Questions Swirl In Whitewater Affair

January 08, 1994|By Susan Baer | Susan Baer,Washington Bureau

WASHINGTON -- The kinds of heavy clouds that often forecast a political thunderstorm have begun to take shape over the White House.

In the past week, the president and first lady have been beset by accusations of stonewalling, calls for a special prosecutor, disclosures of secret grand jury subpoenas and suspicions of a cover-up with regard to their involvement in a failed Arkansas land deal.

But lost in much of the ominous discussion of the Clintons' investment in Whitewater Development Corp. -- a tangled story now code-named Whitewater -- is the crucial question that has proven as elusive as it is complex:

Exactly what crime, impropriety or, at the very least, politically embarrassing act is the president suspected of having committed?

In other words, if there is a cover-up going on, what is it that the White House is covering up?

In a nutshell, the suspicion is this: that, as governor of Arkansas, Bill Clinton used his office to give favorable treatment to an unstable savings & loan -- whose eventual failure ended up costing taxpayers millions of dollars -- in return for campaign contributions and personal financial benefit.

What does Whitewater, an investment in land in the Ozarks, have to do with this?

The Arkansas S&L, Madison Guaranty Savings & Loan, was headed by James McDougal, a longtime Clinton friend and colleague and, more importantly, the Clintons' business partner in Whitewater.

At the referral of the Resolution Trust Corp., which oversees the cleanup of the nation's failed thrifts, the Justice Department is conducting a criminal investigation of Madison, whose collapse in the late '80s cost taxpayers anywhere from $48 million to $60 million.

As the administration has repeatedly pointed out, Bill and Hillary Rodham Clinton are not targets of that investigation.

But some of the questionable practices at Madison that the government is examining cast at least a shadow of suspicion on then-Governor and Mrs. Clinton, supporting the contention that they may have improperly benefited from their association with Mr. McDougal and the S&L at a substantial cost to the public.

What's more, although the dealings under federal investigation occurred before Mr. Clinton became president, it is the administration's recent activities -- its determined effort to keep the Clintons' Whitewater files private -- that are fueling suspicions of wrongdoing and a cover-up.

Whitewater files

For months the White House dismissed the subject with a flick of the wrist and dodged questions of whether Whitewater files were in the office of deputy White House counsel Vincent W. Foster Jr., who committed suicide last July.

Finally, it acknowledged last month that such files were removed from Mr. Foster's office by top White House officials before U.S. Park Police investigators had a chance to view them.

Days later, on Dec. 23, the White House announced that Mr. Clinton was "voluntarily" turning over those papers to the Justice Department. It did not disclose until this week, however, that on that same day, the Clintons' personal lawyer was negotiating a subpoena with the Justice Department that would protect all the files from public disclosure.

In light of growing suspicion, the administration -- which has now assembled a damage-control team of some of the most sophisticated political plotters in the land -- is reportedly considering making the files public.

Whether these five boxes would make clear the murky Whitewater/Madison saga is unknown.

The files are incomplete, and the Clintons have said they don't know where all of Whitewater's business records are.

The questions

But the papers may go a long way toward answering some of the questions pursued by the Justice Department and Congressional Republicans, who are conducting their own inquiry and calling for the appointment of an independent counsel.

Here are some of them:

* Was the 1978 Whitewater partnership a sweetheart deal for the Clintons -- a sort of gift to the Clintons from Mr. McDougal, who needed state favors -- in which they invested little but stood to gain much?

Once the Whitewater deal was uncovered during the 1992 presidential campaign, Mr. Clinton acknowledged that he probably should have gotten out of the venture after he was elected governor -- since his business partner would be subject to state banking regulations -- but didn't feel an ethical need to since the deal was a money-loser.

To bolster that claim, the campaign last year issued what it continues to refer to as an "independent" audit of the deal which shows that the couple lost $69,000.

But that "independent" examination was commissioned by Denver lawyer James Lyons, a Clinton and Foster buddy, and was admittedly based on incomplete records.

No Whitewater loss was claimed by the Clintons for tax purposes. In fact, the Clintons' 1992 tax returns show a $1,000 capital gain from the sale of their interest in Whitewater last year.

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