Whitewater controversy
Encyclopedia
The Whitewater controversy (also called the Whitewater scandal, Whitewatergate, or most often, simply Whitewater) was an American
politics controversy that began with the real estate
investments of Bill
and Hillary Clinton
and their associates, Jim
and Susan McDougal
in the Whitewater Development Corporation
, a failed business venture in the 1970s and 1980s.
A New York Times article published during the 1992 U.S. presidential campaign reported that Clinton and his wife had invested and lost money in the Whitewater development project.
David Hale
, the source of criminal allegations against President Bill Clinton in the Whitewater affair, claimed in November 1992 that Bill Clinton, while governor of Arkansas, pressured him to provide an illegal $300,000 loan to Susan McDougal, the partner of the Clintons in the Whitewater land deal. Clinton supporters regarded Hale's allegations as questionable, as Hale had not mentioned Clinton in reference to this loan during the original FBI investigation of Madison Guaranty
in 1989. Hale also had a history of creating dummy companies, then looting their federal funds, such as SBA loans, and then allowing them to fail. Only after coming under indictment for this in 1993 did Hale make allegations against the Clintons.
A U.S. Securities and Exchange Commission investigation did result in convictions against the McDougals for their role in the Whitewater project, but the Clintons themselves were never prosecuted, as three separate inquiries found insufficient evidence linking them with the criminal conduct of others related to the land deal. Bill Clinton's successor as Arkansas Governor, Jim Guy Tucker
, was also convicted and served time in prison for his role in the fraud. Susan McDougal later served 18 months in prison for contempt of court for refusing to answer any questions relating to Whitewater, and was later granted a pardon by President Clinton just before leaving office.
The term Whitewater is also sometimes used to include other controversies from the Bill Clinton administration
, especially those such as Travelgate, Filegate, and the circumstances surrounding Vince Foster
's death, that were investigated by the Whitewater Independent Counsel.
Bill Clinton
had known Arkansas businessman and political figure Jim McDougal
since 1968, and had made a previous small real estate investment with him in 1977. Clinton and Hillary Rodham were seeking ways of supplementing his salary of $26,500 as Arkansas Attorney General
(which would rise to $35,000 if his campaign for Governor of Arkansas succeeded) and hers of $24,500 as Rose Law Firm
associate. It was around this time that Rodham also began her cattle futures trading
.
In Spring 1978, McDougal approached Clinton and Rodham with new proposal: to join with him and his wife Susan
to buy 230 acre (0.9307778 km²) of undeveloped land along the south bank of the White River
near Flippin, Arkansas
, in the Ozark Mountains. The goal was to subdivide
the site into lots for vacation homes, intended for the many people coming south from Chicago
and Detroit who were interested in low property tax
es, fishing
, rafting
, and mountain scenery. The plan was to hold the property for a few years and then sell the lots at a profit.
The four borrowed $203,000 to buy land, and subsequently transferred ownership of the land to the newly created Whitewater Development Corporation
, in which all four participants had equal shares; Susan McDougal chose the name "Whitewater Estates"; their sales pitch was, "One weekend here and you'll never want to live anywhere else." The business was incorporated on June 18, 1979.
featured high interest rates in general, and by the time these lots were surveyed
and thus available for sale at the end of 1979, rates had climbed to near 20 percent. Prospective buyers could no longer afford to buy vacation homes. Rather than take a loss on the venture, the four decided to hold on, building a model home and hoping for better economic conditions.
During the next several years, Jim McDougal asked the Clintons for checks for various interest payments on the loan or other expenses; the Clintons, believing themselves passive partners in the venture, later claimed to have no knowledge of the uses of these contributions. Concurrently, Jim McDougal had lost his job as the governor's economic aide when Bill Clinton failed to win re-election in 1980. McDougal decided to go into banking instead, and then acquired the Bank of Kingston in 1980 and the Woodruff Savings & Loan in 1982 renaming them the Madison Bank & Trust and the Madison Guaranty Savings & Loan, respectively.
In spring 1985, McDougal held a fundraiser at Madison's office in Little Rock that paid off Clinton's remaining 1984 gubernatorial campaign debt of $50,000. McDougal raised $35,000, and of that Madison cashier's checks accounted for $12,000.
In 1985, Jim McDougal set his sights on investment into local residential construction, labeling the project Castle Grande
. The 1,000 acres (4 km²), located south of Little Rock, Arkansas
, were priced at about $1.75 million, more than McDougal could afford on his own: due to financial laws, McDougal could borrow at most $600,000 from his own Savings and loan, Madison Guaranty. McDougal subsequently involved several others to produce the additional funds. Among these was Seth Ward, an employee of the bank, who helped funnel the additional $1.15 million required. To avoid potential investigations, the money was moved back and forth among several other investors and intermediaries. Hillary Clinton, then an attorney with the Little Rock-based Rose Law Firm, provided legal services to Castle Grande.
In 1986, their scheme was unveiled by federal regulators who realized that all of the necessary funds for this real estate venture had come entirely from Madison Guaranty; regulators called Castle Grande a sham. In July of that year, McDougals resigned from Madison Guaranty. Seth Ward fell under investigation, along with the lawyer who helped him draft the agreement.
Castle Grande earned $2 million in commissions and fees for McDougal's business associates, as well as an unknown amount of legal fees by Hillary Clinton's law firm, but in 1989 it collapsed, at a cost to the government of $4 million. This in turn helped trigger the 1989 collapse of Madison Guaranty, which federal regulators then had to take over. Taking place in the midst of the nationwide Savings and Loan crisis
, the failure of Madison Guaranty cost the United States $73 million.
The Clintons lost between $37,000 and $69,000 on their Whitewater investment, a lesser amount than the McDougals lost, for reasons unclear in the media reports. The White House and the President's supporters claimed that they were exonerated by the Pillsbury Report, a $3 million study done for the Resolution Trust Corporation by the Pillsbury, Madison & Sutro law firm at the time that Madison Guaranty Savings & Loan was dissolved. In this report it was shown that James McDougal, who had set up the deal, was the managing partner, and Clinton was a passive investor in the venture. Charles Patterson, lead attorney from Pillsbury, Madison & Sutro on the investigation, refuted the White House's claim, stating that "It was not our purpose to vindicate, castigate, exculpate". The President's critics cited the unequal capital contributions by the Clintons and McDougals as evidence that then-Governor Clinton was to contribute in other ways.
about the failure of the Whitewater development, which Bill Clinton and Jim McDougal had originally purchased in 1978. The subsequent New York Times article, by reporter Jeff Gerth
, appeared on March 8, 1992.
in July 1993, chief White House counsel Bernard Nussbaum
removed documents, some of them concerning the Whitewater Development Corporation
, from Foster's office and gave them to Margaret Williams, Chief of Staff to the First Lady. According to the New York Times, Williams placed them in a safe in the White House
for five days before turning them over to their personal lawyer.
As a result of the expose by the New York Times, the Justice Department opened an investigation into the failed Whitewater deal. Media pressure continued to build, and on April 22, 1994, Hillary Clinton gave an unusual press conference under a portrait of Abraham Lincoln
in the State Dining Room of the White House, to address questions on both Whitewater and the cattle futures controversy
; it was broadcast live by CBS
, NBC
, ABC, and CNN
. In it she claimed that the Clintons had had a passive role in the Whitewater venture, and had committed no wrongdoing, but admitted her explanations had been vague and that she no longer opposed appointing a special prosecutor to investigate the matter. Afterwards she won media praise for the manner in which she conducted herself during this, her first adversarial press conference; Time called her "open, candid, but above all unflappable ... the real message was her attitude and her poise. The confiding tone and relaxed body language ... immediately drew approving reviews." By now there was growing backlash from Democrats and other members of the political left against the press' investigations of Whitewater, with The New York Times coming in for special criticism by Gene Lyons of Harpers, who felt its reporters were exaggerating the significance and possible impropriety of what they were uncovering.
At Clinton's request, Attorney General Janet Reno
appointed a special prosecutor
Robert B. Fiske
in 1994 to investigate the legality of the Whitewater transactions. Two allegations surfaced: 1) that Clinton had exerted pressure on an Arkansas businessman, David Hale, to make a loan that would benefit him and the owners of Madison Guaranty
; and 2) that an Arkansas bank had concealed transactions involving Clinton's gubernatorial campaign in 1990. In May 1994, Independent Counsel Robert Fiske issued a grand jury subpoena
to the President and his wife for all documents relating to Madison Guaranty
, with a deadline of 30 days. They were reported as missing by the Clintons. Almost two years later, the subpoenaed billing records of the Rose Law Firm
, which Hillary Clinton worked for, were discovered in the Clintons' private residence in the White House by a staffer in January 1996.
The Clintons claimed to have been cleared of all wrongdoing in two reports prepared by the San Francisco
law firm of Pillsbury Madison and Sutro for the Resolution Trust Corporation
, which was overseeing the liquidation of Madison Guaranty. Charles Patterson, lead attorney for Pillsbury, Madison refuted that claim, stating that "It was not our purpose to vindicate, castigate, exculpate".
was appointed by a three-judge panel to continue the Whitewater investigation, replacing Robert B. Fiske, who had been specially appointed by the Attorney General prior to the re-enactment of the Independent Counsel law. Fiske was replaced because he had been chosen and appointed by Janet Reno
, Clinton's Attorney General, creating an apparent conflict of interest.
David Hale
, the key witness against President Clinton in Starr's Whitewater investigation, alleged in November 1992 that Clinton, while governor of Arkansas, pressured him to provide an illegal $300,000 loan to Susan McDougal, the partner of the Clintons in the Whitewater land deal.
Hale's defense strategy, as proposed by attorney Randy Coleman, was to present himself as the victim of high-powered politicians who forced him to give away all of the money. This self-caricature was undermined by testimony from November 1989, wherein FBI agents investigating the failure of Madison Guaranty had questioned Hale about his dealings with Jim and Susan McDougal, including the $300,000 loan. According to the agents' official memorandum of that interview, Hale described in some detail his dealings with Jim Guy Tucker (then an attorney in private practice, later Bill Clinton's Lt. Governor), both McDougals, and several others, but never mentioned Governor Bill Clinton. Nor did Clinton's name come up when Hale testified at McDougal's 1990 trial, which ended in an acquittal.
Clinton denied that he pressured Hale to approve the loan to Susan McDougal. By this time, Hale had already pleaded guilty to two felonies and secured a reduction in his sentence in exchange for his testimony against Clinton from prosecutors. Charges were made by Clinton supporters that Hale received numerous cash payments from representatives of the so-called Arkansas Project
, a $2.4 million campaign established to assist in Hale's defense strategy, and to investigate Clinton and his associates between 1993 and 1997. These charges were subsequently the topic of a separate investigation by former Department of Justice investigator Michael E. Shaheen Jr. Shaheen filed his report in July 1999 to Starr, who summarized the findings in that there was insufficient evidence of Hale having been paid in hopes of influencing his testimony, with such allegations being "unsubstantiated or, in some cases, untrue," and that no charges would be brought against Hale or Arkansas Project outlet The American Spectator
. Writers from Salon.com complained that the full, 168-page, unleaked report had not been made public, a complaint still being reiterated by Salon.com as of 2001.
The state prosecutors went ahead and signed an arrest warrant against Hale in early July 1996. Criminal charges filed by the state prosecutors charged that Hale had made misrepresentations to the state insurance commission regarding the solvency of an insurance company that he had owned, National Savings Life. The prosecutors also alleged in court papers that Hale had made the misrepresentations to conceal the fact that he had looted the insurance company. Hale said that any infraction was a technicality and that no one lost any money. In March 1999 Hale was convicted of the first charge, with the jury recommending a 21-day jail sentence.
Starr drafted an impeachment referral to the House of Representatives in the fall of 1997, alleging that there was "substantial and credible evidence" that Clinton might have committed perjury regarding Hale's allegations.
Theodore B. Olson, who with several associates launched the plan that later became known as the "Arkansas Project
", wrote several essays for The American Spectator
accusing Clinton and many of his associates of wrongdoing. The first of those pieces appeared in February 1994, alleging a wide variety of criminal offenses by the Clintons and others, including Webster Hubbell
. These allegations led to the discovery that Hubbell, a Hillary Clinton friend and former Rose Law Firm
partner, had committed multiple frauds, mostly against his own firm. Hillary Clinton, instead of being complicit in Hubbell's crimes, had been among his victims. In December 1994, one week after Hubbell pleaded guilty to mail fraud and tax evasion, Associate White House Counsel Jane Sherburne created a "Task List" which includes a reference to monitoring Hubbell's cooperation with Starr. Hubbell was later recorded in prison saying "I need to roll over one more time" regarding the Rose Law firm lawsuit. In his next court appearance, he pleaded the Fifth Amendment
against self-incrimination (see United States v. Hubbell
).
In February 1997, Starr announced he would leave the investigation to pursue a position at Pepperdine University
's law school. However, he "flip flopped
" in the face of "intense criticism", and new evidence of sexual misconduct.
By April 1998, diverted to some degree by the burgeoning Lewinsky scandal
, Starr's investigations in Arkansas were winding down, with his Little Rock grand jury
about to expire in the following month. Webster Hubbell
, Jim Guy Tucker
, and Susan McDougal
had all refused to cooperate with Starr. Tucker and McDougal were later pardoned by President Clinton. When the Arkansas grand jury did conclude its work in May 1998, after 30 months in panel, it came up with only a contempt indictment against Susan McDougal. Although she refused to testify under oath regarding the Clintons' involvement in Whitewater, Susan McDougal did make the case in the media that the Clintons had been truthful in their account of the loan, and had cast doubt on her former husband's motives for cooperating with Starr. She also claimed that James McDougal felt abandoned by Clinton, and told her "he was going to pay back the Clintons. She also, again not under oath, claimed to the press that her husband had told her that Republican activist and Little Rock lawyer Sheffield Nelson was willing to "pay him some money for talking to The New York Times about Clinton, and in 1992 he told her that, in fact, one of Clinton's political enemies was paying him to tell The New York Times about Whitewater.
From the beginning, Susan McDougal charged that Starr offered her "global immunity" from other charges if she would cooperate with the Whitewater investigation. McDougal told the jury that refusing to answer questions about the Clintons and Whitewater wasn't easy for her, or her family. "It's been a long road, a very long road ... and it was not an easy decision to make," McDougal told the court. McDougal refused to answer any questions while under oath, leading to her being imprisoned by the judge for civil contempt of court
for the maximum 18 months including eight months in isolation. Starr's subsequent indictment of McDougal for criminal contempt of court charges resulted in a jury hung 7-5 in favor of acquittal. President Clinton later pardoned her, shortly before leaving office.
In September 1998 Independent Counsel Starr released the famous Starr Report
, concerning offenses alleged to have been committed by President Clinton as part of the Lewinsky scandal
. As it dealt exclusively with the Lewinsky scandal, it mentioned Whitewater only in passing, save for a glancing reference that longtime Clinton friend and advisor Vernon Jordan had both tried to find Monica Lewinsky
a job after her removal from White House internship and tried to help Webster Hubbell financially with "no-show" consulting contracts while he was under pressure to cooperate with the Whitewater investigations. Indeed it was on this basis that Starr took on the Lewinsky investigation under the umbrella of the Whitewater Independent Counsel mandate in the first place.
There was much acrimony from the most fervent critics of the Clintons after release of the Starr report on the Foster matter and after Starr's departure and return to the case. The death of Foster had been the source of many conspiracy theories. Christopher Ruddy
, a reporter for Clinton critic Richard Scaife's Pittsburgh Tribune-Review helped fuel much of this speculation with claims that Starr had not pursued this line of inquiry far enough.
concerning her investments in Whitewater. This was the first time in American history that a First Lady had been subpoenaed to testify before a grand jury. She testified that they never borrowed any money from the bank, and denied having caused anyone to borrow money on their behalf. Over the course of the investigation, fifteen individuals — including Clinton friends Jim
and Susan McDougal
, White House counsel Webster Hubbell
and Arkansas Governor Jim Guy Tucker
— were convicted of federal charges. Except for Jim McDougal, none of them agreed to cooperate with the Whitewater investigators, and Clinton pardoned four of them in the final hours of his presidency (see list of people pardoned by Bill Clinton).
had been investigating Whitewater and holding hearings on it. The House Committee on Financial Services
had been scheduled to begin hearings in late March 1994, but they were postponed a couple of days before after an unusually angry written communication from Democratic Banking Committee chair Henry B. Gonzalez
to Republican Jim Leach
in which he called the Leach "obstinate," "obdurate," "in willful disregard" of House etiquette, and "premeditatedly" plotting a "judicial adventure". The House Banking Committee did then begin its hearings in late July 1994.
The Senate Banking, Housing, and Urban Affairs Committee
also began hearings on Whitewater in July 1994; these intensified in May 1995, following the Republican gain of control, when the Special Whitewater Committee
was formed, with Republican Banking Committee chairman Al D'Amato
also being chairman of the special committee and Michael Chertoff
being chief counsel. The committee's hearings were much more extensive than those held previously by the Democrats, running for 300 hours over 60 sessions across 13 months, taking over 10,000 pages of testimony and 35,000 pages of depositions from almost 250 people; many of these marks were records. The hearings' testimony and senatorial lines of investigation mostly followed partisan lines, with Republicans investigating the President and the Democrats defending him. The Senate Special Whitewater Committee issued an 800-page majority report on June 18, 1996, which only hinted at one possible improper action by President Clinton, but spoke of the Clinton Administration as "an American presidency [of having] misused its power, circumvented the limits on its authority and attempted to manipulate the truth." The First Lady came in for much stronger criticism, as she was "the central figure" in all aspects of the alleged wrongdoings. The Democratic minority on the Committee derided these findings as "a legislative travesty," "a witch hunt," and "a political game."
On November 19, 1998, Independent Counsel Starr testified before the House Judiciary Committee
in connection with the Impeachment of Bill Clinton
over charges related to the Lewinsky scandal
. Here, Starr said that in late 1997 he had come close to preparing an impeachment report related to Whitewater, in particular related to the fraudulent $300,000 loan to Susan McDougal, and to whether the President had testified truthfully regarding the loan. Starr said that he held back the charges due to not being sure of the truthfulness of two major witnesses, but that the investigation was still ongoing. Regarding the reappearance of Hillary Rodham Clinton's Rose Law Firm billing records in the White House residential section, Starr said the investigation had found no explanation for the disappearance or the reappearance: "After a thorough investigation, we have found no explanation how the billing records got where they were or why they were not discovered and produced earlier. It remains a mystery to this day." Starr also chose this occasion to completely exonerate President Clinton of any wrongdoing in the Travelgate and Filegate matters; Democrats on the committee immediately criticized Starr for withholding these findings, as well as the Whitewater one, until after the 1998 Congressional elections
.
s for interest
payments made by the Whitewater Development Company and not them personally. Due to the age of mistake, the Clintons were not obligated to make good the error, but Bill Clinton announced that they would nonetheless do so.
Deputy White House counsel Vince Foster
looked into this matter, but did not take any action before his death. Almost two years from the original announcement passed before, on December 28, 1993, the Clintons did make this reimbursement payment, for $4,900, to the Internal Revenue Service
. This was done just before Justice Department investigators started seeking the Clintons' Whitewater files. The payment was made without filing an amended return (possibly because the three-year period for amended return filing had passed), but did include full interest on the amount in error, including the additional two-year delay. The Whitewater files in question, publicly released in August 1995, cast some doubt on the Clintons' assertions in the matter, as they showed that the couple were aware that the interest payments in question were by the Whitewater corporation and not them personally.
, released a report in September 2000 that stated "This office determined that the evidence was insufficient to prove to a jury beyond a reasonable doubt that either President or Mrs. Clinton knowingly participated in any criminal conduct." Ray nonetheless criticized the White House in a statement regarding the release of the report, saying delays in the production of evidence and "unmeritorious litigation" by the president's lawyers severely impeded the investigation's progress, leading to the investigation's nearly $60 million total cost. Ray's report effectively ended the Whitewater investigation.
shop.
The length, expense, and results of the greater Whitewater investigations turned much of the public against the Independent Counsel mechanism. In particular, Democrats portrayed Whitewater as a political witch-hunt, much as Republicans had at the end of the 1980s Iran-Contra investigations. As such, the Independent Counsel law expired in 1999, with critics saying it cost too much with too few results; even Kenneth Starr favored the law's demise. Indeed no one ended up happy with the Whitewater investigation: Democrats felt that the investigation was a political witch-hunt, Republicans were frustrated that both Clintons had escaped formal charges, and people without partisan involvement found press coverage of Whitewater's facts and narratives, which spanned four decades, difficult to understand to the point of bafflement.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
politics controversy that began with the real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
investments of Bill
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
and Hillary Clinton
Hillary Rodham Clinton
Hillary Diane Rodham Clinton is the 67th United States Secretary of State, serving in the administration of President Barack Obama. She was a United States Senator for New York from 2001 to 2009. As the wife of the 42nd President of the United States, Bill Clinton, she was the First Lady of the...
and their associates, Jim
Jim McDougal
James B. "Jim" McDougal , a native of White County, Arkansas, and his wife, Susan McDougal , were financial partners with Bill Clinton and Hillary Rodham Clinton in the real estate venture that led to the Whitewater political scandal of the 1990s...
and Susan McDougal
Susan McDougal
Susan McDougal is one of the few people who served prison time as a result of the Whitewater controversy although fifteen individuals were convicted of various federal charges...
in the Whitewater Development Corporation
Whitewater Development Corporation
The Whitewater Development Corporation was a failed business venture of James and Susan McDougal with Bill and Hillary Clinton. The business was incorporated on June 18, 1979, with the purpose of developing vacation properties on 230 acres of land along the White River near Flippin, Arkansas.-...
, a failed business venture in the 1970s and 1980s.
A New York Times article published during the 1992 U.S. presidential campaign reported that Clinton and his wife had invested and lost money in the Whitewater development project.
David Hale
David Hale (Whitewater)
David Hale is a former Arkansas municipal judge, a former Arkansas banker, and a self proclaimed Bill Clinton political supporter—though he never made substantial contributions to any of his campaigns. He alleged the charges that resulted in the Whitewater scandal trials. He worked with Jim...
, the source of criminal allegations against President Bill Clinton in the Whitewater affair, claimed in November 1992 that Bill Clinton, while governor of Arkansas, pressured him to provide an illegal $300,000 loan to Susan McDougal, the partner of the Clintons in the Whitewater land deal. Clinton supporters regarded Hale's allegations as questionable, as Hale had not mentioned Clinton in reference to this loan during the original FBI investigation of Madison Guaranty
Madison Guaranty
Madison Guaranty was a Little Rock, Arkansas financial trust company.Starting in 1982 and operated by Jim McDougal-Susan McDougal Madison Guaranty Savings and Loan failed in the late 1980s. On April 14, 1997, Jim McDougal was convicted of 18 felony counts of fraud conspiracy charges...
in 1989. Hale also had a history of creating dummy companies, then looting their federal funds, such as SBA loans, and then allowing them to fail. Only after coming under indictment for this in 1993 did Hale make allegations against the Clintons.
A U.S. Securities and Exchange Commission investigation did result in convictions against the McDougals for their role in the Whitewater project, but the Clintons themselves were never prosecuted, as three separate inquiries found insufficient evidence linking them with the criminal conduct of others related to the land deal. Bill Clinton's successor as Arkansas Governor, Jim Guy Tucker
Jim Guy Tucker
James "Jim" Guy Tucker, Jr. is an Arkansas political figure. He served as the 43rd Governor of Arkansas, the 11th Lieutenant Governor of Arkansas, Arkansas Attorney General, and U.S. Representative...
, was also convicted and served time in prison for his role in the fraud. Susan McDougal later served 18 months in prison for contempt of court for refusing to answer any questions relating to Whitewater, and was later granted a pardon by President Clinton just before leaving office.
The term Whitewater is also sometimes used to include other controversies from the Bill Clinton administration
Presidency of Bill Clinton
The United States Presidency of Bill Clinton, also known as the Clinton Administration, was the executive branch of the federal government of the United States from January 20, 1993 to January 20, 2001. Clinton was the first Democratic president since Franklin D. Roosevelt to win a second full term...
, especially those such as Travelgate, Filegate, and the circumstances surrounding Vince Foster
Vince Foster
Vincent Walker Foster, Jr. was a Deputy White House Counsel during the first few months of President Bill Clinton's administration, and also a law partner and friend of Hillary Rodham Clinton...
's death, that were investigated by the Whitewater Independent Counsel.
Origins of Whitewater Development Corporation
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
had known Arkansas businessman and political figure Jim McDougal
Jim McDougal
James B. "Jim" McDougal , a native of White County, Arkansas, and his wife, Susan McDougal , were financial partners with Bill Clinton and Hillary Rodham Clinton in the real estate venture that led to the Whitewater political scandal of the 1990s...
since 1968, and had made a previous small real estate investment with him in 1977. Clinton and Hillary Rodham were seeking ways of supplementing his salary of $26,500 as Arkansas Attorney General
Arkansas Attorney General
The Arkansas Attorney General is an executive position and constitutional officer within the Arkansas government. The Attorney General is the chief law enforcement/legal officer and lawyer for Arkansas. The position is elected every four years, e.g...
(which would rise to $35,000 if his campaign for Governor of Arkansas succeeded) and hers of $24,500 as Rose Law Firm
Rose Law Firm
Rose Law Firm is headquartered in Little Rock, Arkansas. It is the oldest law firm in the United States west of the Mississippi River and the third oldest in the United States....
associate. It was around this time that Rodham also began her cattle futures trading
Hillary Rodham cattle futures controversy
In 1978 and 1979, lawyer and First Lady of Arkansas Hillary Rodham engaged in a series of trades of cattle futures contracts. Her initial $1,000 investment had generated nearly $100,000 when she stopped trading after ten months...
.
In Spring 1978, McDougal approached Clinton and Rodham with new proposal: to join with him and his wife Susan
Susan McDougal
Susan McDougal is one of the few people who served prison time as a result of the Whitewater controversy although fifteen individuals were convicted of various federal charges...
to buy 230 acre (0.9307778 km²) of undeveloped land along the south bank of the White River
White River (Arkansas)
The White River is a 722-mile long river that flows through the U.S. states of Arkansas and Missouri.-Course:The source of the White River is in the Boston Mountains of northwest Arkansas, in the Ozark-St. Francis National Forest southeast of Fayetteville...
near Flippin, Arkansas
Flippin, Arkansas
Flippin is a city in Marion County, Arkansas, United States. The population was 1,357 at the 2000 census.-Geography:Flippin is located on a major non-interstate highway, US 412/62, in the Ozark Mountains near the South Shore of Bull Shoals Lake...
, in the Ozark Mountains. The goal was to subdivide
Subdivision (land)
Subdivision is the act of dividing land into pieces that are easier to sell or otherwise develop, usually via a plat. The former single piece as a whole is then known in the United States as a subdivision...
the site into lots for vacation homes, intended for the many people coming south from Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
and Detroit who were interested in low property tax
Property tax
A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...
es, fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
, rafting
Rafting
Rafting or white water rafting is a challenging recreational outdoor activity using an inflatable raft to navigate a river or other bodies of water. This is usually done on white water or different degrees of rough water, in order to thrill and excite the raft passengers. The development of this...
, and mountain scenery. The plan was to hold the property for a few years and then sell the lots at a profit.
The four borrowed $203,000 to buy land, and subsequently transferred ownership of the land to the newly created Whitewater Development Corporation
Whitewater Development Corporation
The Whitewater Development Corporation was a failed business venture of James and Susan McDougal with Bill and Hillary Clinton. The business was incorporated on June 18, 1979, with the purpose of developing vacation properties on 230 acres of land along the White River near Flippin, Arkansas.-...
, in which all four participants had equal shares; Susan McDougal chose the name "Whitewater Estates"; their sales pitch was, "One weekend here and you'll never want to live anywhere else." The business was incorporated on June 18, 1979.
Failure of Whitewater Development Corporation
This periodEconomic history of the United States
The economic history of the United States has its roots in European colonization in the 16th, 17th, and 18th centuries. Marginal colonial economies grew into 13 small, independent farming economies, which joined together in 1776 to form the United States of America...
featured high interest rates in general, and by the time these lots were surveyed
Surveying
See Also: Public Land Survey SystemSurveying or land surveying is the technique, profession, and science of accurately determining the terrestrial or three-dimensional position of points and the distances and angles between them...
and thus available for sale at the end of 1979, rates had climbed to near 20 percent. Prospective buyers could no longer afford to buy vacation homes. Rather than take a loss on the venture, the four decided to hold on, building a model home and hoping for better economic conditions.
In spring 1985, McDougal held a fundraiser at Madison's office in Little Rock that paid off Clinton's remaining 1984 gubernatorial campaign debt of $50,000. McDougal raised $35,000, and of that Madison cashier's checks accounted for $12,000.
In 1985, Jim McDougal set his sights on investment into local residential construction, labeling the project Castle Grande
Castle Grande
Castle Grande was a real estate development in Arkansas about 10 minutes south of Little Rock. It came into National news as a result of the Whitewater investigations. The project was a lot where Jim McDougal hoped to build a microbrewery, shopping center, a trailer park and other future projects...
. The 1,000 acres (4 km²), located south of Little Rock, Arkansas
Little Rock, Arkansas
Little Rock is the capital and the largest city of the U.S. state of Arkansas. The Metropolitan Statistical Area had a population of 699,757 people in the 2010 census...
, were priced at about $1.75 million, more than McDougal could afford on his own: due to financial laws, McDougal could borrow at most $600,000 from his own Savings and loan, Madison Guaranty. McDougal subsequently involved several others to produce the additional funds. Among these was Seth Ward, an employee of the bank, who helped funnel the additional $1.15 million required. To avoid potential investigations, the money was moved back and forth among several other investors and intermediaries. Hillary Clinton, then an attorney with the Little Rock-based Rose Law Firm, provided legal services to Castle Grande.
In 1986, their scheme was unveiled by federal regulators who realized that all of the necessary funds for this real estate venture had come entirely from Madison Guaranty; regulators called Castle Grande a sham. In July of that year, McDougals resigned from Madison Guaranty. Seth Ward fell under investigation, along with the lawyer who helped him draft the agreement.
Castle Grande earned $2 million in commissions and fees for McDougal's business associates, as well as an unknown amount of legal fees by Hillary Clinton's law firm, but in 1989 it collapsed, at a cost to the government of $4 million. This in turn helped trigger the 1989 collapse of Madison Guaranty, which federal regulators then had to take over. Taking place in the midst of the nationwide Savings and Loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
, the failure of Madison Guaranty cost the United States $73 million.
The Clintons lost between $37,000 and $69,000 on their Whitewater investment, a lesser amount than the McDougals lost, for reasons unclear in the media reports. The White House and the President's supporters claimed that they were exonerated by the Pillsbury Report, a $3 million study done for the Resolution Trust Corporation by the Pillsbury, Madison & Sutro law firm at the time that Madison Guaranty Savings & Loan was dissolved. In this report it was shown that James McDougal, who had set up the deal, was the managing partner, and Clinton was a passive investor in the venture. Charles Patterson, lead attorney from Pillsbury, Madison & Sutro on the investigation, refuted the White House's claim, stating that "It was not our purpose to vindicate, castigate, exculpate". The President's critics cited the unequal capital contributions by the Clintons and McDougals as evidence that then-Governor Clinton was to contribute in other ways.
Clinton's first run for president
During Bill Clinton's first bid for the presidency in 1992, he was asked by reporters from The New York TimesThe New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
about the failure of the Whitewater development, which Bill Clinton and Jim McDougal had originally purchased in 1978. The subsequent New York Times article, by reporter Jeff Gerth
Jeff Gerth
Jeff Gerth is a former investigative reporter for The New York Times who has written lengthy, probing stories that drew both praise and criticism. He shared a Pulitzer Prize in 1999 for his coverage of how American firms gave the Chinese access to sensitive technology related to satellite launches...
, appeared on March 8, 1992.
Removal of documents
Within hours after the death of Vince FosterDeath of Vince Foster
Deputy White House counsel Vince Foster was found dead in Fort Marcy Park off the George Washington Parkway in Virginia, outside Washington, D.C., on July 20, 1993...
in July 1993, chief White House counsel Bernard Nussbaum
Bernard W. Nussbaum
Bernard W. Nussbaum is an American attorney, best known for having served as White House Counsel under President Bill Clinton.-Background and career:...
removed documents, some of them concerning the Whitewater Development Corporation
Whitewater Development Corporation
The Whitewater Development Corporation was a failed business venture of James and Susan McDougal with Bill and Hillary Clinton. The business was incorporated on June 18, 1979, with the purpose of developing vacation properties on 230 acres of land along the White River near Flippin, Arkansas.-...
, from Foster's office and gave them to Margaret Williams, Chief of Staff to the First Lady. According to the New York Times, Williams placed them in a safe in the White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
for five days before turning them over to their personal lawyer.
Subpoena of the Presidential couple
Abraham Lincoln
Abraham Lincoln was the 16th President of the United States, serving from March 1861 until his assassination in April 1865. He successfully led his country through a great constitutional, military and moral crisis – the American Civil War – preserving the Union, while ending slavery, and...
in the State Dining Room of the White House, to address questions on both Whitewater and the cattle futures controversy
Hillary Rodham cattle futures controversy
In 1978 and 1979, lawyer and First Lady of Arkansas Hillary Rodham engaged in a series of trades of cattle futures contracts. Her initial $1,000 investment had generated nearly $100,000 when she stopped trading after ten months...
; it was broadcast live by CBS
CBS
CBS Broadcasting Inc. is a major US commercial broadcasting television network, which started as a radio network. The name is derived from the initials of the network's former name, Columbia Broadcasting System. The network is sometimes referred to as the "Eye Network" in reference to the shape of...
, NBC
NBC
The National Broadcasting Company is an American commercial broadcasting television network and former radio network headquartered in the GE Building in New York City's Rockefeller Center with additional major offices near Los Angeles and in Chicago...
, ABC, and CNN
CNN
Cable News Network is a U.S. cable news channel founded in 1980 by Ted Turner. Upon its launch, CNN was the first channel to provide 24-hour television news coverage, and the first all-news television channel in the United States...
. In it she claimed that the Clintons had had a passive role in the Whitewater venture, and had committed no wrongdoing, but admitted her explanations had been vague and that she no longer opposed appointing a special prosecutor to investigate the matter. Afterwards she won media praise for the manner in which she conducted herself during this, her first adversarial press conference; Time called her "open, candid, but above all unflappable ... the real message was her attitude and her poise. The confiding tone and relaxed body language ... immediately drew approving reviews." By now there was growing backlash from Democrats and other members of the political left against the press' investigations of Whitewater, with The New York Times coming in for special criticism by Gene Lyons of Harpers, who felt its reporters were exaggerating the significance and possible impropriety of what they were uncovering.
At Clinton's request, Attorney General Janet Reno
Janet Reno
Janet Wood Reno is a former Attorney General of the United States . She was nominated by President Bill Clinton on February 11, 1993, and confirmed on March 11...
appointed a special prosecutor
Special prosecutor
A special prosecutor generally is a lawyer from outside the government appointed by an attorney general or, in the United States, by Congress to investigate a government official for misconduct while in office. A reasoning for such an appointment is that the governmental branch or agency may have...
Robert B. Fiske
Robert B. Fiske
Robert Bishop Fiske, Jr. is a prominent trial attorney and a partner with the law firm of Davis Polk & Wardwell in New York City...
in 1994 to investigate the legality of the Whitewater transactions. Two allegations surfaced: 1) that Clinton had exerted pressure on an Arkansas businessman, David Hale, to make a loan that would benefit him and the owners of Madison Guaranty
Madison Guaranty
Madison Guaranty was a Little Rock, Arkansas financial trust company.Starting in 1982 and operated by Jim McDougal-Susan McDougal Madison Guaranty Savings and Loan failed in the late 1980s. On April 14, 1997, Jim McDougal was convicted of 18 felony counts of fraud conspiracy charges...
; and 2) that an Arkansas bank had concealed transactions involving Clinton's gubernatorial campaign in 1990. In May 1994, Independent Counsel Robert Fiske issued a grand jury subpoena
Subpoena
A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
to the President and his wife for all documents relating to Madison Guaranty
Madison Guaranty
Madison Guaranty was a Little Rock, Arkansas financial trust company.Starting in 1982 and operated by Jim McDougal-Susan McDougal Madison Guaranty Savings and Loan failed in the late 1980s. On April 14, 1997, Jim McDougal was convicted of 18 felony counts of fraud conspiracy charges...
, with a deadline of 30 days. They were reported as missing by the Clintons. Almost two years later, the subpoenaed billing records of the Rose Law Firm
Rose Law Firm
Rose Law Firm is headquartered in Little Rock, Arkansas. It is the oldest law firm in the United States west of the Mississippi River and the third oldest in the United States....
, which Hillary Clinton worked for, were discovered in the Clintons' private residence in the White House by a staffer in January 1996.
The Clintons claimed to have been cleared of all wrongdoing in two reports prepared by the San Francisco
San Francisco, California
San Francisco , officially the City and County of San Francisco, is the financial, cultural, and transportation center of the San Francisco Bay Area, a region of 7.15 million people which includes San Jose and Oakland...
law firm of Pillsbury Madison and Sutro for the Resolution Trust Corporation
Resolution Trust Corporation
The Resolution Trust Corporation was a United States Government-owned asset management company run by Lewis William Seidman and charged with liquidating assets, primarily real estate-related assets such as mortgage loans, that had been assets of savings and loan associations declared insolvent by...
, which was overseeing the liquidation of Madison Guaranty. Charles Patterson, lead attorney for Pillsbury, Madison refuted that claim, stating that "It was not our purpose to vindicate, castigate, exculpate".
The Kenneth Starr investigation
In August 1994, Kenneth StarrKenneth Starr
Kenneth Winston "Ken" Starr is an American lawyer and educational administrator who has also been a federal judge. He is best known for his investigation of figures during the Clinton administration....
was appointed by a three-judge panel to continue the Whitewater investigation, replacing Robert B. Fiske, who had been specially appointed by the Attorney General prior to the re-enactment of the Independent Counsel law. Fiske was replaced because he had been chosen and appointed by Janet Reno
Janet Reno
Janet Wood Reno is a former Attorney General of the United States . She was nominated by President Bill Clinton on February 11, 1993, and confirmed on March 11...
, Clinton's Attorney General, creating an apparent conflict of interest.
David Hale
David Hale (Whitewater)
David Hale is a former Arkansas municipal judge, a former Arkansas banker, and a self proclaimed Bill Clinton political supporter—though he never made substantial contributions to any of his campaigns. He alleged the charges that resulted in the Whitewater scandal trials. He worked with Jim...
, the key witness against President Clinton in Starr's Whitewater investigation, alleged in November 1992 that Clinton, while governor of Arkansas, pressured him to provide an illegal $300,000 loan to Susan McDougal, the partner of the Clintons in the Whitewater land deal.
Hale's defense strategy, as proposed by attorney Randy Coleman, was to present himself as the victim of high-powered politicians who forced him to give away all of the money. This self-caricature was undermined by testimony from November 1989, wherein FBI agents investigating the failure of Madison Guaranty had questioned Hale about his dealings with Jim and Susan McDougal, including the $300,000 loan. According to the agents' official memorandum of that interview, Hale described in some detail his dealings with Jim Guy Tucker (then an attorney in private practice, later Bill Clinton's Lt. Governor), both McDougals, and several others, but never mentioned Governor Bill Clinton. Nor did Clinton's name come up when Hale testified at McDougal's 1990 trial, which ended in an acquittal.
Clinton denied that he pressured Hale to approve the loan to Susan McDougal. By this time, Hale had already pleaded guilty to two felonies and secured a reduction in his sentence in exchange for his testimony against Clinton from prosecutors. Charges were made by Clinton supporters that Hale received numerous cash payments from representatives of the so-called Arkansas Project
Arkansas Project
The Arkansas Project was a series of investigations that were initiated with the intent of damaging and ending the presidency of Bill Clinton...
, a $2.4 million campaign established to assist in Hale's defense strategy, and to investigate Clinton and his associates between 1993 and 1997. These charges were subsequently the topic of a separate investigation by former Department of Justice investigator Michael E. Shaheen Jr. Shaheen filed his report in July 1999 to Starr, who summarized the findings in that there was insufficient evidence of Hale having been paid in hopes of influencing his testimony, with such allegations being "unsubstantiated or, in some cases, untrue," and that no charges would be brought against Hale or Arkansas Project outlet The American Spectator
The American Spectator
The American Spectator is a conservative U.S. monthly magazine covering news and politics, edited by R. Emmett Tyrrell Jr. and published by the non-profit American Spectator Foundation. From its founding in 1967 until the late 1980s, the small-circulation magazine featured the writings of authors...
. Writers from Salon.com complained that the full, 168-page, unleaked report had not been made public, a complaint still being reiterated by Salon.com as of 2001.
The state prosecutors went ahead and signed an arrest warrant against Hale in early July 1996. Criminal charges filed by the state prosecutors charged that Hale had made misrepresentations to the state insurance commission regarding the solvency of an insurance company that he had owned, National Savings Life. The prosecutors also alleged in court papers that Hale had made the misrepresentations to conceal the fact that he had looted the insurance company. Hale said that any infraction was a technicality and that no one lost any money. In March 1999 Hale was convicted of the first charge, with the jury recommending a 21-day jail sentence.
Starr drafted an impeachment referral to the House of Representatives in the fall of 1997, alleging that there was "substantial and credible evidence" that Clinton might have committed perjury regarding Hale's allegations.
Theodore B. Olson, who with several associates launched the plan that later became known as the "Arkansas Project
Arkansas Project
The Arkansas Project was a series of investigations that were initiated with the intent of damaging and ending the presidency of Bill Clinton...
", wrote several essays for The American Spectator
The American Spectator
The American Spectator is a conservative U.S. monthly magazine covering news and politics, edited by R. Emmett Tyrrell Jr. and published by the non-profit American Spectator Foundation. From its founding in 1967 until the late 1980s, the small-circulation magazine featured the writings of authors...
accusing Clinton and many of his associates of wrongdoing. The first of those pieces appeared in February 1994, alleging a wide variety of criminal offenses by the Clintons and others, including Webster Hubbell
Webster Hubbell
Webster Lee "Web" Hubbell , is a former Arkansas lawyer and politician. He was a lawyer in Pulaski County before serving as Mayor of Little Rock from 1979 until he resigned in 1981. He was appointed by Bill Clinton as chief justice of Arkansas State Supreme Court in 1983...
. These allegations led to the discovery that Hubbell, a Hillary Clinton friend and former Rose Law Firm
Rose Law Firm
Rose Law Firm is headquartered in Little Rock, Arkansas. It is the oldest law firm in the United States west of the Mississippi River and the third oldest in the United States....
partner, had committed multiple frauds, mostly against his own firm. Hillary Clinton, instead of being complicit in Hubbell's crimes, had been among his victims. In December 1994, one week after Hubbell pleaded guilty to mail fraud and tax evasion, Associate White House Counsel Jane Sherburne created a "Task List" which includes a reference to monitoring Hubbell's cooperation with Starr. Hubbell was later recorded in prison saying "I need to roll over one more time" regarding the Rose Law firm lawsuit. In his next court appearance, he pleaded the Fifth Amendment
Fifth Amendment to the United States Constitution
The Fifth Amendment to the United States Constitution, which is part of the Bill of Rights, protects against abuse of government authority in a legal procedure. Its guarantees stem from English common law which traces back to the Magna Carta in 1215...
against self-incrimination (see United States v. Hubbell
United States v. Hubbell
United States v. Hubbell, 530 U.S. 27 , was United States Supreme Court case involving Webster Hubbell, who had been indicted on various tax-related charges, and mail and wire fraud charges, based on documents that the government had subpoenaed from him...
).
In February 1997, Starr announced he would leave the investigation to pursue a position at Pepperdine University
Pepperdine University
Pepperdine University is an independent, private, medium-sized university affiliated with the Churches of Christ. The university's campus overlooking the Pacific Ocean in unincorporated Los Angeles County, California, United States, near Malibu, is the location for Seaver College, the School of...
's law school. However, he "flip flopped
Flip-flop (politics)
A "flip-flop" , U-turn , or backflip is a sudden real or apparent change of policy or opinion by a public official, sometimes while trying to claim that both positions are consistent with each other...
" in the face of "intense criticism", and new evidence of sexual misconduct.
By April 1998, diverted to some degree by the burgeoning Lewinsky scandal
Lewinsky scandal
The Lewinsky scandal was a political sex scandal emerging in 1998 from a sexual relationship between United States President Bill Clinton and a 25-year-old White House intern, Monica Lewinsky. The news of this extra-marital affair and the resulting investigation eventually led to the impeachment of...
, Starr's investigations in Arkansas were winding down, with his Little Rock grand jury
Grand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
about to expire in the following month. Webster Hubbell
Webster Hubbell
Webster Lee "Web" Hubbell , is a former Arkansas lawyer and politician. He was a lawyer in Pulaski County before serving as Mayor of Little Rock from 1979 until he resigned in 1981. He was appointed by Bill Clinton as chief justice of Arkansas State Supreme Court in 1983...
, Jim Guy Tucker
Jim Guy Tucker
James "Jim" Guy Tucker, Jr. is an Arkansas political figure. He served as the 43rd Governor of Arkansas, the 11th Lieutenant Governor of Arkansas, Arkansas Attorney General, and U.S. Representative...
, and Susan McDougal
Susan McDougal
Susan McDougal is one of the few people who served prison time as a result of the Whitewater controversy although fifteen individuals were convicted of various federal charges...
had all refused to cooperate with Starr. Tucker and McDougal were later pardoned by President Clinton. When the Arkansas grand jury did conclude its work in May 1998, after 30 months in panel, it came up with only a contempt indictment against Susan McDougal. Although she refused to testify under oath regarding the Clintons' involvement in Whitewater, Susan McDougal did make the case in the media that the Clintons had been truthful in their account of the loan, and had cast doubt on her former husband's motives for cooperating with Starr. She also claimed that James McDougal felt abandoned by Clinton, and told her "he was going to pay back the Clintons. She also, again not under oath, claimed to the press that her husband had told her that Republican activist and Little Rock lawyer Sheffield Nelson was willing to "pay him some money for talking to The New York Times about Clinton, and in 1992 he told her that, in fact, one of Clinton's political enemies was paying him to tell The New York Times about Whitewater.
From the beginning, Susan McDougal charged that Starr offered her "global immunity" from other charges if she would cooperate with the Whitewater investigation. McDougal told the jury that refusing to answer questions about the Clintons and Whitewater wasn't easy for her, or her family. "It's been a long road, a very long road ... and it was not an easy decision to make," McDougal told the court. McDougal refused to answer any questions while under oath, leading to her being imprisoned by the judge for civil contempt of court
Contempt of court
Contempt of court is a court order which, in the context of a court trial or hearing, declares a person or organization to have disobeyed or been disrespectful of the court's authority...
for the maximum 18 months including eight months in isolation. Starr's subsequent indictment of McDougal for criminal contempt of court charges resulted in a jury hung 7-5 in favor of acquittal. President Clinton later pardoned her, shortly before leaving office.
In September 1998 Independent Counsel Starr released the famous Starr Report
Starr Report
The Starr Report was an investigative account of United States President Bill Clinton by Independent Counsel Kenneth Starr and released on September 11, 1998.-Background:...
, concerning offenses alleged to have been committed by President Clinton as part of the Lewinsky scandal
Lewinsky scandal
The Lewinsky scandal was a political sex scandal emerging in 1998 from a sexual relationship between United States President Bill Clinton and a 25-year-old White House intern, Monica Lewinsky. The news of this extra-marital affair and the resulting investigation eventually led to the impeachment of...
. As it dealt exclusively with the Lewinsky scandal, it mentioned Whitewater only in passing, save for a glancing reference that longtime Clinton friend and advisor Vernon Jordan had both tried to find Monica Lewinsky
Monica Lewinsky
Monica Samille Lewinsky is an American woman with whom United States President Bill Clinton admitted to having had an "improper relationship" while she worked at the White House in 1995 and 1996...
a job after her removal from White House internship and tried to help Webster Hubbell financially with "no-show" consulting contracts while he was under pressure to cooperate with the Whitewater investigations. Indeed it was on this basis that Starr took on the Lewinsky investigation under the umbrella of the Whitewater Independent Counsel mandate in the first place.
There was much acrimony from the most fervent critics of the Clintons after release of the Starr report on the Foster matter and after Starr's departure and return to the case. The death of Foster had been the source of many conspiracy theories. Christopher Ruddy
Christopher Ruddy
Christopher Ruddy is an American conservative journalist. He is currently the CEO of Newsmax Media which publishes Newsmax.com, one of the top ranked websites for conservative political news in the United States...
, a reporter for Clinton critic Richard Scaife's Pittsburgh Tribune-Review helped fuel much of this speculation with claims that Starr had not pursued this line of inquiry far enough.
Reaction of the Clintons
On January 26, 1996, Hillary Clinton was forced to testify before a grand juryGrand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
concerning her investments in Whitewater. This was the first time in American history that a First Lady had been subpoenaed to testify before a grand jury. She testified that they never borrowed any money from the bank, and denied having caused anyone to borrow money on their behalf. Over the course of the investigation, fifteen individuals — including Clinton friends Jim
Jim McDougal
James B. "Jim" McDougal , a native of White County, Arkansas, and his wife, Susan McDougal , were financial partners with Bill Clinton and Hillary Rodham Clinton in the real estate venture that led to the Whitewater political scandal of the 1990s...
and Susan McDougal
Susan McDougal
Susan McDougal is one of the few people who served prison time as a result of the Whitewater controversy although fifteen individuals were convicted of various federal charges...
, White House counsel Webster Hubbell
Webster Hubbell
Webster Lee "Web" Hubbell , is a former Arkansas lawyer and politician. He was a lawyer in Pulaski County before serving as Mayor of Little Rock from 1979 until he resigned in 1981. He was appointed by Bill Clinton as chief justice of Arkansas State Supreme Court in 1983...
and Arkansas Governor Jim Guy Tucker
Jim Guy Tucker
James "Jim" Guy Tucker, Jr. is an Arkansas political figure. He served as the 43rd Governor of Arkansas, the 11th Lieutenant Governor of Arkansas, Arkansas Attorney General, and U.S. Representative...
— were convicted of federal charges. Except for Jim McDougal, none of them agreed to cooperate with the Whitewater investigators, and Clinton pardoned four of them in the final hours of his presidency (see list of people pardoned by Bill Clinton).
Reaction of Senate and Congress
Parallel to the Independent Counsel track, both houses of the United States CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
had been investigating Whitewater and holding hearings on it. The House Committee on Financial Services
United States House Committee on Financial Services
The United States House Committee on Financial Services is the committee of the United States House of Representatives that oversees the entire financial services industry, including the securities, insurance, banking, and housing industries...
had been scheduled to begin hearings in late March 1994, but they were postponed a couple of days before after an unusually angry written communication from Democratic Banking Committee chair Henry B. Gonzalez
Henry B. Gonzalez
Henry Barbosa González was a Democratic politician from the state of Texas. He represented Texas's 20th congressional district from 1961 to 1999.-Background:...
to Republican Jim Leach
Jim Leach
James Albert Smith "Jim" Leach is a former member of the U.S. House of Representatives from Iowa. In August 2009, he became Chairman of the National Endowment for the Humanities ....
in which he called the Leach "obstinate," "obdurate," "in willful disregard" of House etiquette, and "premeditatedly" plotting a "judicial adventure". The House Banking Committee did then begin its hearings in late July 1994.
The Senate Banking, Housing, and Urban Affairs Committee
United States Senate Committee on Banking, Housing, and Urban Affairs
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes,...
also began hearings on Whitewater in July 1994; these intensified in May 1995, following the Republican gain of control, when the Special Whitewater Committee
United States Senate Whitewater Committee
The Senate Whitewater Committee was a special committee convened by the United States Senate during the Clinton administration to investigate the Whitewater scandal...
was formed, with Republican Banking Committee chairman Al D'Amato
Al D'Amato
Alfonse Marcello "Al" D'Amato is an American lawyer and former New York politician. A Republican, he served as United States Senator from New York from 1981 to 1999.-Early life and family:...
also being chairman of the special committee and Michael Chertoff
Michael Chertoff
Michael Chertoff was the second United States Secretary of Homeland Security under President George W. Bush and co-author of the USA PATRIOT Act. He previously served as a judge on the United States Court of Appeals for the Third Circuit, as a federal prosecutor, and as assistant U.S. Attorney...
being chief counsel. The committee's hearings were much more extensive than those held previously by the Democrats, running for 300 hours over 60 sessions across 13 months, taking over 10,000 pages of testimony and 35,000 pages of depositions from almost 250 people; many of these marks were records. The hearings' testimony and senatorial lines of investigation mostly followed partisan lines, with Republicans investigating the President and the Democrats defending him. The Senate Special Whitewater Committee issued an 800-page majority report on June 18, 1996, which only hinted at one possible improper action by President Clinton, but spoke of the Clinton Administration as "an American presidency [of having] misused its power, circumvented the limits on its authority and attempted to manipulate the truth." The First Lady came in for much stronger criticism, as she was "the central figure" in all aspects of the alleged wrongdoings. The Democratic minority on the Committee derided these findings as "a legislative travesty," "a witch hunt," and "a political game."
On November 19, 1998, Independent Counsel Starr testified before the House Judiciary Committee
United States House Committee on the Judiciary
The U.S. House Committee on the Judiciary, also called the House Judiciary Committee, is a standing committee of the United States House of Representatives. It is charged with overseeing the administration of justice within the federal courts, administrative agencies and Federal law enforcement...
in connection with the Impeachment of Bill Clinton
Impeachment of Bill Clinton
Bill Clinton, President of the United States, was impeached by the House of Representatives on charges of perjury and obstruction of justice on December 19, 1998, but acquitted by the Senate on February 12, 1999. Two other impeachment articles, a second perjury charge and a charge of abuse of...
over charges related to the Lewinsky scandal
Lewinsky scandal
The Lewinsky scandal was a political sex scandal emerging in 1998 from a sexual relationship between United States President Bill Clinton and a 25-year-old White House intern, Monica Lewinsky. The news of this extra-marital affair and the resulting investigation eventually led to the impeachment of...
. Here, Starr said that in late 1997 he had come close to preparing an impeachment report related to Whitewater, in particular related to the fraudulent $300,000 loan to Susan McDougal, and to whether the President had testified truthfully regarding the loan. Starr said that he held back the charges due to not being sure of the truthfulness of two major witnesses, but that the investigation was still ongoing. Regarding the reappearance of Hillary Rodham Clinton's Rose Law Firm billing records in the White House residential section, Starr said the investigation had found no explanation for the disappearance or the reappearance: "After a thorough investigation, we have found no explanation how the billing records got where they were or why they were not discovered and produced earlier. It remains a mystery to this day." Starr also chose this occasion to completely exonerate President Clinton of any wrongdoing in the Travelgate and Filegate matters; Democrats on the committee immediately criticized Starr for withholding these findings, as well as the Whitewater one, until after the 1998 Congressional elections
United States House elections, 1998
The U.S. House elections in 1998 were part of the midterm elections held during President Bill Clinton's second term. They were a major disappointment to the Republican Party, which was expecting to gain seats due to the embarrassment Clinton suffered during the Monica Lewinsky scandal, and the...
.
Convictions
Ultimately the Clintons were never charged, but 15 other persons were convicted of more than 40 crimes, including Bill Clinton's successor as Governor, who was removed from office.- Jim Guy TuckerJim Guy TuckerJames "Jim" Guy Tucker, Jr. is an Arkansas political figure. He served as the 43rd Governor of Arkansas, the 11th Lieutenant Governor of Arkansas, Arkansas Attorney General, and U.S. Representative...
: Governor of Arkansas at the time, removed from office (fraudFraudIn criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, 3 counts) - John HaleyJohn HaleyJohn Haley is a former Little Rock, Arkansas lawyer, who was an attorney for convicted Arkansas governor Jim Guy Tucker and also Jim Guy Tucker's co-defendant....
: attorney for Jim Guy Tucker (tax fraud) - William J. Marks, Sr.: Jim Guy Tucker business partner (conspiracyConspiracy (crime)In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
) - Stephen Smith (Whitewater)Stephen Smith (Whitewater)Stephen Smith is a University of Arkansas communications professor who was a top gubernatorial aide to Bill Clinton in Arkansas. Smith help run Governor Bill Clinton's early office and help him overcome his early defeat in his political career...
: former Governor Clinton aide (conspiracy to misapply funds). Bill Clinton pardoned. - Webster HubbellWebster HubbellWebster Lee "Web" Hubbell , is a former Arkansas lawyer and politician. He was a lawyer in Pulaski County before serving as Mayor of Little Rock from 1979 until he resigned in 1981. He was appointed by Bill Clinton as chief justice of Arkansas State Supreme Court in 1983...
: Clinton political supporter; Rose Law Firm partner (embezzlementEmbezzlementEmbezzlement is the act of dishonestly appropriating or secreting assets by one or more individuals to whom such assets have been entrusted....
, fraud) - Jim McDougalJim McDougalJames B. "Jim" McDougal , a native of White County, Arkansas, and his wife, Susan McDougal , were financial partners with Bill Clinton and Hillary Rodham Clinton in the real estate venture that led to the Whitewater political scandal of the 1990s...
: banker, Clinton political supporter: (18 felonies, varied) - Susan McDougalSusan McDougalSusan McDougal is one of the few people who served prison time as a result of the Whitewater controversy although fifteen individuals were convicted of various federal charges...
: Clinton political supporter (multiple fraud) Bill Clinton pardoned. - David HaleDavid Hale (Whitewater)David Hale is a former Arkansas municipal judge, a former Arkansas banker, and a self proclaimed Bill Clinton political supporter—though he never made substantial contributions to any of his campaigns. He alleged the charges that resulted in the Whitewater scandal trials. He worked with Jim...
: banker, self proclaimed Clinton political supporter: (conspiracy, fraud) - Neal AinleyNeal AinleyNeal Ainley is a former Perry County Bank president .Neal Ainley entered into a guilty plea to two misdemeanor counts of concealing cash payments to...
: Perry County Bank president (embezzled bank funds for Clinton campaign) - Chris WadeChris WadeChristopher "Chris" Wade is a former Whitewater real estate broker. He is currently retired, and his son Chris Wade, Jr. is the broker/owner of Ozarks Realty Company in Flippin, Akansas....
: Whitewater real estate broker (multiple loan fraud) Bill Clinton pardoned. - Larry KucaLarry KucaLarry Kuca former head of Madison Financial, a subsidiary of Madison GuarantyLarry Kuca pleaded guilty to one misdemeanor for defrauding the US Small Business Administration of a $150,000 loan together with David Hale in July 1995. Madison Financial and Madison Guaranty were owned and run by Jim...
: Madison real estate agent (multiple loan fraud) - Robert W. PalmerRobert W. PalmerRobert W. Palmer is a former Madison Guaranty land appraiser and pleaded guilty to federal conspiracy charges related to Whitewater. He was later pardoned by Bill Clinton in a controversial manner....
: Madison appraiser (conspiracy). Bill Clinton pardoned. - John LathamJohn Latham (Whitewater)John Latham is a former CEO of Madison Guaranty that came into front page national news as a result of the Whitewater investigations.Madison Guaranty was owned and operated by James and Susan McDougal. On February 7, 1985 Jim McDougal wrote to Gov. Bill Clinton to recommend Latham for the Arkansas...
: Madison Bank CEO (bank fraudBank fraudBank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently representing to be a bank or financial institution. In many instances, bank fraud is a criminal offense...
) - Eugene FitzhughEugene FitzhughEugene Fitzhugh 1 A Little Rock, Arkansas lawyer and businessman.On June 23, 1994 he pleaded guilty to trying to bribe David Hale. In exchanged for his bribery plea, he was sentenced to 28 months, and prosecutors dropped charges accusing him of conspiring to defraud the Small Business Administration...
: Whitewater defendant (multiple bribery) - Charles Matthews: Whitewater defendant (briberyBriberyBribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
)
Tax returns
In March 1992, during his presidential campaign, the Clintons acknowledged that on their 1984 and 1985 tax returns, they had claimed improper tax deductionTax deduction
Income tax systems generally allow a tax deduction, i.e., a reduction of the income subject to tax, for various items, especially expenses incurred to produce income. Often these deductions are subject to limitations or conditions...
s for interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
payments made by the Whitewater Development Company and not them personally. Due to the age of mistake, the Clintons were not obligated to make good the error, but Bill Clinton announced that they would nonetheless do so.
Deputy White House counsel Vince Foster
Vince Foster
Vincent Walker Foster, Jr. was a Deputy White House Counsel during the first few months of President Bill Clinton's administration, and also a law partner and friend of Hillary Rodham Clinton...
looked into this matter, but did not take any action before his death. Almost two years from the original announcement passed before, on December 28, 1993, the Clintons did make this reimbursement payment, for $4,900, to the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
. This was done just before Justice Department investigators started seeking the Clintons' Whitewater files. The payment was made without filing an amended return (possibly because the three-year period for amended return filing had passed), but did include full interest on the amount in error, including the additional two-year delay. The Whitewater files in question, publicly released in August 1995, cast some doubt on the Clintons' assertions in the matter, as they showed that the couple were aware that the interest payments in question were by the Whitewater corporation and not them personally.
Ray report
Kenneth Starr's successor as Independent Counsel, Robert RayRobert Ray (prosecutor)
Robert William Ray is an American lawyer. As the successor to Ken Starr as the head of the Office of the Independent Counsel he investigated and issued the final reports on the Whitewater scandal, the White House travel office controversy, and the White House FBI files controversy...
, released a report in September 2000 that stated "This office determined that the evidence was insufficient to prove to a jury beyond a reasonable doubt that either President or Mrs. Clinton knowingly participated in any criminal conduct." Ray nonetheless criticized the White House in a statement regarding the release of the report, saying delays in the production of evidence and "unmeritorious litigation" by the president's lawyers severely impeded the investigation's progress, leading to the investigation's nearly $60 million total cost. Ray's report effectively ended the Whitewater investigation.
Epilogue
Bill and Hillary Clinton never visited the actual Whitewater property. In May 1985, Jim McDougal had sold the remaining lots of the failed Whitewater Development Corporation to local realtor Chris Wade. By 1993, there were a few occupied houses on the site, but mostly just "For Sale" signs; after swarms of Whitewater reporters made the trek there, one owner hung a sign saying "Go Home, Idiots." By 2007, there were about 12 houses in the subdivision, with the last lot up for sale by son Chris Wade, Jr. for $25,000. In Flippin, Jim McDougal's savings and loan bank had been replaced by a variety of small businesses, most recently a barberBarber
A barber is someone whose occupation is to cut any type of hair, and to shave or trim the beards of men. The place of work of a barber is generally called a barbershop....
shop.
External links
- Washington Post time line
- Washington Post key stories
- Washington Post players June 2, 1996; Page A01
- FINAL REPORT of the Special Committee to Investigate Whitewater Development Corporation and Related Matters. United States Senate Special Whitewater Committee. U.S. Government Printing Office. (June 17, 1996).