This is the first of three excerpts from "The Great Whitewater Fiasco: An American Tale of Money, Power and Politics," a Ballantine paperback by Martin L. Gross. During the 1992 presidential election, Whitewater appeared to be a dead issue.
But behind the scenes, a game of intrigue involving Whitewater and Madison Guaranty was being played out in the Resolution Trust Co., in the Justice Department and in the U.S. attorney's office in Little Rock.
The story goes as follows:
In July 1991, RTC criminal investigator L. Jean Lewis was assigned to follow up the failed Madison Guaranty. She spent weeks studying documents but found nothing mentioning Whitewater.
But when the RTC decided to look further, Ms. Lewis and civil investigator Wyatt Adams traveled to Little Rock, where Madison records were strewn haphazardly around in a warehouse.
They located Whitewater checking accounts, then hit pay dirt that connected Whitewater and the failed S&L.
On a sheet marked "Reserve for Development -- Maple Creek Farms," a Madison-financed operation, was a $30,000 item for an engineering survey charged to Whitewater.
Also found were Whitewater checks payable to another bank and to real estate entities Pembroke Manor and Rolling Manor with the notation "loan."
The result was an RTC "criminal referral," number C0004, that according to published reports alleged that a giant $1.5 million check-kiting scheme had been developed at Madison Guaranty involving several entities, including Whitewater.
Ms. Lewis reportedly believed that between $70,000 and $100,000 had been funneled from Madison to Whitewater, which was half-owned by the Clintons.
The report C0004 became the hottest document in Washington because the names of Presidential candidate William Jefferson Clinton and Hillary Rodham Clinton appeared in it as "possible beneficiaries" of or "possible witnesses" to the alleged crimes.
On Sept. 2, 1992, the referral was submitted to the Justice Department, beginning a saga that is not only continuing, but becoming ever more dramatic.
The referral arrived at the U.S. attorney's office in Little Rock, but Chuck Banks, then the Republican appointee, refuses to discuss it until the independent counsel or a congressional committee approaches him.
But we do know that the criminal referral arrived at the Justice Department in Washington in October 1992 and came to the attention of then-President George Bush, who decided not to use the information in his re-election campaign.
Mr. Clinton won the 1992 election, and though Whitewater was in suspended animation, it was not dead.
Where is C0004?
Jean Lewis started pestering the Little Rock FBI office. What had happened to her C0004 on Madison-Whitewater? Finally, the FBI acknowledged that the local U.S. attorney had received it.
This took her up to May 1993. The new U.S. attorney in Little Rock, Paula J. Casey, a former law student of Bill Clinton's, was about to take office. Ms. Lewis wrote and was told she should contact Washington.
But numerous phone calls to Attorney General Janet Reno's office produced the same result -- nothing.
Ms. Lewis then tried the executive office for the U.S. attorneys at the Justice Department.
"Oh," an employee blurted out, "the one involving the president and his wife." She then explained that, "Any time a referral comes in that would make the department look bad or has political ramifications, it goes to the attorney general."
(During this period, Webster Hubbell, Mrs. Clinton's former law partner and Mr. Clinton's best friend, was No. 3 at Justice. Many considered Hubbell the real boss at Justice, with a daily pipeline to Mr. Clinton.
(Hubbell has now pleaded guilty to two counts of fraud in connection with the Rose Law Firm, part of which involves Madison Guaranty. He has been sentenced to 21 months in jail. Anything he knows about C0004 will probably be a subject of his cooperation with the independent counsel, Kenneth W. Starr.)
A week later, Ms. Lewis received a phone call from Justice. The referral had been given to a special counsel, but he was now in private practice.
Calls from Justice
Justice called again. The referral had been found in the Fraud Section, but the person assigned the case "didn't want to deal with it."
After another fortnight, Justice called again. The package had been sent to an associate deputy attorney general, but Justice had gotten it back because he had been appointed a U.S. attorney in Florida.
That same day, Justice called again. They had decided that C0004 -- the hot document mentioning the Clintons -- should go back to the newly named U.S. attorney in Little Rock, Paula Casey.
Meanwhile, the Kansas City office of the RTC had renewed its investigation of Madison-Whitewater and had come up with nine new criminal referrals, which were sent to Ms. Casey.