[Senate Report 104-280]
[From the U.S. Government Publishing Office]
104th Congress Report
SENATE
2d Session 104-280
_______________________________________________________________________
INVESTIGATION OF WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS
----------
F I N A L R E P O R T
OF THE
SPECIAL COMMITTEE TO INVESTIGATE
WHITEWATER DEVELOPMENT CORPORATION
AND RELATED MATTERS
together with
ADDITIONAL AND MINORITY VIEWS
June 17, 1996.--Ordered to be printed
Filed under authority of the order of the Senate of June 13, 1996
INVESTIGATION OF WHITEWATER DEVELOPMENT CORPORATION AND RELATED
MATTERS --FINAL REPORT
104th Congress Report
SENATE
2d Session 104-280
_______________________________________________________________________
INVESTIGATION OF WHITEWATER
DEVELOPMENT CORPORATION
AND RELATED MATTERS
__________
F I N A L R E P O R T
OF THE
SPECIAL COMMITTEE TO INVESTIGATE
WHITEWATER DEVELOPMENT CORPORATION
AND RELATED MATTERS
together with
ADDITIONAL AND MINORITY VIEWS
June 17, 1996.--Ordered to be printed
Filed under authority of the order of the Senate of June 13, 1996
SPECIAL COMMITTEE TO INVESTIGATE WHITEWATER DEVELOPMENT CORPORATION AND
RELATED MATTERS
ALFONSE M. D'AMATO, New York,
Chairman
PAUL S. SARBANES, Maryland RICHARD C. SHELBY, Alabama
CHRISTOPHER J. DODD, Connecticut CHRISTOPHER S. BOND, Missouri
JOHN F. KERRY, Massachusetts CONNIE MACK, Florida
RICHARD H. BRYAN, Nevada LAUCH FAIRCLOTH, North Carolina
BARBARA BOXER, California ROBERT F. BENNETT, Utah
CAROL MOSELEY-BRAUN, Illinois ROD GRAMS, Minnesota
PATTY MURRAY, Washington PETE V. DOMENICI,* New Mexico
PAUL SIMON, Illinois ORRIN G. HATCH, Utah
FRANK H. MURKOWSKI, Alaska
Howard A. Menell, Staff Director
Robert J. Giuffra, Jr., Chief
Counsel
Philip E. Bechtel, Deputy Staff
Director
Steven B. Harris, Democratic Staff
Director and Chief Counsel
Michael Chertoff, Special Counsel
Richard Ben-Veniste, Democratic
Special Counsel
Alice S. Fisher, Deputy Special
Counsel
Louis J. Gicale, Deputy Special
Counsel
Everett C. Johnson, Jr., Deputy
Special Counsel
James B. Comey, Deputy Special
Counsel
Neal E. Kravitz, Democratic
Principal Deputy Special Counsel
Lance Cole, Democratic Deputy
Special Counsel
Steven Bankler, Investigative
Accountant
H. Christopher Bartolomucci,
Associate Special Counsel
Gabriel Berg, Democratic Legal
Intern
Julius J. Bonavolanta, Special
Investigator
Mark J. Brenner, Assistant Special
Counsel
Robert H. Buchanan, Staff Intern
David Carle, Democratic Press
Secretary
William S. Castle, Senior
Investigator
Lori A. Conlon, Administrative
Assistant
Vincenzo A. DeLeo, Special
Investigator
Viet D. Dinh, Associate Special
Counsel
Douglas A. Epstein, Democratic
Counsel
Christopher Farro, Staff Intern
Steven H. Fromewick, Democratic
Assistant Special Counsel
Sophia Hardy, Democratic Intern
Nguyen-Hong Hoang, Democratic
Legal Intern
David Kaufman, Staff Intern
David M. Luna, Democratic Law
Clerk
Joseph Mitchell, Staff Intern
Timothy P. Mitchell, Democratic
Professional Staff Member
Michael P. O'Callaghan, Associate
Special Counsel
Richard J. O'Connell, Special
Investigator
James S. Portnoy, Democratic
Associate Special Counsel
James F. Redfern, Special
Investigator
Andrew M. Schauer, Democratic
Assistant Special Counsel
Jennifer M. Swartz, Senior
Investigator
Megan H. Tinker, Senior
Investigator
Amy R. Wendt, Democratic Staff
Assistant
Jeffrey H. Winter, Democratic
Special Assistant
Stephanie H. Womack, Democratic
Special Assistant
----------
* Appointed to replace Senator Bill Frist pursuant to S. Res. 184
(October 12, 1995).
Peter C. Barrett, Staff Assistant
Yael Belkind, Democratic Staff
Assistant
Sloan Deerin, Staff Assistant
Mitchell Feuer, Democratic Counsel
Emily L. Frydrych, Assistant to
the Democratic Staff Director
Martin J. Gruenberg, Democratic
Senior Counsel
Mark D. Hoffman, Executive
Assistant to the Staff Director
Glenn Ivey, Democratic Counsel
Joseph A. Jiampietro, Counsel
Joseph R. Kolinski, Chief Clerk/
Computer Systems Administrator
Andrew Lowenthal, Democratic
Professional Staff Member
Doris R. Mahoney, Executive
Assistant
Charles Marr, Democratic
Professional Staff Member
E. Richard Mills, Press Secretary
Joseph N. Mondello, Jr., Counsel
Patrick A. Mulloy, Democratic
Chief International Counsel
Douglas R. Nappi, Counsel
Lendel Porterfield, Financial
Institutions Subcommittee Staff
Director
Amy C. Randel, Democratic Staff
Assistant
Sarah Bloom Raskin, Democratic
Counsel
Madelyn Simmons, Professional
Staff Member
Paul Weech, Professional Staff
Member
Edward M. Malan, Editor
George E. Whittle, Editor
Irene C. Whiston, GPO Editorial
Assistant
Donna Lee Krause, GPO Editorial
Assistant
C O N T E N T S
----------
Page
Preface.......................................................... 1
Phase ------The Foster Phase..................................... 6
Conclusions of the Special Committee......................... 8
1. By the time of Vincent Foster's death in July 1993,
the Clinton's had established a pattern of concealing
their involvement with Whitewater and the McDougals'
Madison Guaranty S&L................................. 10
2. The Clintons and their associates were aware, at the
time of Mr. Foster's death, that the Clintons'
involvement with Whitewater and the Madison Guaranty
S&L might subject them to liability.................. 12
3. At the time of his death, Mr. Foster's office
contained damaging evidence about the Whitewater and
Travelgate affairs................................... 13
4. White House officials engaged in highly improper
conduct in handling documents in Vincent Foster's
office following his death........................... 14
5. Mrs. Clinton was closely involved in the handling of
documents in Mr. Foster's office following his death
and directed that investigators be denied
``unfettered access'' to Mr. Foster's office......... 17
6. Senior White House officials and other Clinton
associates provided incomplete and inaccurate
testimony to the Special Committee................... 20
7. The Office of the White House Counsel was misused to
impede ongoing investigations and to serve the purely
personal legal interests of the President, Mrs.
Clinton and their associates......................... 21
Background................................................... 22
I. Mr. Foster's Involvement in the Clintons' Personal
Matters.............................................. 23
II. The Traditional Independence of the White House
Counsel's Office..................................... 33
Summary of the Evidence...................................... 36
I. The Contents of Vincent Foster's Office at the Time of
his Death............................................ 36
II. July 20, 1993........................................ 42
A. The Discovery of Mr. Foster's Body................ 42
B. The Park Police Notify the White House and the
Foster Family.................................... 44
C. The White House Ignores Repeated Park Police
Requests to Seal Mr. Foster's Office............. 44
D. Mrs. Clinton Learns of Mr. Foster's Death and
Begins to Contact Close Associates............... 46
E. Mrs. Clinton Calls the White House on an Unlisted
Trunk Line....................................... 47
F. Helen Dickey's Telephone Call to the Arkansas
Governor's Mansion............................... 48
G. The Handling of Trash and Burn Bags in Mr.
Foster's Office.................................. 50
H. Senior White House Officials Conduct a Late-Night
Search of Mr. Foster's Office.................... 51
I. Secret Service Officer Henry O'Neill Observes
Margaret Williams Remove Documents from Mr.
Foster's Office.................................. 53
III. July 21, 1993....................................... 55
A. Mr. Foster's Office is Finally Sealed............. 55
B. The White House Impedes Initial Park Police
Efforts to Search Mr. Foster's Office............ 57
C. The White House Counsel and Deputy Attorney
General agree on a Search Protocol for the
Documents in Mr. Foster's office................. 58
D. The White House Finalizes the Agreement on the
Search Protocol.................................. 60
IV. July 22, 1993........................................ 63
A. The White House Counsel's Office Interferes with
Park Police Interviews of White House Staff...... 63
B. The First Lady, Margaret Williams, Susan Thomases
and Bernard Nussbaum Conduct a Series of Early
Morning Telephone Calls.......................... 64
C. The White House Breaks its Agreement with the
Justice Department: ``A Terrible Mistake''....... 67
D. The Window Dressing Review of the Documents in Mr.
Foster's Office.................................. 70
E. Mr. Nussbaum's Failure to Search Properly Mr.
Foster's Briefcase............................... 74
F. The Foster Family Lawyer Overhears Discussion of
the Scraps of Paper in Mr. Foster's Briefcase.... 77
G. The Secretive, Real Review of the Contents of Mr.
Foster's Office.................................. 78
H. The Transfer of Clinton Personal Files to the
First Family's Residence......................... 79
I. The Reaction of Law Enforcement Officials to Mr.
Nussbaum's Search................................ 82
V. July 26, 1995......................................... 83
A. The Existence of the Torn-Up Note is Finally
Revealed to Law Enforcement...................... 83
B. The White House's Decision Not to Disclose the
Note Immediately to Law Enforcement.............. 87
C. Mrs. Clinton and Susan Thomases Are Told of the
Discovery of the Note............................ 88
VI. July 27, 1993........................................ 90
A. The Review and Transfer of the Clinton Personal
Files From the White House Residence to Williams
& Connolly....................................... 90
B. White House Deliberations About the Handling of
the Note......................................... 93
C. The President is Told of the Note................. 95
D. The White House Finally Turns the Note Over to Law
Enforcement...................................... 95
Findings of the Special Committee............................ 98
1. At the time of his death, Vincent Foster was
intimately involved in two brewing scandals--
Travelgate and Whitewater--touching on President and
Mrs. Clinton......................................... 99
2. Senior White House officials were aware that the
President and Mrs. Clinton faced potential liability
over Whitewater and their relationship with the
McDougals............................................ 100
3. Senior White House officials ignored repeated
requests by law enforcement officials to seal Mr.
Foster's office on the night of his death............ 101
4. White House officials conducted an improper search of
Mr. Foster's office on the night of his death........ 102
5. Margaret Williams may have removed files from the
White House Counsel suite on the night of his death.. 103
6. Bernard Nussbaum agreed with the Justice Department
officials on July 21, 1993, to allow law enforcement
officials to review documents in Mr. Foster's office. 104
7. Margaret Williams and Susan Thomases, in consultation
with Mrs. Clinton, took part in formulating the
procedure for reviewing documents in Mr. Foster's
office on July 22, 1993.............................. 105
8. Bernard Nussbaum failed to conduct a meaningful
review of Mr. Foster's office and did not describe to
law enforcement officials sensitive files pertaining
to the Clintons and the Administration............... 107
9. An index of documents in Mr. Foster's office is
missing and other indices were revised following his
death to conceal possible references to Whitewater... 108
10. Bernard Nussbaum knew about yellow scraps of paper in
Mr. Foster's briefcase prior to Stephen Neuwirth's
apparent discovery on July 26, 1993.................. 109
11. Margaret Williams, in consultation with Mrs. Clinton,
removed files from Mr. Foster's office to the White
House residence to be reviewed by the Clintons....... 110
12. Senior White House officials did not provide complete
and accurate information to the Park Police and FBI
with respect to the handling of Mr. Foster's note.... 111
13. Mr. Hubbell probably knew about the discovery of Mr.
Foster's note on July 27, 1993....................... 112
14. Margaret Williams provided inaccurate and incomplete
testimony to the Special Committee in order to
conceal Mrs. Clinton's role in the handling of
documents in Mr. Foster's office following his death. 113
15. Susan Thomases provided inaccurate and incomplete
testimony to the Special Committee in order to
conceal Mrs. Clinton's role in the handling of
documents in Mr. Foster's office following his death. 115
16. Bernard Nussbaum provided inaccurate and incomplete
testimony to the Special Committee concerning the
handling of documents in Mr. Foster's office
following his death.................................. 117
Phase 2.--The Washington Phase................................... 135
Conclusions of the Special Committee......................... 137
1. By mid-1993, the Clintons and their associates had
already taken steps to minimize their potential
liability from investigations of Whitewater and
Madison Guaranty..................................... 139
2. The White House concealed damaging evidence about
Whitewater and Travelgate from career law enforcement
officials investigating Vincent Foster's death....... 140
3. Senior White House officials improperly gathered
confidential information about investigations
involving Whitewater and Madison Guaranty............ 140
4. A pivotal event: Senior White House officials and
private counsel for the Clintons participate in an
improper Whitewater defense meeting.................. 142
5. Senior White House officials did not pass the torch
to the Clintons' new private counsel, but continued
to take highly improper steps to advance the
Clintons' private interests.......................... 143
6. Senior White House officials held formal ``Whitewater
Response Team'' meetings to protect the Clintons'
private interests in ongoing federal investigations.. 143
7. In early 1994, senior White House officials sought to
manipulate the RTC investigation of Madison Guaranty
and the Rose Law Firm................................ 145
8. Jay Stephens was removed from the investigation of
possible civil claims against parties associated with
Madison Guaranty, including the Clintons............. 146
9. Senior RTC officials sought to impede the criminal
investigation of Madison............................. 147
10. U.S. Attorney Paula Casey mishandled the RTC criminal
referral referencing the President and Mrs. Clinton.. 148
11. Senior Administration officials improperly sought to
manipulate the investigation of the RTC and Treasury
Inspectors General into the propriety of White House-
Treasury contacts.................................... 149
12. The White House delayed in producing documents to the
Special Committee.................................... 150
13. Senior Administration officials provided inaccurate
and incomplete testimony to the Senate............... 152
14. The Office of the White House Counsel was frequently
and improperly put in the service of the personal
legal interests of the President and Mrs. Clinton.... 153
Conclusions of the Special Committee on the Discovery of the
Rose Law Firm Billing Records.............................. 155
1. The Rose billing records provide the best evidence of
the legal services performed by Mrs. Clinton for
Madison Guaranty..................................... 155
2. The disappearance and mysterious reappearance of the
Rose Law Firm billing records was part of a larger
patten of removal, concealment and, at times,
destruction of records concerning Mrs. Clinton's
representation of Madison............................ 158
3. Vincent Foster is the last person known to have the
billing records in his possession.................... 159
4. The billing records mysteriously reappear in the Book
Room of the White House Residence in August 1995..... 159
5. Only a limited number of people had access to the Book
Room of the White House Residence.................... 160
6. Very few people had motive to be handling or reading
the Rose billing records in August 1995.............. 160
7. Only a limited number of people were definitely within
the chain of custody of the billing records.......... 160
8. Mrs. Clinton is more likely than any other known
individual to have placed the billing records in the
Book Room in August 1995............................. 161
Background................................................... 161
I. Whitewater Development Corporation and Madison
Guaranty S&L......................................... 161
II. Capital Management Services and David Hale........... 163
Summary of the Evidence...................................... 164
Part I: The Handling of Federal Investigations............... 164
I. Mrs. Clinton Learns of the RTC Criminal Referral on
Madison.............................................. 164
A. The RTC begins its criminal investigation of
Madison.......................................... 165
B. The first RTC criminal referral: C0004............ 166
C. Betsey Wright informs Mrs. Clinton of the RTC
criminal referral................................ 167
II. Criminal Referral C0004 Languishes at the Justice
Department........................................... 168
A. The U.S. Attorney sends Criminal Referral C0004 to
the main Justice Department...................... 168
B. Criminal Referral C0004 gets lost at the Justice
Department....................................... 170
III. Interference with the RTC's Ongoing Investigation of
Madison.............................................. 172
IV. Paula Casey Delays her Recusal from Madison, Handles
the Hale Pleas Negotiations, and Declines to
Prosecute Criminal Referral C0004.................... 181
A. Investigations of Capital Management and David
Hale............................................. 181
B. Plea Negotiations with David Hale................. 183
C. Ms. Casey's declination of Criminal Referral
C0004............................................ 189
Part II: White House Intervention in Federal Investigations.. 192
I. White House Contacts Relating to Investigations of
Madison and David Hale............................... 192
A. The White House receives information on the
ongoing SBA investigation of Mr. Hale............ 192
B. Mr. Hale's lawyers contact the White House about
Mr. Hale's ``mutual interest'' with President
Clinton.......................................... 195
C. The White House obtains more information about the
Hale investigation............................... 199
II. After Treasury and RTC Officials improperly advised
the White House about RTC Referrals mentioning
President Clinton and Governor Tucker, President
Clinton meets with Governor Tucker at the White
House................................................ 201
III. A Pivotal Event: The November 5, 1993 Meeting
Between White House Officials and the Clintons'
Private Lawyers...................................... 204
IV. The White House Obtains Confidential SBA Documents
Relating to Mr. Hale and Capital Management.......... 208
V. The White House Begins to Hold Whitewater Defense
Meetings............................................. 212
A. Senior White House officials debated the
appointment of a Special Counsel................. 213
B. White House contacts with former Arkansas
Securities Commissioner Beverly Bassett Schaffer. 216
C. The Whitewater Response Team assigns defense tasks
to White House officials......................... 220
VI. The Retention and Investigation of Pillsbury Madison
& Sutro.............................................. 220
A. The White House expresses concern over the
retention of Jay Stephens........................ 221
B. Mr. Stephens is removed from the RTC investigation 221
C. The White House makes inaccurate claims about the
Pillsbury report................................. 222
Part III. White House Interference with Congressional
Inquiries.................................................. 224
I. Mr. Ickes Provided Incomplete and Inaccurate Testimony
to the Senate Banking Committee...................... 224
II. The White House Interfered with Treasury IG and RTC
IG Investigations into White House-Treasury Contacts. 227
A. Independence of IG investigation is compromised... 227
B. Confidential information is provided to the White
House............................................ 231
III. The White House Interfered with the Special
Committee's 1995-96 Investigation.................... 236
A. The refusal of William Kennedy to comply with the
Special Committee's subpoena for his notes of the
pivotal November 5, 1993 White House defense
meeting.......................................... 237
B. White House delays in producing highly relevant
documents to the Special Committee............... 238
Part IV. The Rose Law Firm Billing Records................... 239
I. The Destruction and Mishandling of Rose Law Firm
Files................................................ 240
II. The ``Disappearance'' and ``Discovery'' of the Rose
Law Firm Billing Records............................. 240
III. Mrs. Clinton's Statements in Light of the Rose Law
Firm Billing Records................................. 245
A. Madison's retention of the Rose Law Firm.......... 245
B. Mrs. Clinton's contacts with regulator Beverly
Bassett Schaffer................................. 248
C. Mrs. Clinton's role in Madison's proposed
preferred stock deal............................. 249
D. Mrs. Clinton's role in the Castle Grande
transaction...................................... 250
IV. The Federal Investigations into the Rose Law Firm's
Representation of Madison............................ 253
V. The Special Committee's Investigation into the
Circumstances Surrounding the Discovery of the Rose
Law Firm Billing Records............................. 258
Phase 3--The Arkansas Phase...................................... 286
Conclusions of the Special Committee......................... 287
1. Mrs. Clinton's legal work on Castle Grande related to
an effort to conceal the true nature of the
activities at Madison Guaranty....................... 289
2. Webster Hubbell was significantly more involved in
Castle Grande than he admitted in his Senate
testimony............................................ 292
3. In 1985, Mr. McDougal retained Hillary Clinton to
represent Madison Guaranty; the work was not brought
in by a young associate.............................. 293
4. Mrs. Clinton had a substantive contact with Beverly
Bassett Schaffer about Madison Guaranty's proposal to
issue preferred stock................................ 295
5. Governor Clinton's official and personal dealings with
James McDougal raised an apparent, if not an actual,
improper conflict of interest........................ 296
6. The Clintons took an active role in obtaining and
extending Whitewater-related loans; they were not
``passive'' investors in Whitewater.................. 296
7. Governor Clinton's office steered state bond work to
Dan Lasater.......................................... 297
8. The Clintons took a series of erroneous tax deductions
related to Whitewater................................ 299
Summary of the Evidence...................................... 299
Part I: Whitewater Development Corporation................... 299
I. Whitewater: The Early Years........................... 301
A. The Clintons' Previously Undisclosed Land Deal
with James McDougal.............................. 301
B. Whitewater: A ``No Cash'' Deal.................... 302
C. Lot 13: Irregularities in Madison Bank's loan to
Mrs. Clinton..................................... 304
II. The Clintons' Continued Involvement in Whitewater:
1987--1992........................................... 306
A. The Clintons' Active Involvement in the Management
of Whitewater After 1986......................... 306
B. Governor Clinton's Approval of Special Legislation
Benefitting his Whitewater Banker................ 307
III. The Clintons' Handling of Whitewater During the 1992
Presidential Campaign................................ 312
A. The Focus on Whitewater During the 1992 Campaign.. 312
B. The Lyons Report.................................. 314
C. The Clintons Finally Get Out of Whitewater........ 317
IV. The Clintons' Questionable Tax Treatment of
Whitewater: A History of Unreportable Income and
Improper Deductions.................................. 319
A. 1978: The Clintons' Unreported Income of $5,405
from 15-Acre Installment Sale.................... 320
B. 1979: The Clintons' Improper Interest Deduction of
$2,400........................................... 321
C. 1980: The Clintons' Improper Interest Deduction of
$9,000........................................... 322
D. 1980: The Clintons' Unreported Income of $10,000
from Whitewater payment of the $20,000 Union Bank
Note............................................. 323
E. 1982: The Clintons' Unreported Income of $5,691
for Whitewater Payment of Citizens Bank of
Jonesboro Note................................... 325
F. 1984: The Clintons' Improper Deduction of $144 for
Real Estate Taxes................................ 326
G. 1984 and 1985: The Clintons' Improper Interest
Deductions of $2,811 and $2,322.................. 326
H. 1987: The Clintons' Improper Interest Deduction of
$2,561........................................... 326
I. 1988: The Clintons' Improper Deduction of $1,275
for Real Estate Taxes............................ 327
J. 1988: The Clintons' Unreported Income of $1,673
from the Sale of Lot 13.......................... 327
Part II: Governor Clinton's Questionable Relationship With
James McDougal............................................. 328
I. James McDougal's Madison Guaranty: A Corrupt Savings &
Loan................................................. 328
A. Madison's Fraudulent Land Deals................... 329
B. Madison's Phony Books and Records................. 330
C. Federal Regulators Oust Mr. McDougal from Madison. 330
II. Governor Clinton Provides Benefits to James McDougal
and Madison S&L...................................... 332
A. Governor Clinton Steers Valuable State Leases to
Madison.......................................... 332
B. McDougal Holds a Questionable 1985 Fundraiser for
Clinton.......................................... 333
C. Governor Clinton Vetoes Legislation For McDougal
Business Partners................................ 337
D. Clinton's Promises to McDougal on Brewery
Legislation...................................... 340
E. McDougal Asks Governor Clinton to Fire Tough State
Regulators....................................... 341
F. McDougal Helps Select S&L Regulators.............. 343
G. McDougal Hires Mrs. Clinton and Her Law Firm...... 344
1. The Questionable Retention of the Rose Law
Firm......................................... 344
2. Mrs. Clinton Asks the Arkansas S&L Regulator
to Approve a Novel Stock Issue............... 346
III. The Castle Grande Land Deal: A Series of Fraudulent
Loans................................................ 348
A. Structuring of the Acquisition of the Castle
Grande Property to Evade State Regulations....... 349
B. The Fraudulent Nature of the Castle Grande
Purchase......................................... 350
C. The September 24, 1985 Letters.................... 353
D. The May 1 Option Disguises the Questionable
Payments to Seth Ward............................ 354
E. Mrs. Clinton's Previously Unknown Legal Work for
Questionable Castle Grande Transactions.......... 356
F. Webster Hubbell's Mysterious Role in Structuring
Questionable Castle Grande Transactions.......... 359
Part III: Governor Clinton's Questionable Relationship with
Dan Lasater................................................ 361
I. Governor Clinton's Close Personal Relationship With
Dan Lasater.......................................... 361
II. Governor Clinton Provides Favors to Dan Lasater...... 363
A. Dan Lasater's Special Access to Governor Clinton.. 363
B. The Governor's Office Steers Valuable State Bond
Business to Dan Lasater.......................... 364
Part IV: David Hale and Capital Management Services, Inc..... 371
I. The Special Committee's Attempts To Obtain Hale
Testimony............................................ 371
II. Mr. Hale's Testimony in the McDougal Trial: What was
Governor Clinton's Role in the Making of the $300,000
Master Marketing Loan?............................... 372
Part V: The Lending Activities of Perry County Bank in the
1990 Clinton Gubernatorial Campaign........................ 375
Additional views of Senator Faircloth............................ 392
Minority Views of Senators Sarbanes, Dodd, Kerry, Bryan, Boxer,
Mosely-Braun, Murray and Simon................................. 395
Summary of Conclusions........................................... 395
I. Preface.........................................................395
II. Washington Phase................................................419
A. Jean Lewis's 1992 Referrals........................... 419
1. Introduction..................................... 419
2. RTC Criminal Investigator L. Jean Lewis Set Aside
Higher Priority Investigations to Focus on
Madison Guaranty Following the Publication of
Jeff Gerth's March 8, 1992 Article in The New
York Times....................................... 420
3. Lewis Rushed to Complete a Criminal Referral
Prior to a Self-Imposed Pre-Election Deadline.... 421
4. Lewis' 1992 Referral Failed to Allege Evidence of
a Federal Crime and Gratuitously Named the
Clintons as Witnesses............................ 422
5. Lewis Pressured the United States Attorneys
Office and the FBI to Open a Formal Investigation
Before the Presidential Election................. 423
6. United States Attorney Charles Banks Resisted
Lewis' Pressure and Declined to Commence a Grand
Jury Investigation Before the 1992 Presidential
Election......................................... 425
7. The Bush White House and Justice Department
Showed an Interest in Lewis' Referral Before the
1992 Presidential Election....................... 427
a. The White House............................... 427
b. The Department of Justice..................... 427
c. The Passport Controversy...................... 428
8. The Clinton Justice Department Properly Handled
Lewis' 1992 Referral............................. 429
9. Webster Hubbell Had No Involvement in the
Handling of Lewis' 1992 Referral................. 429
10. Other Failed S&Ls in Arkansas Went Uninvestigated
Due to Lewis' Focus on Madison Guaranty.......... 430
B. The Investigations of David Hale...................... 430
1. The SBA uncovers Hale's Fraudulent Activity....... 430
2. The White House does not Interfere with the
Investigation.................................... 432
3. The SBA provides the White House with copies of
documents already sent to Congress............... 432
C. The RTC's Handling of the 1993 Referrals.............. 434
1. The legal review was consistent with RTC policy... 434
2. The poor quality of previous referrals made legal
review essential................................. 435
3. The legal review was not an attempt to impede the
Madison investigation............................ 436
4. Lewis was not a credible witness and her
allegations are therefore suspect................ 437
D. The Justice Department's Handling of the 1993
Referrals............................................ 439
1. The U.S. Attorney's Office handled the 1993
referrals properly............................... 439
2. Plea negotiations with Hale were handled
appropriately.................................... 441
3. Casey's recusal was handled properly.............. 442
4. The White House did not influence the
investigation.................................... 443
E. The Clinton Administration's Contacts with Beverly
Bassett Schaffer in 1993 and 1994 Were Proper and
Appropriate.......................................... 443
1. Background........................................ 444
2. There were no improper contacts between the
Clinton Administration and Beverly Bassett
Schaffer......................................... 446
3. Conclusion........................................ 447
F. The OGE Report and the Transmission of Investigative
Materials to the White House and Secretary Bentsen... 447
1. OGE'S Investigation Was Thorough and Complete, and
Received the Full Cooperation of the
Administration................................... 447
a. The Inspectors General's investigation was
thorough and complete........................ 448
b. The IGs had sufficient time to conduct the
investigation................................ 448
c. The Administration cooperated fully with the
investigation................................ 449
d. No one in the Administration tried to
influence the IG's investigation or OGE's
conclusions in any way....................... 450
e. Conclusion.................................... 450
2. It was Entirely Proper for the White House
Counsel's Office to Receive Transcripts of the
Depositions Taken by the Inspectors General...... 451
a. The White House had a legitimate and pressing
need for the Deposition transcripts.......... 451
b. There is no evidence that OGE's investigation
was affected by the release of the deposition
transcripts to the White House............... 453
c. There is no evidence that the White House
Counsel's Office used the deposition
transcripts or the information contained in
the transcripts to influence the
congressional testimony of White House
officials.................................... 453
d. The deposition transcripts did not contain
material, confidential RTC information....... 455
e. Conclusion.................................... 456
3. There Is No Evidence that the Treasury Department
Exerted Undue Influence On OGE's Investigation... 457
a. It was entirely proper for Secretary Bentsen
and his representatives to receive a draft
version of the IG's report and the deposition
transcripts.................................. 457
b. No harm resulted from the release of the
deposition transcripts and draft report to
the Treasury Department...................... 458
c. Francine Kerner's participation in the
investigation was proper and appropriate..... 458
4. Roger Altman Did Not Receive a Transcript of
Harold Ickes' Deposition Prior to his Senate
Banking Committee Testimony on August 2, 1994.... 459
III.The Arkansas Phase..............................................466
A. The Initial Whitewater Loans.......................... 466
1. Background........................................ 466
2. The Citizens Bank Loan............................ 466
3. The Union National Bank Loan...................... 468
4. The Clintons were passive Investors............... 470
B. The 1987 and 1988 Whitewater Extensions............... 471
1. The Whitewater Loan............................... 471
2. Branch Banking Legislation........................ 478
C. Subsequent events related to the Whitewater property.. 480
1. The Lot 13 Loan................................... 480
2. The Clintons Sell their interest in WWDC.......... 481
D. Whitewater Tax Issues................................. 481
1. Background........................................ 482
2. The Clintons Properly Claimed Interest Deductions
on their personal tax returns for interest
payments they made on the Whitewater Loans with
personal funds................................... 482
3. The Clintons have corrected past errors in their
personal tax returns that resulted from
inadequate information about the Whitewater
investment....................................... 484
4. The Clintons had no reason to report any personal
income from the Whitewater investment............ 486
5. The Clintons have sought to take advantage of
Whitewater losses that they have claimed on their
personal tax returns............................. 488
E. Madison Guaranty Savings and Loan Association......... 489
1. Reports on Madison Guaranty & Savings and Loan
Association make no finding of improper or
illegal activity by President or Mrs. Clinton.... 489
2. Madison Guaranty in the context of the nationwide
S&L crisis....................................... 492
F. The Treatment of the McDougals's and their business
enterprises by Arkansas State agencies............... 494
1. Whitewater Investment............................. 494
2. The Arkansas State Agency Leases of Offices from
Madison Guaranty were proper, appropriate and in
the normal course of business.................... 494
a. State leases involving Madison Guaranty....... 495
b. The April 5, 1985 Madison Fundraiser.......... 505
c. Conclusion.................................... 511
3. There is no evidence that McDougal received
special treatment from the Alcoholic Beverage
Commission....................................... 511
a. McDougal did not receive special treatment in
connection with his efforts to develop a
brewery on the IDC property.................. 512
b. Governor Clinton had no involvement in the
ABC's approval of a regulation permitting
breweries to operate tasting rooms........... 513
4. The Sewer Legislation............................. 514
a. The Impact on Small Utilities................. 515
b. Potential Litigation Involving the Rose Law
Firm......................................... 517
5. McDougal's Maple Creek Farms Development and the
Reassignment of the Arkansas Health Department
Sanitarians...................................... 518
a. Background.................................... 518
b. McDougal's worsening relations with the health
department................................... 520
c. McDougal Requests a meeting with Governor
Clinton...................................... 521
d. McDougal meets with Governor Clinton and
Health Department Officials.................. 523
e. The Reassignment of the Sanitarians........... 524
f. Conclusions................................... 526
6. There was no impropriety in connection with
William Lyons appointment to the Banking Board or
his subsequent resignation....................... 526
a. Background.................................... 527
b. Lyon's testimony conflicts with the evidence.. 527
c. There is no evidence that Governor Clinton had
knowledge of Lyon's conversation with
McDougal or did anything improper............ 528
7. Regulation of Madison Bank and Trust by the
Arkansas State Banking Department................ 529
G. Dan Lasater and Bond Underwriting contracts involving
Lasater & Company.................................... 530
1. Background........................................ 531
a. Dan Lasater................................... 531
b. Lasater & Company............................. 531
c. The Arkansas Housing Development Agency and
the Arkansas Development Finance Authority... 531
d. The Arkansas State Police Commission.......... 532
2. Under Clinton Administration Policy, Arkansas
firms were encouraged to participate in state
bond underwriting................................ 532
3. Lasater & Company received no special treatment in
connection with AHDA/ADFA bond underwriting
contracts........................................ 534
4. Neither Governor Clinton nor his staff pressured
AHDA/ADFA to include Lasater's firm in bond
underwritings.................................... 536
5. Lasater had no influence over AHDA/ADFA
appointments..................................... 539
6. The Raney/Hutton/Lasater Team was awarded the
state police commission bond underwriting
contract on the merits........................... 540
a. Background.................................... 540
b. The formation of the Raney/Hutton/Lasater
group........................................ 540
c. The awarding of the underwriting contract..... 542
d. Legislative review of the underwriting
contract..................................... 544
e. The Clinton Administration properly
investigated rumors that Lasater was under
investigation for drug use and was advised
that no investigation was underway........... 544
7. Neither Governor Clinton nor his staff pressured
the Arkansas State Police to award bond
underwriting contracts with Lasater's firm....... 545
8. Dan Lasater's relationship with Bill Clinton and
Roger Clinton.................................... 547
H. The Rose Law Firm's representation of Madison Guaranty 548
1. Retention of the Rose Law Firm by Madison Guaranty
Savings & Loan................................... 549
a. Madison Guaranty's proposal to issue preferred
stock........................................ 549
b. Mrs. Clinton's role in the retention of the
Rose Law Firm by Madison Guaranty............ 551
c. Conclusion.................................... 555
2. The Arkansas Securities Department's regulation of
Madison Guaranty Savings & Loan.................. 555
a. The proposal to issue preferred stock......... 555
b. The proposal to operate a broker-dealer
subsidiary................................... 557
c. Beverly Bassett Schaffer's efforts to close
Madison Guaranty............................. 560
d. Conclusions................................... 563
3. The IDC real estate transactions.................. 564
a. The Rose Law Firm and Mrs. Clinton played no
role in the alleged ``Straw Buyer''
arrangement between Seth Ward and James
McDougal..................................... 565
b. The Rose Law Firm and Mrs. Clinton played no
role in the resales of IDC parcels that
federal regulators have called ``Sham
Transactions''............................... 574
4. The Rose Law Firm's work for Madison Guaranty on
IDC matters was legitimate, well-documented, and
appropriately billed............................. 576
a. Introduction.................................. 576
b. The liquor license issue...................... 577
c. The utility service issue..................... 580
d. Conclusions................................... 581
I. David Hale's false allegation against Governor Clinton 583
1. Introduction..................................... 583
2. Hale's personal circumstances changed
dramatically in 1993 when he learned that law
enforcement officials had detected his criminal
conduct and were about to indict him on numerous
felonies......................................... 584
3. Hale tried to extract an offer of blanket
immunity from federal prosecutors by offering to
provide undefined information about high ranking
Arkansas politicians............................. 586
4. Hale eventually reached a plea bargain with the
Independent Counsel that required him to plead
guilty to two felonies........................... 588
5. Hale's history of fraud and duplicity............ 590
6. Hale's unsubstantiated assertion about Governor
Clinton.......................................... 593
7. Hale's allegation that Governor Clinton showed
interest in the Master Marketing Loan is riddled
with internal inconsistencies.................... 593
8. Hale cannot keep his story straight.............. 594
9. President Clinton testified that he never spoke
with Hale about a loan for Susan McDougal........ 595
10. The jurors in the Tucker/McDougal trial believed
President Clinton's testimony and concluded that
Hale committed perjury........................... 596
11. Hale's technique of embellishment................ 597
12. Hale's refusal to testify before the Special
Committee without a grant of blanket use immunity 598
J. The Pillsbury Madison & Sutro investigation........... 604
1. Introduction...................................... 604
2. The PM&S investigation was conducted by a capable,
experienced lawyers who were not subject to any
outside influence................................ 604
3. PM&S's investigation and findings on the
Whitewater investment............................ 606
4. PM&S findings on the Rose Law Firm's legal work
for Madison Guaranty............................. 606
5. PM&S key findings on conspiracy theories involving
the Rose Law Firm................................ 608
6. The Role of Jay Stephens.......................... 609
7. Questions concerning the thoroughness of PM&S's
investigation and the validity of the conclusions
in the PM&S reports.............................. 611
IV. Foster Phase....................................................624
A. Introduction.......................................... 624
1. Events at Foster's Office the Night of His Death.. 625
a. David Watkins Asked Patsy Thomasson to Look in
Foster's Office for a Suicide Note........... 625
b. Patsy Thomasson Briefly looked in Foster's
Office for a Suicide Note.................... 627
c. Bernard Nussbaum Also Entered Foster's Office
to Look for a Suicide Note................... 628
d. Margaret Williams Went to Foster's Office out
of a Sense of Grief.......................... 628
e. Officer O'Neill's Testimony................... 630
f. Contradictions in Officer O'Neill's testimony. 631
g. White House Officials Told Law Enforcement
About the Search for the Suicide Note........ 633
2. White House Officials Did Not Receive a Request
from the Park Police to Seal Foster's Office..... 634
3. Park Police Had No Authority to Review All
Documents in Foster's Office..................... 635
a. Park Police Were Interested Only In Documents
Relevant to Foster's State of Mind........... 636
4. Recollections Differ as to Whether Bernard
Nussbaum Agreed that Department of Justice
Attorneys Would Review Foster's Documents........ 637
5. The Difference of Opinion Between Senior Justice
Department Officials and White House Counsel
Reflected Differing Judgments about Appearances
Rather than about Legal Rights................... 642
6. Park Police Expressed No Interest in Retrieving
Foster's Substantive Files....................... 644
a. No Instructions Were Conveyed to Bernard
Nussbaum Regarding Documents in Foster's
Office....................................... 646
7. Park Police Investigation Was Not Hindered by
Nussbaum's Review of Foster Documents............ 649
8. The Torn Note is Found in Foster's Briefcase...... 651
a. Nussbaum Overlooked the Note in Foster's
Briefcase on July 22......................... 651
b. The Note Was Given to the Department of
Justice after it was Found................... 653
9. Removing the Clintons' Personal Files from the
White House Counsel's Office Was Appropriate..... 655
a. Documents Were Transferred to Williams &
Connolly on July 27.......................... 658
B. Introduction to Rose Law Firm Billing Records......... 659
1. Billing Records Were Produced by the White House.. 659
a. Billing Records Do Not Contradict Mrs.
Clinton's Statements Regarding Representation
of Madison Guaranty.......................... 661
b. Chain of Custody of Billing Records Before
Discovery in January 1996.................... 664
104th Congress Report
SENATE
2d Session 104-280
_______________________________________________________________________
INVESTIGATION OF WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS
_______
June 17, 1996.--Ordered to be printed
Filed under authority of the order of the Senate of June 13, 1996
_______________________________________________________________________
Mr. D'Amato, from the Special Committee to Investigate Whitewater
Development Corporation and Related Matters, submitted the following
F I N A L R E P O R T
together with
ADDITIONAL AND MINORITY VIEWS
Preface
On May 17, 1995, the United States Senate, by a vote of 96-
3, adopted Senate Resolution 120, which established the Special
Committee to Investigate Whitewater Development Corporation and
Related Matters (hereinafter the ``Special Committee''), to be
administered by the Committee on Banking, Housing, and Urban
Affairs (the ``Banking Committee''). Resolution 120 charged the
Special Committee with the responsibility to conduct an
extensive investigation into and to hold public hearings on
specified matters relating to the President's and Mrs.
Clinton's investment in Whitewater Development Corporation
(``Whitewater'') along with James and Susan McDougal, Madison
Guaranty Savings and Loan Association (``Madison Guaranty''),
and related matters.
In discharging its responsibilities under Resolution 120,
the Special Committee deposed 274 witnesses and held 60 days of
public hearings, during which 136 witnesses testified. The
Committee also reviewed approximately 1 million pages of
documents produced by the President and Mrs. Clinton, the White
House, various federal agencies, and a number of individual
witnesses.
Resolution 120 authorized the Committee to investigate and
to hold public hearings into three general subject areas.
Section 1(b)(1) authorized investigation into whether White
House officials engaged in improper conduct in handling papers
in Deputy White House Counsel Vincent Foster's office following
his death on July 20, 1993--the so-called Foster Phase of the
Special Committee's inquiry.
With respect to the Washington Phase of the inquiry,
Section 1(b)(2) authorized investigation into whether the White
House improperly interfered with any investigations or
prosecutions by various federal agencies relating to, among
other things, Whitewater, Madison Guaranty related entities,
and Capital Management Services, Inc. (``CMS'').
Finally, in the Arkansas Phase, Sec. 1(b)(3) of Resolution
120 authorized the Special Committee to investigate, among
other things, the activities of Whitewater, Madison Guaranty,
CMS, Lasater & Co., and the work and billing practices of the
Rose Law Firm relating to Madison Guaranty.
1. the foster phase
During the 103d Congress, the Banking Committee, pursuant
to Senate Resolution 229, conducted an inquiry into the cause
of Mr. Foster's death and the conduct of the subsequent
investigation of his death by the United States Park Police. On
July 15, 1994, Special Counsel Robert B. Fiske, Jr. advised the
Banking Committee that ``public hearings on the subject of the
handling of documents in Mr. Foster's office while this
investigation is continuing could prejudice our
investigation.'' 1 Accordingly, the Banking Committee's
public hearings on July 29, 1994 into the cause of Mr. Foster's
death excluded inquiry into the handling of documents in Mr.
Foster's office.
At the conclusion of the Banking Committee's hearings in
the summer of 1994, the following matters, among others, were
identified for future inquiry relating to Mr. Foster's death:
the White House interference into the Park Police
search of Mr. Foster's office;
the presence of White House counsel staff during
standard Park Police investigatory interviews;
the White House insistence that the Park Police
investigation proceed with Department of Justice
involvement to the extent that DOJ was ``calling the
shots'' and ``setting up protocol'' and the Park Police
were ``stand[ing] and waiting for permission to do our
job''; and
the late delivery of the note in Mr. Foster's office
to Park Police, discovered by White House counsel.
2
On April 22, 1995, Independent Counsel Kenneth W. Starr
advised the Chairman and Ranking Member of the Banking
Committee that his investigation would not be hindered or
impeded by a Senate inquiry into the way in which White House
officials handled documents in Mr. Foster's office following
his death.
Accordingly, the Special Committee commenced its
investigation and public hearings into whether White House
officials engaged in improper conduct in handling documents in
Mr. Foster's office at the time of his death. The Special
Committee recognizes that Mr. Foster's death remains a source
of much grief to his family and friends. In conducting its
inquiry under section 1(b)(1) of Resolution 120, the Committee
sought to balance carefully the need to protect the privacy of
the Foster family and its duty to carry out fully the mandate
of the Senate.
2. the washington phase
Resolution 120 directed the Special Committee to review the
handling of several federal investigations relating to the
Whitewater real estate venture; Madison Guaranty McDougal's
S&L, the failure of which cost American taxpayers more than $60
million; and CMS, a small business investment company owned by
David Hale, who made illegal loans to James and Susan McDougal
in part to finance the Whitewater investment. Specifically,
section 1(b)(2) of the Resolution authorized the Special
Committee to conduct an investigation and public hearings into
the following matters:
(A) whether any person has improperly handled
confidential Resolution Trust Corporation (``RTC'')
information relating to Madison Guaranty or Whitewater,
including whether any person has improperly
communicated such information to individuals referenced
therein;
(B) whether the White House has engaged in improper
contacts with any other agency or department in the
Government with regard to confidential RTC information
relating to Madison Guaranty or Whitewater;
(C) whether the Department of Justice has improperly
handled RTC criminal referrals relating to Madison
Guaranty or Whitewater;
(D) whether RTC employees have been improperly
importuned, prevented, restrained, or deterred in
conducting investigations or making enforcement
recommendations relating to Madison Guaranty or
Whitewater; and
(E) whether the report issued by the Office of
Government Ethics on July 31, 1994, or related
transcripts of deposition testimony--
(i) were improperly released to White House
officials or others prior to their testimony
before the Committee on Banking, Housing, and
Urban Affairs pursuant to Senate Resolution 229
(103d Congress); or
(ii) were used to communicate to White House
officials or to others confidential RTC
information relating to Madison Guaranty or
Whitewater.3
In conducting the inquiry mandated during this so-called
``Washington Phase'' of the investigation, the Special
Committee examined whether the President and Mrs. Clinton--or
their agents--misused the power of the presidency in responding
to a series of investigations of the Whitewater matter. As in
the past, the Senate sought to serve as the public's watchdog,
to expose abuses of the public trust.
Of necessity, the Special Committee inquired into the
investigative and prosecutorial processes of Executive Branch
agencies to determine whether the laws were properly and
faithfully executed. Congress has a duty to investigate
allegations that the normal investigative and prosecutorial
processes of the Executive Branch have been compromised.4
More important, Congress has the constitutional obligation to
ensure that the President's private interests have not been
elevated above the public good.
3. the arkansas phase
This is the beginning of the Whitewater matter. In this
phase of its inquiry, the Senate charged the Special Committee
with investigating the complex web of intermingled funds,
fraudulent transactions, political favors, and conflicted
relationships which comprise the ``20 years of public life in
Arkansas'' that Mrs. Clinton did not want an independent
counsel, among others, to look into.5
Specifically, Section 1(b)(3) of Resolution 120 authorized
an investigation and public hearings into the following
matters:
(A) the operations, solvency, and regulation of
Madison Guaranty Savings & Loan Association, and any
subsidiary, affiliate, or other entity owned or
controlled by Madison Guaranty Savings and Loan
Association;
(B) the activities, investments, and tax liability of
Whitewater Development Corporation and, as related to
Whitewater Development Corporation, of its officers,
directors, and shareholders;
(C) the policies and practices of the RTC and the
Federal banking agencies (as that term is defined in
section 3 of the Federal Deposit Insurance Act)
regarding the legal representation of such agencies
with respect to Madison Guaranty Savings and Loan
Association;
(D) the handling by the RTC, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation,
and the Federal Savings and Loan Insurance Corporation
of civil or administrative actions against parties
regarding Madison Guaranty Savings & Loan Association.
(E) the sources of funding and the lending practices
of Capital Management Services, Inc., and its
supervision and regulation by the Small Business
Administration, including any alleged diversion of
funds to Whitewater Development Corporation;
(F) the bond underwriting contracts between Arkansas
Development Finance Authority and Lasater & Company;
and
(G) the lending activities of Perry County Bank,
Perryville, Arkansas, in connection with the 1990
Arkansas gubernatorial election.
These various subjects, seemingly disparate, are
nevertheless woven together by common and recurring themes of
abuse of power, fraud on federal institutions and theft of
public funds, and frequent neglect, if not deliberate
disregard, of professional, ethical, and, at times, legal
standards.
The Special Committee completed its task under Resolution
120 in a bipartisan manner. With few notable exceptions, the
Special Committee conducted its investigation and public
hearings by mutual consent between the Chairman and Ranking
Member, thus obviating the need for votes by the Special
Committee.
Because the testimony of witnesses before the Special
Committee was often contradictory, incomplete, or inaccurate as
to important events and actions, the Committee placed
particular emphasis on available documentary evidence.
Unfortunately, throughout its inquiry, the Committee was
hindered by parties unduly delaying the production of, or
withholding outright, documents critical to its investigation.
Although the White House was most often and most notably
engaged in this course of action, the pattern of noncooperation
extended to other parties, as this Report lays out more fully
in the Washington Phase of the Special Committee's inquiry.
This Report of the Special Committee is divided into three
separate but interrelated parts. Part 1 focuses on the Foster
Phase of the inquiry, into whether White House officials
engaged in improper conduct in the handling of documents in Mr.
Foster's office at the time of his death. Part 2 summarizes the
Special Committee's investigation into the Washington Phase and
discusses the handling of federal investigations into
Whitewater and related matters, the Administration's attempts
to interfere with these investigations, and the White House's
attempts to interfere with Congressional inquiries into the
Administration's alleged improprieties. Part 3 centers on the
Arkansas Phase and details the transactions and activities that
comprise Governor Clinton's web of political, personal, and
business relationships--a web that includes, among others,
Whitewater, Madison, CMS, James McDougal, David Hale, and Danny
Ray Lasater. Each Part begins with a separate, detailed outline
and concludes with respective endnotes.
These three parts are interrelated because the entire story
of Whitewater is not simply the sum of its parts. Rather,
seeping through the pages that follow are clearly identifiable
patterns of motivation, conduct, and, at times, concealment.
Beyond discrete judgments of impropriety in particular
instances, therefore, the Special Committee has examined the
evidence and reached conclusions that transcend any individual
persons, actions, or events but rather illuminate patterns of
conduct behind the Whitewater affair.
The Conclusions of the Special Committee are summarized at
the beginning of each Part. They do not answer all questions
and allegations that have surfaced, but, taken together, they
provide a comprehensive survey of the facts uncovered by the
Special Committee in its 13 months of investigation. And they
offer a full, fair, and often troubling picture of the inner
workings of government that the Senate, by an overwhelming
mandate, charged the Special Committee to present to the
American people.
Part I--The Foster Phase
CONTENTS
Page
Conclusions of the Special Committee............................. 8
1. By the time of Vincent Foster's death in July 1993,
the Clinton's had established a pattern of concealing
their involvement with Whitewater and the McDougals'
Madison Guaranty S&L................................. 10
2. The Clintons and their associates were aware, at the
time of Mr. Foster's death, that the Clintons'
involvement with Whitewater and the Madison Guaranty
S&L might subject them to liability.................. 12
3. At the time of his death, Mr. Foster's office
contained damaging evidence about the Whitewater and
Travelgate affairs................................... 13
4. White House officials engaged in highly improper
conduct in handling documents in Vincent Foster's
office following his death........................... 14
5. Mrs. Clinton was closely involved in the handling of
documents in Mr. Foster's office following his death
and directed that investigators be denied
``unfettered access'' to Mr. Foster's office......... 17
6. Senior White House officials and other Clinton
associates provided incomplete and inaccurate
testimony to the Special Committee................... 20
7. The Office of the White House Counsel was misused to
impede ongoing investigations and to serve the purely
personal legal interests of the President, Mrs.
Clinton and their associates......................... 21
Background....................................................... 22
I. Mr. Foster's Involvement in the Clintons' Personal Matters.......23
II. The Traditional Independence of the White House Counsel's Office.33
Summary of the Evidence.......................................... 36
I. The Contents of Vincent Foster's Office at the Time of his Death.36
II. July 20, 1993....................................................42
A. The Discovery of Mr. Foster's Body.................... 42
B. The Park Police Notify the White House and the Foster
Family............................................... 44
C. The White House Ignores Repeated Park Police Requests
to Seal Mr. Foster's Office.......................... 44
D. Mrs. Clinton Learns of Mr. Foster's Death and Begins
to Contact Close Associates.......................... 46
E. Mrs. Clinton Calls the White House on an Unlisted
Trunk Line........................................... 47
F. Helen Dickey's Telephone Call to the Arkansas
Governor's Mansion................................... 48
G. The Handling of Trash and Burn Bags in Mr. Foster's
Office............................................... 50
H. Senior White House Officials Conduct a Late-Night
Search of Mr. Foster's Office........................ 51
I. Secret Service Officer Henry O'Neill Observes Margaret
Williams Remove Documents from Mr. Foster's Office... 53
III.July 21, 1993....................................................55
A. Mr. Foster's Office is Finally Sealed................. 55
B. The White House Impedes Initial Park Police Efforts to
Search Mr. Foster's Office........................... 57
C. The White House Counsel and Deputy Attorney General
Agree on a Search Protocol for the Documents in Mr.
Foster's office...................................... 58
D. The White House Finalizes the Agreement on the Search
Protocol............................................. 60
IV. July 22, 1993....................................................63
A. The White House Counsel's Office Interferes with Park
Police Interviews of White House Staff............... 63
B. The First Lady, Margaret Williams, Susan Thomases and
Bernard Nussbaum Conduct a Series of Early Morning
Telephone Calls...................................... 64
C. The White House Breaks its Agreement with the Justice
Department: ``A Terrible Mistake''................... 67
D. The Window Dressing Review of the Documents in Mr.
Foster's Office...................................... 70
E. Mr. Nussbaum's Failure to Search Properly Mr. Foster's
Briefcase............................................ 74
F. The Foster Family Lawyer Overhears Discussion of the
Scraps of Paper in Mr. Foster's Briefcase............ 77
G. The Secretive, Real Review of the Contents of Mr.
Foster's Office...................................... 78
H. The Transfer of Clinton Personal Files to the First
Family's Residence................................... 79
I. The Reaction of Law Enforcement Officials to Mr.
Nussbaum's Search.................................... 82
V. July 26, 1995....................................................83
A. The Existence of the Torn-Up Note is Finally Revealed
to Law Enforcement................................... 83
B. The White House's Decision Not to Disclose the Note
Immediately to Law Enforcement....................... 87
C. Mrs. Clinton and Susan Thomases Are Told of the
Discovery of the Note................................ 88
VI. July 27, 1993....................................................90
A. The Review and Transfer of the Clinton Personal Files
From the White House Residence to Williams & Connolly 90
B. White House Deliberations About the Handling of the
Note................................................. 93
C. The President is Told of the Note..................... 95
D. The White House Finally Turns the Note Over to Law
Enforcement.......................................... 95
Findings of the Special Committee................................ 98
1. At the time of his death, Vincent Foster was
intimately involved in two brewing scandals--
Travelgate and Whitewater--touching on President and
Mrs. Clinton......................................... 99
2. Senior White House officials were aware that the
President and Mrs. Clinton faced potential liability
over Whitewater and their relationship with the
McDougals............................................ 100
3. Senior White House officials ignored repeated
requests by law enforcement officials to seal Mr.
Foster's office on the night of his death............ 101
4. White House officials conducted an improper search of
Mr. Foster's office on the night of his death........ 102
5. Margaret Williams may have removed files from the
White House Counsel suite on the night of his death.. 103
6. Bernard Nussbaum agreed with the Justice Department
officials on July 21, 1993, to allow law enforcement
officials to review documents in Mr. Foster's office. 104
7. Margaret Williams and Susan Thomases, in consultation
with Mrs. Clinton, took part in formulating the
procedure for reviewing documents in Mr. Foster's
office on July 22, 1993.............................. 105
8. Bernard Nussbaum failed to conduct a meaningful
review of Mr. Foster's office and did not describe to
law enforcement officials sensitive files pertaining
to the Clintons and the Administration............... 107
9. An index of documents in Mr. Foster's office is
missing and other indices were revised following his
death to conceal possible references to Whitewater... 108
10. Bernard Nussbaum knew about yellow scraps of paper in
Mr. Foster's briefcase prior to Stephen Neuwirth's
apparent discovery on July 26, 1993.................. 109
11. Margaret Williams, in consultation with Mrs. Clinton,
removed files from Mr. Foster's office to the White
House residence to be reviewed by the Clintons....... 110
12. Senior White House officials did not provide complete
and accurate information to the Park Police and FBI
with respect to the handling of Mr. Foster's note.... 111
13. Mr. Hubbell probably knew about the discovery of Mr.
Foster's note on July 27, 1993....................... 112
14. Margaret Williams provided inaccurate and incomplete
testimony to the Special Committee in order to
conceal Mrs. Clinton's role in the handling of
documents in Mr. Foster's office following his death. 113
15. Susan Thomases provided inaccurate and incomplete
testimony to the Special Committee in order to
conceal Mrs. Clinton's role in the handling of
documents in Mr. Foster's office following his death. 115
16. Bernard Nussbaum provided inaccurate and incomplete
testimony to the Special Committee concerning the
handling of documents in Mr. Foster's office
following his death.................................. 117
Conclusions of the Special Committee
``Bernie, are you hiding something?''--Philip Heymann,
former Deputy Attorney General.6
Whitewater is a ``can of worms you shouldn't open.''--
Vincent Foster's handwritten notes.7
``HRC `doesn't want [an independent counsel] poking into 20
years of public life in Arkansas.' ''--Diary of Roger Altman,
former Deputy Secretary of Treasury, quoting Margaret Williams,
Chief of Staff to the First Lady.8
``Ms. Thomases and the First Lady may have been concerned
about anyone having unfettered access to Mr. Foster's
office.''--Associate White House Counsel Stephen
Neuwirth.9
The death of White House Deputy Counsel Vincent W. Foster,
Jr. on July 20, 1993 marked the first time since the death of
Secretary of Defense James Forrestal in 1949 that a high-
ranking U.S. official took his own life.10 Now, almost
three years later, the circumstances surrounding Mr. Foster's
tragic death remain the subject of much speculation and even
suspicion. Against the backdrop of the death of a high-ranking
U.S. official, this controversy has been fueled by a series of
misguided actions taken by senior White House officials to
shield the documents in Mr. Foster's office from independent
career law enforcement investigators and to spirit the
documents to the White House Residence.
As Deputy Counsel to the President, Mr. Foster was the
number two lawyer in the White House. He worked on the most
important public issues faced by the new Clinton
Administration. At the time of his death, Mr. Foster also was
one of the Clintons' key advisors on Whitewater and Travelgate.
These matters are now the subject of criminal investigations by
Independent Counsel Kenneth Starr. In fact, by July 20, 1993,
federal investigators already were examining Madison Guaranty
Savings and Loan Association, the S&L at the center of the
Whitewater affair, as well as the controversial firing in May
1993 of seven career White House Travel Office employees. Mr.
Foster's office contained important evidence of actions that
the Clintons and senior White House officials took with respect
to Whitewater and Travelgate.
The Special Committee's investigation into the handling of
Mr. Foster's documents was among the most important matters of
inquiry under Resolution 120. It raised the question, once
again in our nation's history, whether the power of the White
House was misused to serve the purely private ends of the
President and his associates: specifically, whether senior
officials took improper steps, in their handling of Mr.
Foster's documents, to cover up embarrassing revelations or
even crimes relating to Whitewater and Travelgate.
Often, the successful prosecution of financial crimes and
public corruption depends on the documentary trail left by the
perpetrators of such wrongdoing. For example, Independent
Counsel Starr recently obtained the convictions of Arkansas
Governor Jim Guy Tucker and James and Susan McDougal, the
owners of Madison Guaranty and the Clintons' partners in the
Whitewater real estate development, in part on the basis of
more than 600 documents introduced into evidence. By the same
token, the concealment or removal of documents can seriously
delay or derail investigation of financial malfeasance.
The White House undeniably mishandled the review of
documents in Mr. Foster's office following his death.
Department of Justice and Park Police investigators told the
Special Committee that their investigations were hindered and
impeded by the refusal of senior White House officials to allow
them to review Mr. Foster's documents. The question before the
Committee, then, is whether senior White House officials simply
committed an inexplicable series of blunders and misjudgments
or whether these officials deliberately interfered with the
investigations into Mr. Foster's death and, perhaps, into the
Whitewater and Travelgate affairs.
After careful review of all the evidence, the Special
Committee concludes that senior White House officials,
particularly members of the Office of the White House Counsel,
engaged in a pattern of highly improper conduct in their
handling of the documents in Mr. Foster's office following his
death. These senior White House officials deliberately
prevented career law enforcement officers from the Department
of Justice and Park Police from fully investigating the
circumstances surrounding Mr. Foster's death, including whether
he took his own life because of troubling matters involving the
President and Mrs. Clinton. At every turn, senior White House
officials prevented Justice Department and Park Police
investigators from examining the documents in Mr. Foster's
office, particularly those relating to the Whitewater and
Travelgate affairs then under investigation.
This pattern of concealment and obstruction continues even
to the present day. The Special Committee concludes that senior
White House officials and other close Clinton associates were
not candid in their testimony before the Committee.
Specifically, the Committee concludes that Margaret Williams,
Chief of Staff to the First Lady, Susan Thomases, a New York
attorney and close advisor to Mrs. Clinton, Bernard Nussbaum,
then-White House Counsel, and Webster Hubbell, former Associate
Attorney General and now-convicted felon, all provided
inaccurate and incomplete testimony to the Committee in order
to conceal Mrs. Clinton's pivotal role in the decisions
surrounding the handling of Mr. Foster's documents following
his death.
Finally, the Special Committee concludes that the
misconduct surrounding the handling of Mr. Foster's documents
is part of a larger and more troubling pattern, that began in
Arkansas in the 1980s and has continued in Washington during
the Clinton Administration, in which the Clintons and their
associates have sought to hinder, impede and control
investigations into Madison Guaranty S&L and the Whitewater
real estate investment. Parts of this larger pattern include
(i) Mrs. Clinton's decision in 1988--when federal investigators
were examining possible misconduct leading to Madison
Guaranty's failure just two years before--to order the
destruction of records relating to her representation of this
S&L; (ii) Mr. Foster's and Mr. Hubbell's improper and
unauthorized 1992 removal of Rose Law Firm records and files
relating to Mrs. Clinton's representation of this corrupt S&L;
and (iii) and the improper communication to White House
officials during the fall of 1993 of confidential information
relating to ongoing criminal investigations of Madison Guaranty
and of Capital Management Services, Inc., a small business
investment company also central to the Whitewater affair.
By the time of Vincent Foster's death in July 1993, the Clintons had
established a pattern of concealing their involvement with
Whitewater and the McDougals' Madison Guaranty S&L
The actions of senior White House officials and other close
Clinton associates in the days and weeks following Mr. Foster's
death cannot be viewed in a vacuum. Their actions were but part
of a pattern that began in 1988 of concealing, controlling and
even destroying damaging information concerning the Whitewater
real estate investment and the Clintons' ties to James and
Susan McDougal and the Madison S&L. Indeed, at the time of Mr.
Foster's death, the Clintons and their associates were aware
that the Clintons' involvement with Whitewater land deal, the
McDougals, and the Madison S&L might subject them to civil
liability and even criminal investigation.
In 1988, Mrs. Clinton ordered the destruction of records
relating to her representation of Mr. McDougal's Madison
S&L.11 This was not a routine destruction of records. At
the time, federal regulators were investigating the operation
and solvency of Madison in anticipation of taking it over.
These Rose Law Firm records, which after Madison's failure
would have belonged to the Resolution Trust Corporation
(``RTC''),12 were directly relevant to that investigation.
By ordering their destruction, Mrs. Clinton eliminated
pertinent records and also exposed her firm to potential
liability with respect to her representation. Indeed, if such
representation was proper, as Mrs. Clinton has claimed, her
document destruction deprived the law firm of the records
necessary to defend itself in a suit by federal investigators.
Moreover, in 1988, Seth Ward, a former associate of Mr.
McDougal and Webster Hubbell's father-in-law, was actually
suing Madison Guaranty over a land deal that federal regulators
have described as a fraud.13 Mrs. Clinton had performed
work on the project, including having numerous telephones calls
and meetings with Mr. Ward, and the law firm record of her work
and the transactions surrounding this land deal certainly would
have been highly relevant to the conduct of that suit.
Accordingly, Mrs. Clinton's destruction of documents could
constitute a breach of legal ethics and, possibly, a violation
of law if done with the knowledge that the documents are
material to investigations or ongoing litigation.14
Professor Stephen Gillers of New York University, a noted
ethics expert, has recently stated: ``I don't know how it could
be that these files were destroyed. . . . It makes it stranger
that they were destroyed, not only so soon after they were
created but also at a time when this lawsuit was about to go to
trial. . . . It certainly could lead to suspicion that she has
something to hide because one possible inference from the
destruction is that there was something in those files that she
did not want to have made public.'' 15
The pattern further continued during the 1992 presidential
campaign, after questions arose about the Clintons' investment
with the McDougals in Whitewater and Mrs. Clinton's
representation of Madison Guaranty before a state agency. In an
effort to respond to inquiries from the press and charges from
other candidates, Mrs. Clinton's then-law partner, Vincent
Foster, collected all the information he could on the Madison
representation. At the conclusion of the campaign, the Madison
files, which were by now the property of the RTC as conservator
of Madison, as well as the files of other Rose clients for whom
Mrs. Clinton had performed legal services, were secretly
removed from the firm by another then-Rose Law Firm partner,
Webster Hubbell. Mr. Hubbell removed these files, at times
taking the firm's only copies,16 without obtaining the
consent of the firm or client.17 Given that Mr. Hubbell
was about to assume a position of great public trust as
Associate Attorney General, his unauthorized decision to remove
these files is especially troubling.
Also during the 1992 presidential campaign, Mr. Foster or
Mr. Hubbell ordered the printing of billing records relating to
the Rose Law Firm's representation of Madison Guaranty. These
important records revealed the extent of Mrs. Clinton's legal
work for McDougal's S&L, including her telephone call to
Beverly Bassett Schaffer, the Arkansas Securities Commissioner
appointed by Governor Clinton, about the troubled thrift's
controversial proposal to raise capital by issuing preferred
stock. The records also reflected Mrs. Clinton's work on the
IDC or Castle Grande transaction, which federal regulators
described as a series of fraudulent land flips.18 The
records contain the handwritten questions of Mr. Foster to Mrs.
Clinton and notations by Mr. Hubbell.19 Mrs. Clinton has
recently stated through her lawyer that she may have reviewed
them during the 1992 presidential campaign.
After federal investigators began to look into matters
relating to Madison Guaranty and Whitewater, a number of
subpoenas were issued for these Rose Law Firm billing records.
By then, however, the records were nowhere to be found. Despite
extensive searches conducted by the law firm, neither the
originals nor copies were discovered.20 They were not in
the firm computers, its client files, or the firm's storage
facility.21
Apparently, at some point, someone removed these billing
records from the Rose Law Firm. In August 1995, Carolyn Huber,
an assistant to Mrs. Clinton, discovered them in the book room
of the White House Residence, next to Mrs. Clinton's
office.22 At the time, Mrs. Huber did not realize the
records were under subpoena, and she placed them in a box in
her office. In January 1996,23 Mrs. Huber identified these
records, and personal counsel for the President and Mrs.
Clinton turned them over investigators. Mr. Hubbell testified
that he last saw the records during the 1992 presidential
campaign in the possession of Mr. Foster.24
By July 1993, the Clintons and their associates had
established a pattern of concealment with respect to the
Clintons' involvement with Whitewater and the Madison S&L.
Because of the complexity of the allegations of misdeeds
involving these institutions, documents and files are critical
to any inquiries into the matter. Yet, at every important turn,
crucial files and documents ``disappeared'' or were withheld
from scrutiny whenever questions were raised.
The Clintons and their associates were aware, at the time of Mr.
Foster's death, that the Clintons' involvement with Whitewater
and the Madison Guaranty S&L might subject them to liability
In late fall 1992, Betsey Wright, the coordinator of
``damage control'' efforts during the presidential campaign and
a former chief of staff to Governor Clinton, learned of a
``criminal referral regarding a savings and loan official in
Arkansas and . . . involv[ing] the Clintons.'' 25 Ms.
Wright testified that she learned this information from a
Clinton supporter from California who had a friend who heard it
at a cocktail party in Kansas City.26 At the cocktail
party, an RTC official informed someone, whose friend reported
it to Ms. Wright, that the RTC had just sent a ``criminal
referral up to the prosecutor in Little Rock.'' 27 Upon
hearing the news, Ms. Wright tried to gather more information
about the referral.28 She then told Mrs. Clinton about the
referral directly. Ms. Wright testified: ``I remember I asked
Hillary if she was aware of any friend of theirs who was in a
savings and loan business who might be under criminal
investigation, and we couldn't think of anybody.'' 29
It is with this knowledge that the Clintons and their
advisers came to Washington, taking with them the important
documents relating to Whitewater and Madison. The documents
(including documents improperly taken from the law firm) were
entrusted only to close associates of the Clintons, chiefly
Messrs. Foster and Hubbell.
By March 1993, senior Clinton Administration officials
confirmed that the RTC had sent a criminal referral mentioning
the Clintons to the Justice Department.30 Specifically,
RTC Senior Vice President William H. Roelle testified that,
after taking office, Roger Altman, then Deputy Treasury
Secretary, directed the staff to inform him of all important or
potentially high-visibility issues.31 According to Mr.
Roelle, on or about March 23, 1993, he told Mr. Altman of an
RTC referral involving the Clintons.32
Powerful documentary evidence strongly indicates that Mr.
Altman immediately passed this important information on to
White House Counsel Bernard Nussbaum. On March 23, Mr. Altman
sent Mr. Nussbaum a facsimile with a handwritten cover sheet,
forwarding an ``RTC Clip Sheet'' of a March 9, 1992 New York
Times article with the headline, ``Clinton Defends Real-Estate
Deal.'' 33 This article reported the responses of
presidential candidate, Bill Clinton, to an earlier Times
report on the Clintons' Whitewater investment. The next day,
Mr. Altman faxed to Mr. Nussbaum the same article that he sent
the day before and portions of the earlier Times report on
Whitewater, dated March 8, 1992, entitled ``Clintons Joined S&L
Operator in an Ozark Real-Estate Venture.'' 34
In addition, SBA Associate Administrator Wayne Foren
testified that, in early May 1993, he briefed Erskine Bowles,
the new SBA Administrator about the agency's ongoing
investigation of David Hale's Capital Management Services
because the case involved President Clinton.35 Shortly
thereafter, Mr. Bowles told Mr. Foren that he had briefed White
House Chief of Staff Mack McLarty about the case.36
Although Mr. Bowles did not recall being briefed by Mr. Foren
about Capital Management 37 or talking to Mr. McLarty
about the case,38 Mr. Foren's account was corroborated by
his deputy, Charles Shepperson.39 Mr. McLarty's calendar
indicated that Mr. Bowles had two meetings with Mr. McLarty at
the White House in early May 1993.40
As of July 1993, therefore, Mrs. Clinton and others in the
Administration were on notice that there was an ongoing federal
investigation to which Madison-related documents could be
relevant.
At the time of his death, Mr. Foster's office contained damaging
evidence about the Whitewater and Travelgate affairs
After he became Deputy White House Counsel, Mr. Foster
continued to play a key role in controlling potential damage to
the Clintons from Whitewater. He was given the responsibility
for overseeing the preparation of Clintons' tax returns for
1992 to reflect properly the sale of their shares in
Whitewater.41 Mr. Foster worked with other White House
officials in the Spring of 1993 in preparing a response to
expected Whitewater questions.42 And, most interestingly,
Mr. McDougal had left a message for Mr. Foster on June 16,
1993, ``re tax returns of HRC, VWF and McDougal.'' 43 The
documents in Mr. Foster's office at the time of death included
a file on Whitewater and his notes of conversations with the
Clintons' accountant, Yoly Redden, concerning the tax treatment
of the sale of Whitewater.44 The notes identified the tax
problem as a ``can of worms you shouldn't open'' 45 and
further warned: ``Don't want to go back into that box Was McD
trying to circumvent bank loss--why HRC getting loan from
other.'' 46
Mr. Foster also played a central role in both the firing of
seven career employees of the Travel Office on May 19, 1993 and
subsequent attempts to conceal Mrs. Clinton's true role in the
controversial firings. Harry Thomason, a close Clinton
confidant, reportedly instigated the firings after the career
employees rejected his plan to obtain the White House's charter
business for a company he partly owned.47 With public
criticism growing, the White House circumvented normal
procedures and directly asked the FBI (not the Department of
Justice) to investigate allegation so possible criminal
misconduct by the career employees of the Travel Office.48
Although Mr. Foster was not formally reprimanded for his role
in the firings, he felt personally responsible.49
Other senior White House officials implicated in Travelgate
include David Watkins and Patsy Thomasson. The Special
Committee belatedly obtained a memorandum of Mr. Watkins
outlining Mr. Foster's extensive involvement as Mrs. Clinton's
conduit to the firings.50 Indeed, Mr. Watkins fingered Mr.
Foster as the person who directly communicated to him Mrs.
Clinton's order that the Travel Office staff be fired: ``Foster
regularly informed me that the First Lady was concerned and
desired action--the action desired was the firing of the Travel
Office staff.'' 51 Notwithstanding Mrs. Clinton's clear
involvement in the firing of the staff, Mr. Foster and other
White House officials did nod disclose her true role to
investigators probing the affair.
Significantly, at the time of his death, Mr. Foster's
briefcase contained files, a personal notebook and a torn-up
note, all concerning the controversial Travel Office matter.
Thus, when Mr. Foster committed suicide in July 1993, White
House officials were aware that a danger existed that the law
enforcement officials might discover documents concerning
Whitewater or Travelgate in his office. In fact, David
Margolis, one of the Justice Department officials who attended
the search of Mr. Foster's office two days after his death, was
aware of an RTC criminal referral concerning Madison that
mentioned the Clintons.52 This risk of discovery provides
the backdrop against which the story of Mr. Foster's death and
the White House's subsequent scramble must be viewed.
White House officials engaged in highly improper conduct in handling
documents in Vincent Foster's office following his death
The evidence before the Special Committee established that
White House officials engaged in a pattern of deliberate
obstruction, and interference with, efforts by law enforcement
authorities to conduct their several investigations into Mr.
Foster's death.
This White House interference began immediately following
Mr. Foster's death on the night of July 20. Senior White House
officials ignored specific requests by the Park Police to seal
Mr. Foster's office on the night of his death.53 Instead,
White House Counsel Bernard Nussbaum, Chief of Staff to the
First Lady Margaret Williams and Deputy Assistant to the
President Patsy Thomasson entered Mr. Foster's office
purportedly to search for a suicide note.
According to career Secret Service Office Henry O'Neill,
and corroborated by Secret Service records, Ms. Williams
removed file folders from Mr. Foster's office that night. Even
assuming, contrary to the testimony of Officer O'Neill, that no
files were removed from the office that night, the multiple
entries into Mr. Foster's office plainly compromised the
integrity of evidence the Park Police considered to be
valuable.54 Beyond this, Mr. Nussbaum not only ignored
instructions to seal Mr. Foster's office, but also allowed Ms.
Thomasson, a staffer without a security clearance who was
involved in the Travel Office matter, to conduct an improper
search of Mr. Foster's office. For reasons unknown--but to a
large extent illuminated by Officer O'Neill's testimony--
Margaret Williams also participated in the late night foray
through Mr. Foster's office.
The next morning, on July 21, Mr. Nussbaum's personal
secretary, Betsy Pond, also rummaged through Mr. Foster's
office--ostensibly to straighten it up--thereby disturbing
important evidence.55 Stephen Neuwirth, Mr. Nussbaum's
associate, immediately recognized the impropriety: ``I didn't
think it was appropriate for an assistant to Mr. Nussbaum to be
in the office at that time.'' 56 Thomas Castleton, a staff
assistant, also entered Mr. Foster's office in the morning of
July 21.57 Only the Park Police investigators were impeded
in their attempt to enter Mr. Foster's office to search for
evidence. They waited in vain all day ``for approval from Mr.
Nussbaum'' to conduct their investigation.58
In addition, members of the White House Counsel's office
participated in the Park Police interviews of White House
staffers, not to protect the legal interests of the staffers
but, in the words of Park Police Detective Peter Markland, to
``report back to Mr. Nussbaum what was being said in the
interviews.'' 59 The White House Counsel's office coached
the staffers about their testimony during a meeting on
``comportment and interrogation.'' 60 The Park Police left
with the impression that their interviews had been
rehearsed.61
The pattern of obstruction continued with the White House
dealings with the Justice Department. Mr. Nussbaum agreed with
Deputy Attorney General Heymann on the procedures for reviewing
documents in Mr. Foster's office.62 The next day, when
Susan Thomases, a close advisor to Mrs. Clinton and a member of
the Whitewater defense team during the 1992 presidential
campaign,63 complained about the review procedures after a
conversation with Mrs. Clinton, Mr. Nussbaum broke the
agreement and changed the procedures.64 In explaining this
about-face, Mr. Nussbaum told his associate, Stephen Neuwirth,
that Ms. Thomases and Mrs. Clinton were ``concerned about
anyone having unfettered access to Mr. Foster's office.''
65 Contrary to his promise to the Deputy Attorney General,
Mr. Nussbaum proceeded to review the documents by himself and
did not afford Mr. Heymann an opportunity to decide whether
Justice Department officials should be present for the
review.66
The Special Committee concludes that Mr. Nussbaum engaged
in highly improper conduct in braking the White House agreement
with the Justice Department. Mr. Nussbaum, in effect,
interposed himself between the investigators and the matters
under investigation. Prompted by Mrs. Clinton, Susan Thomases,
and senior White House officials, he made a conscious decision
to interfere with a federal investigation.
Beyond this, the Special Committee concludes that the
``review'' of documents in Mr. Foster's office on July 22 was a
sham. Law enforcement authorities did not review any documents;
Mr. Nussbaum relied on their presence simply to ``dress up''
the review.67 Mr. Nussbaum ignored repeated complaints by
Justice Department officials that they had no meaningful role
in the review, and that Mr. Nussbaum was providing only a
``generic description'' 68 of the files in the
office.69 He carefully glossed over sensitive documents
that he knew could embarrass the President and the
Administration, including those related to Whitewater and
Travelgate.
Almost immediately after law enforcement offices left Mr.
Foster's office, Mr. Nussbaum went to work to conduct the real
search in secret. Michael Spafford, an attorney for the Foster
family, testified that he overhead Mr. Nussbaum tell Mr. Sloan
at the end of the meeting that they would look through the
materials again later.70 Associate White House Counsel
Clifford Sloan's notes of the meeting ended with the following:
``get Maggie--go through office--get HRC, WJC stuff.'' 71
Ms. Williams and Mr. Nussbaum collected the files,
including at least one marked Whitewater. Ms. Williams then
consulted with Mrs. Clinton, and transferred one or two boxes
of documents to the White House Residence for further review by
the President and Mrs. Clinton. In the case of Mr. Foster's
highly sensitive Travelgate files, Mr. Nussbaum took the
records to his office.72 There is also evidence that
indices of files in Mr. Foster's officer were altered or
destroyed after his death.73 These indices were the only
means of securing a chain of custody for Mr. Foster's
documents.
In short, senior White House officials deliberately
disrupted the critical chain of custody of Mr. Foster's
documents and may have lost or destroyed evidence now highly
relevant to ongoing criminal investigations of Whitewater and
Travelgate.
During the July 22 search, Mr. Nussbaum also failed to
inform law enforcement officials that scraps of paper were at
the bottom of Mr. Foster's briefcase. He was told by both
Clifford Sloan \74\ and Deborah Gorham \75\ that papers
remained in Mr. Foster's briefcase after his search, but did
not inform law enforcement. When Mr. Neuwirth finally
``discovered'' Mr. Foster's torn-up note on July 26, the White
House waited a further 26 hours before notifying the
authorities. Although the ostensible reason for the delay was
to permit the President and Mrs. Foster to review the note,
White House officials conducted a series of meetings during
this period to discuss the consequences of turning the note
over to the authorities.
Even without the benefit of all the facts uncovered by the
Special committee within the last year, Deputy Attorney General
Philip Heymann aptly summed up the pattern of troubling
behavior by the White House as it appeared to him on July 27,
when he finally saw the note:
I'm trying to describe a collection of little things,
each of which I'm prepared to believe is just a
difference of opinion, and in my view, a clumsy and
foolish way to handle the matter on the part of the
White House staff and Mr. Nussbaum.
But they're starting to collect, and as they're
collecting too much, and the last one's quite dramatic.
I mean, first of all, we had a sensible system for
reviewing the documents, and that's changed to a system
that doesn't have any law enforcement input into it at
all. It's changed without notifying me.
I'm vaguely worried about the Park Police feeling
that they're not wholly able to investigate those
messages are not too clear.
And then along comes a note that should have been
found on the 22nd, if they really went through all the
documents. I never looked at the briefcase but it at
least worries me that perhaps it should have been
found, and we learn about it 27 hours later.\76\
Mr. Heymann then ordered the Justice Department to
investigate the discovery of the note and Mr. Foster's
assertions made therein.
Amazingly, the White House did not cooperate fully even
with the new investigations ordered by Mr. Heymann. During
official FBI interviews, where they were under an obligation to
tell the truth, senior White House officials did not tell the
FBI that Mrs. Clinton saw the note, and that Susan Thomases was
told about it by Mr. Nussbaum, before it was disclosed to the
authorities. At Mr. Heymann's request, the Justice Department's
Office of Professional Responsibility investigated Mr. Foster's
assertion that the FBI lied in their report to the Attorney
General on the Travelgate controversy. Mr. Foster's notebook on
that matter, which Mr. Nussbaum found in Mr. Foster's
briefcase, was critical evidence to that investigation.
Nevertheless, instead of disclosing its existence to Justice
Department officials, Mr. Nussbaum tucked away in his office
Mr. Foster's notebook and other Travelgate materials.\77\
In July 1995, when he found out about Mr. Nussbaum's
concealment of Mr. Foster's Travelgate notebook, the Director
of the Office of Professional Responsibility at the Justice
Department, Michael Shaheen, wrote an angry memorandum to
Associate Attorney General David Margolis. After outlining
specific instances of noncooperation by the White House, Mr.
Shaheen concluded: ``The fact that we have just now learned of
the existence of obviously relevant notes written by Mr. Foster
on the subject of the FBI report is yet another example of the
lack of cooperation and candor we received from the White House
throughout our inquiry.\78\
Viewed in the aggregate, then, these numerous instances of
White House interference with several ongoing law enforcement
investigations amounted to far more than just aggressive
lawyering or political naivete. Rather, the Special Committee
concludes that the actions of these senior White House
officials constitute a highly improper pattern of deliberate
misconduct.
Mrs. Clinton was closely involved in the handling of documents in Mr.
Foster's office following his death and directed that
investigators be denied ``unfettered access'' to his office
From the moment that she was notified of Mr. Foster's
death, Mrs. Clinton and her key agents--Margaret Williams and
Susan Thomases--were engaged in the subsequent handling of
documents in Mr. Foster's office. Telephone records indicate
that upon learning the news, Mrs. Clinton first called her
Chief of Staff, Margaret Williams.\79\ After talking with Mrs.
Clinton, Ms. Williams and her assistant, Evelyn Lieberman,
drove to the White House and searched Mr. Foster's office. The
second call Mrs. Clinton made on the night of Mr. Foster's
death was to the residence of Harry Thomason,\80\ a key player
in the Travelgate scandal. Mrs. Clinton then called Susan
Thomases, who handled Whitewater damage control during the 1992
presidential campaign, and talked for 20 minutes.\81\
This series of telephone calls in the hours immediately
following Mr. Foster's death established a communications
triangle among Mrs. Clinton, Ms. Thomases, and Ms. Williams
that would surface frequently in the handling of documents in
Mr. Foster's office. The evidence strongly suggests that Mrs.
Clinton, upon learning of Mr. Foster's death, at least realized
its connection to Mr. Thomason's Travelgate scandal, and
perhaps to the Whitewater matter, and dispatched her trusted
lieutenants to contain any potential embarrassment or political
damage.
After speaking with Mrs. Clinton, Ms. Thomases paged Ms.
Williams, while Ms. Williams was searching Mr. Foster's office
at the White House,\82\ presumably to monitor the progress of
the search. After the completion of her search, Ms. Williams
returned home and called Mrs. Clinton at 12:56 a.m. on the
morning of July 21.\83\ Upon the conclusion of her eleven
minute conversation with Mrs. Clinton, Ms. Williams called Ms.
Thomases at 1:10 a.m. and spoke for fourteen minutes.\84\
These telephone calls illustrated a pattern that would be
repeated at each critical event in the handling of papers in
Mr. Foster's office: discussions among Mrs. Clinton, Ms.
Thomases, and Ms. Williams; subsequent implementation by Ms.
Williams, monitored by Ms. Thomases; and, finally, reporting by
Ms. Williams to Mrs. Clinton and Ms. Thomases.
The operation of the Clinton-Thomases-Williams triangle was
best illustrated on July 22, when White House officials and
Justice Department officials were scheduled to review documents
in Mr. Foster's office. Ms. Williams called Mrs. Clinton at
6:44 a.m. Central Daylight Time.\85\ Mrs. Clinton then called
Ms. Thomases in Washington,\86\ who immediately paged Bernard
Nussbaum at the White House.\87\ When Mr. Nussbaum called back,
Ms. Thomases asked him about the upcoming review of Mr.
Foster's office and, by Mr. Nussbaum's own account, said that
``people are concerned'' about the procedures to be employed
for conducting the review.\88\
Later that morning, Mr. Nussbaum told Mr. Neuwirth that the
First Lady and Ms. Thomases were concerned about law
enforcement officials having ``unfettered access'' to documents
in Mr. Foster's office.\89\
At 10:00 a.m., when the document review was scheduled to
begin, Mr. Nussbaum told Justice Department officials that he
alone would review the documents, breaking a prior agreement
with the law enforcement officials. Throughout the day, while
White House officials were meeting with Mr. Nussbaum to discuss
procedures for reviewing documents in Mr. Foster's office, Ms.
Thomases made repeated phone calls to the White House, in an
apparent effort to monitor, and perhaps to affect, the progress
of those discussions. Telephone records indicated that, between
10:48 a.m. and 11:54 a.m., Ms. Thomases called the office of
the Chief of Staff, Mack McLarty, three times and the office of
the Chief of Staff to the first Lady, Margaret Williams, three
times.\90\ At 12:55 p.m., Ms. Williams called the Rodham
residence in Little Rock, apparently in response to a page from
Mrs. Clinton's personal assistant.\91\ And records indicated
that, at 1:25 p.m., approximately the time when Mr. Nussbaum
told law enforcement officials that he alone would review
documents in Mr. Foster's office, a telephone call was placed
from the White House to the Rodham residence.\92\
After Mr. Nussbaum finished his review of documents in Mr.
Foster's office, he and Ms. Williams conducted a second review
to segregate and remove the Clintons' personal files.\93\ Ms.
Williams called Mrs. Clinton from Mr. Foster's office to seek
instructions concerning where to place the files, and Carolyn
Huber recalled that Ms. Williams said that ``Mrs. Clinton had
asked her to call me'' \94\ about transferring the files to the
residence. Ms. Williams told Thomas Castleton that she was
taking the files to the residence so that the Clintons could
review them before they were handed over to Williams &
Connolly.\95\ After the documents were transferred, Ms.
Williams and Ms. Thomases again talked on the telephone at 5:13
p.m.\96\ At 7:12 p.m., Ms. Thomases called Mrs. Clinton in
Little Rock.\97\
The evidence leads to the inescapable conclusion that,
early in the morning of July 22, Mrs. Clinton, Susan Thomases
and Margaret Williams discussed the procedures for conducting
the review of documents in Mr. Foster's office. Ms. Thomases
then communicated their ``concern[s]'' \98\ to Mr. Nussbaum
about his prior agreement with senior Justice Department
officials. In place of that agreement, which would have
permitted those officials to review jointly Mr. Foster's
documents with Mr. Nussbaum,\99\ the White House adopted a new
procedure under which he alone would review the documents.
Thus, as Mrs. Clinton wished, law enforcement would not have
``unfettered access', to Mr. Foster's documents. Ms. Williams
called Mrs. Clinton from Mr. Foster's office to ask where to
take the Clintons' personal documents that she had segregated
with Mr. Nussbaum. After getting instructions from Mrs.
Clinton, Ms. Williams transferred the files to the White House
Residence for the Clintons to review. After the new plan was
fully executed, Ms. Thomases again talked to Ms. Williams and,
according to telephone records, called Mrs. Clinton.
On July 27, the day after a note in Mr. Foster's hand was
discovered and the day that documents from Mr. Foster's office
was transferred from the White House Residence to Williams and
Connolly, Mrs. Clinton summoned Susan Thomases and Webster
Hubbell to the White House.\100\ The three were in the White
House Residence alone together, and Mr. Hubbell and Ms.
Thomases left at the same time.\101\ Ms. Thomases and Mr.
Hubbell studiously avoided testifying about this meeting in
early appearances before the Special Committee. However, when
eventually confronted with clear documentary evidence, in the
form of Secret Service logs,\102\ Ms. Thomases finally admitted
that she recalled the three being together at the White House
in the week following Mr. Foster's death.\103\ Ms Thomases
maintained that they did no more than exchange condolences with
Mrs. Clinton, \104\ and that there was no discussion of the
handling of documents in Mr. Foster's office. Mr. Hubbell
stated that he went to the White House to give Mrs. Clinton an
account of Mr. Foster's funeral after Mrs. Clinton left.\105\
He claimed that he did not see Ms. Thomases or discuss the Mr.
Foster's note, which had been discovered but not disclosed to
the authorities, with Mrs. Clinton.\106\
The Special Committee concludes that this testimony of Ms.
Thomases and Mr. Hubbell about their simultaneous visits to the
second floor of the White House residence is highly
implausible. White House officials, investigators, and the
media \107\ were all speculating about and searching for a note
following Mr. Foster's death. Yet both Ms. Thomases and Mr.
Hubbell persist with their unbelievable story that the note was
not discussed less than one day after it was discovered in Mr.
Foster's briefcase.
In sum, the Special Committee concludes senior
Administration officials and Ms. Thomases have sought to
conceal the true involvement of Mrs. Clinton in the handling of
documents in Mr. Foster's office, an involvement that is
unmistakably established by Mr. Neuwirth's admission, and by
documentary records, all of which shatter the wall of denial
erected by close Clinton associates.
Senior White House Officials and other Clinton Associates provided
incomplete and inaccurate testimony to the Special Committee
The Special Committee concludes that its effort to find the
truth about the events of July 20-27, 1993 was impeded by what
appeared to be a disturbing pattern of incomplete and
inaccurate testimony by senior White House officials and close
Clinton associates. Time and again, the testimony of career law
enforcement officials and others without a motive to lie, as
well as documentary evidence, told one consistent story, while
senior White House officials and close Clinton associates
offered a contradictory version of the facts.
Three Park Police officers testified that on the night of
Mr. Foster's death, July 20, they told White House officials to
take steps to seal his office--requests the White House
officials denied. A Secret Service Officer testified that later
that night he observed the First Lady's Chief of Staff,
Margaret Williams, remove files from Mr. Foster's office;\108\
Ms. Williams denied that she removed anything from the office.
This pattern continued on the next day, July 21. Justice
Department officials testified that they had reached an
agreement with the White House concerning the procedures for
searching Mr. Foster's office.\109\ Even though the
contemporaneous documentary evidence supported the testimony of
the Deputy Attorney General and career Justice Department
officials,\110\ White House Counsel Bernard Nussbaum and his
associates denied the existence of any such agreement allowing
law enforcement to examine the documents in Mr. Foster's
office.\111\
The Special Committee heard more of the same concerning the
events of July 22. Ignoring a peculiar pattern of early morning
telephone calls involving the First Lady, Ms. Williams and
Susan Thomases denied that Mrs. Clinton played any role
whatsoever in the decision to bar law enforcement from looking
at the documents in Mr. Foster's office. Breaking ranks
somewhat, Mr. Nussbaum admitted that he was told by Ms.
Thomases that unspecified ``people'' were concerned about the
upcoming search--presumably, the First Lady, since Ms. Thomases
was widely known for speaking with Mrs. Clinton's authority.
Finally, Stephen Neuwirth, a lower level counsel, admitted that
Mr. Nussbaum told him that Mrs. Clinton and Ms. Thomases were
concerned about giving law enforcement ``unfettered access'' to
Mr. Foster's office.\112\
This pattern continued later in the day on July 22, when
Ms. Williams denied that she was bringing documents from Mr.
Foster's office to the White House Residence for the Clintons
to review. Instead, she offered an implausible story to explain
her decision to bring the documents to the Residence.\113\ Ms.
Williams' account was contradicted by a young White House
staffer, Thomas Castleton, who testified that Ms. Williams told
him that ``the President or the First Lady had to review the
contents of the boxes to determine what was in them.''\114\
Beyond this, there is the curious discovery of Mr. Foster's
note on July 26. Thomas Spafford, a lawyer for the Foster
family, testified that, on July 22, he overheard Clifford Sloan
tell Mr. Nussbaum on July 22 that there were scraps at the
bottom of the briefcase. Messrs. Sloan and Nussbaum denied
this.\115\
As set forth below in the Findings of this Report, the
Committee concludes that four persons--Margaret Williams, Susan
Thomases, Bernard Nussbaum and Webster Hubbell--provided
incomplete and inaccurate testimony to the Committee in an
apparent effort to conceal the intimate involvement of Mrs.
Clinton in the events following Mr. Foster's death.
The Office of the White House Counsel was misused to impede ongoing
investigations and to serve the purely personal legal interests
of the President, Mrs. Clinton and their associates
Every citizen is entitled to mount a defense to civil and
criminal charges. The President is no different. He is not
entitled, however, to use the power of his office to gain a
defense of his private legal affairs not available to other
Americans. The White House Counsel's Office is supposed to
serve the President in his official executive capacity. These
lawyer are paid by the taxpayers to serve the public interest.
In the matter of Mr. Foster's death, the Office of the
White House counsel served, in effect, as the Clintons'
personal defense law firm. This service extended beyond Mr.
Foster's employment as the Clinton's personal attorney to the
use of the White House Counsel's Office in the days following
his death to interfere with and hinder several ongoing federal
investigations into Mr. Foster's death and the handling of
documents in Mr. Foster's office at the time of his death.
Instead of cooperating with law enforcement officials, the
Office of the White House Counsel impeded the investigations of
the Park Police and the Department of Justice. The White House
lawyers ignored and, in some cases, intentionally violated
established procedures that would have ensured the proper
handling of documents in Mr. Foster's office.
The impropriety of these and other actions--actions that
prompted the Deputy Attorney General to ask Mr. Nussbaum,
``Bernie, are you hiding something?''--is compounded when one
recognizes that these actions were taken by members of the
Office of the White House Counsel. These were government
lawyers who were supposed to protect the public interest in
proper investigations and faithful execution of the laws, not
to do the private bidding of the President and First Lady.
The Special Committee concludes that the White House
Counsel's Office was misused in the aftermath of Mr. Foster's
death to interfere with and to obstruct various federal
investigations. This pattern of abuse by the White House
Counsel's Office is not limited in time or scope, but rather
has recurred throughout the Special Committee's investigation
into other matters authorized by Senate Resolution 120. These
include efforts to obtain improperly confidential law
enforcement information from the RTC and from the Small
Business Administration, all while coordinating with private
attorneys representing the Clintons as subjects of
investigation.
The Special Committee recommends that steps be taken to
insure that such misuse of the White House Counsel's Office
does not recur in this, or any future, Administration.
Taken as a whole, the events described in this Report and
summarized in this conclusion, reveal a concerted effort by
senior White House officials to block career law enforcement
investigators from conducting a thorough investigation of a
unique and disturbing event--the first suicide of a very senior
U.S. official in almost fifty years. Unquestionably, the
Department of Justice and Park Police were authorized to
conduct this investigation, and White House officials owed them
a duty to cooperate. Instead, law enforcement officials were
confronted at every turn with concerted efforts to deny them
access to evidence in Mr. Foster's office. Strikingly, the
Counsel to the President carried out the wishes of the First
Lady by breaking his earlier agreement with the Deputy Attorney
General of the United States. And law enforcement officials
were forced to sit still as White House lawyers conducted a
charade of a search. Only after the duly appointed
investigators had departed, did the White House Counsel and the
First Lady's Chief of Staff begin the real search, which
resulted in the transfer of documents to the White House
Residence; the removal of Mr. Foster's Travel Office notebook;
and the disappearance of important document indices that would
have reflected the full contents of his files.
The actions of the White House are especially serious
because the Special Committee has discovered that the files
shielded from the Department of Justice contained evidence
relevant to two investigations that touched on the Clintons'
personal interests: the criminal referral into Madison S&L, and
the anticipated investigation, by Congress and others, into the
Travel Office firings. As demonstrated in this Report, the
White House, including Mrs. Clinton, were on notice that these
investigations were either ongoing or imminent. As it happens,
both of these investigations were of sufficient weight to be
now under the jurisdiction of an Independent Counsel.
Against this background, the actions of the White House
during the week after Mr. Foster's death must be judged. These
White House actions were highly improper; they were deliberate;
and they adversely affected ongoing investigations by career
law enforcement officials. The American people will never be
sure of the contents of Vincent Foster's office at the time of
his death. Their uncertainty and doubts, however, clearly are
the direct result of the wrongful action by the White House.
Background
The death of any senior U.S. official is sure to be a
matter of public concern. But Mr. Foster's death swelled into a
substantial controversy because of two additional factors.
First, Mr. Foster had a very close and long-standing personal
and professional relationship with the President and Mrs.
Clinton. As a prominent lawyer in Arkansas and then as Deputy
White House Counsel, he provided legal counsel to them on a
number of sensitive personal matters. Questions therefore arose
as to whether concerns about any of these matters, including
the Whitewater and Travelgate affairs, contributed to Mr.
Foster's death. Second, senior White House officials,
particularly members of the Office of the White House Counsel,
took actions in the days following Mr. Foster's death to search
and to review the contents of Mr. Foster's office while
preventing law enforcement officials from doing the same. These
actions raised serious questions about whether, in the wake of
Mr. Foster's death, the Office of the White House Counsel was
misused to serve the purely personal legal and political
interests of the President, the First Lady and their
associates.
i. mr. foster's involvement in the clintons' personal matters
Vincent Foster was born on January 15, 1945 in Hope,
Arkansas. He attended kindergarten with future President
William Jefferson Clinton and future White House Chief of Staff
Thomas ``Mack'' McLarty. Mr. Foster graduated from Hope High
School in 1963 and from Davidson College in 1967. Mr. Foster
graduated first in his class from the University of Arkansas
School of Law in 1971, and passed the bar exam later that year
with the highest score in the state. He then joined the Rose
Law Firm in Little Rock, Arkansas, and became a full partner
two years later, in 1973. Mr. Foster's partners included future
First Lady Hillary Rodham Clinton, future Associate Attorney
General Webster Hubbell, and future Associate White House
Counsel William Kennedy.
Messrs. Foster and Hubbell participated in efforts during
the 1992 presidential campaign to control damage arising from
the Whitewater matter and, specifically, to Mrs. Clinton's
representation of the Madison Guaranty Savings and Loan
Association. James and Susan McDougal, the Clinton's partners
in the real estate venture at the heart of the whitewater
affair, owned and controlled Madison. On May 28, 1996, James
McDougal was convicted of eighteen federal felonies and Susan
McDougal was convicted of four federal felonies. These
convictions related both to the operations of Madison and the
Whitewater real estate investment. During the 1992 campaign,
Mr. Hubbell improperly removed from the Rose Law Firm its files
concerning its representation of Madison. Messrs. Hubbell and
Foster also reviewed Rose Law Firm billing records relating to
Rose's representation of Madison.\116\ These records were found
in the White House Residence in August 1995 and finally turned
over to investigators in January 1996, more than two years
after they were first subpoenaed. The records contain
handwritten questions from Mr. Foster to Mrs. Clinton; it is
not possible to date when these questions were put to Mrs.
Clinton.
In January 1993, President-elect Clinton asked Mr. Foster
to become White House Deputy Counsel. Mr. Foster's office on
the second floor of the West Wing of the White House was in the
same suite as that of White House Counsel Bernard Nussbaum. The
Counsel's suite was located right next to the West Wing office
suite of the First Lady.
As Deputy Counsel, Mr. Foster worked on many sensitive
legal and political matters for the Clintons. In May 1993, Mr.
Foster assigned his former law partner, Associate White House
Counsel William Kennedy, to investigate allegations of
mismanagement and misappropriation of funds in the White House
Travel Office. On May 19, 1993, the White House fired seven
career employees of the Travel Office. Almost immediately, the
White House came under intense criticism for its handling of
these firings. According to press reports, less than a month
after President Clinton's inauguration, Catherine Cornelius,
the President's cousin, wrote a memorandum proposing that the
White House dismiss the career employees of the Travel Office
and that she run the operation.\117\ The memorandum cast doubts
on the administration's claim that the seven career employees
were fired for financial misconduct. In addition, Harry
Thomason, a close friend of the Clintons, reportedly had
attempted to steer the White House's lucrative charter business
to an aviation company that he partly owned.\118\ Rebuffed by
the career employees of the Travel Office, Mr. Thomason
reportedly accused them of wrongdoing.\119\
As public criticism mounted, the White House asked a senior
FBI official, John Collingwood, to attend a ``political
strategy session'' with senior presidential advisers on how to
deal with the growing scandal.\120\ On the same day, the White
House took the highly unusual step of releasing a confidential
FBI statement confirming that the bureau was investigating
possible criminal misconduct in the Travel Office.\121\
Thus, in addition to allegations of cronyism underlying the
firing of the career employees, the White House came under fire
for misusing the FBI, an independent investigative agency, for
its own political ends, a charge that would surface time and
again as the White House attempted to contain and manage
embarrassing and potentially incriminating information through
contacts with federal investigative agencies. Protocols
required that White House contacts with the FBI go through the
Department of Justice, and ``[b]y calling on the FBI to help
save the Administration from embarrassment, the White House
appeared to be deviating from two decades of efforts to
insulate the law-enforcement agency from even the appearance of
Presidential manipulation.'' \122\ The FBI conducted an
internal inquiry into contacts between its agents and the White
House, and the White House initiated its own investigation into
the matter. On July 2, 1993, the White House released the
report of its internal review, which sharply reprimanded Mr.
Kennedy and others. Although Mr. Foster was not formally
reprimanded, he felt personally responsible for the affair and
insisted that Mr. Nussbaum allow him to shoulder the
blame.\123\ Mr. Foster's secretive files on the Travel Office
controversy were in his briefcase at the time of Mr. Foster's
death, together with a torn-up note purportedly discovered six
days later. The note listed Mr. Foster's troubles and concerns,
many of which dealt with the Travel Office controversy.
The Travel Office affair apparently weighed heavily on Mr.
Foster's mind at the time of his death.124 Many
colleagues, confidantes, and friends of Mr. Foster stated to
investigators that ``the single greatest source of his distress
was the criticism he and others within the Counsel's office
received following the firing of seven employees from the White
House Travel Office.'' 124 However, according to a FBI
report of an interview with Susan Thomases, who ``got to know
Vince Foster fairly well'' from her work with the Clinton
campaign, transition, and administration,126 ``[h]is death
came as a complete shock to her and she can offer no reason or
speculation as to why he may have taken his life.'' 126
According to the FBI report, Ms. Thomases last saw Mr. Foster
on ``Wednesday or Thursday before his death,'' when ``they had
lunch together with some people in Washington.'' 128
Ms. Thomases has made subsequent statements that contradict
the FBI report of her interview. In Blood Sport, an account of
the Whitewater affair, author James Stewart reported that Ms.
Thomases last saw Mr. Foster on the Wednesday evening before
his death.129 Their last meeting was not a public
luncheon, as the FBI report recorded, but was at the Mansion on
O Street, a private hotel frequented by Ms. Thomases. Ms.
Thomases had suggested the location after Mr. Foster asked to
speak to her ``off the campus.'' 130 According to Blood
Sport, Mr. Foster confided in Ms. Thomases during that last
meeting, telling her about his personal and professional
troubles. Mr. Foster reportedly did not want to ``let the
president and Hillary down'' and, in particular, referred to
the Travel Office affair. Mr. Foster reportedly stated to Ms.
Thomases that ``he didn't trust David Watkins, who he feared
might fabricate or embellish the facts to cover himself--
possibly at the expense of the first lady.'' 131
When asked about the apparent discrepancy between her FBI
statement and her interview with Mr. Stewart, Ms. Thomases told
the Committee that she told the FBI agent about her last
meeting with Mr. Foster at the Mansion on O Street.132 She
offered no explanation as to why the agent failed to record
this significant fact. Ms. Thomases admitted that she spoke to
Mr. Stewart in connection with Blood Sport, but claimed, ``I
don't believe that I said that that's what happened with [Mr.
Foster] that night. I think [Mr. Stewart] probably put together
different pieces of a different conversation.'' 133 Ms.
Thomases maintains that her statement to the FBI that ``she can
offer no reason or speculation as to why he may have taken his
life,'' 134 was correct, because ``I still do not feel
that I'm ready to speculate on why he took his life.'' 135
During his brief tenure as Deputy White House Counsel, Mr.
Foster handled a number of sensitive personal matters for the
President and the First Lady--continuing, even though he was
now on the public payroll, his Arkansas role as personal lawyer
to the Clintons.136 For example, among the files in Mr.
Foster's office at the time of his death were the following:
1. Whitewater Development 137
2. Clinton Exploratory Committee 138
3. Clinton Fund Raiser ``Dream Team'' Reception
139
4. Clinton Physician 140
5. Arkansas Home 141
6. HRC: Personal & Confidential 142
7. HRC: Financial 143
8. Clinton Financial Statements 144
9. 1992 Income Tax Returns 145
10. First Family--1993 Income Tax Returns 146
11. Clintons: 1992 and 1993 Projected Income Taxes
147
12. WJC Passport 148
13. Personal--Clinton Campaign '92 Correspondence
149
14. Personal--Clinton Papers 150
15. Personal--Clinton--Legal 151
16. First Family--1994 Income Tax Returns. 152
17. First Family--General 153
18. HRC--CLE/Arkansas Law License 154
19. First Couple--Blind Trust 155
20. First Family--Arkansas Home 156
Perhaps the most sensitive matter that Mr. Foster handled
for the Clintons concerned their investment in Whitewater. In
1978, the Clintons and James and Susan McDougal jointly
purchased 233 acres in the Arkansas Ozarks. Neither the
Clintons nor the McDougals contributed any equity into the
purchase. Instead, Jim McDougal and Bill Clinton, then Attorney
General and the Governor-elect of Arkansas, borrowed $20,000
from Union National Bank. Mr. McDougal's loan officer at Union
National Bank, Harry Denton, would later become the chief
lending officer at Mr. McDougal's Madison Guaranty S&L. The
rest of the purchase money was financed by a mortgage of
$182,611.20 from Citizens Bank of Flippin, a loan in which
Union National Bank took a 50 percent participation.
In June 1979, the Clintons and McDougals formed Whitewater
Development Company, Inc. (``Whitewater'') and eventually
transferred ownership of the land to the new corporation. The
Clintons and McDougals intended to subdivide the property into
lots for sale as vacation property. Slow sales at lower than
anticipated prices, however, resulted in a cumulative loss of
$193,189 for Whitewater by the end of 1986. Although the
McDougals and the Clintons purportedly were equal partners in
the project, their contributions to the company to cover its
losses were greatly disproportionate. Of the $194,493 that the
shareholders contributed to Whitewater, the McDougals and their
companies contributed $158,523, while the Clintons advanced
only $35,970.
When Bill Clinton ran for President in 1992, the Whitewater
investment and his relationship with James McDougal became a
source of political embarrassment. Over the years, the Clintons
took a series of questionable deductions on their federal
income tax returns related to their investment in
Whitewater.157 And, in March 1989, federal regulators
closed Madison Guaranty S&L. Madison's insolvency ultimately
cost federal taxpayers over $60 million.158
On March 8, 1992, the front page of the New York Times
carried this headline: ``Clintons Joined S&L Operator In An
Ozark Real-Estate Venture.'' The article, written by Jeff
Gerth, reported the ties between the Clintons and the
McDougals, focusing attention on their investment in Whitewater
and the questionable tax deductions taken by the Clintons in
1984 and 1985. The Times report suggested that Whitewater may
have been used as a conduit to funnel money to the Clintons or
to Bill Clinton's political campaigns.
Ms. Thomases played a key role in responding to the Times
inquiries about Whitewater. She and Loretta Lynch, another
attorney working for the Clinton campaign, gathered information
relating to Whitewater and, specifically, to Mrs. Clinton's
representation of McDougal's Madison Guaranty before state
regulators.
Mr. Hubbell and Mr. Foster compiled information from the
Rose Law Firm to help the response effort. According to Mr.
Hubbell, ``the issue then, way back when, was did Mrs. Clinton
ever have any contact with the Arkansas Securities Department.
When we went back to the bills, that was the only, I believe,
indication on the bills of a direct contact with the Arkansas
Securities Department, so I underlined that--probably gave that
to Vince.'' 159
Indeed, in notes taken during the 1992 campaign, Susan
Thomases recorded a February 24, 1993 conversation with Webster
Hubbell about the Rose Law Firm's representation of Madison.
According to the notes, Mr. Hubbell told Ms. Thomases that Mrs.
Clinton did all the billing for the Rose Law Firm to Madison,
and that she had numerous conferences with Jim McDougal,
Madison President John Latham, and Rick Massey, then a junior
associate at the firm.160 The notes also indicated that
Mrs. Clinton had reviewed some documents and that she had one
telephone conversation with Beverly Bassett Schaffer in April
1985.161 Ms. Thomases recorded in the margin of her notes
at this point: ``Acc. to time Rec.'' She testified that
``[t]his is my notation for according to time records,''
162 which is what Mr. Hubbell had indicated to
her.163 Ms. Lynch confirmed that Mr. Hubbell reviewed
timesheets and billing records relating to the Rose Law Firm's
representation of Madison.164
The billing records mysteriously disappeared after the 1992
campaign. Despite four subpoenas from separate federal
investigations for over two years, the billing records were not
disclosed until they were ``discovered'' in the third floor of
the White House Residence, next to Mrs. Clinton's office in the
private quarters.
Eventually, the Clinton campaign released a report on the
Whitewater investment authored by James Lyons, a Colorado
attorney retained by the campaign. The Lyon's report stated
that, rather than gaining an illicit profit from their
association with Mr. McDougal, the Clintons actually lost
$68,900 on their investment in Whitewater. Mr. Lyons apparently
prepared two versions of his report. In a confidential letter
to the Clintons on April 10, 1992, he enclosed a ``complete
report'' on Whitewater by Patten, McCarthy & Associates, an
accounting firm he had retained to study Whitewater. Mr. Lyons
wrote:
Please note the enclosed complete report discusses
such things as the $9,000 interest deduction taken by
you in 1980 (paragraph 4, page 5), lot 13 and
borrowings associated with it (paragraph 5, page 5),
and the sale of 24 lots in 1985 to Ozark Air for
assumption of the mortgage and an airplane (paragraph
6, page 6). None of these items is set out in the
summary report which was released to the press.165
Mr. Lyons advised the Clintons that there are only three
copies of the complete report, and wrote that ``it is my
recommendation to you that you maintain the complete report in
strictest confidence and do not waive either the attorney/
client or accountant/client privilege which attaches to the
enclosed report.'' 166 Mr. Foster assisted Mr. Lyons in
preparing the report.167
The Lyons report temporarily quelled the media interest in
the Whitewater story, but Clinton advisors remained worried
over legal and political implications of this investment. Among
the documents in Mr. Foster's office at the time of his death
was his handwritten note: ``Get out of White Water.'' 168
To that end, Mr. Foster, Mr. Hubbell and others in the Clinton
organization met with Mr. Lyons on November 24, 1992, two weeks
after Mr. Clinton was elected President.169
The point man for the Clinton team in this effort was James
Blair, General Counsel of Tyson Foods and a longtime friend and
advisor to the Clintons. Mr. Blair had also known Mr. McDougal
for over 30 years and had contacted Mr. McDougal in early 1992
when questions arose about Whitewater.170 Mr. Blair called
Mr. McDougal's attorney, Sam Heuer, and told him that ``the
Clintons and the McDougals needed to be totally separated over
the Whitewater thing.'' 171 According to Mr. Blair, he
suggested that Mr. McDougal pay a nominal amount to buy the
Clintons' interest in Whitewater.172 ``I think we settled
on a thousand dollars as an appropriate nominal amount.''
173 There was one problem: ``McDougal doesn't have a
thousand dollars.'' 174 Mr. Blair then told Mr. Heuer,
``[W]ell, what the heck, I will loan him the thousand dollars.
I'll just Fed Ex you a check to your trust account. And I
believe that's what I did.'' 175 Mr. McDougal has never
repaid Mr. Blair.176
On December 22, 1993, Mr. McDougal and the Clintons
executed the transaction to get the Clintons out of Whitewater.
Mr. Blair then assigned Mr. Foster the task of contacting the
accountants and preparing the Clintons' tax returns.177
The issue facing Mr. Foster in the months preceding his death
was how to treat the $1000 sale on the Clintons' 1992 tax
returns. The basic dilemma stemmed from the Clintons' claim,
bolstered by the publicly released Lyons report, that they had
incurred significant losses on their investment in Whitewater.
The problem with declaring the loss on the Clintons' tax return
was the lack of a proper basis with which to calculate the cost
of the venture to the Clintons. Despite their claim that they
were 50% partners in the venture, the Clintons had contributed
less than 25% of the funds used to cover Whitewater's losses.
Among the documents in Mr. Foster's office at the time of
death were his notes of conversations with the Clintons'
accountant, Yoly Redden.178 The notes, in Mr. Foster's
hand, identified the tax problem as a ``can of worms you
shouldn't open.'' 179 His notes in the file outlined the
basic tax issues the Clintons faced in connection with
Whitewater:
``(1) What was nature of deductions: A. How deduct
interest/principal payments for corp?
(2) Can you use contribution which predated
incorporation?
(3) Contribution/advancements of $68,900 to the McD
(4) Inability to utilize $8000 capital loss''
180
Mr. Foster's objective was to avoid calling attention to
Whitewater during the annual audit of the President and Mrs.
Clinton's tax returns by the Internal Revenue Service
audit.181 One approach was simply to report a wash, that
is, to show no loss and no gain from the venture, thereby
obviating the need for any tax treatment. The problem with such
treatment, however, was that it would have bolstered the
allegation that the Clintons were insulated from Whitewater
losses and thus the company was a vehicle for Mr. McDougal to
channel funds to the Clintons. In notes titled ``Discussion
Points,'' Mr. Foster wrote:
(1) An argument that they were protected against
loss: A) wash is consistent with this theory 182
But Mr. Foster did not a have a proper cost basis with
which to calculate the Clintons' true losses or gains. His
discussion points continued:
(2) Improper to reduce basis by improper tax benefit.
(3) Computation of economic loss was based, in part,
on assumptions Whereas computation of tax gain or loss
must be defensible in audit.183
Therein lay the problem. To claim a loss based on economic
assumptions, as the Lyons' report did, was one thing.1 But
to claim a loss on the Clintons' 1992 tax returns without
proper support and documentation increased the likelihood of
calling attention to Whitewater during the IRS audit--of
opening the can of worms that Mr. Foster and the Clintons'
accountant wished to keep sealed.184 Mr. Foster's notes
summarized the options as follows: ``10 Options $1000 basis so
no tax effect but is arbitrary & still risks audit vs. 0. basis
w/$1000 gain avoids any audit of issue.'' 185
---------------------------------------------------------------------------
\1\ Elsewhere in his notes, Mr. Foster wrote:
A. Colo analysis was of economic loss
(1) did not take into account interest deductions
(2) calculation included some items for which there were no
canceled cks.Williams & Connolly Document DKSN000517. ``Colo analysis''
was an apparent reference to the Lyons report.
---------------------------------------------------------------------------
In a letter to Mr. Foster days before the tax returns were
due, Ms. Redden, the accountant the Clintons hired to handle
Whitewater tax issues, wrote: ``Because of the numerous
problems with Whitewater records and the commingling of funds
with other companies and individuals, I believe many
explanations may have to be made if we claim a loss.'' 186
This letter, addressed to Mr. Foster, was not among the
documents in Mr. Foster's office that the White House produced
to the Special Committee. It was obtained by the Special
Committee through another source.187 Ms. Redden testified
that after the Clintons were in the White House she had a
number of discussions with Mr. Foster concerning tax issues
related to Whitewater.188 The main focus of these numerous
communications was the tax basis for the Clintons'
contributions to Whitewater and how to treat the $1000
payment.189
The Clintons' final tax returns for 1992 reported a capital
gain of $1000 from the sale of stock to Mr. McDougal.190
According to Ms. Redden, ``I think we need to claim no gain or
a loss.'' 191 Mr. Foster did not follow her advice,
however, because he was also consulting with another
accountant, and ``[a]t the end we compromised what we were
going to put in the return in connection with Whitewater.''
192
For reasons unknown, on June 16, 1993, Mr. McDougal called
Mr. Foster at the White House. Unable to reach Mr. Foster, he
left a message with his secretary: ``re tax returns of HRC, VWF
and McDougal.'' 193 It is unclear whether Mr. Foster
returned Mr. McDougal's telephone call, and it is unclear why
Mr. McDougal contacted Mr. Foster about Mr. Foster's tax
returns.
Mr. Foster also worked with Ricki Seidman, then Deputy
Assistant to the President and Deputy Director of
Communications, on the Whitewater matter in the first half of
1993. In June 1994, Ms. Seidman told the FBI the following
about her relationship with Mr. Foster and her involvement in
Whitewater:
Seidman was asked about FOSTER's involvement with
Whitewater. She said the only Whitewater issue she
could recall was in April, 1993 in connection with the
CLINTONs tax returns. The tax returns show that the
CLINTONs had divested themselves of their interest in
Whitewater. SEIDMAN's involvement was from a
``communications perspective''. The Whitewater issue
had surfaced during the campaign, interest had then
ended, and it was believed the tax returns would bring
the Whitewater issue into the ``public domain again''.
SEIDMAN said there was discussion regarding the
``soundest way'' to seek closure to the issue. The
options considered were (1) declare a loss; (2) declare
an even split; and (3) declare the Clintons received a
$1000 gain. SEIDMAN said she and FOSTER were discussing
these options. She remembered attending meetings at
WILLIAMS and CONNOLY [sic] on the issue.194
The Clintons' Whitewater investment created other problems
that occupied Mr. Foster's time as Deputy White House Counsel.
Among the documents found in Mr. Foster's office following his
death were campaign disclosure forms, required by law,
accounting the personal finances of the Clintons and of their
campaign organization.195 On January 10, 1992, the Clinton
for President campaign filed a disclosure form that failed to
disclose that the Clintons had personally guaranteed a loan to
the Whitewater Development Corporation.196 Yoly Redden,
the Clintons' accountant, testified that she assisted the
campaign in preparing the disclosure statements.197
According to Ms. Redden, there were discussions about the
Clintons' Whitewater investment, and a decision was made to
omit it from the statements. ``We were told, it was our
understanding that the Whitewater investment was worthless,
they were not going to get anything out of it at that point in
time.'' 198
On April 6, 1992, after the New York Times article
detailing the Clintons' Whitewater investment, the campaign
revised the statement to disclose the Clintons' personal
liability for the Whitewater loan.199 The revision,
however, did not deal with the more troublesome issue
concerning disclosure: how to treat the McDougals'
disproportionate share of Whitewater losses? By assuming more
than 50 percent of Whitewater losses, the McDougals had in
effect given money to the Clintons, their supposed equal
partners in Whitewater. This transfer could be treated as a
gift, a loan, or income. Although the Clintons would incur a
tax liability only if the transfer was considered income,
campaign laws required disclosure of all three categories, a
requirement that had not been met with respect to the
McDougals' contributions to Whitewater. At one point, Mr.
Foster complained to his friend and the Clintons' confidant,
Susan Thomases, about the poor condition of the Clintons'
Whitewater records.200
Mr. Foster was working on another matter involving the
Clintons' financial investments in the months and days
preceding his death. On June 18, 1993, USA Today published an
article on Hillary Clinton's investment in a limited
partnership named Value Partners, managed by Smith Capital
Management of Little Rock, Arkansas.201 The article noted
the success of the investment for Mrs. Clinton, but erroneously
reported that Mrs. Clinton's ``investments are now held in a
blind trust.'' 202 A copy of the article was found in Mr.
Foster's office following his death. Mr. Foster personally
circled two places where the article asserted that Mrs.
Clinton's assets had been placed in a blind trust. He sent
copies of the article to Lisa Caputo, Mrs. Clinton's press
secretary, Ricki Seidman, White House Deputy Communications
Director,2 and Margaret Williams, Mrs. Clinton's Chief of
Staff. His handwritten comments identified a problem: ``The
assets are not yet in a blind trust. The document has been
approved but is not signed yet, pending working out some
details.'' 203 The article apparently bothered Mr. Foster
enough to prompt him to complain immediately to Bill Smith, the
head of Smith Capital Management. Smith replied apologetically
that his company does not talk to the press about the First
Lady's investment, ``particularly during the recent flurry of
articles and interviews regarding the holdings of health care
stocks in Value Partners.'' 204
---------------------------------------------------------------------------
\2\ In a later interview with the FBI, Ms. Seidman acknowledged
that she worked with Foster on ``accusations concerning shorted health
positions taken by HILLARY CLINTON in connection with Value Partners.''
II Hearings, p. 1794.
---------------------------------------------------------------------------
The ``flurry of articles'' concerned the strategy of Value
Partners to profit by selling stocks ``short.'' A short-seller
borrows stocks from his broker to sell at current market price,
anticipating that the value of the stock will fall. When the
price does fall, the short-seller buys the lower-priced stock
to return to his broker, profiting from the difference in
price. On May 31, 1993, the Wall Street Journal disclosed that
Value Partners actively sold short several health care
stocks.205 At this time, Mrs. Clinton was directing the
administration's efforts to reform the nation's health care
system. The Administration's proposal depressed the value of
health care stocks.3 Value Partners was structured as a
limited partnership, and no evidence exists that Mrs. Clinton
directed or reviewed the fund's investment decisions. However,
Mrs. Clinton's investment amounted to nearly $100,000 in a fund
that dedicated 13% of its $1.3 million portfolio to short
positions in health care stocks.206 Mrs. Clinton thus came
under media criticism for personally benefiting from her high-
profile public campaign.
---------------------------------------------------------------------------
\3\ See, e.g., Stefan Fatsis, Stocks Sink on Clinton Economic Plan,
Associated Press, Feb. 16, 1993 (``Pharmaceutical stocks led
yesterday's decline. Clinton week accused drug companies of price
gouging and made them a prime target of health care reform efforts'').
A detailed University of Michigan study concluded that the public
pronouncements of the Clintons criticizing pharmaceutical firms
depressed stock prices of those firms by as much as 27 percent. S.
Craig Pirrong, Political Rhetoric and Stock Price Volatility: A Case
Study, Catalyst Institute Research Project, University of Michigan,
November 1993.
---------------------------------------------------------------------------
In addition to an appearance of impropriety, the investment
in Value Partner posed a potential legal problem. Title 18,
Section 208 of the United States Code exposes an executive
officer or employee to felony liability for participating
``personally and substantially'' in a ``particular matter'' in
which he is aware of a financial interest. Mr. Foster
apparently had advised Mrs. Clinton that she need not be
concerned by this criminal statute because she was not an
officer or employee of the executive branch.207 In
reaching this conclusion, Mr. Foster apparently did not consult
with the Office of Legal Counsel of the Department of Justice,
and ignored a contrary opinion issued by that office 17 years
earlier.208
Mr. Foster's conclusion that the First Lady was not covered
by government ethics laws also conflicted with the position of
the White House in Association of American Physicians and
Surgeons v. Clinton.209 That litigation sought to compel
the White House to release the documents and deliberations of
Mrs. Clinton's health care task force. The Federal Advisory
Committee Act (``FACA'') compels such public disclosure if a
government agency, like the health care task force, consults
advisers who are not government employees.210 The
plaintiffs alleged that Mrs. Clinton is such a nongovernmental
adviser and thus the records of the task force were covered by
FACA. In order to avoid disclosure, the White House argued that
Mrs. Clinton was indeed a federal official and therefore FACA
did not apply to the task force. The United States Court of
Appeals for the D.C. Circuit agreed with the White House.
Recognizing the potential spillover effect of the holding,
however, the court cautioned in a footnote: ``We do not need to
consider whether Mrs. Clinton's presence on the Task Force
violates . . . any conflict of interest statutes.'' 211
The matter apparently weighed heavily in Mr. Foster's mind.
The Wall Street Journal, in a series of editorials, criticized
Mr. Foster for his role with respect to the Health Care Task
Force.212 Mr. Foster complained to James Lyons, a Foster
friend and former legal adviser to the Clinton campaign, that
``the press had been particular vicious in their attacks on
members of the Rose Law Firm.'' 213 In particular, Mr.
Foster complained about criticisms for his handling of the
Association of American Physicians and Surgeons v. Clinton
litigation.214 Mr. Lyons told the FBI in an interview:
FOSTER won a victory for the Task Force (and by
association, for HILLARY RODHAM CLINTON) on that matter
and the Wall Street Journal accused him of ``sharp
tactics''. LYONS advised that the allegation really
bothered Foster.215
In the note apparently discovered in Mr. Foster's briefcase
six days after his death, Mr. Foster wrote, ``The Wall Street
Journal editors lie without consequence.'' 216
Just before his suicide, Mr. Foster concentrated on
finalizing plans to place the First Family's investments in a
blind trust, which would have remedied the ethical and legal
problems posed by the Value Partners investment. In Mr.
Foster's papers was a facsimile from Brantly Buck, a partner of
the Rose Law Firm, who had been retained to assist in the
creation of the blind trust. The facsimile, dated July 19,
1993, the day before Mr. Foster's suicide, forwarded draft
statements of financial objectives for the blind trust. White
House phone records indicated that Mr. Buck called Mr. Foster
twice on the morning of his suicide.217
Mr. Foster's phone log also showed that he received a call
from James Lyons, the author of the Whitewater report for the
Clinton campaign, at 11:11 a.m. on July 20, 1993, the morning
of Mr. Foster's death.218 When contacted by the Park
Police, Mr. Lyons said that he had spoken with Mr. Foster on
July 18, and they had agreed to meet for dinner on July 21.
According to a Park Police report, ``Lyons had told Foster he
would call him and let him know when he would leave Denver and
arrive in Washington. This is the reason for the phone message
on the morning of July 20, 1993.'' 219 In a later
interview with the FBI, Mr. Lyons provided more detail into his
scheduled dinner with Mr. Foster. Mr. Foster was very concerned
about the Travelgate affair and regarded himself and Bill
Kennedy as potential witnesses in the matter. According to the
FBI report, Mr. Foster ``felt strongly that White House should
hire outside counsel to be handling the Travelgate matter for
this reason. He also believed that he would be needing a
personal attorney to represent him in the matter.'' 220 It
was to seek personal representation that Mr. Foster purportedly
scheduled dinner with Mr. Lyons. Mr. Foster, however, also
complained to Mr. Lyons about the extent to which he and other
members of the Counsel's office were handling personal matters
for the Clintons:
FOSTER believed that private sector attorneys should
be handling many of the matters they [White House
Counsel's office] were handling, both for ethical and
workload reasons. The CLINTON administration had called
for a 25 percent cut. Under the BUSH administration the
Counsel's office had 18 to 20 lawyers at its peak and
when CLINTON took office there were only 6 or 7.4
There were many discussions about the composition and
character of the associates in the Counsel's office and
everybody was spread incredibly thin.221
---------------------------------------------------------------------------
\4\ In reality, the number of lawyers in the Bush administration
was about 14, the same as under President Reagan. Jeremy Rabkin, ``At
the President's Side: The Role of the White House Counsel in
Constitutional Policy,'' Law and Contemporary Problems, Volume 56,
Autumn 1993, at 63, 71 n. 39. Although the official directory of the
Clinton White House lists, in addition to the Counsel and his deputy,
only several Associate Counsels, the staff actually includes about 13
lawyers. Id. at 71, n. 39. According to one commentator, ``Official
listings of the White House staff never give the full number of lawyers
because extra lawyers are usually `detailed' from departments to
circumvent congressional restrictions or concerns about excessive size
of the full time staff.'' Ibid.
Linda Tripp, Mr. Nussbaum's executive assistant, testified
that she approached Mr. Nussbaum and questioned him, based on
her experience in the previous administration, about the
inordinate amount of time that Mr. Foster seemed to spend on
the Clintons' personal matters. Ms. Tripp believed that Mr.
Foster worked mostly on personal matters for the Clintons.
According to Ms. Tripp, ``I questioned the role of the deputy
counsel in the Clinton Administration as opposed to what I had
perceived it to be in the Bush Administration.'' 222
Indeed, C. Boyden Gray, President Bush's White House Counsel
testified that, under President Bush, ``[p]ersonal, what I
would call personal work, taxes, blind trusts, problems
involving his residence, his house in Maine, for example, those
matters would be handled by his private counsel. How to deal
with the book royalties from Mrs. Bush's book, for example;
they would be handled by his personal lawyer.'' 223 When
asked why, Gray explained that ``I don't think the taxpayers
should pay for personal matters, I suppose, is the short way to
answer it.'' 224
II. The Traditional Independence of the White House Counsel's Office
The Office of the White House Counsel originated from
presidential custom. The Reorganization Act of 1939,225
which authorized the modern White House staff, did not mention
a legal adviser to the President. The first such legal adviser
came to the White House under President Franklin Delano
Roosevelt. When Roosevelt was governor of New York, he had a
close personal adviser in Samuel Rosenman, who held the title
of ``Counsel to the Governor.''226 Upon his election as
President, Roosevelt prevailed on Mr. Rosenman, then a judge on
New York's highest court, to join his staff. President
Roosevelt wanted to give Mr. Rosenman the title of ``Counsel to
the President,'' the Washington equivalent of his title in
Albany. However, Attorney General Francis Biddle objected, ``
`on the grounds that such a title would undercut the role of
the Attorney General as the President's chief legal adviser.'
'' 227 Consequently, Mr. Rosenman was given the title of
``Special Counsel to the President.''
Despite its origins in the personal, rather than
institutional, needs of the President, the Counsel's office has
become firmly established within the White House.228 The
role of this office has varied from administration to
administration. Mr. Rosenman, consistent with the practice in
Albany, served not just as President Roosevelt's legal
counselor, but as one of his key advisers. He was the principal
speech writer and spent most of his time drafting the
President's public statements--a task for which he recruited
Clark Clifford as his assistant.
Mr. Clifford continued the tradition as special counsel to
President Truman. He later recounted that his job was to do
``[w]hatever the President wanted.'' Mr. Clifford saw his role
``as an adviser or counselor, and not as an administrator or
bureaucrat.'' 229 His advice to President Truman was not
strictly legal, but often political. Secretary of State
Marshall complained to President Truman about Mr. Clifford's
participation in White House discussions on U.S policy toward
Palestine: ``I fear that the only reason Clifford is here is
that he is pressing a political consideration with regard to
this issue. I don't think politics should play any part in
this.'' 230
Similarly, Theodore Sorenson, special counsel to President
Kennedy, and Harry McPherson, special counsel to President
Johnson, were among the principal policy and political advisers
to each president. Both participated fully in the major
deliberations of their administrations. In 1985, when
organizers of a conference of presidential chiefs of staff
discovered that no such position existed in the White House
under Presidents Kennedy and Johnson, they invited the two
advisers who most closely approximated that role, Mr. Sorenson
and Mr. McPherson.231 Myer Feldman held the post, with the
title of ``Counsel to the President,'' for one year between Mr.
Sorenson and Mr. McPherson. For reasons unknown, Mr. McPherson
retained the old title of Special Counsel. When Richard Nixon
became President, he appointed John Ehrlichman as ``Counsel to
the President.'' A year later, however, the title was discarded
again and three top advisers--Murray Chotiner, Harry Dent, and
Charles Colson--held the title of ``Special Counsel''
simultaneously.
In 1971, President Nixon appointed John Dean as White House
Counsel and relied on Mr. Dean primarily for legal advice on
particular matters. While Lloyd Cutler, President Carter's
White House Counsel, noted that his job primarily concerned the
legal aspects of matters that came to the President's
attention,232 he also played a ``Clark Clifford role'' in
the White House.233 That means that ``I can dispense
advice and get involved in any question that interests me.''
234 Even with Mr. Cutler, however, it was clear that the
modern White House counsel was no longer the equivalent of the
chief of staff, as Mr. Sorensen was under President Kennedy. In
the Reagan White House, each of the three successive counsels--
Fred Fielding, Peter Wallison, and A.B. Culvahouse--reported to
the President's respective chiefs of staff--James Baker, Donald
Regan, and Howard Baker. Although C. Boyden Gray reportedly
enjoyed special influence in the Bush White House stemming from
his long-standing relationship with the President, he generally
viewed himself not as a political adviser, but as counsel on
legal problems.235
Against this historical background, President Clinton
appointed Bernard Nussbaum to head the Counsel's office. In
addition to being Counsel, Mr. Nussbaum held the honorific
``Assistant to the President,'' a title not given to any
previous holder of the office. Mr. Nussbaum had worked with
Mrs. Clinton--he as the senior lawyer, she as a young law
school graduate--on the staff of the House Judiciary Committee
Impeachment Inquiry, the Watergate Committee.236 By his
own account, Mr. Nussbaum was among the President's inner
circle of advisers and enjoyed free access to the President.
``I see the President any time I think it's reasonably
necessary. Unfortunately, it's been necessary too many times.''
237
Mr. Nussbaum's background as a private lawyer defined where
his loyalty laid as White House Counsel. ``When you're down to
one client--the President--the only thing that counts is your
relationship with that client.'' 238 5 When Mr. Nussbaum
resigned from his office, he wrote to the President:
---------------------------------------------------------------------------
\5\ It is illustrative to compare Mr. Nussbaum's vision of the
White House Counsel with that of his successor, Lloyd Cutler, who said
upon his appointment: The Counsel is supposed to be counsel for the
President in office and for the Office of the Presidency. . . . When it
comes to a President's private affairs, particularly private affairs
that occurred before he took office, those should be handled by his own
personal private counsel and, in my view, not by the White House
Counsel.''
Remarks Announcing the Appointment of Lloyd Cutler as Special
Counsel to the President and an Exchange with Reporter, 30 Wkly Comp.
Pres. Document 462, 465 (Mar. 8, 1994).
As I know you know, from the day I became Counsel, my
sole objective was to serve you well as effectively as
I could, consistent with the rules of law, standards of
ethics, and the highest traditions of the Bar . . .
Unfortunately, as a result of controversy generated by
those who do not understand, nor wish to understand the
role and obligations of a lawyer, even one active as
White House Counsel, I now believe I can best serve you
---------------------------------------------------------------------------
by returning to private life. 239
Mr. Nussbaum has explained elsewhere that ``[t]he principal
source of that misunderstanding, I think, is the failure to
appreciate . . . that fact that the president's lawyer is a
lawyer, and that every lawyer--even one representing the
president in his official capacity--has an obligation to
represent his client faithfully and zealously.'' 240 Those
who criticized his conduct in office ``have it exactly
backward: The problem is not that lawyers who are in the public
arena are too zealous in representing their clients; it is that
they--and others in the public arena--are often not zealous
enough, because of a fear of appearances, of negative publicity
and, consequently, of unpopularity, of loss of position.''
241
Whether or not Mr. Nussbaum is correct in his ethical
vision or his assessment of the public interest, the mandate of
Resolution 120 requires the Special Committee to answer a more
immediate question: whether, in their zeal to serve and protect
their clients, President and Mrs. Clinton, Mr. Nussbaum and
other White House officials engaged in any improper conduct in
handling the papers in Mr. Foster's office following his death.
Summary of the Evidence
i. the contents of vincent foster's office at the time of his death
The full contents of Mr. Foster's office at the time of his
death will perhaps never be known. That is so because Mr.
Nussbaum, in cleaning out the files in Mr. Foster's office
following his death, did not prepare an inventory of materials
reviewed or removed. Stephen Neuwirth did prepare an inventory
of certain files in Mr. Foster's office, but only after Mr.
Nussbaum and Margaret Williams had removed certain files to
President and Mrs. Clinton's private quarters on the third
floor of the White House Residence.
Deborah Gorham, Mr. Foster's secretary, testified that, in
her first trip into Mr. Foster's office after his death, she
opened the drawer containing the Clintons' personal documents.
``I saw Pendaflex folders and file folders, and I did not see
an index that normally would have been there listing the names
of the files.'' 242 According to Ms. Gorham, she
maintained ``indexes for all file drawers, that I recall, and
it listed the content, the names of each of the folders in each
drawer.'' 243 She did not see the index in the drawer,
where she normally kept it.
The Special Committee took steps to locate this missing
index. The White House produced three indices of files in
Foster's office. A six-page index is dated July 22, 1993, on
the first page. The final page of the index contained the
following listing: 6
---------------------------------------------------------------------------
\6\ The remainder of the index was redacted.
---------------------------------------------------------------------------
First Family--SF 278
First Family--1994 Income Tax Returns
First Family--General
HRC--CLE/Arkansas Law License
First Couple--Blind Trust
First Family--Arkansas Home
POTUS--Arkansas Office
WJC--Passport
WJC--Papers
First Family--SF 278 pre-POTUS 244
The White House represented to the Special Committee that
this index ``was in a box identified by Tom Castleton as
containing documents from Cabinet I of Mr. Foster's office.''
245 Ms. Gorham, however, testified that the document is
not one that she would have created. ``Certainly the typeface,
the font and the style and the names of the subjects are
familiar, but on your first entry where it reads `First Family
1994 Income Tax,' the word `Returns,' which should be, I
believe, a part of that sentence after `Tax,' has been returned
to the left margin.'' 246 Raising the specter that the
index had been altered, Ms. Gorham testified that she would not
have formatted her document in such a fashion.247
The White House produced yet another six-page index, which
was found apparently ``in a box identified by Mr. Castleton as
containing materials from Ms. Gorham's desk.'' 248 The
last page of this index contained the same list of files as in
the first index described above.249 7 However, the format
of the list is different. ``First Family 1994 Income Tax
Returns'' and ``HRC--CLE/Arkansas Law License'' are each typed
on one line, without left returns breaking up the entries--a
format consistent with the way Ms. Gorham would have maintained
the document. Although the index ``is consistent with the
typeface and certainly the names of the subjects and the type
font that was used,'' Ms. Gorham was not sure if she had
prepared the document.250 This second index, like the
first, was dated July 22, 1993, on the first page. Ms. Gorham
testified that ``on the White House system, that date would
have had to have been manually entered.'' 251 Ms. Gorham
also testified that she would not have revised the index after
Mr. Foster's death,252 and that she did not revise the
index on July 22, 1993.253
---------------------------------------------------------------------------
\7\ All the other materials on the index, as in the first index,
had been redacted.
---------------------------------------------------------------------------
Neither index contained any reference to a file on
Whitewater Development Corporation. According to Ms. Gorham,
she created her index file in the first two weeks of April,
several months prior to Mr. Foster's death,254 and the
index listed all the files in the drawer containing the First
Family's personal documents.255 She also remembered that
the Whitewater file was among those in Foster's office at that
time.256 8
---------------------------------------------------------------------------
\8\ A file labelled ``WHITEWATER DEVELOPMENT, Personal and
Confidential VWF'' was transferred from Foster's office to the
Clintons' personal lawyers.
---------------------------------------------------------------------------
The third index 257 produced by the White House
listed, among other things, the same ten files contained in the
other two indices, but in a slightly different order and with
an additional notation for certain files:
POTUS--SF 278
First Family--1994 Income Tax Returns (removed)
HRC--CLE/Arkansas Law License (removed)
First Couple--Blind Trust (removed)
First Family--Arkansas Home (removed)
WJC--Papers (removed)
First Family--SF278 pre-POTUS (removed)
Clinton Mansion (removed)
POTUS--Arkansas Office
WJC--Passport 258
This index, labelled ``VWF--Existing Files'' on the first
page, contained the following line on the last page: ``Updated
10/25/93''. Like the other two indices, it did not contain any
reference to a Whitewater file. At the Special Committee's
request, the White House conducted a search of the back-up
disks and tapes of Ms. Gorham's files, downloaded when she left
the White House in late 1993. The third index was among the
files contained in those disks and tapes, and the file
directory information indicated that it was last updated on 10/
25/93 at 2:14 p.m. The first and second indices, however, were
not among the files in Ms. Gorham's computer at the time it was
downloaded. An analysis of latent data on the computer's hard
drive by an FBI expert yielded no additional useful
information.259
Ms. Gorham testified that she did not see the index she
maintained for the Clintons' personal files in Foster's office
on July 22, nor anytime thereafter.260 The Committee was
never able to ascertain what happened to this index--a critical
piece of evidence concerning the contents of Mr. Foster's
office at the time of his death.
When Mr. Nussbaum reviewed documents in Mr. Foster's office
on July 22 before Justice Department officials, he did not
identify every document in the office, even generically, for
the law enforcement officers. His scatter-shot identification
process frustrated the officers.
The following colloquy occurred at the Special Committee's
August 1, 1995, hearing:
Mr. Giuffra: Do you believe that Ms. Nussbaum
described every document in Mr. Foster's office?
Mr. Markland: No, sir, I don't.
Mr. Giuffra: So he only identified some of the
documents that were contained in Mr. Foster's office?
Mr. Markland: Yes. Or he would go through a file
drawer and just broadly say that they were strictly
White House business.261
Agent Salter corroborated Mr. Markland's testimony, telling
the Special Committee: ``No, I don't believe he had looked at
everything in the office.'' 262 Mr. Nussbaum maintained,
however, that he described every file in the office, including
the Clintons' personal files. ``I said these were Clinton
personal files. I said these involve investments, taxes, other
financial matters and the like. Included was a file on the
Clintons' Whitewater real estate investment.'' 263
Two persons kept careful notes of the document review on
July 22. Michael Spafford took nine pages of handwritten notes
apparently listing the files and documents that Mr. Nussbaum
called out during the meeting. His meticulous notes listed, for
example, paper clips and scotch tape from Vince Foster's left
drawers, and the contents of Mr. Foster's trash bag.264
Likewise, Cliff Sloan took 16 pages of notes during the
meeting.265 The notes taken by Mr. Sloan, which he later
typed up,266 tracked Mr. Spafford's notes, but at times
provided some more detail both in the number of items listed
and in the description of each item. Neither set of notes
recorded the specific name of the files or any description of
the documents eventually transferred to the White House
residence and later to Williams & Connolly.
Senator Kerry specifically questioned Mr. Nussbaum about
files located in Mr. Foster's credenza. Mr. Nussbaum testified
that he reviewed all of the files in the credenza and described
them to the law enforcement officials. ``I said this is a tax
file, or this is an investment file, like that. I didn't
describe every piece of paper in the file. I would flip through
the file to see if there's a suicide note or extortion note,
but I would give a general description of the file and I would
flip through the file.'' 267
Mr. Spafford's and Mr. Sloan's notes of Mr. Nussbaum's
review, however, cast doubt on Mr. Nussbaum's testimony. Mr.
Nussbaum provided detailed descriptions of a number of items in
the credenza, while identifying the Clinton personal files--
apparently the bulk of the files in the credenza--generally as
``matters re First Family.'' 268 Following are Mr.
Spafford's handwritten notes of what Mr. Nussbaum described in
the credenza:
Credensa: on R
matters re First Family
mostly files re GC matters
notebooks on prospective nominees.
supplies
candlesticks
notebook re jud nominees
notebk re St. Justice
magazines
copy of foreword to bk Ron Kennedy
Fed rules of Civ Pro
Bk on Mkt Liberalism
3/18 letter re posters of Pres.
card from friend 269
Although Mr. Sloan's typed notes did not identify the
various locations, the listing was similar to Mr. Spafford's:
Work Orders
Financ disclosure
Various investments matters re: First Family
Judic. Nominations
List of people--prepare book of prospective
nominees
Treas. Regs.
WH Mess
Marine Helicopter
``State Justice Institute''
Q____________
Book Pres, would write foreword to
Book on Civ. Pro.
Market Liberalism
WH mil. office
Judic. selection
3/18--letter re: posters--using Pres.
likeness next (?) WH
Card 270
The files transferred to the White House Residence and
eventually taken to Williams & Connolly included a file
labelled ``WHITEWATER DEVELOPMENT, Personal and Confidential
VWF.'' Law enforcement officials did not recall Mr. Nussbaum
mentioning Whitewater during the review of documents in Mr.
Foster's office on July 22,271 and the notes taken by Mr.
Sloan and Mr. Spafford contained no reference to a Whitewater
file.9
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\9\ Likewise, neither Mr. Spafford's nor Mr. Sloan's notes listed
Mr. Foster's personal diary during the transition period--which Park
Police investigator John Rolla later reviewed, Rolla, 6/20/95 Dep. p.
96--or Foster's notebook on the Travelgate scandal, White House
Documents F000002-F000162, which Mr. Nussbaum apparently removed from
Mr. Foster's briefcase on July 22, 1993, and kept in a safe until
March, 1994. Letter from Abner J. Mikva, Counsel to the President, to
Hon. William F. Clinger, Chairman, House Committee on Government Reform
& Oversight, August 30, 1995, p. 1.
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Mr. Nussbaum claimed that he had no knowledge that Mr.
Foster was working on any matter involving Whitewater.272
Mr. Nussbaum emphasized that ``[t]he Whitewater matter, which
subsequently became the focus of so much attention, was not on
our minds or even in our consciousness in July 1993.'' 273
He repeated that although Whitewater had surfaced briefly
during the 1992 campaign, ``in 1993, Whitewater was not on my
screen, nor, as far as I know, was it the subject of discussion
in the White House. And if it was, it was something I would
have known.'' 274
Evidence obtained by the Banking Committee during the
summer of 1994 flatly contradicts Mr. Nussbaum's testimony.
Resolution Trust Corporation (``RTC'') Senior Vice President
William H. Roelle testified that, upon taking office, former
Deputy Secretary of the Treasury Roger Altman directed the
staff to inform him of all important or potentially high-
visibility issues.275 According to Mr. Roelle, on or about
March 23, 1993, he told Mr. Altman that the RTC had sent a
criminal referral mentioning the Clintons to the Justice
Department.276
The White House produced files to the Banking Committee
showing that Mr. Altman immediately sent Mr. Nussbaum two
facsimiles about Whitewater. The first facsimile, sent on March
23, 1993 with a handwritten cover sheet, forwarded an ``RTC
Clip Sheet'' of a March 9, 1992 New York Times article with the
headline, ``Clinton Defends Real-Estate Deal.'' 277 The
article reported the responses that Bill Clinton, then a
presidential candidate, offered to an earlier Times report
detailing the Clintons' investment in Whitewater and their ties
to Jim and Susan McDougal.
The second facsimile from Mr. Altman to Mr. Nussbaum, sent
the next day, March 24, 1993, forwarded the same article that
was sent the day before and portions of the earlier Times
report--an article dated March 8, 1992, by Jeff Gerth entitled
``Clintons Joined S&L Operator in an Ozark Real-Estate
Venture,'' which originally broke the story in the news
media.278
According to the report of the Banking Committee on the
communications between officials of the White House and the
Treasury Department:
Mr. Altman testified that he did not recall having
sent either facsimile to Mr. Nussbaum. Mr. Nussbaum
testified that he did not recall having received either
facsimile from Mr. Altman. Mr. Altman and Mr. Nussbaum
both testified that they had no recollection of having
spoken to one another during March 1993 about the
articles contained in the facsimiles or the subject of
those articles. Nevertheless, Mr. Altman and Mr.
Nussbaum both testified that the facsimiles were
apparently sent and received by their respective
offices.279
Before the Special Committee, Senator Bond asked Mr.
Nussbaum specifically about the apparent contradiction between
his assertion that he had no knowledge of Whitewater at the
time of Mr. Foster's death and the existence of Mr. Altman's
facsimiles. Mr. Nussbaum maintained that he did not know of the
facsimiles.280 He testified that he first heard of
Whitewater in late September 1993.281 ``So, in July of
1993, I had no knowledge and no memory of receiving a fax from
Roger Altman, and Whitewater, as I said in my statement, was
not on my mind nor, do I believe, on anyone else's mind in the
White House in July of 1993.'' 282
There is further evidence, however, that Mr. Foster was not
the only White House official working on personal matters for
the Clintons involving Whitewater. Until July of 1993, Ricki
Seidman was Deputy Assistant to the President and Deputy
Director of Communications. She reported to the FBI in 1994
that she and Mr. Foster had worked together on Whitewater
issues before his death:
Seidman was asked about FOSTER's involvement with
Whitewater. She said the only Whitewater issue she
could recall was in April, 1993 in connection with the
CLINTONs tax returns. The tax returns show that the
CLINTONs had divested themselves of their interest in
Whitewater. SEIDMAN's involvement was from a
``communications perspective''.283
Ms. Seidman explained that she discussed various options
with Mr. Foster for treating the transaction on the Clintons'
1992 tax returns. Ms. Seidman confirmed notes found in Mr.
Foster's office at the time of his death summarizing the three
options under consideration: (1) report a loss on the
Whitewater investment; (2) not report any gains or losses; or
(3) declare a $1000 gain to the Clintons from their transfer of
all Whitewater stock to Jim McDougal in December, 1992.284
In addition, SBA Associate Administrator Wayne Foren
testified that, in early May 1993, he briefed Erskine Bowles,
the new SBA Administrator about the agency's ongoing
investigation of David Hale's Capital Management Services
because the case involved President Clinton.285 Shortly
thereafter, Mr. Bowles told Mr. Foren that he had briefed White
House Chief of Staff Mack McLarty about the case.286
Although Mr. Bowles did not recall being briefed by Mr. Foren
about Capital Management 287 or talking to Mr. McLarty
about the case,288 Mr. Foren's account was corroborated by
his deputy, Charles Shepperson.289 Mr. McLarty's calendar
indicated that Mr. Bowles had two meetings with Mr. McLarty at
the White House in early May 1993.290
When asked why Mr. Nussbaum prevented law enforcement
officials from looking at documents in Mr. Foster's office on
July 22, Detective Markland replied: ``In my mind, at this
time, I believe he was afraid we would have uncovered some
indication of the Whitewater situation and other things that
Mr. Foster was involved with that are just now coming to
light.'' 291
Mr. Nussbaum claimed that he did not seek to conceal
damaging information about the Whitewater matter. In his view,
the groundswell of interest in the handling of documents after
Mr. Foster's death resulted from ``the unfair linkage of two
separate, disparate events,'' 292 the way he reviewed and
handled documents in Mr. Foster's office and the emergence of
the Whitewater investigation in late 1993.293
Yet, as early as the spring 1993, White House officials
expected the then-dormant Whitewater issue to reemerge in the
media. According to the FBI report of Ms. Seidman's interview,
in April 1993, ``it was believed the tax returns would bring
the Whitewater issue into the `public domain again'. SEIDMAN
said there was discussion regarding the `soundest way' to seek
closure to the issue.'' 294 10 In addition to Ms.
Seidman's sworn statement, common sense casts doubt on Mr.
Nussbaum's testimony that Whitewater was not on the White
House's radar screen in 1993. Whitewater was a major issue in
the 1992 campaign, and the Clintons went to the extraordinary
step of retaining an outside attorney to issue a report on the
matter. The ``unfair linkage,'' in Mr. Nussbaum's words, so
obvious when investigations relating to Whitewater were
reported later in 1993, was never made in the weeks following
Mr. Foster's death precisely because Mr. Nussbaum concealed any
mention of Whitewater from law enforcement officials. There is
little doubt that Mr. Nussbaum foresaw the embarrassment and
political liability of such a linkage between Mr. Foster's
death and Whitewater when he examined the documents in Mr.
Foster's office. It is against this backdrop of motive that the
events and actions following Mr. Foster's death must be
examined.
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\10\ Like Mr. Nussbaum, the President and Mrs. Clinton have denied
knowledge of Foster's work involving Whitewater. Following are excerpts
from a deposition of President Clinton by former Special Counsel Robert
Fiske:
Q: Was he [Foster] during this period of time working on any
matters for you personally?
A: Yes, I believe that he was trying to handle the transition of
our assets into a blind trust. I think that's all he was doing.
Q: Were you aware that he was also doing some work in connection
with the preparation and filing of the tax returns for Whitewater for
'90, '91, and '92?
A: I don't recall that I was aware of that, no.
Fiske received the same testimony from the First Lady:
Q: Was he [Foster] doing any personal work for you or the President
other than the blind trust?
A: Not that I'm aware of, no. Oh, wait. The only thing I would add
to that is I think he also did some personal advising, or at least was
in some way involved in the tax returns when they were being finalized
for '93, but that was part of the blind trust work, as I recall.
Q: Your own tax returns?
A: Yes.
Q: Was he doing work, to your knowledge, with respect to the filing
of the Whitewater tax returns?
A: Not that I know of, no.
It is unclear whether Mrs. Clinton's answer to Mr. Fiske's question
encompassed Mr. Foster's work on the Clintons' personal returns
relating to their tax liability for Whitewater. In her interview with
the FBI, Ms. Seidman reported that she attended meetings with the
Clintons' personal lawyers at Williams & Connolly on the treatment of
the 1992 sale of Whitewater on the Clintons' 1993 tax returns.
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II. July 20, 1993
A. The discovery of Mr. Foster's body
At about 5:30 p.m. on July 20, 1993, the driver of a white
utility van stopped at Fort Marcy Park off the George
Washington Parkway in Virginia to relieve himself.