pleaded guilty to the loan fraud in 1994. Hale accused Mr. Clinton of pressuring him to make the incontrovertibly fraudulent $300,000 federally-backed loan to Susan McDougal in 1985. The loan was made to Mrs. McDougal's front company, Master Marketing, in order to comply with SBA requirements that borrowers be "socially or economically disadvantaged."

Hale testified that Clinton asked him to make the loan "for Jim [Guy Tucker] and the governor," in Hale's words. McDougal explained to Hale that the loan was necessary to "clean up some members of the political family," a reference Hale took to mean that the loan was intended to help Mr. Clinton. (Though the White House would later denounce Hale as an enemy of the Clintons, at the time he was active in Democratic politics in Arkansas.) At the meeting in a trailer at Castle Grande, Hale testified, Clinton explicitly warned him, "My name cannot show up in this," at which point McDougal assured Clinton that he had "already taken care of that."

Almost $50,000 of the $300,000 loan made to Susan McDougal's front company found its way to the ailing Whitewater venture. Most of the rest of the fraudulent loan went to pay for Mrs. McDougal's personal expenses. The loan was never repaid. (Clinton's interest in the loan to Susan McDougal may have been unrelated to Whitewater. James McDougal suspected that his wife had had an affair with the governor.)

Mrs. McDougal served eighteen months in prison rather than tell a grand jury what she knows about the Clintons' business dealings. When this civil contempt sanction expired she still wouldn't talk and was indicted for criminal contempt of the grand jury. Mrs. McDougal simply refuses to state under oath whether the president lied in his testimony about the SBA loan. Of course, if she could answer "no," there would be no reason for her to refuse to answer. If she ever did stop defying the court, one, thing the grand jury might want to know is what she meant when she wrote "Payoff Clinton" as a notation on a check.

In videotaped testimony shown at the trial, Clinton denied I ever discussing the loan with Hale. At trial James McDougal supported the president's denial. McDougal attacked Starr's prosecutors and said he would never cooperate because they were "Republican gangsters" pursuing a "political prosecution."

One year after his conviction, however, McDougal changed his tune. He said he lied when he testified that Clinton did not pressure Hale to make the fraudulent loan. In an interview with NBC, McDougal said he had been present when the president met with Hale to discuss the loan, just as Hale had described in his testimony. McDougal explained that he had corroborated the president's denials at trial because "I was trying my best to protect him."

McDougal admitted that since he had lied at his trial, people would "have every right to be suspicious" and think that he was lying again. But this time, McDougal said, everything he had to say "was very well documented," and Clinton "should be deeply concerned" about what McDougal was going to say about the meeting.

If David Hale told the truth at trial, and McDougal told the truth after the trial, the president committed perjury in his testimony for the McDougal-Tucker trial. Admittedly both McDougal and Hale are convicted felons, but that's just the price of having to call Clinton's friends and associates to testify.

Ann Coulter. . Regnery Publishing, Washington, D.C. 1998.

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