No conflict of interest found in Rose Law Firm's link to failed Arkansas thrift

February 18, 1994|By Susan Baer | Susan Baer,Washington Bureau of The Sun

WASHINGTON -- Federal bank regulators said yesterday that they had found no evidence of conflict of interest by Hillary Rodham Clinton's former law firm in representing the government in a case involving a failed Arkansas savings and loan in 1989.

After conducting an internal review, the Federal Deposit Insurance Corp. said it was unclear whether the Rose Law Firm had revealed to the government that it had represented the failed thrift, Madison Guaranty Savings & Loan, before state regulators in the mid-1980s. The regulatory agency said it would have expected a complete written disclosure in light of the firm's previous work for the savings and loan.

But, finding no violation of federal conflict-of-interest policies -- policies the FDIC concedes were not as strict before 1990 -- it recommended no sanctions against the law firm.

Questions surrounding Rose's hiring by the government, which paid the firm $400,000 in fees and expenses, are among many to come to light in the Whitewater-Madison controversy being investigated by a special counsel, Robert B. Fiske Jr.

Yesterday, President Clinton said that most of the investigation into the Whitewater land deal he and his wife entered into with a friend who later became the owner of Madison "has nothing to do with me."

He told reporters that he had reluctantly urged Attorney General Janet Reno to appoint a special counsel so that "I wouldn't have to fool with it any more."

But he said that decision "is going to cost the taxpayers millions of dollars because what they did was shutdown the investigation that was ongoing of the S&L issues down there."

Mr. Fiske, who has set up shop in Little Rock, Ark., persuaded a federal judge Wednesday to convene a grand jury solely to investigate the Whitewater matter.

The Rose Law Firm -- where Mrs. Clinton; the late deputy White House counsel, Vincent M. Foster Jr., who committed suicide last summer; and Associate Attorney General Webster Hubbell all worked -- figures prominently in the criminal investigation.

After a report in the Washington Times last week alleged that Rose employees had witnessed the shredding of Whitewater documents -- an allegation that attorneys there denied -- Mr. Fiske ordered the law firm not to destroy any printed or computerized material that could pertain to his Whitewater investigation.

And in a tangential matter, the FDIC ruled Wednesday that Mrs. Clinton had no conflict of interest when she represented the government in a case against Dan Lasater, a former Clinton supporter. The agency found that Mrs. Clinton had done just two hours of work in the case against Mr. Lasater, a bond trader with ties to a failed Illinois thrift.

Meanwhile, the FDIC said yesterday that there was no evidence that Mr. Hubbell, the former Rose partner who is now the No. 3 official at the Justice Department, misled the agency when it hired the law firm in 1989 to sue Madison's accountants. The suit was an effort to recover some of the $47 million to $60 million in taxpayer losses that resulted from Madison's collapse.

Federal regulations generally forbid law firms to represent the government in cases against savings and loans at which the firms have done significant work in the past.

After hiring Rose, the federal regulators settled their $6 million lawsuit against the Madison accountants, Frost & Co., for $1 million.

According to the FDIC report, Mr. Hubbell recalled "advising the [FDIC] staff attorney very generally that the firm had done a small amount of work for the S&L years earlier."

But neither the staff attorney involved nor the attorney's supervisor could recall Mr. Hubbell's raising the issue, the report states.

Nevertheless, the eight-page report concluded: "It is not clear whether the information was conveyed to the FDIC staff at the time. However, based on our review, we do not believe the prior representation represented a conflict of interest."

It noted, however, that, "In 1989, the FDIC's conflicts procedures . . . were less formal."

The report also cleared the Rose Law Firm and Mr. Hubbell of possibly failing to disclose to regulators the fact that Mr. Hubbell's father-in-law, Seth Ward Sr., was involved in litigation with Madison.

Once again, the report states, "It is uncertain whether the Hubbell/Ward relationship was disclosed at the time of retention." But, while stressing that the "better course" would have been "clear and full disclosure in writing," the FDIC said it found no conflict.

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