Hillary's Other Deal

April 14, 1994|By TRB

WASHINGTON — Washington. -- Unless you've been in a coma lately, you may have heard about Hillary Clinton's commodities trades. In less than a year during the late 1970s, while her husband was governor, she turned $1,000 into $100,000. It is only natural to suspect that this was a sweetheart deal of some sort -- though, so far, no one can figure out exactly what sort.

But unless you're a Whitewater obsessive, you may have missed the story of Hillary's cellular-phone deal. In just four years during the mid-1980s, she turned a $2,000 investment in a cellular-franchise application into a $46,000 payoff. Almost as spectacular, and more recent to boot.

What's more, there is no mystery about the nature of this sweetheart deal. The profit derived from the fact that successful applicants were given a tremendously valuable franchise free. Hillary Clinton's ability to get in on this gravy train derived from the fact that she was a prominent lawyer, a woman and married to the governor.

So why is there no fuss about Hillary's cellular deal (reported in the April 18 Business Week)?

One reason is that another investor in the deal was Sheffield Nelson, Bill Clinton's Republican arch-nemesis in Arkansas. That may explain why the story hasn't been taken up by the anti-Clinton agitprop machine (radio talk show hosts, etc.) which depends on Arkansas Clinton-haters for grist.

As for the mainstream press, this particular story has come out at a moment in Whitewater when the natural ebb-and-flow of every Washington scandal is in an ebbing phase. The feverish self-feeding momentum of a month ago has reversed itself. The press is in a ''let's not get carried away'' frame of mind. What gets treated as a big story and what gets ignored can be comically arbitrary. Hillary's cellular investment was actually reported by Charles Babcock and Sharon LaFraniere in the Washington Post two years ago, as part of a long piece about the Clintons' finances. It made page seven. Nobody cared back then, either.

But the main reason no one is making a fuss about Hillary's cellular-telephone profits is that all cellular franchises across the country were rewarded in more or less the same way. Hundreds of prominent people did exactly what Hillary Clinton did -- openly, within the law and beyond reproach. Thus Hillary's cellular deal illustrates, once again, this column's Law of Scandal: The scandal isn't what's illegal, the scandal is what's legal.

What makes this deal a non-story as far as the press is concerned -- the fact that it was perfectly legal and everybody does it -- is precisely what makes it more important in the real world than one woman's luck or graft in commodities trading. The press needs a ''bright line'' of legal or ethical misbehavior, or at least possible misbehavior, to certify something as ''news.'' But the inevitable reality that people will cross the line from time to time is less interesting than society's decision about where the line should be drawn.

All line-crossing stories can be boiled down to three words: flesh is weak -- a dog-bites-man story if there ever was one. Line-drawing stories tell you not about random individuals or about universal human nature but about the society we live in.

Hillary's cellular deal is a classic line-drawing story. At the time she was invited to join the investor group bidding on the Little Rock franchise, the Federal Communications Commission was planning to allocate these goodies the way it had allocated TV and radio licenses: through insane ''comparative hearings,'' in which applicants would vie to prove their moral worthiness for receiving this gift. Being local, being a minority or woman, being highly regarded in the community were all pluses.

Later, the FCC switched to the only slightly less insane method of awarding these gifts by lottery. Hillary's group came in second, but the winning group's claim was threatened by a lawsuit and the winners unloaded the franchise to Hillary's group at a deep discount. Having secured the franchise, Hillary's group almost immediately flipped it at full value to McCaw, the cellular giant. That's typical. The FCC puts almost no restrictions on resale of its cherished licenses once you have persuaded it that you, above all others, deserve to have one.

Peruse the Forbes 400 list of the richest Americans, and you'll see that a remarkable number got there through the gift or growth in value of radio-spectrum space handed out free by the FCC. Many others got rich from cable franchises given away by local governments. The scandal isn't that anyone in particular gets these deals, whether through political position, corruption or privileged minority status. The scandal is that anyone gets these deals at all.

Lately the FCC has begun auctioning off its licenses, as it should have been doing all along, with the proceeds going to the public treasury. But the agency still sometimes gives its goods away free. In December it awarded the New York City franchise for advanced wireless communication to a tiny company it decreed to be a ''pioneer.'' According to the New York Times, the license is worth $250 million. Weep, Hillary.

TRB is a column of The New Republic, written by Michael Kinsley.

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