[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: March 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
THE CLINTON YEARS--PART 4
______
speech of
HON. ROBERT K. DORNAN
of california
in the house of representatives
Wednesday, March 23, 1994
Mr. DORNAN. Mr. Speaker, this would by my special order using a very
broad, generic term, ``The Clinton Years--Part 4.'' I will probably try
and do one tomorrow night, and then we are out for almost 2 weeks for
district work period, so people can take a breather and try and absorb
all of the material that is absolutely exploding on the front pages of
newspapers across the country.
On the day after St. Patrick's Day, out of deference to the surname
Kennedy, I called for the resignation or firing of William H. Kennedy
III, on the 18th of March from this microphone. I notice today our
Whip, Mr. Gingrich of Georgia, has joined me in that call.
On the evening news tonight they said that the White House has
limited his duties and taken away anything that has to do with security
passes, because we know that hundreds of White House compound workers'
security passes have been bottled up in Mr. Kennedy's White House
office. What it turns out to be is that Mr. Nussbaum, who used to be
his boss, Vincent Foster was in between them before he killed himself,
he actually had pulled out of the security pass process, some security
clearances, and buried them in his desk.
This involves some pretty well-known names. Dee Dee Myers should have
had her security clearance, because as the White House spokesperson and
the main person who interfaces with the world's news media, she should
have a top secret clearance. She says it is just procrastination. She
is a nice lady, so I will take that on its face.
However, Patty Thomasson, who was over here testifying to the
Committee on Rules the other day, or excuse me, she was testifying to
the Appropriations Subcommittee, and could not answer a lot of
questions about what is going on over there. She said she dearly wanted
to answer questions, but the special prosecutor, Mr. Fiske, was
preventing her from doing that. She is the chief of White House
administration. She does not have a security clearance.
The rumors are starting to fly that some of these people from the
flower child generation cannot cut it, that they cannot get security
clearances. Although Mr. Kennedy has had some of his duties taken away
from him, William Kennedy III, no relation to the New England Kennedys,
as I have said last night, and I have confirmed that and that is so, he
is now partially crippled.
It says on the front page of many of the newspapers across the
country, here is a headline, a Rowan Scarborough story in the
Washington Times: ``Passes stalled by White House Aide. While House
Associate Counsel''--by the way, he is the last of the gang of four,
kind of a rough term, because it conjures up Mrs. Mao Tse-tung, but the
gang of four, as the press calls them, is Mrs. Hillary Rodham Clinton,
Vince Foster, who took himself out at the barrel of a gun, Webb Hubbel,
who was probably forced to resign by his 60 former colleagues at the
Rose law firm, who are probably now going to take him before the
Supreme Court's Committee on Ethics Violations as an Arkansas lawyer
for overbilling, so Bill Kennedy is the last one from the Rose law
institute to work in the White House. Now he has had his duties
crippled.
It says, ``Mr. Kennedy paid $1,352 in delinquent social security
taxes under his wife's maiden name, Leslie Gail McCrae. He said, `She
likes to keep her maiden name,''' as Mrs. Rodham Clinton did during the
first 2 years of Clinton's governorship in Arkansas, and now they are
going through a divorce, which is tragic, but he says she wanted to
keep her maiden name alive. I guess she will be going back to her
maiden name. he filed all of these back social securities for nannies
of the male Nannygate under her name.
The headline was, ``House Planning for Whitewater Hearings.''
Surprise. I mentioned the 408 to 15 vote. I guess I did not understand
it, because our fine Speaker warns that it does not necessarily ensure
an inquiry. I guess the heat has to be turned up, and I am convinced
there is going to be a hearing.
It even goes beyond the front pages. Here is Washington's liberal
paper of record, ``Clinton Aide Pays Back Taxes.'' That is Kennedy
again. That is above the fold with a photograph, and it was Roger
Altman accompanied by two unidentified men that their faces are
blocked, ``arrive at the U.S. Courthouse to testify before the grand
jury.'' And in the same block there is a subtitle, ``Altman-White House
Discuss Recusal.'' I call for, on St. Paddy's Day itself, I called for
Altman's resignation, and Gene Hanson, one of his deputies who sat in
on at least three, or maybe four meetings, and said either nothing,
making mistakes on the Record, and making him look like a liar. But I
give him the benefit of the doubt that he did not know what he was
saying. Anyway, people in the White House say she is going to take it
in the eyes, so that was no big call for her resignation. And the other
two I called for resignations were, of course, Patty Thommason, and
then one that no one is talking about, and that is the former captain
of troopers in Little Rock, Clinton's closest confidante on all trooper
activities, who on July 21 of last year was given double salary and
moved from his trooper status over to FEMA, out of Denton, TX. And I am
still waiting for the public records of whose payroll he was on when he
flew up to the Oval Office to discuss, inside the Oval Office, what to
do with the troopers. This was around the week before Christmas, and
calls were made from the Oval Office, admitted at both ends to Troopers
Ronny Anderson and Trooper Danny Ferguson. Ferguson was subsequently
given a promotion from sergeant to lieutenant. I have called for him to
come forward and am calling for Ronny Anderson to come forward. I know
it is tough. I know he has five children, and three of them are
triplets, but they have to come out and tell the truth because the Los
Angeles Times has them on a tape recording, and particularly has Danny
Ferguson on a tape recording saying he brought Paula Corbin Jones up to
a hotel room in the Excelsior Hotel where she claims in a signed
affidavit, backed up by two signed affidavits by two of her friends
about the type of things that Anita Hill did not have a shred of, but
yet she became the poster woman of feminist groups in the United
States, radical groups, moderates, and otherwise on no evidence but her
word against a distinguished jurist. Now we have three signed
affidavits, and the press is still spiking that story. Do not worry. It
will all come out, because it is front page material in the European
press and in the major Asian press, particularly the English Asian
press like Singapore and Hong Kong.
Coming to the L.A. Times, you have a battle going on I think still
between Jack Nelson, the Washington spokesman, born in Atlanta, cutting
his journalistic teeth on the Atlanta Constitution in Georgia, called
up in the Carter years to be the L.A. Times's man in Washington. He
told me he was out of the loop on the whole trooper story, that part of
it that was done with great investigative reporting, including phone
records by the L.A. Times, and yet 5 days after Jack Nelson told me
that, there he sits on Washington Week in Review, given a leading
question that he was told about before the show, because one of the
staffers told me this, asked about his role in all of this by the
retiring Paul Duke--I guess he has retired now--and Jack Nelson of the
L.A. Times went on to say that, ``Oh, I was given the transcript before
it went to print on the front page of the L.A. Times about all of the
Troopergate story, and I made some changes.''
Jack, Jack, you told me you were out of the loop and you did not
touch it. Made changes. Well, we are going to have to decide from
whence we should get our L.A. Times news, Jack Nelson, or from Doug
France and Bill Rimple, because Bill Rimple has a front page story in
today's L.A. Times on Whitewater financial details. So the story grows.
Now it is starting to spill back onto the style section. Here is the
style section from today's Washington Post, ``The Man Hillary Ushered
Out.'' I mentioned his name last night, reading from the Wall Street
Journal, Chris Emery, fired White House staffer. His title was usher,
whatever that means, at the White House, ``Chris Emery says he still
doesn't know what hit him. But it hurts.'' By Martha Sherrill.
``A few Secret Service agents have called him, upset and
sympathetic.'' This is why Hillary cannot stand the Secret Service.
``The National Enquirer has checked in--to see if he is ready to blab--
'' probably for money, which I hope he does not take.
``And a British paper has offered money.'' Oh, here we go. His story
will not be believed if he takes the money. Do not take the money,
Chris, let us go for the truth.
``Four Members of Congress have gotten in touch--one Democrat who
said she'd heard `things were pretty bad over there,''' meaning the
White House, and one Republican who was dying to have lunch, probably
hoping Chris Emery had some dirt to dish.
``He doesn't. Only a puzzling account of how he was abruptly fired by
Hillary Rodham Clinton 3 weeks ago--and how he says he still doesn't
have a clue why.
```I'm very comfortable that I didn't do anything indiscreet,' says
Emery, 36, a White House usher for the past 8 years. `And I never made
a pass at anybody.' A lot of people in this town cannot say that.
`Insulted anybody, made a racial joke, took money from the cash box or
ever snooped around in their private affairs. But this is the kind of
thing that's been waking me up in the middle of the night for 3
weeks.'''
Folks, this is no way to treat a government employee of 8 years of
honorable service. And the story goes on. It says his face is tense,
his haircut is smooth and fresh, and he is sitting in the living room
of his home in Howard County, wearing blue pants, white T-shirt. They
were a little dramatic, but they did it with feeling in the style
section.
What I said here on the floor was only what I had heard or read, that
he had talked to Barbara Bush once or twice on the phone to tell her
how to set up her PC, her personal computer unit at home, and when
Hillary found out that he had been discussing with Barbara Bush, she
has since commented that he should not have done that, out the door he
went.
Remember the article I mentioned last night, ``The Name of Rose,'' by
L.J. Davis, subtitled ``An Arkansas Thriller''? Mr. Speaker, I think we
are dealing with such important material now that I would like to put
in the Record, if the cost is less than $2,000, because my special
order itself is going to cost more than that, and I will be reading
about that in the papers, but I think this whole article, ``The Name of
Rose,'' referring to the Rose law firm should go into the Record. So I
would submit that into the Record.
Mr. Speaker, here is why I think the taxpayers will want to go to the
library next week and get the Congressional Record for March 23, and
why they should beat a path to the newsstand if they are in a big city,
and buy today's Wall Street Journal. Listen to this, Mr. Speaker, my
colleagues who are watching in their offices, and all Americans who are
following this by C-Span, and by satellite ships at sea, ``Censored in
Arkansas,'' Wall Street Journal, ``Earlier in the week we commended
L.J. Davis's New Republic cover story on Whitewater and on the culture
of Arkansas. This story that will be in the Record when published in
the wee hours of this morning, ``reflects a curious dichotomy in
Whitewater press coverage. A lot of the news has been broken by
publications willing to report what they learn, even at the risk that
now and then some of its may be overtaken by other facts.''
This is the face of a moving story, Mr. Speaker, the Washington
Times, the New York tabloids. Please, a footnote here. When they say
New York tabloids in this context, they do not mean the kooky world
report that has flying saucers capturing the Clinton's and injecting
them with wisdom or something, and they did not mean the star that
Gennifer Flowers went to, or the National Enquirer that is worlds above
the others because they can be sued and have been sued by people like
Carol Burnett for huge out-of-court settlements. They do have to watch
their research because they claim to be a part of the real world. What
this means by New York tabloids, that is an old word in newspapers that
mainly describes the size of the newspaper. Now in Hollywood, the Daily
Variety is a tabloid size, while the Hollywood Reporter is newsletter
size. Tabloids means in Chicago the Sun Times, and it means in New York
the Daily News and the New York Post, papers that are easier to read on
the subway without banging your knuckles into the next person's face.
So, backing up, the Washington Times, the New York tabloids, the
American Spectator, the British press are publishing facts that you
can't get in American newspapers. The mainstream American press has
come in for much derision overseas.
Their newsmagazine, the Economist, which has the Time-Newsweek-U.S.
News & World Report world to themselves likened Whitewater to the 1936
episode in which the American press was reporting, and the British
press covering up, the romance of Madam Simpson, an American, leading
to the abdication of Edward VIII. This was not quite fair, since the
story came back to life in December. Trooper Gates started that.
The American press has mostly done a commendable job of plumbing the
finances of Arkansas and the Clintons and kibbitzing every move in
Washington's procedural chess game. For better or worse, however, the
respectable press has shown little to no appetite for publishing
anything about violence and sex. Stories on these subjects, of course,
circulate constantly among reporters and in the cloakrooms, I might
add, and shape the understanding of events within the press corps if
not among its readers. That is the U.S. public.
Somehow we think the readers ought to know the following account from
Mr. L.J. Davis, a contributing editor to Harper's magazine, inside
liberal publication, since 1978.
He, Mr. Davis, was returning to his room at Little Rock's Legacy
Hotel about 6:30 after an interview on the evening of February 13. That
is last month, folks, 5 weeks ago, plus. The last thing he remembers is
putting his key in the door, and the next thing he remembers is waking
up face down on the floor with his arm twisted under his body and a big
lump on his head above his left ear. His room door was shut and still
locked. Nothing was missing except for four significant pages of his
notebook that included a list of sources in Little Rock.
He did not file a police report, saying he wanted to get out of town
and was not sure what had happened to him.
Now, cynics are already saying, oh, another phony story like the man
who lived next door to Gennifer Flowers and was beaten up terribly in
his apartment, had his spleen ruptured, underwent surgery, and the
tapes that he said he had through the door of Clinton coming down the
hall to meet with Flowers, and he was the next apartment to her, that
was all confirmed by the news media, but they did not print it, they
said, well, he might have made this all up.
But let me tell you something, when you get hit as hard as he was
hit, he thought, I have since found out from friends of his, that he
had had a heart attack or had a stroke or fell forward against the
door. He was not sure what happened to him. And when he felt the lump
on his head, he was frightened and he wanted out of town.
What did he do when he left town? He went to his doctor. Listen to
this, ``I thought I was walking on a trampoline for 3 days.'' That
means constant motion sickness. ``He told us, and then he consulted his
physician. Mr. Davis says his doctor found his injury inconsistent with
a fall,'' a fall from passing out, ``and that he had been `struck a
massive blow above the left ear with a blunt object.' He suffered both
a concussion and an amnesiac episode from the blow.'' With Mr. Davis'--
and that is all in quotas--with Mr. Davis' permission, Dr. Richard
Wagman has confirmed the doctor's diagnosis to us, the Wall Street
Journal.
Along similar lines throughout the world, except in the United
States, Sally Purdue is now a household name. She is a former Miss
Arkansas from my time in the 1950's. She is 55 years of age, and is 8
years older than Mr. Clinton, and a TV reporter. She now works with
Down's syndrome children in St. Louis. Sounds like a good lady who has
turned her life around. She went on one talk show in September of 1992,
and I added the month, Sally Jessy Raphael, to say she had had an
affair with Bill Clinton in 1983.
The news media spiked, censored, all of this, because they had their
game plan. They knew who they wanted to win the election. Mickey Kouse
and the same New Republic magazine said it. This was only briefly
noted, although the Washington Post did report that Jack Paladino,
hotshot San Francisco private investigator hired by the Clinton
campaign to squelch ``bimbo eruptions,'' so titled not by my pal Mary
Matalin, now of TV fame on CNBC, but so titled by Betsy Wright, former
co-McGovern precinct walker and organizer with young Bill Clinton in
1972 in east Texas, and now a freelance public relations person in
town, and his chief of staff when he was Governor, said she was in
charge of suppressing bimbo eruptions, and right there, legally as it
should be in all of the campaign FEC, Federal Election campaign forms
from the Clinton campaign are these huge thousands of dollars of fees
to Jack Paladino.
Back to the Wall Street Journal: Like all other bimbo eruptions, this
one, Sally Purdue, had been spiked, subjected to a universal U.S. news
blackout, but the Sally Purdue story took a different turn. Last
January, Ms. Purdue told Ambrose Evans-Pritchard of the Sunday
Telegraph, million circulation, one of the biggest papers in London,
all of England for that matter, given the trains, that she had been
threatened with violence if she continued to talk. She named the name.
I said that on radio months ago, named Ron Tucker. She said he claimed
to represent the Democratic Party. She says Mr. Tucker first offered
her a Federal job in exchange for silence, and then added, and this has
been in magazines, ``If I didn't take the offer, then they knew that I
went jogging by myself, and he couldn't guarantee what would happen to
my pretty legs.'' This story was spiked the very same month that Nancy
Kerrigan's actual blow to her leg to keep her out of Olympic
competition, to which Tonya Harding has pleaded guilty, I mean,
bargain-pled for a lesser charge, because everybody knows now she was
guilty of being in on this sports atrocity that became an international
story every day at the Olympics, and other young athletes of every
nation had to watch any of their moments in the Sun overshadowed by
this bust in the knee, the very same month the media, all the big
papers, were spiking this story about Sally Purdue.
Afterward, the Wall Street Journal continues, Ms. Purdue says she
received threatening phone calls and threatening letters, one of which
she made available to the Sunday Telegraph in London and they printed
it. She says she found an unspent shotgun shell on the seat of her
Jeep, and later the back window was shattered. She reported this to the
FBI, which told the Sunday Telegraph there was an ongoing
investigation. Hey, my former members of the media, here, Mr. Speaker,
they ought to be going after that Pulitzer Prize.
The FBI is going to say, ``We can neither confirm or deny,'' but they
told the Sunday Telegraph in London there is an ongoing investigation.
Mr. Tucker's employee at the time, now get this, folks, John Newcomb,
of Marion Mining added the confirmation that Mr. Tucker told him that
he had been asked to get to this woman and get her to shut up. That was
Sally Purdue's boss.
In an interview with the Wall Street Journal, us, this week, Mr. Ron
Tucker, this is the guy allegedly who made the threats, said, ``Sally
Purdue is a flake stirring up a hornet's nest. I only met with her for
10 to 15 minutes once. I am not a political animal,'' and then
degenerated into a series of threats and obscenities directed at the
Wall Street Journal, and I guess everybody in general.
Editors and reporters have to grapple with a flood of stories,
charges, and rumors of violence, even deaths in Arkansas.
Footnote, the head of security for Mr. Clinton's campaign before the
Secret Service took over after the convention, he was murdered in
Arkansas. I do not even know the date. It is not a story. It was not on
the evening news.
He was chased by a car down a road in Little Rock, two bullets were
fired at the back of the car, at least, and maybe others missed, and
hit the car, and they then pulled up alongside of the car and fired
four more and hit him as he careened off to the side of the road, dead
or dying, and the car pursuing him obviously pulled over, and somebody
got out and gave him the coup de grace. At least seven shots, maybe
more, killing the head of security for Mr. Clinton during the campaign.
I mean, what is going on down there in Arkansas?
Continuing and finishing the Wall Street Journal thing, the State
seems to be a congenitally violent place and full of colorful
characters with stories to tell, axes to grind, and secrets of their
own, and now the whole thing is going to be contaminated down there
with tabloid money.
Now, let me take a pause here. We, the Wall Street Journal, believe
Mr. Davis, and that is the first violent story, smashed in the head in
his hotel room and his papers rifled and some stolen. The Wall Street
Journal believes this.
The Telegraph story included a lot of corroboration, though, of
course, no evidence that anyone ordered Mr. Tucker to say what Ms.
Purdue charges he said. Yet, as the story develops, we are increasingly
coming to the conclusion that the respectable press is spending too
much time adjudicating what the reader has the right to know and too
little time with the old spirit of, ``Stop the presses, we have a
breaking story.''
Mr. Speaker, last night, I put in the Congressional Record at the end
of my remarks the transcript of a special ``60 Minutes'' show that was
only 13 minutes long. This was the show hosted by the youngest of the
incomparable ``60 Minutes'' team, Steve Croft. It was suggested to them
by a competitor, ABC, FOB, Friend of Bill, Rick Kaplan, who within
weeks would be giving candidate Governor Clinton Colonel Holmes' letter
that Colonel Holmes had kept in his possession for 23 years, the
infamous letter that opens up, ``Thank you for helping me avoid the
draft,'' and goes on to say, ``We,'' all of these idealists of the
1960's who were pro-Hanoi, ``We have come to loathe the U.S.
military,'' that letter.
Kaplan gave it to Clinton, and he had 3 days to prepare for a
personal Nightline show. The Nightline show was on February 12,
Lincoln's birthday, for us Republicans to grit our teeth. Mr. Speaker,
this is not as long as the Rose story, but if it is less than $2,000, I
would like to ask permission to at this point, so I can comment on it
tomorrow, put in the Record Ted Koppel's Nightline interview with
candidate Clinton, February 12, 1992.
Mr. Speaker, here is the transcript, and this will be in your library
pretty soon across America around our country. This is March 22, 1994,
page H--for House--1885. For those of you not familiar with the
Congressional Record, we alternate on days whether we start with the
Senate proceedings or House proceedings. This particular record of
yesterday's legislative transactions, 1-minute speeches, special
orders, begins with the Senate. So it is House page 1885, sequential
numbering going back to January, the beginning of the 2d session of the
103d Congress.
It begins with Steve Croft, host: ``Are you prepared tonight to say
that you have never had an extramarital affair?''
Governor Bill Clinton: ``I am not prepared tonight to say that any
married couple should ever discuss that with anyone but themselves and
lawyers, like us, during divorce battles.''
Croft: ``I am Steve Croft, and this is a special abbreviated edition
of 60 Minutes,'' 13 minutes long. ``Tonight, Democratic presidential
hopeful Governor Bill Clinton and his wife Hillary talk about their
life, their marriage, and the allegations that have all but stalled his
Presidential campaign.''
Mr. Speaker, any American interested in this, this was one of the
slickest jobs of covering a story up, thanks to national ABC's Rick
Kaplan giving exclusive--recommending an exclusive to CBS's ``60
Minutes'' show, which, by the way, immediately followed the Superbowl
show of January 26, 1992. Fifty million in the audience, maybe.
The reason I put this in the Record and want to discuss it tonight is
that in rereading this 2 years and 2 months later, it is a joke, it is
a joke. Hillary only speaks three times. Here is her first utterance.
It is two words: ``Oh, sure.'' It was in response to this: They get
into a discussion of Gennefer Flowers. Everything we now know about all
of this period, none of this is true. Croft says, referring to Flowers,
``Was she a friend, an acquaintance, did your wife know her?'' He
gestured to Hillary, and Clinton says, ``Yes.'' Hillary says, ``Oh,
sure.'' Bill Clinton: ``She was an acquaintance, I would say a friendly
acquaintance.'' Those became infamous words, sort of like, ``I did not
inhale.'' So Hillary gives a noise, and then Clinton says, ``When this
rumor story got started in the middle of 1980 and she was contacted and
told about it, she was so upset and she called back and said, `How
could I be listed on this'''--that was infamous list of Larry Nichols--
``I haven't seen you for more than 10 minutes in 10 years.'' She would
call from time to time when she was upset or thought she was really
in--being hurt by the rumors. And I would call her back--either she
would call the office or I would call her back there at the office or I
would call her back at the house. Hillary knew when I was calling her
back. I think once she called her, when we were together, I think,''
lawyer talk, ``so there is nothing out of the ordinary there.''
Steve Croft says, ``She is alleging and has described in some detail
in the supermarket tabloid the Star what she calls a 12-affair with
you.'' Clinton says, ``It--that allegation is false.''
Croft was not a good enough lawyer to come back and say, ``Well, now
are you saying the 12-year arrangement is now false?'' Keep in mind
that Gennefer Flowers has not only come back from a successful cabaret
tour in Europe, where the song most in demand, and she belts it out
pretty good, is ``Stand by Your Man,'' but she has a book coming out,
and she has 1 hour and 9 minutes of tape, I think she said, and she
only released 8 at the stupidly conceived press conference at the ritzy
Waldorf Astoria in New York after taking $50,000 from this senior
sister publication of National Enquirer.
Now, here is Hillary Clinton's only long statement on this show.
Clinton says, ``It--that allegation is false.'' Hillary: ``When this
woman first got caught up in these charges, Gennefer, I felt as I felt
about all of these women''--all of what women?--``that, you know, that
they have just been minding their own business.'' That sounds like
Frankie Fontaine.
``And that got hit by media. I mean it was no fault of their own.
They were caught in Clinton's past. This is no fault of all these
women. We reached out to them, I expected her to say, I felt their
pain. I met with two of them to assure them. They were friends of
ours.''
Who? Bobbie Jo Williams, Marilyn Jo Jenkins, Elizabeth Ward, Sally
Perdue, Gennefer Flowers? There is a list floating around in the
newsroom, about 25 names. She says, ``They were friends of ours. I felt
terrible about what was happening to them. You know, Bill talked to
these women, to this woman every time she called, distraught,
Flowers.'' This is a few days after Flowers' press conference at the
Waldorf Astoria. She was saying her life was going to be ruined. She
was asking for Federal jobs and got one at more pay than the lieutenant
governor, Guy Jim Tucker, who is now the Governor. And you know, he
would get off the phone and he would, ``tell me that she said sort of
whacky things, which we thought were attributable to the fact that she
was terrified.'' Clinton comes in, ``It was only when money came out,
when the tabloid went down there offering money to say that they had
been involved with me that she changed her story. There is a recession
on.'' No, there wasn't. It was over about a year. ``Times are tough,
and I think you can expect more and more of these stories as long as
they are down there handing out money.'' These stories did not pop out
on Senator Bob Kerrey, former Senator Tsongas, they did not pop out on
Jerry Brown, with his 800 number and wide turtleneck. They could have
called in stories easy there. They did not pop out on old tough former
House Member Tom Harkin, no, they were only popping out on him. Croft
says, ``I am assuming from your answer that you are categorically
denying that you ever had an affair with Gennefer Flowers.'' ``I have
said that before, and so has she.'' You see, he brings her into the
denial, Flowers. Croft: ``You said your marriage had problems, you had
difficulties. What do you mean by that, what does that mean? Is that
some kind of a--help us break the code.'' Here Croft is trying to do
his job. ``I mean does that mean--``I don't mean''--that is not a good
sentence, but it is the transcript that CBS sent me. He meant to say
``me.'' ``I don't mean''--Croft interrupts and says, ``You were
separated? Does that mean you had communication problems? Does that
mean that you contemplated divorce? Does it mean adultery?'' Clinton:
``I think the American people, at least people that have been married
for a long time, know what it means and know the whole range of things
that that can mean.'' Croft says, ``You have been saying all week that
you have got to put this issue behind you.'' He was in a free fall in
the primary in New Hampshire about this time, running a poor third,
``Are you prepared tonight to say that you never had an extramarital
affair?'' ``I am not prepared to say tonight that any married couple
should ever discuss that with anybody but themselves. I am not prepared
to say that about anybody. I think that's the issue''--``excuse me, but
that is what you have been saying essentially for the last''--``that is
what I believe--look, Steve, you go back and look at what I said. You
know I have acknowledged wrongdoing, and I have acknowledged causing
pain in my marriage, I have said things to you tonight, to the American
people from the beginning, that no politician ever has.'' Oh, no, Gary
Hart came clean with a lot, and it drove him out of the race.
``I think most Americans watching this tonight, they will know what
we are saying, they will get it, and they will feel that we have been
more candid. And I think that what the press has to decide is are we
going to engage in a game of gotcha,'' that is kind of what he is
saying now. ``You know, I can remember a time when it was said when a
divorced person could not run for President.'' Now he is bringing
Reagan into the pack here. ``That time, thank goodness, is past. Nobody
is prejudiced against anybody because he is divorced.'' Now he has
roped in about a third of the Nation who are married. ``Are we going to
take the reverse position now that if people have problems in their
marriage or things in their past which they do not want to discuss
which are painful to them, that they can't run?''
Croft: You're trying to put this issue behind you, and the problem
with the answer is not a denial, and people are sitting there, voters,
and they are saying, ``Look, it's really pretty simple. If he's never
had an extramarital affair, why doesn't he say so?''
Well, that may be what they are saying, but you know what I think
they are saying? I think they are saying, ``Here is a guy who is
leveling with us.'' You, you may not think that, that we should say
more, that we should keep--that you should keep asking the questions,
but I'm telling you. I think that what we--I'll come back to what I
said. I've told the American people more than any other candidate for
President. They are the result of what has been going on--result of
what has been going on in my State and spending more time trying to
play gotcha.
Now here comes Hillary: There is not a person watching this who would
feel comfortable sitting on this couch detailing everything--they did
not detail anything--that ever went on in the life of their marriages,
and I think it's real dangerous for this country if we don't have a
zone of privacy for everybody. I mean I think that is absolutely
critical.
Croft: I, I, I couldn't agree with you more, and I think and I agree
with you that everyone wants to put this behind you, and the reason it
hasn't gone away is that your answer is not a denial; is it?
Clinton: But interesting. Let's assume it's not a denial, Croft says.
Of course it's not, Clinton says.
And then he goes into a long, complex sentence.
Croft comes back and says I don't like these questions any better
than you do, but the question of marital infidelity is an issue with a
sizable portion of the electorate according to the latest CBS News poll
which was just taken. It will decide 14 percent of the registered
voters in America.
Clinton: I know it's an issue, and, and, and, but what does that
mean? That means that 86 percent of the American people either don't
think it's relevant to Presidential performance--he was banking on
that, and that is not what it means--or look at whether a person
looking at all the faxes, the best person to serve. He said we have
gone further than anybody.
Hillary says--we know of, and that's all we're going to say, and
people can ask us a hundred different ways and a hundred different
directions, and we're just going to leave the ultimate decision up to
the American people.
Croft: I think most Americans would agree that it's admirable that
you have--have stayed together, that you have worked your problems out,
that you have seemed to reach some sort of an understanding and an
arrangement.
Clinton: Wait a minute, wait a minute.
Croft: But--
Wait a minute. You're looking at two people who love each other. This
is not an arrangement or an understanding. This is a marriage and a
very difficult thing.
And then Hillary comes in with her famous line:
You know I'm not sitting here like some little woman standing by my
man like Tammy Wynette. I'm standing here because I love him, respect
him. I honor what he's been through and what we have been through
together. You know, if that is not enough for people, then the heck
with it. Don't vote for him.
Folks, without reading the last few lines, get your Congressional
Record. Here is what happened:
The impression they left with the American people was that they were
separated at one point, maybe thinking about divorce, happens in most
marriages today, and that maybe there was during this separation period
one indiscretion; at the outside, two. They patched it up, and they got
back together.
According to the troopers that is about as far from the truth as
anything could possibly be. Mr. Croft was had, ``60 Minutes'' was had
with their 13-minute show, CBS was had, and tomorrow night I will
discuss how Ted Koppel was had on that February 12 ``Nightline'' show.
Mr. Speaker, I know the Speaker pro tempore has to go to a function,
a very important function, and I am going to cut short my special order
tonight. I can hear groans from across America, Mr. Speaker, but I will
tell you there are a lot of people in your cloakroom who know that Bob
Dornan may come off in the well like a Tasmanian devil sometimes, a
tiger, but I have talked to several people on your side, one of them,
one of the best orders on the floor, told me he is gone, he is going
down, referring to the President.
Another one told me, ``I had to defend him last night on television.
What am I going to do? We all know--don't know enough about this stuff
to mount a credible defense.''
Here is a story that I would like to ask permission, if it costs less
than $2,000 to put in the Record, and I think all of these will cost
about $500, if that.
``Money Audits the Clintons.'' That means ``Money'' magazine.
Subtitle: ``They may owe $45,000 in back taxes and interest. Here's
what you can learn from their mistakes.'' It is by Teresa Tritch and
Mary L. Sprouse. I place this in the Record at this point:
[From Money; April 1994]
Money Audits the Clintons
(By Teresa Tritch and Mary L. Spouse)
Although virtually every one of Bill and Hillary Clinton's
moves has been recorded, analyzed and debated, there is one
facet of their lives that hasn't gotten the same level of
scrutiny until now. Over a nine-week period that ended in
early March, Money focused on that unglamorous and overlooked
area--the Clintons' record as taxpayers. After studying each
of their federal income tax returns for the years 1980
through 1992 (they hadn't yet filed for '93), we pieced
together a portrait that many of Money's affluent readers
might recognize: The Clintons tend to get tripped up by the
tax complications that come with professional and financial
success.
A close examination of the Clintons' tax returns, which
they have made public, suggests that the First Couple
committed three glaring mistakes: Though both are
sophisticated lawyers, they didn't keep adequate records,
they tended to overestimate certain deductions, and they
relied far too much on their tax preparer to get everything
right. In all, their questionable write-offs indicate that
the Clintons may have underpaid their income taxes by $16,358
over the 13-year period--which means their total liability
today would be $45,411 if you include interest the IRS
charges for underpayment. Their questionable write-offs dealt
with (1) their charitable contributions, (2) his business
expenses as Arkansas governor, (3) her automobile
depreciation and, most important, (4) their Whitewater real
estate development deal, which went bad. Three working days
before our deadline in March, Money sent 16 written questions
based on our reporting to Bruce Lindsey, special assistant to
the President. Though Lindsey had granted us an earlier
interview, he declined to answer any of the 16 for
publication despite repeated requests from the magazine's
management . . . (see ``How Hillary Manages the Clintons'
Money,'' Money, July 1992), he maintained a colorful habit
for at least seven years while Arkansas governor: He took
time out every few months to hand-write a list of his small
deductible charitable contributions ranging from his now
storied skivvies to a brass key ring. The write-offs have
gained wide press attention because many of them seem too
high--$100 for a sport coat, for example.
They may lack the records needed to back up their biggest
Whitewater tax moves. Even if the Clintons can document all
their Whitewater deductions with their canceled checks, that
may not be enough to preserve the write-offs in an IRS audit.
They would need Whitewater records too, to show that were
entitled to the deductions. And those crucial documents are
so far either missing or unavailable. In January, the White
House's Lindsey told the Washington Post: ``If anyone knew
the entire corporate history would be paraded before the
American public, they might have kept more documents and
better records.''
They sailed into Whitewater without proper tax advice.
Every one of the five tax experts consulted by Money agrees
on one issue: The Clintons either didn't seek, or didn't
heed, the right tax advice from the moment they entered the
complicated Whitewater deal back in 1978 and '79. ``There is
no evidence of the hand of a tax professional in any of it,''
says Jack Porter, national tax director at the accounting
firm BDO Seidman in Washington, D.C. The Clintons relied on
two certified public accountants in Little Rock to prepare
their returns for the years in question--Gaines Norton from
1980 to '83 and Yoly Redden from '84 to '92; both declined to
discuss their work with our reporters. (Money has some
history with Redden: She took our tax preparers' test in 1989
and concluded that our hypothetical family owed only $16,618.
Our expert set the correct tax 41% higher at $23,393).
Our audit, like official IRS inquiries, aims to challenge
questionable return entries and estimate what taxes and
interest might be owed. Also like the IRS, we are raising tax
questions, not affixing legal blame. In an audit, you have
the opportunity to defend your tax moves by simply showing,
for example, that you made the payments you claimed as
deductions and that you are entitled to the write-offs.
Moreover, the 4,000-page U.S. tax code is often open to wide
interpretation. Therefore, to be fair, we have noted the
documents the Clintons would need to produce in an actual
audit, and the arguments they might make to justify their tax
stance. Our findings:
charitable deductions
The Clintons' claim--$177,047.
Potential added tax--$1,651.
From 1980 through '92, the Clintons wrote off charitable
gifts totaling $160,886 in cash contributions and $16,161
worth of noncash donations. Often the gifts went to the
Salvation Army, churches and educational charities. Given
their incomes and prominence, the Clintons' generous level of
giving is not in itself a cause for audit scrutiny.
Beginning with their 1983 return, however, the Clintons
attached a list--usually handwritten--itemizing and valuing
their noncash contributions. They noted things like $30 for
three shower curtains, $5 for an electric razor, $40 for
running shoes. Many tax pros say such detail invites IRS
scrutiny, even if you have filed a perfect return. Attaching
a list is particularly dicey with noncash charitable
donations, since there is often no way to prove an item's
fair market value. In an audit, such disputes boil down to
the taxpayer's word vs. the auditor's judgment. Guess what?
The auditor usually prevails.
There is a valid question about whether the Clintons padded
the value of the underwear and other stuff they donated from
1983 through '89. In our audit, Money relied on Goodwill
Industries' and the Salvation Army's flexible guidelines,
which are sometimes used by IRS auditors. We also gave the
Clintons the benefit of the doubt. For example, for 1984 they
claimed $100 for a gray three-piece suit; we gave them the
full $100. Still, some items--particularly shoes, underwear
and T-shirts--seem overvalued at times. For example, in 1988
the Clintons deducted $15 for long underwear; we reduced it
to $2. In another instance, we allowed $30 for a pair of
brown shoes they valued at $80.
We concluded that the Clintons may have overvalued their
noncash contributions by a total of $2,939 from 1983 through
'89. The tax due: $1,187. To rebut that assessment, they
would have to offer convincing oral testimony. At best, they
might get to split the difference between their estimate and
the auditor's.
The Clintons also deducted a $1,405 cash contribution in
1990 to ``Vance Hall Sporting Goods,'' which doesn't sound
like a charity. An IRS spokesman told Money that there are
cases where a retailer makes an IRS-approved arrangement with
a tax-exempt organization; if you write a check directly to
such a store sponsoring a charitable event, you can claim a
deduction. But unless the Clintons can prove that Vance Hall
was qualified to accept tax-deductible donations, they would
lose the deduction and owe additional tax of $464, for a
grand total of $1,651.
One more thing: Amid all the cataloguing of charitable
minutiae, one sign of sloppiness cropped up in 1990. That
year's return failed to note $11,662 of the couple's
contributions to 19 charities. Redden then filed an amended
1040, which brought the couple's charitable deductions that
year to an eye-catching record high of $36,875.
his expenses
The Clintons' claim--$29,190.
Potential added tax--$5,765.
Bill Clinton's $35,000 annual salary during most of his 10
years as Arkansas governor was the lowest in the 50 states.
But he also got $70,000 a year to cover expenses--a $19,000
public relations fund for work-related costs and a $51,000
mansion fund for meals, household items and official
entertaining at the Governor's residence.
Let's start with the $19,000. For most of his tenure,
Clinton was reimbursed in full from this fund for all of his
official expenses. And so, quite correctly, he never claimed
any deduction on his tax return for expenses. For a 26-month
period from January 1989 through February '91, however, the
State of Arkansas decreed that the $19,000 public relations
fund should be included in Clinton's taxable income. (The
same went for the six other Arkansas officials who got such
funds.) So Clinton began deducting unreimbursed employee
expenses, claiming write-offs totaling $13,212 in 1989,
$12,912 in '90, and $3,066 in '91.
In themselves, there's nothing suspicious about the write-
offs. But they could nonetheless draw an auditor's attention
for this reason: The unique nature of a politician's job--
part public servant, part campaigner--makes it imperative to
separate deductible business expenditures from nondeductible
campaign costs. Bill Clinton's 1989 to '91 write-offs for
printing ($7,316, including $4,812 for brochures), travel
($3,696) and advertising ($1,638) are particularly
questionable. An auditor would ask whether they were actually
nondeductible campaign expenses.
Bill Clinton might also have to explain the $2,848 in
``meal-seminar/forums'' expenses he deducted on his '90
return. If the meals and gatherings happened at the
Governor's mansion, they should have been paid by the mansion
account. And under the tax law, you can't deduct expenses
your employer would have normally covered. ``I don't think
meals for visiting groups in the mansion are a deductible
expense, since this [mansion] fund should be used to pay for
them,'' says James Pledger, director of the Arkansas
Department of Finance and Administration. To keep the
deductions, Clinton would have to show that the meals did not
take place at the mansion and that the amounts he claimed
were ``ordinary and necessary'' business expenses.
Finally, his $3,066 in 1991 employment-related deductions
would raise a question. Clinton would have to demonstrate
that this money was spent on deductible business expenses
before March 1991. After that, the state law once again
allowed him to be reimbursed as he submitted expense
receipts. All in all, there's a lot in these expenses for an
auditor to chew on.
car depreciation
The Clinton's claim--$8,168.
Potential added tax--$501.
In 1986, while Hillary Clinton worked as an attorney at the
Rose Law Firm and was Arkansas' First Lady, she bought a
$12,615 Oldsmobile that she drove for business purposes 52%
of the time. (You can claim accelerated depreciation for a
car only if you use it for business more than 50% of the
time.) The Clinton's accountant, Redden, correctly
depreciated the business portion of the car over three years
on their 1986, '87 and '88 returns, for a total allowable
write-off of $6,565. According to the tax law, further
depreciation would be permitted only if Hillary Clinton
increased her use of the car for business. And sure enough,
in 1990, she drove it 60.52% of the time for business. But in
calculating the four-year-old car's extra depreciation,
Redden employed a formula that applied to newly acquired
property placed in service after 1986. As a result, she
overstated the deduction by $1,518, causing the Clintons to
underpay their taxes by $501.
Unfortunately, even when a professional tax preparer causes
the goof, a taxpayer must pay any tax shortfall the IRS
discovers within three years. In addition, Redden herself
could be hit with a preparer penalty of up to $1,000.
whitewater
The Clinton's claim--$24,154.
Potential added tax--$8,441.
Navigating Whitewater takes total concentration as the
numbers whiz by. Since the Clintons have refused thus far to
disclose their relevant 1978 and '79 tax returns, you must
start midstream with the twisting, tortuous flow of the
interest deductions they took in '80 and then again from '84
through '88.
The write-offs, totaling $24,154, are for interest payments
they claim to have made on three separate Whitewater loans:
The first was a $20,000 down payment loan at 10% in 1978
from Union National Bank in Little Rock. The loan was taken
out by Bill Clinton and James McDougal, the politically
connected developer who, with his wife Susan, had just
invited the Clintons to become their fifty-fifty partners in
a then promising venture to develop the 230-acre Whitewater
tract in Arkansas' popular Ozark Mountains.
The second loan was a $182,611 mortgage at 10%, also in
1978, from Citizens Bank in Flippin, Ark., cosigned by the
Clintons and McDougals. Together, the two loans covered the
purchase price of the Whitewater site.
The third was a $20,800 note at 11.5% in 1983 from Security
Bank in Paragould, Ark. taken out by Bill Clinton. According
to the White House, he used that money to pay off a $30,000
loan at a whopping 20% that Hillary Clinton had gotten from
James McDougal's Bank of Kingston in Kingston, Ark. in 1980.
She used the original loan to put a model home on a
Whitewater lot.
An audit of interest deductions ought to be simple. In
general, all taxpayers must prove is that they made payments
they claimed as a deduction, that the expense was indeed
interest for which they were liable, and that they paid the
interest in the year they wrote off the deduction. But the
complex Whitewater loans made the Clintons' subsequent tax
write-offs anything but routine. Also, the Clintons'
argument--that they couldn't have done anything wrong because
they didn't make money on the disappointing deal and didn't
even claim a capital loss in the end--is as irrelevant as it
is self-serving. A taxpayer can lose everything and still
file incorrectly, thereby incurring back taxes, interest and
penalties. Our audit indicates the Clintons may face
precisely those consequences in the following intances:
The first--and largest--of the Whitewater deductions on the
returns Money examined is a $9,000 interest payment to
``James McDougal'' in 1980. The $9,000 entry is audit bait
for two reasons: A business partner is rarely listed as a
mortgage lender, and mortgage interest is almost never a
round number. The White House has said the Clintons paid
McDougal the $9,000 to reimburse him for interest payments he
made on their behalf in 1978 and '79. That might explain why
the figure is rounded: Although the Clintons and McDougals
were fifty-fifty partners, the law does not require that
every payment be split equally. Because of the
irregularities, however, an auditor would demand both a bank
statement showing how much of the amount was interest, if
any, plus a signed, dated receipt from McDougal acknowledging
the interest repayment. Without this hard proof, an auditor
could treat the $9,000 as a nondeductible repayment of loan
principal, not deductible interest.
If the Clintons' undisclosed 1978 and '79 returns surface,
they may well spark more audit questions. For example, the
White House claims the Clintons deducted $10,000 in interest
on Whitewater loans in 1978. But Time magazine recently
reported that records it reviewed show the banks received at
most $5,752.
The second largest Whitewater deduction also appears on the
Clintons' 1980 return--$4,350 paid to Citizens Bank in
Flippin, which provided the $182,611 mortgage in 1978. But
even that seemingly innocuous entry has a twist. In 1979 the
Clintons and McDougals formed the Whitewater Development
Corp. and contributed the 230-acre site to the newly formed
company. This turn of events could prompt an auditor to ask
for proof that the Clintons were the party entitled to the
$4,350 mortgage interest write-off.
The White House has insisted in published reports that the
Whitewater corporation did not assume the loans. Rather, the
explanation goes, when the land went to the corporation, the
Clintons, in effect, got a note from the Whitewater company
obligating it to the same terms as on the loans they took out
to buy the property. In that case however, an auditor would
expect the Clintons to have reported Whitewater's interest
payments on their returns as income and then claim an
offsetting deduction for the interest they paid. But they did
not do that; they never reported any interest income from
Whitewater.
What actually may have happened is that all three--the
Clintons, the Whitewater company and the McDougals--made loan
payments directly to the bank at various times. When
Whitewater didn't have enough money to make the payments,
``McDougal would call up the Clintons and say . . . `Can you
write the check?'' So Clinton would write a $4,000 check, or
whatever, so the bank wouldn't foreclose on the loan,''
Lindsey told Money in a January interview. Whoever made
payments during the year took deductions at tax time.
Despite that unorthodox approach, some tax experts think
the Clintons could keep the deduction in an audit. ``You have
a leg up in defending your interest deductions as long as you
actually made the payment,'' says a former high-ranking IRS
official who requested anonymity.
Yet other tax experts, including Lee Sheppard, a tax lawyer
and contributing editor of the professional journal Tax
Notes, take a tougher stance: She says that when the land
used as collateral for the loan was transferred to
Whitewater, the corporation assumed the loans de facto and
thus was solely entitled to the interest deduction no matter
who, if anyone, paid the interest.
If there were a legal challenge to their deduction, the
Clintons could rebut it by citing to the IRS federal court
cases won by taxpayers in similar circumstances. Even then,
however, they would have to present more Whitewater documents
than they have so far. The worst-case outcome: The Clintons'
$4,350 deduction would be denied.
The third set of Whitewater deductions, from 1984 through
'88, relate to $20,800 that Bill Clinton borrowed from the
Security Bank in Paragould in '83. In 1984 and '85, the
Whitewater company paid Security $5,133 in loan interest and
deducted it. A 1992 analysis commissioned by the Bill Clinton
for President Committee and coordinated by James Lyons, a
Denver tax attorney and family friend, revealed that the
Clintons had also deducted the $5,133. The Clintons explained
that the bank erroneously sent them a $5,133 interest
statement, which they forwarded to their tax preparer,
Redden. She then dutifully entered the deduction on their
returns. To make good, the Clintons say they voluntarily paid
the IRS some $4,000 in back taxes and interest in 1992.
The Clintons' Whitewater headache doesn't end there,
though. Any IRS auditor who asks Bill why he borrowed the
$20,800 would learn of Hillary's earlier $30,000 loan--and
the many tax questions that surround it. When she borrowed
the $30,000 from Kingston Bank in 1980 to build a model home
on a Whitewater lot, the corporation transferred the three-
acre lot to her; she then used the land, at the time worth
about $5,500 according to Whitewater real estate agent Chris
Wade, as collateral. Records examined by Money show that she
paid $10 to record the deed; but it's unclear whether she
paid a cent more than that.
The upshot: The Clintons may be on the hook for a taxable
capital gain on the transfer of the $5,500 lot in 1980. The
Clinton's gain would equal the fair market value of the lot,
minus their tax basis (that is, essentially, the amount they
invested in Whitewater from their own pockets). In the
absence of further documentation, an auditor would assume a
very low basis figure, say the $500 that the couple have said
they contributed to the corporation when it was formed.
Here's the math: The lot's $5,500, minus the $10 Hillary paid
for the deed, minus her $500 basis, equals a $4,990 capital
gain. The audit tally on this transaction alone: $4,454, made
up of tax ($1,098) and interest ($3,356). To beat an IRS
challenge, the Clintons would have to prove that they either
paid much more for the lot, or that it was worth much less
than $5,500 or that their tax basis in Whitewater was far
higher than $500.
One more Whitewater matter: As we went to press, AP
reported that in 1984 and '88 the Clintons deducted more than
$1,400 in Whitewater property taxes they had paid but may
have been reimbursed for later on. Whatever the final
outcome, the drip-drip-drip of Whitewater revelations will
likely continue for years to come.
And then, Mr. Speaker, finally so you can get to that event and I can
go home and prepare to discuss tomorrow, and hopefully I will talk to
Ted Koppel tomorrow, the show that was structured by an ABC producer
named Rick Caplan who produces World News Tonight, gave that letter to
Bill Clinton 3 days in advance, and Mandy Grunwald whose dad was 25
years ahead of Time magazine, she in that same Style section could not
keep quiet a secret. She claimed authorship of the line:
``They're accusing me of sleeping with a woman I didn't,''--wrong--
``and dodging a draft I didn't,''--wrong, dodged it three times.
Here is an article that will probably be a first in my life. Never
have I put in an article from a homosexual magazine, and I would not
put this one in with titles around the edges like:
``Roseanne's Lesbian Kiss'';
``Canada's Politically Correct War'';
``The Gay Oscars'';
``The Gay Menendez Jurors.''
Randy Shilts, 1951 to 1994, died at age 43 of AIDS who wrote the
book, ``The Band Played On.'' He tried to blame everything on Reagan
and Bush. It would not fly, but I feel very sorry he died.
The cover story is a picture of the Surgeon General of the United
States, the leading voice on health matters in the United States. It is
titled, and this is the March 22 issue of the Advocate, a homosexual
tabloid, tabloid size. It is titled, ``Condom Queen.''
``Surgeon General Joycelyn Elders,'' and I cannot read on the Xerox
the subtitle, but there is a big picture with a button with a lightning
bolt on it. I do not know what that means, but it says: ``The Condom
Queen Reigns. Surgeon General Joycelyn Elders speaks out where the
President fears to tread,'' by Chris Bull. He is a prominent homosexual
writer, and I want this in the Record because tonight I am calling for
her resignation or firing.
I am joining the front page story of today's Washington Times where
Cardinal Hickey--what did I do with that--here it is--Cardinal Hickey,
never known as a conservative cardinal, the cardinal for the
Archdiocese of Washington, DC; he says, ``her advocacy of homosexual
behavior, her support for homosexual adoptions is outrageous. The
President must publicly disavow her positions,'' and this is quoting
from a letter from the Archbishop of Washington to the President of the
United States.
Furthermore Cardinal Hickey says, ``I deeply regret her apparent
intolerance of people whose religious faith and moral values collide
with her own ill-considered views. The Surgeon General irresponsibly
accuses religious leaders,'' and it goes on and on with some of the
absurd statements that she has not denied in her exclusive interview
with this outrageous homosexual tabloid.
So, Mr. Speaker, with that there is plenty of things to discuss
tomorrow night, Mr. Speaker, and I would like to be courteous to you.
The news is exploding. I do not know where to go next. So, we will be
back tomorrow with some more fascinating stuff and an analysis of the
February month in the campaign and the very cleverly structured
``Nightline'' show with Ted Koppel which put away the draft issue until
I brought it back into the public consciousness from this microphone in
September 1992.
The articles referred to are as follows:
[From the Advocate, March 22, 1994]
The Condom Queen Reigns
Surgeon General Joycelyn Elders speaks out where the president fears to
tread
(By Chris Bull)
In a memorable and often-quoted line uttered in 1989 while
she served as the director of the Arkansas Department of
Health under then-governor Bill Clinton, Joycelyn Elders, who
is now Clinton's U.S. surgeon general, compared driver's
education for young people to sex education in the schools.
``We taught them what to do in the front seat of the car,''
she said. ``Now it's time to teach them what to do in the
backseat.''
Elders made the remark as part of an aggressive campaign to
lower the rate of teenage pregnancy in the state, which at
the time had the second highest rate in the nation, after
Mississippi. But Elders says that the now-famous quote should
apply equally to gay youths who are at high risk for
infection with HIV. The federal government, she insists, has
a responsibility to teach young gay men ``what to do in the
backseat'' to protect themselves from HIV, especially in the
light of several recent studies indicating that a sizable
number of young gay men have not been reached by AIDS
education campaigns and are continuing to engage in
unprotected sex.
``If there are young gay men out there who are not hearing
the message, then we have to step in and figure out how to
get to them.'' Elders says. ``The federal government has a
responsibility to all of our citizens, not just the
heterosexual citizens. This country has to get over the
judgmental way it makes decisions and make sure we are fair
to all our citizens.''
Statements like these have earned Elders a reputation as
the most fearless and most outspoken member of the Clinton
administration; so much so, in fact, that she appears to be
on a collision course with her boss. Last December, for
instance, Elders precipitated a political firestorm by saying
that legalizing drugs would reduce crime and violence.
Clinton quickly distanced himself from his surgeon general by
insisting that drugs would ``not be legalized on my watch.''
Elders is able to maintain this stance without jeopardizing
her relationship with Clinton--who is known for his political
caution--through a combination of personal popularity and
political savvy. ``Elders is widely perceived as sincere,
well-meaning, and tough,'' says Christopher H. Foreman Jr., a
research associate at the Brookings Institution, a
Washington, D.C.-based policy-analysis group. ``Those
qualities will keep her in good stead in a time when so many
politicians are seen as weak and insincere.''
Although she rarely addressed gay and lesbian issues during
her six-year stint as Arkansas's top health official, as U.S.
surgeon general Elders now appears ready to risk the
president's ire by speaking out on behalf of gay causes. For
this interview Elders insisted that she wanted to address
gay-related topics gingerly until she had thoroughly
familiarized herself with them, but then she proceeded to
unhesitatingly express her opinion on a wide range of gay-
related causes. Elders endorsed gay and lesbian adoption,
advocated suicide-prevention efforts aimed at gay and lesbian
youths, termed the Boy Scouts of America's ban on gay scouts
and scout leaders ``unfair,'' denounced antigay campaigns by
conservative religious groups, and said that Americans ``need
to be more open about sex.''
Indeed, Elders is seemingly willing to address topics that
have landed other Administration officials in hot water. Last
October, for instance, after receiving flak from conservative
groups, the White House's AIDS policy coordinator, Kristine
Gebbie, was forced to back off her statement that sex is ``an
essentially important and pleasurable thing'' that continues
to be ``repressed'' by the country's ``Victorian morality.''
Before the outcry over her remarks occurred, Gebbie had said
she considered it part of her job to stand on the ``White
House lawn talking about sex with no lightning bolts falling
on my head.''
Elders does not appear to fear lightning bolts. What
underlies antigay attitudes in this country, she says, is an
irrational ``fear of sexuality'' in general. ``Society wants
to keep all sexuality in the closet,'' she says. ``We have to
be more open about sex, and we need to speak out to tell
people that sex is good, sex is wonderful. It's a normal part
and healthy part of our being, whether it is homosexual or
heterosexual. There are certain times and places where sex is
inappropriate, but just because it is inappropriate at
certain times does not mean that it's bad. I think the
religious right at times thinks that the only reason for sex
is procreation. Well, I feel that God meant sex for more than
procreation. Sex is about pleasure as well as about
responsibility.''
During a 1992 campaign stop, Clinton refused to criticize
the Boy Scouts ban on the grounds that as a private
organization it is entitled to set its own policies. But
Elders says she opposes the ban ``in principle'' because of
its negative effect on the mental health of gay youths. and
she has promised to oppose it publicly. ``If we have
important organizations that we are all supporting, I
certainly think that all our youth should be allowed to
participate,'' she says. ``Once again we are dealing with the
ignorance of our society about what gay people are like and
the effect of policies like this on them.''
Elders says the fight for full equality for gays and
lesbians depends at least in part upon the ability of most
Americans to ``learn that gay people are not just out there
wanting to have sex with anybody who walks down the street
and that gay people have real loving, lasting relationships
and families.''
As a result, Elders says gays and lesbians can play an
important societal role by adopting children as well as by
raising their own. ``I feel that good parents are good
parents--regardless of their sexual orientation.'' she says.
``It's clear that the sexual orientation of parents has
nothing to do with the sexual orientation or outlook of their
children. Many children in this society are born unwanted,
and I feel that if gay or lesbian couples feel that they want
children enough to adopt, well, then they are probably just
as capable of being good parents as heterosexual parents who
choose to adopt. Gays and lesbians are not going to choose to
adopt or have their own children unless they really want
children. They are making a conscious choice. We have too
many parents who did not choose nor did they want, to be
parents.''
Despite what seem to be enlightened convictions, this is
the first time that Elders has been asked to address gay and
lesbian health issues in a comprehensive manner--a task she
says has been one of the most difficult challenges she has
faced since assuming her post last September. ``One of the
biggest problems in this job that I am facing is that I don't
know enough about gay and lesbian issues,'' she admits. ``I'm
trying to get educated as fast as I can. I don't want to do a
lot of speaking out until I am comfortable with the issue and
I can answer all the questions that are posed to me from both
sides.''
Even so, Elders is taking some tentative steps toward
addressing gay-related health issues. During a Jan. 18
meeting, for example, Elders surprised lesbian-health
advocates by suggesting that the Department of Health and
Human Services (HHS) fund the creation of brochures aimed at
educating health care workers about lesbian health concerns.
``I can see that there are many problems that lesbians face
that physicians have yet to address,'' Elders says. ``We have
to train our nation's physicians to ask the right questions
and to offer lesbians advice that is appropriate to them.
Many times doctors may be concerned that women are taking
proper contraception, but if some women are having sex only
with other women, that's not the right kind of concern to
have.''
At other times, though, Elders has been on the defensive.
During a public appearance last December for World AIDS Day,
Elders was targeted by Luke Sissyfag, a 20-year-old AIDS
activist who loudly accused her and the president of dragging
their feet on issues revolving around AIDS. But Elders took
the protest in stride. ``I've met Luke on several occasions
now, and I respect what he's doing,'' she says. ``I think
that it's OK for him to feel like we're not doing enough. I
don't feel like we're doing enough. One of the wonderful
things about America is that Luke can go around and be
critical of me and of the president if he doesn't think we're
doing enough. There are many ways of skinning the cat.''
Elders is facing a learning curve on gay-related issues in
part because she steered clear of them while in Arkansas.
Eric Camp, a spokesman for the Arkansas Gay and Lesbian Task
Force, a statewide political group based in Little Rock, says
that addressing homosexuality publicly in the state would
have amounted to political suicide. ``She was already seen as
an extremist in the state for talking about birth control and
abortion,'' he says. ``Her programs never would have gone
anywhere had gay and lesbian issues been included. But I
think that on the national level she will be far more
inclined to consider gays and lesbians part of her
constituency.''
Elders says she did not consciously dodge the issue,
though. ``I did talk to gay groups in Arkansas, and when I
did it got a lot of press,'' she says. ``I've spoken out
before, It was not as well-organized a constituency there as
some other groups might have been, but that would not have
been a reason to avoid it.''
In Arkansas, Elders focused primarily on what has been a
lifetime mission: reducing the rate of teenage pregnancies,
which she says have made a generation of young women into a
``slave class'' by forcing them to raise children before they
are ready to do so at the expense of their own educational
and employment opportunities. Among her initiatives was a
controversial plan to place medical clinics in each of the
state's 300 school districts that would dispense condoms, sex
education, and health care. So far, 24 districts have
installed clinics, and 28 more are on a waiting list for
state funds to established them.
Elders' emphasis on youth and sexuality as public health
concerns may lend itself easily to addressing AIDS and gay-
related issues. Kerry Lobel, lead organizer for the Arkansas
Women's Project, a Little Rock-based advocacy group, says
that when seeking support from Elders, gay and AIDS activists
would be well-advised to frame the issue in terms of youth,
prevention of sexually transmitted diseases, and reproductive
health. ``Dr. Elders will stick up for children and young
people no matter what,'' she says. ``If the issue can be
presented that way, she will listen. That's where her heart
is.''
Elders, a pediatrician by training, indeed becomes most
passionate when the topic turns to gay and lesbian youth.
While the school-based clinics in Arkansas were designed to
focus primarily on the needs of heterosexual students, Elders
says they should eventually address the needs of young people
who are struggling to come to terms with their sexuality as
well. ``We can't just write off 10% of our student
population.'' Elders says. ``We should certainly work on gay
and lesbian health issues. We need to make sure our teachers
are educated about sexuality and that counselors know how to
address the issue in a sensitive manner.''
Commenting on a hotly contested 1989 HHS report-later
suppressed by the Bush administration--that found that gay
and lesbian youths represent approximately 30% of teenage
suicides, Elders says that ``when we are talking about young
people taking their own lives, that's the worst health threat
we can possibly face. So for me it has to be an issue. Again
I have to admit stupidity on exactly how to address the
issue, but certainly we should make educators and counselors
aware of the issue and make sure they know how to respond to
the situation when it arises. I certainly see addressing gay
and lesbian youth suicide as part of my mission. My job as
surgeon general is to talk about all of the health issues
that have an impact on Americans.''
Elders has been able to speak out forcefully on a variety
of topics in Arkansas and in Washington, D.C., in part
because of her personal popularity with the public. The
daughter of sharecroppers who lived in rural Arkansas, the
60-year-old Elders overcame poverty to serve in the U.S. Army
as a first lieutenant. She later attended the University of
Arkansas Medical School on the GI Bill.
That modern Horatio Alger story has helped to disarm some
of her critics. During her contentious confirmation hearings
last July, for instance, Elders repeatedly invoked her
upbringing to explain her position on a number of issues.
Still, the Senate finally confirmed Elders in a less-than-
overwhelming 65-34 vote. ``She's a very sympathetic figure,
and even her critics have to be careful not to appear to be
attacking a black woman,'' says Foreman.
Elders also benefits from a close relationship with
Clinton, who stood behind her despite fierce attacks from
right-wing pressure groups and conservative members of
Congress. During the confirmation hearings the Traditional
Values Coalition, a conservative lobbying group, dubbed
Elders the nation's ``condom queen'' for her staunch support
of condom distribution in the schools and said she was
``clearly the worst Clinton nominee yet.'' After her
confirmation Elders responded in an interview with The New
York Times by saying, ``If I could be the `condom queen' and
get every young person who is engaged in sex to use a condom
in the United States, I would wear a crown on my head with a
condom on it.''
Conservative members of the Senate were most critical of a
1992 remark that Elders made attacking the Roman Catholic
Church. Elders said the church hierarchy's opposition to
abortion rights is more vehement than was its opposition to
the Holocaust and ``the 400 years in which black Americans
had their freedom aborted.'' Sen. Don Nickles (R-Okla.), who
led the opposition to Elder's nomination, said the statement
``exhibited strong anti-Catholic belief.''
Clinton's support also helped Elders withstand attacks from
right-wing groups in Arkansas. After conservative opponents
spread false rumors that the clinics she had proposed for the
state's schools would perform abortions for students, Elders,
a Methodist, called them ``very religious non-Christians''
who ``love little babies as long as they are in someone
else's uterus.'' Conservatives demanded an apology, and
Elders complied in a letter to the state legislature, but she
continues to use the phrase to describe her opponents anyway.
By way of contrast, Clinton did not display the same
fortitude when another black female nominee, Lani Guinier,
came under attack for statements and beliefs that are less
incendiary than some of Elders's. In fact, longtime Arkansas
political observers say that Clinton and Elders have for
years played out a political cat-and-mouse game that benefits
both players.
An incident at the 1987 press conference where Clinton
introduced Elders to the state illustrates the point. In
response to a question as to whether she planned to
distribute condoms in public schools, Elders said, ``Well, we
won't be putting them on their lunch trays, but yes.'' Press
reports at the time described Clinton as blushing from
embarrassment but nodding in agreement with Elders.
``Clinton relies on Dr. Elders to say the things he cannot
say for political reasons,'' says Lobel, who has observed the
complex political relationship between the two for years.
``When he finally said that he was pro-choice, we all said,
`Well, of course he's pro-choice,' but we really only knew
that because she had been so outspoken and he would not have
let her do that unless he agreed with her.''
That same dynamic was at work during the outcry over
Elders's December statement about legalizing drugs; the
situation escalated further when her 27-year-old son, Kevin,
was arrested in Little Rock on drug charges. Sen. Robert Dole
(R-Kan.) said Americans ``must be wondering if the surgeon
general is hazardous to our health,'' and Nickels called for
her resignation.
Elders said she had ``no second thoughts'' about the
remark, and Clinton said he remained ``four-square'' behind
her. ``When you have someone who is outspoken and energetic
like she is,'' he said, ``there are going to be times when
she'll be outspoken and energetic in a way that I don't
necessarily agree with.''
Marj Plumb, health policy director for the National Gay and
Lesbian Task Force, a Washington, D.C.-based political group,
says she has seen that dynamic at work on gay-related topics
as well. During the meeting at which Elders suggested
developing lesbian-health brochures, Plumb recalls that she
turned to Patsy Fleming, special assistant to HHS secretary
Donna Shalala, who was sitting next to Plumb, and said,
```Are your sure you want to take the heat for something like
this?'' and when Patsy said, ``Marj, this is Dr. Elders you
are talking about.' So even internally at HHS there is a
general understanding that she is going to articulate a
vision that is not necessarily politically safe for others to
articulate.''
Elders's ability to speak out on national health issues is
also aided by the surgeon general's office, which has little
official authority but has come to serve as a bully pulpit
for the officeholder's political and medical agenda. The
office has just ten full-time employees and a $550,000 annual
budget. In contrast, the administration's AIDS policy office,
headed by Gebbie, has 55 employees and a $5-million annual
budget.
Dr. C. Everett Koop, who served as President Reagan's
surgeon general from 1984 to 1988, paved the way for Elders
on AIDS-related issues. Though considered a staunch
conservative when he was nominated for the post, Koop
nevertheless bucked the Reagan administration by advocating
humane treatment of people with AIDS and supporting sexually
explicit educational campaigns to stem the spread of HIV.
Elders says she intends to continue Koop's tradition. ``If
AIDS had started out as a disease of upper-middle-class white
babies, it would have gotten a lot more attention,'' she
says. ``Koop recognzied this and did what a surgeon general
has to do. You have to stand up for what's right--based on
the medical and scientific data--regardless of what your
personal beliefs are.''
Elder's outspokenness occasionally offends even her allies.
In 1991, for instance, Elders said that one of the benefits
of legal abortion is the reduction of severe birth defects,
citing Down's syndrome as an example. A number of parents of
children with Down's syndrome protested, saying that Elders
was implying that handicapped babies should not be allowed to
be born. Elders responded that she had a nephew with the
syndrome whom she loved and that she cared for many Down's
patients in her pediatric practice.
But the comment raises disturbing questions for gays and
lesbians as well. With increasing evidence of a genetic basis
for homosexuality, some scientists and medical ethicists have
raised the possibility that antigay parents, upon learning
that their fetus carries a gene for homo-sexuality, could opt
for an abortion rather than give birth to a child that might
grow up to be gay.
Elders refuses to get drawn into that debate, though. ``I
think that's a decision only parents can make, she says. ``If
a woman had an abortion because they located the gay gene, it
would not upset me any more than choosing an abortion on any
other grounds. It's not a position for the government to
take. The choice has to be left up to the individual. No one
can try to make such a choice for a woman.
That nonjudgmental view is consistent with Elder's approach
to gay rights in general. Commenting on antigay campaigns
undertaken by conservative religious groups, Elders says that
if '`you are truly right within your heart and with
Christianity, you know in advance that you do not know in
advance that you do not know enough about other people's
lives to judge them. You do not love enough to make decisions
about how other people should live their lives. How can I be
judgmental of you when in the sight of God you may think you
are better than me? You have to wonder how much love that
people who hate gay people have in their hearts.''
____
[From the New Republic, Apr. 4, 1994]
The Name of Rose
(By L.J. Davis)
You see a girl walking down the street. You can say,
``There goes a beautiful girl'' or ``There goes a whore.''
What the hell's the difference? They've both got legs.
--Jon E.M. Jacoby, executive vice president of Stephens
Inc., explaining the Arkansas system of politics and finance
as it reached perfection during the Clinton years.
an arkansas thriller.
i.
In Arkansas, the latest backstairs of the national
political system, you hear a lot of things. Concerning
Whitewater, for example, you are constantly--and probably
correctly--reminded that the dustup involves nothing but a
typical loony tunes S&L deal from the 1980s, despite the
august personages involved and their perplexing insistence on
behaving like refugees from a Raymond Chandler novel. In
Arkansas memories are long, political rascality is king of
regional sports and rumor and truth tend to commingle until
otherwise reasonable people are driven slightly bonkers
trying to sort out one from the other, In Little Rock the
whole Whitewater affair is regarded as something of a hoot--
the Yankee carpetbagger press, with the reality of Arkansas
staring it in the face, has gone and missed the real story
again. But if Whitewater was nothing but a minor peccadillo
that the press has glommed onto because it thinks it
understands it--and compared with the private financial
shenanigans of Arizona Governor Fife Symington, Whitewater
resembles a misdeed along the lines of crossing the street
against the light--why, then, has the Clinton administration
so frantically placed its back to the door, as though a peek
beyond would reveal grandpa tied to a chair, surrounded by
his looted bank books? In Arkansas the answer to this
question verily resembles the epitaph on the tombstone of Sir
Christopher Wren: if you would see Clinton's monument look
around.
When it comes to Bill Clinton's home state, the national
press has repeatedly looked, seen everything and observed
next to nothing (the honorable, largely ignored exception
being the Los Angeles Times). Visiting Little Rock in search
of atmosphere during the presidential campaign, reporter
after reporter dutifully described the imposing Stephens
Building, the elegant Capitol Hotel, the Worthen Bank tower
and the headquarters of Arkla Petroleum, future White House
Chief of Staff Mack McLarty's gas company, without realizing
that all of these things were either owned, controlled or
under the influence of a single, immensely powerful family:
the Stephenses.
By a happy chance, the family is also the stellar client of
Hillary Rodham Clinton's old employer, the Rose Law Firm.
Although it usually served as a hired gun with a conveniently
blind eye, Rose proves to be a handy prism for observing a
Gothic, sometimes darkly humorous tale of bonds, banks, a
friendly cocaine distributor, sinister Pakistanis, shadowy
Indonesians and the uses to which an agreeable state
government can be put. The story is in fact three connected
stories, combined in a typically Southern saga: Stephens Inc.
and the Worthen Bank Corporation; the Rose Law Firm itself;
and the Arkansas bond business, which, like most bond
businesses, is extremely difficult for the well-educated
layman to understand, thus making it an excellent place to
hide things in plain sight. Central to the story is a pair of
siblings named Witt and Jackson Stephens.
ii.
In one sense, nothing unusual occurred in Arkansas during
the 1980s: tales of high jinks in high places have always
figured prominently in American discourse, and some of the
most colorful stories--a number of them actually true--have
come out of the Bubba Belt of the South and Southwest, whose
geographical heart happens to be occupied by Arkansas. But
Arkansas is rendered sui generis by the presence of the only
major investment bank not headquartered on Wall Street,
Stephens Inc. of Little Rock, which does much to explain some
of the arresting peculiarities of a state that is more than a
little strange even when judged by the spacious standards of
its region.
For one thing, although Arkansas is the home to some of the
nation's wealthiest families, it is one of the poorest states
in the country, although there is no reason for it to be poor
at all. Abundantly endowed with minerals, petroleum, timber
and some of the most fertile agricultural land on the surface
of the planet, it bears a close resemblance to a Third World
country, with a ruling oligarchy, a small and relatively
powerless middle class and a disfranchised, leaderless
populace admired for its colorful folkways, deplored for its
propensity to violence (on a per capita basis, Little Rock
has one of the highest murder rates in the nation) and
appreciated for its willingness to do just about any kind of
work for just about any kind of wage.
In the words of one local wag, the farther you get from
Arkansas, the better the Stephens boys look. Indeed, the
family's sanitized, Horatio Alger-like biographies have been
featured, accompanied by a remarkable lack of examination, in
publications as various as Forbes and Golf Digest. The
dynasty's founder, Witt Stephens, together with his younger
brother by sixteen years, Jackson, grew up on a hardscrabble
farm near the town of Prattsville, the sons of a small-time
speculator in oil stocks and sometime state legislator, A.J.
Stephens, who remained a power in state Democratic politics
until the end of his life.
An eighth-grade dropout. Witt first makes his living by
peddling Bibles and belt buckles before he discovered a pair
of bonanzas in undervalued, Depression-era municipal bonds
and the natural gas with which Arkansas is so richly endowed.
Meanwhile, Jackson briefly served as a page with his father
in the state legislature and went on to become a classmate of
future President Jimmy Carter at the Naval Academy, a
circumstance that would later serve the family's fortunes
well while causing a disaster of still unmeasured magnitude
in the American banking system.
After World War II the brothers joined forces at Stephens
Inc, in Little Rock, with Witt--or Mr. Witt, as he came to be
known--serving as the company's colorful, cigar-chumping and
aphoristic face to the world (or as much of the world as paid
attention) while the taciturn Jack toiled away in the back
office, revealing a golden touch at investment strategy.
These things are relative, of course; by the time Witt (who
died in 1992 at the age of 83) handed over the reins to Jack
in 1957, while retaining his petroleum interest and serving
as the presiding genius of the firm. Stephens Inc. was worth
a beggarly $7.5 million. But in the Arkansas of 1957, a
financial institution with $7.5 million had the money and the
clout to do a number of things--including purchase a
governor.
Witt, like his father before him, was a staunch hereditary
Democrat, a supporter and friend of such Arkansas luminaries
as Senator William Fulbright. He was also a great patron of
the infamous, six-term Orval Faubus--not, apparently, because
of the governor's segregationist policies (to the family's
credit, Jack Stephens, a trustee of the University of
Arkansas since 1948, had successfully lent his voice to the
cause of integrating the institution), but because Faubus was
sound on the subject of natural gas, a subject dear to the
Stephens' heart. As the family's fortune continued to wax
after the Faubus years, it became an axiom of Arkansas
policies that someone could occasionally become governor
without permission from Stephens headquarters, but the
politician was unlikely to remain governor for very long
unless be paid close attention to the care and feeding of the
brothers--the great exception to the rule being two-term
Republican Winthrop Rockefeller, the beneficiary,
representative and broken reed of an even vaster American
fortune, who became the failed hope of Arkansas liberalism.
Decades later, when the self-effacing Jack became chairman of
the Augusta National Golf Club in Georgia, naive visitors
were quickly enlightened on the subject of how a man so shy
could assume a post so prominent in the sport of the moneyed
and the gently bred, ``Jackson Stephens?'' it was explained.
``He's the man who owns Arkansas.
It was Jackson Stephens at the helm that Stephens Inc.
propelled itself into the stratosphere of the American
financial plutocracy, making a bewildering variety of
investments in enterprises as various as real estate,
hazardous waste incineration, data processing, nursing homes,
trucking and airplane maintenance, while simultaneously
diversifying into the business of underwriting issues of
common stock. In its new role, the firm called on the
services of young C. Joseph Giroir, the only trained
securities lawyer in the state, and his paralyzing
respectable firm, Rose.
The securities business, in turn, led to a chain of
peculiar events beginning in 1977 (the year, it so happened,
that Bill Clinton became Arkansas attorney general and the
Rose hired his wife). That year, no less a figure than T.
Bertram Lance appeared on the corporate doorstep of his old
friend's classmate, bringing with him a load of troubles and
a glittering opportunity. Lance was compelled to resign as
head of Jimmy Carter's Office of Management and Budget
because of his long history of questionable financial
practices in Georgia. As a result of that history, he was
also beset by a negative net worth, substantial loans from
banks in Chicago and New York and a large stock holding in
the National Bank of Georgia. Sadly for Lance the price of
the bank stock was depressed and its sale on the open market
could not rescue him from the specter of bankruptcy, which
was the dilemma Stephens Inc, was invited to solve.
A solution was soon found in the form of the now notorious
Bank of Commerce and Credit International (BCCI), although
whether Lance introduced Stephens to the Pakistani-run scam
or vice versa is a matter of some debate. Beyond dispute,
however, it is the fact that the comptroller of the currency,
the nation's principal regulator of commercial banks, had
clearly stated that BCCI was never to enter the American
banking system under any circumstances. Oddly, this
unambiguous order did nothing to prevent Stephens Inc. from
solving Lance's problems while settling a small score of its
own. The National Bank of Georgia was controlled by a holding
company called Financial General one of the few entities in
the country allowed to engage in interstate banking under the
laws of the time. The Stephens interests controlled slightly
less than 5 percent of Financial General and the investment
had soured, partly because Financial General refused to hire
the family data processing company. It was, Stephens soon
persuaded BCCI, just the sort of investment BCCI was looking
for, the comptroller's edict notwithstanding.
In short order, Stephens launched Lance on the path to
renewed solvency, assembled blocks of stock for purchase by
the front men who would conceal BCCI's identity, effected an
introduction to the subsequently disgraced Democratic wise
man Clark Clifford, turned a small but tidy profit on the
sale of its own shares, pocketed fees of at least $95,000--
and, in return for a sum that in Stephens terms amounted to
chump change, set in motion the process that would give BCCI
involvement by the Securities and Exchange Commission,
Stephens Inc. neither admitted nor denied the SEC's findings
but promised to go and sin no more.
But BCCI was not the only exotic party attracted by Lance's
bank holdings. Also appearing on the scene was Mochtar Riady,
one of the wealthiest men in Indonesia, with far-ranging
interests and a known connection to his country's dictator,
General Suharto. When someone went into business with Riady,
there was also the possibility that they were in business
with the general, a fairly decent chap by dictatorial
standards (he had begun his reign with the slaughter of
200,000 supposed Communists, a feat he had not found
necessary to duplicate except on the island of Timor) but a
tyrant nonetheless.
Stephens Inc., which appeared to be uninterested in the
true activities of BCCI, exhibited a similar indifference
when it came to Riady. Moreover, the Stephens people did not
appear to be the least bit curious about the business
endeavors of the distinguished former statesman who effected
the introduction between Jakarta and Little Rock. This was
Robert B. Anderson. Formerly a secretary of the treasury in
the Eisenhower administration, Anderson had carried out
diplomatic assignments for President Lyndon Johnson in the
Middle East and had served as President Richard Nixon's chief
negotiator in the Panama Canal talks before opening an
offshore bank--Commercial and Trade Bank and Trust Ltd. on
Anguilla--that catered to people who needed to launder money,
evade taxes, or both.
Jack Stephens had willingly presided over the handoff of a
big hunk of an American bank to a bunch of Pakistani thugs,
but he was not willing to let Riady go so easily. ``He wanted
to buy into an American bank, an idea I was not enthusiastic
about,'' Stephens told an interviewer some years later,
perhaps making an unconscious semantic distinction. He'd seen
nothing wrong with selling BCCI an American bank--they even
named it First American--but he and Riady soon began planning
an entirely new kind of Arkansas bank holding company, for
which they required the services of Giroir and his expertise
in securities law. But they also needed something that
increasingly became a hallmark of the Rose firm: a
willingness to perpetrate a subtle conflict of interest.
Founded in 1820, well before Arkansas became a state, Rose
is one of the oldest surviving law firms west of the
Mississippi, one of the most competent and one of the most
quietly influential. Often, in looking at the state
government of Arkansas, the Rose firm and the Stephens
interests, it is hard to escape the impression that one is
looking at a single entity, rather along the lines of NATO.
The law partnership takes its curious name from U.M. Rose, a
talented attorney who dominated the firm from the mid-1860s
to the end of the century, was one of the founders of the
American Bar Association and is one of two Arkansans whose
statues adorn the Capitol in Washington. Over the years Rose
has provided Arkansas with numerous legislators and justices
of the state supreme court. In 1957, when the modern civil
rights era was born in Governor Faubus's refusal to integrate
Little Rock's Central High, it was a Rose lawyer who acted as
lead counsel to the school board. (Rose still has no black
partners.) And from 1975 until 1988 the firm enjoyed a
spectacular run--growing from seventeen lawyers to fifty-
three--under the leadership of the dapper and charming
Giroir, the first and only chairman in the history of Rose,
who deeply entwined the partnership and his personal destiny
in the affairs of the Stephens family's empire.
During the Clinton administration, the history of the Rose
firm could be divided into two periods: the Giroir years, and
the shorter period, from 1987 to 1992, when the firm claimed
to be a democracy, voting on its future rather than blindly
following a single, charismatic leader. This democracy,
however, was publicly dominated by three partners: the
amiable Webster Hubbell, who was until a few days ago
associate attorney general; the quiet Vincent Foster, who was
deputy White House counsel until his suicide last summer; and
Hillary Rodham Clinton, who as of press time is still First
Lady. The firm's sea change, which generated a certain amount
of hoopla from the legal press, was more apparent than real.
Under the surface, Rose was much the same as always, doing
good for its friends and clients while doing well for itself,
but much more silently.
In his years as Rose's chief, Giroir conspicuously chaired
a group drawn from the State's so-called Good Suit Club. The
club successfully lobbied the legislature to change the state
usury law, which made owning an Arkansas commercial bank a
much more attractive proposition. It also was active in
convincing the State's lawmakers to revise the law
restricting the formation of bank holding companies, which
enabled Giroir, Riady and Stephens to make a substantial and
potentially lucrative investment.
On his own, Giror had purchased control of four Arkansas
banks. He sold all four--including the second largest bank in
the city of Pine Bluff--to Worthen Banking Corporation, the
new holding company Riady and Stephens had been able to set
up after state law, with Giroir's help, had been made more
congenial to such things. For his part in the deal, Giroir
was compensated with $53,760,294 in cash, stock and assumed
debt. He also became a major stockholder of Worthen (named
after the venerable and very large Little Rock bank that was
the pride of the Stephens commercial banking empire) and a
powerful member of its board. He received further income by
renting property to the company, and he pocketed an
additional $2.1 million when he sold part of his
stockholdings to a company affiliated with Riady's son James
(who was also Worthen's co-president). More important, he
managed to create a whole new client for his firm; Rose
became Worthern's principal outside counsel.
These things are complicated, dull and dry, which is an
excellent form of concealment, but consider the sequence of
events. With the stroke of a pen and without a visible second
thought, then-Governor Bill Clinton, following his traumatic
period as a voter-rejected civilian between 1980 and 1982,
gave life to two pieces of legislation inspired by his wife's
boss--revising the usury laws and permitting the formation of
new banking holding companies.
In a State as small as Arkansas, where everybody of
importance knows everybody else, it seems impossible that
Governor Clinton could not have known that the relevant
legislation would be of immense personal benefit to the boss
in question, the state's most powerful family and an
Indonesian investor whose presence in Arkansas seemed to be
regarded a the most natural thing in the world. Last and not
incidentally, the governor, by permitting the creation of the
Worthen Bank Corporation, had arranged a new payday for the
Clinton family through the windfall in legal fees provided to
the Rose firm (Hillary Rodham Clinton, partner). When the
compensation of the firm's partners was computed. Rodham
Clinton has insisted, she specifically exempted herself from
receiving a share of Rose's business with the state. But
although Worthen could not have been brought to life without
the help of her husband's government, it was not a government
agency, Rodham Clinton was therefore not excluded from a
partner's share of its fees.
More important, Worthen also became a major depository of
the state's tax receipts. Nothing unusual here; governments
frequently park their deployed funds with large private
banking institutions until they decide what to do with the
money. But the results soon proved to be imprudent under the
most charitable interpretation of the word. In 1985 Worthen
Bank managed to lose $52 million of Arkansas state taxpayers'
money in a purchase of government securities from a New
Jersey brokerage with a questionable past and no future
whatever; several of its principals ended up in the jail for
fraud. With its capital wiped out in a single stroke and a
seizure by federal regulators imminent, Worthen was swiftly
rescued with a $30 million cash infusion from its major
stockholders, in the form of a loan that paid the Stephens
partners a handsome 10 percent--together with additional
funds from Stephens Inc., which pocketed a $3.2 million fee
for its trouble. (The risk, is true Stephens fashion, was not
great. Two-thirds of the funds were swiftly replaced by
Worthen's insurance company, which made Stephens Inc.'s noble
rescue of the bank--and of a big hunk of the Arkansas
treasury--an almost surefire, profitable investment.) Also
conspicuous during the complex negotiations were Joe Giroir
and his partner Webb Hubble, appearing in their capacity as
members of Rose.
Two questions surround this incident. First, how could
Worthen have allowed the state to make such an obviously
tainted investment via the New Jersey brokerage firm? Second,
and more important, why did nobody in Arkansas appear before
the bar of justice? The New Jersey firm was a direct lineal
descendent of a peculiar regional phenomenon: the world of
so-called bond daddies. The bond-daddy racket, long centered
in Memphis but with many of its members drawn from Arkansas,
specialized in selling questionable government securities to
gullible investors, principally small banks with little
financial sophistication.
Here is where the oddity begins, at least as it concerns
Worthen. The Stephens brothers, if not Giroir and Riady, were
intimately familiar with the black arts of finance. They were
also experts in the government bond market. Moreover, at
least one of the principals in the New Jersey brokerage of
Bevill, Bresler & Schulman Inc. (which executed the
transaction for Worthen and the state of Arkansas) was well-
known in the region. Bevill's operations had all the earmarks
of a standard bond-daddy scam, and yet Worthen committed $52
million anyway. (At the bank, the official explanation was
that co-president Jim Jett acted naively, on his own and
without the supervision of his principal stockholders, which
is possible but not entirely plausible, since Giroir, who
represented the Stephenses, sat on the board.)
Consider a virtually identical event at the same time in
Ohio, in which a savings bank controlled by Marvin Warner,
Jimmy Carter's ambassador to Switzerland, invested in the
same kind of fraudulent securities, destroyed itself, ignited
a statewide financial panic and caused Governor Richard
Celeste to declare the first Ohio bank holiday since the
Great Depression. A number of the responsible parties,
including Warner, found themselves behind bars, some for a
very long time. Why? Under long established Anglo-American
law, an officer or director of a bank is governed by the
``prudent man'' rule, which states that he is personally
responsible for the financial and legal consequences of his
acts. In Arkansas, where the prudent man rule seems to have
been suspended, a number of people were fired, but the
Clinton government hauled precisely no one into court on
criminal charges. Once again in Clinton's Arkansas, the law
seemed to be different than it was in the rest of the United
States--which makes certain Arkansans smile in knowing
amusement over the fact that Bill Clinton now happens to be
running the United States.
iii.
The near failure of Worthen in 1985, like the arrival of
BCCI, proved to be another pivotal event in recent Arkansas
history: Stephens, Worthen, Rose and the Clintons remained at
the center of the stage, but the cast of supporting players
began to change.
A former Stephens executive named Ray Bradbury, who had
been deeply involved in the BCCI negotiations--hardly a job
qualification, one would think--took the helm at Worthen,
where he discovered that the bank was also stuffed with bad
real estate loans. Meanwhile, federal regulators learned that
the bank had made an excessive number of insider loans,
particularly to the Riadys, although what happened next is,
as usual, a matter of mutually exclusive explanations.
Knowledgeable observers in Little Rock and elsewhere say
that the Riadys were slowly forced out of the bank by the
federal government; at Worthen, the official version says
that the Riadys disengaged because it was clear the troubled
bank could not be a major force in international finance. In
any event, the Riadys soon departed.
The role of Joe Giroir also underwent a change. As a
principal owner of Worthen, he was charged with securities
fraud in a shareholder suit; he was also sued by Worthen
itself for taking illegal ``short-swing'' profits when he
sold stock to the Riady affiliate. Not only did Giroir lose
his board position and partial ownership of the bank--with
Giroir and Riady out of the picture, the Stephenses gradually
increased their stockholding to more than 40 percent, while
stoutly denying they controlled the place--but, following
Giroir's disgrace in 1988, Rose lost Worthen as a client that
had once paid the firm hundreds of thousands of dollars per
year.
As for Giroir, his troubles were far from over. In 1986 he
was revealed to be a shareholder in and a substantial
borrower from a Pine Bluff thrift called FirstSouth, the
first billion-dollar S&L failure in the country. Before the
dust had cleared, the head of FirstSouth had gone to jail
together with a former president of the Arkansas Bar
Association, and Giroir had sued the federal regulators while
the federal regulators were suing him, putting a considerable
crimp in the plans of his partners. Hubbell and Foster, to
create a lucrative practice in the cleanup of the S&L crisis.
(At failed S&Ls, the fees for firms like Rose could be
enormous. According to one frustrated federal investigator,
private lawyers in Dallas were making $500,000 per month from
the thrift catastrophe, more than the total annual budget for
the federal cleanup effort in the entire state of Texas--and
in Arkansas, where lawyers were cheaper, the damage per
capita was among the worst in the country. Somehow, Governor
Clinton escaped criticism for this interesting fact.) It was
clear that Joe Giroir, who had built the modern Rose Law
Firm, was not the partnership's greatest liability--the
firm's reputation aside, federal regulators charged that
Giroir had used Rose letterhead to give FirstSouth legal
advice beneficial to himself; Rose was forced to settle with
the Federal S&L Insurance Corporation regulators for a
reported half-million dollars--although once again there is a
contradictory official version of his abrupt departure.
Giroir once claimed that he left the firm voluntarily but
will no longer comment on the matter. The Rose firm fell
abruptly silent on this and all other subjects following
recent allegations that it had shredded its Whitewater files,
but its spokesman told American Lawyer in 1992 that Giroir
departed in a coup arranged by litigators who were miffed
that he and the firm's other rainmakers were paid
substantially more than the lawyers who actually did the scut
work in court--litigators prominently including Hubbell,
Foster and Rodham Clinton, who actually seemed to be engaged
in very little legal work at all.
With the departure of Giroir, life at Rose became quieter
if no less active. The three partners became the firm's
public face to the world. The most physically imposing and
locally active of these was Hubbell, a six-foot, five-inch
giant of a man who had played football for the University of
Arkansas, had almost made it into the big time with the
Chicago Bears, had served briefly as mayor of Little Rock
(when Rose received a significant portion of the city's bond
business) and had received an interim appointment as chief
justice of the Arkansas Supreme Court from Governor Clinton.
(According to a reliable source, Hubbell's father-in-law.
Seth Ward, a septuagenarian self-made entrepreneur, once
complained that keeping Hubbell in politics cost him $100,000
a year.)
The second was Foster, once described as an immaculately
brown-suited man in an immaculate brown office, who was
regarded as the ``soul'' of a firm that, according to grand
jury testimony, shredded volumes of his records the moment an
independent federal prosecutor appeared in the vicinity. The
last was Rose's first female partner, Rodham Clinton, who
occasionally did some lawyering in the intervals when she
wasn't working for the Children's Defense Fund, attending to
her personal business affairs or serving as the governor's
first lady. The three were described to American Lawyer as
``big, big buddies''; Rodham Clinton's office was next door
to Hubbell's, and much of her work was actually done by
Foster. The three also were closely entwined in a curious
financial arrangement. This was Mid-life Investors, a
partnership set up by E.F. Hutton in 1983. Hubbell, Foster
and Rodham Clinton each kicked in $15,000 and named each
other--rather than their spouses--as beneficiaries. But
although the fund was active at least until 1991, Rodham
Clinton reported annual dividends of under twenty dollars
from Mid-life Investors, a sum that comes as a surprise to
Roy Drew, the financial counselor who supervised the
partnership and invested its money in such 1980s takcover
candidates as Diamond Shamrock and Firestone Tire. According
to Drew, with the likes of Sir James Goldsmith and the
Japanese offering huge sums for the stock of Shamrock and
Firestone, there was no way Mid-life Investors could have
failed to reap substantial profits.
Although Rodham Clinton was a litigator--that is, a lawyer
whose task is to appear in court, if only to force the other
side to settle--and an attorney who was named one of the 100
most influential in the country by the National Law Journal
in 1988 and 1991, she was almost never seen in the courtrooms
of Little Rock; some court reports remember an occasional
appearance, and one could not remember having seen her at
all. According to a search conducted by American Lawyer, she
tried just five cases during her fifteen years at Rose; other
published sources say her work revolved around copyright
infringement cases involving songwriters and bread companies.
But paradoxically, in view of what happened to Giroir, she
(like Giroir) received extra compensation for the business
she generated from her extracurricular activities, even if
she did not work on the cases at all.
For example, she was only one of two Rose partners to act
as a corporate director, serving at various times on the
boards of four companies carning $64,700 on 1991 from
director's fees alone. (Her 1991 salary from Rose was in the
vicinity of $110,000; her husband earned $35,000 and go to
live in a free house.) She was on the board of Wal-Mart, a
Rose client that Stephens had launched on the road to glory.
(Rodham Clinton also owned $80,000 worth of Wal-Mart stock.)
She served Southern Development Bancorp, a holding company
created to give development loans in rural Arkansas, which,
according to the The Washington Post, paid Rose somewhere
between $100,000 and $200,000 in fees. In 1989 she joined the
board of TCBY yogurt company, which occupies the tallest
building in Little Rock. TCBY then proceeded to pay Rose
$750,000 for legal work during the next few years. Last, and
puzzlingly, she was a director of Lafarge, a giant French
cement company that had no discernible, connection to
Arkansas except like Stephens Inc., it was engaged in burning
hazardous waste. (As president, Bill Clinton did nothing to
stop operation of an Ohio Waste incinerator, partly backed at
one time by Stephens Inc., despite the fact that it didn't
work, had no legal permit and his own vice president had
promised that it would never operate until it was thoroughly
investigated, which it wasn't.)
With Rodham Clinton aboard at Rose, the firm's long
established connections to the governor's office were made
firmer still. Rose, the gold standard of Arkansas law firms,
had long enjoyed unusual access to the state's corridors of
power. It both advised and did the bidding of the powerful
family that acted as the state's shadow government, and
during the Clinton years, the Rose Law Firm sometimes behaved
as though it were an agency of the state rather than a legal
partnership with offices in a converted YMCA.
The intimate connection between Rose, Stephens Inc. and the
governor's office may help explain how the Stephens family
made a vast amount of money when its most visible enterprises
were doing no such thing. The investment bank had hit a
gusher when it took Wal-Mart public, made a pleasing sum on
the stock of Tyson Foods, the nation's largest chicken
processor, but otherwise cut no great swath in the stock
market. Until recently, Worthen was a disaster area. At least
part of the answer for the family's continued prosperity
seems to reside in the unusual way Bill Clinton's state dealt
with Stephens Inc.'s old specialty, government bonds.
iv.
The crown jewel of Bill Clinton's avowed attempt to create
industries and jobs in the state was an unusual entity called
the Arkansas Development Finance Authority (ADFA). According
to well-established common law, a government-chartered
authority is supposed to be an independent body, insulated
from the hurly-burly of everyday political life and its
temptations. But ADFA, written into law with the help of Webb
Hubbell, was no such thing. All ten members of its board were
appointed by the governor. Though it was specifically granted
the power to issue industrial development bonds, the
governor, personally, was required to approve every bond
issue. State agencies with the ability to issue industrial
bonds are supposed to distribute the money (and thus create
jobs and wealth) to companies and individuals who can't
receive lines of credit on favorable terms from the usual
financial institutions or venture capitalists. On significant
occasions, however, ADFA spread its bounty to less than
deserving clients. Nor do the peculiarities of this body end
here.
Although it issued bonds, ADFA did no due diligence--the
common practice of engaging an outside financial expert to
examine the applicants for the proceeds and determine if they
actually need the money and are otherwise worthy recipients.
(Due diligence, according to an ADFA spokesman who happens to
be the brother-in-law of one of Witt Stephens' daughters, was
the responsibility of the purchasers of the bonds under the
ancient principle of caveat emptor--a practice that had
previously helped the region's bond daddies flourish and had
wiped out the capital of the Worthen bank.) While its
spokesman is a little fuzzy on the subject, it seems that
there was no regular ADFA oversight to ensure that money was
being spent according to the original purpose of
the loan, although an ADFA employee might occasionally be
sent into the field to discover if everything was tickety-
boo.
It is also somewhat difficult to discover just what ADFA
was actually doing. A recent examination of the log kept at
ADFA headquarters for the enlightenment of wandering
reporters and inquisitive citizens reveals just twenty-five
bond issues from 1985 to the present--or twenty-six, if you
count the paperwork on a bond issue that was removed in a
reporter's presence. Moreover, the log suggests that ADFA was
heavily involved in good works with religious orders. But
according to the Los Angeles Times' count of ADFA's
activities, the authority released seventy industrial bond
issues--according to my count, the number is sixty-five--none
of them to religious charities or university hospitals, and
most of them missing from the official log. Which begs the
question: Just what was ADFA doing with the $719 million it
dispensed (or whose dispensation it authorized) as of January
1992?
``AFDA,'' says Larry Nichols, a dismissed authority
official, ``was set up by Clinton for Dan Lasater.'' Now, it
should be borne in mind that Nichols is something of an
Arkansas character and, in some circles, a figure of fun. A
well-known supporter of the Nicaraguan contras, Nichols was
also the person who originally alleged that Clinton had an
affair with Gennifer Flowers and four other women, only to
destroy his credibility when he retracted his charges in a
document remarkable for its abject contrition. But there are
those in Arkansas who insist that Nichols is neither entirely
a vindictive nut nor the sort of notorious regional liar who
has to hire a man to call his own dog. ``You ought to listen
to Larry Nichols,'' says a Little Rock political consultant.
``He says a lot of things, but sometimes he tells you
something you really need to know.'' And, certainly, there is
something intriguing about Bill Clinton's relations with
Lasater, a man no governor in his right mind would let in the
front door.
If Dan Lasater was not the largest cocaine user in the
state of Arkansas, he was certainly the most conspicuous one.
A prosperous Little Rock bond dealer, he was an acquaintance
of the Clinton family and a contributor to the governor's
political fortunes. Lasater distinguished himself in other
ways, too. He served ashtrays full of cocaine at parties in
his mansion, stocked cocaine on his corporate jet (a plane
used by the Clintons on more than one occasion) and later
told the FBI that he had distributed cocaine on more than 180
occasions. ``I shared my success . . . in that manner,'' he
explained.
He was also a patron of Governor Clinton's cocaine-using
half-brother, Roger, employing the younger man in his
thoroughbred racing stables in Florida and claiming that he
gave Roger Clinton $8,000 to pay off debts to drug suppliers.
By 1985 it was also known that Lasater was the subject of a
police investigation that even the most uneducated guess
would suggest, could end in only one way. But that year,
Governor Clinton deemed Lasater worthy of handling a $30.2
million bond issue to modernize the state police radio
system, despite the fact that the expenditure would normally
be made by an appropriation from the treasury and the fact
that Lasater was about to be busted. Nonetheless, Clinton
vigorously lobbied the legislature, ignored the wishes of the
Stephens family and won the day, giving Lasater & Co. a
handsome $750,000 underwriting fee, according to the Los
Angeles Times. In 1986 Lasater was sentenced to two and a
half years in prison, with Roger Clinton testifying against
him at his trial. In 1990 he received a state pardon from
Governor Clinton.
For whatever it's worth, one of the few people to have
access to the office of the late Vincent Foster during the
three days it was unsealed following his suicide was White
House official Patsy Thomasson, who managed Lasater's
business affairs while he was in jail. But in the Clinton
system, perfected in Little Rock and now being practiced in
Washington, none of these things should be considered a
mistake or an aberration.
Lasater was not the only strange thing about the Arkansas
bond business during the time of Bill Clinton. Whenever a
normal state issues bonds, there are many ways for a variety
of people to get well on the public nickel. The beneficiary
of the proceeds receives a loan at below-market rates. The
financial institution that sold the bonds receives
underwriting fees. For each bond issue, an outside attorney
is engaged to certify that the deal conforms to the law and
prepares the documents required by the Internal Revenue
Service and the federal treasury. A bank is chosen as trustee
for the money, collecting the repayments from the lucky
borrowers and making the repayments to the purchasers of the
bonds. And the borrower itself almost invariably retains a
lawyer. But when one examines the activities of ADFA, a
certain pattern emerges concerning at least some of the
beneficiaries of Arkansas largess.
For example, one of the very first ADFA bond issues
provided $2.75 million to POM, a manufacturer of parking
meters in Russellville, whose president happened to be Seth
Ward II, the brother-in-law of Webb Hubbell. Despite the fact
that Hubbell was chairman of the conflicts committee at Rose,
he seemed to see nothing amiss in the fact that Rose then
collected a fee as ADFA's certifying attorney or that he
himself served as POM's attorney. Nor did Hubbell seem to see
anything unusual in the fact that he was representing the
Resolution Trust Corporation in its case against the auditors
of Madison Guaranty, despite the fact that his father-in-law,
the senior Ward, had not repaid millions in loans from the
thrift, or that Ward had received an airplane from Madison in
the bargain.
Between 1985 and mid-1992 Stephens Inc. was involved in the
underwriting and sale of 78 percent of ADFA's housing and
industrial bonds, an unsurprising figure considering the
firm's familiarity with the market and its clout in the
state. Still, considering Stephen's involvement in the
authority's affairs, Governor Clinton did not appear to feel
that it was ever so slightly wrong to appoint two Stephens
associates--a vice president of one of Worrhen's banks and a
vice president of a chain of nursing homes partly controlled
by the Stephens empire--to ADFA's ten-member board. Nor did
the man who signed off on every single ADFA bond issue
exhibit suspicion when Stephens seemed to be supplementing
its brokerage fees by helping itself to ADFA's money in the
form of favorable loans. Meanwhile, at least another member
of the board, the vice president of Twin Cities Bank, an
institution that served as trustee in one of ADFA's tangled
deals, appeared to take a similar double-dip. And the
governor's wife's law firm was not only receiving a healthy
chunk of ADFA's legal business, but Rose apparently found
nothing wrong with affiliates of Stephens receiving ADFA
money, or with the fact that on not one but two occasions,
ADFA issued bonds that benefited the relatives of Rose
partners.
In 1988 and 1989 ADFA lent a total of $1.37 million to the
Pine Bluff Warehouse Company. Rose received $22,321 in legal
fees from ADFA. The trustee bank was Worthen's National Bank
of Commerce in Pine Bluff, whose vice president sat on the
ADFA board and whose chief executive officer was not merely a
member of Pine Bluff Warehouse's board but the father of a
senior Rose partner, William Kennedy III, now associate White
House counsel. Stephens, unsurprisingly, underwrote the
bonds.
In 1989 ADFA loaned $4.67 million to Arkansas Freightways,
whose largest outside stockholder was Stephens Inc. Co-
counsel on the bond issue was Rose. The trustee bank's
executive vice president was a member of the ADFA board. The
underwriter was Stephens.
Also in 1989 ADFA tried to loan $83 million to a Texas
entrepreneur for the purpose of bailing out Beverly
Enterprises, the country's largest operator of nursing homes,
10 percent owned by Stephens, whose vice president sat on the
ADFA board, at a time when Beverly's stock was being hammered
by the company's persistent losses. A swift and decisive halt
to the deal was called by Arkansas Attorney General Steve
Clark, a rising political star who was expected to be a
strong gubernatorial candidate in 1990, and who claimed that
a Stephens-Beverly lobbyist had offered him a $100,000 bribe
(as campaign contributions, of course) if he would just lay
off and let the deal go through. The lobbyist was later
cleared by an Arkansas court, but Clark was caught charging
personal expenses on his state credit card. His political
career in shambles, he was later disbarred. Current reports
place him somewhere in the state of Georgia.
But these were only the most conspicuously questionable of
ADFA's doings, the ones most easily understood by the public
and the press. There was also the question of the true extent
of Rose's involvement in the authority's bond business.
According to the Daily Record, a Little Rock business
journal, Rose ranked fourth among the law firms working
directly for ADFA, with fees of only $175,000 for the years
up to 1991. But not everyone agrees with this assessment.
When Frank White, the only man ever to defeat Clinton in a
gubernatorial election, tried to repeat the feat in 1986, his
campaign claimed that Rose had actually been in on every ADFA
deal (for the authority or for the recipient) while Clinton
was governor.
Unfortunately, the relevant data was assembled under the
supervision of White's political consultant, Darrell
Glasscock, a former Louisiana state official and a great
supporter of the contras (an occupation that appears to have
been an Arkansas cottage industry). Reached recently by
phone, former Governor White, now an official of Worthen's
principal competitor, the First Commercial bank holding
company, clearly wishes he had never heard of Glasscock,
cheerily questions Glasscock's veracity and pleasantly turns
aside any questions about Rose.
When a visitor to ADFA asks for the complete documentation
on any particular bond issue, he is presented with a thick
volume that, if placed on a chair, would allow him to dine
with the grown-ups. A small sampling of these volumes reveals
an interesting thing: every company examined, including POW,
Arkansas Freightways, Pine Bluff Warehouse and Concert
Vineyards appears to be eminently creditworthy. These are the
sorts of enterprises that could walk in the door of any bank
and walk off with any reasonable sum they needed.
Why, then--in addition to the mutual back-scratching
described above--were they being given loans at below market
rates by a desperately poor state with other uses for its
money? This question takes added luminosity from the fact
that ADFA really didn't work very well. The old Arkansas
Industrial Development Commission, started by Orval Faubus,
created 90,000 jobs in nine years. And it had no bonding
power. After seven years under the Clinton regime and with
tens of millions in issued loans, ADFA had created just 2,700
jobs, many at wages significantly below the national
standard. This anemic showing obscures the fact that ADFA had
yet another purpose: its generosity was returned in the form
of campaign contributions for William Jefferson Clinton.
According to the Los Angeles Times, in the 1990 race for
the governorship, the recipients of ADFA's largess
contributed $400,300, nearly one-fifth of the Clinton war
chest. They then kicked in with millions more for the
presidential race. Outside Arkansas the white-shoe investment
bank of Goldman Sachs, which later contributed its co-
chairman, Robert Rubin, to President Clinton's inner circle
of economic advisers, raised millions for the presidential
race and even paid for a substantial hunk of the Democratic
National Convention. According to ADFA's incomplete records,
Goldman was either the lead or sole underwriter of at least
$400 million in ADFA bonds. In addition, two of ADFA's board
members were active Clinton fund-raisers, which raises yet
another question among many: Wasn't this against the law? For
once, the answer is terse and straightforward. Not in
Arkansas.
Under the Arkansas ethics-in-government act, passed in 1988
and, according to state legislators, either drafted or
inspired by Hubbell, state legislators were required to
report possible conflicts of interest. Surprisingly, the laws
specifically exempted the governor and other elected or
appointed officials, including officials of state agencies
and commissions. Moreover, these officials were not even
required to report dealings with entities--such as Rose--that
employed their relatives. This was not the only remaining
service that Rose had provided to the governance of its
state. When the time came to rewrite the state's
incorporation laws, it was Rose that drew up the 397-page
treatise that formed the basis of the legislation.
Well, somebody has to draft a state's legislation, and
under Arkansas' unusual ethics law, it was perfectly all
right for Rose to do just that. Less clear (if anything in
these murky waters can be described as clear) is just why
Clinton seemed so eager to assist the Stephens family, which
was hardly enamored of the man and kept bankrolling the
candidates who ran against him for governor until it
experienced a change of heart in 1990. Witt Stephens
habitually referred to Clinton as ``that boy.'' In a moment
of candor his brother Jack once remarked that ``it would be
awfully easy for Stephens, if we wanted to be close to a
governor, to be close to Bill Clinton.'' Nonetheless, the
Clinton governorship's assistance to Stephens extended well
beyond ADFA. During Clinton's years in Little Rock, the
Stephens interests were involved in some 61 percent of the $7
billion of all the state bonds issued in Arkansas.
Contrary to state law, Stephens Inc., according to the
Arkansas Democrat-Gazette, was given the underwriting for the
state university system without competitive bids from other
bond dealers. The Fayetteville campus alone, where the
Clintons had once taught law, had $33 million in bonds
outstanding. Under Clinton, Stephens devised a plan to rescue
the state's troubled student loan authority, in which the
authority's bonds would be bought by the state employees'
retirement funds. An independent consultant--Roy Drew, the
very man who created Mid-life Investors for Hubbell, Foster
and Rodham Clinton--was brought in to examine the deal. Drew
thought it was a terrible investment and so did the state's
auditor, Julia Hughes Jones. But Drew was dismissed, Jones's
budget failed to pass the legislature (the first time ever
for an Arkansas state auditor) and she began to receive late-
night harassing calls from a collection agency--concerning,
ironically, her own daughter's student loan, which was
current. In the upshot, the retirement funds bought $100
million of the loan authority's bonds, another $100 million
in the bonds of two other state agencies, ADFA was given the
task of overseeing the retirement fund's investment policies
and Stephens Inc., according to The Philadelphia Inquirer,
made $1.8 million.
These were very considerable favors to a family that not
only bankrolled Clinton's opponents but seemed to despise him
as a man. But Bill Clinton's canny instinct that the
Stephenses needed to be appeased--rather than ignored--
eventually paid off. After Clinton's unexpected loss in the
New Hampshire primary, with the campaign coffers bare, the
staff paying its bills on their personal credit cards and
federal matching funds just beyond reach, the Worthen Bank
rescued the candidacy with a prearranged $3.5 million line of
credit, selflessly advanced at a lucrative rate of interest.
Later, Worthen--whose executives, like many Stephens
executives, experienced a spasm of Arkansas patriotism that
caused them to reach for their checkbooks--became the Clinton
campaign's depository of $55 million in federal campaign
funds, which, in effect, was free money. Worthen did not have
to pay any interest on this staggering sum, but as long as it
was on deposit (and as long as Worthen, with its
undistinguished track record in the department of government
deposits, managed not to lose it), the bank was free to use
it to make itself some money that it got to keep.
And when the votes were counted, everybody who wanted to go
to Washington got to go to Washington: Bill Clinton and
Hillary Rodham Clinton, president and First Lady; Mack
McLarty, White House chief of staff; Vince Foster, deputy
White House counsel; Webb Hubbell, associate attorney
general; Patsy Thomasson, a White House aide. Jack Stephens,
though mentioned as a candidate for secretary of the
treasury, had, it now seems safe to say, the good sense to
stay home.
Oh, and one last thing: when Whitewater special prosecutor
Robert Fiske--who once defended Clark Clifford, the famed
friend of Jack Stephens' old client, BCCI--arrived in Little
Rock, something strange happened. Worthen Bank had a fire.
Is this a great country, or what?
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