The Clinton Scandals

When President Clinton held a dinner honoring Thomas Jefferson in 1994, his wife sat at the table between Maya Angelou and C. Vann Woodward. Ms. Clinton knew beforehand that Angelou had grown up in Arkansas but not that Woodward had been born there. Standing up at the dinner’s end, she said, “See what good folk come from Arkansas? Why is it the press can find only the same few scumbags there?” That prompts a more important question: Why did the Clintons deal with the “scumbags” being questioned by the press? I assume that Ms. Clinton had in mind not only such colorful Arkansans as Gennifer Flowers and Paula Jones but others, like James and Susan McDougal or David Hale, who have given the Clintons as much grief as any erupting bimbos.

And behind this is another question. Assuming the desire of a smart Southern politician to use political position for private gain, the task is not unusual or even very difficult. As the late Willmoore Kendall used to say, all you have to do is stand on the right corners and money will silt up in your pockets. Witness the exploding bank accounts of Lamar and Honey Alexander.¹ I am not talking about breaking laws, just about what George Washington Plunkitt called “honest graft”—which he defined as picking all the apples in the paradise of politics while staying away from the tree of death, the Penal Code.² Plunkitt would be ashamed of the Clintons. They did not make any of the obvious money from big-time contacts. They dealt with obscure wheeler-dealers who actually lost them money. They get all the blame for graft and none of the gain (with the exception of Ms. Clinton’s famous killing in cattle futures). Instead of letting money silt up in their pockets, they seemed to do cartwheels in order to shake it out.

This is not only a strange story but an extremely complicated one. The beginnings of understanding are now available for a wider audience in a book by James Stewart, the Pulitzer Prize–winning journalist formerly of The Wall Street Journal who wrote the best-selling Den of Thieves. He performs the great service of putting faces on the names that come and go in the public allegations and partial representations of what went on at Whitewater, Madison Guaranty, Castle Grande—all those household words that might as well refer to outer galaxies for all the reality they carry in the minds of most people who hear them.

It has always been obvious that the culture, social as well as financial, of Arkansas had much to do with the story. Stewart takes us into the odd world of big money and small-time operators rubbing shoulders in Little Rock or at remote Arkansas developments. The many advantages of this approach lead to one disadvantage. Stewart gets close to people like Jim and Susan McDougal, or David Hale, or the four troopers who have given accounts of Bill Clinton’s philandering. Like a good journalist, he is empathetic, trying to get into their minds. But, more than a good journalist should, he ends up trusting almost everything they have to say. This does not invalidate his book. He tries to be fair to everyone, and he is especially good on the troubled personality of Vincent Foster. But in matters where the word “character” often comes up, and documents are often lacking, Stewart is surprisingly confident that he can rely on the words of people with extremely wobbly characters, short on both integrity and stability.

The shortcomings of Stewart’s book are clearest where his account overlaps that of the investigation of the McDougals’ dealings with the Rose Law Firm, at which Ms. Clinton was a partner—an investigation made for the FDIC (Federal Deposit Insurance Corporation). This thorough investigation, government financed, was conducted by Jay Stephens, a San Francisco lawyer and Republican activist, no friend to the Clintons, whose appointment George Stephanopoulos protested as stacking the deck. That makes the findings of the investigation which have been issued in the series listed above all the more convincing. ³

The Stephens commission’s findings were of the man-bites-dog sort, yet they have been downplayed by the regular press and vilified by the scandal industry that has grown up around “Whitewater.” The complaint is that the report is based on only some allegations (those concerned with the Rose Law Firm); that it is based on incomplete evidence (all that can be found, not all that has not been found and may not exist); and that it is technically legal in its conclusion (that the FDIC should not pursue the Rose Law Firm for losses to the government).

But you can bet that there would have been a great whoop from the same quarters if the findings had upheld even one tiny part of the industry’s blizzard of allegations. The report’s disinterestedness would be defended, despite Stephens’s ties. What is important about the report is the extensive, plodding examination of every shred of evidence on the questions it covers, and the contrast between its methods and those of others who have dealt with the same matters, even of so thorough and honest a reporter as James Stewart. Read together, the Stewart book and the Stephens report give us our best way into the labyrinth called Whitewater.

1.

Dogpatch Connections

I first heard of the White River, along whose right bank some real estate was named Whitewater, during the 1992 campaign, when Hillary Rodham Clinton took me to her husband’s campaign headquarters to discuss the strange Arkansas constitution with Diane Blair, the University of Arkansas political scientist who had written the best book on the state’s political structure.⁴ Ms. Clinton had been regaling me with tales of her time in Fayetteville, the site of the state’s university in the upper corner of the state—a place of rural preachers, charming but arbitrary judges, and other characters who seem to have wandered out of Al Capp’s Li’l Abner comic strip.

At the campaign building, we went into the deserted “Coca-Cola room” where Ms. Blair and Ms. Clinton continued their reminiscing about Fayetteville. They had been fellow faculty members before they became faculty wives (both their husbands taught in the university law school). They talked of picnics and their outings by the White River, remembering how Bill Clinton derailed such escapes by talking endlessly with any potential voter he came across in the woods. The women had been amused by the mingling of their academic colleagues with the local characters of Fayetteville, in what was at once a backward part of the state and a sophisticated one—a reality embodied in the most famous Fayetteville native, William Fulbright, president of his home town’s university, who became a powerful senator in Washington but still had to defend segregation in order to hold his own region’s vote.

Fulbright was the unintentional first link in what became the Whitewater scandal. While Bill Clinton was working as a student aide to Fulbright, he met one of the senator’s former aides, James McDougal, a flamboyant man from a tiny town (Arkadelphia) who wore Savile Row suits and drove a Mercedes 280-S. McDougal had entered the university at Fayetteville, but dropped out to go directly into politics—and was soon an aide to Senator John McClellan, then to Fulbright, then to a friend, Bob Riley, the Arkansas lieutenant governor who served as interim governor when Dale Bumpers moved to the Senate. Armed with these experiences, McDougal became the head of the political science department at Ouachita Baptist University in his home town—even though he still had no college degree himself.

McDougal, a reforming alcoholic, was smitten by a beauty queen in the student body, Susan Henley, a nineteen-year-old senior whom he had to woo by subterfuge, since a Baptist college would not countenance a divorced thirty-four-year-old professor dating a student. McDougal found ways to court her, despite her immurement in an all-girls dorm. He proposed to her on a student trip to Washington, where he had arranged to show off his important contacts. Melodramatic as always, he swept Susan away on graduation day, not letting her stay for the commencement ceremony her parents were about to attend. He said it was now or never. If she hesitated he would leave her for good.

McDougal affected a learning he did not have by using his good memory. He liked to quote passages from his hero James Madison, after whom he later named several businesses. The Clintons attended the McDougals’ wedding, after which Jim took his backwoods bride to Europe on borrowed money. According to James Stewart, there was always tension between Ms. Clinton and the new Ms. McDougal. The latter affected cutoff jeans and tight tank tops. Ms. Clinton was no doubt made uneasy by her husband’s admiring references to “that pretty girl,” to Jim’s “child bride.” McDougal, in his pompous suits, was Jubilation T. Cornpone with Daisy Mae in tow.

The garrulous and energetic McDougal had kept up his political contacts around the state. When Bill Clinton ran for attorney general, McDougal contributed funds to this race by a fellow veteran of Fulbright’s staff. After his marriage, McDougal had found a new outlet for his energy. His sponsor in Alcoholics Anonymous introduced him to the promises of money made in real estate. McDougal’s first land purchase was turned over in six months for double the price. The land bug had bitten.

McDougal, who liked to boast of his royal ancestry, was fond of playing patron to friends. He was soon offering quick land profits to people he wanted to impress, including his former patron, Senator Fulbright. Fulbright let McDougal handle an investment for him in 1973. Though Fulbright was a partner of record in the land purchase, he never saw the property and had nothing to do with its disposal (he was campaigning at the time). Yet he walked off with triple his investment.

The Ouachita professor and the university president would seem an odd pair in any setting but that of Fayetteville. The Clintons felt that McDougal, for all his weird ways, might do for them what he had for Fulbright. And, sure enough, he did. In 1976, he suggested that Clinton buy five acres of land for $500 down and monthly payments of $175. In 1978, just as Clinton was beginning his campaign for governor, McDougal sold the land for him, giving him $2,150 in profit. It was not spectacular, but it was painless.

McDougal seemed to be on a roll. In 1976, he had taken a trip into the northwest hills and saw a newspaper ad for the sale of twelve hundred acres of land. After buying it sight unseen, he went to the office of a real-estate representative in Flippin, Arkansas, and met Chris Wade. The land was divided into lots, which Wade resold even before McDougal finished payment on the whole tract—a neat profit for McDougal, with little capital needed.

In 1978, Wade called McDougal when a new chunk of property was listed along the White River. As the founder of the bank in Flippin, Wade even promised to lend money for the down payment, all but 10 percent. Jim and Susan McDougal made the Clintons their partners in the new enterprise, and they borrowed the 10 percent from a Little Rock bank. So much for Dogpatch Connection Number One.

The second connection came through Diane Blair’s husband, Jim, who was not only a part-time law professor in Fayetteville but a lawyer doing business with local firms, including Tyson Foods, one of Arkansas’s largest. He had met a former truck driver who became the head of the egg operation at Tyson, a man even more colorful than McDougal, named Robert L. “Red” Bone. The uneducated Bone is a shrewd gambler who made the finals of the Amarillo Slim Poker Classic in Las Vegas, and Blair played poker with him in Fayetteville. Bone had begun gambling on commodities, both for himself and for his employer. He reduced the risk by using his knowledge of Tyson’s egg marketing to invest in egg futures. He made and lost and remade millions, adopting a life style that even McDougal would envy—paying $500 to get the pizza he wanted from a closed fast-food store, or paying a country-and-western club’s band $1,200 to keep playing his favorite song.

Insider trading is hard to prevent with agricultural products, since so many people know about the size and movement of the products (which must be sold while fresh). But even in that wide-open world, Bone was accused of manipulating the egg market, and Tyson told him to stop trading or leave the company. He left, and became a regional broker for Refco (Ray E. Friedman & Co.) commodity traders, run by Thomas Dittmer, one of the world’s largest cattle owners. Friedman was as knowledgeable about cattle markets as Bone had been prophetic where the fate of eggs was concerned. Bone had a phone tie (twenty or thirty calls a day) to the Refco trader at Chicago’s Mercantile Exchange. He also participated in daily conference calls with Dittmer, cattle-feed owners, and meatpackers.

This pooled knowledge made their predictions as close to a sure thing as the gambler Bone had ever seen. He made a quick $15 million, and shared tips with his poker friend and lawyer, Jim Blair. The Blairs were intimate friends of the Clintons (not just political acquaintances, like the McDougals). Since (as Stewart tells us) “Bill Clinton was never interested in money,” Jim Blair told Ms. Clinton that she should let Bone do some trading for her. She promised to consider it, but Blair opened an account for her before she had time to answer. This was in October 1978.

The account made her $5,300 in one day, and $8,000 in two weeks. She withdrew $5,000 and thought she had a magic spring of money in the Ozark hills. Things got rocky for a while in the new year. She lost on half the trades Bone made for her. Bone told all his customers not to worry and plunged on, sure of his long-range earnings. Though she was supposed to make the decisions, Bone did not observe that nicety, despite warnings from the Board of Trade in Chicago. Even Jim Blair, in and out of Bone’s office daily, did not always know what Bone was doing with his money. “You might observe,” Bone told his critics, “there’s a difference between the Ozark hills and the big urban cities as to how people do business.”

In July of 1979, Ms. Clinton was responsible for $117,500 on a margin call, but Bone covered such setbacks for her and his other clients. She kept making steady gains, but on wide swings of funds that sometimes made her liable for far more than she and her husband owned. According to Stewart, “Bone never spoke to Hillary about the trades, and was hardly aware she was a client.” Stewart concludes that the fact that her husband was governor down in Little Rock did not matter to him. Her source of access to Bone was Jim Blair’s friendship, not any political office.

By July of 1979, Ms. Clinton, now pregnant, felt she had a nest egg for her child and closed the account. It had made, over the months, $100,000. Big as the gain was for her, it was small potatoes next to what Blair was making in conjunction with Bone. But she proved luckier than Blair, because Bone’s cozy little circle broke up that fall when Dittmer cut his phone buddies off from a huge coup he staged for his own profit. Bone and Blair lost their fortunes, and it was no consolation when Dittmer had to pay a quarter-million-dollar fine to commodity regulators.

Though Ms. Clinton had broken no laws, and was unaware of Bone’s procedural irregularities on her behalf, she felt uneasy about her quick gain. It had certainly been the result of a favor—not to her or her husband but to Jim Blair. No political recompense was expected or delivered. But Ms. Clinton, the critic of Reagan-era greed, did not want others to know of her good fortune. She established what would be a pattern of refusing to discuss her finances. When news of the cattle money came out fifteen years later, her White House representative said that she had benefited from reading The Wall Street Journal, a ridiculous claim, undermined when the Journal did a search of all the articles that might have affected cattle investment in the relevant months.

She knew that the innocent $100,000 could look suspicious and she wanted no money-grubbing taint on her liberal do-gooder image. Her determination to hide what was embarrassing but not illegal set her on a disastrous path, and the $100,000 would prove a bane, not a blessing, in other ways. It made her more intent on holding real estate, since she needed to put her earnings where they would do something better than accumulate interest and be liable to high taxes.

But she was not happy with McDougal’s performance, so different from Bone’s. McDougal was not making sales of Whitewater plots sufficient to meet payments on the loans taken out to buy the land. The Clintons had to pay $10,000 in 1978, and $12,000 in 1979—which they deducted as interest rather than as payment on the original debt and interest. This could have been inadvertent, since neither Clinton paid close attention to financial procedure, but they paid the fine when the violation of the tax laws was discovered, though the statute of limitations had run out by then.

What Stewart describes as indifference to detail “bordering on neglect” left the Clintons unaware that McDougal paid their debts on the loans in 1980 and for some time after. If they thought of it at all, they probably believed McDougal was doing what he said he would—paying the loans back from sale of the plots. They were surprised, later, to find that the debt had kept growing instead of being retired. At this stage of their relations, Ms. Clinton treated McDougal as she had Bone, expecting him to manage affairs for her.

When Clinton was elected governor in 1978, McDougal had become a part-time advisor to his administration, working closely with Steve Smith, a Fayetteville native who was one of Clinton’s bearded “hippies” pushing liberal programs. The spiffy and voluble McDougal, the hirsute and soft-spoken Smith—they made an improbable pair around the governor’s office, company made even more colorful by frequent visits from McDougal’s wife, with her skimpy, head-turning costumes. This was not Ms. Clinton’s favorite assemblage in the Statehouse. At one point, she told McDougal, “There’s too much fun and games around here.” Feeling unappreciated, McDougal did for his new friend Steve Smith what he liked to do for friends—went north to Kingston and bought him a bank. More exactly, he brought Smith into a partnership purchase as he had brought the Clintons in on Whitewater. It was a dark day for Smith, since the bank was soon in trouble for lending too much to McDougal for his real-estate debts.

McDougal claims that in 1980 he got a call from Ms. Clinton informing him that her husband had just lost the governorship—a fishy story, as if he would not have known that. He says she demanded money, and to please her his bank lent Ms. Clinton $30,000 to complete building a house at the Whitewater property, and he then turned the house over to her, promising to sell it and retire the $30,000 loan. But the original Whitewater loan was still pressing, and McDougal had to renew it at higher interest rates (obliging all the partners to make increased payments). To meet those payments, Bill Clinton had to take out a $20,000 loan and Ms. Clinton another $20,000. Whitewater had become a money-eating monster, and every financial maneuver McDougal undertook to cope with it just involved other debts with higher interest.

At this point, an irresistible lure appeared before McDougal. S&Ls had just been deregulated, and McDougal, under examiners’ scrutiny for breaking the rules of his Kingston bank, happily bought an S&L and launched himself into flashy new ventures. McDougal was back in Little Rock, expansive and on the rebound thanks to his S&L loans. His wife advertised real estate on television, wearing famously provocative “hot pants.” McDougal hosted a fund-raiser for Clinton’s 1982 reelection campaign, promising that Senator Fulbright would be there. Fulbright did not come. Neither did Ms. Clinton. But McDougal’s S&L was making him attractive as a potential client of Ms. Clinton’s firm.

2.

The Rose Law Firm

The anti-Washington mood of our time is nothing compared to the anti-government ethos of those who set up Arkansas’s state structure after Reconstruction. A part-time legislature and a do-little governor were the ideal, reflected even today in things like the famously low salary Clinton drew as governor. For a man who was still paying off his student loans when he ran for attorney general, $35,000 a year was a dismayingly small sum when he reached the Statehouse. Of course his lawyer-wife could earn more, in any of several ways—private practice, public-service law, children’s advocacy, a professorship, or joining a large firm. Any of these would have posed some problem of conflict with her husband’s career—he was attorney general when they went to Little Rock, not governor, but even that raised sticky questions.

Some were surprised when Hillary the idealist joined the Rose Law Firm. Admittedly, it was not the most well-connected firm politically—that was Wright, Lindsey and Jennings, which Clinton joined temporarily after losing his first campaign for reelection as governor. Rose had the reputation of being the most conservative and respectable Arkansas firm—founded by a man who led Theodore Roosevelt’s delegation to the Hague Peace Conference in 1902. Though Rose dealt with big Arkansas industries, like Tyson Foods and Wal-Mart, it prided itself on its old-fashioned propriety. William Kennedy, who later joined the ill-fated Rose contingent in the White House, told me during the 1992 campaign: “We built a Great Wall of China around Hillary” to protect her from conflicts of interest. The world would learn how porous that wall was.

If Ms. Clinton was not to engage in activities involving conflict of interest, what could she do? The firm was belatedly setting up a litigation division when she arrived. Rose’s corporate representation was steady but unspectacular. Other firms had moved into the surge of litigation over things like taxes and the environment. It seemed fortuitous that Clinton’s boyhood friend from Hope, Vincent Foster, was developing a litigation section for the Rose firm, along with another of Bill’s friends, Webster Hubbell, just when Ms. Clinton joined the firm. The three became a team at Rose—but not a very successful one. The whole division did not do as well as expected, and she in particular had few important cases. The head of the firm, C. Joseph Giroir, was dubious about the litigation effort, and the litigation team was unhappy at the little financial support it was getting.

Even though the firm paid “rain-makers” for generating business, Ms. Clinton was the lowest-paid partner in the firm. Partly this was because she was involved in ceremonial and political duties as the attorney general’s wife (later the governor’s). She had outside interests like the Children’s Defense Fund. It may have been an interest in keeping some status as a rainmaker that made Ms. Clinton join the board of directors of Wal-Mart, an obvious invitation to charges of conflict of interest for the governor’s wife. Nonetheless, when the Rose firm, looking for business in the litigation-rich area of S&Ls, sought McDougal’s business, it sent two other people to make an overture, Richard Massey and David Knight.

Richard Massey, an associate at Rose, knew the president of McDougal’s S&L, John Latham, from their having been fellow students at the University of Arkansas law school. In fact, Latham had audited a course on securities for which Massey served as teaching assistant. Massey and Rose partner David Knight took Latham to lunch in the spring of 1985 to “pitch the business” (Massey’s words), while telling him that McDougal would have to pay for a past service the firm had performed.

Though Stewart reports this lunch, he also accepts a McDougal story that is at odds with it. McDougal says the Rose firm had been on retainer (of $2,000 a month) since August 1984, when Governor Bill Clinton, jogging past McDougal’s office, had dropped in and asked McDougal to throw some business Hillary’s way. McDougal claims that he agreed, and started paying the Rose firm immediately. Yet the records show he did not start payments for nine months after this supposed incident (which Clinton says he does not remember). Stewart believes “the jogging story” and says McDougal just did not get around to keeping his word for the better part of a year.

If that is the case, why did Latham, McDougal’s man, turn down the Rose initiative from Massey and Knight during the nine-month interval? Why, for that matter, were the Rose lawyers seeking business they already had? The FDIC report gives a more convincing interpretation of the evidence, one that accords with Ms. Clinton’s memory of the matter. According to the report, the S&L did not throw business to Rose for general services, or as a favor to Ms. Clinton, but went to the firm with a specific problem needing resolution. McDougal’s S&L wanted to issue preferred stock, but when it requested the proper form from the Arkansas Securities Department, a department official told them they could issue only common stock. A Madison Guaranty employee did some research indicating that the preferred stock issue was permissible under law. The research was given to John Latham, and then the S&L retained the Rose firm to argue its case.

Why Rose rather than the S&L’s regular counsel? There are two possible explanations (not, of course, mutually exclusive)—that Latham remembered his lunch with Massey, who had taught securities law, or that McDougal thought Ms. Clinton could use her influence with the Securities Department, whose commissioner was a Clinton appointee. Neither supposition fits with Stewart’s thesis that McDougal had promised to give Ms. Clinton business before the preferred stock matter arose. Either supposition does accord with Ms. Clinton’s account, submitted in writing to the S&L investigation:

To the best of my recollection, the president of Madison Guaranty, John Latham, who was a friend of an associate at the Rose Law Firm, Richard Massey, became interested in having Madison Guaranty issue some kind of preferred stock to raise capital. Latham had spoken to Massey about doing the related legal work. In the spring of 1985, Massey came to see me because he had learned that certain lawyers at the law firm were opposed to doing any more work for Jim McDougal or any of his companies until he paid his bill and then only if Madison Guaranty agreed to prepay a certain sum to the firm once a month to cover fees and expenses. Under such an arrangement, the firm could be assured that Madison Guaranty was staying current with regard to paying for the new work that the firm might do for it.

I believe Massey approached me about presenting this proposal to Jim McDougal because he was aware that I knew him. I agreed to go see McDougal. I visited him at his office on April 23, 1985, and told him that I understood Latham wanted Massey to do some work for Madison Guaranty but that our firm would not let Massey proceed until the previous bill was paid and some kind of prepayment arrangement was worked out for new work the firm might do. As I recall, McDougal agreed that Massey could proceed with the work and informed me he would arrange to pay the past due bill. McDougal also indicated that he was agreeable to some kind of prepayment arrangement.

This is a far more plausible account than McDougal’s, the one Stewart accepts even while admitting that McDougal forgot key things (i.e., when he started paying Rose). The FDIC report dismisses the idea that McDougal, strapped for funds at the time, was just “tossing a $2,000-a-month retainer” (in Stewart’s words) to the Rose firm for unspecified services somewhere along the line. Nor does it accept, as Stewart does, that the $2,000 somehow put significant money in Ms. Clinton’s pocket. The FDIC investigators demonstrate that the most she could have made, even if the firm used all of McDougal’s advance (and it did not), was less than twenty dollars a month. The report agrees with Ms. Clinton that the Rose firm was wary about McDougal’s willingness to meet his obligations, based on his earlier nonpayment to the firm. The $2,000 was not a retainer, to be kept no matter what, but an advance on services performed, to insure payment. Unearned funds from the advance were returned by Rose—without even a deduction of what McDougal owed from transactions other than the preferred stock matter. Stewart’s thesis that this was a cozy arrangement between “Bill and Jim and Hillary”is dismissed as obvious error by the report, which says that McDougal’s “purported recollections … upon analysis make little sense.”

When Richard Massey appeared before the D’Amato committee, his bald head made some people mock Ms. Clinton’s claim that a young man handled McDougal’s S&L matters. Massey was thirty at the time, young in the firm (eight months there), and an appropriate person to handle securities—that is why he went to the lunch with John Latham to “pitch” securities business. As the partner in charge of the account, Ms. Clinton billed for sixty hours over a fifteen-month period—an average of one hour a week, amounting to a total of $7,000. This is “minimal” according to Gary Greenfield, a billing expert at Litigation Cost Management in Oakland, California. Her fee was “pretty cheap, even for Little Rock, even for ten years ago,” according to John Morris, editor-at-large of The American Lawyer. ⁵

I said above that the testimony given by Ms. Clinton does not preclude the possibility that McDougal was trying to use Ms. Clinton to influence the Arkansas Securities Department on the preferred stock issue. After all, the commissioner at the department, Beverly Bassett, was a Clinton appointee, and Ms. Clinton did call Bassett to ask where a letter about preferred stock issues, a letter prepared by Massey, should be directed. Bassett said not to her, but to Charles Handley. Bassett also said that she did not know Ms. Clinton had any ties to McDougal, and that Ms. Clinton asked for no special consideration.

Nor (and this is the main thing) did the request get special treatment. Though Bassett’s department replied that a preferred stock issue was permitted in principle, a simultaneous request from Massey for permission to form a stock brokerage service at McDougal’s S&L was delayed until the firm could show adequate capital. Since the firm never did show that, neither the stock issue nor the brokerage was approved. Ms. Clinton cited the dead end on the matter when, for another reason (the Rose firm was now representing the government against S&Ls and terminating its work for the banks), she returned the unused part of McDougal’s advance.

But before the break between the Rose firm and McDougal, Rose lawyers did some work on a real-estate development McDougal called Castle Grande. In 1985 McDougal arranged for Webb Hubbell’s father-in-law, Seth Ward, to buy the part of a large tract that he could not raise the money to purchase himself. McDougal’s S&L lent $1.15 million to Ward, with an option to buy the land back and a promise of commissions on lots sold (commissions that brought Ward more than $300,000). The FDIC report finds circumstantial evidence that Hubbell may have given his father-in-law legal advice in private (which Hubbell denies), but the Rose firm’s main work was to establish sewer rights for the land and the legality of brewing beer on it (despite dry laws in the neighboring area). Ms. Clinton is identified by computer symbol as drafting one land option for Ward, the purpose of which is disputed but was apparently legal. Ms. Clinton does not remember the transaction, and since the matter took only two hours, in a field of law not her specialty, it seems that she or a subordinate simply put Ward’s claim in legal form, following his description—since, in fact, the land involved was not correctly identified, and the option was redrawn by another firm, giving it its accurate name.⁶ As the FDIC report concludes, “Ward had a habit of dropping by and demanding product immediately. This looks like one such occasion.”

Seth Ward was a rather cantankerous sixty-five-year-old with whom Ms. Clinton had disagreements when he served on the Little Rock airport commission, which she represented. He used to wander the halls of the Rose firm, where ties to his son-in-law gave him entree, demanding action on this or that complaint. The FDIC report finds no reason to think Ms. Clinton’s recorded time on the phone with him had anything to do with allegedly fraudulent arrangements between McDougal and Ward, which the men kept to themselves. The firm is exonerated by the report in these words:

It simply would not be persuasive to argue that, for $21,000, McDougal corrupted the Rose Law Firm and convinced half a dozen lawyers, most of whom he did not know, to join him in a scheme to violate the law. Odd as he might seem, McDougal did not involve large groups of strangers in his schemes. Instead, McDougal typically involved a close group of long-time friends and trusted associates in his plans, and nobody else. And typically it was the same people, over and over, friends and vassals who dated back to McDougal’s youth.

Unlike Stewart, the FDIC investigators do not fall for McDougal’s claim of real intimacy with the Clintons. Their relations were more like those of Senator Fulbright, who was innocently involved in McDougal’s Castle Grande real-estate development.⁷ Neither Fulbright nor the Clintons, according to the FDIC report, were the “old cronies” of McDougal that McDougal claimed they were.

3.

Whitewater Again

McDougal, feverishly shunting money about, told Stewart he was embarrassed at the way the Clintons kept paying money into Whitewater and getting nothing back, so he decided to let them get out of the bad investment. He sent Susan to explain this to Ms. Clinton. Why Susan—who did not get along with Ms. Clinton, and who was as confused as anyone by Jim’s schemes? Daisy Mae, arrived on business, must have been a surprise to Ms. Clinton. The only thing Ms. McDougal is reported as remembering from the meeting is that Ms. Clinton said she wanted the money for Chelsea’s education that Jim had promised her.

Ms. Clinton’s own account to the Resolution Trust investigators refutes Stewart’s claim that the Clintons inexplicably turned down a chance to get free of the Whitewater burden. She says the McDougals were asking that the Clintons surrender their equity in the company without releasing them from responsibility for loans taken out to meet Whitewater payments: “It proved impossible to get my husband and me released from those loans, so we ultimately declined to surrender our equity.” Stewart, throughout his narrative, gullibly accepts all McDougal’s claims to be acting only for the Clintons’ own good, and not because he was trying to bail himself out of trouble by using Whitewater for his own tax losses.

McDougal’s house of cards was now collapsing. Perhaps he sent Susan so he would not have to explain his quandary. Within the year he had a heart attack, was diagnosed as manic-depressive, left Susan, and went into hiding. Susan, desperate herself, fled all real-estate entanglements by going to California (where she would later face charges of embezzling nearly $200,000 from conductor Zubin Mehta). At this point, there was no one left to deal with Whitewater debt deadlines and lot payments except Ms. Clinton.

This is when, as publicity for Stewart’s book puts it, Ms. Clinton managed Whitewater “almost single-handedly.” She was reacting to the creditors who could not reach McDougal. Stewart himself says that her new position on Whitewater, after a stance “bordering on neglect,” was to “get it out of her and her husband’s lives.” That is consistent with what she calls a “passive” attitude toward Whitewater. When the McDougals could not be reached, or did not return forms, she signed them as “President” of Whitewater. She asked for power of attorney to handle urgent matters, but McDougal did not give it to her (Susan did). To renew a loan, she put the whole then-assessed value of Whitewater (itself inflated, but not by her) down as the Clintons’ asset.

Whitewater backed its way into the 1992 campaign for the presidency when Jeff Gerth of The New York Times, reporting on McDougal’s failed S&L, noticed that he and candidate Clinton were partners in a real-estate holding, and wondered if money illegally gained from the S&L went into Whitewater, profiting the candidate (as if Whitewater had won Clinton any profits).⁸

Bill Clinton knew little about this shared investment, as Stewart makes clear. Ms. Clinton still did not know all of McDougal’s acrobatic financial moves in the matter. What she did know she tried to convey to her friend, the lawyer Susan Thomases, after the Gerth article appeared, asking her to cope with the problem. Thomases, sorting through the mare’s-nest, got hopelessly lost and had to ask a professional accountant and lawyer, James Lyons, to sort it out for her. Rose Law Firm records were taken, to be searched for the truth in a blur of transactions.

The removal of records, especially by Webster Hubbell, has caused great suspicion of a cover-up. There may have been some such intent having nothing to do with the Clintons. We now know that Hubbell is being accused of cooperating secretly with the alleged fraud involving his father-in-law, Seth Ward. He has, since the 1992 election, been indicted and convicted of overbilling clients. Other people at Rose may have had things to hide. The leader of the firm, Joseph Giroir, so stuffy about developing the firm’s litigation business, was sued for malpractice by the Federal Savings and Loan Insurance Company—he had been representing both the government and an S&L he had invested in—and this forced his retirement from the firm in 1987. Ms. Clinton may not have been able to get all the records she wanted even if she had pursued a policy of full disclosure. The “Great Wall of China” may have been more useful for keeping things from her than for keeping her free of conflicts.

Jeff Gerth wrote another story about the McDougals and Clinton that his editors refused to run, since it depended on the unsubstantiated word of David Hale, a man about to be indicted as a felon. (The story later ran after The Washington Post had made it safe to treat it as a charge already “in play.”) David Hale had owned a company that dispensed loans from the Small Business Administration to disadvantaged people including Susan McDougal (given to her because she is a woman). Jim McDougal diverted the funds to pay his debts. So far there is no involvement of the Clintons in this. But when Hale got caught illegally dispensing SBA loan money, he began to lay the foundations for plea bargaining by seeking maximum publicity for claims that he could implicate President Clinton in his own illegal acts. He went to David Bossie, a full-time publicist of charges against the Clintons, who worked for the right-wing lobbyist Floyd Brown (best known for his “Willie Horton” ad in the 1988 presidential campaign).

Stewart relates on page 317 of his book the story Hale gave Bossie. It is presented as “internally consistent,” in line with Stewart’s implicit defense of Jeff Gerth for accepting it as publishable in The New York Times. In this version, Clinton and McDougal urged Hale to set up the SBA loan to Susan McDougal. But Stewart had described the same transaction in a very different way 180 pages earlier. In that version, only McDougal suggested the loan to Hale, who instantly answered that there would be “no problem making a loan to Susan.” In fact, Hale had the papers ready in a week and Ms. McDougal “could hardly believe she was getting the money this fast.” This quick loan was made by April 8, 1986, yet Hale claims his meeting with Clinton and McDougal was in February.⁹

Hale’s account is at odds with Stewart’s other findings, that Clinton himself never handles financial details but refers them to his wife, and it conflicts with the FDIC’s conclusion that McDougal was secretive about his financial needs, not confiding them to Clinton. Stewart has not mentioned Hale’s claims when referring to possible illegal acts committed by Clinton in TV interviews for Nightline or Washington Week in Review; yet a casual reader of his book, not remembering to go back from page 317 to page 137, could walk away with the impression that Stewart endorses Gerth’s story and Hale’s fabrication.¹⁰

4.

The White House

Stewart deals with various scandals having nothing to do with Whitewater (that failed venture entered into fourteen years before Clinton’s election as President). The White House scandals are, primarily, “travelgate” and “troopergate” and Vince Foster’s death.

Before we take up these matters, it is helpful to consider another book, Jeffrey Birnbaum’s Madhouse, to set the stage for all the confused transactions in the Clinton executive mansion. Birnbaum, the White House correspondent for The Wall Street Journal, had the idea of collecting the experiences of six of the Clinton administration’s most ardent young aides, apparently not knowing when he began the project that it would be a history of burnout, of frustration and anger. All White Houses are full of ambitious scrambling and schemes; but the Clinton mansion was especially overheated. Life there was a matter of exhilaration followed by anguish for the six people treated here—congressional lobbyist Howard Paster, publicist Jeffrey Eller, policy advisors Bruce Reed and Gene Sperling, press secretary Dee Dee Myers, and political strategist Paul Begala. All felt vaguely betrayed. Though some of this is probably their own fault, the result of unreal expectations, the picture one gets of the Clinton White House is of jolting starts and stops, of impulsive plunges followed by hopes for a major recovery (bringing in some new magician resented by those already on the scene—Leon Panetta, Tony Coelho, David Gergen, Dick Morris). It was a place of effusive attention or neglect by Mr. Clinton, of suspicion and resentment felt to radiate from Ms. Clinton.

Again, the emotions are no doubt refracted and brought to burning force by intermediary lenses. But one can sympathize with the draining experience of Dee Dee Myers who is abundantly praised by Clinton, sulphurously blamed by him in bursts of rage, edged out of her job by Leon Panetta, granted a reprieve by the boss she fought the nomination battles with, but still made to feel she must go. At her farewell interview with Clinton, he wept openly and said, “I feel like you’re a member of my family…. I am so sorry for the way this happened.”

The emotional volatility of Clinton’s surroundings may account for some of Ms. Clinton’s perceived efforts to impose order and discipline. She is seen as the bad cop, as what David Maraniss, Clinton’s biographer, calls his “gatekeeper.” Her husband may even seem in complicity with others to escape her vigilance. That may help account for the love affairs among the aides working long hours in the intense surroundings of the White House. Several of them figure in Birnbaum’s book. Clinton’s attitude is conveyed when he says things like this: “I was born at sixteen and I’ll always feel sixteen. And Hillary was born at age forty.”

The complicity of Clinton with his own state troopers in Arkansas is suggested in Stewart’s treatment of the four men who accused their former boss of adultery. Stewart predictably gets to like these men, despite their initial effort to sell their story, and despite the lies two of them told to claim insurance when they crashed a police car after drinking. Stewart finds reasons to believe them—not least the President’s apparent effort to get their bosses to silence them, and the call Clinton made to one of them. That is the kind of impulsive phone call that drives people in the White House wild. When David Maraniss’s biography of Clinton published Betsey Wright’s story of how, before the 1988 election, she went over a list of names of women who might claim they had affairs with him, the President instantly called Wright to ask if she had said this. Then he tried to claim that he had called for some other reason. The result was to make Wright’s account a front-page story.

Clinton’s unbridled impulses have led him to call author Ben Wattenberg to say his administration’s programs were faulty, and to tell businessmen he was wrong to tax them. His problem is that he thinks he can talk anybody over to his side if he just weeps a bit with them, as he did with Dee Dee Myers. This no doubt explains his call to the trooper, who had shared Clinton’s life for some time. Clinton must have felt he could jolly him around, as he does so many people. He does not reflect on how effectively such conduct betrays his vulnerability to the charges that occasion it.

One story by the troopers illustrates the way Clinton can draw others into complicity with him. The security men say that Clinton drove off in one of their cars one night, only to have Ms. Clinton telephone the troopers’ security lodge asking for his whereabouts. When they said he had gone off for a little drive alone, she slammed the phone down. Trooper Roger Perry called Clinton’s cell phone to say she was after him. “God!” he is supposed to have responded. Minutes later, the car screeched up to the kitchen door of the Governor’s Mansion. When Perry went to retrieve his car, he says he heard arguing inside. When he returned two hours later, the kitchen had been torn up.

It is not surprising that Ms. Clinton found the Secret Service agents’ omnipresence in the White House unsettling. In Arkansas, Clinton made a personal choice of the state troopers who guarded him, and thought he had secured their loyalty. Ms. Clinton told Vince Foster to get new agents in the White House, ones who had not formed ties with the Bushes. Foster did not think the matter urgent, but when a story about Ms. Clinton smashing a lamp appeared in the papers (and was later embellished to have her throwing it at Mr. Clinton), she was sure that Secret Service agents had leaked it. (How could she know the source if the story was untrue?) She peremptorily asked why Foster had not got rid of the agents when she asked. He was shocked, according to Stewart, by this treatment. He had been the older partner welcoming her into the Rose Law Firm, where she was his protégé. In the White House, she made it clear, she was his boss. His notes would now refer to her (but not her husband) as “the client.”

This alleged Secret Service incident was the immediate background for the “travelgate” affair, badly simplified and distorted in the press. The common version of this is that Ms. Clinton wanted the White House travel agents fired to bring in an agency connected with her friend Harry Thomason. The travel people were ousted without a hearing, and only then was the FBI summoned to concoct an ex post facto case for the dismissal.

The real story is far messier and less structured (like most tales of the Clinton White House). We get glimpses of the story, from various angles, in Birnbaum’s book—how, by accident, Dee Dee Meyers prematurely revealed the consultation with the FBI, and how Jeff Eller’s romantic liaison with another staff member, Catherine Cornelius, led him to intemperate support of her allegations against the travel office.

Ms. Cornelius’s role has been neglected or unstated. When adverted to at all, she is described as Bill Clinton’s third cousin, as if that were the controlling factor in her role. But she was one of the most excitable of the overheated young aides in a combustible crew. Originally brought into the White House as David Watkins’s secretary, she asked to be assigned to the travel section (she had done some travel work for the campaign), where she undertook spy activities, collecting data on what she took to be major corruption there. She reported to David Watkins, who had already heard from Harry Thomason that the travel office had refused to accept a bid for a travel contract. Watkins arranged a meeting of Cornelius and Thomason with Vince Foster, at which Cornelius revealed that she had been “surreptitiously copying financial records” (in Stewart’s words). Watkins, who would later refer to pressure from Ms. Clinton to fire those in the travel office, was, before that, the conduit for bringing Ms. Cornelius’s charges to Foster. He also had a reason of his own for the change: the new travel agency being hired was a former client of his.

There was financial mismanagement in the travel office—a report by the auditors of KPMG Peat Marwick, completed before the firing, showed that no clear record was kept of cash movement, of press receipts, of overall expenditures. When the auditor found that petty cash was missing $18,000, the head of the office, Billy Dale, produced $2,800 he “found in a drawer,” though he had taken $2,500 out of his personal account on the day the auditors first asked about petty cash. (What would the press have made of this if Ms. Clinton were telling the story?) The person who conducted the independent audit said the head of the office should have been fired. Dale himself initially tried to plea bargain charges against him by returning $69,000 to the government and admitting to a count of inadvertent wrongdoing.¹¹ But he ended up standing trial and being acquitted of embezzlement—which does not absolve him from mismanagement, favoritism, the taking of expensive gifts, the refusal to accept open bidding, or collusion with journalists who padded their travel accounts and covered up customs violations on presidential trips.¹²

The fired travel officers were presented as martyrs to the wrath of Hillary when they were paraded before Senator D’Amato’s committee. That is the way they were treated by the press, which Dale had cultivated over the years. Republicans, who normally bemoan the job security of bureaucrats, revealed a previously unsuspected concern for the job security of Dale and his staff. David Watkins, who had to leave the White House himself for lying about personal use of a White House helicopter to take him to a Maryland golf course, acquired a new dignity in others’ eyes when his notes, produced at the D’Amato hearing, said he was acting under pressure from Ms. Clinton. In testimony taken under oath, he said she never directly ordered him to fire anyone but that he felt pressure from her to do something about the travel office. Of course, most people who fire others like to say they are doing it at the behest of superiors. On the basis of Watkins’s notes (but not of his testimony), William Safire decided that Ms. Clinton was lying when she said she did not order the travel officers’ firings. Safire ignores the role of Catherine Cornelius, of Jeff Ellers, of Watkins himself. He decides that Ms. Clinton is not just lying in this case but must be a compulsive liar in many cases, a “congenital liar,” and he decided all this on the basis of one man’s unsworn jottings (against his own sworn testimony)—and that man was himself a liar. (Watkins’s lie about the helicopter’s use is far better attested to than any by Ms. Clinton. It led to his dismissal.)

The conversation and notes of Vincent Foster show that the matter troubling him most before his suicide was the reaction to travelgate. As he put it in the torn note found after his death:

No one in the White House, to my knowledge, violated any law or standard of conduct, including any action in the travel office.

The FBI lied in their report to the AG.

The press is covering up the illegal benefits they received from the travel staff.

The GOP has lied and misrepresented its knowledge and role and covered up a prior investigation.

This last point refers to the refusal of the Reagan Administration to follow up on a 1988 letter by an insider at the travel office alleging that there was a pattern of favors given to Dale by contractors.

It would be absurd to say Foster committed suicide over travelgate. Who knows the inmost reason (or combination of reasons) for a suicide? Stewart is very good on the character and situation of Vince Foster, a man who cared greatly for decorum and appearances. He was inordinately sensitive to criticism—as his reaction to relatively mild needling by The Wall Street Journal showed. Such people find public service difficult. Even milder criticism of Bobby Ray Inman (whose prior service had not been exposed to public debate) made him withdraw from the office of Secretary of Defense before he had assumed it.

Foster’s dour sense of duty was causing him mounting difficulties. His outgoing wife hated being left behind in Little Rock while Foster gave himself to his Washington work with an almost monastic singlemindedness. When she did move to Washington, she resented the fact that Vince would not take her out to parties. She sat at home, where he returned from work needing rest. For someone with his sense of propriety and procedure, the scrambling and lunging White House of Bill Clinton must have been a daily torture. He sided with Ms. Clinton’s desire for more order, predictability, and privacy. One never knew what Clinton would do next—or what past impulses might become a matter for criticism.

Stewart rightly rejects all conspiratorial nonsense about Foster’s death, noting how irresponsible are those rumormongers who get basic facts wrong and never correct themselves (e.g., the widespread claim that Foster’s gun was in his right hand though he was left-handed). ¹³ But Stewart is rightly critical of the White House’s handling of the suicide’s aftermath. He interviews the park police, who were blocked from the very beginning. Clinton, visiting the widow, would not let the police ask questions before information became contaminated by people’s comments to each other.

In a White House where procedure was always the victim of impulse, it would have been surprising if the handling of Foster’s office and papers had been orderly. Most of this is understandable, and Bernard Nussbaum, the worst offender, would hardly have taken others with him to Foster’s office if he intended to remove or destroy papers—why have witnesses? Later, his more settled resistance to Justice Department examination of the papers was of a piece with the White House’s self-defeating policy of stonewalling.

The general source of this resistance, in spirit if not in all details, does seem to be Ms. Clinton. Given a spontaneous and imprudent husband, she seems to have leaned in the opposite direction, toward control, toward the suppression of spontaneity. After all, she does not know, from day to day, what she may have to cope with. The novel Primary Colors, though lurid and overdone in most respects, does capture one aspect of the 1992 Clinton campaign. When allegations about Clinton—the draft, peace demonstrations, “bimbos”—arose, those within the campaign were hampered by a lack of certitude about what he was capable of doing on impulse. If bimbos seemed to be out for profit—well, there was an Elvis veer in Clinton toward the trashy, a “nostalgie de les boobs.”

The campaigners only underwent this ordeal for months. Ms. Clinton lives with it. She must feel that she is walking through a minefield every day. When she expressed her anger at the Whitewater involvement, she said that Bill got her into it, with his cornpone political acquaintances like McDougal. If her bristly nonresponsiveness created distrust, she was willing to pay that price. But the price was too high, as many around her recognized, early on.

One of those, interestingly enough, was Susan Thomases—often made the villain, the evil genius of Ms. Clinton. She advocated a policy of openness. When Ms. Clinton resisted the idea of a special counsel (though she was finally defeated on this), Ms. Thomases recommended getting a respected and independent journalist and giving him or her access to whatever was desired. That, in fact, was how Stewart’s book came into being. Thomases convinced Ms. Clinton to give Stewart, an expert on financial scandal with no connection to any part of the story, her cooperation on the book. At first Ms. Clinton was disposed to agree, but then she closed down again.

It was a big mistake. Stewart is left getting his impression of her actions on Whitewater from the manic-depressive Jim McDougal, the uncomprehending Susan, and the desperate David Hale. It is understandable that Ms. Clinton would not want to answer questions posed after Stewart had interviewed the Arkansas troopers; but pretending that problems do not exist will not make them go away. It is noteworthy that Ms. Thomases, who knows Ms. Clinton as well as anyone, was confident that nothing was to be gained by silence.

The White House stonewalling gave the media a charter for literal irresponsibility—they were not responsible for rumors that went uncontradicted. There was a compensatory mechanism in this. The media had felt uncomfortable and constrained when taking up allegations, with some evidentiary backing, of Clinton’s philandering. People doubted whether this was a matter for publication or extended discussion. Financial charges, on the other hand, were clearly relevant to public integrity, and even the wildest claim could be indulged with abandon.

The result was enough to justify Ms. Clinton’s distrust of the media, and then some. ABC News, interviewing David Hale to hear his story about Clinton’s supposed encouragement of loan to Susan McDougal, said that while Hale’s lawyer was trying to call Vince Foster on the day of his death, the FBI raided Hale’s house for evidence of wrongdoing in dealing with the Small Business Administration. The conspiracy buffs themselves could not have asked for a better slither of innuendo fusing quite different matters and suggesting dark reasons for Foster’s death. Jeff Gerth’s Times articles, William Safire’s rumblings about Foster’s “so-called suicide,” the distorted accounts of travelgate—such work by the “respectable” press gives an opening to wild conspiratorialists. When an FDIC report lays to rest many of the charges implicit in Jeff Gerth’s articles, the Times does not apologize for its errors but argues strenuously to continue the blatant political circus of Al D’Amato.

For all its laborious showmanship, the D’Amato committee has not been as clear and convincing as the FDIC report on matters where the two investigations overlap. No crimes on the Clintons’ part have been proved. The most that James Stewart has suggested in the way of illegal acts are deduction of principal as interest on two tax returns and an exaggeration of assets on a financial report—all possibly inadvertent. If politicians were to be dismissed for these matters, the ranks would be thinned more thoroughly than by nanny-tax problems. The Clintons are not, by temperament or talent, schemers for money. They were amateurish in making one investment they thought would give a quick return and be over, and they have been culpable in trying to prevent the truth about this from coming out.

Despite efforts to make a big affair of Whitewater and other McDougalisms, these were minor matters. Gerth, bringing the subject to the public for the first time, presented McDougal’s S&L as “one of the largest state-chartered associations in Arkansas.” It was thirtieth (in a small state) for amounts loaned and twenty-fifth for claimed assets. We were told this was a part of the billions of dollars lost by defaulting S&Ls. McDougal’s was the 196th costliest, nationwide, and it caused only 7 percent of the losses in Arkansas (once again, that little state). Puffing up the importance of sad, manic McDougal was a way to bring down Clinton. David Hale’s desperate thrashings for a plea bargain were even flimsier. He is a man whose trustworthiness can be judged from the fact that he set up thirteen different dummy corporations at one address (his own). The same people who minimized Nixon’s efforts to use the vast engines of the government—the CIA, the FBI, the IRS—to cover up crimes committed while he was president, the people who said “it did not start with Watergate,” or “nobody died at Watergate,” have become obsessed with the financial scams of a minor Little Rock con man and his wife. We are told we must fight “the arrogance of power”—by turning things over to Alfonse D’Amato.¹⁴

Whitewater has been a scandal, but the clearest proved wrongdoing has been by politicians, journalists, and professional (well-paid) Clinton critics.¹⁵ Some of these believe that their showing a bit of restraint in dealing with sexual allegations gives them a mandate for any and all other charges. The public’s time and money have been sent down a rabbit hole where only McDougal ever knew all that he was up to, once, and now, as in the line attributed to Browning, he must confess “only God knows.” Supposedly respectable people have become the conduits of filth. Bill Clinton was presumably a philanderer, and I find nothing morally admirable in this. But if he is placed on a moral spectrum with the Reverend Jerry Falwell, who peddled videotapes accusing the President of murder, Clinton seems by comparison a paragon of virtue. There are levels of the despicable that Whitewater “analysts” have been plumbing to record new depths. That is the real scandal.

—March 21, 1996