[Congressional Record Volume 140, Number 145 (Friday, October 7, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                               WHITEWATER

 Mr. PRYOR. Mr. President, it has been more than 2\1/2\ years 
since the ``Whitewater'' story first appeared on the front page of the 
New York Times. Since then, allegations of wrongdoing by the President 
and the First Lady have been replayed over and over by the national 
media. These allegations have been investigated for months by two 
different special prosecutors, at considerable taxpayer expense. In 
fact, this investigation is still ongoing. These allegations have also 
been the subject of no less than 4 days of hearings by the House 
Banking Committee and 6 days of hearings by its Senate counterpart.
  And what have these efforts produced? Legal wrongdoing has yet to be 
found, but the reputations of Bill and Hillary Clinton, two devoted 
public servants, have been tarnished. The shadow of scandal has been 
cast over the Clinton Presidency. The public's perception that 
Government officials are more interested in partisan politics and 
personal gain than the welfare of the people they are supposed to 
represent has been reinforced.
  This damage has already been done. And even if the special 
prosecutor's investigation finds all allegations to be groundless, it 
cannot easily be repaired.
  The question remains, however: do these allegations warrant the 
attention they have been given, and continue to be given? Or are they 
merely unfounded insinuations that have been blown up into something 
more?
  An article in this month's edition of Harper's Magazine addresses 
this very issue. It was written by Gene Lyons, an Arkansas journalist 
who describes his past writings about Clinton as ``mostly critical.'' 
Lyons asserts that the Whitewater scandal began with a series of 
damaging articles by Jeff Gerth of The New York Times, articles which 
were thoroughly researched yet not fair or balanced in their content. 
According to Lyons, most reporters have adopted Gerth's findings 
without questioning their basis in fact, raising some question as to 
whether his articles were an example of the facts fitting a theory 
rather than the facts demonstrating a case. Lyons' article seeks to 
correct what he asserts are factual distortions and to refute specific 
allegations and/or insinuations of wrongdoing by the Clintons.
  I hope my colleagues will take this opportunity to read Mr. Lyons' 
article. It presents a persuasive case that there may be less to the 
Whitewater affair than the media might have us believe.
  I ask that a copy of Mr. Lyons' article be printed in the Record 
immediately following my remarks.
  The article follows:

                  [From Harper's Magazine, Oct. 1994]

   Fool for Scandal--What the Times Didn't Tell You About Whitewater

                            (By Gene Lyons)

       The Great Whitewater Political Scandal and Multimedia 
     Extravaganza, now on the verge of entering its second smash 
     year, has always played very differently here in Little Rock 
     than in, say, Washington, New York, or Los Angeles. To read 
     the great metropolitan newspapers, observe the grave demeanor 
     of network TV anchors, and heed the rhetoric of the 
     politicians and radio talk-show hosts who have made the issue 
     their own, one would gather the republic teeters on the brink 
     of a constitutional crisis. The dread ``gate'' suffix of 
     Nixonian legend has been applied. Melodramic charges of 
     bribery, corruption, cover-up, even suicide and murder, fill 
     the air (although at the time of this writing the focus has 
     shifted to ``improprieties'' in Washington). There has even 
     been loose talk of presidential impeachment.
       All this over a failed $200,000 dirt-road real estate deal 
     up in Marion County and a savings and loan flameout that cost 
     taxpayers a lousy $65 million--the 196th most costly S&L 
     failure of the 1980s, nationally speaking, and one that 
     accounted for about 7 percent of the roughly $1 billion tab 
     bankrupt institutions ran up right here in little old 
     Arkansas. For the longest time, it was hard for most 
     Arkansans to take all the bellyaching over Whitewater and Jim 
     McDougal's Madison Guaranty very seriously.
       Apart from a superficial acquaintance with both Clintons 
     shared by thousands of Arkansans, I know none of the 
     characters in the Whitewater saga personally. (My wife gave 
     Clinton a little bit of money and went to Wisconsin for a 
     week on his behalf as an ``Arkansas Traveler'' at her own 
     expense. But that's her business.) What little I have written 
     over the years has been mostly critical. Indeed, I cherish a 
     videotape of myself in a short-lived guise as the poor man's 
     Andy Rooney on a Little Rock TV station back in 1988 
     predicting that the governor had won his last election.
       It angers me, though, that Whitewater has brought back all 
     the old stereotypes, what the Arkansas Times magazine once 
     called the image of ``the Barefoot State.'' Barefoot, hell. 
     To hear the national press go on about it under Clinton poor 
     little Arkansas became a veritable American Transylvania: a 
     dark, mysterious netherworld populated by a mob of ignorant 
     peasants and presided over by a half dozen corrupt tycoons in 
     collusion with the Clintons as the Count and Countess 
     Dracula. Scarcely a Whitewater story has appeared in the 
     national press that hasn't made references to the state's 
     uniquely ``incestuous'' links between business, government, 
     and the legal establishment--concepts utterly foreign to 
     places like Washington, D.C., and New York City, of course.
       Even Arkansans long weary of Clinton's smooba-like style of 
     leadership--his indecisiveness, his downright genius for 
     equivocation, his habit of launching more trial balloons than 
     the National Weather Service--can't recognize the caricature 
     of either the man or his milieu in the national press. And 
     we're not just talking about such off-the-wall publications 
     as The American Spectator or the Wall Street Journal 
     editorial page. In The New Republic, author L. J. Davis 
     accused Bill and Hillary Clinton of a nefarious plot to void 
     Arkansas usury limits for the benefit of the First Lady's 
     banker clients. Problem is, the deed was done through an 
     amendment to the Arkansas constitution by public referendum 
     during the term of Republican Governor Frank White--a banker.
       So how did we get here? Well, at the expense of shocking 
     you, dear reader, it all began with the New York Times--
     specifically with a series of much-praised articles by 
     investigative reporter Jeff Gerth: groundbreaking, 
     exhaustively researched, but not particularly fair or 
     balanced stories that combine a prosecutorial bias and the 
     art of tactical omission to insinuate all manner of sin and 
     skullduggery. Accompanied by a series of indignant 
     editorials, Gerth's work helped create a full-scale media 
     clamor last December for a special prosecutor. Testimony in 
     recent Senate hearings showed that the Resolution Trust 
     Corporation's Whitewater investigation began in direct 
     response to the Times coverage; the hearings themselves 
     resulted in large part from the Clinton Administration's 
     panicky reaction to reporters' queries about the RTC probe, 
     Gerth's among them. Absent the near-talismanic role of the 
     New York Times in American journalism, the whole complex of 
     allegations and suspicions subsumed under the word 
     ``Whitewater'' might never have made it to the front page, 
     much less come to dominate the national political dialogue 
     for months at a time. It is all the more insinuations in 
     Gerth's reporting are either highly implausible or 
     demonstrably false.
       Let us return briefly to those thrilling days of 
     yesteryear--specifically the 1992 primary season. On March 8, 
     1992, Jeff Gerth's initial story about Whitewater appeared on 
     the Times front page under the headline ``Clintons Joined S. 
     & L. Operator in an Ozark Real-Estate Venture.''
       ``[In 1984], Madison started getting into trouble. Federal 
     examiners studied its books that year, found that it was 
     violating Arkansas regulations and determined that correcting 
     the books to adjust improperly inflated prices would ``result 
     in an insolvent position,'' records of the 1984 examination 
     show.
       ``Arkansas regulators received the Federal report later 
     that year, and under state law the securities commissioner 
     was supposed to close any involvent institution.
       ``As the Governor is free to do at any time, Mr. Clinton 
     appointed a new securities commissioner in January, 1985. He 
     chose Beverly Bassett Schaffer. . . .
       ``In interviews, Mrs. Schaffer, now a Fayetteville lawyer, 
     said she did not remember the Federal examination of Madison, 
     but added that in her view, the findings were not 
     ``definitive proof of insolvency.''
       ``In 1985, Mrs. Clinton and her Little Rock law firm, the 
     Rose firm, twice applied to the [Arkansas] Securities 
     Commission on behalf of Madison, asking that the savings and 
     loan be allowed to try two novel plans to raise money.
       ``Mrs. Schaffer wrote to Mrs. Clinton and another lawyer at 
     the firm approving the ideas. ``I never gave anybody special 
     treatment,'' she said.
       ``Madison was not able to raise additional capital. And by 
     1986 Federal regulators, who insured Madison's deposits, took 
     control of the institution and ousted Mr. McDougal. Mrs. 
     Schaffer supported the action.''
       Gerth's original story was recently praised in the American 
     Journalism Review as containing 80 to 90 percent of what the 
     press knows about Whitewater today. Rival reporters 
     complained, though, that the 1992 article lacked a ``nut 
     paragraph'' summing up what the Clintons had done wrong and 
     why it was important.
       The insinuations became clearer in subsequent Gerth stories 
     in the fall of 1993.* Following the Washington Post's October 
     31, 1993, revelation that the RTC had made a referral to the 
     Justice Department naming the Clintons as (perhaps unwitting) 
     beneficiaries of possible criminal actions, Gerth and Stephen 
     Engelberg, another Times reporter, wrote lengthy articles 
     that appeared on November 2 and December 15. The first dealt 
     mainly with the still-unsubstantiated claims of former 
     Municipal Judge David Hale that Bill Clinton urged him to 
     commit federal bank fraud by lending $300,000 to Jim 
     McDougal's wife, Susan. (Gerth and Engelberg neglected to 
     point out that David Hale--no Clinton intimate but a 
     courthouse pol first appointed by Republican Governor Frank 
     White--had set up thirteen dummy companies with the same 
     mailing address as his own, evidently without pressure from 
     the Clintons.) Elsewhere, the November 2 piece was pretty 
     much a rehash of the original 1992 article, with a few 
     characteristically misleading tidbits added for emphasis. 
     ``By 1983, Mr. McDougal's bank was in trouble with Arkansas 
     regulators,'' the Times informed readers. The state's banking 
     commissioner, Marlin S. Jackson, ordered the bank to stop 
     making imprudent loans.
---------------------------------------------------------------------------
     *By this time, recall, the stakes were incontestably higher--
     Bill Clinton was President of the United States; politically 
     damaging memos by one Jean Lewis, an employee in the 
     ostensibly neutral RTC, had been leaked to Republican 
     Congressman Jim Leach and others; and right-wing outfits like 
     Floyd Brown's Citizens United had begun to churn out what 
     Trudy Lieberman in the Columbia Journalism Review called ``a 
     steady stream of tips, tidbits, documents, factoids, 
     suspicions and story ideas for the nation's press.''
---------------------------------------------------------------------------
       Mr. Jackson, a Clinton appointee, said in an interview last 
     year that he told Mr. Clinton at the time of Mr. McDougal's 
     questionable practices. ``Now, what Jackson told the Los 
     Angeles Times (which also turned the tale inside out but did 
     give fair context) was that the governor had urged him to 
     ignore politics and be the ``best banking commissioner you 
     can [be].'' Jackson had acted on this suggestion, with the 
     result that the Clintons' own note was called.
       The real bombshell was Gerth and Engleberg's December 15, 
     1993, story, which all but accused both Clintons, Jim 
     McDougal, and Beverly Bossett Schaffer of criminal conspiracy 
     to keep Madison Guaranty afloat regardless of the cost. But 
     the implicator in that account that has shown the most 
     staying power involves a supposed quid pro quo involving 
     Hillary Rodham Clinton. It centers on an April 1985 political 
     fund-raiser Jim McDougal held and the suspicion that he may 
     have illegally siphoned Madison Guaranty funds into Bill 
     Clinton's campaign coffers. ``Just a few weeks after Mr. 
     McDougal raised the money for him,'' the Times noted darkly, 
     ``Madison Guaranty won approval from Mrs. Schaffer, Mr. 
     Clinton's new financial regulator, for a novel plan to sell 
     stock.''
       ``The search for new capital,'' Gerth and Engelberg 
     continued, took Madison to the offices of Mrs. Schaffer, who 
     had the ultimate authority to approve any such stock sale. 
     One of the lawyers employed by Madison to argue its case 
     before the state regulators was Mrs. Clinton.
       Within weeks, Mrs. Schaffer wrote a letter to Mrs. Clinton 
     giving preliminary approval to Madison's stock plan.
       The sale never went forward. But this fall the [RTC] asked 
     the Justice Department to examine a number of Madison's 
     transactions, and federal officials say the state's approval 
     of the stock plan was among the matters raised by 
     investigators.
       The Times also quoted McDougal to the effect that Bassett 
     Schaffer was his handpicked choice as Arkansas securities 
     commissioner.
       The theory implicit in Gerth's Times stories may be 
     summarized as follows: when his business partner and 
     benefactor McDougal got in trouble, Bill Clinton dumped the 
     sitting Arkansas securities commissioner and appointed a 
     hack, Beverly Bassett Schaffer. He and Hillary then pressured 
     Bassett Schaffer to grant McDougal special favors--until the 
     vigilant feds cracked down on Madison Guaranty, thwarting the 
     Clintons' plan. This is the Received Version of the 
     Whitewater scandal as it first took shape in the pages of the 
     New York Times--what all the fuss is ultimately about. And it 
     bears almost no relation to reality.
       The distortions begin with the headline of the original 
     Gerth story in the Times: ``Clintons Joined S&L Operator in 
     an Ozark Real-estate Venture.'' This headline was misleading 
     because when Bill and Hillary Clinton entered into the 
     misbegotten partnership to subdivide and develop 230 forested 
     acres along the White River as resort property in 1978. Jim 
     McDougal wasn't involved in the banking and S&L businesses at 
     all. He was a career political operative--a former aide to 
     Senators J. William Fulbright and John L. McClellan. In the 
     meantime, McDougal had done well in the inflation-fueled 
     Ozarks land boom of the Seventies. But it wouldn't be until 
     five years later--by which time the Whitewater investment was 
     already moribund--that he bought a controlling interest in 
     Madison Guaranty.
       Details, details. Gerth wrote that McDougal quickly built 
     Madison ``into one of the largest state-chartered 
     associations in Arkansas.'' Wrong again. Among thirty-nine 
     S&Ls listed in the 1985 edition of Sheshunoff's Arkansas 
     Savings and Loans, Madison ranked twenty-fifth in assets and 
     thirtieth in amount loaned. These errors of detail might be 
     forgiven if Gerth had in fact uncovered a conspiracy between 
     the Clintons and the Arkansas securities commissioner to 
     treat Jim McDougal leniently. The appearance of conspiracy, 
     however, was created not by the actions of the alleged 
     parties but by selective reporting.
       Consider, for example, Gerth's treatment of the appointment 
     of Beverly Bassett Schaffer as Arkansas securities 
     commissioner in his March 8, 1992, article. ``After federal 
     regulators found that Mr. McDougal's savings institution 
     Madison Guaranty, was insolvent meaning it faced possible 
     closure by the state, Mr. Clinton appointed a new state 
     securities commissioner . . .'' The clear implication is that 
     in response to a Federal Home Loan Bank report dated January 
     20, 1984, suggesting that Madison might be insolvent, Clinton 
     in January 1985 installed Bassett Schaffer as Arkansas 
     securities commissioner for the purpose of protecting 
     McDougal.
       So how come he waited an entire year. In reality, the 
     timing of Bassett Schaffer's appointment had nothing to do 
     with the FHLBB report, which there's no reason to think 
     Clinton knew about. (The Clintons had no financial stake in 
     Madison Guaranty, although that, too, has been obscured.) The 
     fact is that Bill Clinton had to find a new commissioner in 
     January 1985 because the incumbent, Lee Thalhiemer, had 
     resigned to reenter private practice. Appointed by Republican 
     Governor Frank White and kept on by Clinton. Thalhiemer says 
     he told Gerth this in an interview, and describes the Times 
     version as ``unmitigated horseshit.''
       Bassett Schaffer strenuously insists that to this day she 
     had never met McDougal, never heard Bill Clinton mention his 
     name, and does not believe he influenced her appointment--and 
     told Gerth so. She had actively sought the job from the 
     moment she learned that Thalhiemer was quitting (he confirms 
     recommending her to Clinton). She herself had volunteered in 
     Clinton's 1974 congressional campaign and had worked for him 
     full time on the Arkansas attorney general's staff while in 
     law school. And her brother, Woody Bassett, also a 
     Fayetteville attorney, was a personal friend and supporter of 
     Bill Clinton.
       The claim that Jim McDougal was behind Bassett Schaffer's 
     appointment rests entirely on the word of McDougal himself, a 
     victim of manic-depressive illness whose lawyer filed an 
     insanity plea in a 1990 bank-fraud trial in U.S. District 
     Court, in which McDougal was ultimately found not guilty. In 
     his original 1992 article, Gerth had acknowledged McDougal's 
     history of emotional illness but described him as ``stable, 
     careful and calm.'' By 1993 mention of those difficulties had 
     all but vanished from the pages of the New York Times--
     despite the fact that the supposed recipient of Bill 
     Clinton's largess was living in Arkadelphia in a trailer on 
     SSI disability payments. Also unmentioned, for what it's 
     worth, was that McDougal had long since recanted his 
     accusations against Clinton and taken to blaming the whole 
     mess on Republican partisans in the RTC.
       But did Bassett Schaffer help McDougal anyway? Did the 
     Arkansas Securities Department, as Gerth asserts, have proof 
     of Madison Guaranty's insolvency in early 1985? Did Bassett 
     Schaffer have the legal authority to shut it down?
       Consider the allegation that Madison was insolvent and 
     Bassett Schaffer failed to respond. True, the 1984 FHLBB 
     report did argue that Madison Guaranty had overestimated its 
     profit from contract land sales--not including Whitewater--by 
     $564,705. ``Correcting entries will adversely effect [sic] 
     net worth and result in an insolvent position.'' But is this 
     proof of legal insolvency? Hardly. In the first place 
     (although Gerth neglected to point this out), the title page 
     of the document from which the Times reporter took the one 
     brief passage he cited stipulated that it had ``been prepared 
     for supervisory purposes only and should not be considered an 
     audit report.'' More significantly, federal auditors later 
     accepted Madison's position on contract land sales, and the 
     putative adjustments were never made. Indeed, on June 26, 
     1984, six months after the report Gerth cited, and six months 
     before Bassett Schaffer took office, Madison Guaranty's board 
     of directors met in Dallas with state and federal regulators. 
     They agreed to enter a formal ``Supervisory Agreement'' with 
     the FHLBB that spelled out detailed legal and accounting 
     procedures designed to help the S&L improve its financial 
     position. In a letter dated September 11, 1984, the FHLBB 
     gave Madison formal approval of a debt-restructuring plan 
     that ``negat[ed] the need for adjustment of $564,705 in 
     improperly recognized profits'' and dropped all references to 
     insolvency. Arkansas officials also called Gerth's attention 
     to an independent 1984 audit that also refuted Madison's 
     insolvency. In his story the reporter neglected to mention 
     either document.
       If McDougal shoved any funny money in the Clinton's 
     direction--either through Whitewater or an April 1985 
     campaign fund-raiser--the Arkansas Securities Department sure 
     found an odd way to reward him. No sooner did Bassett 
     Schaffer receive the FHLBB's 1986 report on Madison than she 
     recommended stringent action. On July 11, 1986, she and a 
     member of her staff flew to Dallas to meet with FHLBB and 
     Federal Savings and Loan Insurance Corporation regulators for 
     a showdown with Madison's board. McDougal himself was not 
     invited. McDougal was stripped of authority, and federal 
     officials agreed to supervise the failed thrift until the 
     FSLIC found money to pay depositors. When, a year later, 
     Bassett Schaffer received an audit for 1986 (and a revised 
     audit for 1985) officially reflecting that Madison Guaranty 
     was insolvent, she wrote the FHLBB and FSLIC a letter, dated 
     December 10, 1987, strenuously urging them to shut down 
     Madison and two other Arkansas S&Ls. Fifteen months later, 
     federal regulators (whose tardiness cannot be blamed on 
     pressure from a state governor) finally locked Madison's 
     doors.
       There is not the slightest evidence, then, that Bassett 
     Schaffer inappropriately delayed taking action against 
     Madison. Nor, it seems, did she bend the law when asked by 
     Hillary Clinton to approve a stock sale by the ailing thrift.
       Remember the dark hint of misdeeds in Gerth and Enelberg's 
     December 15, 1993, story: ``Just a few weeks after Mr. 
     McDougal raised the money for [Governor Clinton], Madison 
     Guaranty won approval from Mrs. Schaffer, Mr. Clinton's new 
     financial regulator, for a novel plan to sell stock.'' Now, 
     what made Madison Guaranty's plan ``novel'' is hard to say. 
     The vast majority of state-regulated S&Ls in 1985 issued 
     stock. Even so, the adjective, with its implication of wrong-
     doing, has recurred mantra-like in virtually every Whitewater 
     roundup article since.
       For Hillary Rodham Clinton to have ventured anywhere near 
     Madison in any capacity was a damn fool thing to do. But the 
     fact is that her entire involvement in the ``novel'' stock 
     issue consisted of the mention of her name in a letter 
     written by a junior member of the Rose Law Firm expressing 
     the opinion that it would be permissible under state law for 
     Madison Guaranty to make a preferred stock offering. After 
     studying the applicable statutes and consulting with her 
     staff, Bassett Schaffer agreed. ``Arkansas law,'' she wrote 
     in a two-paragraph letter dated May 14, 1985--the now-famous 
     ``Dear Hillary'' missive--``expressly gives state chartered 
     associations all the powers given regular business 
     corporations . . . including the power to authorize and issue 
     preferred capital stock.'' Bassett Schaffer had issued the 
     narrowest sort of regulatory opinion. Had she ruled 
     otherwise, Madison Guaranty would have had no difficulty 
     finding a judge to reverse her. Anyway, no application was 
     ever filed.
       The Arkansas Securities Department's power to close ailing 
     S&Ls was mostly theoretical. Unlike the feds, Bassett 
     Schaffer's office had no plenary authority to shut S&Ls down 
     and seize their assets. Nor did Arkansas law make any 
     provision for the state to pay off depositors of bankrupt 
     S&Ls. That duty belonged to the FSLIC. ``We acted in unison 
     at all times,'' says Walter Faulk, then director of 
     supervision for the FHLBB in Dallas. ``I never saw [Bassett 
     Schaffer] take any action that was out of the ordinary. Nor, 
     to be perfectly honest, could she have gotten away with 
     anything if she did. To my knowledge, there is nothing that 
     she or the governor of Arkansas did or could have done that 
     would have delayed the action on this institution.''
       When I asked him recently about the discrepancies and 
     omissions in his reporting, Jeff Gerth stood his ground, 
     alternately argumentative and defensive, and did not wish to 
     be quoted. He argues, for example, that he never literally 
     wrote that Jim McDougal had in fact gotten Bassett Schaffer 
     the job, merely that he'd claimed to. Her denial struck him 
     as beside the point. In other instances, he pleaded 
     limitations of time and space.
       The perception that Gerth most resents is the one most 
     talked about in Arkansas: his reliance upon the hidden hand 
     of Sheffield Nelson--Clinton's 1990 Republican gubernatorial 
     opponent and a legendary political infighter. The Times 
     reporter insists that Nelson did no more than give him Jim 
     McDougal's phone number and later introduce him to former 
     Judge David Hale, whose defense attorney is Nelson's 
     associate. Nelson, the Republican nominee for governor again 
     in 1994, tends to be coy about his role. But he has given 
     other reporters a thirty-eight-page transcript of an early 
     1992 conversation between himself and McDougal, then 
     embittered by what he saw as Clinton's abandonment.
       Indeed, Jeff Gerth, Sheffield Nelson, and the New York 
     Times go way back. As long ago as 1978. Gerth wrote a well-
     timed expose of Nelson's mortal foes Witt and Jack Stephens--
     the billionaire natural-gas moguls and investment bankers who 
     ran Arkansas like a company store during the Orval Faubus era 
     (1955-67). The Stephens brothers owned a small gas-
     distribution company in Fort Smith that was paying them at a 
     better rate than other gas-royalty owners. But what made 
     Gerth's piece significant was its timing; it appeared shortly 
     before a Democratic primary in which the Stephenses' nephew, 
     U.S. Representative Ray Thornton, was eliminated in a three-
     man race for the U.S. Senate. Gerth had promised local 
     reporters he'd uncovered a scandal that would knock Thornton 
     out of the race. Some observers think the Times article about 
     the business dealings of Thornton's uncles did swing just 
     enough votes in Fort Smith to keep him out of a runoff 
     election won by Senator David Pryor.
       A few more highlights from Sheffield Nelson's political 
     biography may help underline his motives for helping 
     reporters portray the Clintons in the worst possible light. 
     Hired out of college as Witt Stephen's personal assistant. 
     Nelson was later installed as CEO of Arkansas-Louisiana Gas 
     Co. (Arkla), controlled by the Stephens family and the 
     state's principal natural-gas utility. (It was his subsequent 
     refusal to use Arkla pipeline to carry gas from other 
     Stephens-owned companies to buyers east of the state that 
     eventually provoked a lifelong blood feud of Shakespearean 
     malevolence.) Until 1989 Nelson was a Democrat, impatiently 
     biding his time until the end of the Clinton era. But when it 
     became apparent that Clinton would run again in 1990, Nelson 
     became a Republican and won the 1990 gubernational primary 
     over an opponent funded by Stephens interests. Bill Clinton 
     then proceeded to humiliate Nelson 58 percent to 42 percent 
     in the general election.
       Clinton owed his 1990 triumph in part to the fact that his 
     Public Service Commission conducted an inquiry into a 
     business deal involving Nelson and a friend of Nelson's named 
     Jerry Jones. It seems that back when Nelson was CEO of Arkla, 
     he'd overridden the objections of company geologists and sold 
     the drilling rights to what turned into a mammoth gas field 
     in western Arkansas to Arkoma, a company owned by Jones, whom 
     Nelson had brought onto Arkla's board of directors. The price 
     was $15 million. Jones found gas almost everywhere he 
     drilled. Two years after Nelson's departure, Arkla paid Jones 
     and his associates a reported $175 million to buy the same 
     leases back as well as some other properties. Jerry Jones 
     then proceeded to buy the Dallas Cowboys and win two Super 
     Bowls. The election-year probe of the Arkla-Arkoma deal 
     resulted in millions of dollars of refunds to rate payers, 
     which wasn't necessarily the point. It also earned the 
     President's permanent spot on Sheffield Nelson's enemies 
     list. The result, it's no exaggeration to say, has been 
     Whitewater.
       The talents of investigative reporters now poring over 
     Whitewater documents might be better spent looking into 
     another McDougal real estate venture. Sheffield Nelson and 
     Jerry Jones put up a reported $225,000 each in return for a 
     12.5 percent share of McDougal's ill-conceived luxury 
     retirement community on Campobello Island, New Brunswick, 
     Canada. It was New Deal Democrat McDougal's odd conceit that 
     wealthy vacationers and retirees would be moved by 
     sentimental memories of FDR's summer retreat (remember 
     Sunrise at Campobello?) to purchase lots on a resort island 
     that is in fact damp, cold, foggy, and remote. The Campobello 
     project not only failed but helped pull Madison Guaranty down 
     with it. Gerth and the Times have left that aspect of the 
     Madison Guaranty story unexplored--even though, unlike 
     Whitewater, the name of Campobello Properties Ventures is 
     mentioned prominently and repeatedly in the very FHLBB 
     examination report that Gerth quoted in his original March 8, 
     1992, article. Also unlike Whitewater, the Campobello's 
     project did put a big chunk of Madison Guaranty's scant 
     capital at risk--some $3.73 million, to be exact, at a time 
     when the FHLBB examiner contended that the S&L was actually 
     $70,000 in the hole.
       At last report, that particular picturesque stretch of 
     Canadian coastline belonged to the Resolution Trust 
     Corporation. Nelson and Jones, however, actually made a 
     profit. In 1988, the FHLBB, then supervising Madison 
     Guaranty's assets, bought the boys out for $725,000--leaving 
     them a profit of $275,000. No doubt there's a plausible 
     explanation, although William Seidman, chief of the FDIC and 
     the RTC at the height of the S&L crisis, told the Fort Worth 
     Star-Telegram that ``I can't believe it. It's an 
     extraordinary event. It smells. It could be legit, but I 
     doubt it.'' Gerth says the Campobello deal holds no interest 
     for Times readers. But imagine the uproar had your tax 
     dollars bailed out the Clintons rather than an embittered 
     Republican politician feeding damaging allegations to the New 
     York Times.
       The same faults that mar Jeff Gerth's reporting on 
     Whitewater--misleading innuendo and ignorance or suppression 
     of exculpatory facts--also showed up in the Times accounts of 
     Hillary Rodham Clinton's commodity trades with Springdale 
     attorney Jim Blair and her husband's dealings with Tyson 
     Foods. ``During Mr. Clinton's tenure in Arkansas,'' Gerth 
     wrote near the top of his March 18, 1994, front-page account, 
     ``Tyson benefited from a variety of state actions, including 
     $9 million in government loans, the placement of company 
     executives on important state boards and favorable decisions 
     on environmental issues.'' The alleged $9 million in loans 
     was the implied quid pro quo for old pal Blair's generous 
     tips to Hillary in the 1970s that helped her turn $1,000 into 
     nearly $100,000.
       Following Gerth's report the incriminating $9 million 
     figure appeared virtually everywhere. The Times itself 
     weighed in with a March 31 editorial called ``Arkansas 
     Secrets,'' attacking the ``seedy appearances'' of Bill and 
     Hillary Clinton's ``extraordinary indifference to . . . the 
     normal divisions between government and personal interests.'' 
     The same editorial went on to deride what it called ``the 
     Arkansas Defense'': that ``you cannot apply the standards of 
     the outside world to Arkansas, where a thousand or so 
     insiders run things in a loosey-goosey way that may look 
     unethical or even illegal to outsiders.'' Nor have Times 
     editorial writers been the only ones to scold the Clintons 
     for succumbing to the lax moral climate of the President's 
     native state. The Baltimore Sun, Spiro Agnew's hometown 
     paper, opined that the First Lady's adventures in the cow 
     trade ``certainly [don't] smell right, especially considering 
     that [Jim Blair] represented a giant, influential 
     agribusiness firm in Arkansas that later received what seemed 
     to be favors from Gov. Clinton.'' Newsweek's Joe Klein wrote 
     of the President's ``multiple-personality disorder,'' 
     involving a moderate Clinton, a liberal Clinton, and ``the 
     likely suspect in the Whitewater inquiry, a pragmatic power 
     politician who did whatever necessary to get and keep office 
     in Arkansas . . . granting low-interest loans to not-very-
     needy business interests, who in turn contributed generously 
     to his political campaigns. This Clinton snuggled up close to 
     the Arkansas oligarchs, the bond daddies and chicken 
     pluckers--and never quite escaped the orbit of the shadowy 
     Stephens brothers, Witt and Jackson.'' (Witt Stephens has 
     been dead for three years, and Jack Stephens is a Reagan 
     Republican who has bankrolled nearly every Clinton opponent--
     except Sheffield Nelson--since the early 1980s.)
       There's just one problem with this chorus of self-righteous 
     denunciation: the $9 million in loans that inspired it never 
     existed. Especially attentive readers of the New York Times 
     may have noticed an odd little item in the daily 
     ``Corrections'' column on April 20, 1994:
       ``An article on March 18 about Hillary Rodham Clinton's 
     commodity trades misstated benefits that the Tyson Foods 
     company received from the state of Arkansas. Tyson did not 
     receive $9 million in loans from the state; the company did 
     benefit from at least $7 million in state tax credits, 
     according to a Tyson spokesman.''
       Gerth blames a chart misread on deadline.
       But was the Times embarrassed? Hardly. In the journalistic 
     equivalent of double jeopardy, the Times editors, having 
     convicted Hillary Clinton on a spurious charge, decided she 
     was guilty of a new charge: helping Tyson Foods to that $7 
     million in tax credits. No sooner had she held her April 22 
     press conference on Whitewater-related issues than the Times 
     fretted that the First Lady's performance had been smooth but 
     cleverly evasive. Particularly suspicious, an April 24 
     editorial found, were her dealings with Jim Blair, ``a lawyer 
     for Tyson Foods, a large company that was heavily regulated 
     by and received substantial tax credits from the Arkansas 
     government.'' [Emphasis added] And people call the President 
     slick!
       The truth is far less lurid. The $7 million in investment 
     tax credits Tyson Foods claimed against its Arkansas state 
     tax bill after 1985--that is, between seven and fourteen 
     years after Hillary's commodity trades--were written into the 
     state's revenue code and were never Bill Clinton's to bestow 
     or withhold. True, the Clinton Administration did sponsor the 
     1985 legislation that created the tax credits. It did so 
     under strong pressure, not from Tyson but from International 
     Paper, which threatened to take its processing plants 
     elsewhere unless Arkansas matched tax breaks available from 
     other states--a potentially severe economic blow to the 
     already poor southern half of the state. Far from being 
     unique to Arkansas, state investment tax credits are now the 
     rule from sea to shining sea. One week after the Times made 
     its lame correction, Tyson announced the opening of a new 
     plant in Portland, Indiana. According to a press release by 
     Indiana Governor Evan Bayh, the state and local governments 
     provided some $9 million in economic incentives--
     approximately equal to what Tyson got from Arkansas during 
     Bill Clinton's six terms.
       Elsewhere, nearly every bit of evidence cited as proof of 
     shady connections between the Clintons and Tyson Foods in the 
     Times March 18, 1994, front-page story got the familiar Gerth 
     treatment. Besides the imaginary $9 million in loans, Gerth 
     cited several other suspicious transactions, among them a 
     bitter court battle over polluted groundwater in the town of 
     Green Forest in which the Clinton Administration ``failed to 
     take any significant action,'' and a pair of seemingly 
     tainted appointments--including renaming a Tyson veterinarian 
     to the state Livestock and Poultry Commission and Jim Blair 
     to the University of Arkansas board. An objective account of 
     the court battle would have pointed out that the city of 
     Green Forest was itself a defendant in the same lawsuit. Bill 
     Clinton was not. Officials of the Arkansas Department of 
     Pollution Control and Ecology testified for the plaintiffs 
     against Tyson Foods. So much for yet another dark Clintonian 
     conspiracy.
       Reappointing a Tyson veterinarian to the Livestock and 
     Poultry Commission? Clinton is guilty as charged. Except that 
     the fellow happens to be the state's ranking expert on 
     chicken diseases, the prevention and treatment of which is 
     the commission's principal task. As for naming Jim Blair 
     himself to the University of Arkansas board? Well it's quite 
     an honor, and Blair can undeniably score great Razorback 
     tickets. Otherwise, where's the scandal? At any rate, Blair 
     wasn't a Tyson employee back when he and Hillary did their 
     cattle trades. He was in private practice as one of 
     Springdale's most prominent corporate attorneys, representing 
     banks, trucking companies, insurance firms, and poultry 
     interests.
       Gerth portrayed chicken mogul Don Tyson as a major Clinton 
     supporter and fund-raiser, one whose close ties to the 
     President had ``been a subject of debate for years in Little 
     Rock and (which) became an issue during the 1992 Presidential 
     campaign.'' The fact is that Clinton's battles with Tyson and 
     the poultry industry are legendary in Arkansas. After Clinton 
     failed to support an effort by the poultry and trucking 
     lobbies to raise the truck weight limit to 80,000 pounds, 
     Tyson backed his Republican opponent, Frank White, in 1980 
     and 1982 and refused to speak to Clinton for years. When 
     Clinton finally gave in on the 80,000-pound limit (making 
     Arkansas the last of the states to do so), he pushed through 
     the legislature an unusual ``ton-mile'' tax on eighteen 
     wheelers--scaling the fee to the weight and distance they 
     drove on Arkansas highways. The ton-mile tax was eventually 
     thrown out after a bitter court battle. (In keeping with 
     tradition, a profile of Clinton in The New York Times 
     Magazine by Michael Kelly last July omitted the political 
     context and cited the same fight as evidence of Clinton's 
     spinelessness.)
       Like most Arkansans, Tyson did back Clinton's 1983 
     educational reforms and made relatively modest campaign 
     contributions from then on--something that was clearly 
     prudent on the part of one of the state's largest private 
     employers. But in the legislature the poultry and trucking 
     industries fought virtually every Clinton initiative. Indeed 
     it was Clinton's anger at the poultry industry and the 
     Stephens interests, among others, after they combined to beat 
     back a half-cent education sales tax in 1987 that provoked 
     him to create a statewide ``blue-ribbon'' panel to write 
     Arkansas's first meaningful ethics and disclosure law. After 
     the selfsame ``special interests'' gutted the thing during a 
     special session, Clinton dissolved the legislative session, 
     led the effort to put the new standard on the ballot as an 
     inspired act, campaigned for it hard, and won. (Times 
     editorial writers may be interested to know that New York 
     Governor Mario Cuomo's having earned $270,000 in 1992 giving 
     speeches might constitute a felony here in darkest Arkansas.)
       Don Tyson did throw in with the governor on one notable 
     issue during Clinton's last go-around with the Arkansas 
     legislature. A charter member of the so-called Good Suit 
     Club--a group of wealthy bankers and businessmen, like the 
     late Sam Walton of Wal-Mart, who met informally to encourage 
     educational reform--Tyson endorsed Clinton's plan to levy a 
     \1/2\ of 1 percent increase in the corporate income tax to 
     benefit community technical colleges, helping the bill win 
     the necessary three-fourths vote. Quick, somebody call Gerth 
     at the New York Times and notify the special prosecutor. 
     Something tells me they're fixing to load those technical 
     colleges up with poultry-science courses.
       All of this raises the really interesting question at the 
     heart of the Whitewater scandal: why--with representatives of 
     the vaunted national press camped out in Little Rock for 
     weeks at a time, squinting over aged public documents and 
     pontificating nightly at the Capital Hotel bar--has nobody 
     blown the whistle on Gerth and the New York Times? There are 
     several reasons, ambition and fear among them. It is always 
     safest to run with the pack, and editors who invest thousands 
     of dollars on a scandal don't normally want to hear that 
     there's no scandal to be found. Reporters who have challenged 
     aspects of the official version, like Greg Gordon and Tom 
     Hamburger of the Minneapolis Star Tribune and John Camp of 
     CNN, have not found their celebrity enhanced. Those who have 
     tried to split the difference, like the reporters for Time 
     magazine--which has always reported (albeit parenthetically) 
     that Arkansas bank regulators treated Madison Guaranty 
     sternly--have ended up producing accounts as muddled and 
     self-referential as a John Barth novel. ``The dealings in 
     question,'' Time's George Church wrote last January 24, ``are 
     so complex that it is difficult even to summarize the 
     suspicions they arouse, let alone cite the evidence 
     supporting such suspicions. * * * Violations of law, if any, 
     would be extremely difficult to prove.'' And people call 
     Clinton mealymouthed.
       Regional bias and cultural condescension play a part, too. 
     How could the New York Times be wrong and the Arkansas Times 
     be right? But even if Bill Clinton had been governor of 
     Connecticut instead of Arkansas, in the post-Watergate, post-
     everythinggate culture no reporter wishes to appear 
     insufficiently prosecutorial--particularly not when the 
     suspects are the President and his wife. By definition 
     they've got to be guilty of something; it may as well be 
     Whitewater.

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