[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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