Clintons signal that they may owe back taxes over their Whitewater losses

March 19, 1994|By Carl M. Cannon | Carl M. Cannon,Washington Bureau of The Sun

WASHINGTON -- President Clinton and his attorney sent strong signals yesterday that a review of the Clintons' tax returns will show that their losses on the Whitewater Development Corp. may have been less than the Clintons have claimed -- and that the president and his wife might owe back taxes.

"If there were any mistakes, they certainly were not intentional," the president said in an interview with wire service reporters yesterday. "If we do owe, we'll make it good."

"I'm happy to endorse the public remarks of my client," said David Kendall, Mr. Clinton's personal attorney, who is reviewing the Clintons' tax returns. He refused to comment further.

When Whitewater first became a political liability during the 1992 campaign, Mr. Clinton tapped a friend, Denver attorney James M. Lyons, to prepare a response. Mr. Lyons retained an accounting firm to reconstruct the Whitewater financial picture, even though it wasn't given the complete Whitewater records.

The firm's report said that the Clintons put $68,900 into Whitewater. White House officials have characterized this entire amount as a loss to the Clintons, but there is doubt now about the $68,900 figure and therefore about how much the Clintons really lost.

"The Lyons report was a snapshot of what they had at the time," said one senior White House official. Asked whether it now appeared that this figure was exaggerated and that the Clintons would, therefore, have underpaid their taxes, this official said: "There's some evidence that might be the case."

So far, the Clintons have refused to make public the documents that might help end the confusion: Their 1978 and 1979 tax returns.

It was during those years that the Clintons initially entered into the Whitewater partnership with another couple, James and Susan McDougal. It was also in those years that Mrs. Clinton, speculating in the commodities futures market, earned a quick profit of $100,000 under the guidance of James B. Blair, a lawyer for Arkansas-based Tyson Foods Inc., the nation's largest poultry company.

While governor, Mr. Clinton was criticized by environmental groups for siding with Tyson in regulatory disputes relating to clean water.

Last year, the Clintons voluntarily paid about $4,000 in back taxes and interest because they improperly deducted interest payments on their 1984 and 1985 tax returns that were made by Whitewater and not by them personally.

Another such disclosure that the Clintons underpaid their taxes would add to the almost daily barrage of Whitewater-related revelations has swamped the White House staff and

left it struggling to keep functioning on legislative issues.

Whitewater tax records are also being reviewed by special counsel Robert B. Fiske Jr. as part of his inquiry into the matter.

"What we're trying to do now is go back over this and get all the relevant information to the special counsel . . . and to make sure that, if we have made any mistakes, that we can identify those mistakes . . . and give that information to the special counsel too," Mr. Clinton said yesterday.

"Every year we had our taxes prepared by an accountant. I always wanted to be scrupulous about paying whatever taxes I owed. . . . So if there were any mistakes, they certainly were not intentional."

The Clintons used both personal and corporate checks to pay bank notes on their Whitewater loans, which has made untangling the liabilities a complicated chore for the couple's accountants and lawyers.

One well-placed White House attorney said last night that Mr. Kendall's review is not yet complete, but Mr. Clinton and Hillary Rodham Clinton have been dropping hints in what appears to be an effort to soften the blow if such back payments are required.

"We made lots of mistakes," Mrs. Clinton told Time magazine in a reference to the overall handling of Whitewater. "I'd be the first to admit that." Mrs. Clinton added that, if it turned out that she and her husband underpaid their taxes on Whitewater, they'll make up the difference. "We never intended to do anything wrong," she said.

Yesterday, Mr. Clinton said he'd always told his accountants: "Resolve all doubt in favor of the government. I never wanted a tax problem. I was always paying lots of taxes."

But, he added, "That doesn't mean that no mistakes could have been made, because we didn't have access to the Whitewater records all these years. I'm not saying we didn't [make mistakes]. I'm just saying that, if any were made, it was purely accidental. The accountants certainly tried to make sure we paid what we owed."

Meanwhile, Republican Sen. Alfonse D'Amato of New York released a letter yesterday from Deputy Treasury Secretary Roger C. Altman describing yet another contact with the White House over Whitewater.

Mr. Altman, acting head of the Resolution Trust Corp., an independent regulatory agency that is looking at Whitewater's connection to a failed savings and loan, met with the deputy White House chief of staff, Harold Ickes.

Saying he was "deeply distressed" that Mr. Altman had not mentioned this in two previous letters to the Senate Banking Committee, Mr. D'Amato called on Mr. Altman to resign. Mr. Altman's spokeswoman said he had no intention of resigning.

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