[Congressional Record Volume 142, Number 113 (Monday, July 29, 1996)]
[Senate]
[Pages S9082-S9083]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       THE POLITICS OF WHITEWATER

 Mr. SIMON. Mr. President, my attention has been called to an 
article in the Miami Herald by Ernest Dumas, who is described in the 
Miami Herald as ``Sometime critic of Bill Clinton who teaches 
journalism at the University of Central Arkansas, and writes a column 
for the Arkansas Times. A former political writer, and associate editor 
of the Arkansas Gazette in Little Rock, he wrote this article for the 
Herald.''
  I don't believe I've ever met Mr. Dumas, but he has written an 
article that gives a perspective on the Whitewater situation that I 
frankly have not seen in the media elsewhere.
  I call this to the attention not only of my colleagues in the Senate 
and in the House, but I call this to the attention of editorial writers 
who may be looking through the Congressional Record.
  It gives a very different perspective on ``The Politics of 
Whitewater.''
  I ask that the Miami Herald article be printed in the Congressional 
Record.
  The article follows:

                 [From the Miami Herald, June 23, 1996]

                       The Politics of Whitewater

                           (By Ernest Dumas)

       When Sens. Jesse Helms and Lauch Faircloth, the North 
     Carolina Republicans, had lunch in 1994 with their old friend 
     and protege, Judge David R. Sentelle of the U.S. Court of 
     Appeals for the District of Columbia, even they must have 
     have fathomed the importance of what Sentelle was about to 
     agree to do.
       His Judicial panel would remove Robert B. Fiske Jr. as the 
     independent counsel for Whitewater and replace him with a far 
     more doctrinaire Republican, Kenneth W. Starr, who had lost 
     his job as solicitor general when Bill Clinton became 
     president and who was representing the Republican National 
     Committee and groups hostile to the Clinton administration, 
     including the tobacco industry.
       Starr would keep the Whitewater investigation on track for 
     the 1996 presidential election all right, but he would prove 
     far more valuable to his party.
       The majority report of the Senate Special Whitewater 
     Committee last week said the two lending institutions that 
     were the heart of the scandal were ``piggy banks for the 
     Arkansas political elite.''
       It was half true. A who's who of Arkansas Republicans had 
     helped David L. Hale plunder his federally subsidized small 
     business investment company.
       Hale, who triggered the Whitewater investigation and the 
     appointment of an independent prosecutor when he accused 
     President Clinton of asking him to make an illegal loan in 
     1986, actually was illegally channeling federal tax dollars 
     into the campaign of Clinton's Republican opponent. Moreover, 
     according to his testimony at the trial in April, he was 
     paying the Republican state chairman to help him defraud the 
     federal Small Business Administration. Another former state 
     Republican chairman and perennial candidate was on the books 
     for a substantial federally subsidized loan when the Clinton 
     administration moved to shut Hale down in 1993. Other 
     prominent Republicans collaborated with Hale to skim money 
     from the company.
       Other than Gov. Jim Guy Tucker, then a private businessman, 
     and the ubiquitous James D. McDougal himself, the owner of 
     Madison Guaranty Savings and Loan Corp., no Democratic 
     political figure had anything to do with the dummy companies 
     and scams that Hale ran.
       Thanks to Kenneth Starr, this is not the picture Americans 
     got of Whitewater.
       Not only did Starr not seek indictments against the 
     Republicans when they began to turn up on every chapter of 
     the examinations of Hale's small-business lending company, he 
     did not call them as witnesses at the trial at Little Rock. 
     The prosecutors persuaded the trial judge not to allow the 
     deeds of Hale's Republican collaborators to be used as proof 
     of selective prosecution. It would have confused the picture 
     of Whitewater, a story about the rascality of Bill Clinton 
     and his Democratic friends.
       The special prosecutor's refusal to explore any of the 
     Republican bigwigs to the glare of trial--while leveraging 
     misdemeanor pleas from many spear carriers in the real estate 
     deals who made no profits from the deals--makes a compelling 
     case that the investigation is politically motivated and the 
     prosecution selective.
       Hale ran a federally licensed and subsidized small business 
     investment company at Little Rock called Capital Management 
     Services, which in 1992 applied to the Small Business 
     Administration for another $45 million. It claimed an 
     expanded capital base. He didn't get approval before the 
     election and Clinton's SBA in 1993 got suspicious. When 
     auditors began digging into the company's records, Hale told 
     the SBA to just forget the whole thing. Clinton's new SBA 
     director, Erskine Bowles, referred the matter to the Justice 
     Department. When the SBA put Hale's

[[Page S9083]]

     company in receivership, 86 percent to fits loans were 
     overdue and its accumulated losses exceeded its private 
     capital by 171 percent.
       On July 20, 1993, the FBI raided Hale's offices and 
     confiscated his files. By August Clinton's new U.S. attorney 
     for the Eastern District of Arkansas, Paula Casey, prepared 
     to ask a federal grand jury to indict Hale for defrauding the 
     SBA.
       What the SBA inspectors and the FBI had found was that Hale 
     had essentially been dealing with himself and a few cronies, 
     including two state Republican chairmen and other Republican 
     politicians and, briefly, seven years earlier, Jim McDougal 
     and Jim Guy Tucker, then a private citizen licking the wounds 
     of a crushing defeat at the hands of Bill Clinton in the 1982 
     governor's race.
       Hale's story about Clinton asking him to make an illegal 
     loan to one of his old business partners seems implausible 
     because Hale at the time was funneling money illegally from 
     his small business development company into the campaign of 
     Clinton's Republican opponent, former Gov. Frank White, who 
     had appointed Hale to his municipal judgeship in 1981.
       Here are details about some of the Arkansas Republicans who 
     have avoided the harsh light of Special Prosecutor Starr:
       Hale's fellow municipal judge, Bill Watt, testified at the 
     April trial that Hale had written a $10,000 check to the 
     company headed by his law partner, Richard M. Grasby, the 
     Republican county chairman, with directions that $2,000 of it 
     be laundered and put into White's campaign against Clinton. 
     Watt contributed $1,000 in the name of his secretary and 
     $1,000 in the name of the secretary's daughter. The gifts 
     never showed up in White's campaign reports. White says he 
     doesn't think he got them. Using the proceeds of a federally 
     backed small business loan for political gifts is illegal. 
     Defense attorneys elicited the story from Watt, a prosecution 
     witness.
       Starr is prosecuting two rural bankers this week on charges 
     that they arranged $13,000 in contributions to Clinton's 
     campaign and reimbursed themselves by padding their expenses 
     at the bank. The gifts to White's campaign from federal funds 
     seemed to be analogous, but Starr passed when the gifts came 
     to light last year.
       More intriguing was Starr's pass on Bob Leslie, a Little 
     Rock lawyer who was the state Republican chairman and later 
     national committeeman, during the 1980s. Leslie had been the 
     Republican candidate for Congress from South Arkansas' Fourth 
     District in 1982. When Hale was on the stand, a defense 
     lawyer, Bobby McDaniel of Jonesboro, asked him about a 
     $20,000 SBA-guaranteed loan to Leslie. Hale said it was a 
     ``pay-off'' for Leslie's help in a scheme to defraud the 
     Small Business Administration. Leslie had written legal 
     opinions to the SBA saying Hale qualified for more SBA funds 
     when he didn't.
       ``He had a tax problem, and I loaned that money to him,'' 
     Hale said, ``The U.S. attorney said they were not going to 
     charge him.''
       Leslie wasn't called as a witness. He told reporters he had 
     done nothing wrong.
       Hale also made a federally backed loan of $275,000 to a 
     minority mortgaging company Leslie formed, which was not 
     repaid. Leslie told a reporter that he actually didn't get to 
     use the money.
       Hale had an unusual affinity for Republican chairmen. 
     Leslie's predecessor as state chairman was Ken Coon, the 
     Republican nominee for governor in 1974 and an unsuccessful 
     candidate for Congress in the Republican primary last month.
       When he applied to the SBA for leverage capital the last 
     time, Hale listed Coon as the recipient of a substantial loan 
     for a disadvantaged business if the SBA was forthcoming. Coon 
     was a director of a burial insurance company Hale owned.
       Another rising Republican star who became entangled in 
     Hale's web but was ignored by the special prosecutor was 
     Robert Boyce, a young businessman who ran unsuccessfully for 
     the legislature in 1992 from Little Rock's silk-stocking 
     Pulaski Heights district.
       Boyce was president of a company that was supposed to 
     handle liquidation sales for stores going out of business. In 
     November 1988 Hale wired $300,000 into Boyce's account and he 
     wrote checks totaling $250,000 to two men who were later 
     convicted of conspiring with Hale to defraud the SBA. Boyce 
     told SBA inspectors in 1994 that while he was the purported 
     owner and president of Retail Liquidators Hale secretly owned 
     it and used it as a front to obtain loans from his SBA 
     lending company. Federal law bars small business lending 
     companies from lending to the owners.
       Boyce wasn't charged or called as a witness at the trial.
       The most fetching story is that of Sheffield Nelson, the 
     former Republican state chairman and now the Republican 
     national committeeman from Arkansas. Nelson, the former 
     president of Arkansas Louisiana Gas Co., the state's largest 
     natural gas distributor, was the Republican nominee for 
     governor in 1990 against Clinton and would be defeated again, 
     this time by Tucker, in 1994.
       It was Nelson who arranged for Jim McDougal, a friend and 
     business partner, to tell a New York Times reported in 1992 
     about his ancient Whitewater land deal with the Clintons.
       Unlike the Clintons, who lost money, Nelson and his pal, 
     Jerry Jones, owner of the Dallas Cowboys, profited immensely 
     from real-estate dealings with McDougal.
       While perusing the want ads of The Wall Street Journal in 
     the early `80s, McDougal was attracted by an ad for the sale 
     of land on Campobello Island, off the coast of Maine, 
     President Franklin D. Roosevelt, McDougal's idol, had 
     summered there as a youth. The owners wanted $825,000 for 
     3,400 acres.
       Convinced that the land could be developed for quick 
     resale, McDougal persuaded Nelson and Jones to invest with 
     him. Nelson and Jones put up $225,000 each. It was the first 
     real estate venture for McDougal's new thrift, Madison 
     Guaranty. The savings and loan subsequently would put up 
     millions of dollars to develop the desolate and blustery land 
     but the agents would never find buyers.
       Despite the early charges, Whitewater Development Corp., 
     the Clintons' partnership with the McDouglas, never cost 
     Madison Guaranty and the American taxpayers a penny. But 
     Campobello Estates cost them plenty. It was the single 
     biggest contributor to the S&L's demise. The Federal Home 
     Loan Bank Board warned as early as 1984 that the investment 
     was imprudent and that it was imperiling the thrift's 
     solvency. Nelson and Jones never put anything more into it. 
     It was Madison's money.
       After McDougal was ousted from the management of Madison in 
     1986 and it was closed in 1989, the Resolution Trust Corp. 
     found itself owning Campobello. Nelson and Jones wanted out 
     of the deal. Amazingly, an old football-playing buddy of 
     Jones at the University of Arkansas, Tommy Trantham, had been 
     appointed supervisor of Madison. Trantham arranged for 
     Madison to buy out Nelson and Jones at a handsome profit of 
     $136,500 each, a buy-out ultimately borne by the taxpayers. 
     The RTC, then under the George Bush administration, approved 
     the buy-out.
       William Seidman, who headed the Federal Deposit Insurance 
     Corp. and the RTC at times during the banking and thrift 
     crises, later expressed shock at the buy-out. His experience, 
     he told The Fort Worth Star Telegram, was that limited 
     partners didn't even get their money back, much less a hefty 
     profit.
       Nelson's and Jones' roles never surfaced in the special 
     prosecutor's case. They never got a summons from Sen. Alfonse 
     D'Amato, R-N.Y., to explain themselves before the Senate 
     Whitewater Committee.
       It is this selective prosecution that is the peril of 
     political investigations like Starr's. The prosecutor does 
     not try to solve a crime and punish the perpetrator but to 
     identify one subject or group and then find a crime.
       ``Therein lies the most dangerous power of the 
     prosecutor.'' Justice Robert Jackson of the U.S. Supreme 
     Court, who would be the chief prosecutor at Nuremberg, warned 
     in 1940, ``that he will pick people that he thinks he should 
     get, rather than cases that need to be prosecuted. With the 
     law books filled with a great assortment of crimes a 
     prosecutor stands a fair chance of finding at least a 
     technical violation of some act on the part of almost 
     anyone.''
       With 50 FBI agents and an army of attorneys at his disposal 
     and boundless jurisdiction, the Whitewater prosecutor's 
     problem was that he found more than he cared to prosecute, 
     and in exactly the wrong places.

                          ____________________