Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 27, 1994 TAG: 9404010006
SECTION: HORIZON PAGE: D-1 EDITION: METRO
SOURCE: By Paul F. Horvitz International Herald Tribune
DATELINE: LENGTH: Long
``As all of you know, my former chief of staff has implicated me in a scandal involving the First Liberty Savings & Loan. Once people start talking about a scandal, it's hard to talk about anything else. So fine, let's talk about it.''
- President Bill Mitchell opening a somber speech to Congress in the 1993 movie ``Dave.''
Life, it seems, is imitating art.
The president is Bill Clinton, not the fictitious Bill Mitchell.
The savings and loan is Madison Guaranty, not Liberty Savings.
And it's hard for some Americans to talk about anything else, even though few of them know what the seeming scandal is really about.
So fine, let's talk about it.
Q. Is President Bill Clinton in trouble?
A. Politically, he is in big trouble. A growing number of Americans think he did something wrong or illegal in the so-called Whitewater affair, but they're not sure what.
Republicans are maintaining a drumbeat of criticism and demanding hearings in Congress. Journalists are scratching for every shred of new material.
In short, it is open season on Bill Clinton's veracity, even though critics can only speculate on what he might have done. If the storm does not abate, Democrats may be hurt in the November congressional elections.
Q. But did the president do anything wrong?
A. No evidence has yet emerged of unlawful acts by the president or his wife, Hillary.
However, federal banking regulators looking into the collapse of Madison Guaranty Savings & Loan in Arkansas have named the Clintons as possible beneficiaries of questionable Madison transactions during the 1980s. A former business partner of the Clintons' ran the bank.
While the regulators did not imply wrongdoing by the Clintons, their conclusion does raise questions.
In recent days, credible reports suggest that the Clintons may at least have to pay back taxes related to a real estate venture that kept an account at Madison.
Ethically, the Clintons may be vulnerable because federal officials overseeing banking regulation held private discussions with aides to Mr. and Mrs. Clinton to alert the White House to investigators' procedures.
Q. Why is all of this called Whitewater?
A. Whitewater refers to Whitewater Development Corp., a small company created to develop river-front land on the White River in Northern Arkansas. The company was a flop and the Clintons, who put money into Whitewater, say they lost nearly $69,000.
Three facts are fundamental: In 1978, Bill and Hillary Rodham Clinton joined James and Susan McDougal as investors in Whitewater, which was created by McDougal.
In 1982, McDougal bought Madison Guaranty, a small savings and loan, and Whitewater Development kept an account at Madison.
In 1993, Vincent W. Foster Jr., a close Clinton friend who held a top White House job and who had worked on Whitewater's back taxes, killed himself.
Whitewater might better be called the Madison-Whitewater-Foster affair.
Q. Why is there such an uproar?
A. Ever since Watergate, the scandal that brought down President Richard Nixon two decades ago, any U.S. president's effort to contain a political crisis by withholding documents or skirting questions has guaranteed an uproar in Congress and the press.
The Clinton White House did try to soft-pedal Whitewater questions and initially tried to keep personal documents sequestered on the theory that Whitewater had nothing to do with the president's governmental duties.
This alone was viewed by some commentators as scandalous, and Republicans are demanding to know what the White House is hiding.
Q. What are the crucial issues in Whitewater?
A. The core questions seem to be these:
Did the president, while governor of Arkansas, gain any improper financial benefit from Madison Guaranty before it collapsed in 1989? Did Madison funds, for example, wind up in the Clinton campaign treasury?
Did the governor or his wife try to keep Madison afloat to help their friend, James McDougal, who contributed to Mr. Clinton's campaigns?
Has the Clinton White House tried to influence the course of an ongoing federal investigation of the Madison collapse?
Did Vincent Foster learn anything explosive about Madison or Whitewater before he killed himself last July?
The questions raised publicly are so far speculative. But a special independent investigator, requested by Clinton, is looking into all of this.
The investigator, Robert B. Fiske Jr., has already subpoenaed White House documents and called Clinton aides to testify before an investigative grand jury. He says the White House is cooperating.
The grand jury will decide if there are grounds for criminal charges.
Q. What surfaced that raised all the questions?
A. In the mid-1980s, federal banking regulators found Madison Guaranty's finances shaky and its management poor.
In 1986, they forced McDougal out as Madison president. Three years later they declared Madison insolvent and took it over, charging McDougal with bank fraud.
He was found not guilty. The U.S. Treasury now must pay around $50 million to satisfy the claims of federally insured Madison depositors who lost money when the bank collapsed.
The independent U.S. agency overseeing nationwide savings and loan bailouts, called the Resolution Trust Corp., continued to investigate.
The agency wanted to know whether any of the Madison losses could be recovered from people who contributed to the bank's demise or who benefitted from its questionable dealings.
It turns out that agency investigators found enough to warrant turning over their Madison inquiry to federal prosecutors for a criminal inquiry.
They privately asked the Justice Department to investigate in late 1992 and again last June.
When news of the request emerged last October, critics and journalists went into high gear. A Justice Department team was dispatched to Arkansas in November.
Q. Was there any White House cover-up?
A. Talk of a cover-up exploded last month when it was learned that over the past five months Treasury Department officials temporarily running the Resolution Trust Corp. held three separate meetings with Clinton aides.
Many in Congress view these meetings as an improper contact between an investigating agency and a potential target of an investigation.
The White House counsel, Bernard W. Nussbaum, was forced to resign when it was learned that he attended the meetings.
Various reports of document shredding in Arkansas have emerged, but none have been conclusive on whether the documents had anything to do with Whitewater or Madison.
Q. What does the president say in his defense?
A. Clinton says he has done nothing wrong and will be completely vindicated. He says Republicans are whipping up ``hysteria'' to try to destroy him politically.
His Whitewater investment was a bad decision made 16 years ago, he says, and he lost money. He says he had nothing whatever to do with Madison Guaranty.
The White House says the Clintons took no action to influence the federal investigation of Madison Guaranty.
McDougal denies that any Madison money was funneled into the Clinton campaign and says the president has committed no crime.
In 1992, the Clintons paid a small sum in back taxes on Whitewater-related deductions, and the Clintons' personal lawyer now reportedly sees the possibility of a further payment of back taxes.
Q. What is the role of Hillary Rodham Clinton in all of this?
A. She is feeling heat from Republicans and the press because she apparently handled the family's Whitewater investment and for a short time provided legal counsel to Madison Guaranty.
Madison used the Rose Law Firm in Little Rock, where Mrs. Clinton worked, for some of its legal work.
In 1985, Mrs. Clinton, representing Madison, asked a state regulator appointed by her husband to approve a novel stock sale to bring fresh cash to Madison. The sale was approved but never took place.
In 1989, federal regulators wanted to sue the accounting firm used by Madison. Vincent Foster, also of Rose, solicited and won the contract for this legal work, but it is not clear whether he informed the government, as he should have, that Rose lawyers had previously represented Madison.
The suit was handled by another Rose attorney, Webster Hubbell. Questions have been raised about whether Hubbell overbilled the government or other Rose clients. He resigned on Monday as associate attorney general.
Q. What happened to the Justice Department investigation of Madison?
A. Under pressure from Republicans, Clinton asked that the investigation be turned over to an independent prosecutor. Attorney General Janet Reno named Fiske in January.
Fiske, 63, is a New York Republican and former federal prosecutor with an unstained reputation. It is possible that he will eventually ask to interview the president and Mrs. Clinton.
Q. When will the Whitewater investigation be completed?
A. Fiske has not said, but he is moving quickly. It would seem unlikely that a final report would be issued before end of the year. The House and Senate have voted to hold hearings on the Whitewater case, which has become a political nightmare for the Clinton administration.
by CNB