[Congressional Record Volume 140, Number 40 (Thursday, April 14, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 14, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              SENATOR D'AMATO'S SPEECH ON THE TAX INCREASE

  Mr. NICKLES. Madam President, a few moments ago, the majority leader, 
Senator Mitchell, made a speech where he was critical of Senator 
D'Amato for some of the statements that he had made. One of the 
statements he criticized Senator D'Amato for was because of Senator 
D'Amato's characterization of the tax increase that passed last year, 
which was a very partisan tax increase, the largest tax increase in 
history.
  The majority leader is critical because the Senator said in his 
statement that it was a tax increase on everybody. The majority leader 
said that was incorrect. I will respond, since this is tax day, that 
the tax increase that passed last year was a tax on everybody, 
including my now 18-year-old daughter. She drives an automobile, and 
gasoline taxes went up for everybody. So anybody who drives a car had a 
tax increase. Some individuals had personal income tax increases, and 
corporate taxes went up. So there were very significant tax increases. 
I might well mention that a strong majority of Americans, at least 
those driving automobiles, had a tax increase.
  The majority leader said there was the largest deficit reduction in 
history and said maybe not if you look at the present value of dollars. 
CBO says it is not the largest deficit reduction package in history.
  I want to mention one other thing, and that is the fact of using 
figures. We continued to hear today that it had more spending cuts than 
tax increases. I think that statement is totally false. It is 
predicated on a false baseline, and we have inflated baselines. The 
reason I say that is, I think if you use what most people call a 
baseline as actual dollars that we spend this year, you will find 
spending goes up every year. So from that analogy of using common-sense 
budgeting, we had no spending cuts in the package compared to what we 
are spending today.
  We are spending $1.5 trillion today, and next year $1.6 trillion, and 
the following year, increases I think over a period of time to almost 
$2 trillion. So it is hard for me to say that we have spending cuts. 
Spending continues to increase. It may increase at a less progressive 
rate, or less than what was indicated or what was anticipated.
  I tell my colleagues that in the budget package we passed, we passed 
a resolution I sponsored that said we should use baselines, not next 
year's projections, but this year's reality. I think that is a 
commonsense budget approach, and I think Senator Boxer, and others on 
both sides of the aisle, supported this resolution, even though it was 
opposed by Chairman Sasser of the Budget Committee. We passed it 
overwhelmingly in the Budget Committee, and it was part of the budget 
resolution that passed in the Senate. It is also in the House budget 
resolution.
  Both Houses are passing resolutions that will say we should use real 
dollar figures when we set our baseline, not projected inflated 
baselines. We have used projected inflated baselines going all the way 
back to 1974, 1975 in the Budget Control Act. I think it has been 
responsible for inflated budgets and distorted budgets, certainly, and 
distorted facts, when you get into these deficit reduction debates. The 
tax increase that passed in last year's budget were real, and some were 
even retroactive, even before Clinton was sworn into office. We had a 
very contentious, partisan debate. Our side lost on that by one vote. 
That was twice, and that is OK; that is the way the legislative 
procedure works.
  I am still irritated when I hear some of the rhetoric on spending 
cuts, because spending cuts are based on inflated baselines, so it is 
something that was anticipated to go up 15 percent, and he reduced it, 
through difficult decisions, to 10 percent. Somebody says you cut 5 
percent in whatever program that is, and I find that to be misleading. 
In any program--defense, entitlements, whatever--we need to say what 
are we spending this year. If we are spending more next year due to 
inflation or cost-of-living adjustments, whatever, if it increases, we 
should call it an increase; if it decreases, we should call it a 
decrease. I think if we do that, it would simply tighten our accounting 
and get us away from some of the partisan rhetoric we have had over 
deficit battles, because it has been so confusing and misleading.
  I remember in the budget battle we had last year, a great deal of our 
time was focused on: Are these cuts real? Many said they were not, 
because spending goes up every year.
  I come to Senator D'Amato's defense, because it seems like if he or 
somebody else makes a comment on Whitewater, or requests hearings, or 
says that some questions have not been answered, two or three 
colleagues come to the floor and attack him. That is exactly what 
happened today.
  It reminds me that in Arkansas you had a State trooper that made 
allegations concerning President Clinton's sexual activities, and he 
was attacked. You had two Arkansas troopers that made allegations a few 
months ago, and they were attacked. So Mr. Hale made an allegation--
this was a judge appointed by then Governor Clinton--that Governor 
Clinton pressured him to make a loan to Mrs. McDougal, and $110,000 of 
that went into Whitewater. He made that allegation, and he was 
attacked.
  So anybody who makes an allegation against this administration or the 
then Governor Clinton is attacked. Senator D'Amato makes a statement on 
the floor, and he is attacked. People are going back researching. Did 
he say such and such? And they are basically saying he distorted the 
truth, and so on.
  Frankly, I heard his comments saying almost everybody had a tax 
increase. I think that was correct. I agree with the comments made by 
the majority leader that we should stick to the facts, and we should be 
very plainspoken when we talk about deficit reduction, and plainspoken 
when we talk about Whitewater, or any other issue. We should stay to 
the facts.
  President Clinton has stated that he has been bending over 
backwards--maybe I will find the quote. Yes. On March 24, he said: 
``Cooperation, disclosure, and doing the people's business are the 
order of the day.''
  But he has not disclosed a lot of information. He has never disclosed 
how much money he invested in Whitewater. I mean, really, if this is an 
investment or a real estate deal, how much money did he invest, or how 
much did he lose? We never had that information come out, and he never 
disclosed it. It is kind of basic. If it was an investment, how much 
money was put in or taken out? How much did you win? How much did you 
lose?
  It should not be that tough. But the President is saying cooperation 
and disclosure is the order of the day. That is not the case.
  The Whitewater files were in Mr. Foster's office for months. 
Actually, Mr. Nussbaum and others in the White House looked at some of 
those documents the day Mr. Foster died. Yet the White House kept 
control over them or turned them over to President Clinton's attorney 
for months before they were ever disclosed. Yet they were not disclosed 
to the public. They were disclosed to the special counsel.
  If President Clinton's comments are correct that cooperation and 
disclosure are the business of the day, why are not those documents 
just made public? Maybe Mr. McDougal will make some public by selling 
them. I do not know. Maybe those are some of the same documents. I know 
we have never seen the information on how much money did the President 
and Mrs. Clinton invest? It would be nice to know.
  What about the fact that the corporation did not file tax returns? 
That is kind of a basic thing. You know, it is not optional. Tomorrow 
is tax day. All people all across the country will file their tax 
returns. We have people who are cramming in trying to do their tax 
returns. It is going to be very frustrating. Lots of Americans are 
going to be frustrated late tonight trying to do their tax returns.
  The reason is you have to pay the amount owed or the amount refunded 
or you can file and request an extension. Those are your options. One 
option that is not there is ``I would rather not.''
  And yet the Clintons, President and Mrs. Clinton, who own 50 percent 
of Whitewater, did not file tax returns for 3 years. Why? You know, it 
is against the law not to file tax returns. There is not an option. 
There is not a box that says ``I would rather not.'' They have never 
been asked that question. When I say ``they,'' I am talking about the 
President and Mrs. Clinton. I do not know. I have never seen it. I 
watched it kind of close. Maybe they have. But I do not believe they 
ever answered that question.
  I have been involved in corporations. I see my friend and colleague 
from Alaska, Senator Murkowski. He ran a bank and has been involved in 
private sector business.
  You do not have an option not to pay taxes. But they did not file 
returns for 3 years.
  Also, I will just mention a little coverup. They had the Lyons report 
done during the campaign to investigate Whitewater because the New York 
Times--not Republicans, the New York Times--made some report about 
Whitewater, and so the Lyons report was put together to answer all 
questions.
  The Lyons report never told anybody that Whitewater never filed tax 
returns. Yet those tax returns which now have been filed--Mr. Foster 
filed those shortly before his death last year. But those tax returns, 
to my knowledge, have yet to be made public.
  So, when I look at Mr. Clinton's comment, and this sounds so good, 
``Hey, we are cooperating and disclosing, maybe they are already 
disclosing them to the special counsel because they have been 
subpoenaed, but they have not been subject to the Freedom of 
Information Act. They have not been turned over to the public. And both 
President and Mrs. Clinton said, ``Hey, this is just a real estate 
investment that happened years ago.''
  These tax returns, I believe, were for the years 1990, 1991, and 
1992. That is not 14 years ago. Those tax returns were done, I believe, 
just last June, June of 1993.
  So we are not talking about digging up the archives. They are 
available. They should be turned over and they should be made public. 
Why should they be under the guise of a subpoena? Why should just Mr. 
Fiske see them? If this is just a real estate deal, let us get all the 
information out.
  Frankly, I think that is good advice for President and Mrs. Clinton. 
I think they would be well advised to turn over all this information 
and get it out and make it public and be done with it, get this 
Whitewater issue behind them.
  Many of us have called for congressional hearings and have said we 
need to have some of these questions answered. I know Mr. Clinton 
yesterday, when he was speaking to the Association of Newspaper 
Editors, just answered all these questions. But I do not think he 
answered these very basic questions, not to mention the more detailed, 
more complicated questions.
  I think we are probably going to need to have congressional hearings 
to get these questions answered, and Mrs. Clinton, who was involved in 
the issues in a very big way, I think misled people when she said they 
were just passive investors. I do not think that was accurate. I think 
it was very misleading.
  I do not believe they have answered hardly any questions concerning 
Whitewater. I do not think they have had a press conference. I do not 
think she ever asked the press. Maybe she granted one or two selective 
interpretation views with friendly reporters, but I do not believe she 
ever answered questions to the extent of her involvement dealing with 
Whitewater.
  Now, there is this issue on commodity futures, and, Madam President, 
I find it to be very unusual for someone to make a $1,000 investment 
and in less than a year make $100,000. I find that to be more than 
unusual. You realize that is about a 10,000 percent rate of return. 
Most of us feel like we are doing pretty good if we make a 10-percent 
rate of return or maybe a 12-percent rate of return. If you did real 
well, maybe you made a 15-percent rate of return. This was not 10 or 
15; it was not a 100-percent rate of return; it was not a 1,000-percent 
rate of return; it was a 10,000-percent rate of return.
  I do not know that much about commodity futures and trading in 
commodity futures, but I realize, according to the data that she has 
turned over, they turned, in 1 day, a $1,000 investment into $6,300. I 
have yet to find an investment where you can do that.
  I do not know all the answers, but I think we need some answers, and 
I think many of the statements that Mrs. Clinton and President Clinton 
have submitted since this commodity futures thing came out--again, I 
think that information came out originally from a story by the New York 
Times, not by Republicans. But I do think we are entitled to know the 
answers.
  Is there graft involved? Is there corruption involved? Is there 
bribery involved? I do not know. But I think we are entitled to know 
the answers.
  I mentioned I do not know that much about commodity futures, but an 
article in the Wall Street Journal by someone who does, David Brandon--
this was in the April 7 edition of the Wall Street Journal. He is the 
former head of the IRS chief counsel's commodities industry 
specialization team in the mid-1980's. He says:

       . . . I have followed with great interest the media stories 
     on Hillary Clinton's excellent adventures in the commodities 
     markets.

  I skip a couple lines and read the conclusion in the first paragraph:

       In fact, the chances of someone making almost $100,000 in 
     the futures markets on her first try are about as great as 
     walking into a casino in Las Vegas, hitting the million 
     dollar jackpot on your first try at the slots, then walking 
     out never to play again. It just doesn't happen that way.

  You know, I think he is exactly right.
  Madam President, I ask unanimous consent to print the entire article 
of Mr. Brandon in the Record at this point.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, Apr. 7, 1994]

                    The Mystery of Hillary's Trades

                         (By David L. Brandon)

       As former head of the IRS chief counsel's Commodities 
     Industry Specialization Team in the mid-1980s, I have 
     followed with great interest the media stories on Hillary 
     Clinton's excellent adventures in the commodities markets. As 
     a proud capitalist and free market proponent--and an avid 
     beef eater--I would be the first in line to salute this 
     woman's success with cattle futures. But, based on my years 
     of experience with these markets, her story just doesn't add 
     up. In fact, the chances of someone making almost $100,000 in 
     the futures markets on her first try are about as great as 
     walking into a casino in Las Vegas, hitting the million 
     dollar jackpot on your first try at the slots, then walking 
     out never to play again. It just doesn't happen that way.
       For those unfamiliar with the details of Mrs. Clinton's 
     remarkable venture into the commodities markets, she 
     allegedly made more than $99,000 in cattle futures--and other 
     commodities--in late 1978 and 1979, withdrawing from trading 
     just before the markets went bust. No explanation has been 
     offered of how Mrs. Clinton managed to satisfy state laws 
     that require futures investors to demonstrate a minimum net 
     income and net worth, nor how a novice could have such 
     uncanning timing.
       There is, in fact, a much more probably explanation for 
     Mrs. Clinton's good fortune. The media have already suggested 
     that trades may have been moved to Mrs. Clinton's account 
     after gains had been realized. However, the stories thus far 
     have not clearly focused on a common trading strategy called 
     a ``straddle'' that was very much in vogue at the time.
       Straddles have the unique ability to produce exactly equal 
     and offsetting gains and losses that can be transferred or 
     used by the straddle trader for a variety of purposes. During 
     the late 1970s and early 1980s, straddles were used for all 
     kinds of illegal activities, ranging from tax evasion to 
     money laundering and bribes. In fact, this activity prompted 
     a number of legal and regulatory changes by the Reagan 
     administration to curb the abuses.
       Although it sounds somewhat esoteric, a commodities 
     straddle is a relatively simple trading device.
       A commodities futures contract is nothing more than an 
     agreement between two parties to buy or sell a certain type 
     of commodity--in Mrs. Clinton's case, cattle--for a stated 
     price on some date in the future. If the price of the 
     commodity goes up before the contract delivery date, the 
     individual who agreed to buy the commodity will realize a 
     gain equal to the difference between the current price and 
     the contract price. The individual who agreed to sell will 
     realize a loss in an equal amount. Conversely, if the price 
     goes down, the buyer will lose and the seller will gain.
       A straddle is created when an investor enters into 
     contracts to both buy and sell the same commodity. In this 
     case, any gain on one contract will be exactly offset by a 
     loss on the opposite contract. While straddle trading 
     today is used in a variety of legitimate ways, these 
     transactions lend themselves to all sorts of abuses as 
     well. Before regulatory changes in the 1980s, it was 
     common to enter into straddles to wipe out large capital 
     gains for tax purposes. For example, an investor who 
     realized a $100,000 capital gain in the stock market might 
     enter into a large straddle in the commodities market. 
     when the commodity price moved, the investor would close 
     the loss leg of the straddle and realize a $100,000 loss, 
     which offset his gain in the stock market. The investor 
     was not required to report the unrealized $100,000 gain in 
     the opposite leg of the straddle until that leg was closed 
     in the following year. Typically the investor entered into 
     another straddle in the following year, thereby 
     indefinitely rolling over the capital gain into subsequent 
     years.
       Another ploy common during that time required the 
     assistance of a friendly broker. An investor could create a 
     straddle using two separate investment accounts with his 
     broker. After the straddle had moved, so that a gain and an 
     offsetting loss had been created, the friendly broker simply 
     wrote in the name of the investor's tax exempt retirement 
     fund on the account that held the gain leg of the straddle. 
     The result was that a loss was realized that was reported on 
     the investor's tax return, while the gain went unreported in 
     the tax exempt retirement account.
       In the late 1970s and early 1980s, the IRS began noticing 
     large number of individual tax returns that curiously showed 
     commodities losses just big enough to wipe out unrelated 
     capital gains; no corresponding commodities gains, which 
     would suggest a straddle, ever appeared on subsequent 
     returns. Even more curiously, the profile of these investors 
     always had one thing in common, which was limited experience 
     or no prior experience in commodities trading. In the early 
     1980s, an IRS agent in Chicago thought to look into one 
     taxpayer's retirement fund and, of course, found the hidden 
     gain leg of the straddle.
       After that experience, the IRS redoubled its efforts to 
     seek out thousands of missing straddle gains. It found them 
     in retirement accounts, in London, in the Cayman Islands--
     almost anywhere a taxpayer thought he might hide them from 
     the IRS. With respect to these thousands of mysterious, 
     isolated commodities transactions that showed up on tax 
     returns, the IRS uncovered some form of questionable trading 
     in virtually 100 percent of the cases it investigated. Well 
     before the close of the 1980s, the IRS had assessed more than 
     $7 billion in delinquent taxes and penalties attributable to 
     these transactions and eventually settled these cases out of 
     court for approximately $3.5 billion.
       While most of the IRS's efforts were directed at finding 
     hidden gains of the ubiquitous straddle, the trading device 
     could just as easily be used to openly transfer gains while 
     hiding the offsetting loss. If someone desired to make an 
     illicit payment to another party, a straddle could be used to 
     accomplish this purpose with no incriminating or suspicious 
     looking bank withdrawals or deposits. In fact, the IRS found 
     numerous incidents of straddle being used for money 
     laundering purposes.
       Does Mrs. Clinton's trading activity fit the profile of the 
     illegitimate straddle trader? She was a novice in the 
     commodities markets who, against all odds, realized large 
     gains. Although she intermittently realized losses, it does 
     not appear that she ever had to risk her own capital beyond 
     her initial $1,000 deposit, which itself may have been 
     insufficient to cover even her first transaction, which 
     netted her $5,300. According to the trading records released 
     by the White House, most of Mrs. Clinton's gains were 
     recorded as intra-month transactions. This means that these 
     records include no information regarding key elements of the 
     trade, such as the type and quantity of the contracts, 
     acquisition dates, acquisition prices, etc. Such information 
     is needed to determine whether trades were part of a 
     prearranged straddle.
       It also appears that Mrs. Clinton's broker, Robert L. 
     ``Red'' Bone, was no stranger to the spicier practices of 
     commodities trading, according to the Wall Street Journal's 
     front page article last Friday.
       It seems more than coincidental that Mr. Bone was a former 
     employee of Tyson Foods and that Mrs. Clinton's investment 
     adviser, James Blair, was the company's legal counsel. Tyson, 
     the poultry concern, is one of the largest employers in the 
     state of Arkansas. The fact that the Clintons withheld 
     disclosing only those tax returns that included their 
     commodities gains until the transactions were reported by the 
     New York Times in February also appears quite suspicious. 
     From my standpoint as a former government staff attorney with 
     extensive experience in these matters, Mrs. Clinton's 
     windfall in the late 1970s has all the trappings of 
     prearranged trades.
       How would a straddle have been used in Mrs. Clinton's case? 
     The Journal has already reported that gains theoretically 
     could have been transferred to Mrs. Clinton's account, while 
     ``others'' may have absorbed losses. Such a transaction could 
     be accomplished with a straddle.
       A party desiring to transfer cash to another's personal 
     account for legal or illegal purposes could enter into a 
     straddle in a particularly volatile commodity, such as cattle 
     futures in the late 1970s. After gains and losses were 
     generated in the opposite sides of the straddle, the gain 
     side would be marked to the beneficiary's account, while the 
     loss side would remain in the account of the contributor. The 
     contributor might even be entitled to use the loss to offset 
     other gains. Such a transaction would be not only well-hidden 
     from government authorities but potentially tax deductible.
       No direct evidence of wrongdoing has been produced in the 
     case of Mrs. Clinton's trading activity. In fact, no 
     conclusive evidence of anything has been produced. In order 
     to settle the legitimate questions surrounding her trades, a 
     satisfactory explanation is needed for her apparently low 
     initial margin deposit and whether the requirements relating 
     to an investor's minimum net income and net worth were 
     satisfied. In addition, the details of her numerous intra-
     month trades should be provided, as well as the details of 
     the trades of persons who may have had a special interest in 
     how well she did. If it is discovered that certain interested 
     parties happened to realize losses in cattle futures at the 
     same time, and they were comparable in size to the gains 
     reported by Mrs. Clinton, this would amount to a ``smoking 
     gun.''
       This is not a matter of partisan politics. Even if the 
     public had never heard of Hillary Rodham Clinton, the 
     circumstances surrounding her unusual good fortune would 
     still appear suspicious to anyone awake to abuses of the 
     commodities markets. In this writer's experience, the normal 
     trading world just doesn't work that way.
       Mr. Brandon was a career attorney in the Office of Chief 
     Counsel of the Internal Revenue Service from 1983 to 1989. 
     During that time he also served as head of that department's 
     Commodity Industry Specialization Team, which was responsible 
     for coordinating and developing the IRS's legal positions on 
     tax issues arising in connection with commodities 
     transactions.

  Mr. NICKLES. Madam President, I do not know all the answers, and I do 
not have answers to all the questions, but I am concerned about this. I 
am concerned when I know we have one colleague in the Senate who is 
under investigation by the Justice Department for basically expensing 
or being reimbursed improperly for about $4,000 and that one individual 
has been under investigation for a couple years and has had to spend 
hundreds of thousands of dollars defending himself.
  Mrs. Clinton made $5,300 in 1 day in commodity futures. She made 
$100,000 in about 10 months. I find that to be very unusual. And the 
information that they have submitted is not conclusive. They did not 
give all the information on trades. And originally, too, I might 
mention, the comments were that the trades were made by Mrs. Clinton, 
who was very shrewd and prudent and read the Wall Street Journal. Now 
we find out that that was not the case, that now they say Mr. Blair, 
who is outside counsel for Tyson Foods, a huge poultry firm affected by 
the usual State agencies, made many of the trades.
  President Clinton said she discontinued to trade when she became 
pregnant with Chelsea. Now we found that was not the case either. 
Talking about a new account, they said, well, in this account we lost 
money. Now it turned out they made several thousand dollars and they 
forgot to pay taxes on it. Now they just recently made payment on taxes 
and on interest.
  My point is I think there are some questions here. I am concerned 
about integrity. I heard the majority leader, and again I am referring 
to Senator Mitchell, say we should be held accountable.
  I think the President and Mrs. Clinton should be held accountable. 
And I think questions need to be answered. They need to be answered 
truthfully. I do not think they have been answered truthfully in some 
of these cases. I am not here to make a partisan row. I am not here to 
try to tear down the Presidency. I am here trying to seek the truth, 
and I think the American people are entitled to the truth.
  I think concerning the issues of Whitewater and the commodity 
futures, I do not think they had the truth. Until all the truth and all 
the information comes out and until the administration releases all the 
Whitewater documents to the public or at least to the press, many of us 
will continue to clamor for hearings until we get that information out.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Alaska.

                          ____________________