[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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                           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.295 The 
man parked his car next to a white two-door Honda with a blue 
interior and Arkansas plates.296 He walked about 200 yards 
away from the parking lot. As he was urinating, the man noticed 
the body of a white male wearing a white dress shirt and grey 
pants.297 Traces of blood were visible on the man's face, 
and the right shoulder was stained light purple.298
    The man then returned to his van to find a 
telephone.299 He drove to nearby Turkey Run Park, where he 
found two uniformed Park Service employees.300 He told the 
Park Service employees that he had found a body and asked one 
of them to call the police.301 One of the Park Service 
employees walked to a nearby telephone and called the 
police.302
    The Fairfax County Public Safety Communications Center 
received a 911 call at approximately 6:00 p.m. on July 20, 
1993, reporting a dead body lying near a cannon in Fort Marcy 
Park.303 The dispatcher relayed this information to the 
Park Police and the Fairfax County Emergency Response 
Team.304 Park Police Officer Kevin Forshill responded to 
the call from his post in Langley, Virginia.305 Officer 
Forshill and two medical technicians searched the area near the 
two cannons, while another group of medical technicians 
searched elsewhere in the park.306 Near the second cannon, 
Officer Forshill found the body.307 He then notified the 
dispatcher and requested detectives to be at the scene.
    Park Police investigators Renee Apt, Cheryl Braun, and John 
Rolla responded to Officer Forshill's call at 6:35 p.m.308 
Sergeant Braun, the senior investigator, assigned Detective 
Rolla to investigate the death scene while she examined the 
parking lot. Their preliminary view was that Mr. Foster's death 
was a suicide.309 Under standard procedure, however, the 
Park Police treated the investigation as a possible homicide. 
The Park Police continued to treat the investigation as a 
possible homicide until August 10, 1993, when the Park Police 
officially ruled Mr. Foster's death a suicide.310
    In a death investigation, standard procedures called for 
investigators to define the crime scene and to prevent any 
unauthorized access to the area.311 In the case of a 
suspected suicide, the investigators considered relevant ``the 
person's home, their office, their car, places where they 
frequent would be relevant; any place where they would leave 
information about them, their state of mind, a place for them 
to leave their note, if they leave a note.'' 312 As a 
necessary precaution, such places should be preserved ``as a 
matter of routine police procedure'' in order to ensure the 
integrity of the evidence.313 Sergeant Braun thus 
immediately requested that the main gate of the fort be closed 
to prevent entries into the area.314
    When Detective Rolla arrived at the death scene, the area 
around Mr. Foster's body was taped off.315 The officers 
who first arrived on the scene briefed Detective Rolla and gave 
him several Polaroid photographs of the scene.316 
Detective Rolla then made a careful visual examination of the 
body and conducted a thorough inventory of the physical 
evidence on the body.317 Detective Rolla then took his own 
Polaroid pictures of the crime scene and, when the Fairfax 
County Medical Examiner arrived, helped him move the body for a 
preliminary examination.318
    Sergeant Braun interviewed a couple whose car was parked 
near Mr. Foster's Honda, and another officer canvassed the area 
for other witnesses.319 All the items in Mr. Foster's car 
were catalogued: a wallet with $300 in cash, his White House 
identification, and a piece of paper with the names and 
telephone numbers of three doctors; two empty beer bottles, a 
canvas bag, a folded map of Washington D.C., and cassette tapes 
in the car interior; Mr. Foster's daughter's college papers and 
textbooks in the trunk; and sunglasses and empty cigarette 
boxes in the glove compartment.320 With the discovery of 
Mr. Foster's White House identification, Sergeant Braun 
considered the case a high priority investigation and proceeded 
with heightened caution.321 After Sergeant Braun finished 
examining Mr. Foster's car, it was sealed with tape and towed 
to the Anacostia Station of the Park Police.322 A Park 
Police officer accompanied the car to the station to ensure 
that its contents would not be disturbed.323

B. The Park Police notify the White House and the Foster family

    After Sergeant Braun and Detective Rolla finished their 
investigation at the scene, the shift commander asked them to 
call the White House. The investigators contacted White House 
Security Chief Craig Livingstone and White House Associate 
Counsel William Kennedy, both of whom went to the hospital to 
identify Mr. Foster's body. After Mr. Kennedy confirmed Mr. 
Foster's identity at the hospital, he called White House Chief 
of Staff Mack McLarty, Counsel Bernard Nussbaum, and Associate 
Attorney General Webster Hubbell.324
    Sergeant Braun and Detective Rolla made plans to notify the 
Foster family and were requested to pick up David Watkins, 
Assistant to the President for Management and Administration, 
to assist in the notification.325 They arrived at the 
Foster residence between 10:00 p.m. and 10:30 p.m.326 A 
few minutes later, Webster Hubbell, his wife, and Mr. Foster's 
sisters, Sharon Foster and Sheila Anthony, arrived at the 
Foster home.327 While the friends and relatives waited on 
the lawn, Sergeant Braun and Detective Rolla informed Mrs. 
Foster and her daughter Laura of Mr. Foster's death.328 
The friends rushed to console the visibly upset family.
    Park Police investigators were still attempting to continue 
their investigation. Typically, the death notification involves 
an attempt to determine whether there was evidence of foul play 
and to ask the family about the victim's finances, mental 
state, domestic relations, health problems, and use of 
medication.329 After a brief interview yielded no useful 
information,330 Detective Rolla asked Mrs. Foster to look 
for a note or anything out of the ordinary and to contact the 
police if she found anything.331 At approximately 11:00 
p.m., President Clinton arrived at the Foster residence. 
Feeling that they would get no further information from the 
family, Sergeant Braun and Detective Rolla left shortly 
thereafter, at about 11:10 p.m.332

C. The White House ignores repeated Park Police requests to seal Mr. 
        Foster's office

    As Sergeant Braun was leaving the Foster residence after 
the President arrived on July 20, she pulled David Watkins 
aside and asked him to seal Mr. Foster's office. Because the 
investigators did not find, at Fort Marcy or at the Foster 
home, a note or any other evidence indicating why Mr. Foster 
might have taken his own life, they considered Mr. Foster's 
White House office, the last known place where he was seen 
alive, to be a part of the overall crime scene.333 
Sergeant Braun testified that, from the investigation of the 
death scene and the interviews with the Foster family, the Park 
Police ``did not get any information that would confirm that 
Mr. Foster was depressed or had even discussed the possibility 
of committing suicide with any of his friends or relatives.'' 
334 Mr. Foster's office, therefore, became highly relevant 
to the investigation. ``So I felt that that may be a place 
where Mr. Foster may have left a note, would be at his office, 
maybe for his co-workers to find rather than for his wife.'' 
335 Detective Rolla agreed with Sergeant Braun: ``And 
then, having not been able to get any information as to his 
state of mind from the family, no knowledge that they had found 
a note or anything, his place of business becomes the next 
logical place to go, as I said earlier.'' 336 The Park 
Police believed that Mr. Watkins, who had provided the officers 
with a White House business card indicating that he was 
``Assistant to the President for Management and 
Administration,'' 337 possessed the authority to direct 
that Mr. Foster's office be sealed.338
    Once the Park Police determined that the focus of their 
investigation should shift to Mr. Foster's office, the police 
sought ``to preserve [the office] in the condition that he left 
it.'' 339 According to Sergeant Braun, Mr. Watkins agreed 
to secure Mr. Foster's office. 340 Detective Rolla 
corroborated Sergeant Braun's recollection:

        She asked him to secure the office because we knew the 
        situation was that we weren't going to be able to be in 
        there that night. And just to have things maintained, 
        we wanted it secured until such time as higher 
        officials could get in there and be gone through 
        properly.341

    Mr. Watkins denied that the Park Police asked him to take 
steps to seal Mr. Foster's office.342
    Major Robert Hines of the Park Police learned of Mr. 
Foster's death at approximately 9:45 p.m. on July 20.343 
Lieutenant Gavin, the shift commander, called to request that 
Major Hines contact Deputy Assistant to the President William 
Burton.344 Major Hines then called Mr. Burton and 
requested that he seal Mr. Foster's office. ``We needed to go 
into the office and look for any kind of reasons or intention 
that Mr. Foster may have to commit suicide.'' 345 To 
ensure that such a search would be fruitful, the office should 
not be contaminated. ``I would expect when we said seal the 
office, that the office would be closed, it would be secured 
and no one would be entering the office.'' 346 Sylvia 
Mathews, a White House aide, confirmed that she overheard a 
conversation between Mr. Burton and the Park Police that 
evening.347 Following the conversation, Mr. Burton asked 
Mr. Nussbaum to seal Mr. Foster's office. 348 Ms. Mathews' 
contemporaneous notes of the evening stated: ``At that point, 
Bill said we should get Bernie and lock the office. I am 
uncertain what time that was, but probably after 10:00 p.m. I 
don't remember who told Bernie, but he went up and locked the 
office.'' 349
    Notwithstanding the testimony of Major Hines and Ms. 
Mathews, Mr. Burton and Mr. Nussbaum denied that they had been 
asked to seal Mr. Foster's office.350
    Both Webster Hubbell's wife and Marsha Scott, a White House 
official and a friend of the Hubbells, remembered that Mr. 
Hubbell called either David Watkins or Mack McLarty on the 
night of Mr. Foster's death to request that his office be 
sealed.351 In a press briefing several days later, Dee Dee 
Myers identified Mr. McLarty as the person who directed that 
Mr. Foster's office be sealed.352
    David Gergen testified that, after leaving the Foster 
residence, he went to the White House at around 
midnight.353 In the White House kitchen, he and Mr. 
McLarty discussed sealing Mr. Foster's office.354 Mr. 
Gergen then spoke by telephone with Mark Gearan, the White 
House Communications Director. He asked Mr. Gearan, who was in 
his office on the first floor of the West Wing, whether the 
office had been sealed. According to Mr. Gergen, Mr. Gearan 
checked, and ``[h]e came back to me and said, yes, the office 
has been sealed.'' 355 Mr. Gearan testified that, when Mr. 
Gergen asked him whether Mr. Foster's office was locked, he 
asked Mr. Burton about it. Mr. Burton told Mr. Gearan that the 
office was locked, and Mr. Gearan relayed this information to 
Mr. Gergen.356
    Mr. Burton did not recall this conversation.357
    Even though White House officials had received several 
requests from law enforcement and an internal White House 
request, Mr. Foster's office was not sealed on the evening of 
July 20.

D. Mrs. Clinton learns of Mr. Foster's death and begins to contact 
        close associates

    After learning of Mr. Foster's death, Mr. McLarty called 
Hillary Clinton, who was travelling from Los Angeles to 
Arkansas that evening. Mrs. Clinton's plane landed in Little 
Rock at approximately 8:30 p.m. Eastern Daylight Time.358 
Mrs. Clinton then proceeded to her mother's home in Little 
Rock. Between 9:00 p.m. and 10:00 p.m., a Secret Service agent 
told Lisa Caputo, Mrs. Clinton's press secretary, that Mr. 
McLarty was calling by telephone.359 Mr. McLarty then told 
Ms. Caputo that he needed to speak privately to Mrs. Clinton. 
When Mrs. Clinton came on the line, Mr. McLarty informed her of 
Mr. Foster's death.360 Mr. McLarty confirmed that he 
notified Mrs. Clinton some time after 9:00 p.m., after her 
plane landed in Arkansas.361
    Margaret Williams, Mrs. Clinton's chief of staff, testified 
that she received two phone calls from Mrs. Clinton on the 
evening of July 20. ``The first call she was on the plane and 
said that--she must have called through Signal because I 
thought she said are you at home. And she said are you going to 
be there, and I said yes. And she said I will call you when I 
land.'' 362 After the plane landed, Mrs. Clinton called 
Ms. Williams again and informed her of Mr. Foster's 
death.363 Telephone records from the Rodham residence 
confirm that Mrs. Clinton called Ms. Williams on July 20 at 
10:13 p.m. Eastern Daylight Time and spoke for 16 
minutes.364 It was the first telephone call that Mrs. 
Clinton made after learning of Mr. Foster's death.
    The Rodham residence telephone records indicate that, after 
talking with Ms. Williams, Mrs. Clinton called the residence of 
Harry Thomason and Susan Bloodworth-Thomason in Carpinteria, 
California, for four minutes.365 Mr. Thomason, a long-time 
friend of the Clintons, was involved in the Travel Office 
affair that apparently weighed heavily on Mr. Foster's mind at 
the time of his death. Mrs. Clinton next called Susan Thomases 
in New York and spoke for 20 minutes. Ms. Thomases, who had 
played a key role in Whitewater damage control during the 1992 
presidential campaign, testified that she and Mrs. Clinton 
commiserated each other about Mr. Foster's death, and that they 
did not discuss the handling of papers in Mr. Foster's 
office.366

E. Mrs. Clinton calls the White House on an unlisted trunk line

    Mrs. Clinton next called the number 202-628-7087 and spoke 
for 10 minutes.367 The Committee was forced to go to 
considerable lengths to identify to whom Mrs. Clinton placed 
this call. Counsel for Mrs. Clinton and the White House 
represented to the Special Committee that, despite undertaking 
every effort available, they were unable to determine the 
identity of the person whom Mrs. Clinton called at 202-628-
7087. The telephone company also could not identify the person 
or entity registered to that number.11
---------------------------------------------------------------------------
    \11\ The Special Committee on September 15, 1995, issued a subpoena 
to Bell Atlantic requesting identification of the person or entity 
registered to that number. On September 27, 1995, the phone company 
replied with records indicating that the number was not registered as 
in service on July 20, 1993. After additional review, Bell Atlantic 
advised the Special Committee on November 28, 1995, that it was unable 
to determine to whom 202-628-7087 was registered in July 1993. 
Representatives of the telephone company speculated that the number may 
have been an auxiliary number for which it did not maintain separate 
billing records, or that the number may have been confidentially 
assigned to the White House for secured use. Similarly, the White House 
advised the Special Committee on November 15 and November 28, 1995, 
that it was unable to identify the person whom Mrs. Clinton called on 
July 20, 1993.
---------------------------------------------------------------------------
    On November 30, 1995, the Special Committee then issued a 
set of interrogatories to Mrs. Clinton, exploring her knowledge 
and recollection of the identity of the person or persons she 
called at 202-628-7087.12 On December 7, 1995, Mrs. 
Clinton submitted a sworn affidavit to the Special Committee, 
attesting that ``I do not remember calling the number 202-628-
7087 that evening. I understand that the number is an auxiliary 
White House switchboard number. It would not surprise me to 
learn that I had placed a call to the White House that 
evening.''
---------------------------------------------------------------------------
    \12\ On December 5, 1995, Chairman D'Amato wrote to the White House 
that ``[t]he Special Committee now has reason to believe that the 
number may have been used by the White House Communications Agency as a 
secure telephone line.''
---------------------------------------------------------------------------
    On December 7, 1995, the White House advised the Special 
Committee that ``the telephone number (202) 628-7087 was an 
unlisted trunk line that rang on the White House switchboard. . 
. . The number was also used as a means to get through to the 
White House when the switchboard was overloaded, and may have 
been provided to certain individuals for the purpose.''
    The White House further advised that ``we understand that 
Bill Burton remembers receiving a call in the Chief of Staff's 
office from Mrs. Clinton on the evening of July 20 and speaking 
with her about Vincent Foster's death.'' Tellingly, Mr. Burton 
had omitted this conversation when he first testified before 
the Committee. In his second appearance, Mr. Burton testified 
with a refreshed recollection:

          I was in Mr. McLarty's private office most of the 
        evening, and at some point that night I received a call 
        from the First Lady. I don't remember if I answered the 
        phone or if Ms. Mathews answered the phone and 
        transferred the call in to me or if someone else 
        answered the phone and transferred the call into me. I 
        don't remember who called.
          It was the First Lady, and we had a personal 
        conversation about Mr. Foster's death, and it lasted 
        about 10 or 15 minutes to the best of my 
        recollection.368

    Sylvia Mathews, who was in the Chief of Staff's office with 
Mr. Burton, did not recall observing Mr. Burton speaking on the 
telephone with Mrs. Clinton, nor did he discuss with her at any 
time about his conversation with Mrs. Clinton. She testified 
that ``I was away from the desk, as we discussed previously, 
several times.'' 369
    After calling the White House, Mrs. Clinton called Carolyn 
Huber.370 Ms. Huber, Assistant to the First Lady and 
Director of White House Correspondence, was the former 
administrator of the Rose Law Firm and would later discover in 
the White House Residence the long-missing Rose Law Firm 
billing records reflecting its work for James McDougal's 
Madison Guaranty. Mrs. Clinton spoke with Mrs. Huber for four 
minutes, and then called a family member in Washington, 
D.C.371 In her seventh and final call of the night, Mrs. 
Clinton called the President at 1:09 a.m. in the White House 
Residence and spoke to him for 13 minutes.372

F. Helen Dickey's telephone call to the Arkansas governor's mansion

    Helen Dickey worked for Governor Clinton in Arkansas as the 
assistant to the governor's mansion administrator.373 She 
became staff assistant to the White House Social 
Secretary.374 Between January 1993 and November 1994, Ms. 
Dickey lived in a suite of rooms in the northeast corner of the 
third floor of the White House Residence.
    Ms. Dickey testified that, on July 20, 1993, she returned 
to the White House Residence some time between 6:00 p.m. and 
8:00 p.m. and went to her rooms.375 Records maintained by 
the Secret Service indicate that Ms. Dickey entered the White 
House Residence at 7:32 p.m.376 She left her suite at some 
point to go to the solarium, also on the third floor, to watch 
the President's appearance on Larry King Live. The show started 
at 9:00 p.m.377 At some point during the show, John 
Fanning, a White House doorman, entered the solarium and told 
Ms. Dickey that Mr. Foster had committed suicide.378
    Ms. Dickey, visibly shaken, went to the second floor 
kitchen and called her mother from the kitchen telephone. After 
talking with her mother for two to three minutes, Ms. Dickey 
called her father, who lived in a suburb of Atlanta, 
Georgia.379 She then went back up to the third floor and, 
at some point, returned to the second floor kitchen to find the 
President, who had finished his interview with Larry 
King.380 The President told Ms. Dickey that ``Vince Foster 
had shot himself in a park.'' 381 After her two to three 
minute conversation with the President, Ms. Dickey returned to 
the third floor. Ms. Dickey made three calls from the telephone 
in the hallway of the third floor of the Residence. One call 
went to Ann Stock, Ms. Dickey's former supervisor as the 
Arkansas Governor's Mansion administrator, and another went to 
Ann McCoy, her supervisor as the White House Social 
Secretary.382 She talked to each for no more than five 
minutes.383
    Ms. Dickey then placed the third telephone call to the 
Arkansas Governor's Mansion at 501-376-6884.384 Roger 
Perry, an Arkansas State Trooper on duty at the mansion, 
answered the telephone. Ms. Dickey testified that she stated to 
Trooper Perry: ``I called just to let you know that Vince 
Foster has committed suicide. I just wanted you all to know 
before you heard it on the news.'' 385 According to Ms. 
Dickey, Trooper Perry ``showed signs of being shocked and being 
very sad.'' 386 The entire conversation lasted 
approximately two to three minutes.387 Her best estimate 
of the time of the call to the Governor's Mansion was 10:30 
p.m. Eastern Daylight Time.388
    During its investigation, the Special Committee received an 
affidavit from Roger Perry. In relevant part, the affidavit 
stated:

          On the 20th day of July, 1993, I received a telephone 
        call from a person known to me as Helen Dickey. I was 
        working in the security detail at the Arkansas 
        Governor's mansion in Little Rock, Arkansas at that 
        time. Dickey advised me that Vincent Foster, well knew 
        [sic] to me had gotten off work and had gone out to his 
        car in the parking lot and had shot himself in the 
        head. I do not recall the exact time of this telephone 
        call but am fairly certain it was some time from about 
        4:30 p.m. to no later than 7:00 p.m. [Central Daylight 
        Time]

    The Special Committee also received affidavits from Larry 
Patterson and Lynn Davis, also of the Arkansas State Police. 
Trooper Patterson stated that he had received a telephone call 
from Trooper Perry on July 20, 1993. Trooper Perry told him 
that Ms. Dickey had called and said Vincent Foster ``had gotten 
off work and had gone out to his car in the parking lot and 
shot himself in the head.'' Trooper Patterson did not recall 
the exact time of Trooper Perry's telephone call but was 
``fairly certain it was some time before 6:00 p.m.'' Central 
Daylight Time. Captain Davis likewise stated in his affidavit 
that Trooper Perry called him on July 20, 1993, to say that Ms. 
Dickey had called him and said that Vincent Foster ``had gone 
to his car on the parking lot and had shot himself in the 
head.'' According to Captain Davis, ``I estimate the time as 
being no later than six o'clock, Central Standard [sic] Time.''
    To resolve the discrepancy between Ms. Dickey's testimony 
and the sworn affidavits of Messrs. Perry, Patterson and Davis, 
the Special Committee attempted to obtain records of telephone 
communications between the White House and the Arkansas 
Governor's Mansion on July 20, 1993. The White House advised 
that ``no such call was made from the private telephone lines 
in the Executive Residence.'' 389 The call may have been 
placed, however, through the White House or Signal switchboard. 
Ms. Dickey testified that she recalled placing the call through 
the White House operator.390 On October 13, 1995, White 
House advised that ``[w]e have obtained records of long-
distance calls placed through the Signal switchboard, and have 
confirmed that no call to the Governor's Mansion was made 
through the Signal switchboard on July 20, 1993.'' 391 The 
White House also advised that Sprint, the provider of long 
distance service through the White House switchboard, did not 
retain records of individual long-distance telephone 
calls.392
    After additional inquiries, the Special Committee 
discovered that the White House was mistaken. Sprint indeed 
retained some records of individual telephone calls placed 
through the White House switchboard. The Special Committee thus 
issued a subpoena on November 20, 1995, to obtain such records 
and was initially advised that the records reflected the 
destination number to which a telephone call was placed, but 
not the extension in the White House from which the call 
originated.393 Sprint subsequently advised that its 
records only reflect the first six digits of the destination 
number, that is, the area code and prefix, and not the last 
four digits of the destination number.394 Because the 
Governor's mansion does not have an exclusive prefix, it is not 
possible to determine from the records produced by Sprint to 
the Special Committee when Ms. Dickey placed the phone call.
    After further inquiry by the Special Committee, however, 
the White House advised that ``[w]e have confirmed that a call 
to Ms. Dickey's father's telephone number in Georgia was made 
at 10:06 p.m. on July 20, 1993, from one of the private lines 
in the Residence.'' 395 Ms. Dickey testified that she 
called her father before calling the Arkansas Governor's 
mansion.396 Ms. Dickey also denied that she told the 
troopers that Vincent Foster had gone to his car in the parking 
lot and shot himself in the head. According to Ms. Dickey: 
``That's absolutely not true. . . . I never heard that, I never 
would have said that because that's not the facts as I knew 
them at that time. I'm absolutely positive of the timing of 
this.'' 397

G. The handling of trash and burn bags in Mr. Foster's office

    During the course of the evening, Sylvia Mathews determined 
that she should retrieve the trash from Mr. Foster's office in 
case it contained evidence relevant to his death. According to 
Ms. Mathews, ``I consulted with senior staff around and said 
should we examine the contents and was told--I don't remember 
the exact words or who said what, but generally encouraged to 
go ahead and look through the trash.'' 398 Ms. Mathews 
specifically recalled Bill Burton being present for this 
discussion.399 The trash had already been collected by the 
cleaning staff, but Ms. Mathews retrieved it. After locating 
what she believed to be Mr. Foster's trash, Ms. Mathews 
prepared an inventory and found nothing significant.400 At 
Bill Burton's request, she placed the trash in the office of 
Roy Neel, the Deputy White House Chief of Staff.401 Mr. 
Nussbaum testified that Ms. Mathews asked him if she should 
recover the trash from Mr. Foster's office. He then told her to 
go ahead and to store the trash in Roy Neel's office.402
    Ms. Mathews also wanted to recover Mr. Foster's burn bag. 
The burn bag, a receptacle used for sensitive materials to be 
destroyed, is collected daily by the Secret Service. Secret 
Service officer Henry P. O'Neill was responsible for emptying 
the individual burn bags into a larger burn bag to be 
processed.403 Officer O'Neill testified that he brought 
this co-mingled burn bag, which contained the papers of several 
offices, to the Chief of Staff's suite and gave it to Ms. 
Mathews. Officer O'Neill believed that this bag did not contain 
anything from the White House Counsel's suite or from Vincent 
Foster's office.404 When he had gone to empty the burn 
bags in the counsel's suite with the cleaning staff earlier 
that evening, he had been interrupted by Bernard Nussbaum 
entering the suite.405 Officer O'Neill never had a chance 
to empty the burn bags, because the suite was occupied that 
evening.
    Bill Burton then instructed Ms. Mathews to check with Mr. 
Nussbaum before examining the contents of the co-mingled burn 
bags.406 Mr. Nussbaum told Ms. Mathews that Mr. Foster's 
office did not have a burn bag.407 Mr. Nussbaum instructed 
Ms. Mathews to return the burn bag because it contained 
materials co-mingled from other offices in the White 
House.408 Ms. Mathews then returned the bag to Officer 
O'Neill and told him to proceed as usual.409 Mr. Nussbaum 
did not recall discussing the burn bag with Ms. 
Mathews.410

H. Senior White House officials conduct a late-night search of Mr. 
        Foster's office

    Even though the Park Police made two requests to seal Mr. 
Foster's office, three White House senior officials conducted a 
search of his office on the night of July 20.
    Patsy Thomasson, David Watkins' deputy, received the 
following message on her pager at 10:34 p.m. on July 20: 
``PLEASE PAGE DAVID WATSKINS [sic] WITH YOUR 
LOCATION''.411 Ms. Thomasson was at Sequoia Restaurant, 
minutes from the Foster residence in Georgetown. When Ms. 
Thomasson reached Mr. Watkins, he told her that Mr. Foster was 
dead.412 Ms. Thomasson then asked him, ``[I]s there 
anything I can do to help? Do I need to be where you are? What 
do I need to do?'' 413 Rather than asking Ms. Thomasson to 
take steps to seal Mr. Foster's office, as the Park Police had 
specifically requested Mr. Watkins to do, he instructed Ms. 
Thomasson to go into Mr. Foster's office at the White House to 
look for a suicide note.414 Ms. Thomasson arrived at the 
White House at 10:48 p.m.415
    White House Counsel Bernard Nussbaum was finishing dinner 
at Galileo's, a restaurant several minutes from the White 
House, when he was paged by the White House on July 20. When he 
returned the page, Mark Gearan told him that Mr. Foster was 
dead.416 Mr. Nussbaum went directly to the White 
House,417 where he encountered the President and Mack 
McLarty on their way to the Foster residence.418 According 
to Mr. Nussbaum, he then went to his office to make telephone 
calls to notify his staff of Mr. Foster's death. At about 10:45 
p.m., Mr. Nussbaum reached the White House Counsel's suite, 
where both his office and Mr. Foster's office are located. On 
his way there, ``it occurred to me that perhaps Vince left a 
note telling us why he had taken his life.'' 419
    Margaret Williams, Chief of Staff to the First Lady, 
testified that she received the news of Mr. Foster's death from 
Mrs. Clinton. Telephone records indicated that this call came 
at 10:13 p.m. Eastern Daylight Time and lasted 16 minutes. When 
she hung up with Mrs. Clinton, Ms. Williams called her mother 
420 and Evelyn Lieberman, her assistant.421 Ms. 
Lieberman, who lived near Ms. Williams, went to Ms. Williams' 
house and drove her to the White House. Ms. Williams did not 
recall why she went to the White House beyond the fact that ``I 
just knew everybody else would be there.'' 422 When the 
two arrived at the White House, Ms. Williams asked Ms. 
Lieberman to remain in the foyer of Mrs. Clinton's office to 
answer the phones. Ms. Williams went to Mr. Gearan's office to 
review a press statement and then went to her own office, which 
was down the hall from Mr. Foster's office, to get a copy of 
Mrs. Clinton's schedule.

          All evening, I had been avoiding looking in the 
        direction of Vince's office as I entered and left the 
        First Lady's suite. But in a strange way, when I saw 
        the light on in his office, I had this hope, albeit 
        irrational, that I would walk in and I would find Vince 
        Foster there and we would have a chat sitting on his 
        couch, as we have done so many times before.423

    Ms. Thomasson, Mr. Nussbaum, and Ms. Williams all admitted 
that they entered Mr. Foster's office on the evening of July 
20. Their stories fall apart after that. Each provided 
testimony that was inconsistent with the other two. And, their 
testimony was contradicted the testimony of career Secret 
Service officer Henry P. O'Neill, the watch officer for that 
evening, and contemporaneous Secret Service records.
    Ms. Thomasson testified that, after placing her personal 
belongings in her office, she went to the second floor on the 
West Wing of the White House.424 There, she encountered 
Mr. Nussbaum in the hallway and told him that Mr. Watkins had 
asked her to look for a suicide note in Mr. Foster's 
office.425 She and Mr. Nussbaum then walked together into 
Mr. Foster's unsecured office.426 The cleaning lady was 
leaving the suite as Mr. Nussbaum and Ms. Thomasson 
entered.427 Ms. Thomasson then did a quick search for a 
note. ``I sat at Vince's desk, opened the drawers to the desk 
to see if there was anything that looked like a suicide note. I 
looked in the top of his briefcase, which was sitting on the 
floor. I didn't see anything.'' 428 According to Ms. 
Thomasson, Mr. Nussbaum walked out for a moment, and Ms. 
Williams came in and began to cry on the couch.429 After a 
few minutes Ms. Williams left the office. Mr. Nussbaum then 
came back in the office and suggested that they ``probably 
should get out of here at that point.'' 430 Ms. Thomasson 
and Mr. Nussbaum then left Mr. Foster's office 
together.431 She then paged Mr. Watkins, at 11:36 p.m., to 
report that she had found no note in Mr. Foster's 
office.432
    Mr. Nussbaum offered a markedly different recollection. 
When he reached the Counsel's suite at around 10:45 p.m., the 
door was open. He did not arrive with Ms. Thomasson, as Mr. 
Thomasson has claimed. Instead, Ms. Thomasson and Mr. Williams 
were already in Mr. Foster's office. Ms. Williams was sitting 
on the sofa crying, and Ms. Thomasson was sitting behind Mr. 
Foster's desk. They told Nussbaum that they had just arrived, 
and Ms. Thomasson told Mr. Nussbaum that she was searching for 
a suicide note. According to Mr. Nussbaum, ``Patsy and I 
checked the surfaces in Vince's office. We opened a drawer or 
two looking for a note. . . . The three of us then left the 
office.433 He claimed that the search lasted no more than 
ten minutes,434 13 and that the three then left Mr. 
Foster's office together.435 Mr. Nussbaum then went next 
door to his office to make some phone calls.14 When he 
left about an hour later, he locked and alarmed the Counsel's 
suite.436
---------------------------------------------------------------------------
    \13\ However, a Park Police report of an interview with Mr. 
Nussbaum on July 22, 1993, noted that Mr. Nussbaum stated the search 
for a suicide note with Patsy Thomasson lasted from 2200 hours to 2400 
hours. Park Police Document 29.
    \14\ Mr. Nussbaum testified that although he does not remember, he 
``might have gotten up and walked out and come back.'' Nussbaum, 7/12/
95 Dep. p. 38.
---------------------------------------------------------------------------
    Ms. Williams contradicted the testimony of both Ms. 
Thomasson and Mr. Nussbaum. She testified that when she entered 
Mr. Foster's office, Ms. Thomasson was already sitting at Mr. 
Foster's desk. Ms. Williams sat on the couch and commiserated 
with Ms. Thomasson. Mr. Nussbaum entered the office later, 
obviously upset. 437 After a brief time in the office, Mr. 
Nussbaum left, and Ms. Williams followed shortly 
thereafter.438 According to Ms. Williams, Ms. Thomasson 
remained in the office after both Mr. Nussbaum and Ms. Williams 
left.439
    Ms. Thomasson, Mr. Nussbaum, and Ms. Williams thus differed 
as to the critical sequence of entries into and exits from Mr. 
Foster's office on the evening of July 20. Ms. Thomasson 
testified that she entered and exited Mr. Foster's office 
together with Mr. Nussbaum and suggested that at no time was 
she alone in the office.15 Mr. Nussbaum testified that he 
entered Mr. Foster's office after Ms. Thomasson and Ms. 
Williams; the three left the office together; and, after 
stopping by his office to make some phone calls, Mr. Nussbaum 
locked and alarmed the suite. Ms. Williams testified that she 
entered after Ms. Thomasson and before Mr. Nussbaum, and that 
she exited shortly after Mr. Nussbaum, leaving Ms. Thomasson 
alone again in the office.
---------------------------------------------------------------------------
    \15\ The only possible exception may be the brief moment when, 
according to Ms. Thomasson, Ms. Williams left and Mr. Nussbaum entered 
the office for the second time.
---------------------------------------------------------------------------

I. Secret Service Officer Harry O'Neill observes Margaret Williams 
        remove documents from Mr. Foster's office

    Henry P. O'Neill joined the Secret Service Uniformed 
Division in 1977 and has been assigned to the White House since 
May of that year. On the evening of July 20, 1993, he arrived 
at work at 6:30 p.m., several hours before his scheduled shift 
at 10:30 p.m., in anticipation of some voluntary overtime 
hours. He made his regular rounds with the cleaning 
staff.440 He accompanied the cleaning staff to the White 
House Counsel's suite and disarmed the alarm at 10:42 
p.m.441 As he reached the door of the suite, Officer 
O'Neill made a radio call to the uniformed division control 
center. The center acknowledged the call, and Officer O'Neill 
unlocked the door and entered.442 ``I flip the light 
switch on in the reception area. Then I walk to the right into 
Mr. Foster's--at that time, the deputy counsel's office, and 
behind the doorway there's an alarm switch, and you just flip 
the switch into access or open.'' 443 He then let the 
cleaning crew in.
    Officer O'Neill proceeded into Mr. Nussbaum's office and 
checked the burn bag.444 He did not check Mr. Foster's 
office for a burn bag because as he walked back into the 
reception area, ``I recognized Mr. Nussbaum as I turned to the 
right. He walked into his office, and just about the same time 
I noticed other figures walk in behind him and I heard women's 
voices. And so I directed the cleaning ladies to exit the 
suite, and I left the suite also.'' 445 16 Officer O'Neill 
could not identify exactly who, or how many people were 
accompanying Mr. Nussbaum into the suite. He was certain, 
however, that he heard women's voices and that Mr. Nussbaum was 
not alone as he entered the suite. The Secret Service officer 
then left the Counsel's suite and walked to the legislative 
affairs office. He was on his way back to alarm the Chief 
Counsel's suite when he ran into Howard Pastor, the Assistant 
to the President for Legislative Affairs, who informed him of 
Mr. Foster's death. As Officer O'Neill approached the Counsel's 
suite he saw Ms. Lieberman, Ms. Williams' assistant, leaving 
the suite.446 She asked Officer O'Neill to lock up the 
office. He replied that he would take care of it.447 
Officer O'Neill then rode the elevator with Ms. Lieberman down 
to the ground floor to inform his supervisor of Mr. Foster's 
death. While he was on the phone, he overheard Ms. Lieberman 
asking Officer James Shea to ensure that the Counsel's suite 
was locked.448 Officer O'Neill told Shea that he knew of 
the request and would secure the office.449
---------------------------------------------------------------------------
    \16\ The standard procedure for the cleaning staff was to exit 
whenever a White House staff member enters his or her office. S. Hrg. 
7/26/95 p. 13.
---------------------------------------------------------------------------
    When Officer O'Neill returned to secure the White House 
counsel's suite, he found Patsy Thomasson sitting behind Vince 
Foster's desk.17 He ``stopped in the doorway immediately 
walking into the office because as I looked to the left there 
was a woman sitting at the desk.'' 450 Officer O'Neill 
went back to the first floor. He returned to the Counsel's 
suite for a third time and again saw Ms. Lieberman coming out 
of the counsel's suite. She asked him again to lock Mr. 
Foster's office. According to Officer O'Neill:

    \17\ Officer O'Neill initially did not know who Ms. Thomasson was, 
but later identified her. O'Neill, 7/26/95 Hrg. p. 19.
---------------------------------------------------------------------------
        And then a few seconds after I saw her [Lieberman] come 
        out, Mr. Nussbaum walked out behind her and walked 
        through the hallway towards the stairs, past the 
        elevator, and within a few more seconds I saw Maggie 
        Williams walk out of the suite and turn to the right in 
        the direction that I was standing.451

    As Ms. Williams walked past Officer O'Neill to her office 
Ms. Lieberman told him `` `that's Maggie Williams; she's the 
First Lady's chief of staff.' '' 452
    Officer O'Neill observed Ms. Williams carrying file folders 
out of the Counsel's suite when he saw her on the night of Mr. 
Foster's death:

          She was carrying what I would describe in her arms 
        and hands, as folders. She had them down in front of 
        her as she walked down to her--in the direction of 
        where I was standing.
          She walked past me, and she continued on down the 
        hallway. It's only about 20 feet at the most. And she 
        started to enter her office, and she had to brace the 
        folders in her arm on a cabinet, and then she entered 
        the office and came out within a few seconds and locked 
        the door.453

    The folders were of ``some weight, 3 to 5 inches.''454 
Officer O'Neill was certain that he saw Ms. Williams carrying 
folders out of the Counsel's suite that evening.455 After 
leaving the folders in her office, Ms. Williams joined Ms. 
Lieberman outside of the counsel's suite.456 Officer 
O'Neill then locked and alarmed the suite and joined the two 
women on the elevator.457
    Ms. Lieberman, Ms. Williams and Mr. Nussbaum each denied 
removing any documents, or seeing anyone removing documents, 
from Mr. Foster's office on the night of his death.18
---------------------------------------------------------------------------
    \18\ Ms. Williams' attorney submitted an affidavit stating that he 
``arranged to have Ms. Williams polygraphed'' by a private polygrapher. 
Anderson, 7/31/95 Dep. Exh. 1. The affidavit represented that this 
private ``examination confirmed that Ms. Williams was truthful in her 
assertion that she did not remove any documents from Mr. Foster's 
office on the night of his death.'' Anderson, 7/31/95 Dep. Exh. 1. 
After receiving the favorable results from her private polygrapher, Ms. 
Williams then offered to submit to a polygraph examination on the same 
subject by the Office of the Independent Counsel. According to Ms. 
Williams' attorney, the Independent Counsel's polygrapher advised him 
at the conclusion of the test that ``Ms. Williams was truthful in her 
assertion that she did not remove any documents from Mr. Foster's 
office on the night of his death.'' Anderson, 7/31/95 Dep. Exh. 1.
---------------------------------------------------------------------------
    Mr. Nussbaum testified that after he left Mr. Foster's 
office together with both Ms. Thomasson and Ms. Williams, he 
proceeded to his office to make some telephone calls and then 
locked and alarmed the Counsel's suite when he left. This 
testimony was contradicted by the White House alarm logs 
maintained by the Secret Service for July 20, 1993, which 
showed that Officer O'Neill alarmed the counsel's suite at 
11:41 p.m.458 19
---------------------------------------------------------------------------
    \19\ Mr. Nussbaum explained that, although he locked and alarmed 
the suite, he did not remember calling the Secret Service to report 
that he had done so. Thus, ``you can lock the office and turn on the 
alarm without making that call. And if you do it without making that 
call, they may get, the Secret Service log may get the wrong name.'' 
Nussbaum, 8/10/95 Hrg. p. 125. This explanation is unpersuasive. It 
fails to explain why Officer O'Neill was identified on Secret Service 
logs as the person who set the alarm in the Counsel's suite--a position 
consistent with Officer O'Neill's testimony.
---------------------------------------------------------------------------
    Curiously, after Ms. Williams left the White House, she 
called Mrs. Clinton in Little Rock at 12:56 a.m. on the morning 
of July 21, and they spoke for 11 minutes. Ms. Williams claimed 
that she did not tell Mrs. Clinton about her search of Mr. 
Foster's office.459 Although Ms. Williams testified that 
she did not recall talking to Susan Thomases on the evening of 
Mr. Foster's death,460 telephone records obtained by the 
Special Committee indicated that, upon ending her conversation 
with Mrs. Clinton, Ms. Williams called Ms. Thomases at 1:10 
a.m., and they spoke for 14 minutes.461 Of her 
conversation with Ms. Williams, Ms. Thomases testified: ``I 
don't recollect speaking with her that night. That's not to say 
that she didn't call me back and I didn't speak to her, but I 
have no independent recollection of having spoken with her that 
night.''462

                          III. July 21, 1993.

A. Mr. Foster's office is finally sealed

    When Associate Attorney General Webster Hubbell woke up on 
July 21, 1993, he immediately called William Burton, Deputy 
Assistant to the President, and asked him to lock Mr. Foster's 
office.463 In the middle of the night, ``one of the things 
that kept me awake is saying we ought to make sure Vince's 
office is locked.'' 464 Mr. Hubbell wanted to make sure 
that the office was secured and that its contents were 
documented and handled in a ``professional'' manner.465 
When Mr. Hubbell reached Mr. Burton at the White House, some 
time between 7:00 a.m. and 8:00 a.m., Mr. Burton assured Mr. 
Hubbell that White House Chief of Staff Mack McLarty had taken 
steps to seal the office on the previous night.466 Mr. 
Burton did not recall discussing sealing the office with Mr. 
Hubbell,467 although his undated, handwritten notes listed 
``1) Secure office'' near the notation ``Webb'' and Mr. 
Hubbell's home and office phone numbers.468
    Betsy Pond, Bernard Nussbaum's secretary, arrived at the 
White House early in the morning of July 21, at around 7:00 
a.m.469 She then entered Mr. Foster's office, which had 
not been sealed. She followed the routine procedure to disarm 
the alarm for the Counsel's suite.470 Once inside Mr. 
Foster's office, she looked at documents on the coffee table 
and the desk, turned the documents over, and ``smushed them 
together in a pile.''471
    Associate Counsel to the President Stephen Neuwirth 
testified that when he arrived at the White House Counsel's 
suite on July 21, he saw Ms. Pond in Mr. Foster's office. Ms. 
Pond told him that she was straightening out the office, and 
Mr. Neuwirth told her that she should not be in Mr. Foster's 
office.472 Mr. Neuwirth testified that he ``didn't think 
it was appropriate for an assistant to Mr. Nussbaum to be in 
the office at that time.'' 473 Ms. Pond then left Mr. 
Foster's office and called Mr. Nussbaum at home. According to 
Ms. Pond, she told Mr. Nussbaum that she had been in Mr. 
Foster's office, and Mr. Nussbaum told her not to let anyone in 
the office.474 Mr. Nussbaum confirmed this 
conversation.475
    Linda Tripp, Mr. Nussbaum's executive assistant, testified 
that Ms. Pond told her that she went into Mr. Foster's office 
to search for a note:

          She said, ``Well, I just went in there but just to 
        straighten papers.'' And, I said, ``Betsy, why would 
        you have gone in there to straighten papers? We never 
        go into Vince's office to straighten anything.'' She 
        then admitted that she was hysterical, and she was 
        very, very overwrought, and that she had actually been 
        in there looking for a note but that no one was to go 
        in there; and, those were Bernie's strict 
        instructions.476

    At 8:00 a.m., the White House senior staff, which included, 
among others, Messrs. Burton, Gergen, and Nussbaum, attended a 
daily meeting in Mr. McLarty's office.477 Although those 
present at the meeting were fairly certain that they discussed 
Mr. Foster's death,478 none could recall the specifics of 
the discussion. Nor could anyone remember a discussion of the 
investigation into their colleague's death,479 other than 
``that the Park Police would be looking into it.''480 And, 
no one recalled any discussion of sealing Mr. Foster's office 
and preserving its contents.481
    Instead, Mr. Nussbaum testified that, after the daily 
meeting of the White House Counsel's Office at 9:00 a.m., he 
talked with Mr. Neuwirth and Associate Counsel to the President 
Clifford Sloan about securing Mr. Foster's office. Mr. Nussbaum 
realized that ``there would be investigations obviously with 
respect to Vince's death. And under those circumstances, it 
would be best to make sure that the office was secure in 
connection with those investigations.''482 According to 
Mr. Nussbaum, Mr. Neuwirth and Mr. Sloan, the three lawyers 
concluded that Mr. Foster's office should be sealed,483 
and they proceeded to call the Secret Service.484
    While the lawyers deliberated, Linda Tripp had 
independently contacted the Secret Service to arrange for the 
office to be sealed. ``When I first came in the morning and saw 
that it was not secured and Betsy was reacting to her 
situation, I said, `Why is this not secure? Why is there no 
tape? Why is there no guard?' She said, `No one has done that 
yet?' ''485 Ms. Tripp testified that her professional 
background led her to recognize the need to seal the office. 
``I've worked on the covert side of the Department of Defense. 
. . . And, instantly, to me, that made--it made little sense to 
do anything else but ensure that we were not violating--I mean, 
it was obvious a history-making situation that would come to if 
not this end then at least a very visible end. It just didn't 
occur to me not to do that.''486
    So when one of the lawyers emerged from the meeting in Mr. 
Nussbaum's office and said, ` ``Someone better arrange to have 
an agent posted,' '' Ms. Tripp had already made such 
arrangements.487 Donald Flynn, a Secret Service 
supervisor, confirmed that Ms. Tripp had called the 
Presidential Protective Division to request that an officer be 
posted outside Mr. Foster's office.488 Mr. Flynn forwarded 
the request to the uniformed division of the Secret Service 
and, at about 10:10 a.m., took up position outside Mr. Foster's 
office until he was relieved by the uniformed officer.489
    Even after a uniformed officer was posted at the door, 
White House personnel still had access to Mr. Foster's office. 
As Detective Markland testified, ``I came to find out that it 
wasn't exactly sealed but posted, which meant that people had 
access to the office but their comings and goings would be 
recorded by a Secret Service agent.''490 Because the White 
House Counsel's office did not specify that access should be 
limited, Secret Service Agent Flynn instructed the uniformed 
officers not to impede access but simply to record entries into 
the office.

          There really was no understanding as to whether or 
        not people could enter the office or not. I mean, I'll 
        offer this on my own and that was that I instructed the 
        officer that came up there to relieve me that if anyone 
        did enter the office, to jot down the time and the name 
        of who it was and what the purpose was for them going 
        in the office, and then to relay the information to 
        me.491

Thus, the log indicated that at 11:10 a.m., Mr. Nussbaum 
entered the office and removed a small black and white 
photograph.492 Although Thomas Castleton, an intern in the 
White House Counsel's office, testified that he entered Mr. 
Foster's office with Mr. Nussbaum, Castleton's entry was not 
recorded in the log book.493

B. The White House impedes initial Park Police efforts to search Mr. 
        Foster's office

    Based on their various requests the previous night, the 
Park Police assumed that Mr. Foster's office had been sealed. 
Sergeant Braun was under the impression that the office had in 
fact been sealed.494 Similarly, Major Robert Hines had 
spoken with Mr. Burton on the night of July 20 and requested 
that he seal the office, following ``a normal procedure that 
our investigators would ask the Secret Service to do.''495 
Thus, when Major Hines and Park Police Chief Robert Langston 
briefed White House officials on their investigation at a 10:00 
a.m. meeting on July 21, both Major Hines and Chief Langston 
thought that Mr. Foster's office had already been 
sealed.496 In fact, Chief Langston testified that, during 
the 10:00 a.m. briefing, White House officials assured him that 
the office had been sealed the night before, even though it was 
not.497 ``There was acknowledgement, somewhere in that 
meeting, that the office had been sealed and that investigators 
would be conducting interviews of the staff up there that 
morning.''498
    The two Park Police investigators, Captain Hume and 
Detective Peter Markland, arrived at the White House just as 
Major Hines and Chief Langston finished briefing White House 
officials. Detective Markland, who replaced Sergeant Cheryl 
Braun on the case, found out upon his arrival at the White 
House that a uniformed officer had not been posted at Mr. 
Foster's office until the morning following Mr. Foster's death, 
despite contrary assurances to the Park Police. He had a brief 
discussion with Secret Service Inspector Dennis Martin and Mr. 
Nussbaum, and ``even though they were different times and there 
was confusion as to what time somebody was posted and who 
ordered it posted, both of them agreed they had not been posted 
until that morning at some point.'' 499 Given the 
importance of the office to his investigation, Detective 
Markland was upset at the news. ``I was under the impression 
that it was posted the night before, after Mr. Foster was 
identified. So I was upset about that.'' 500 Detective 
Markland and Captain Hume complained to Chief Langston about 
the White House's failure to secure the office. ``[T]hose were 
comments that were just made by Hume or Markland at the time 
that it had not been sealed or wasn't sealed properly, or 
people had been allowed access, or something like that; that 
they had great concerns at the time.'' 501 Those concerns 
prompted Chief Langston to call Robert Bryant, the special 
agent in charge of the Washington field office for the FBI, to 
request an FBI agent to assist the Park Police 
investigators.502
    The Park Police investigators were not permitted to enter 
Mr. Foster's office to search for evidence on July 21. 
According to Secret Service Agent Flynn, he understood that 
Captain Hume and Detective Markland ``were coming over with the 
intent of going into Mr. Foster's office to look for a suicide 
note.'' 503 Secret Service Inspector Martin was assigned 
to escort the investigators ``wherever they needed to go.'' 
504 However, when Agent Flynn encountered the trio later 
in the day, Agent Martin appeared to be ``baby-sitting'' the 
Park Police investigators.505 ``They were waiting with him 
for a time to determine when they could go in Mr. Foster's 
office.'' 506 The investigators had not been allowed 
access to Mr. Foster's office to search for evidence because 
``[t]hey were waiting for approval from Mr. Nussbaum.'' 
507 They waited through the afternoon.508

C. The White House Counsel and Deputy Attorney General agree on a 
        search protocol for the documents in Mr. Foster's office

    Associate Attorney General Webster Hubbell was among those 
who attended the Park Police briefing at the White House in the 
morning of July 21. As they were walking out of the meeting, 
Mr. Hubbell told Mr. Nussbaum that ``he ought to think about 
staying out of this.'' 509 Mr. Hubbell testified that he 
advised Mr. Nussbaum to recuse himself from the investigation 
because ``I knew that there had been issues regarding the 
travel office and whether there should be an independent 
counsel to represent the White House with regard to the travel 
office investigation.'' 510 Mr. Nussbaum replied that he 
wanted to talk to Mr. Hubbell about that later.511 They 
never talked.512
    Some time that afternoon, Mr. Nussbaum spoke with other 
senior officials at the Justice Department. Shortly after the 
Park Police briefing, Mr. Nussbaum decided to ask the Justice 
Department to coordinate the investigation into Mr. Foster's 
death.513 He then called either Attorney General Janet 
Reno or Deputy Attorney General Philip Heymann to make the 
request. According to Mr. Nussbaum, the Justice Department 
replied that the FBI would assist with the investigation. For a 
coordinating function, however, ``they may get other people 
involved.'' 514 Other than this quick response to Mr. 
Nussbaum's request for assistance, Mr. Nussbaum did not recall 
any conversation with anyone about documents in Mr. Foster's 
office until officials from the Justice Department arrived at 
the White House later in the afternoon.515
    Mr. Heymann had a more detailed and markedly different 
recollection of the conversation. Mr. Heymann did not remember 
who initiated this conversation, but suspected that he 
telephoned Mr. Nussbaum after the White House contacted 
Attorney General Reno and she delegated the matter to Mr. 
Heymann. He was immediately aware of the sensitive nature of 
the investigation, based on his experience in the Justice 
Department.516
    According to Mr. Heymann, important legal, political and 
ethical considerations must be balanced in an investigation 
into the death of a senior administration official:

          Number one is I know there's going to be a serious 
        problem with documents because there are serious issues 
        of executive privilege and there are serious issues of 
        law enforcement and they aren't easily reconciled. 
        Number two, I know that there are going to be political 
        attacks and political allegations of cover-up and I 
        know that there's going to be conspiracy theorists. 
        I've been through that regularly and I know that 
        they're out there. . . . That difficulty of reconciling 
        the three, number one and number two, leads to the 
        third, and that is I worry a lot about the Department 
        of Justice retaining the appearance and the reality of 
        absolutely unbiased law enforcement.517

Because of these competing considerations, Mr. Heymann believed 
that any review of documents had to be undertaken jointly by 
law enforcement officials and the White House. ``So we can't 
make the judgment completely ourselves as to what's relevant. 
On the other hand, I don't think it's wise or desirable for the 
White House counsel to decide on his own what is executive 
privilege and what isn't.'' 518
    On the afternoon of July 21, Mr. Heymann and Mr. Nussbaum 
agreed on an appropriate procedure to review the documents in 
Mr. Foster's office. ``I agreed with Mr. Nussbaum on what I 
think, and continue to think, is an entirely sensible plan for 
reconciling these competing interests.'' 519 Career 
Department of Justice officials would review the documents 
jointly with Mr. Nussbaum, but the officials would be allowed 
to see each document to determine its relevance to the ongoing 
investigation:

          I would send over career prosecutors of unimpeachable 
        reputation and rectitude and they would, with him, look 
        at every document in the office. They would look at the 
        heading of its and maybe the first couple of lines, in 
        order to see whether it had any likely relevance or any 
        possible relevance, to Vince Foster's death.520

Although ``agreed'' did not mean that he and Mr. Nussbaum 
entered into a binding contract, Mr. Heymann was certain that 
he and Mr. Nussbaum had reached a meeting of minds on July 21 
on the appropriate review procedure.521 ``I understood it 
to be that we both thought that this was the right way to 
handle what would otherwise be a very difficult and sensitive 
problem.'' 522 He described this procedure to Captain 
Charles Hume of the Park Police that afternoon. According to 
Captain Hume: ``My first impression was that the documents 
would be looked at by the Justice Department attorneys.'' 
523
    Mr. Heymann selected two respected career prosecutors to go 
to the White House to review the documents--Roger Adams, 
Counsel to the Deputy Attorney General, and David Margolis, 
Associate Deputy Attorney General. Mr. Adams, who had been the 
principal ethics official for the criminal division, was, in 
Mr. Heymann's words, ``unbiasable.'' 524 Mr. Margolis, who 
had been chief of the Department's organized crime section, 
``sort of epitomizes the most highly respected career 
prosecutor at this time. There's no more highly respected 
career prosecutor at this time.'' 525
    That afternoon, Mr. Heymann sent Mr. Adams and Mr. Margolis 
to the White House to begin to carry out the document review 
procedure to which he and Mr. Nussbaum had just agreed. ``I 
know we agreed and I know that because I know I sent Adams and 
Margolis over and I even thought the process was going to start 
that afternoon.'' 526 Mr. Margolis corroborated Mr. 
Heymann's recollection:

          To give it the full background, he had called me up 
        from a meeting, and he said, ``I want you to go over to 
        the White House with Roger Adams.'' He said, ``Vince 
        Foster is dead. There's an investigation of it.'' I had 
        seen the headline of that in the newspaper that 
        morning. He said he had reached a tentative agreement 
        with Mr. Nussbaum that Roger and I were to go through 
        at least the first page or two of each document in 
        order to determine whether they were relevant to our 
        investigation. . . . Phil told me that he believed he'd 
        had an agreement in principle with Bernie Nussbaum to 
        do it that way, so I should go finalize it and then 
        begin the search process.527

D. The White House finalizes the agreement on the search protocol

    When Messrs. Adams and Margolis arrived at the White House 
in the late afternoon, at around 5:00 p.m., they went to the 
White House Counsel's suite. There, they met with Mr. Nussbaum, 
other members of the White House Counsel's office, an attorney 
for the Foster family, and officials of the FBI, Park Police, 
and Secret Service.528 The purpose of the meeting was to 
discuss the procedures for the review of documents in Mr. 
Foster's office.
    Mr. Margolis testified that, at the meeting, he and Mr. 
Nussbaum finalized the agreement on how to conduct the search 
the following morning. ``When I got there, I discussed it with 
Mr. Nussbaum. And I believed then and I believe today that we 
finalized that agreement and that we both agreed to it.'' 
529 Roger Adams confirmed that Mr. Nussbaum agreed that 
the Justice Department officials would review the documents for 
relevance and, if the documents were relevant, for possible 
claims of privilege.530 Mr. Adams was certain that an 
agreement had been reached. ``I am not sure how the 
conversation went, but the procedure that I have just outlined 
was what was clearly agreed upon at that meeting on Wednesday 
the 21st.'' 531
    The recollection of the Justice Department officials was 
corroborated by a contemporaneous FBI report.20 After 
summarizing how the FBI became involved in the investigation on 
July 21, the report stated:
---------------------------------------------------------------------------
    \20\ The report was written and submitted to the Director of the 
FBI on July 22, 1993. Although it is not possible from the time stamp 
on the document to determine whether the report was received at around 
9:00 in the morning or in the evening of July 22, the text of the 
report makes clear that it was written prior to any FBI activity at the 
White House on July 22.

          An initial meeting was held with the White House 
        Counsel Bernard Nussbaum at which time it was agreed 
        that the Victim's office, which is located adjacent to 
        Mr. Nussbaum's would continue to be sealed by the U.S. 
        Secret Service (USSS) until 10:00 A.M. on 7/22/93, at 
        which time Margolis and Adams would conduct a 
        preliminary examination of documents within the 
---------------------------------------------------------------------------
        office.532

    When, near the end of the meeting, Mr. Neuwirth stated that 
Mr. Nussbaum alone would review each document for relevance, 
Mr. Adams and Mr. Margolis immediately objected. Mr. Nussbaum 
then intervened, correcting Mr. Neuwirth and stating that the 
Justice Department attorneys would review the documents. 
According to Mr. Margolis:

          When we finished, Mr. Neuwirth on his staff, as I 
        recall, attempted to restate the agreement, and got it 
        what I believe was exactly wrong, and said, ``The way 
        we're going to do it is that Bernie will go through the 
        documents, and he'll give you what is both relevant and 
        non-privileged to review.'' I said that's exactly 
        wrong. We just agreed to the other procedure. And it 
        was my recollection then, and it's my recollection 
        today, that Mr. Nussbaum agreed with me that Mr. 
        Neuwirth was wrong, and that we had that other 
        agreement.533

Mr. Adams recollected the same incident.534
    At Mr. Heymann's request, Roger Adams typed up notes 
summarizing the activities of the Justice Department in 
connection with the Foster investigation. Those notes, prepared 
the following week, confirmed Mr. Margolis' recollection:

          At the Wednesday meeting there was agreement that the 
        Justice Department attorneys would look at each 
        document or at least each file to determine if it 
        contained privileged material, in which case it would 
        not be examined by the Park Police or FBI. We would not 
        read the documents or make notes, but merely examine 
        them long enough to determine if they were covered by 
        the attorney-client privilege or possibly executive 
        privilege. As an example of the clarity of this 
        agreement, Mr. Neuwirth at one point, apparently trying 
        to summarize it, said that ``Bernie would look at each 
        document and determine privilege. If he determined no 
        privilege, it could be shown to the law enforcement 
        officers.'' He was immediately corrected and Mr. 
        Nussbaum agreed that the Justice Department 
        representatives would see the documents to determine 
        privilege.535

    The recollection of Mr. Nussbaum and his associates 
contradicts the testimony of the career Justice Department 
officials and, most importantly, the only contemporaneous 
document--an FBI report--recording what occurred at the 
meeting.
    Mr. Nussbaum conceded that the search of Mr. Foster's 
office was discussed, 536 but maintains that no agreement 
was reached as to the procedure for reviewing documents. ``In 
my--to the best of my recollection, and I do have a 
recollection about this, there was no agreement. I think my 
recollection is supported by Mr. Neuwirth of my office who was 
there, by Mr. Sloan of my office who was there.'' 537 Mr. 
Nussbaum acknowledged, however, that a misunderstanding may 
have occurred:

          If the Justice Department officials believe that we 
        reached an agreement after our July 21 meeting, then a 
        misunderstanding and a miscommunication occurred, and I 
        may be responsible for that. But I do not believe, nor, 
        as you have heard, do my colleagues in the White House 
        counsel's office believe, who were present at those 
        meetings, that we reached any agreement on July 21 or 
        that we in any way misused the Department of 
        Justice.538

Mr. Neuwirth and Mr. Sloan corroborated Mr. Nussbaum's 
testimony that the exact protocol for the search was not 
resolved at the end of the July 21 meeting.539
    When Mr. Adams and Mr. Margolis returned to the Justice 
Department after the meeting, Mr. Margolis reported to Mr. 
Heymann that Mr. Margolis had finalized Mr. Heymann's agreement 
with Mr. Nussbaum.

          I told him along the lines that he had thought that 
        he had reached a tentative agreement with Bernie 
        Nussbaum; that Roger and I would review at least the 
        first couple, first page or two of each document, to 
        determine whether it might contain something along the 
        lines of an extortion note or a suicide note. So it was 
        the agreement that he had reached.540

Mr. Heymann confirmed this testimony:

          Mr. Heymann: That is what they reported to me when 
        Mr. Margolis and Mr. Adams returned that evening, the 
        evening of Wednesday the 21st, to the Justice 
        Department.
          Senator Shelby: What do your notes reflect, I was 
        paraphrasing them?
          Mr. Heymann: It said they discussed the system that 
        had been agreed upon, I just described to you. BN, that 
        stands for Mr. Nussbaum, agreed. SN, that stands for 
        Neuwirth, said no. We shouldn't do it that way. The 
        Justice Department attorneys shouldn't have direct 
        access to the files. David Margolis, the Justice 
        Department attorney, said it's a done deal and Mr. 
        Nussbaum at that point said yes, we've agreed to 
        that.541

    During the meeting, everyone agreed that, given the 
lateness of the hour, the search of Mr. Foster's office would 
not take place until the following day.542 It was then 
decided that the Secret Service would place a secure lock on 
Mr. Foster's office door, the keys to which would be kept by 
agent Flynn of the Secret Service.543 The lock was 
installed at approximately 8:00 p.m. on July 21.544

                           IV. July 22, 1993

A. The White House Counsel's office interferes with Park Police 
        interviews of White House staff

    The next morning, July 22, at about 9:00 a.m., Detective 
Markland and Captain Hume of the Park Police returned to the 
White House to interview White House staff. Two Associate White 
House Counsels attended each of the interviews. Deborah Gorham, 
Mr. Foster's secretary, testified that members of the White 
House staff attended a meeting on the afternoon of July 21 with 
Mr. Sloan, Mr. Neuwirth, and Mr. Nussbaum. Mr. Neuwirth, 
according to an electronic mail message from Linda Tripp to Ms. 
Gorham, ``briefed us on comportment and interrogation.'' 
545
    During this meeting on July 21, Ms. Gorham told Mr. 
Nussbaum that Mr. Foster had ``placed shredded remnants of 
personal documents'' 546 in his briefcase. Ms. Gorham 
wrote to Ms. Tripp in an e-mail that ``I told Bernie in front 
of everybody that shredded remnants were in the bag,'' 547 
an exchange that Ms. Tripp recalled.548
    Captain Hume and FBI special agent Dennis Condon 
interviewed Betsy Pond, Mr. Nussbaum's secretary, in Mr. 
Sloan's presence. According to Captain Hume's report of the 
interview, Mr. Sloan took notes during the entire interview. At 
one point, ``Bernard Nussbaum burst into the room and demanded, 
``is everything all right?'' 549 After being reassured, 
Mr. Nussbaum left. Captain Hume asked Ms. Ponds whether she had 
been coached:

          When I questioned her if she had been told how to 
        respond to our questions, she stated that Clifford 
        Sloan (who was present during our interview) and Steve 
        Neuwirth, both associate counselors, had called them 
        all together on Wednesday evening and told them they 
        would be questioned by the police and for them to tell 
        the truth.550

    While Captain Hume and Agent Condon interviewed Ms. Pond, 
Detective Markland and FBI agent Scott Salter interviewed 
Deborah Gorham in the presence of Mr. Neuwirth.551 Mr. 
Neuwirth interjected at the end of the interview and ``took Ms. 
Gorham out of the room to speak to her.'' 552 They 
returned a short time later, ``and Ms. Gorham stated that there 
was one thing she thought may be important that she recalled.'' 
553 Ms. Gorham then told the investigators that in the 
previous week, Ms. Gorham had, at Mrs. Foster's request, asked 
the White House credit union to credit Mr. Foster's pay on a 
weekly, rather than biweekly, basis to avoid overdrawing the 
family account.
    A similar incident occurred later in the day, after the 
Park Police had completed their interview with Ms. Gorham:

          At approximately 1450 hours, immediately after the 
        inventory of Mr. Foster's Office by White House Counsel 
        (reference report under this case file number by Capt. 
        Hume), Detective Markland and S/A Salter were asked to 
        remain and were ushered into Mr. Nussbaum's office by 
        Mr. Neuwirth. Ms. Gorham was brought in and she stated 
        that she had just remembered some conversations that 
        she thought were important to our 
        investigation.554

Ms. Gorham then told the investigators that Mr. Foster's son 
and wife had called within the last two weeks to ask about Mr. 
Foster's mood.555
    Detective Markland testified that he believed the attorneys 
from the White House counsel's office attended the interviews 
in order to ``report back to Mr. Nussbaum what was being said 
in the interviews.'' 556 Because the White House lawyers 
were present, ``[t]he atmosphere of those interviews made it 
impossible to establish any kind of relationship with the 
people being interviewed.'' 557 The lawyers created an 
``intimidating situation'' and therefore the interviews were 
not very productive.558 According to Detective Markland: 
``It was my belief that the staff members that we were 
interviewing had been briefed beforehand and would say no more 
than what they were told they should tell us.'' 559 
``Everyone I interviewed on this day up there I felt had been 
talked to by Mr. Nussbaum or his staff and knew exactly what 
they were going to say, nothing more, nothing less. And that 
was it. They all came off very rehearsed.'' 560

B. The First Lady, Margaret Williams, Susan Thomases and Bernard 
        Nussbaum conduct a series of early morning telephone calls

    At 7:44 a.m. Eastern Daylight Time (EDT) on July 22, 
Margaret Williams, the Chief of Staff to the First Lady, called 
Mrs. Clinton at her mother's house in Little Rock.561 They 
talked for seven minutes. This call set off a chain reaction of 
further calls.
    At 6:57 a.m. Central Daylight Time, or 7:57 a.m. EDT, Mrs. 
Clinton called the Mansion on O Street,562 a small hotel 
where Susan Thomases usually stayed in Washington, D.C.563 
The call lasted three minutes.564 Ms. Thomases, a New York 
lawyer, is a close personal friend of President and Mrs. 
Clinton. She has known the President for 25 years and Mrs. 
Clinton for almost 20 years.565 She was an adviser to the 
Clinton 1992 presidential campaign on the Whitewater issue, and 
remained in a close circle of confidants to the Clintons after 
the election.566 Susan Thomases was the third person Mrs. 
Clinton called after she learned of Mr. Foster's death, and 
they talked for 20 minutes.567
    After her conversation with Mrs. Clinton, at 8:01 a.m. EDT, 
Ms. Thomases paged Bernard Nussbaum at the White House, leaving 
her number at the Mansion on O Street.568 After Mr. 
Nussbaum answered the page, Ms. Thomases and Mr. Nussbaum both 
agree that they talked about the upcoming review of documents 
in Mr. Foster's office.569
    Associate White House Counsel Stephen Neuwirth, who was 
formerly an associate at Mr. Nussbaum's law firm in New York 
City, testified that Mr. Nussbaum told him that Ms. Thomases 
and Mrs. Clinton were concerned about investigators having 
``unfettered access'' to Mr. Foster's office. ``Again, while I 
don't remember his exact words, in a very brief discussion, my 
understanding was that Ms. Thomases and the First Lady may have 
been concerned about anyone having unfettered access to Mr. 
Foster's office.'' 570 Mr. Neuwirth thought that the 
conversation occurred on July 22, before the scheduled document 
review with law enforcement officials.571
    Ms. Williams initially did not tell the Special Committee 
about her early morning phone call to the Rodham 
residence.572 After obtaining her residential telephone 
records documenting the call, the Special Committee voted 
unanimously to call Ms. Williams back for further testimony. 
When presented with these records, Ms. Williams testified: ``If 
I was calling the residence, it is likely that I was trying to 
reach Mrs. Clinton. If it was 6:44 in Arkansas, there's a 
possibility that she was not up. I don't remember who I talked 
to, but I don't find it unusual that the Chief of Staff to the 
First Lady might want to call her early in the morning for a 
number of reasons.'' 573
    Ms. Thomases testified that she did not give instructions 
to anyone about the search of Mr. Foster's office:

          While my memory is not perfect--I just don't remember 
        every person that I spoke to during those days. But I 
        do know that I never, I say never, received from anyone 
        or gave to anyone any instructions about how the review 
        of Vince Foster's office was to be conducted or how the 
        files in Vince's office were to be handled. I want to 
        repeat that. I never received from anyone or gave to 
        anyone any instructions about how the review of Vince 
        Foster's office was to be conducted or how the files in 
        Vince's office were to be handled.574

She acknowledged paging Mr. Nussbaum on the morning of July 22, 
but maintained that ``I was not looking for Bernie to talk 
about the review of documents in Vince Foster's office. I was 
really trying to reach him to talk to about how he was feeling 
and how he was doing.'' 575
    Ms. Thomases did offer that she talked to Mr. Nussbaum 
about the review of documents in Mr. Foster's office, but only 
because Mr. Nussbaum initiated the subject:

          He obviously was very focused on the documents at 
        that time, where I was not, and he proceeded to tell me 
        not to worry, that he had a plan, that he was going to 
        take care of him. He was kind of, as I said in my 
        deposition, he was sort of venting. He seemed to have a 
        very clear sense that he was on top of it; he was going 
        to handle it; he was going to give Vince's documents to 
        the Clinton's lawyers, and that he was going to protect 
        all the Presidential papers.576

She told Mr. Nussbaum that his procedure ``sounds good to me.'' 
577 Ms. Thomases testified that she did not express any 
view to Mr. Nussbaum that the police should not have unfettered 
access to Mr. Foster's office.578 Ms. Thomases maintained: 
``I don't remember ever having a conversation with Hillary 
Clinton during the period after Vince Foster's death about the 
documents in Vince Foster's office.'' 579
    After Ms. Thomases' initial testimony, the Special 
Committee obtained telephone records documenting that she 
talked with Mrs. Clinton for three minutes immediately prior to 
paging Mr. Nussbaum on July 22. The Special Committee voted 
unanimously to call Ms. Thomases back for further testimony. 
When presented with the new records, Ms. Thomases testified 
that ``I know you think there is a relationship between those 
two calls.'' 580 She maintained, however, that the two 
calls were not related. She testified that her early-morning 
conversation with Mrs. Clinton was about ``the possibility that 
I didn't feel well enough to go to Little Rock'' for Mr. 
Foster's funeral.581 According to Ms. Thomases, she called 
Mr. Nussbaum because ``I was worried about my friend Bernie, 
and I was just about to go into a very, very busy day in my 
work, and I wanted to make sure that I got to talk to Bernie 
that day since I had not been lucky enough to speak to him the 
day before.'' 582
    Mr. Nussbaum had a markedly different recollection of his 
conversation with Ms. Thomases on July 22. He testified that 
Ms. Thomases--not he--initiated the discussion about the 
procedures that he intended to employ in reviewing documents in 
Mr. Foster's office. ``The conversation on the 22nd was that 
she asked me what was going on with respect to--what was going 
on with respect to the investigation or the examination--the 
examination of Mr. Foster's office.'' 583
    Beyond this, Mr. Nussbaum testified that Ms. Thomases 
``said people are concerned about whether I was using the 
correct procedure or whether the procedure was--people were 
concerned or disagreeing, something like that, whether a 
correct procedure was being followed, whether I was using the 
correct procedure, whether it was proper to give people access 
to the office at all something like that.'' 584 According 
to Mr. Nussbaum, Ms. Thomases never specified who the 
mysterious ``people'' were to whom she was referring,585 
nor did Mr. Nussbaum understand who they were.586
    Mr. Nussbaum claimed that he resisted the overtures of the 
First Lady's close advisor:

          But I said Susan--she wasn't in the White House--at 
        least I didn't know she was in the White House--I said 
        I'm having discussions with various people. As far as 
        the White House is concerned, I will make a decision as 
        to how this is going to be conducted. It's going to be 
        done the right way. It will balance out the various 
        interests. It's going to be done the way I think it 
        should be done.587

    And, Mr. Nussbaum further testified that Mrs. Clinton did 
not convey to him, directly or indirectly, her views on how to 
conduct the search of Mr. Foster's office.588 Mr. Nussbaum 
did not recall telling Mr. Neuwirth that Ms. Thomases and Mrs. 
Clinton were concerned about the police having unfettered 
access to Mr. Foster's office.589
    Apparently, Ms. Thomases did not give up easily. In the 
late morning of July 22, senior White House officials, 
including Mr. Nussbaum and Mr. Neuwirth, met in the office of 
Chief of Staff Thomas McLarty to discuss the upcoming review of 
Mr. Foster's office.590 At about the time of this meeting, 
between 10:48 a.m. and 11:54 a.m., Ms. Thomases called Mr. 
McLarty's office three times and Ms. Williams' office three 
times.591
    When asked about the coincidence of these telephone calls, 
Ms. Thomases testified that she ``never actually remember[ed] 
speaking with Mack McLarty at his number during this period.'' 
592 With respect to the repeated calls to the office of 
the Chief of Staff to the First Lady, Ms. Thomases testified 
that she probably was attempting not to reach Ms. Williams but 
rather to be transferred to someone else in the White 
House.593 Although she testified that July 22 was ``a 
very, very busy day in my work,'' 594 Ms. Thomases 
suggested that she also may have been put on hold during these 
lengthy calls, for as long as nine minutes.595
    Ms. Williams testified that she could not recall talking 
with Ms. Thomases and suggested that she was at home in the 
morning of July 22.596 This explanation was contradicted 
by Secret Service records indicating that Ms. Williams had 
entered the White House at 8:10 a.m. that morning.597

C. The White House breaks its agreement with the Justice Department: 
        ``A terrible mistake''

    By the time senior Justice Department attorneys David 
Margolis and Roger Adams arrived at the White House at 10:00 
a.m. on July 22, 1994, Mr. Nussbaum had a change of heart. He 
``announced that he had decided to change the procedure for the 
search or inventory of the office. He said that he alone would 
look at each document to determine relevance and privilege, and 
that we would not be doing that.'' 598
    According to Roger Adams, the Justice Department officials 
``pointed out that that was completely inconsistent with the 
agreement of the day before, and we argued with Mr. Nussbaum. 
We said this was not what we had agreed to, that he was making 
a mistake, and we were going to have to call our boss, the 
Deputy Attorney General.'' 599 According to Mr. Margolis, 
Mr. Nussbaum said that there had been a change of plans, ``that 
he would look at the materials to determine whether they were 
relevant, make the first cut, and determine the privilege 
issues and the sensitivity issues. And then anything that met 
all his standards along those lines, if we still wanted to see, 
he would show us.'' 600
    Upset, Mr. Margolis immediately called Mr. Heymann from Mr. 
Nussbaum's office phone.601 ``I called Mr. Heymann and 
explained this change to him. And we discussed it. We were both 
dead set against it.'' 602 Both were surprised by Mr. 
Nussbaum's new plan, which they thought was wrong. According to 
Mr. Margolis, ``We were very concerned as to how this would 
appear to the public in terms of law enforcement, and in terms 
of whether we were running a credible investigation.'' 603 
Mr. Heymann testified that ``Mr. Margolis told me that Mr. 
Nussbaum had said to me that they had changed the plan, that 
only the White House counsel's office would see the actual 
documents.'' 604 Mr. Heymann then asked to speak to Mr. 
Nussbaum.
    When Mr. Nussbaum got on the telephone, Mr. Heymann warned 
him sternly that ``this was a terrible mistake'': 605

          I remember very clearly sitting in the Deputy 
        Attorney General's conference room picking up the phone 
        in that very big room. I remember very clearly being 
        very angry and very adamant and saying this is a bad--
        this is a bad mistake, this is not the right way to do 
        it, and I don't think I'm going to let Margolis and 
        Adams stay there if you are going to do it that way 
        because they would have no useful function. It would 
        simply look like they were performing a useful 
        function, and I don't want that to happen.606

    According to Mr. Heymann, Mr. Nussbaum was surprised at Mr. 
Heymann's reaction and wanted to check with unspecified others 
before making a final decision. ``[H]e was taken aback by my 
anger and by the idea that I might pull out the Justice 
Department attorneys and he said I'll have to talk to somebody 
else about this or other people about this, and I'll get back 
to you, Phil.'' 607
    Mr. Nussbaum feared that the Justice Department officials 
would not attend the document review. He specifically told Mr. 
Heymann: ``don't call Adams and Margolis back to the Justice 
Department. I'll get back to you.'' 608 Notwithstanding 
this explicit promise, Mr. Nussbaum never called Mr. Heymann 
back.609
    The nearly contemporaneous notes 21 of Cynthia Monaco, 
Special Assistant to the Deputy Attorney General, confirmed Mr. 
Heymann's testimony:
---------------------------------------------------------------------------
    \21\ The notes were dictated in July 1993 and typed up later. 
Monaco, 7/6/95 Dep. pp. 26-27.

          The next day [July 22] was a disaster. I first 
        realized there was a problem when I saw Phil Heymann on 
        the phone with Bernie Nussbaum. I walked into the 
        conference room and sat down. This was probably about 
        10:30 or 11 in the morning when he should have been in 
        the Crime Bill pre-meeting in room 4118. Phil was on 
        the phone with Bernie Nussbaum and he said: ``you are 
        messing this up very badly. I think you are making a 
        terrible mistake.'' And what I took it to mean, in the 
        context of the general conversation was that Bernie had 
        refused to let David and Roger take a look at the 
---------------------------------------------------------------------------
        documents.610

Mr. Nussbaum denied having this conversation with Mr. 
Heymann.611
    After Mr. Heymann and Mr. Nussbaum finished their 
conversation, Mr. Margolis returned to Mr. Nussbaum's office 
and spoke with Mr. Heymann.612 Mr. Margolis thought that 
even if Mr. Nussbaum did not change his mind, the Justice 
Department attorneys should remain at the White House because 
``we really had no choice. Walking away was not really an 
option, because we had no sense of when the search would be 
conducted by Mr. Nussbaum, and what the parameters would be, 
and just what would happen, although we agreed we had to push 
with all our might to try to change it around. And that's what 
we did.'' 613 Mr. Margolis thought that Mr. Heymann agreed 
with this course of action.614
    Mr. Heymann, however, assumed from his conversation with 
Mr. Nussbaum that Mr. Nussbaum, after his consultations, would 
call Mr. Heymann back to let him decide what to do. ``And I 
also thought that I had an understanding that nothing would 
happen without my at least being informed and having an 
opportunity to react.'' 615 Mr. Heymann believed that the 
search would not go forward until Mr. Nussbaum called him 
back.616
    After he got off the telephone with Mr. Heymann, Mr. 
Margolis tried again in vain to convince Mr. Nussbaum that the 
new procedures were ``a big mistake.''

          I explained to Mr. Nussbaum that to do it his way 
        would be a big mistake. I said, ``It was your mistake 
        if you do it this way, but it is a big mistake.'' I 
        think it was at that point when I also said to him, 
        ``You know, if this were IBM that we were talking 
        about, I would have a subpoena duces tecum returnable 
        forthwith with these documents. But I recognize this is 
        not IBM.'' And he made a facetious comment about, if 
        this were IBM rather than the White House counsel's 
        office, a smart lawyer would have removed the documents 
        before the subpoena ever got there. That I took as a 
        facetious comment. Anyway, he wasn't talking about what 
        he would do.617

    Mr. Margolis stressed the importance of maintaining the 
public perception of a credible and thorough 
investigation.618 He believed that law enforcement 
officials must have a substantive role in the review process 
and not be ``excess baggage,'' as they would be under Mr. 
Nussbaum's new plan; ``I might as well go back to my office, 
and he could mail the results of the search back to me.'' 
619
    According to Mr. Margolis, Mr. Nussbaum conceded that 
having the investigators attend the review was mostly out of 
concern for ``show and appearances.'' 620 Fearing that the 
lawyers would leave, Mr. Nussbaum insisted that they wait in 
the White House lobby:

          He made it very apparent that he would be really 
        appreciative if we didn't leave in the interim. I think 
        I have said something about, ``Maybe in any event I'll 
        go back to the office while you're thinking about it, 
        and I can always get back here in 15 minutes if I 
        decide to and I want to and if I have to.'' But he very 
        much requested that we just wait.621

    Mr. Adams and Mr. Margolis then waited in the lobby of the 
White House.622 At one point, the Justice Department 
attorneys went outside. Believing that Mr. Adams and Mr. 
Margolis had left the White House, the White House lawyers went 
out to look for them. ``Bernie had said he had thought, when he 
couldn't find us in the lobby, that we might have left and he 
was concerned about that.'' 623 Mr. Nussbaum did not 
remember Mr. Margolis threatening to leave the White 
House.624
    The notes of Adams of the morning's events confirmed Mr. 
Margolis' recollection:

          The next morning [July 22], however, Mr. Nussbaum had 
        changed his mind and said he would look at the 
        documents and decide privilege issues himself. The 
        Justice Department attorneys pointed out that that was 
        inconsistent with the previous day's agreement and 
        would cause problems. We stated that the Counsel's 
        Office would be better off to allow the Department 
        attorneys to decide or at least help decide privilege 
        issues, because that would allow the White House to say 
        that the issue was considered independently. Moreover, 
        we stated that we had been asked to undertake this 
        particular assignment in part because we had 
        reputations of not talking to the press or ``leaking.'' 
        Mr. Nussbaum did not immediately begin the search but 
        waited for about two and one half hours--during which 
        time he said he was considering whether to allow us to 
        see the documents--before deciding that only he and 
        Associate Counsels Neuwirth and Sloan would see the 
        documents.625

    Mr. Nussbaum admitted that he discussed with various people 
how to conduct the search on July 22.626 But he did not 
recall a specific discussion with Mr. Margolis in the morning 
during which Mr. Margolis and Mr. Adams objected to his 
proposed procedure.627 And, he did not recall Mr. Margolis 
or Mr. Heymann telling him that he was making a 
mistake.628 Although Mr. Nussbaum could not remember 
speaking with the Justice Department officials, he did 
acknowledge conversations with a number of senior White House 
officials who were concerned about the search.629
    In particular, John Quinn, then Chief of Staff and 
Counselor to the Vice President and now Counsel to the 
President, advised Mr. Nussbaum that only White House officials 
should be allowed access to Mr. Foster's office.630 ``He 
thought it was a terrible mistake and stressed it very 
firmly.'' 631 According to Mr. Quinn:

          I wanted to be sure that somebody with the 
        appropriate level of security clearance and who was 
        privy to the attorney-client relationship first went 
        through the office in order to ascertain if national 
        security materials or privileged communications were 
        present and, if so, to take steps to segregate 
        them.632

D. The window-dressing review of the documents in Mr. Foster's office

    After lunch, at about 1:15 p.m., Mr. Nussbaum summoned the 
law enforcement officials to attend the review of the contents 
of Mr. Foster's office.633 Mr. Nussbaum then announced 
that he alone--and no law enforcement official--would review 
the documents in his now deceased deputy's office. According to 
Mr. Margolis:

          So we ate, we came back in, and that's when Bernie 
        told us he had given due consideration to our 
        arguments, he thought they were good arguments, but he 
        was sticking with doing it his way, which was he would 
        review the documents, tell us generically what they 
        were, if there wasn't a problem with them and if they 
        had any sense of being germane, let us look at 
        them.634

    Mr. Nussbaum testified that the career law enforcement 
officials initially resisted his plan, but then ``went along.'' 
635 After Mr. Nussbaum indicated that law enforcement 
officials would not be allowed to review Mr. Foster's papers, 
Mr. Margolis said, ```It's a mistake * * *. But it's your 
mistake. So, okay.''' 636 Mr. Margolis also told Mr. 
Nussbaum, ``You know, if this were IBM that we were talking 
about, I would have a subpoena duces tecum returnable forthwith 
for these documents. But I recognize this is not IBM.'' 
637
    The group entered Mr. Foster's office to observe Mr. 
Nussbaum conduct the review. Present were Mr. Nussbaum, Mr. 
Burton, Mr. Sloan, and Mr. Neuwirth from the White House; 
Captain Hume and Detective Markland from the Park Police; 
Agents Salter and Condon from the FBI; Messrs. Margolis and 
Adams from the Justice Department; Paul Imbordino and Paul 
Flynn from the Secret Service; and Michael Spafford, a private 
attorney who represented the Foster family. 638
    During the document review, according to Mr. Adams, ``Mr. 
Nussbaum was seated at Vince Foster's desk. Standing behind him 
were Steve Neuwirth and Cliff Sloan. Mr. Margolis and myself 
and the law enforcement officers were seated in what I describe 
as a rough semicircle around the desk in sort of rough rows. 
Standing off to one side was the Foster family's attorney Mr. 
Spafford.'' 639
    According to Captain Hume's report of the review: ``The 
eight law enforcement officers were gathered on the opposite 
side of the desk and room in a position where we couldn't 
examine any documents.'' 640 Detective Markland confirmed 
that the law enforcement officers were specifically placed 
where they could not see the documents as Mr. Nussbaum was 
reviewing them. 641
    Mr. Nussbaum then reviewed the documents in Mr. Foster's 
office. He briefly described the documents and placed them into 
three categories. Mr. Margolis and FBI agent Adams believed 
that one pile consisted of personal materials that were going 
to the Foster family; the second pile consisted of official 
White House documents that were to be distributed to other 
White House attorneys; and the third consisted of the Clintons' 
personal documents, which were to be sent to the Clintons' 
personal lawyer. 642 The Park Police detectives described 
the three categories as follows: (1) documents of potential 
interest to law enforcement; (2) documents concerning White 
House business with no relevance to the investigation; and (3) 
personal papers of either the Clintons or the Foster family. 
643 Mr. Spafford, the Foster family attorney, wrote in a 
contemporaneous memorandum: ``The documents were separated into 
three groups: personal matters, documents of potential interest 
to the investigators, and matters of no apparent interest.'' 
644
    Mr. Nussbaum provided a brief and generic description of 
the documents he reviewed. 645 Captain Hume reported that 
``Bernard Nussbaum did the actual review of the documents in a 
very hurried and casual fashion.'' 646 According to Mr. 
Adams:

          As best I can recall, with most of the documents he 
        made just sort of a generic description, something like 
        this is personal; this is going to the family of the--
        this is something that Vince has been working on; it's 
        relevant to work of the White House counsel's office; 
        it's going to be distributed to other lawyers in the 
        office.
          Another thing he would say is this is something he 
        had been working on for the President personally. This 
        is going to the President's outside attorney. Now, 
        there were occasions where some documents he would 
        describe a little bit more--a little bit more 
        definitely than that, but it's my recollection that, in 
        general, it was just a generic description of them. 
        647

    Mr. Margolis recalled essentially the same rushed 
procedure:

          [Nussbaum] went through the items on and in and 
        around Mr. Foster's desk and announced what they were, 
        generically, like, ``This file is a file of nominations 
        that Vince was working on for the President. It's not 
        germane. This is a matter that Vince was working on for 
        the first family in their nonofficial capacity. It's 
        not germane.'' Things like that. 648

    At different times during the review, Mr. Margolis renewed 
his objections to Mr. Nussbaum's review. In fact, Mr. Margolis 
specifically objected to the fact that Mr. Nussbaum's 
descriptions were so generic that they were of little 
assistance to the investigators. 649 He remarked that ``it 
gave me a bit of deja vu all over again of dealing with the CIA 
* * * .'' 650 FBI Agent Salter had a similar view: ``At 
one point, I recall that Mr. Nussbaum described documents as he 
went through, and declared that they were not pertinent to the 
investigation, and I know Mr. Margolis responded by saying how 
do we know if they're pertinent or not if we don't get to look 
at the documents.'' 651 Mr. Adams recalled that, at some 
point, ``Mr. Margolis again interposed an objection to the 
procedure. He said, the best I can recall, that this was a 
mistake and that Mr. Nussbaum might as well conduct the review 
himself and mail us the results or mail Mr. Margolis the 
results.'' 652
    Mr. Nussbaum took what the law enforcement officials 
thought were ``extreme'' positions to shield documents from 
their review. According to the Park Police report:

          There was some conversation between Nussbaum and 
        Margolis as to what constituted privileged 
        communication. Nussbaum carried his interpretation of 
        what was considered privileged to the extreme; one 
        example was when he picked up a xeroxed copy of a 
        newspaper article and declared that it was privileged 
        communication even though it had been in the 
        newspapers. 653

At no time during the approximately one-and-one-half hour 
period of the review did Mr. Nussbaum allow the law enforcement 
officials to examine any documents. 654
    The White House lawyers expressed concern--to an 
unreasonable degree--that the law enforcement officials might 
sneak a peak at Mr. Foster's documents. According to the Park 
Police report: ``At one point Special Agent Scott Salter got up 
to stretch and Clifford Sloan challenged him and asked him if 
he was standing up in an attempt to get a look at the 
documents.'' 655 Agent Salter described the incident as 
follows:

          I was seated at the end of the sofa next to detective 
        Pete Markland from the Park Police, and I think there 
        was a third person seated at the opposite end from me. 
        And I think the review of documents had been going on 
        for about 30 minutes with the three of us seated on the 
        couch. There wasn't a lot of room. After about 30 
        minutes, I stood up and stood at the end of the couch, 
        and in front of me was Mr. Margolis and then the desk.
          After standing there for just a few minutes, Mr. 
        Cliff Sloan looked at me and said, excuse me, agent, 
        you aren't standing there so you can see the documents 
        on Mr. Nussbaum's desk, are you? And at that point I 
        merely said that--I told Mr. Sloan that I think he's 
        getting carried away, and then Mr. Nussbaum interjected 
        and said of course, we're all on the same side here, 
        words to that effect. And that was the end of the 
        incident. 656

Mr. Adams indicated that ``the remark was (to put it 
charitably) extremely offensive.'' 657 Mr. Margolis 
testified that he may have muttered an expletive after Mr. 
Sloan's remark. 658 ``I was bothered by that. So, a minute 
later when Cliff was looking over Bernie's shoulder at some 
document that Bernie was looking at, I said, `Hey, Cliff, 
you're not looking over Bernie's shoulder so you can read the 
documents that he is looking at, are you?' '' 659 Mr. 
Sloan acknowledged the incident and apologized before the 
Special Committee, stating that his comment ``was the wrong 
thing to say to a law enforcement official, or any person 
trying to do his or her job.'' 660
    Toward the end of the review, Mr. Nussbaum announced that 
he would give Mr. Foster's personal papers and effects to Mr. 
Spafford, the Fosters' personal attorney. Mr. Margolis 
objected, wanting to maintain the chain of custody within the 
government. 661 The Park Police officers later told Mr. 
Margolis: ``we feel strongly that we would rather have the 
files go to Mr. Spafford and Mr. Hamilton because we would 
rather deal with them in the future than with White House 
counsel's office.'' 662 Agent Salter confirmed Mr. 
Margolis' testimony: ``I think we all agreed it would be easier 
for the Park Police to have access to them if the family's 
attorney took them and they could be reviewed outside of the 
west wing of the White House.'' 663
    During the review, the law enforcement officials requested 
that Mr. Nussbaum turn on the computer in Mr. Foster's office 
and examine its contents. 664 According to Mr. Adams, Mr. 
Nussbaum refused because the computer might contain privileged 
information. 665 Mr. Adams' memorandum about the review 
described the incident as follows:

          We asked to have the computer in Mr. Foster's office 
        turned on. Mr. Nussbaum said he did not know how to do 
        so and, in any event, he would not do so in our 
        presence in case there were privileged documents on the 
        computer. He said he would have a staff member examine 
        the contents of the computer later after we left. 
        (Press reports in the morning newspapers of that day 
        had stated, without attribution, that no suicide note 
        had been found on his computer.) 666

Mr. Spafford's handwritten notes of the meeting confirmed that 
Mr. Margolis asked Mr. Nussbaum to review the computer. 
667 Mr. Sloan's notes of the meeting listed the computer 
with an asterisk next to it. 668
    Mr. Foster's burn bag was also in the office at the time of 
the search. According to Agent Salter, Mr. Nussbaum looked in 
the burn bag and ``said that there was nothing that was 
pertinent to the investigation.'' 669 Mr. Spafford's notes 
listed the burn bag and indicated that it was picked up 
everyday. Its contents were described as ``h/w notes re GC 
[General Counsel] issues/all wk related''. Mr. Sloan's notes, 
however, contained a more detailed inventory of the contents of 
the burn bag:
        Burn bag
        --lists
        --background investigations [?]
        --references to jobs
        --arbitration of claims
        --nothing personal
        --campaign stuff 670
    On July 27, after Mr. Neuwirth apparently discovered a 
handwritten note in Mr. Foster's briefcase, Linda Tripp sent 
the following electronic mail message to Deborah Gorham:

        it seems that whatever was uncovered by [Neuwirth], who 
        summoned our boss, who then summoned BB, who then 
        summoned H--and whatever it was provoked a need for 
        notetaking--and had to do I presume with the burn bag--
        I can't imagine that anyone as meticulous as this 
        individual was, would have left anything he did not 
        intend to be found. 671

Ms. Tripp testified that ``this individual'' referred to Mr. 
Foster. 672 Ms. Gorham replied to Ms. Tripp's message with 
the following: ``What provoked COS [Neuwirth 673] to call 
BWN [Nussbaum] was the briefcase. Once BWN arrived, I forgot 
who went into VWF's office to get the Burn Bag. But they must 
feel like a slapstick comedy by not returning the burn bag 
along with the briefcase.'' 674 In another message on the 
same day, Ms. Gorham wrote to Ms. Tripp: ``On Wednesday, I told 
Bernie that VWF had placed shredded remnants of personal 
documents in the bag. On Thursday, I told Bernie in front of 
everybody that shredded remnants were in the bag.'' 675 
Ms. Tripp replied: ``I recalled the shredded talk, because when 
we spoke to [Neuwirth] and he briefed us on comportment and 
interrogation, you mentioned that--that was on Wednesday 
evening, right? So it took until MONDAY to figure out it should 
be looked at? Christ. And we're the support staff.'' 676

E. Mr. Nussbaum's failure to search properly Mr. Foster's briefcase

    Under any view, Mr. Nussbaum's effort to search Mr. 
Foster's briefcase was seriously deficient. At the time of Mr. 
Nussbaum's review, the briefcase was located on the floor next 
to Mr. Foster's desk. 677 Mr. Adams testified that Mr. 
Nussbaum ``picked up the briefcase, announced that this was 
Vince's briefcase and he would proceed to inventory the items 
in the briefcase in the same manner as he had inventoried the 
items on the desk and credenza, and he proceeded to take files 
and documents from the briefcase and describe them as he 
described the other documents in the office.'' 678 Agent 
Salter confirmed Mr. Adams' description. 679
    Although notes taken by Mr. Spafford and Mr. Sloan 
indicated that the briefcase contained a copy of the White 
House Travel Office Management Review, Mr. Nussbaum did not 
disclose to investigators that most of the contents of the 
briefcase pertained to the Travelgate controversy. 680 
Among the contents was a notebook in Mr. Foster's hand relating 
to the entire Travel Office matter. According to Mr. Spafford's 
notes, Mr. Nussbaum described the notebook as ``Notebook of 
notes of meetings, GC [General Counsel] issues''; Mr. Sloan's 
notes similarly identified the notebook simply as ``Notes re: 
meeting''. 681 After the review, Mr. Nussbaum removed Mr. 
Foster's notebook and other Travelgate files from the briefcase 
and kept it in his office until his resignation in March 1994. 
682 The notebook and documents in Mr. Foster's briefcase 
were not turned over to the Independent Counsel until April 5, 
1995. 683
    The notebook and documents were never disclosed to Justice 
Department officials and FBI agents then investigating 
Travelgate and the handling of documents in Mr. Foster's 
office. In fact, the Justice Department official responsible 
for the investigation, Office of Professional Responsibility 
Counsel Michael E. Shaheen, Jr., found out about the existence 
of Mr. Foster's notebook through a press report in July 1995. 
Mr. Shaheen, enraged at Mr. Nussbaum's concealment of the 
notebook, wrote a memo to Mr. Margolis on the subject. It 
stated in part:

          We were stunned to learn of the existence of this 
        document since it so obviously bears directly on the 
        inquiry we were directed to undertake in late July and 
        August 1993, by then DAG Philip Heymann--that is, to 
        review the conduct of the FBI in connection with its 
        contacts with the White House on the Travel Office 
        matter and to determine what Vince Foster meant by the 
        statement in his note that ``the FBI lied in their 
        report to the AG.''
          In a July 13, 1993 letter, President Clinton informed 
        then Congressman Jack Brooks that the Attorney General 
        was in the process of reviewing matters relating to the 
        Travel Office, ``and you can be assured that [she] will 
        have the Administration's full cooperation in 
        investigating those matters which the Department wishes 
        to review.'' While these may have been Mr. Clintons' 
        views, the White House personnel with whom we dealt 
        apparently did not share his commitment to full 
        cooperation with respect to our investigation. The 
        recent disclosure of the Foster notebook confirms this. 
        684

Mr. Shaheen, after outlining specific instances of 
noncooperation by the White House, 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.'' 
685
    Mr. Nussbaum testified that he did not recall, during the 
course of his review on July 22, ever picking the briefcase up 
off the floor 686 or looking into the briefcase as he was 
pulling out the files. 687 Agent Salter testified, 
however, that Mr. Nussbaum picked up the bag, opened it by the 
handles, tilted it, and looked inside. 688 Mr. Adams, 
689 Agent Condon, 690 Agent Flynn, 691 Captain 
Hume, 692 Detective Markland 693, and Mr. Spafford 
694 all confirmed that Mr. Nussbaum picked up the bag.
    Detective Markland testified that Mr. Nussbaum told the law 
enforcement officials that the briefcase was empty:

          He would reach down, take papers out of the 
        briefcase, put them on the desk, go through them, put 
        them in the appropriate piles. When he got done, he 
        said that's it, it's empty. After that he picked up the 
        briefcase with both hands, spread it apart a little 
        bit, tilted it, put it back down and shoved it to the 
        back of the room. I could see the briefcase lifted off 
        the floor by him and tilted, put it down, said it was 
        empty two times and moved it back. 695

Detective Markland was certain that Mr. Nussbaum had looked in 
the bottom of the briefcase. ``He had a clear view of the 
briefcase on the floor so that he had it spread open with both 
hands and was looking down into the briefcase.'' 696
    Agent Salter similarly confirmed that Mr. Nussbaum ``stated 
that it was empty and he turned and placed it behind him 
against the wall.'' Mr. Margolis likewise testified that ``he 
did take files out of it, a number of files out of it, and then 
he told us, I don't remember the exact language, but told us 
that that was it, that there was nothing more.'' 697
    Mr. Nussbaum contended that he did not recall the process 
described by Detective Markland, 698 and his White House 
colleagues concurred in Mr. Nussbaum's testimony that he did 
not state that the briefcase was empty. 699
    The general impression of those at the review was that the 
briefcase was empty when Mr. Nussbaum was finished. Thus, when 
Mr. Burton found out that Mr. Neuwirth had discovered a note in 
the briefcase, he said, ``Well, you've really got to explain 
this because I saw Bernie empty it. How could it have been in 
that briefcase?'' 700
    The law enforcement officials present at the review agreed 
with Mr. Burton's assessment. After the note was discovered, 
Captain Hume was skeptical that Mr. Nussbaum would not have 
seen a note in the briefcase on July 22. Major Hines agreed 
with Captain Hume that ``our oldest, blindest detective would 
have found the note.'' 701 Detective Markland likewise 
testified that it was impossible for Mr. Nussbaum to miss a 
torn up note in the briefcase because ``he is looking for 
documents, he has a co-worker and friend who is dead. One of 
the things he may be looking for could presumably be ripped up, 
he is not a stupid person. And he physically picked up the 
briefcase at one point and tilted it and I saw it come off the 
floor and tilt, and then he put it down and said it is empty.'' 
702 Detective Markland was blunt in his testimony:

          Q: Do you think he [Nussbaum] was lying?
          A: Yes, I think it would have been impossible for him 
        to miss that many torn scraps of yellow paper out of a 
        briefcase that he was searching on the 22nd. 703

F. The Foster Family lawyer overhears discussion of the scraps of paper 
        in Mr. Foster's briefcase

    Michael Spafford testified that, at the end of the review, 
he remained in the room as the law enforcement officials were 
leaving. He and Mr. Nussbaum discussed the details of the 
transfer of Mr. Foster's personal effects to the family. Mr. 
Sloan then approached Mr. Nussbaum with the briefcase open in 
his hands:

          At some point in time I was talking to Mr. Nussbaum, 
        and at some point in time Mr. Sloan had the briefcase 
        in his hand. So I didn't see him pick it up. And he 
        made the comment at that point in time that there 
        appeared to be scraps in the bottom of the briefcase.
          * * * * * * *
          He was standing, and he had it by the handles. And he 
        had it open like this, and he was looking into the 
        briefcase. 704

    According to Mr. Spafford, Mr. Nussbaum's response was 
dismissive. ``Mr. Nussbaum was sitting on the couch or sofa at 
the time, and his comment was something to the effect that we 
will get to all that later; we have to look through the 
materials and we will look through that later.'' 705 Mr. 
Spafford had put away his materials and was gathering up Mr. 
Foster's personal effects at this point, so he was no longer 
taking notes of the meeting. 706 The following week, right 
after he found out that Mr. Neuwirth had discovered a note in 
the briefcase, Mr. Spafford recounted the incident in a 
privileged conversation. 707
    Mr. Nussbaum and his associate Mr. Sloan both testified 
that they did not recall this incident. According to Mr. Sloan, 
``I have no recollection of anything remotely like that 
incident, and I think that I would recall it if it had 
happened. Mr. Spafford and I have an honest difference in 
recollection on this point.'' 708
    Mr. Spafford's testimony casts a cloud of doubt on the 
White House's assertions that the note in Mr. Foster's hand was 
actually ``discovered'' on July 26. As Mr. Margolis testified 
to the Special Committee:

          I thought I had this figured out, that the torn-up 
        scraps of paper were not in the briefcase the day that 
        Mr. Nussbaum did the search in our presence. That's 
        what--that was the explanation I came up with, and that 
        somebody--that it had never been there before and 
        somebody put it in afterward or it had been there, 
        somebody took it out and then decided they better put 
        it back because there was public speculation of, you 
        know, where is the suicide note.
          So, in my own mind, I speculated that must be what 
        happened. But then, when I picked up the paper one day 
        and saw that Mr. Spafford said that the note had been 
        in there when the search was conducted, I am at a loss 
        now. I just have no explanation. I don't know. 709

The Justice Department and the FBI did not have the information 
Mr. Spafford provided to the Special Committee when the FBI 
closed its investigation into the circumstances surrounding the 
discovery of the note.

G. The secretive, real review of the contents of Mr. Foster's office

    At the conclusion of Mr. Nussbaum's review of the contents 
of Mr. Foster's office, the office was again locked, and the 
key given to Mr. Nussbaum. 710 Detective Markland thought 
that the office would remain sealed: ``It was my understanding 
that the office would be again posted and left undisturbed.'' 
711
    Although the law enforcement officials understood that Mr. 
Nussbaum would go through some of the documents again, 712 
Mr. Nussbaum did not notify them that he intended to conduct a 
second search of the office, almost as soon as they left, with 
Margaret Williams, Chief of Staff to the First Lady. 713
    The circumstances surrounding this second search remained 
mysterious for some time. The White House did not disclose that 
Ms. Williams was involved in the review and removal of 
documents from Foster's office. At a press conference on April 
22, 1994, Mrs. Clinton was asked whether Ms. Williams was among 
those who removed documents from Mr. Foster's office. Mrs. 
Clinton replied, ``I don't think that she did remove any 
documents.'' 714 On August 2, 1994, Press Secretary Dee 
Dee Myers echoed Mrs. Clinton's statement: ``I think that it is 
true that Maggie didn't remove any documents from Vince's 
office; they were removed by Bernie Nussbaum.'' 715
    The evidence demonstrates that the foregoing White House 
statements were false. Mr. Spafford testified that Mr. Nussbaum 
told Mr. Sloan at the end of the meeting that they would look 
through the materials again later. 716 Mr. Sloan's notes 
of the meeting ended with the following: ``get Maggie--go 
through office--get HRC, WJC stuff,'' 717 but he testified 
that ``I did not have contemporaneous knowledge of anything 
beyond what's in my notes on this.'' 718
    At 3:05 p.m. on July 22, William Burton called Ms. Williams 
and left a message for her to call back.719 Twenty minutes 
later, Stephen Neuwirth called Ms. Williams and left the same 
message.720 Ms. Williams testified that she had no 
independent recollection of these calls other than from the 
message slips produced to the Special Committee.721
    Mr. Nussbaum testified that ``[s]hortly after the search of 
Vince's office was completed, I asked Maggie Williams the First 
Lady's chief of staff, to help me transfer these files to the 
Clintons and to their personal lawyers.'' 722 When Ms. 
Williams got there, ``Maggie and I started looking to try to 
select--making sure we took Clinton personal files rather than 
any other files.'' 723 Mr. Nussbaum stated that he and Ms. 
Williams went through Mr. Foster's office together. ``This is 
Maggie walks in. Let's do this, Maggie. We start doing it. I 
may walk out to take a call. We complete doing it, but it was 
done relatively promptly.'' 724
    Margaret Williams, however, testified that she took no part 
in the review of the files, that ``it seemed pretty much 
settled'' when she entered Mr. Foster's office.725 Mr. 
Nussbaum had already selected which files were to be 
removed.726 ``I can't recall if he had the files boxed 
that he pointed to or designated as the files that he wanted me 
to get to Barnett or whether or not they were just in a stack 
on the table. But it seemed like whatever he was doing, it was 
done.'' 727 She acknowledged, however, that Mr. Nussbaum 
asked her to ``eyeball'' the room and see if he had missed 
something. In this cursory look, Ms. Williams saw a file marked 
``taxes,'' picked it up, and placed it among the materials to 
be removed from Mr. Foster's office.728
    During this second review, Mr. Nussbaum asked Mr. Foster's 
secretary, Deborah Gorham, to help locate certain files. 
Curiously, he specifically asked Ms. Gorham about ``the file 
drawer that contained the President's and First Lady's personal 
and financial documents.'' 729 When Ms. Gorham entered, 
Ms. Williams was in the office with Mr. Nussbaum.730 22 
Ms. Gorham then opened a drawer in Mr. Foster's desk and 
started reading the names of the file folders. Mr. Nussbaum 
interrupted her and said that he would take care of this 
ministerial task himself.731 She left the office and was 
called back a bit later.732 In her second time in the 
office, she sat down at Mr. Foster's desk and opened his middle 
desk drawer, where she found Mr. Foster's personal items, 
``such as checks that were written to Mr. Foster and his life 
insurance policy.'' 733
---------------------------------------------------------------------------
    \22\ Ms. Gorham actually testified that, to the best of her 
recollection, this incident occurred the week after Mr. Foster's 
funeral. Gorham, 8/1/95 Hrg. p. 16.
---------------------------------------------------------------------------
    Mr. Nussbaum testified that he had no recollection of 
asking Ms. Gorham to point out the Clintons' personal 
files.734 Ms. Williams testified that Ms. Gorham was in 
and out of the office, but that Ms. Gorham did not assist in 
the review process.735

H. The transfer of Clinton personal files to the first family's 
        residence

    When Ms. Gorham went into Foster's office at Mr. Nussbaum's 
request, she saw boxes in the office.736 Mr. Nussbaum 
later asked her to have the boxes moved out of Foster's office, 
and she asked Thomas Castleton, Special Assistant to the White 
House Counsel, to carry them.737 According to Ms. Gorham, 
``Mr. Castleton picked them up and carried them out behind Ms. 
Williams. The last that I saw of them, noticed them, was in the 
door just outside of our suite.'' 738
    Linda Tripp, whose desk was in the same area as Ms. Gorham, 
testified that she saw Mr. Castleton carry the boxes out of the 
office. She later learned from Ms. Gorham and Mr. Castleton 
that the boxes were delivered to the White House 
residence.739
    Margaret Williams testified that when Mr. Nussbaum called 
her earlier in the afternoon, he instructed her to deliver the 
files to the Clintons' personal lawyers. ``[H]e asked me if I 
would be responsible for getting the personal documents of the 
President and Mrs. Clinton, which he was compiling, as I 
understood it, and get them to their personal lawyer, who was 
at the time Bob Barnett of Williams & Connolly.'' 740
    Ms. Williams made three calls that afternoon that 
ultimately determined where the files were moved to. ``I called 
Mrs. Clinton--well, I had three calls. I called Bob Barnett's 
office. I don't know if I spoke to Bob Barnett or if I spoke to 
the person who works with him in his office. I called Mrs. 
Clinton, who was in Arkansas, and then I called Carolyn Huber, 
an assistant to the President who was working in the White 
House.'' 741
    In the first call, to Williams & Connolly, Mr. Barnett told 
her that he would send someone over to pick up the files. 
``When I had talked to Mr. Barnett after speaking to Mr. 
Nussbaum, I had indicated that I was going to send some files 
over as soon as they got together, and he said that he would 
send someone to get them.'' 742
    Later in the day, however, Ms. Williams shifted course--
for, as she now claims, an innocent reason. She was simply too 
tired to wait for the messenger to come from a law firm located 
near the White House:

          And, quite frankly, I was tired. And when I thought 
        about the time it would take--if anyone has tried to 
        get into the White House complex, the time it would 
        take, both to get a messenger, clear them in and 
        actually have them get in and collect the box, I 
        decided I could be at home in that time, and I decided 
        at that point that the sending and the waiting for 
        someone to pick up the documents would have to wait 
        until later.743

She then asked Mr. Barnett not to send the messenger.744
    Claiming to be unsure where to put the Clintons' personal 
files, Ms. Williams made her second phone call, to Mrs. Clinton 
in Arkansas:

          I told her that there were personal files that 
        weren't going to get to the lawyer because I was just 
        tired, and I was going to put them in the White House, 
        in the residence, and where did she want them.
           * * * * * * *
          It was a very short conversation. I know I had three 
        points that I wanted to make. I was tired, the files 
        weren't going, I was going to put them in the 
        residence, where did she want them--four 
        points.745

Ms. Williams claimed implausibly not to have previously spoken 
to Mrs. Clinton about the files. She testified that she did not 
tell Mrs. Clinton where she was or the contents of the 
files.746 According to Ms. Williams, Mrs. Clinton did not 
ask any questions--not even one, but instead merely told her to 
call Carolyn Huber.747 This may seem strange, as it 
clearly did to the Committee, ``but let me suggest to you that 
I could have told Mrs. Clinton that I was going to put 44 
elephants in the White House the day after Vince died and she 
probably would have said okay.'' 748
    Ms. Williams then made her third and final telephone call, 
to Ms. Huber, in order to arrange the transfer of the files to 
the residence.749
    Thus, Ms. Williams testified that, because she was tired, 
she made the independent determination to transfer the files to 
the residence. ``I had determined that I was going to take the 
files to the residence if they weren't going to the personal 
lawyer. I made that determination.'' 750 She claimed to 
have received no instructions to move the files to the 
residence, and she called Mrs. Clinton only to ask where the 
files should be placed.751
    Mr. Nussbaum had a different--and less convoluted and more 
plausible--recollection on this key point. He testified that he 
and Ms. Williams discussed moving the files to the White House 
residence. ``Obviously, I presumed they were going to the 
residence, and I think Maggie and I probably discussed that. 
That's the most likely, send them to the residence, and talk to 
the Clintons and they will be sent from the residence on to 
their personal attorneys.'' 752 According to Mr. Nussbaum, 
he told Ms. Williams to take the files to the residence:

          Simply take the files, give them to the Clintons, 
        which means give them to the Clintons in their 
        residence. . . . And when you get instructions from 
        them as to which personal attorney, although it's 
        probably going to be Williams & Connolly, we'll send it 
        over to Williams & Connolly.753

Ms. Williams said okay.754
    Mr. Castleton had worked on the 1992 Clinton campaign and 
was serving as a special assistant in the White House Counsel's 
Office in July 1993.755 His best recollection is that he 
picked up ``a box or possibly two boxes'' 756 in either 
Margaret William's office or Mrs. Clinton's office.757 ``I 
believe that the office in which I picked up the box had some 
dresses, and my recollection is based on having seen her 
physically carrying them inside the office.'' 758
    Mr. Castleton and Ms. Williams then took the elevator down 
to the passage way connecting the offices of the West Wing with 
the White House residence.759 They walked through the Palm 
Room into the residence.760 They ``stopped off for a brief 
time to pick up a set of keys or a key and proceeded up to the 
living quarters area of the residence.'' 761 When they got 
to the living quarters on the third floor, Mr. Castleton put 
the box or boxes ``in a room off of a passageway'' near the 
elevator.762
    Ms. Huber had long ties to the Clintons. She served as 
office administrator for the Rose Law Firm for twelve years and 
administrator of the Governor's Mansion. Since February 1993, 
she has been Special Assistant to the President for 
Correspondence, a position that also called for her to maintain 
records and files in the residence.763 She testified that, 
in the late afternoon on July 22, Ms. Williams ``called and 
said that Mrs. Clinton had asked her to call me to take her to 
the residence to put this box in our third floor office. We 
call it an office. And we have a little closet in there where I 
keep their financial records, so she asked that I would take it 
up and put it there.'' 764 Ms. Williams had not previously 
spoken to Ms. Huber about storing records in the 
residence.765
    Ms. Huber told Ms. Williams to call her when she was ready 
to come over to the residence:

          I would meet them at the elevator that goes up into 
        the residence. I met her and this young man--I do not 
        remember him--Mr. Castleton. We went to the third 
        floor. We went into the room where we have our office. 
        There's a little closet in there. I got the key out of 
        the desk drawer, unlocked the closet and he put the box 
        in.766

Ms. Huber then locked the door. She put the key back into the 
drawer, went downstairs, and left for home.767 She did not 
see any dresses.768
    Although Ms. Huber testified that the boxes were 
transported between 4:00 p.m. to 6:00 p.m., 769 records 
maintained by the Secret Service indicate that Ms. Huber, Ms. 
Williams, and Mr. Castleton went up to the third floor of the 
Residence at 7:25 p.m. and came down at 7:32 p.m.770

I. The reaction of law enforcement officials to Mr. Nussbaum's search

    When Mr. Adams and Mr. Margolis returned to the Justice 
Department after Mr. Nussbaum's search of Mr. Foster's office, 
they were angry. Phil Heymann remembered that ``they were hurt 
and felt a little bit less than degraded, but almost degraded 
by the way it was done. And they were angry. And I remember 
their telling it to me in a way that they must have known was 
calculated to make me angry.'' 771 Mr. Margolis and Mr. 
Adams complained to Mr. Heymann that the law enforcement 
officials were not permitted to look at the documents and that 
they did not have ``any role at all to play with regard to 
decisions made about the documents.'' 772 Cynthia Monaco's 
notes confirmed Mr. Heymann's recollection:

          I later heard from David that in fact what had 
        happened was that Bernie looked at the documents and 
        told him that a privilege was asserted or not asserted. 
        This was in contrast to what Phil and Bernie had 
        decided the day before.773

    Mr. Heymann recalled a specific complaint that Mr. Nussbaum 
had asserted executive privilege ``in a fairly casual way.'' 
774 Because Mr. Nussbaum alone saw the documents, ``nobody 
knows what documents it is that Executive privilege is being 
asserted as to.'' 775 Mr. Margolis testified that Mr. 
Nussbaum would not show him a clipping of a newspaper article 
on the grounds that it would be ``an invasion of the 
President's deliberative process.'' 776
    In any event, Mr. Heymann questioned the validity of Mr. 
Nussbaum's assertion of executive privilege against the Justice 
Department, the executive agency supervising the Office of the 
Legal Counsel, which had a primary function in protecting 
executive privilege. ``[T]he people who were going to have 
access to the documents would be officials of the Department of 
Justice. . . . It wasn't like this was an outside body to whom 
there might be more reason to assert Executive 
privilege.''777 23
---------------------------------------------------------------------------
    \23\ Mr. Heymann's view finds support from independent 
commentators. See, e.g., Jeffrey K. Shapiro, Bernard Nussbaum's Novel 
View of Privilege, Washington Times, August 30, 1995, p. A15; Lester 
Brickman, Foster's Paper: What Executive Privilege? New York Times, 
August 2, 1995, p. A19.
---------------------------------------------------------------------------
    The Justice Department officials thought that they had been 
used by the White House to dress up Mr. Nussbaum's search of 
the office,778 and they wanted to minimize the perception 
that law enforcement had actually participated in the search. 
According to Mr. Margolis: ``Phil was troubled by that, and I 
think that's part of what he was talking about, that the 
impression was created that the Department of Justice did play 
a far larger role in the search than in fact it did.'' 779
    After the search, the press reported that Mr. Foster's 
office had been searched under the ``supervision'' of the 
Justice Department. This report prompted the Justice Department 
to issue a correction. According to Mr. Margolis: ``I worried 
about something like that, and I remember with Mr. Heymann's 
permission, telling our press office to correct that, that the 
search was conducted in the presence of the Justice 
Department.'' 780 Mr. Heymann testified that ``I directed 
that the Department of Justice put out a correction that we had 
not supervised, that we had simply been there as observers 
while the investigation was carried out--while the search was 
carried out by the White House counsel.'' 781
    After talking to Mr. Margolis and Mr. Adams on the evening 
of July 22 about Mr. Nussbaum's search, Mr. Heymann became very 
angry. He said to Mr. Margolis, ``You know, Bernie was supposed 
to call me back and he didn't, and I am going to talk to him.'' 
782 Mr. Heymann then went home and called Mr. Nussbaum. 
``I told him that I couldn't imagine why he would have treated 
me that way. How could he have told me that he was going to 
call back before he made any decision on how the search would 
be done and then not call back?'' 783 Mr. Heymann said to 
Mr. Nussbaum, ``You misused us.'' 784 ``I meant that he 
had used Justice Department attorneys in a way that suggested 
that the Justice Department was playing a significant role in 
reviewing documents when they had come back and told me they 
felt like they were not playing any useful role there.'' 
785
    Exasperated with Mr. Nussbaum's handling of the search, Mr. 
Heymann asked him: ``Bernie, are you hiding something?'' 
786 According to Mr. Heymann, Mr. Nussbaum assured him 
that ``no, Phil, I promise you we're not hiding something.'' 
787
    Incredibly, Mr. Nussbaum denies recalling this heated 
conversation with Mr. Heymann.788

                            v. july 26, 1995

A. The existence of the torn-up note is finally revealed to law 
        enforcement

    The President, Mrs. Clinton, and most of the senior White 
House staff traveled to Arkansas for Mr. Foster's funeral on 
Friday, July 23, 1993. On Monday, July 26, 1993, Mr. Nussbaum 
asked Mr. Neuwirth to prepare an inventory of the remaining 
contents of Mr. Foster's office.
    In the course of preparing the inventory, according to Mr. 
Neuwirth, he made an unexpected discovery in Mr. Foster's 
briefcase:

          On Monday the 26th at Mr. Nussbaum's request I was 
        preparing an inventory of the contents of Mr. Foster's 
        office. One of the things that I did in connection with 
        that inventory was to put into a box toward the latter 
        part of my inventory process items that belonged to Mr. 
        Foster personally, like photographs. And in the process 
        of putting materials in that box I saw the brief bag 
        leaning against the back wall of Mr. Foster's office. I 
        understood it to be empty. I knew that it belonged to 
        Mr. Foster. I picked it up and brought it to put into 
        the box. I had laid two large--one or two or maybe even 
        three large black and white photographs of Mr. Foster 
        and his daughter with the President on the top of the 
        box, and in an effort to avoid damaging those 
        photographs, I turned the briefcase to fit it or the 
        brief bag to fit it into the box, and in the process of 
        turning it, scraps of paper fell out of the brief 
        bag.789

    Mr. Neuwirth testified that, after he saw the pieces of 
paper falling out of the briefcase, he picked them up. At that 
point, he recognized that ``there was handwriting on them that 
looked like Mr. Foster's handwriting, with which I was 
familiar.'' 790 He then looked in the bag for more pieces 
of paper. Mr. Neuwirth then went to Mr. Nussbaum's office, 
which was adjacent to Mr. Foster's, and attempted to reassemble 
the torn up note on Mr. Nussbaum's conference table.791
    Mr. Neuwirth testified that, after he assembled the note, 
he went out to the secretarial area of the White House 
Counsel's suite and asked for Mr. Nussbaum.792
    Mr. Nussbaum testified that he came back to his office at 
about 3:00 p.m. and found Mr. Neuwirth sitting at the 
conference table putting scraps of paper together.\793\ Mr. 
Nussbaum said, ``What are you doing?'' Mr. Neuwirth replied, 
``I just found these. I was packing Vince's briefcase to send 
back along with his other personal effects and I turn over the 
briefcase and these things floated out. And I looked down and 
saw handwriting on them so I picked them up to see if I could 
put them together, and I'm putting them together.'' \794\ When 
Mr. Neuwirth was done, he told Mr. Nussbaum to look at the 
assembled note. ``[W]e saw that it was in Vince's handwriting, 
and it was a list of things, reflecting things that were 
troubling Vince.'' \795\
    Mr. Neuwirth discovered 27 pieces of a single sheet of 
yellow lined paper, 3-hole punched, which had been torn into 28 
pieces.\796\ One piece was missing from the bottom third of the 
page, which appeared to be blank. On the top approximate two-
third of the page were written the following:

          I made mistakes from ignorance, inexperience and 
        overwork
          I did not knowingly violate any law or standard of 
        conduct
          No one in the White House, to my knowledge, violated 
        any law or standard of conduct, including any action in 
        the travel office. There was no intent to benefit any 
        individual or any group.
          The FBI lied in their report to the AG
          The press is covering up the illegal benefits they 
        received from the travel staff
          The GOP has lied and misrepresented its knowledge and 
        role and covered up a prior investigation
          The Ushers Office plotted to have excessive costs 
        incurred, taking advantage of Kaki and HRC
          The public will never believe the innocence of the 
        Clintons and their loyal staff
          The WSJ editors lie without consequence
          I was not meant for the job or the spotlight of 
        public life in Washington. Here ruining people is 
        considered sport.\797\

Although the note was not signed, the FBI determined that it 
was written in Mr. Foster's hand.\798\ \24\
---------------------------------------------------------------------------
    \24\ It has been reported, however, that a panel of experts--
including a forensics authority from Oxford University--concluded that 
the note was not in Mr. Foster's hand. See, e.g., Christopher Ruddy, 
``Experts Say Foster `Suicide' Note Forged,'' Pittsburgh Tribune-
Review, Oct. 25, 1995. Because the White House and the Foster family's 
attorney did not provide the Special Committee with obtain original 
samples of Mr. Foster's handwriting, the Special Committee was not able 
to conduct an investigation into this matter.
---------------------------------------------------------------------------
    Mr. Nussbaum then went to White House Chief of Staff Mack 
McLarty's office to tell him about the note, but realized that 
Mr. McLarty was not there; he was in Chicago with the 
President. ``So I saw Burton, who was a logical person to talk 
to in any event because he was the one who had been dealing 
with me, and I said look, Steve Neuwirth found something, and 
you should see it and let's go up and see it. And we walked up, 
and he went over to read it.'' \799\ According to Mr. B: ``Mr. 
Nussbaum came into the chief of staff's reception area asking 
for Mr. McLarty. We informed him that he was out of town. Mr. 
Nussbaum asked me to accompany him to his office, and I did 
that.'' \800\ Mr. Burton went to Mr. Nussbaum's office and read 
the note in front of Mr. Nussbaum and Mr. Neuwirth.\801\
    Deborah Gorham and Linda Tripp were at their desks in the 
secretarial area of the White House Counsel's suite, right 
outside Mr. Nussbaum's office, on the afternoon of July 26. Ms. 
Gorham testified that Mr. Neuwirth came out of Mr. Foster's 
office with Mr. Foster's briefcase and went into Mr. Nussbaum's 
office. After Mr. Nussbaum returned with Mr. Burton, according 
to Ms. Gorham, others came into Mr. Nussbaum's office. ``And 
then I believe Mr. Burton, Bill Burton might have appeared next 
going into Mr. Nussbaum's office, and then other people, I 
think, came in straggling, but I don't recall who they were.'' 
\802\
    Ms. Tripp recalled that she later saw Clifford Sloan in Mr. 
Nussbaum's office. ``It was later in the evening; I was in the 
reception area. The door to Bernie's office was closed. At one 
point in time Cliff Sloan came out of Bernie's office and asked 
me if it was possible to remove one of the typewriters to bring 
back into Bernie's office.'' \803\ Ms. Tripp asked him why he 
wanted a typewriter when there were five computers in the 
suite, and Mr. Sloan replied that he needed a typewriter.\804\ 
There were two typewriters in the office, but Ms. Tripp 
explained to Mr. Sloan that ``the way they were configured and 
plugged in under all the massive furniture with the taping to 
the carpet and the commingling of all the myriad cable 
underneath, that it would be a very difficult endeavor, and 
then I offered to get him a typewriter--excuse me, from 
elsewhere.'' \805\ Mr. Sloan then said that he didn't want her 
to do that, and walked back into Mr. Nussbaum's office. Mr. 
Nussbaum did not recall wanting a typewriter in his office, 
although he remembered wanting to transcribe the note.\806\ Mr. 
Sloan testified that he was sure that Ms. Tripp was mistaken, 
since he did not know of the note until the next day, July 
27.\807\
    The next morning, on July 27, Ms. Gorham and Ms. Tripp 
exchanged a series of electronic mail messages about the 
peculiar circumstances surrounding the discovery of the note. 
Ms. Gorham wrote to Ms. Tripp: ``Everything from his briefcase 
is missing. . . . I do not know what else was in there but the 
bag is totally cleaned out except for one collar stay.'' \808\ 
In another message to Ms. Tripp, Ms. Gorham wrote: ``On 
Wednesday, I told Bernie that VWF had placed shredded remnants 
of personal documents in the bag. On Thursday, I told Bernie in 
front of everybody that shredded remnants were in the bag.'' 
(\809\) Ms. Tripp replied that she remembered Ms. Gorham 
telling Mr. Nussbaum about the shredded pieces at the meeting 
on Wednesday, July 21, when the White House Counsel's office 
briefed the staff about the Park Police interviews. Ms. Tripp's 
message ended on a note of exasperation: ``So it took until 
MONDAY to figure out it should be looked at? Christ. And we're 
the support staff.'' \810\
    Ms. Gorham testified that, some time in the evening of July 
26 or the morning of July 27, Mr. Nussbaum grilled her about 
what she had seen in Mr. Foster's briefcase in the previous 
week:
    Ms. Gorham. Mr. Nussbaum asked me to sit at the chair on 
the opposite side of his table and asked me if I had seen 
anything in the bottom of Vince's briefcase. And I told him 
that I had only seen the color yellow, and I had seen the top 
of the Goldcraft third cut folder, and that was all I had seen.
    Mr. Chertoff. When you say a Goldcraft third cut folder, 
you mean a folder like this, a manila-type folder?
    Ms. Gorham. Yes, sir.
    Mr. Chertoff. And you told Mr. Nussbaum you had seen that 
in Mr. Foster's briefcase at an earlier time?
    Ms. Gorham. I told him I had seen the top of that cut of 
the folder.
    Mr. Chertoff. And what did Mr. Nussbaum say to you?
    Ms. Gorham. He asked me repeatedly what I had seen. He 
asked me if the yellow could have been paper. Could it have 
been lined paper? Could it have been--what it could have been? 
And I told him repeatedly, numerous times, that all that I had 
seen out of the corner of my eye was the color yellow and the 
top of a Goldcraft third cut folder such as you have.
    Mr. Chertoff. Was there anybody else in the room during 
this discussion with Mr. Nussbaum?
    Ms. Gorham. Not that I recall.
    Mr. Chertoff. Have you previously described this as an 
interrogation?
    Ms. Gorham. That is exactly how I have described and that 
is how--that is what took place.
    Mr. Chertoff. And would you agree that he was adamant and 
very forceful in putting his questions to you?
    Ms. Gorham. Indeed I would.
    Mr. Chertoff. I take it this experience is still very vivid 
in your mind?
    Ms. Gorham. Absolutely.\811\
    Mr. Nussbaum testified that he had ``some kind of a 
recollection'' of questioning Ms. Gorham, but he denies 
grilling or interrogating her.\812\ He did not recall the 
specifics of his conversation with Ms. Gorham. He did not 
recall her mentioning that she saw file folders or yellow paper 
in the briefcase.\813\

B. The White House's decision not to disclose the note immediately to 
        law enforcement

    At one point in the afternoon, Mr. Nussbaum talked with Mr. 
Sloan and Mr. Neuwirth about what to do with the note. They 
agreed that the note was not a suicide note, but Mr. Nussbaum 
knew it was the type of document in which the law enforcement 
officials would have a strong interest. ``So it was not clearly 
a suicide note and therefore, the issue was raised, is this the 
kind of thing that we were searching for that day. That was--to 
me it was clear it was the kind of thing.'' \814\ Mr. Burton 
suggested that the note was possibly shielded from disclosure 
by the attorney-client privilege, or other privacy interests.
    According to Mr. Nussbaum, Mr. Burton argued that they 
should research these issues before deciding whether to turn 
the note over to the authorities.\815\ Mr. Burton testified 
that, although he did not initiate the discussion, he recalled 
that ``an issue of privilege came up with respect to the note 
in that it was my understanding that counsel's office was going 
to look to see if there was anything in the note that gave rise 
to privilege.'' \816\ Although Mr. Nussbaum testified that Mr. 
Burton wanted to know whether there would be ``an obstruction 
of justice issue'' if they did not disclose the note to the 
authorities, \817\ Mr. Burton testified that ``[i]t was never 
considered seriously or trivially or any other way that the 
note would not be turned over. From the time the note was 
found, certainly from the time I knew of the existence of the 
note, that was never in doubt.'' \818\
    Mr. Nussbaum testified that, out of concern for the privacy 
of Mrs. Foster and respect for the President, he decided to 
wait until the next day, July 27, before advising the police of 
the existence of the note. ``I don't want Lisa Foster to hear 
about this on the radio or on TV:'' \819\

          Now, I know I can call her up and read it to her on 
        the phone, but I wanted her to see this thing. I wanted 
        her to be able to digest it. And she's in Arkansas. I 
        called Jim Hamilton. I had a concern about Lisa Foster. 
        That was really my primary concern. I had a concern 
        about Lisa Foster, so I called Hamilton, and I 
        discovered--I believe I called Hamilton. I discovered 
        shortly thereafter that Lisa was going to be in the 
        next day. She was coming in to Washington the next day 
        in connection with--she's returning to Washington after 
        the funeral. She's going to be in the next day on the 
        22nd. The President was out of town. He was to come in 
        late that night. He would be available the next day.
          I thought it was common decency, before I turn this 
        over to law enforcement, to let Lisa see it and digest 
        it and let the President see it and digest it, and I 
        didn't see any harm in letting them have that. In the 
        meantime, we could do the research that Burton was 
        talking about, although I didn't expect that research 
        was going to produce anything that would change my 
        decision. So I made the decision to show the note the 
        next day to Lisa and to show it to the President if he 
        wanted to see it when he came in the next day.\820\

    Mr. Nussbaum and Mr. Burton then called Mack McLarty, who 
was in Chicago with the President. Mr. McLarty told David 
Gergen, who recommended that Mr. McLarty tell the President and 
then promptly turn the note over to the authorities.\821\ Mr. 
McLarty decided, however, to wait until the next day, when the 
President returned to Washington, D.C., to take any action, 
including informing the President of the existence of the 
note.\822\
    Mr. Nussbaum assumed, on July 26, that Mr. McLarty would 
tell President Clinton about the note. 823 Senator Grams 
questioned Mr. McLarty's decision to wait, even though Mr. 
Foster was a personal friend of the President and the 
``apparent suicide of the White House deputy counsel was big 
news at the time.'' 824 Mr. McLarty replied:

          When the note or scraps of paper were reported to me 
        by telephone, I was perplexed when I heard of it. We 
        had just put, had the funeral for Vince and were moving 
        forward, and I was perplexed by it. I was in a hotel 
        room in Chicago. I didn't understand it. It did not 
        refer to suicide. Did not have a salutation or a 
        signature. At that point there were issues--there were 
        legal issues that were raised with me that I took 
        seriously, that were raised in a serious way, that Mr. 
        Nussbaum and others wanted to reflect on. There was the 
        issue of notifying the family. And because I was 
        perplexed by the note, I did want to see it, and I 
        simply felt that it was not the correct course at that 
        time to tell the President of a situation that was 
        really not complete, that had not been reviewed and we 
        had no plan of action. 825

Mr. Gergen took a commercial flight back from Chicago on July 
26. The President and Mr. McLarty flew back to Washington 
together, but Mr. McLarty claims that he did not tell the 
President about the note during the entire flight. 826 Mr. 
Nussbaum did not wait at the White House on July 26 for the 
President's return. 827

C. Mrs. Clinton and Susan Thomases are told of the ``discovery'' of the 
        Note

    In the afternoon of July 26, while Mr. Burton was still in 
Mr. Nussbaum's office, Mr. Nussbaum left to get Mrs. Clinton. 
Mr. Nussbaum recalled Mrs. Clinton's having an emotional 
reaction when she saw the note. ``She walked over and glanced--
looked at it. I may have told her--this is the thing. I may 
have told her look, we found something Vince wrote. I'm not 
positive of it. I don't have a specific memory of it, but it's 
something Vince wrote. It's something you should read. So my 
best memory is she sort of knew what she was going to look at, 
and she just--[S]he looked at it, and all of a sudden she had 
some sort of an emotional--she began to read it but she didn't 
read it. She didn't appear to read it. When she sat down and 
looked at it, she just said--she had an emotional reaction and 
she said I just can't deal with this. This is like--I just 
can't deal with this. Bernie, you deal with this. And she 
walked out of my office.'' 828
    In Mr. Burton's view, however, Mrs. Clinton had a different 
reaction to the note. According to Mr. Burton, as Mr. Nussbaum 
was reading her the note, ``she interrupted him and questioned 
her having been brought into the room and left the room.'' 
829 ``She explained that she did not understand why she 
had been brought into the room, that the decisions to be made 
concerning the privilege issues, notifying the Foster family 
were other people's decision to make and she left the room.'' 
830
    Mr. Nussbaum testified that Mrs. Clinton did not discuss 
with him at all the handling of the note. 831
    Susan Thomases testified that, at some point on July 26 and 
before even the President, the Foster family, the Park Police, 
or the Department of Justice were notified, 832 Mr. 
Nussbaum called and told her about the note. ``The substance is 
that a writing had been found and that he was going to wait 
until the President got back to show it to the President.'' 
833 Mr. Nussbaum denied contacting Ms. Thomases on July 26 
about the note. 834
    The Park Police and the FBI later interviewed, among 
others, Mr. Burton, Mr. Gergen, Mr. McLarty, Mr. Neuwirth, Mr. 
Nussbaum, and Mr. Sloan about the circumstances surrounding the 
discovery of the note. None of the reports of these interviews 
mentioned the fact that Mrs. Clinton and Ms. Thomases were 
among those who saw or knew of the note before it was disclosed 
to the law enforcement officials. 835
    Mr. Neuwirth testified that, although he was not asked 
about it, he told the FBI during his interviews that the Mrs. 
Clinton had been made aware of the note:

          I remember being asked questions. I remember being 
        conscious of the fact that when they asked me questions 
        about what happened on that night, I had not been asked 
        questions that would have covered the period when the 
        First Lady was present, but I went out of my way at the 
        conclusion of the interview to tell them--when they 
        asked me who else I knew had been told about the note, 
        I went out of my way to point out that the First Lady 
        was one of the people that I knew had been made aware 
        of the note prior to the time that I understood it had 
        been given to law enforcement officials. And I'm very 
        conscious of the fact that I made that effort precisely 
        because I didn't think I had been asked a question 
        earlier in which there would have been an opportunity 
        to talk about the fact that the First Lady had come to 
        look at it that night. 836

    However, the FBI report of Mr. Neuwirth's interview, which 
summarized his account of the time between the discovery of the 
note and its disclosure to law enforcement, did not mention 
that Mrs. Clinton had been told of the note--an important fact 
that a trained agent would almost certainly include in such a 
report. 837 The handwritten notes of that interview, taken 
by Agent Salter, recorded a lengthy narrative by Mr. Neuwirth 
of the events on July 26 and July 27. But nowhere in the 
narrative, according to the notes, did Mr. Neuwirth refer to 
either Mrs. Clinton or Ms. Thomases. 838
    Mrs. Clinton's schedule for July 27, the day after the 
discovery of the note, indicated that Mrs. Clinton had a 
private meeting in her office with Mr. Nussbaum and Mr. 
Neuwirth from 2:30 p.m. to 3:00 p.m.--several hours before the 
note was turned over to the authorities. 839 The schedule, 
however, did not specify the topic of the meeting.
    Mr. Burton testified that he does not recall any 
discussions in the White House about whether the law 
enforcement authorities should be told that Mrs. Clinton had 
seen the note. 840 Curiously, Mr. Burton's notes of a 
staff meeting on July 28, the day after the note was disclosed 
to the authorities, listed ``HRC'' with a telling arrow 
pointing to an adjacent letter ``n''. 841 Mr. Burton 
testified that he did not know what his own notes--particularly 
the reference to the letter ``n''--meant. 842

                            vi. july 27,1993

A. The review and transfer of Clinton personal files from the White 
        House residence to Williams & Connolly

    On the afternoon of July 22, and after Mr. Nussbaum's real 
search, Thomas Castleton, an assistant in the White House 
Counsel's office, helped Margaret Williams remove boxes from 
Mr. Foster's office to the White House Residence. As they were 
walking, Ms. Williams told Mr. Castleton that the boxes had to 
be taken to the residence for an important purpose: the 
President or Mrs. Clinton needed to review their contents. 
843 According to Mr. Castleton: ``What [Ms. Williams] said 
was that the boxes contained personal and financial records 
pertaining to the First Family and that we were moving the 
boxes to the residence for them to be reviewed.'' 844 Ms. 
Williams said that the files needed to be reviewed because 
``they did not know what was in these files and needed to 
determine whether there was something of a personal nature or 
not.'' 845 ``She said that the President or the First Lady 
had to review the contents of the boxes to determine what was 
in them.'' 846
    Ms. Williams did not recall any such conversation with Mr. 
Castleton. Ms. Williams testified that such a conversation 
would be out of character for her because ``it is highly 
unlikely I would have this kind of discussion with an intern:'' 
847

          Well, I would like to say affirmatively I did not say 
        it because I can't imagine why I would have that 
        discussion with an intern about the files going to the 
        President and the First Lady. I know that I told him we 
        were going to the residence because I figured he needed 
        to know where he was going, but I can't imagine that I 
        said more than that. So I do not recall having that 
        discussion with him. 848

    Mr. Castleton took exception with Ms. Williams' 
characterization of his role at the White House: he was not an 
intern, but a special assistant to the White House Counsel. 
849
    Ms. Williams claimed that no one reviewed the Clintons' 
personal files while they were stored in the residence. 
According to Ms. Williams, Carolyn Huber gave Ms. Williams the 
key after Ms. Huber locked the closet on Thursday, July 22. 
850 Ms. Williams put the key on her key chain and held it 
through the weekend, taking it with her to Mr. Foster's funeral 
in Arkansas. 851
    Ms. Huber, however, testified that, after she locked the 
closet on July 22, she returned the key to its usual keeping 
place, in an envelope in the desk drawer of the office in the 
residence. 852 The envelope was marked clearly: ``It said 
`key to the closet.'' 853 The drawer was not locked, 
according to Ms. Huber, and therefore the key was readily 
available to anyone with access to the residence. 854
    The plot thickens. Although Ms. Williams testified that the 
files remained undisturbed until she transferred them to 
Williams & Connolly on July 27, Mr. Nussbaum testified that, a 
couple of days after the files were removed from Mr. Foster's 
office on July 22, Ms. Williams returned a Mr. Foster file to 
him because it should not have been among the Clintons' 
personal documents. ``I'm not quite sure Ms. Williams returned 
the document. I believe Ms. Williams returned the document. A 
residence file was returned. There was a file that was returned 
because we were making an effort to send over solely personal 
documents which had been used--yes--which were in the White 
House counsel's office because there was an official purpose.'' 
855 25
---------------------------------------------------------------------------
    \25\ After providing this testimony, Mr. Nussbaum consulted with 
counsel. When the deposition resumed, Mr. Nussbaum revised his 
testimony: ``As I indicated in my testimony, look back at the record, 
I'm not certain I even had this discussion with Ms. Williams. I'm not 
positive. It's either Ms. Williams or Mr. Neuwirth I had a discussion 
with.'' Nussbaum, 7/13/95 Dep. p. 409.
---------------------------------------------------------------------------
    Mrs. Clinton's official schedule showed that she had two 
private meetings with Ms. Williams on July 27, one from 9:15 
a.m. to 9:30 a.m. and another from 10:30 a.m. to 11:30 a.m. 
856 Although the schedule listed Mrs. Clinton's office as 
the location of the meetings, records of movements within the 
White House maintained by the Secret Service and the White 
House Usher's Office indicate that Mrs. Clinton did not leave 
the White House Residence at all that day. 857 Records 
maintained by the Secret Service and the White House Usher's 
office indicated that Ms. Williams was in the White House 
Residence on July 27 from 10:31 a.m. to 12:05 p.m., 1:35 p.m. 
to 2:25 p.m., and 3:20 p.m. to 4:43 p.m. 858
    Ms. Williams testified that on July 27, Robert Barnett, a 
partner at the law firm Williams & Connolly and the Clintons' 
personal attorney, came to the White House to see Mrs. Clinton. 
By chance, Ms. Williams claims that she ran into Mr. Barnett 
while he was on the second floor of the White House Residence 
talking to Mrs. Clinton. 859 According to Ms. Williams, 
Mr. Barnett said, ``you know what? It would make sense to get 
those documents over to the office,'' 860 referring to the 
documents that Ms. Williams had moved from Mr. Foster's office 
to the Residence on July 22. Mr. Barnett then called from the 
residence for another person from Williams & Connolly to come 
for the documents. When that person arrived, according to Ms. 
Williams, she accompanied him to the residence, unlocked the 
closet with the key on her keyring, and pointed the documents 
out to him. 861
    Mr. Barnett had a far different and more believable 
recollection of Ms. Williams' role in the transfer of the 
files. He testified that Ms. Williams called him specifically 
to arrange a transfer of the files, and ``I spoke with her 
about picking up the documents.'' 862 On July 27, he went 
to the White House to pick up the documents. Capricia Marshall, 
Ms. Clinton's assistant, met him at the gate, signed him in 
with the Secret Service, and escorted him to the Second Floor 
to wait for Ms. Williams. 863 Records show that Mr. 
Barnett arrived at the White House at 2:57 p.m. 864, 
registering ``First Lady'' as his visitee with Secret Service, 
and entered the White House Residence at 3:03 p.m. 865 
About 20 minutes later, Ms. Williams came and escorted Mr. 
Barnett up to the third floor closet where the files were kept. 
866 The box was open, and Mr. Barnett went through the 
files, briefly examining their contents. 867 When he 
finished the review, Mr. Barnett asked Ms. Williams for tape 
and sealed the box. 868
    Mr. Barnett then called Ingram P. Barlow, the comptroller 
of Williams & Connolly, to come over and pick up the box from 
the White House. 869 Mr. Barnett gave Ms. Williams Mr. 
Barlow's name and social security number for her to clear him 
in with the Secret Service, and left at 4:30 p.m. 870 Mr. 
Barnett denied seeing Mrs. Clinton while he was in the White 
House Residence. 871
    Mr. Barlow of Williams & Connolly arrived at the White 
House Residence at 4:38 p.m. 872 He was escorted to the 
third floor closet, where he took possession of the box. 
Consistent with Mr. Barnett's testimony, the box was sealed in 
packing tape when Mr. Barlow saw it in the closet. 873
    Mr. Barnett called Susan Thomases at her office on July 26, 
1993 and left a message. 874 Ms. Thomases did not recall 
returning Mr. Barnett's call, nor did she recall making plans 
to go to the White House on July 27. 875 Secret Service 
records, however, indicate that Susan Thomases entered the 
White House at 2:50 p.m. on July 27. 876 Because Ms. 
Thomases had a White House pass at that time, the Secret 
Service entry records did not list the purpose of her visit or 
her intended destination. Records maintained at the White House 
Residence, however, indicated that she entered the Residence at 
3:08 p.m., five minutes after Mr. Barnett. Records maintained 
by the White House Residence Usher's Office further indicate 
that Mr. Barnett and Ms. Thomases exited the White House 
Residence together. 877 Mr. Barnett testified, however, 
that he did not recall seeing Ms. Thomases in the White House 
Residence.
    Although Mr. Barnett testified that he did not recall 
seeing Mrs. Clinton during his visit on July 27, Ms. Williams 
testified that she recalled seeing Mr. Barnett talking with 
Mrs. Clinton when she ran into him in the Residence that 
afternoon.
    Telephone records produced by Ms. Thomases indicate that 
she called Patricia Solis Doyle, Mrs. Clinton's scheduler, on 
the evening of July 26, 1993. 878 Ms. Thomases does not 
recall why she spoke with Ms. Solis, and does not recall 
whether she called Ms. Solis to schedule an appointment to see 
Mrs. Clinton. 879
    On the morning of July 27, Ms. Solis called Ms. Thomases in 
her New York office and left a message. The message read, ``HRC 
wants to see you today.'' 880 The message contained a 
check mark, which, according to Ms. Thomases, signified that 
she had returned the call. Indeed, telephone records indicate 
that, at 11:33 a.m. on July 27, Ms. Thomases called Ms. Solis 
from her Washington office and spoke for 10 minutes. 881 
Her telephone records further indicate that, in the 40 minutes 
between 12:20 p.m. and 1:00 p.m. on July 27, Ms. Thomases 
called the White House four times. Later that afternoon, at 
1:30 p.m., Ms. Thomases received another message from Evelyn 
Lieberman in the First Lady's office. It stated, ``Please call 
Hillary.'' 882
    Ms. Thomases testified that as of the end of the day on 
July 26, she did not have any firm plan or compelling reason to 
come to Washington the next day, July 27.883 Her normal 
day to be in Washington was Wednesday. According to Ms. Solis, 
it was not customary for Mrs. Clinton to summon Ms. Thomases to 
Washington on a particular day. ``That's not normally the way 
it works. If Mrs. Clinton wanted to see Susan, she'd ask is she 
in town, do you know what her schedule is, can she come by.'' 
884
    Interestingly, Ms. Thomases professed that she could not 
explain why she went to Washington on July 27. Ms. Thomases did 
not recall scheduling a meeting with or seeing Mrs. Clinton on 
July 27.885 Indeed, Ms. Thomases testified that she did 
not even have a specific recollection of even being in the 
White House Residence that day. Secret Service records and the 
White House Residence Usher's logs indicate, however, that Ms. 
Thomases arrived at the White House at 2:50 p.m. on July 27, 
and went up to the second floor of the White House Residence at 
3:08 p.m.886 In addition, records indicate that Ms. 
Thomases made two telephone calls from the White House 
Residence on July 27, 1993, and charged them to her telephone 
calling card.887

B. White House deliberations about the handling of the note

    In the morning of July 27th, after the regular White House 
staff meeting, Mr. Nussbaum met with Mr. McLarty, Mr. Burton, 
and Mr. Gergen to discuss how Mr. Foster's note should be 
handled.888 Mr. McLarty thought ``the note would need to 
be provided to the authorities, and it eventually would become 
public knowledge; either we would disclose it or it would 
become public knowledge.'' However, there were ``issues 
outstanding'' that he wanted to discuss with the other White 
House officials.889 According to Mr. Gergen:, the meeting 
was resolved in favor of disclosing the note to the authorities 
as soon as possible. ``[T]here was a unanimous agreement that 
the issues that had been raised the night before had been 
resolved in the minds of those who had raised them, and it was 
a unanimous agreement to go forward.'' 890 Mr. McLarty 
confirmed that at the meeting the ``concerns over executive 
privilege had been settled.'' 891
    Jim Hamilton, an attorney representing the Foster family, 
joined the meeting halfway through, at about 11:00 a.m. He 
introduced a concern that was new to Mr. Gergen:

          He took the position--I do not know whether, I do not 
        know whether he knew about the existence of the note 
        prior to coming in the room, or whether he was told, 
        but he was very strongly of the view that before 
        anything was done with the note, Mrs. Foster needed to 
        be informed of the contents and needed to be informed 
        that there was a note, and he needed to sit down with 
        her and talk about it.892

Mr. Hamilton told those at the meeting that Mrs. Foster was 
flying from Arkansas, and would arrive early in the afternoon, 
at about 2:30 p.m.893 Mr. Hamilton said that he agreed 
that the note should be turned over to the authorities, but he 
did not know what Mrs. Foster's reaction would be to the 
note.894 After consulting with Mrs. Foster, Mr. Hamilton 
returned to the White House and said that Mrs. Foster assented 
to turning the note over to the authorities.895
    White House officials also discussed how to disclose the 
note to the authorities. ``I think there'd been some discussion 
in our staff meetings about whether it ought to go to the 
Justice Department or the Park Police,'' Mr. Gergen said. 
``There was some uncertainty on the part of the White House 
about what the appropriate channel was to make sure it got 
there.'' 896 The officials discussed whether the Park 
Police could be trusted not to leak the existence or contents 
of the note to the press.897 They also feared that 
disclosure of Mr. Foster's note might prompt the authorities to 
reopen investigations into the matters spelled out in the note. 
``I recall there was some speculation about whether the 
contents of the note might prompt legal authorities to look 
further in to the issues raised by the note. In other words, to 
go beyond the scope of the immediate investigation over his 
mental state.'' 898
    The controversy over the White House Travel Office was 
specifically mentioned.899 According to Mr. Gergen:

          I believe with regard to the Travelgate matter [he] 
        said the FBI lied. He accused the FBI of lying, I 
        believe--I can't--I don't remember the exact details of 
        this, but there was a discussion within the White House 
        of whether upon receipt of that or once the note was 
        turned over to the authorities--this was discussions I 
        recall we had on Tuesday, on the day when the note was 
        turned over--whether that would prompt or the Attorney 
        General would feel forced, having received that, to 
        launch an investigation about what he was talking 
        about. You know, did the FBI lie? That was the point 
        that I was trying to make in the deposition. 
        Inevitably, there were points raised in the note that 
        were clearly going to prompt a lot of attention by the 
        press and by others, and that particular point was on 
        the one about the FBI lying.900 26

    \26\ After the note was turned over to law enforcement authorities, 
Mr. Heymann referred it to the Office of Professional Responsibility 
(OPR) and the Criminal Division of the Justice Department with the 
following directive:
    I would like OPR to review the assertion in the notes dealing with 
the FBI and to give me its recommendation as to what, if any, further 
inquiry is necessary and appropriate. I would like the Criminal 
Division to review the other assertions in the notes and to give me its 
recommendation as to what, if any, further inquiry is necessary and 
appropriate.
    Justice Department Document D 000057.
---------------------------------------------------------------------------
    The documents produced by the White House to the Special 
Committee included two pages of undated, handwritten notes by 
Bill Burton. At the top the first page, Mr. Burton listed the 
names of the persons present at the meeting on July 27: Jim 
Hamilton, Bernard Nussbaum, Bill Burton, David Gergen, Mack 
McLarty.901 Further down in his notes, Mr. Burton wrote 
``2 pts'' with an arrow pointing to the following:

          far happier if disc.
          if someone other than Bernie
          if worried about usher's office discuss with 
        me.902

On the second page, Mr. Burton wrote the following: ``We have 
disc a personal writing of Mr. Foster reflecting his depressed 
state. In deference to the family, no further commt.'' 903 
Mr. Burton testified that ``disc.'' on the first page meant 
``discussed'' or ``disclosed'', and the same notation of the 
second page was shorthand for ``discovered''. Senator Grams 
noted the inconsistency in Mr. Burton's answer and pointed out 
further that, on the first page, when Mr. Burton meant 
``discussed'' in the last line of the notes, he wrote out the 
entire word. Mr. Burton explained that he used a variety of 
abbreviations. ``I use some standard Associated Press 
abbreviations; I use some of my own shorthand. Sometimes d-i-s-
c means discussed. Sometimes it means discovered. Sometimes it 
means disclosed.'' 904

C. The President is told of the note

    Mr. McLarty called Mrs. Foster's house after the morning 
meeting and then learned that Mrs. Foster was traveling back 
from Arkansas to Washington.905 She arrived in Washington 
in the afternoon, at about 2:30 p.m. She was then taken to the 
White House to view the note and agreed to disclose the note to 
the authorities.906
     Even though it had been agreed at the morning meeting that 
the President would be notified as soon as possible so that the 
note could be turned over to the authorities, Mr. McLarty 
claims that he did not notify the President until late in the 
afternoon because the President had a full schedule and because 
Mrs. Foster had not been notified.907 At 6:00 
p.m.,908 Mr. McLarty, Mr. Gergen, and Mr. Nussbaum went 
into the Oval Office to tell the President about the note. 
According to Mr. McLarty, Mr. Nussbaum explained to the 
President the existence of the note and either ``read him the 
note or outlined what was in the contents.'' The three men 
explained to the President that Mrs. Foster had already been 
notified, or would be shortly, and that they intended to turn 
the note over to the authorities. Mr. McLarty testified that 
the President accepted their report, and ``he said do with it 
as you think is right, give it to the authorities; and that was 
about it.'' 909
    Mr. Gergen testified that the President did not indicate 
that he knew about the note before the 6:00 p.m. meeting, 
although Mr. Gergen ``couldn't tell from his reaction whether 
he knew.'' 910 By then, Mrs. Clinton had known of the note 
for over 24 hours. Senator Grams observed that ``[i]t seems 
kind of strange knowing that this was one of his best friends 
and all of the speculation surrounding looking for a suicide 
note that night, and then finally when something was found, he 
didn't--wasn't inquisitive; he didn't inquire about it; he 
didn't seem to want to know more information except for to say 
you handle it the best way you know how.'' 911

D. The White House finally turns the note over to law enforcement

    Some time in the afternoon, Mr. McLarty called Attorney 
General Janet Reno and asked her to come to the White House 
that evening, at about 7:00 p.m.912 Deputy Attorney 
General Heymann recalled accompanying Attorney General Reno to 
the White House:

          I rode over with the Attorney General on the evening 
        of Tuesday the 27th. We had a 7:00 meeting. We had not 
        been told what it was about, though. I thought it was 
        probably about the Foster matter. We were shown into 
        Mr. McLarty's office. The only--I think at first only 
        Mr. Gergen, David Gergen was there. Then Mr. Nussbaum 
        came in and Mr. Burton, I believe, and certainly Mr. 
        McLarty. There had been some small talk before 
        that.913

    Mr. Nussbaum began the meeting by informing Attorney 
General Reno and Mr. Heymann of the existence of the note, 
producing the note, and reading them a transcript of the note. 
Mr. Nussbaum then asked the Justice Department Officials what 
``should be done with it.'' Attorney General Reno told Mr. 
Nussbaum to ``turn it over to the Park Police immediately.'' 
914
    Attorney General Reno questioned Mr. Nussbaum about the 
long delay in disclosing the note to the proper authorities:

          She then asked why are we just getting it now if it 
        was found I guess it's 30 hours--it was 30 hours before 
        then. The White House people, I don't know whether it 
        was Mr. Nussbaum or who, said that there was--they 
        wanted first to show it to Mrs. Foster and they wanted 
        to show it to the President who might, if he had wanted 
        to, have asserted executive privilege, they said. They 
        said they were not able to get to the President until 
        late on the 27th and as soon as they got to the 
        President and made the President aware of the note, 
        they had called us.915

Attorney General Reno, who had to leave, asked Mr. Heymann to 
stay and take care of the matter. Mr. Heymann then called Mr. 
Margolis and asked him to call the Park Police 
immediately.916
    Apparently unbeknownst to Attorney General Reno and Deputy 
Attorney General Heymann, Webster Hubbell, the Associate 
Attorney General, was in the White House Residence while Ms. 
Reno and Mr. Heymann were in the White House to receive the 
note. Mr. Hubbell's records indicate that Mrs. Clinton had 
called his office and left a message at 2:30 p.m. that 
afternoon.917 White House logs indicate that Mr. Hubbell 
arrived at the Residence at 6:29 p.m. and remained there until 
8:19 p.m.918 Ms. Thomases, who was in the Residence at the 
same time as Mrs. Clinton and Mr. Hubbell, exited the White 
House at approximately the same time.919 Neither Ms. 
Thomases nor Mr. Hubbell recalled discussing the note with each 
other or with Mrs. Clinton on that day. Ms. Thomases testified, 
``I don't know that Hillary Clinton and I have ever discussed 
that writing.'' 920
    Ms. Thomases acknowledged that she met with Mr. Hubbell and 
Mrs. Clinton in the Residence following Mr. Foster's death, but 
she did not recall whether the gathering occurred on July 27: 
921 27 She claimed that the three shared only memories of 
Mr. Foster:

    \27\ Entry and exit records for the White House and the Residence 
indicate that July 27 was the only day in the week following Mr. 
Foster's death when Mrs. Clinton, Ms. Thomases, and Mr. Hubbell were in 
the White House or the Residence together.
---------------------------------------------------------------------------
          We just talked about the tragedy of Vince's death and 
        we talked about how sad it was, and I remember that the 
        first time the three of us were together, we talked a 
        little bit about some of the good times that we had had 
        together and old times before Bill Clinton was elected 
        President, and in the days in which I used to see 
        them.922
    Mr. Hubbell testified that he learned about the note when 
he ``read it in the newspaper.'' 923 When asked about his 
trip to the White House on July 27, Mr. Hubbell testified that 
he went to the White House to give Mrs. Clinton an account of 
Mr. Foster's funeral after Mrs. Clinton left. ``I remember that 
I had to go to the White House to tell Hillary about what had 
gone on after they left the funeral, but I don't have any 
memory of doing it.'' 924 He testified that it was part of 
the grieving process: ``We, as Southerners, we have large long 
funerals and we get together and drink and eat and talk and do 
it for days. And Hillary had missed that grieving process, and 
I remember my wife saying, Hillary needs to talk to you. She 
needs to understand who was there and things of that sort.'' 
925 Implausibly, he did not recall seeing Ms. Thomases or 
discuss Mr. Foster's note with Mrs. Clinton.926
    After Mr. Heymann called the Park Police, Officer Joseph 
Megby of the Park Police went to the White House. Mr. Nussbaum 
began to assemble the note.927 Some of the pieces fell, 
and Mr. Nussbaum and others picked them up. Mr. Heymann 
testified that ``the note fell down, a number of the pieces of 
the note fell down on the floor and there was a scramble to 
pick them up.'' 928 He noted at the time that ``by the 
time it had been reassembled, the fingerprints of everybody in 
the White House were on it. So if anybody wanted fingerprints, 
they had all the fingerprints in the world.'' 929 28
---------------------------------------------------------------------------
    \28\ A later FBI analysis of the pieces of the note concluded: 
``The specimens were examined and one latent palm print of value was 
developed on one piece of paper, part of Q1.'' Justice Department 
Document FBI-00000079. The latent palm print is unidentified.
---------------------------------------------------------------------------
    Mr. Nussbaum then gave the note to Officer Megby and 
concluded the meeting. Heymann urged Officer Megby to ask any 
questions that he might have, but the officer declined. It was 
not until later that Mr. Heymann learned that Officer Megby 
``was simply a duty officer. This was probably all new to 
him.'' 930
    The circumstances surrounding the discovery of the note and 
the delay in turning it over to the authorities disturbed Mr. 
Heymann and caused him to question the level of cooperation 
that the White House provided to the investigation into Mr. 
Foster's death. The next day, July 28, 1993, Mr. Heymann met 
with Mr. Margolis and instructed him to ask the FBI to conduct 
a thorough investigation into the discovery of the note. Mr. 
Heymann specifically told them to be ``very aggressive,'' 
931 and Mr. Margolis described the investigation as an 
``800-pound gorilla.'' 932 Mr. Heymann and Mr. Margolis 
identified the jurisdictional predicate for the investigation 
as obstruction of justice, 933 and FBI documents confirmed 
that the subject matter was ``possible obstruction of justice 
of U.S. Park Police investigation of death of Vincent Foster, 
Counsel to the President.'' 934
    This sentiment was shared by the Park Police, who 
complained about the lack of White House cooperation to number 
two official of the Interior Department. Mr. Heymann testified 
that, on July 29, 1993, he received a call from Thomas Collier, 
the Chief of Staff to the Secretary of Interior, asking for 
help. Mr. Collier told Mr. Heymann that ``the Park Police are 
very, very upset about the investigation* * *. He said that 
they really couldn't get the cooperation that they wanted, and 
he said that he wanted to pull the Park Police out and he'd 
like me to substitute the FBI for the Park Police.'' 935 
Mr. Heymann did not want to pull the Park Police from the 
investigation, but told Mr. Collier that the FBI, at Mr. 
Heymann's request, were already involved in the White House 
investigation. Mr. Heymann also assured Mr. Collier that he 
would intervene with the White House to ensure future 
cooperation.
    Mr. Heymann then called David Gergen at the White House and 
explained the problems that the Park Police investigators were 
encountering. Mr. Gergen told Mr. Heymann that he would call 
back in a few minutes so that Mr. Gergen could assemble a 
number of White House personnel in his office.936 When Mr. 
Gergen called back, he was on a speakerphone with a number of 
White House officials, ``eight or nine or ten people.'' 
937 Mr. Gergen does not have a clear memory of the 
conversation, but he testified that Mr. Heymann ``may have 
conveyed to me a sense of, not a precise x, y, z, here's what 
you guys are doing, but a sense of watch it, you know, an 
alert. Make sure the White House was doing this, to remind me 
in effect, these are very highly charged kinds of 
investigations and they can be misunderstood very easily.'' 
938
    Mr. Heymann's recollection is clearer:

          I read them the riot act in unmistakable terms, 
        telling them that this was a disaster very near to 
        occur, that I was sending, I had sent the FBI in to 
        interview on the note. That I wanted all interviews to 
        take place without White House counsel there. That I 
        wanted full cooperation. That there was a very good 
        chance that nothing could avoid sort of a major failure 
        of credibility and sense of biased investigation, but 
        that only the most vigorous of steps, at this point, 
        could do that, and I wanted a complete 
        turnaround.939

According to Mr. Heymann, he deliberately delivered a ``very 
strong message'' seeking to change the White House attitude 
toward the investigation.940 He received some, but not 
much, argument from the White House officials involved in the 
conference call. After the conversation, according to Mr. 
Heymann, ``the cooperation with the Park Police and with the 
FBI turned around immediately and completely.'' 941

                   Findings of the Special Committee

    In the course of its investigation, the Special Committee 
was confronted with witnesses who provided conflicting 
testimony about events highly relevant to the Special 
Committee's inquiry. To resolve these conflicts in testimony, 
Senate Resolution 120 authorized the Special Committee to make 
factual findings based on the available evidence. In doing so, 
the Special Committee placed primary emphasis on documentary or 
other physical evidence whenever such evidence was available 
and when there was no indication that such evidence had been 
altered or otherwise compromised. When judgments of credibility 
had to be made, the Special Committee focused on the factors 
that, from common sense and logic, contribute to the 
reliability of a person's testimony--factors such as a motive 
to lie or embellish, the detail and vividness of memory, and 
the internal and external consistency of a person's overall 
testimony. The Special Committee summarizes its factual 
findings below.

Finding 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

    Mr. Foster played a central role in both the firing of the 
Travel Office staff and subsequent attempts to conceal Mrs. 
Clinton's true role in the firings. Mr. Foster participated in 
the May 12, 1993 meeting with Harry Thomasson, Catherine 
Cornelius, and David Watkins where the replacement of the 
Travel Office staff was first discussed.942 Mr. Foster 
then assigned his former law partner, William Kennedy, to 
investigate alleged financial mismanagement in the Travel 
Office. When the July 2, 1993 report of an internal White House 
review into the matter sharply reprimanded Mr. Kennedy, Mr. 
Foster felt personally responsible and insisted that Mr. 
Nussbaum allow him to shoulder the blame.943
    Mr. Watkins' belatedly disclosed memorandum concerning the 
Travel Office affair clearly outlined Mr. Foster's extensive 
involvement as Mrs. Clinton's conduit to the firings. Mr. 
Kennedy wrote, for example, ``Once this made it on the First 
Lady's agenda, Vince Foster became involved, and he and Harry 
Thomasson regularly informed me of her attention to the Travel 
Office situation--as well as her insistence that the situation 
be resolved immediately by replacing the Travel Office staff.'' 
944 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.'' 
945 Despite Mrs. Clinton's obvious and extensive 
involvement in the firing of the staff, Mr. Foster and other 
White House officials did not disclose to investigators probing 
the affair about her true role.
    It is also undisputed that Mr. Foster played a central role 
in the effort to respond to and manage the brewing Whitewater 
scandal. When questions first arose in the 1992 campaign about 
Whitewater and Mrs. Clinton's representation of Mr. McDougal's 
Madison Guaranty, Mr. Foster compiled the files and billing 
records of the Rose Law Firm relating to that 
representation.946 He and Mr. Hubbell improperly removed 
the files from the Rose Law Firm without authorization and 
transported them to Washington after the campaign. In order to 
``[g]et out of White Water,'' 947 Mr. Foster also 
perfected the sale of the Clintons' interest in Whitewater to 
Mr. McDougal.948
    After becoming Deputy White House Counsel, Mr. Foster 
continued his role as the Clintons' personal counsel on 
Whitewater. He was assigned the task of preparing the Clintons' 
tax returns for 1992 in order to reflect properly the sale of 
their shares in Whitewater,949 a problem that his notes 
described as a ``can of worms you shouldn't open.'' 950 
Mr. Foster worked with other White House officials in the 
Spring of 1993 in coordinating a response to questions about 
Whitewater.951 And Mr. Foster's telephone log indicated an 
inexplicable message from Mr. McDougal on June 16, 1993, ``re 
tax returns of HRC, VWF and McDougal.'' 952

Finding 2. Senior White House officials were aware that the President 
        and Mrs. Clinton faced potential liability over Whitewater and 
        their relationship with the McDougals

    Before the Special Committee, Mr. Nussbaum boldly 
announced: ``The Whitewater matter, which subsequently became 
the focus of so much attention, was not on our minds or even in 
our consciousness in July 1993.'' 953 The testimonial and 
evidentiary record belies Mr. Nussbaum's exculpatory 
declaration.
    Questions about Whitewater and Mrs. Clinton's 
representation of Madison were a major campaign issue in 1992, 
so much so that the Clintons took the extraordinary step of 
retaining Jame Lyons, an ``outside attorney,'' to issue a 
report on the matter. Mr. Foster and Mr. Hubbell at that time 
compiled the files and billing records of the Rose Law Firm 
relating to Mrs. Clinton's representation of Madison,954 
and transported the files to Washington after the campaign. And 
Mr. Foster was specifically asked to prepare the Clintons' 
personal tax returns as they relate to Whitewater,955 a 
project which consumed his time in the White House.
    More important, as early as 1992, the Clintons and their 
advisors were aware that questions about Whitewater would again 
resurface, this time in a criminal investigation. In the fall 
of 1992, Betsey Wright heard of a ``criminal referral regarding 
a savings and loan official in Arkansas and . . . involv[ing] 
the Clintons.'' 956 Ms. Wright learned specifically that 
the RTC had just sent a ``criminal referral up to the 
prosecutor in Little Rock.'' 957 She passed this news onto 
Mrs. Clinton.958
    According to RTC Senior Vice President William H. Roelle, 
former Deputy Secretary of the Treasury Roger Altman, upon 
taking office, directed the staff to inform him of all 
important or potentially high-visibility issues.959 Mr. 
Roelle testified that, 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.960 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.'' 961 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.962
    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.963 Shortly 
thereafter, Mr. Bowles told Mr. Foren that he had briefed White 
House Chief of Staff Mack McLarty about the case.964 
Although Mr. Bowles did not recall being briefed by Mr. Foren 
about Capital Management 965 or talking to Mr. McLarty 
about the case,966 Mr. Foren's account was corroborated by 
his deputy, Charles Shepperson.967 Mr. McLarty's calendar 
indicated that Mr. Bowles had two meetings with Mr. McLarty at 
the White House in early May 1993.968
    Mr. Foster's role in response to Whitewater was known in 
the White House. Ricki Seidman, former Deputy Director of 
Communications in the White House, reported to the FBI that she 
and Mr. Foster had worked together on Whitewater issues before 
his death. Specifically, she recalled that she worked with Mr. 
Foster in April 1993 in connection with the Clintons' tax 
returns.969 Seidman participated in the discussions from a 
``communications perspective,'' 970 thus indicating the 
White House's identification of Whitewater as a potential issue 
in the spring of 1993. Indeed, according to the FBI report of 
Ms. Seidman's interview, ``it was believed the tax returns 
would bring the Whitewater issue into the `public domain 
again.' '' 971 And Ms. Seidman stated that there was 
discussion in the White House regarding ``the `soundest way' to 
seek closure to the issue.'' 972
    Given this overwhelming evidence, the Special Committee 
finds that White House officials knew about Mr. Foster's work 
for the Clintons on Whitewater, and that, at the time of his 
death, the Clinton White House was acutely aware that 
Whitewater was a potential political and criminal matter.

Finding 3. Senior White House officials ignored repeated requests by 
        law enforcement officials to seal Mr. Foster's office on the 
        night of his death

    Nine different persons recalled four separate requests to 
White House officials to seal Vincent Foster's office on the 
evening of July 20. Park Police investigator Sergeant Cheryl 
Braun testified that, as she left the Foster residence, she 
asked Assistant to the President David Watkins to seal Mr. 
Foster's office.973 Detective John Rolla expressly 
corroborated her testimony.974 Park Police Major Robert 
Hines testified that he called and asked another senior White 
House official, Bill Burton, to seal Mr. Foster's 
office.975 Another White House official, Sylvia Mathews, 
testified that she overheard Mr. Burton's conversation with the 
Park Police 976 and that right after the telephone call, 
Mr. Burton asked Counsel to the President Bernard Nussbaum to 
seal the office.977
    Counselor to the President David Gergen testified that he 
asked Director of Communications Mark Gearan whether Mr. 
Foster's office was sealed.978 Mr. Gearan then asked Mr. 
Burton, who assured Mr. Gearan that the office had been 
sealed.979 Associate Attorney General Webster Hubbell 
testified that both his wife and Marsha Scott remembered him 
calling Chief of Staff Mack McLarty on the night of Mr. 
Foster's death to ask that Mr. Foster's office be 
sealed.980 All the persons who received these requests to 
seal Mr. Foster's office denied having been asked to do so.
    Mr. Watkins was the critical person in the failure to seal 
Mr. Foster's office on the night of his death. He received a 
specific request from the Park Police to seal Mr. Foster's 
office. Instead of doing so, he directed his assistant, Patsy 
Thomasson, to search the office. Mr. Watkins was intimately 
involved, along with Mr. Foster, in firing the career Travel 
Office staff and in the apparent subsequent cover up before 
investigators. In a memorandum drafted in the Fall of 1993, Mr. 
Watkins described in detail Mr. Foster's and Mrs. Clinton's 
role in the Travelgate affair. He wrote that ``Foster regularly 
informed me that the First Lady was concerned and desired 
action--the action desired was the firing of the Travel Office 
staff.'' 981 The memorandum also revealed that, right 
before the firing of the Travel Office staff, White House Chief 
of Staff Mack McLarty met with Mr. Watkins and Ms. Thomasson 
and explained that the issue was on Mrs. Clinton's ``radar 
screen'' and that ``immediate action must be taken.'' 982 
At all times, however, the White House had maintained that Mrs. 
Clinton was not involved in the Travel Office matter; Mrs. 
Clinton and numerous other White House officials had made 
public statements that she had ``no role'' in the firing of the 
staff. Mr. Watkins' knowledge of Mrs. Clinton's true 
involvement in Travelgate, efforts by White House officials to 
conceal that involvement, and Mr. Foster's direct role in both 
the firing and the cover-up provides an obvious and powerful 
motive to violate the instructions of the Park Police to seal 
Mr. Foster's office. Instead, Mr. Watkins directed his trusted 
assistant, Patsy Thomasson, to search Mr. Foster's office.
    The Special Committee finds that the overwhelming weight of 
the evidence established that senior White House officials 
received multiple requests to seal Mr. Foster's office on the 
night of his death. The testimony of Sylvia Mathews, a White 
House official with absolutely no motivation to mislead the 
Special Committee, was corroborated by notes that she prepared 
within one week of Mr. Foster's death. 983 And Bill 
Burton's undated notes listed Webster Hubbell's name and 
telephone numbers next to the reminder ``(1) Secure Office''. 
984 This testimonial and documentary evidence is 
uncontradicted; the White House officials have testified simply 
that they did not recall the requests to seal Mr. Foster's 
office.
    It is undisputed that, contrary to the requests of law 
enforcement, Mr. Foster's office was not sealed the night of 
his death.

Finding 4. White House officials conducted an improper search of Mr. 
        Foster's office on the night of his death

    The Special Committee received testimony that David Watkins 
and Bernard Nussbaum both received requests to seal Mr. 
Foster's office. Instead of taking steps to seal Mr. Foster's 
office, however, Mr. Watkins paged Patsy Thomasson and 
instructed her to go to into Mr. Foster's office to search for 
a note. 985 Ms. Thomasson was aware of Mr. Foster's role 
in the Travel Office matter. 986 Mr. Nussbaum then joined 
Ms. Thomasson in that search. 987 It is unclear what 
motivated, or whether anyone instructed, Margaret Williams to 
go into Mr. Foster's office, but the Special Committee finds 
improbable Ms. Williams' testimony that she went to Mr. 
Foster's office in the hope that ``I would walk in and I would 
find Vince Foster there and we would have a chat sitting on his 
couch, as we have done so many times before.'' 988
    Following are the sequence of telephone calls established 
by records obtained by the Special Committee:

                                     LATE NIGHT PHONE CALLS, JULY 20th-21st                                     
----------------------------------------------------------------------------------------------------------------
                 Time                            From                       To                     Length       
----------------------------------------------------------------------------------------------------------------
10:13 p.m. EDT.......................  Rodham Residence........  Margaret Williams.......  16 min.              
11:19 p.m. EDT.......................  Rodham Residence........  Susan Thomases..........  20 min.              
12:15 a.m. EDT.......................  Susan Thomases..........  Margaret Williams.......  pager.               
12:56 a.m. EDT.......................  Margaret Williams.......  Rodham Residence........  11 min.              
1:10 a.m. EDT........................  Margaret Williams.......  Susan Thomases..........  14 min.              
----------------------------------------------------------------------------------------------------------------

Ms. Williams testified that she did not even mention to Mrs. 
Clinton the search of Mr. Foster's office in her telephone call 
at 12:56 a.m. on July 21--for example, that no note was found 
possibly explaining Mr. Foster's decision to take his own 
life.989 They had already spoken earlier in the night 
about the fact of Mr. Foster's death.
    Ms. Williams did not recall talking to Ms. Thomases on the 
evening of Mr. Foster's death.990 Of her conversation with 
Ms. Williams that night, Ms. Thomases testified: ``I don't 
recollect speaking with her that night. That's not to say that 
she didn't call me back and I didn't speak to her, but I have 
no independent recollection of having spoken with her that 
night.'' 991
    In the end, the documentary evidence showing the sequence 
of phone calls in the early hours of July 21, after Ms. 
Williams had entered Mr. Foster's office, reasonably leads to 
the conclusion that Ms. Williams called Ms. Thomases and Mrs. 
Clinton to report the results of the search of Mr. Foster's 
office.

Finding 5. Margaret Williams may have removed files from the White 
        House Counsel suite on the night of his death

    Secret Service Officer Henry O'Neill testified that, on the 
night of Mr. Foster's death, he specifically saw Margaret 
Williams remove file folders, three to five inches thick, from 
the White House Counsel suite and placed them in her 
office.992 As Ms. Williams walked past Officer O'Neill to 
her office, her assistant, Evelyn Lieberman, said to Officer 
O'Neill: ``that's Maggie Williams; she's the First Lady's chief 
of staff.'' 993 Ms. Williams denied removing any files and 
her attorney submitted the results of polygraph tests 
indicating that she was truthful in her denial.994
    The Special Committee finds the testimony of Officer 
O'Neill to be credible. Officer O'Neill, a career officer with 
the Secret Service Uniformed Division, has no motive to lie. He 
has a clear recollection of the critical events on the evening 
of Mr. Foster's death, and he is certain that he saw Ms. 
Williams remove the documents. He was situated in an excellent 
position in the narrow hall between the White House Counsel 
suite and Ms. Williams' office, and his memory is punctuated by 
Evelyn Lieberman's introduction of Ms. Williams.
    Although the results of Ms. Williams' polygraph 
examinations should be given some weight, there are reasons to 
question the probative value of those examinations. First, 
polygraph tests are generally unreliable--a recognition that in 
part led to the adoption of the Polygraph Protection Act of 
1987.29 Second, Ms. Williams was given three and probably 
four examinations by her private polygrapher before submitting 
to a test by the Independent Counsel.995 A person may 
increase her chances of being found ``truthful'' by taking 
multiple polygraph examinations. Subjects are approximately 25 
percent more likely to pass polygraph examinations with two 
practice exams, according to one study.30
---------------------------------------------------------------------------
    \29\ During debates on the bill, sponsored by Senators Hatch, 
Simon, and Dodd, one senator noted that polygraph tests are ``not much 
better than a toss of the coin in many instances.'' (134 Cong. Rec. 
S1794, S1800 (March 3, 1988)). Others observed that ``[l]ie detectors 
are inherently unreliable,'' (134 Cong. Rec. S1713, S1737 (March 2, 
1988)) and that ``polygraph tests cannot accurately distinguish 
truthful statement from lies.'' (134 Cong. Rec. S1638, S1647 (March 1, 
1988)).
    \30\ Louis I. Rovner, ``The Accuracy of Physiological Detection of 
Deception for Subjects with Prior Knowledge,'' 15 Polygraph p. 1 
(1986).
---------------------------------------------------------------------------

Finding 6. Bernard Nussbaum agreed with Justice Department officials on 
        July 21, 1993, to allow law enforcement officials to review 
        documents in Mr. Foster's office

    Philip Heymann testified that he and Mr. Nussbaum agreed on 
July 21, 1993, as to the procedures for reviewing the documents 
in Mr. Foster's office.996 David Margolis and Roger Adams, 
whom Mr. Heymann sent to the White House to conduct the review 
as agreed, corroborated Mr. Heymann's recollection.997 Mr. 
Nussbaum does not recall discussing procedures for reviewing 
Mr. Foster's office with Mr. Heymann on July 21. Mr. Margolis 
and Mr. Adams testified that, in Mr. Nussbaum's office that 
evening, they finalized the agreement between Mr. Heymann and 
Mr. Nussbaum.998 Mr. Nussbaum and his associates in the 
White House counsel's office denied reaching any 
agreement.999
    The Special Committee finds that the evidence 
overwhelmingly demonstrates that Mr. Nussbaum agreed with the 
Justice Department on July 21 with respect to the procedures 
for reviewing the documents in Mr. Foster's office. Mr. 
Heymann's specific and detailed recollection of his afternoon 
conversation with Mr. Nussbaum stands in stark contrast to Mr. 
Nussbaum's very hazy recollection that Mr. Heymann may ``get 
other people involved'' in the investigation. Mr. Margolis and 
Mr. Adams finalized Mr. Heymann's agreement when they met with 
Mr. Nussbaum, Mr. Sloan and Mr. Neuwirth later in the 
afternoon.1000 The testimony of Mr. Margolis and Mr. Adams 
is corroborated by notes made by Mr. Adams within one week of 
the meeting and by Cynthia Monaco's dictated diaries 1001 
and a contemporaneous FBI teletype describing the 
meeting.1002
    There is independent evidence confirming that Mr. Nussbaum 
agreed with the Justice Department on the procedures for 
reviewing documents in Mr. Foster's office. Mr. Margolis and 
Mr. Adams testified that, during the later afternoon meeting, 
Mr. Nussbaum overruled and corrected Mr. Neuwirth when Mr. 
Neuwirth stated that Mr. Nussbaum alone would review the 
documents in Mr. Foster's office.1003 The Special 
Committee finds simply not credible the testimony of Mr. 
Nussbaum, Mr. Neuwirth, and Mr. Sloan that they do not recall 
any such incident, given their vivid and specific denial of any 
such agreement with the Justice Department.

Finding 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

    Mr. Nussbaum agreed with Justice Department officials on 
July 21, 1993, to an ``entirely sensible plan'' 1004 to 
review jointly documents in Mr. Foster's office. The next day, 
however, he broke the agreement, reviewed the documents 
himself, and permitted Margaret Williams, Mrs. Clinton's Chief 
of Staff, to participate in a second review and to remove 
documents from Mr. Foster's office. Given this sequence of 
events, which fundamentally changed the manner in which 
documents in Mr. Foster's office were handled, the obvious 
question that the Special Committee faced was, why?
    Records obtained by the Special Committee 1005 showed 
the following sequence of telephone calls in the early hours of 
July 22:

                                      EARLY MORNING PHONE CALLS, JULY 22nd                                      
----------------------------------------------------------------------------------------------------------------
                 Time                            From                       To                     Length       
----------------------------------------------------------------------------------------------------------------
7:44 a.m. EDT........................  Margaret Williams.......  Rodham Residence........  7 min.               
6:57 a.m. CDT (7:57 a.m. EDT)........  Rodham Residence........  Susan Thomases..........  3 min.               
8:01 a.m. EDT........................  Susan Thomases..........  Bernard Nussbaum........  pager.               
----------------------------------------------------------------------------------------------------------------

    Mr. Nussbaum testified that, when he answered Ms. Thomases' 
page, Ms. Thomases asked him about the upcoming review of Mr. 
Foster's office and said that unspecified ``people are 
concerned'' about Mr. Nussbaum's plan to allow law enforcement 
officials to participate in the review.1006
    Later in the day, according to Associate Counsel to the 
President Stephen Neuwirth, Mr. Nussbaum told Mr. Neuwirth that 
Mrs. Clinton and Ms. Thomases were concerned about the law 
enforcement authorities having ``unfettered access'' to Mr. 
Foster's office.1007
    Ms. Thomases acknowledged that she talked with Mr. Nussbaum 
about the review, but only at his instigation, and she denied 
expressing any concern or reservation about the review 
procedures.1008 She testified that she had no 
conversations with Mrs. Clinton about the review of documents 
in Mr. Foster's office.1009
    Ms. Williams did not recall having any conversations about 
the document review.
    The Special Committee finds that there is substantial, 
indeed compelling, evidence indicating that Ms. Williams and 
Ms. Thomases, in consultation with Mrs. Clinton, participated 
in formulating the procedure for reviewing documents in Mr. 
Foster's office on July 22, 1993. Although Ms. Williams and Ms. 
Thomases both denied speaking with Mrs. Clinton about the 
review of documents, the sequence of contiguous telephone calls 
from Ms. Williams to Mrs. Clinton, from Mrs. Clinton to Ms. 
Thomases, and from Ms. Thomases to Mr. Nussbaum leads to the 
unmistakable conclusion that these early morning phone calls 
precipitated Mr. Nussbaum's change of procedure.
    The testimony of White House lawyers directly support this 
finding. According to Mr. Neuwirth's important testimony, Mr. 
Nussbaum understood, from a prior conversation with Ms. 
Thomases, that Mrs. Clinton and Ms. Thomases were concerned 
about the prospect of unfettered access to Mr. Foster's papers. 
Although Ms. Thomases denied that she intervened in the 
formulation of the search procedure, Mr. Nussbaum testified 
that Ms. Thomases attempted to impose her views on how to 
conduct the review, an attempt that he claimed to have 
rebuffed.
    By breaking his agreement with law enforcement over the 
terms of the search of Mr. Foster's office, Mr. Nussbaum 
demonstrated that he clearly took the concerns of Mrs. Clinton 
and Ms. Thomases into account. Mrs. Clinton, however, persists 
in her story that she had no involvement in the handling of 
documents in Mr. Foster's office. In public statements, she 
maintained that ``[t]here were no documents taken out of Vince 
Foster's office on the night he died. And I did not direct 
anyone to interfere in any investigation.'' 1010 Although 
this statement may be technically correct, that Mrs. Clinton 
did not ``direct'' anyone to ``interfere'' with investigations, 
the evidence established that she communicated concerns about 
the handling of documents in Mr. Foster's office. Those 
concerns were passed on, in Mrs. Clinton's name and by someone 
known to have her authority, to White House officials.1011 
Here, as in Travelgate, that is enough. The invocation of Mrs. 
Clinton's interest in the matter commands a ``clear'' message: 
``immediate action must be taken.'' 1012 And the action 
taken, denying investigators access to documents in Mr. 
Foster's office, had the effect of interfering with the 
investigation. The Special Committee and the American people 
deserves candor, not lawyerly word games.
    The documentary evidence establishes that Ms. Thomases and 
Ms. Williams remained directly involved in the process of 
reviewing the documents. Tellingly, throughout July 22, Ms. 
Thomases made repeated phone calls to the offices of Mack 
McLarty and Ms. Williams. 31 Records produced to the 
Special Committee showed the following calls by Ms. Thomases to 
the White House on July 22, 1993:
---------------------------------------------------------------------------
    \31\ The White House identified the telephone extension which 
Thomases called as that of Margaret Williams and her assistant, Evelyn 
Lieberman. Ms. Williams, however, testified that the extension is the 
general number for her office, to which a number of other individuals 
had access. Williams, 7/26/95 Hrg. p. 233. The White House later 
advised the Special Committee that all individuals who had access to 
that extension did not recall talking to Thomases on July 22, 1993. 
Letter from Jane Sherburne to Michael Chertoff and Richard Ben-Veniste, 
August 4, 1995; Letter from Jane Sherburne to Robert Giuffra, August 6, 
1995; Letter from Jane Sherburne to Robert Giuffra, August 8, 1995. 
Both Ms. Lieberman and Ms. Williams testified that they likewise did 
not recall talking with Ms. Thomases. Williams, 7/7/95 Dep. p. 58. Ms. 
Thomases, however, testified that she recalled having conversations 
with Ms. Williams on July 21 and 22. Thomases, 7/17/95 Dep. p. 109.

                                  THOMASES CALLS TO THE WHITE HOUSE, JULY 22nd                                  
----------------------------------------------------------------------------------------------------------------
                 Time                            From                       To                     Length       
----------------------------------------------------------------------------------------------------------------
8:01 a.m.............................  Susan Thomases..........  Bernard Nussbaum........  pager.               
9:00 a.m.............................  Susan Thomases..........  Margaret Williams.......  message              
10:48 a.m............................  Susan Thomases..........  Mack McLarty............  3 min.               
11:04 a.m............................  Susan Thomases..........  Margaret Williams.......  6 min.               
11:11 a.m............................  Susan Thomases..........  Mack McLarty............  3 min.               
11:16 a.m............................  Susan Thomases..........  Mack McLarty............  1 min.               
11:37 a.m............................  Susan Thomases..........  Margaret Williams.......  9 min.               
11:50 a.m............................  Susan Thomases..........  Margaret Williams.......  4 min.               
5:13 p.m.............................  Susan Thomases..........  Margaret Williams.......  9 min.               
5:23 p.m.............................  Susan Thomases..........  Bruce Lindsey...........  3 min.               
----------------------------------------------------------------------------------------------------------------

Ms. Thomases thus remained in close touch with the White House 
while Mr. Nussbaum finalized the search procedures and 
announced to the law enforcement officials, at about 1:00 p.m., 
the decision that he alone would review the documents in Mr. 
Foster's office.
    Contrary to certain public statements by the White House, 
Ms. Williams clearly was involved in the actual review and 
removal of documents from Mr. Foster's office on July 22. 
32 After Mr. Nussbaum reviewed the documents in Mr. 
Foster's office in front of law enforcement, he and Margaret 
Williams conducted a second review--the real review. Ms. 
Williams then removed the Clintons' personal documents from Mr. 
Foster's office and transferred them to the residence, telling 
Thomas Castleton that ``the President or the First Lady had to 
review the contents of the boxes to determine what was in 
them.'' 1013 Ms. Williams called Mrs. Clinton before 
putting the files in the residence, and, at 5:13 p.m., 
apparently after Ms. Williams had completed the transfer of 
files, Ms. Thomases called Ms. Williams' office and talked for 
nine minutes. At 7:12 p.m., Ms. Thomases put in a final call, 
one-minute call to Mrs. Clinton at the Rodham residence. 
1014
---------------------------------------------------------------------------
    \32\ At a press conference on April 22, 1994, Mrs. Clinton was 
asked whether Margaret Williams was among those who removed documents 
from Foster's office. She replied: ``I don't think that she did remove 
any documents.'' White House Document Z 000107. On August 2, 1994, 
Press Secretary Dee Dee Myers affirmed Mrs. Clintons's statement: ``I 
think that it is true that Maggie didn't remove any documents from 
Vince's office; they were removed by Bernie Nussbaum.'' White House 
Document Z 000578.
---------------------------------------------------------------------------
    The sequence of documented telephone calls and their 
correlation to activities surrounding the review and removal of 
documents from Mr. Foster's office on July 22 leads to the 
inescapable conclusion that Ms. Thomases and Ms. Williams, in 
consultation with, or acting at the direction of, Mrs. Clinton, 
prevailed upon Mr. Nussbaum to abandon his procedure for 
reviewing documents in Mr. Foster's office and to replace it 
with one that prevented law enforcement officials from having 
access to Mr. Foster's papers and that permitted Ms. Williams 
to review and remove documents from Mr. Foster's office.

Finding 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

    Mr. Nussbaum testified that he conducted a comprehensive 
review and described each file in Mr. Foster's office--
including all the files in Mr. Foster's credenza, where a 
number of the Clintons' personal files were kept. Notes taken 
by Mr. Spafford of the review demonstrate, however, that he 
provided only a very generic description, ``matters re First 
Family'' 1015; Mr. Sloan's notes are similar: ``Various 
investment matters re: First Family.'' 1016 This single 
general description by Mr. Nussbaum identified a number of 
files that Margaret Williams later transferred to the White 
House residence and eventually to the Clinton's personal 
lawyers at Williams & Connolly. Among these files was Mr. 
Foster's Whitewater file; no one at the review recalled Mr. 
Nussbaum making any reference whatsoever to Whitewater.
    Although Mr. Nussbaum testified that Whitewater was not the 
subject of discussion in the White House at the time of Mr. 
Foster's death, the Special Committee finds that there was 
ample evidence indicating that in early 1993, the White House, 
and particularly Mrs. Clinton, knew that Whitewater was a 
potential public issue. Whitewater had been an issue during the 
1992 presidential campaign. In late 1992, Betsey Wright, the 
coordinator of the Arkansas defense effort and 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.'' 1017 Upon hearing the news, 
she attempted to gather more information and directly told Mrs. 
Clinton about the referral. 1018 And the information was 
circulated within the campaign. Jim Lyons, author of the 
Whitewater report, testified that someone in the Clinton 
campaign notified him of the criminal referral.
    Whitewater remained a live issue when the Clintons moved 
into the White House. Ricki Seidman, then Deputy Director of 
Communications for the White House, told the FBI that she 
discussed and attended meetings with Mr. Foster and the 
Clintons' outside counsel in April 1993 about the tax treatment 
of the Clinton's Whitewater investment because ``it was 
believed the tax returns would bring the Whitewater issue into 
the `public domain' again.'' 1019 In addition, records 
that the White House produced to the Special Committee after 
the conclusion of its public hearings indicate that James 
McDougal, the Clintons' Whitewater partner, called Mr. Foster 
at the White House just prior to his death.
    The Special Committee also finds that Mr. Nussbaum failed 
to describe adequately the contents of Mr. Foster's briefcase. 
Although notes taken by Mr. Spafford and Mr. Sloan indicated 
that the briefcase contained a copy of the White House Travel 
Office Management Review, Mr. Nussbaum did not disclose that 
most of the contents of the briefcase pertained to the 
Travelgate controversy. 1020 Specifically, Mr. Nussbaum 
removed Mr. Foster's notebook on the Travel Office matter from 
the briefcase and kept it in his office until Mr. Nussbaum's 
resignation in March 1994. 1021 According to Mr. 
Spafford's notes, Mr. Nussbaum described the notebook as 
``Notebook of notes of meetings, GC [General Counsel] issues''; 
Mr. Sloan's notes similarly identified the notebook simply as 
``Notes re: meeting''. 1022 The notebook and other Travel 
Office documents in Mr. Foster's briefcase were not turned over 
to the Independent Counsel until April 5, 1995. 1023

Finding 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

    Mr. Foster's secretary, Deborah Gorham, testified that, on 
July 22, she entered Mr. Foster's office and 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.'' 1024 Ms. Gorham maintained an index for every 
drawer; this one was missing.
    The Special Committee received three indices from the White 
House reflecting all the files in Mr. Foster's office. Two are 
dated July 22, 1993. 1025 One is shown to be last revised 
on October 25, 1993. 1026 It is thus undisputed that the 
indices were compiled or revised after Mr. Foster's death. None 
makes any reference to a Whitewater file known to be in Mr. 
Foster's office at the time of his death.
    The evidence before the Special Committee indicates that 
the indices were revised in order to remove an earlier 
reference to the Whitewater file. Deborah Gorham testified that 
she made an index in the Spring of 1993, probably late April, 
and that the index reflected all the files in Mr. Foster's 
office at the time. 1027 She also testified that the 
Whitewater file was among the files in Mr. Foster's office at 
the time she prepared the index. 1028
    The Special Committee finds Ms. Gorham's testimony highly 
credible. Ms. Gorham was careful and meticulous, identifying 
with certainty to the Special Committee particular 
characteristics of indices she maintained. Moreover, 
independent evidence corroborates Ms. Gorham's recollection 
that Whitewater was among the files in Mr. Foster's office in 
April 1993. Mr. Foster prepared the Clintons' 1992 tax returns, 
and one of the key issues in those returns was how to treat the 
Clintons' investment in Whitewater. It is therefore highly 
likely that the Whitewater file was in Mr. Foster's office in 
April 1993, when the tax returns were due, instead of being 
brought into the office at a later date.

Finding 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 

    The Special Committee finds that the evidence demonstrates 
that Mr. Nussbaum knew about yellow scraps of paper in Mr. 
Foster's briefcase before Mr. Neuwirth allegedly discovered the 
scraps on July 26. Mr. Spafford testified that he overheard Mr. 
Sloan tell Mr. Nussbaum on July 22 that there were scraps at 
the bottom of the briefcase. 1029 Although neither Mr. 
Sloan nor Mr. Nussbaum recalled the exchange, Mr. Spafford 
testified that he remembered and had a privileged conversation 
about the incident the following week, right after he learned 
that Mr. Neuwirth had discovered the note in Mr. Foster's 
briefcase. 1030
    In addition, Deborah Gorham testified that in the days 
after Mr. Foster's death, she told Mr. Nussbaum that she saw a 
file folder and something yellow, possibly ``Post-it'' notes in 
Mr. Foster's briefcase. 1031 Ms. Gorham further testified 
that after Mr. Neuwirth discovered the note, Mr. Nussbaum 
grilled her at length about what she saw in Mr. Foster's 
briefcase the previous week. 1032 Although Mr. Nussbaum 
testified that he did not recall grilling Ms. Gorham, 1033 
the Special Committee finds her vivid recollection of Mr. 
Nussbaum's interrogation to be highly credible. Mr. Nussbaum's 
interrogation, described by Ms. Gorham as ``forceful'' and 
``adamant'', 1034 leads to the obvious inference that he 
was concerned about what Ms. Gorham had seen the previous week 
and how it would undercut his story about the discovery of the 
note.
    The Special Committee finds that Mr. Nussbaum must have 
known on July 22 that scraps of paper were in Mr. Foster's 
briefcase. The briefcase has no flaps or inside seams that 
could conceal 27 pieces of yellow paper. Captain Charles Hume 
remarked that the ``oldest and blindest'' Park Police officer 
would have found the note on July 22, 1035 and Sergeant 
Peter Markland testified that he thought Mr. Nussbaum lied when 
he said the note was discovered in the briefcase. 1036 
Even White House official, Bill Burton, testified that he was 
incredulous when he learned that Mr. Neuwirth discovered the 
note in Mr. Foster's briefcase. 1037
    David Margolis, the career Justice Department official 
coordinating the investigation, offered this testimony:

        I thought I had this figured out, that the torn-up 
        scraps of paper were not in the briefcase the day that 
        Mr. Nussbaum did the search in our presence. That's 
        what--that was the explanation I came up with, and that 
        somebody--that it had never been there before and 
        somebody put it in afterward or it had been there, 
        somebody took it out and then decided they better put 
        it back because there was public speculation of, you 
        know, where is the suicide note.
         So, in my own mind, I speculated that must be what 
        happened. But then, when I picked up the paper one day 
        and saw that Mr. Spafford said that the note had been 
        in there when the search was conducted, I am at a loss 
        now. I just have no explanation. I don't know. 
        1038

The Justice Department and the FBI did not have the information 
Mr. Spafford provided to the Special Committee when the FBI 
closed its investigation into the circumstances surrounding the 
discovery of the note.
    Mr. Nussbaum's conduct may be explained by the fact that 
law enforcement officials and Mr. Spafford were still at the 
White House when the existence of the scraps of paper was 
called to his attention by Mr. Sloan. Rather than examining the 
scraps then and there, Mr. Nussbaum chose to put off such an 
examination until such time as he could be sure that he could 
do so in private.

Finding 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

    Thomas Castleton testified that, as he helped Margaret 
Williams transport the Clintons' personal files to the White 
House residence on July 22, Ms. Williams told Mr. Castleton 
that she was taking the files to the residence so that the 
Clintons could review them. 1039 Mr. Nussbaum testified 
that he discussed taking the files to the residence with Ms. 
Williams so that the Clintons could decide which lawyer to send 
them to. 1040 Ms. Williams, however, testified that she 
alone made the independent determination to place the files in 
the residence. 1041 Although Ms. Williams admitted calling 
Mrs. Clinton, Ms. Williams claimed that their discussion was 
limited simply to where to place the files in the residence. 
1042
    The Special Committee finds that the evidence 
overwhelmingly demonstrates that Ms. Williams did not, as she 
asserted, make an independent decision to transfer the 
Clintons' personal files to the White House residence.
    Ms. Williams' story is not credible given Mr. Nussbaum's 
testimony that they had discussed taking the files to the 
residence before Ms. Williams left Mr. Foster's office. Carolyn 
Huber testified that July 22 was the first time ever that Ms. 
Williams had placed files in the White House Residence. 
1043 Ms. Williams did not plausibly explain why she 
thought the residence--and not her office or somewhere else in 
the West Wing--was the appropriate place for the files or how 
personally transferring files to the residence was less taxing 
than having them picked up by a Williams & Connolly 
representative.
    Ms. Williams testified that, despite having never discussed 
the files with Ms. Williams, Mrs. Clinton did not ask any 
questions--even one--but simply told her to arrange the details 
with Ms. Huber. Ms. Williams explained this seemingly odd 
response by suggesting that ``I could have told Mrs. Clinton 
that I was going to put 44 elephants in the White House the day 
after Vince died and she probably would have said okay'' 
1044--a suggestion that the Special Committee finds to 
border on the contemptuous. Moreover, Ms. Huber testified that 
Ms. Williams ``called and said that Mrs. Clinton had asked her 
to call me to take her to the residence to put this box in our 
third floor office.'' 1045 The Special Committee finds 
that Ms. Williams intended the files to be reviewed by the 
Clintons and that, in fact, someone reviewed the files before 
they were turned over to Williams & Connolly. When confronted 
with Mr. Castleton's testimony that she said the Clintons were 
to review the files, Ms. Williams asked rhetorically, ``Why 
would I tell an intern that?'' 1046 The Special Committee 
finds it natural that Ms. Williams would have told Mr. 
Castleton why the files were going to the residence--especially 
because, as Ms. Huber testified, Ms. Williams had never moved 
files to the residence. Mr. Nussbaum testified that Ms. 
Williams returned a file, one dealing with White House 
decorations, before the Clinton personal files were transferred 
to Williams & Connolly. Although, after consulting with 
counsel, Mr. Nussbaum stated that he was not sure that it was 
Ms. Williams who returned the file, he acknowledged that a file 
was indeed returned from the residence because it was not a 
Clinton personal file. 1047 The inevitable conclusion from 
this testimony is that someone reviewed the files to determine 
which files should be returned to Mr. Nussbaum.

Finding 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

    It is undisputed that Mrs. Clinton saw the note within 
hours of its discovery on July 26. 1048 In addition, Susan 
Thomases testified that Mr. Nussbaum called and told her about 
the note the same afternoon. 1049 Neither Mrs. Clinton nor 
Ms. Thomases were identified in the reports by the FBI or Park 
Police as among those who saw or knew about the note before it 
was turned over to the authorities. 1050 Although Mr. 
Neuwirth testified that he told FBI Special Agent Salter that 
Mrs. Clinton was made aware of the note, his testimony is 
inconsistent with written records of the interview. Neither 
Agent Salter's report nor his handwritten notes of the 
interview (later obtained by the Committee) indicated that Mr. 
Neuwirth told him that Mrs. Clinton was among those who saw the 
note. 1051 Instead, Agent Salter's notes recorded Mr. 
Neuwirth's continuous narrative of the chain of events after 
Mr. Neuwirth discovered the note. The narrative, however, 
omitted any mention of Mrs. Clinton as the second person Mr. 
Nussbaum brought into his office to view the note. 1052
    The Special Committee finds that Mr. Neuwirth's omission of 
Mrs. Clinton may have been willful. Bill Burton's handwritten 
record of a meeting about Mr. Foster's note on July 28, the day 
after the note was turned over to the authorities, listed 
``HRC'' with an arrow pointing to an adjacent letter ``n''. 
1053 Because Mr. Burton testified that he did not know 
what his own notes meant, the Special Committee adopts the most 
reasonable interpretation of his notations--that those present 
at the meeting discussed the matter and decided not to disclose 
that Mrs. Clinton saw the note.

Finding 13. Mr. Hubbell probably knew about the discovery of Mr. 
        Foster's note on July 27, 1993

    In the hours and days following Mr. Foster's death, there 
was overwhelming interest in whether Mr. Foster left a note 
explaining the reasons for his apparent suicide. By their own 
admission, Mr. Nussbaum, Ms. Thomasson, Ms. Williams, and Ms. 
Lieberman, testified that they conducted an improper search of 
Mr. Foster's office on the night of his death in order to look 
for a note. Because of the seeming inexplicable nature of Mr. 
Foster's death and the speculations of foul play, there was a 
groundswell of interest in whether Mr. Foster had left a note 
prior to his death. The White House released an official 
statement stating that ``no suicide note or other document 
bearing on'' Mr. Foster's death had been found. 1054 And 
news articles in the week following Mr. Foster's death 
generally mentioned the anomaly that a note had not been found. 
1055
    On July 27, approximately 26 hours after a note in Mr. 
Foster's hand was discovered by White House officials, White 
House Counsel Bernard Nussbaum finally contacted Attorney 
General Reno and Deputy Attorney General Heymann to turn over 
the note. Apparently unbeknownst to Ms. Reno and Mr. Heymann, 
Associate Attorney General Webster Hubbell was upstairs in the 
White House Residence with Mrs. Clinton and Ms. Thomases while 
they were downstairs receiving news of the note. Mr. Hubbell's 
records indicate that Mrs. Clinton had called his office and 
left a message at 2:30 p.m. that afternoon. 1056 White 
House logs indicate that Mr. Hubbell arrived at the Residence 
at 6:29 p.m. and remained there until 8:19 p.m. 1057 Ms. 
Thomases, who was in the Residence at the same time as Mrs. 
Clinton and Mr. Hubbell, exited the White House at the same 
time. 1058 Neither Ms. Thomases nor Mr. Hubbell recalled 
discussing the note with each other or with Mrs. Clinton on 
that day. Ms. Thomases testified, ``I don't know that Hillary 
Clinton and I have ever discussed that writing.'' 1059
    When presented with the entry and exit logs, Ms. Thomases 
acknowledged that she met with Mr. Hubbell and Mrs. Clinton in 
the Residence following Mr. Foster's death. 1060 Secret 
Service records indicate that July 27 was the only time in the 
week following Mr. Foster's death that Mrs. Clinton, Ms. 
Thomases, and Mr. Hubbell were together in the White House. Ms. 
Thomases implausibly testified, however, that during their 
meeting the three only reminisced about Mr. Foster and their 
friendship. 1061
    For his part, Mr. Hubbell testified that he did not recall 
even seeing Ms. Thomases on July 27. 1062 He testified 
that he came to the White House on July 27 in order to give 
Mrs. Clinton an account of Mr. Foster's funeral after Mrs. 
Clinton left. ``I remember that I had to go to the White House 
to tell Hillary about what had gone on after they left the 
funeral, but I don't have any memory of doing it.'' 1063 
He testified that it was part of the grieving process: ``We, as 
Southerners, we have large long funerals and we get together 
and drink and eat and talk and do it for days. And Hillary had 
missed that grieving process, and I remember my wife saying, 
Hillary needs to talk to you. She needs to understand who was 
there and things of that sort.'' 1064
    Mr. Hubbell testified that he learned about the note when 
he ``read it in the newspaper,'' 1065 and that he did not 
discuss the note with Mrs. Clinton during his post-funeral 
visit to the White House. 1066 The Special Committee finds 
Mr. Hubbell's testimony incredible. Whether there was a note 
was the topic of interest, inquiry, and speculation for all 
involved in the story of Mr. Foster's death. White House 
officials conducted an improper search of Mr. Foster's office 
on the night of his death specifically, according to their own 
testimony, to look for a note. The Park Police had specifically 
asked about the existence of a note on the night of his death, 
and continued to look for indications of why Mr. Foster took 
his life during its investigation. Mr. Hubbell's high-ranking 
colleagues at the Justice Department were at the White House at 
the same time as Mr. Hubbell to receive the note from Mr. 
Nussbaum. Mrs. Clinton had called Ms. Thomases repeatedly to 
summon her to Washington for a meeting on July 27, and Mrs. 
Clinton had called Mr. Hubbell on the afternoon of July 27. 
Given all these events, there is little possibility that three 
of the persons closest to Mr. Foster--Mrs. Clinton, Ms. 
Thomases, and Mr. Hubbell--two of whom knew about the existence 
of the note, were in the private quarters of the White House 
together for two hours without any mention of the note.
    The Special Committee adopts the most reasonable finding in 
light of the circumstances, that Mr. Hubbell most likely 
learned of the existence of the note either before or during 
his meeting with Mrs. Clinton and Ms. Thomases on July 27, 
1993.

Finding 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

    The testimony of Margaret Williams, the First Lady's Chief 
of Staff, to the Special Committee was frequently inconsistent 
with her prior statements and contradicted by the testimony of 
other witnesses. These numerous and varied contradictions in 
Ms. Williams's testimony followed one predictable pattern: they 
diminished Ms. Williams' role in the events surrounding the 
handling of the documents in Mr. Foster's office and, more 
important, concealed Mrs. Clinton's involvement in this now 
controversial matter. Although Ms. Williams's testimony may not 
necessarily be untruthful with respect to each and every 
contradiction, the obvious pattern of the contradictions and 
inconsistencies leads inexorably to the conclusion that she did 
not provide complete and accurate testimony to the Special 
Committee.
    Ms. Williams testified implausibly that she entered Mr. 
Foster's office on the night of his death in the vain hope of 
finding Mr. Foster there.1067 She claimed that she did not 
remove any files from the White House Counsel's suite and that 
her assistant, Evelyn Lieberman, did not even enter the suite 
on July 20. Officer Henry O'Neill testified, however, that he 
saw Ms. Williams remove files, three to five inches thick, from 
the suite and place them in her office.1068 According to 
Officer O'Neill, Ms. Lieberman was there and introduced Ms. 
Williams to Officer O'Neill.1069
    After searching Mr. Foster's office, Ms. Williams went home 
and called Mrs. Clinton and Ms. Thomases. When asked about 
these late-night telephone calls, Ms. Williams testified to the 
Special Committee that she did not talk to Mrs. Clinton about 
the search of Mr. Foster's office. Ms. Williams also denied 
talking with Susan Thomases.1070 After being confronted 
with records indicating that she called Ms. Thomases at 1:10 
a.m. on July 21, Ms. Williams insisted that her earlier 
testimony was only that she did not recall talking to Ms. 
Thomases.1071 When reminded that she actually said, ``I 
didn't talk to her,'' 1072 Ms. Williams replied, ``I'm not 
going to argue with you. I think this is exactly what I said.'' 
1073
    With respect to Mrs. Clinton's involvement in the much 
criticized decision to keep law enforcement from reviewing 
documents in Mr. Foster's office on July 22, Ms. Williams did 
not tell the Special Committee initially about her early 
morning phone call to the Rodham residence.1074 When 
presented with records documenting the telephone call made at 
7:44 EDT, Ms. Williams replied, ``I don't remember who I talked 
to.'' 1075
    Ms. Williams initially testified that she did not speak to 
Susan Thomases on the telephone on July 22.1076 Telephone 
records indicated, however, that Susan Thomases called Ms. 
Williams' office twice on July 21 and five times on July 
22.1077 Ms. Thomases made these repeated telephone calls 
to Ms. Williams' office on July 22 at the same time that White 
House officials were meeting to discuss the procedures for 
searching Mr. Foster's office.1078 When questioned about 
these calls, Ms. Williams suggested that she was at home on the 
morning of July 22.1079 Records from the U.S. Secret 
Service established, however, that Ms. Williams entered the 
White House at 8:10 a.m. on July 22.1080
    Ms. Williams testified that she did not review files in Mr. 
Foster's office on the afternoon of July 22, but Mr. Nussbaum 
testified that Ms. Williams helped him pick out the Clintons' 
personal files.1081 Deborah Gorham also testified that Ms. 
Williams was in Mr. Foster's office when Mr. Nussbaum asked Ms. 
Gorham to point out the location of the Clintons' personal 
files.1082 Ms. Williams claimed that she made a completely 
independent decision to have the Clintons' personal files 
transferred to the White House residence en route to Williams & 
Connolly.1083 Mr. Nussbaum testified, however, that he and 
Ms. Williams discussed the matter and decided to remove the 
files to the residence, and then the Clintons would decide 
where the files should go.1084 While she was in Mr. 
Foster's office, Ms. Williams called Mrs. Clinton. Although the 
two had not talked previously about any transfer of files, Ms. 
Williams testified that she, improbably, asked Mrs. Clinton 
simply where the files should go in the residence, and had no 
other discussions with Mrs. Clinton about what the files 
contained or where they came from.1085
    Ms. Williams asserted that she did not intend for the 
Clintons to review the files after they were placed in the 
residence. Thomas Castleton testified, however, that Ms. 
Williams expressly told him that she was taking the files to 
the residence so the Clintons could review them.1086 Ms. 
Williams denies saying this to Mr. Castleton.1087 Carolyn 
Huber testified that, after Ms. Williams placed the files in 
the residence closet, Ms. Huber returned the key to its usual 
place, in a marked envelope in the desk drawer.1088 Ms. 
Williams, however, testified that Ms. Huber gave her the key, 
which Ms. Williams kept on her key chain until she had to open 
the closet for a Williams & Connolly representative.1089 
Ms. Williams testified that no one reviewed the files while 
they were in the residence, but Mr. Nussbaum testified that 
someone, probably Ms. Williams, returned a residence file 
because it was determined not to be a Clinton personal 
file.1090

Finding 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

    Susan Thomases, a prominent New York attorney, was Mrs. 
Clinton's conduit to the White House staff. She was in close 
contact with Mrs. Clinton and the White House staff throughout 
the week following Mr. Foster's death. Although the documentary 
and other evidence before the Special Committee established 
that Ms. Thomases was involved in every key event relating to 
the handling of documents in Mr. Foster's office following his 
death, her testimony to the Special Committee with respect to 
these key events was often implausible, incomplete or 
inaccurate.
    When Ms. Thomases first appeared before the Special 
Committee, on August 8, 1995, she was asked whether she had 
discussed her appearance with Mrs. Clinton. Ms. Thomases 
testified, ``I did not discuss my opinion--my appearance here 
today with Hillary Clinton.'' 1091 On December 18, 1995, 
however, Ms. Thomases contradicted herself by admitting that 
she had actually talked with Mrs. Clinton about her appearance 
``way back when, before the first hearing.'' According to Ms. 
Thomases, she and Mrs. Clinton discussed ``that I was going to 
have to come down, and that I didn't think that I had very much 
interesting to tell you, that you were still going to ask me 
the questions because you felt the need to ask me the 
questions.'' 1092
    On the night of Mr. Foster's death, Ms. Thomases paged Ms. 
Williams at 12:15 a.m., while Ms. Williams was at the White 
House. When asked whether she talked to Margaret Williams after 
Ms. Williams searched Mr. Foster's office, Ms. Thomases claimed 
that she did not ``recollect speaking with [Ms. Williams] that 
night. That's not to say that she didn't call me back and I 
didn't speak to her, but I have no independent recollection of 
having spoken with her that night.'' 1093 The Committee 
later obtained telephone records, however, indicating that Ms. 
Williams, right after speaking with Mrs. Clinton, called Ms. 
Thomases at 1:10 a.m. and spoke for 14 minutes.1094
    With respect to her role in changing the procedures for 
reviewing documents in Mr. Foster's office, Ms. Thomases 
acknowledged that she spoke with Bernard Nussbaum on July 22. 
According to Ms. Thomases, Mr. Nussbaum brought up the subject 
of reviewing documents in Mr. Foster's office and described his 
plan of action, to which Ms. Thomases replied simply that it 
``sounds good to me.'' 1095 Mr. Nussbaum, however, 
testified that Ms. Thomases initiated the discussion, said that 
``people were concerned'' about the review, and attempted to 
impose her views on the proper procedures.1096 Even more 
importantly, Associate White House Counsel Stephen Neuwirth 
testified that Mr. Nussbaum understood from the conversation 
that Ms. Thomases and Mrs. Clinton were concerned about law 
enforcement officials having ``unfettered access'' to Mr. 
Foster's office.1097
    Ms. Thomases testified that ``I don't remember ever having 
a conversation with Hillary Clinton during the period after 
Vince Foster's death about the documents in Vince Foster's 
office.'' 1098 Telephone records, however, established 
that, after receiving the early morning call from Ms. Williams, 
Mrs. Clinton called Ms. Thomases at 6:57 a.m. CDT on July 22, 
and talked for three minutes.1099 Ms. Thomases then 
immediately paged Mr. Nussbaum at the White House and 
subsequently expressed her concerns about the search 
procedures.1100 Even after confronted with these telephone 
records, Ms. Thomases maintained that she called Mr. Nussbaum 
merely to commiserate because she was ``worried about my friend 
Bernie.'' 1101 Ms. Thomases testified that her early-
morning conversation with Mrs. Clinton was about ``the 
possibility that I didn't feel well enough to go to Little 
Rock'' for Mr. Foster's funeral.1102
    When questioned about the repeated telephone calls she made 
to Ms. Williams's office on July 22 at the same time that White 
House officials were meeting to discuss the procedures for 
searching Mr. Foster's office, Ms. Thomases claimed that she 
probably was attempting not to reach Ms. Williams but rather to 
be transferred to someone else in the White House.1103 Ms. 
Thomases also implausibly suggested that she may have been put 
on hold during these lengthy calls, for as long as nine 
minutes, 1104 despite her earlier testimony that July 22 
was ``a very, very busy day in my work.'' 1105
    Finally, U.S. Secret Service records established that Ms. 
Thomases entered the White House at 2:50 p.m. on July 
27.1106 Within ten minutes of her entry, Robert Barnett 
arrived at the White House to meet with Mrs. Clinton.1107 
During this visit, Mr. Barnett reviewed the Clintons' personal 
files, previously in Mr. Foster's office, and transferred them 
from the White House residence to Williams & Connolly.1108 
Ms. Thomases left the White House at 8:20 p.m., after Mr. 
Nussbaum had turned the note apparently in Mr. Foster's 
handwriting over to Attorney General Janet Reno. When asked 
about this unusual visit to the White House--Ms. Thomases is 
normally in Washington on Wednesdays 1109--Ms. Thomases 
testified that she implausibly had ``no specific recollection 
of being at the White House on the 27th.'' 1110

Finding 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

    As members of the Special Committee recognized previously, 
``a witness' response of `I don't recall' or `I don't remember' 
may also be a false statement to the Committee.'' 1111
    Bernard Nussbaum did not recall Bill Burton asking him to 
seal Mr. Foster's office on the night of Mr. Foster's 
death.1112 Sylvia Mathews testified that she overheard the 
conversation, 1113 and her notes supported the 
testimony.1114
    Mr. Nussbaum did not recall talking to Philip Heymann on 
July 21 about the procedures for reviewing documents in Mr. 
Foster's office.1115 Mr. Heymann testified that he and Mr. 
Nussbaum agreed that Justice Department lawyers would review 
the documents; 1116 David Margolis, 1117 Roger Adams, 
1118 and Charles Hume 1119 testified that Mr. Heymann 
so described the procedure to them on July 21.
    Mr. Nussbaum did not recall overruling Mr. Neuwirth when 
Mr. Neuwirth stated in the evening of July 21 that Mr. Nussbaum 
would review the documents.1120 Mr. Adams and Mr. Margolis 
described the incident in detail at the time to other Justice 
Department officials and later to the Special 
Committee.1121
    Mr. Nussbaum did not recall telling Mr. Neuwirth that Ms. 
Thomases and Mrs. Clinton were concerned about investigators 
having ``unfettered access'' to Mr. Foster's office.1122
    Mr. Nussbaum did not recall telling Mr. Heymann on July 22 
that he would call Mr. Heymann back before conducting the 
search.1123
    Mr. Nussbaum did not recall Mr. Margolis or Mr. Heymann 
telling him on July 22 that he was making a ``terrible 
mistake'' by changing the procedures.1124
    Mr. Nussbaum did not recall Mr. Heymann calling him in the 
evening and asking him, ``Bernie, are you hiding something?'' 
1125
    Mr. Nussbaum did not recall telling Susan Thomases about 
the note on July 26.\1126\
    The frequency of these memory lapses contrasted with Mr. 
Nussbaum's very definite recollection of other purported 
facts--facts that put his conduct in a more favorable light. 
Mr. Nussbaum was sure that no one removed any files from Mr. 
Foster's office on the night of his death. He was sure that 
there was no agreement with the Justice Department with respect 
to procedures to review documents in Mr. Foster's office. He 
was sure that there was no discussions in the White House about 
Whitewater at the time of Mr. Foster's death.
    Whether a product of deliberate deception or selective 
memory, Mr. Nussbaum's frequent and convenient assertions that 
he did not recall important, often damaging, events lead the 
Special Committee to the obvious conclusion that Mr. Nussbaum 
provided incomplete and inaccurate testimony to the Special 
Committee.
    The Committee's ability to investigate fully the true facts 
concerning the handling of documents in Mr. Foster's office 
following his death has been hindered by the often incomplete 
and inaccurate testimony of key witnesses. In conjunction with 
this report of findings, the Special Committee has voted to 
refer the matter, including the testimony of specific 
witnesses, to the Office of Independent Counsel for 
investigation of possible criminal violations.
    In sum, notwithstanding the pattern of stonewalling by the 
White House and other witnesses, the Special Committee 
uncovered evidence that clearly established a pattern of highly 
improper conduct by senior White House officials in the days 
following Mr. Foster's death. The Committee and the American 
people will never know exactly what happened in Mr. Foster's 
office in the days after his death--what documents were 
removed, whether any documents were destroyed, and whether any 
evidence of ethical or even criminal misconduct was covered up. 
The misguided actions of senior White House officials raise not 
only questions of impropriety, but also raise the specter that 
investigations were impeded and justice thwarted.

                                Endnotes

    \1\ Letter from Independent Counsel Robert Fiske to the Chairman 
and Ranking Member of the Committee, July 15, 1994, quoted in the 
Report of the Senate Banking Committee, Inquiry into the U.S. Park 
Police Investigation of the Death of White House Deputy Counsel Vincent 
W. Foster, Jr., January 3, 1995 [hereinafter ``Foster Report''], p. 2.
    \2\ Foster Report, January 3, 1995, p. 51 (Additional Views of 
Senators D'Amato, Faircloth, Bond, Hatch, Shelby, Mack, Domenici) 
(quoting Hume, Trans. pp. 48-49).
    \3\ S. Res. 120 Sec. 1(b)(2), p. 4.
    \4\ See Watkins v. United States, 354 U.S. 178, 194-95 (1957); 
McGrain v. Daugherty, 272 U.S. 135 (1927).
    \5\ Treasury Document 2987 (1994 Production).
    \6\ Heymann, 8/2/95 Hrg. p. 50.
    \7\ Williams & Connolly Document DKSN000518.
    \8\ Treasury Document 2987 (1994 Production).
    \9\ Neuwirth, 8/3/95 Hrg. p. 71.
    \10\ Foster Report, p. 4.
    \11\ Vinson & Elkins Document RS237A
    \12\ Clark 1/18/96 Hrg. p. 163.
    \13\ Hubbell, 2/7/96 Hrg. p. 101
    \14\ Model Rules of Professional Conduct Rule 3.4(a); 18 U.S.C. 
Sec. 1510.
    \15\ The Hotline, Whitewater: CBS Looks at Hillary and Her 
Shredder, June 7, 1996.
    \16\ Hubbell, 2/7/96 Hrg. p. 169.
    \17\ Clark, 1/18/96 Hrg. pp. 162-164
    \18\ Black, 2/6/96 Hrg. p. 89.
    \19\ Hubbell, 2/7/96 pp. 20, 50-51
    \20\ Clark, 1/18/96 Hrg. p. 90
    \21\ Clark, 1/18/96 Hrg. p. 90.
    \22\ Huber, 1/18/95 Hrg. p. 5.
    \23\ Huber 1/18/96 Hrg. p. 9
    \24\ Hubbell, 2/7/96 Hrg. p. 56
    \25\ Wright, 1/26/96 Dep. p. 157-159.
    \26\ Wright, 1/26/96 Dep. p. 157-159.
    \27\ Wright, 1/26/96 Dep. p. 157-159.
    \28\ Wright, 1/26/96 Dep. p. 160-161.
    \29\ Wright, 1/26/96 Dep. p. 164.
    \30\ Madison Guaranty S&L and the White Water Development 
Corporation: Washington, DC, Phase, Report of the Committee on Banking, 
Housing, and Urban Affairs on the Communications between Officials of 
the White House and the U.S. Department of the Treasury or the 
Resolution Trust Corporation, S. Rep. 103-433, Jan. 3, 1995, p. 3 & n. 
7.
    \31\ Report of the Committee on Banking, Housing, and Urban 
Affairs, United States Senate, on the Communications between Officials 
of the White House and the U.S. Department of the Treasury or the 
Resolution Trust Corporation, January 3, 1995, [hereinafter Treasury 
Contacts Report], p. 3.
    \32\ Treasury Contacts Report, p. 3 & n. 7.
    \33\ IX Hearing before the Committee on Banking, Housing, and Urban 
Affairs, White House Production, pp. 1447-1449.
    \34\ IX Hearing before the Committee on Banking, Housing, and Urban 
Affairs, White House Production, pp. 1450-1455.
    \35\ Foren, 11/28/95 Hrg. p. 20.
    \36\ Foren, 11/28/95 Hrg. p. 23.
    \37\ Bowles, 11/28/95 Hrg. p. 24.
    \38\ Bowles, 11/28/95 Hrg. p. 24.
    \39\ Shepperson, 11/28/95 Hrg. pp. 23-24.
    \40\ White House Document S12334.
    \41\ Blair, 2/19/96 Dep. p. 79.
    \42\ Seidman, II Foster Hearings, p. 1794.
    \43\ White House Document S9210.
    \44\ Redden, 5/30/96 Dep. p. 237.
    \45\ Williams & Connolly Document DKSN000518.
    \46\ Williams & Connolly Document DKSN000516.
    \47\ Paul Bedard, GOP Says Thomason May Have Broken Law, Washington 
Times, July 9, 1993, p. Al, produced to the Special Committee as White 
House Document F 000274.
    \48\ Id.
    \49\ Report of the Independent Counsel In Re Vincent W. Foster Jr., 
June 30, 1994 [hereinafter ``Fiske Report''], p. 12, reprinted in I 
Hearings before the Committee Banking, Housing, and Urban Affairs on 
the Death of Vincent W. Foster, Jr. [hereinafter ``Foster Hearings''], 
p. 187.
    \50\ House document CGE12287.
    \51\ House document CGE12287.
    \52\ Justice Department Document 6675
    \53\ Braun, 6/19/95 Dep. pp. 24-25, 121; Rolla, 6/20/95 pp. 54-55; 
Hines, 7/20/95 Hrg. p. 25; Mathews, 7/25/95 Hrg. pp. 73-74; Gergen, 7/
12/95 Dep. pp. 29-30; Gearan, 7/6/95 Dep. p. 48; Hubbel, 7/13/95 Dep. 
pp. 49-51.
    \54\ Hines, 7/20/95 Hrg. p. 25.
    \55\ Pond, 6/26/95 Dep. p. 81.
    \56\ Neuwirth, 7/10/95 Dep. p. 49.
    \57\ Castleton, 6/27/95 Dep. p. 75-76.
    \58\ Flynn, 7/21/95 Dep. p. 48.
    \59\ Markland, 8/1/95 Hrg. p. 164.
    \60\ White House Document Z001214.
    \61\ Markland, 6/28/95 Dep. p. 165.
    \62\ Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 42.
    \63\ Thomases, 11/2/95 Hrg. p. 52.
    \64\ Adams, 7/27/95 Hrg. pp. 96-97.
    \65\ Neuwirth, 8/3/95 Hrg. p. 71.
    \66\ Heymann, 7/21/95 Dep. p. 62.
    \67\ Margolis, 8/10/95 Hrg. p. 233.
    \68\ Markland, 8/1/95 Hrg. pp. 167-68.
    \69\ Markland, 8/1/95 Hrg. pp. 167-168.
    \70\ Spafford, 7/27/95 Hrg. p. 20.
    \71\ White House Document Z 000354.
    \72\ 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.
    \73\ White House Documents Z1109, Z1123, Z1110-1117; Gorham, 8/1/95 
Hrg. pp. 69-70.
    \74\ Spafford, 7/27/95 Hrg. p. 19.
    \75\ White House Document Z 001213.
    \76\ Heymann, 7/21/95 Dep. pp. 113-114.
    \77\ 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.
    \78\ Memorandum from Michael E. Shaheen Jr to David Margolis, July 
24, 1995, pp. 2-3.
    \79\ Williams & Connolly Document 001.
    \80\ Williams & Connolly Document 001.
    \81\ Williams & Connolly Document 001.
    \82\ White house Document Z 000655.
    \83\ Bell Atlantic Document (unnumbered).
    \84\ Bell Atlantic Document (unnumbered).
    \85\ Bell Atlantic Document (unnumbered).
    \86\ Williams & Connolly Document 001.
    \87\ White House Document Z 000647.
    \88\ Nussbaum, 7/12/95 Dep. p. 142.
    \89\ Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    \90\ Willkie Farr & Gallagher Document ST 000001-000006
    \91\ Bell Atlantic Document (unnumbered).
    \92\ White House Document Z001243.
    \93\ Nussbaum, 8/9/95 Hrg.p. 25; Williams, 7/7/95 Dep. pp. 122-123; 
Gorham, 8/1/95 Hrg. pp. 16-18.
    \94\ Huber, 8/3/95 Hrg. pp. 14-15.
    \95\ Castleton, 8/3/95 Hrg. pp. 13-14.
    \96\ Willkie Farr & Gallagher Document ST000001.
    \97\ Willkie Farr & Gallagher Document ST 00002.
    \98\ Nussbaum, 7/12/95 Dep. p. 142.
    \99\ Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 42.
    \100\ Department of Justice Document GRO466.
    \101\ White House Document S020921; Department of Treasury 
Document, 12/07/95 (not numbered).
    \102\ White House Document S020921; Department of Treasury 
Document, 12/07/95 (not numbered).
    \103\ Thomases, 5/14/96 Hrg., p.28-30.
    \104\ Thomases, 5/14/96 Hrg., p. 30.
    \105\ Hubbell 6/4/96 Dep. p. 22.
    \106\ Hubbell, 6/4/96 Dep. pp. 32-33.
    \107\ See, e.g., Frank J. Murray, White House Plays Down Suicide 
Probe, Wash. Times, July 23, 1993,p. A7; Ann Devroy, Clinton Finds No 
Explanation to Aide's Death; Probes Continuing on Apparent Suicide, 
Wash. Post, July 23, 1993, p. A4; Thomas L. Friedman, White House Aide 
Leaves No Clue About Suicide, N.Y. Times, July 22, 1993, p. A1; Ruth 
Marcus, Ann Devroy, Clintons Mystified by Aide's Death; Staff Shaken by 
Apparent Suicide, Wash. Post, July 22, 1993.
    \108\ O'Neill, 7/26/95 Hrg. p. 22.
    \109\ Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 42; Margolis, 8/
10/95 Hrg. pp. 178-179; Adams, 6/29/95 Dep. p. 32.
    \110\ Justice Department Document F000166; Justice Department 
Document FBI-129.
    \111\ Nussbaum, 8/9/95 Hrg. pp. 39-41; Neuwirth, 8/3/95 Hrg. p. 
132.
    \112\ Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    \113\ Williams, 7/26/95 Hrg. p. 220-221.
    \114\ Castleton, 6/27/95 Dep. pp. 139-140.
    \115\ Nussbaum, 8/9/95 Hrg. p. 27; Sloan, 8/3/95 Hrg. p. 67.
    \116\ Hubbell, 2/7/96 Hrg. p. 20.
    \117\ Thomas L. Friedman, ``White House Asked Aid of F.B.I. in 
Dismissals,'' New York Times, May 25, 1993, at A18.
    \118\ Paul Bedard, GOP Says Thomason May Have Broken Law, 
Washington Times, July 9, 1993, p. A1, produced to the Special 
Committee as White House Document F 000274.
    \119\ Paul Bedard, GOP Says Thomas May Have Broken Law,Washington 
Times, July 9, 1993, p. A1, produced to the Special Committee as White 
House Document F 000274.
    \120\ Id.
    \121\ Id.
    \122\ Id.
    \123\ Report of the Independent Counsel In Re Vincent W. Foster 
Jr., June 30, 1994 [hereinafter ``Fiske Report''], p. 12, reprinted in 
I Hearings before the Committee Banking, Housing, and Urban Affairs on 
the Death of Vincent W. Foster, Jr. [hereinafter ``Foster Hearings''], 
p. 187
    \124\ Fiske Report, at pp 10-14, reprinted in Foster Hearings, p. 
186-189.
    \125\ Fiske Report, p. 10, reprinted in Foster Hearings, p. 186
    \126\ Department of Justice Document OIC000417-418.
    \127\ Department of Justice Document OIC000418.
    \128\ Department of Justice Document OIC000418.
    \129\ James Stewart, Blood Sport (1996), p. 285.
    \130\ Id.
    \131\ Id.
    \132\ Thomases, 5/14/96 Hrg. p. 14
    \133\ Thomases, 5/14/96 Hrg., p. 17.
    \134\ Department of Justice Document OIC000418.
    \135\ Thomases, 5/16/96 Hrg. p. 15.
    \136\ Nussbaum, 8/9/95 Hrg. p. 254.
    \137\ June 20, 1995 privilege log from Williams & Connolly.
    \138\ June 20, 1995 privilege log from Williams & Connolly.
    \139\ June 20, 1995 privilege log from Williams & Connolly.
    \140\ June 20, 1995 privilege log from Williams & Connolly.
    \141\ June 20, 1995 privilege log from Williams & Connolly.
    \142\ June 20, 1995 privilege log from Williams & connolly.
    143 June 20, 1995 privilege log from Williams & Connolly.
    144 June 20, 1995 privilege log from Williams & Connolly.
    145 June 20, 1995 privilege log from Williams & Connolly.
    146 June 20, 1995 privilege log from Williams & Connolly.
    147 June 20, 1995 privilege log from Williams & Connolly.
    148 White House Documents Z000004, Z001109.
    149 White House Document Z000004.
    150 White House Document Z000004.
    151 White House Document Z000005.
    152 White House Document Z001109.
    153 White House Document Z001109.
    154 White House Document Z001109.
    155 White House Document Z001109.
    156 White House Document Z001109.
    157 Teresa Tritch, The Clintons May Owe Tax of $82,989 on 
Whitewater, Money, Oct. 1995, p. 22.
    158 Susan Schmidt, ``Hearing Puts Focus on Rose Law Practice; 
Conflict of Interest Cases Cited By GOP,'' Washington Post, August 11, 
1995, at A1.
    159 Hubbell, 2/7/96 Hrg. p. 46.
    160 Willkie Farr & Gallagher Document ST32.
    161 Willkie Farr & Gallagher Document ST32.
    162 Thomases, 12/18/95 Hrg. p. 53.
    163 Thomases, 12/18/95 Hrg. p. 53.
    164 Lynch, 5/14/96 Dep. p. 104.
    165 Lyons Document JML140.
    166 Lyons Document JML140
    167 FD-302 Interview with Lyons, 7/5/94, I Foster Hearings, p. 
176.
    168 Williams & Connolly Document DKSN000481.
    169 Hearings before the Special Committee to Investigate 
Whitewater Development Corporation and Related Matters, administered by 
the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, on 
the Inquiry into whether Improper Conduct Occurred Regarding the Way in 
which White House Officials Handled Documents in the Office of White 
House Deputy Counsel Vincent W. Foster, Jr., 104th Cong., 1st Sess., 
July 18, 1995-August 10, 1995 [hereinafter ``S. Hrg.''], 8/8/95 p. 28; 
Williams & Connolly Document DKSN000482.
    170 Blair, 2/19/96 Dep. p. 25.
    171 Blair, 2/19/96 Dep. p. 62.
    172 Blair, 2/19/96 Dep. p. 67.
    173 Blair, 2/19/96 Dep. p. 67.
    174 Blair, 2/19/96 Dep. p. 69.
    175 Blair, 2/19/96 Dep. p. 70.
    176 Blair, 2/19/96 Dep. p. 72.
    177 Blair, 2/19/96 Dep. p. 79.
    178 Redden, 5/30/96 Dep. p. 237.
    179 Williams & Connolly Document DKSN000518.
    180 Williams & Connolly Document DKSN000514.
    181 Jeff Gerth and Stephen Engleberg, ``Documents Show 
Clintons Enjoyed Far Vaster Protection from Whitewater Losses,'' New 
York Times, July 15 1995, at A18.
    182 Williams & Connolly Document DKSN000515.
    183 Williams & Connolly Document DKSN000515.
    184 Williams & Connolly Document DKSN000518.
    185 Williams & Connolly Document DKSN000519.
    186 Letter from Yoly Redden to Vince Foster, April 12, 1993. 
James Blair Document 0000185.
    187 James Blair Document 0000185.
    188 Redden, 5/30/96 dep., p. 228.
    189 Redden, 5/30/96 Dep. pp. 230-231.
    190 Jeff Gerth and Stephen Engleberg, ``Documents Show 
Clintons Enjoyed Far Vaster Protection from Whitewater Losses,'' New 
York Times, July 15, 1995, at A18.
    191 Redden, 5/30/96 Dep. p. 234.
    192 Redden, 5/30/96 Dep. p, 234.
    193 White House Document S9210.
    194 II Foster Hearings, p. 1794.
    195 White House Documents F3158-F3261.
    196 Williams & Connolly Documents DSKN000178-DSKN000179
    197 Redden, 5/30/96 Dep. p. 239.
    198 Redden, 5/30/96 Dep. pp. 241-242.
    199 Williams & Connolly Documents DSKN000180, DSKN000181.
    200 Thomases, 8/8/95 Hrg. p. 38.
    201 Dan Dorfin, ``Short Seller Boosted First Lady's 
Portfolio,'' USA Today, June 18, 1993, at 4B.
    202 Id.
    203 Williams & Connolly Document DKSN000081.
    204 Williams & Connolly Document DKSN000077.
    205 Fred R. Bleakley, ``Investment Fund for Hillary Clinton 
Sold Short Several Health Care Stocks,'' Wall Street Journal, May 13, 
1993, at A12.
    206 Id.
    207 William Safire, First Lady or Top Government Official?, 
Houston Chronicle, Aug. 17, 1993, p. 12.
    208 1 Op. O.L.C. 20, 2/24/76, Harmon, at 22-23.
    209 997 F.2d 898 (D.C. Cir. 1993).
    210 Federal Advisory Committee Act. Pub. L. No. 92-463, 86 
Stat. 770 (1972) (codified at 5 U.S.C. App. (1988)).
    211 Association of American Physicians & Surgs., Inc. v. 
Clinton, 997 F.2d 898, 911, n.10 (D.C. Cir. 1993).
    212 See ``Who is Vincent Foster?'' Wall Street Journal, June 
17, 1993, at A10, reprinted in I Foster Hearings, pp. 354-355.
    213 FD-302 Interview with Jim Lyons, 5/12/94, I Foster 
Hearings, p. 172.
    214 See ``Vince Foster's Victory,'' Wall Street Journal, June 
24, 1993, at A12, reprinted I Foster Hearings, pp. 356-357.
    215 FD-302 Interview with Jim Lyons, 5/12/94, I Foster 
Hearings, p. 172.
    216 I Foster Hearings, p. 353.
    217 White House Document Z001217.
    218 White House Document Z001217.
    219 Park Police Document 52.
    220 I Foster Hearings, p. 173.
    221 I Foster Hearings, p. 174.
    222 S. Hrg. 8/1/95 p. 123.
    223 Gray, 10/20/95 Dep., p. 8.
    224 Gray, 10/20/95 Dep., p. 10.
    225 53 Stat. 561 (1939)
    226 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 65.
    227 Id. at 66, quoting Clark Clifford & Richard Holbrooke, 
Counsel to the President, A Memoir, p. 54 (1991).
    228 Id. at 64.
    229 Id. at 66 n.14, quoting Clark Clifford & Richard 
Holbrooke, Counsel to the President, A Memoir, p. 75 (1991).
    230 Id. at 67, quoting Clark Clifford & Richard Holbrooke, 
Counsel to the President, A Memoir, p. 12 (1991).
    231 Samuel Kernell, The Creed and Reality of Modern White 
House Management, in Chief of Staff: Twenty-five Years of Managing the 
Presidency, pp. 193-222 (Kernell & Popkin eds., 1986).
    232 Lloyd Cutler, ``The Role of the Counsel to the President 
of the United States,'' Record of the Bar Association of New York, 
November, 1980, at 470, 472.
    233 Id. at 470.
    234 Id.
    235 Philip Combs, ``The Distant Drum of C. Boyden Gray,'' 
Washington Post, March 31, 1989, at D1.
    236 Nussbaum, 8/9/95 Hrg. p. 102.
    237 David Margolick, ``An All-Star New York Lawyer Disputes 
the Idea that He's Become a White House Bumbler,'' New York Times, June 
11, 1993, at A26.
    238 Id.
    239 ''Text of Resignation and Clinton Reply,'' New York Times, 
March 6, 1994, at A23.
    240 Bernard Nussbaum, ``Nussbaum Defends Conduct as Counsel,'' 
New Jersey Law Journal, December 5, 1994, at 23.
    241 Id.
    242 Gorham, 8/1/95 Hrg. p. 17.
    243 Gorham, 8/1/95 Hrg. p. 18.
    244 White House Document Z 001109.
    245 Letter from Jane Sherburne, Special Counsel to the 
President, to Robert Giuffra, Chief Counsel, Special Committee to 
Investigate Whitewater Development Corporation and Related Matters, 
August 6, 1995, p. 2.
    246 Gorham, 8/1/95 Hrg. p. 59.
    247 Gorham, 8/1/95 Hrg. p. 59.
    248 Letter from Jane Sherburne, Special Counsel to the 
President, to Robert Giuffra, Chief Counsel, Special Committee to 
Investigate Whitewater Development Corporation and Related Matters, 
August 6, 1995, p. 2.
    249 White House Document Z 001123.
    250 Gorham, 8/1/95 Hrg. p. 60.
    251 Gorham, 8/1/95 Hrg. p. 72.
    252 Gorham, 8/1/95 Hrg. p. 65.
    253 Gorham, 8/1/95 Hrg. p. 62.
    254 Gorham, 8/1/95 Hrg. p. 60.
    255 Gorham, 8/1/95 Hrg. p. 71.
    256 Gorham 8/1/95 Hrg. p. 70.
    257 White House Documents Z 001110--Z 001117.
    258 White House Document Z 001115.
    259 Letter from Jane Sherburne, Special Counsel to the 
President, to Robert Giuffra, Chief Counsel, Special Committee to 
Investigate Whitewater Development Corporation and Related Matters, 
September 1, 1995.
    260 Gorham, 8/1/95 Hrg. pp. 18, 67.
    261 8/1/95 Hrg., p. 168.
    262 Salter, 7/27/95 Hrg. p. 113.
    263 Nussbaum, 8/9/95 Hrg. p. 23.
    264 Swidler & Berlin Document (unnumbered).
    265 White House Documents Z 000364--Z 000379.
    266 White House Documents Z 000340--Z 000355.
    267 Nussbaum, 8/9/95 Hrg. p. 92.
    268 Swidler & Berlin Document (unnumbered); White House 
Document Z000350.
    269 Swidler & Berlin Document (unnumbered).
    270 White House Documents Z000350-Z000351.
    271 Markland, 8/1/95 Hrg. p. 168.
    272 Nussbaum, 7/12/95 Dep. p. 23.
    273 Nussbaum, 8/9/95 Hrg. p. 10.
    274 Nussbaum, 8/9/95 Hrg. p. 26.
    275 Report of the Committee on Banking, Housing, and Urban 
Affairs, United States Senate, on the Communications between Officials 
of the White House and the U.S. Department of the Treasury or the 
Resolution Trust Corporation, January 3, 1995, [hereinafter Treasury 
Contacts Report], p. 3.
    276 Treasury Contacts Report, p. 3 & n. 7.
    277 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Production, pp. 1447-1449.
    278 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Production, pp. 1450-1455.
    279 Treasury Contacts Report, p. 4.
    280 Nussbaum, 8/9/95 Hrg. p. 166.
    281 Nussbaum, 8/9/95 Hrg. p. 166.
    282 Nussbaum, 8/9/95 Hrg. p. 166.
    283 II Foster Hearings, p. 1794.
    284 II Foster Hearings, p. 1794.
    285 Foren, 11/28/95 Hrg. p. 20.
    286 Foren, 11/28/95 Hrg. p. 23.
    287 Bowles, 11/28/95 Hrg. p. 24.
    288 Bowles, 11/28/95 Hrg. p. 24.
    289 Shepperson, 11/28/95 Hrg. pp. 23-24.
    290 White House Document S12334.
    291 Markland, 8/195/ Hrg. pp. 168-169.
    292 Nussbaum, 8/9/95 Hrg. p. 30.
    293 Nussbaum, 8/9/95 Hrg. p. 31.
    294 II Foster Hearings p. 1794.
    295 Foster Report p. 10.
    296 Foster Report p. 10.
    297 Foster Report p. 10.
    298 Foster Report p. 10.
    299 Foster Report p. 11.
    300 Foster Report p. 11.
    301 Foster Report p. 11.
    302 Foster Report p. 11.
    303 Foster Report p. 11.
    304 Foster Report pp. 11-12.
    305 Foster Report p. 12.
    306 Foster Report p. 12.
    307 Foster Report p. 13.
    308 Foster Report p. 15.
    309 Braun, 7/20/95 Hrg. p. 16.
    310 Foster Report, p. 35. Rolla, 7/20/95 Hrg. p. 43; Rolla, 6/
20/95 Dep. pp. 19-20, 23, 25; Braun, 6/19/95 Dep. pp. 18-20.
    311 Braun, 6/19/95 Dep. p. 17.
    312 Braun, 6/19/95 Dep. p. 18.
    313 Markland, 6/28/95 Dep. pp. 71-72; Hines, 6/21/95 Dep. pp. 
30-32.
    314 Braun, 7/20/95 Hrg. p. 35.
    315 Foster Report p. 15.
    316 Foster Report p. 15.
    317 Foster Report p. 16.
    318 Foster Report p. 18.
    319 Foster Report p. 18.
    320 Foster Report pp. 18-19.
    321 Braun, 6/19/95 Dep. p. 22.
    322 Foster Report p. 19; Braun, 6/19/95 Dep. pp. 25-26; Rolla, 
6/20/95 Dep. pp. 31-32.
    323 Foster Report p. 19.
    324 Kennedy, 7/11/95 Dep. p. 35.
    325 S. Hrg., 7/20/95 pp. 13-14; S. Hrg., 7/25/95 pp. 59-60.
    326 S. Hrg., 7/20/95 p. 14.
    327 Hubbell, 7/18/95 Hrg. pp. 133-34; S. Hrg., 7/20/95 pp. 16-
17.
    328 S. Hrg., 7/20/94 p. 17.
    329 Foster Report p. 21, n. 72, quoting Hines Deposition.
    330 S. Hrg., 7/20/95 p. 18.
    331 S. Hrg., 7/20/95 p. 51.
    332 S. Hrg., 7/20/95 pp. 38, 49.
    333 Markland, 6/28/95 Dep. pp. 75-76; Hines, 6/21/95 Dep. p. 
33; Braun, 6/19/95 p. 18.
    334 Braun, 7/20/95 Hrg. p. 18.
    335 Braun, 7/20/95 Hrg. p. 18.
    336 Rolla, 7/20/95 Hrg. pp. 35-36.
    337 Department of Interior Document 111.
    338 Braun, 6/19/95 Dep. p. 42.
    339 Rolla, 7/20/95 Hrg. pp. 35-36.
    340 S. Hrg., 7/20/95 p. 20; Braun, 6/19/95 Dep. pp. 24-25, 
121; Rolla, 6/20/95 Dep. pp. 54-55.
    341 Rolla, 7/20/95 Hrg. pp. 31-32.
    342 S. Hrg., 7/25/95 p. 63; Watkins, 7/14/95 Dep. p. 41-42.
    343 S. Hrg., 7/20/95 Hrg. p. 24; Hines, 6/21/95 Dep. p. 23.
    344 S. Hrg., 7/20/95 Hrg. pp. 24-25; Hines, 6/21/95 Dep. pp. 
23-24.
    345 Hines, 7/20/95 Hrg. p. 25; Hines, 6/21/95 Dep. pp. 28-29, 
35.
    346 Hines, 7/20/95 Hrg. p. 39.
    347 Mathews, 7/25/95 Hrg. pp. 73-74; Mathews, 6/27/95 Dep. pp. 
41-42; White House Document Z000139.
    348 Mathews, 7/25/95 Hrg. pp. 73-74; Mathews, 6/27/95 Dep. p. 
67.
    349 White House Document Z000139.
    350 Burton, 7/5/95 Dep. pp. 44-46; Nussbaum, 7/12/95 Dep. p. 
40.
    351 Hubbell, 7/13/95 Dep. pp. 49-51.
    352 Transcript of White House Press Briefing with Press 
Secretary Dee Dee Myers, U.S. Newswire, August 2, 1993.
    353 Gergen, 7/12/95 Dep. p. 25.
    354 Gergen, 7/12/95 Dep. p. 29.
    355 Gergen, 7/12/95 Dep. p. 30.
    356 Gearan, 7/6/95 Dep. p. 48.
    357 Burton, 7/5/95 Dep. p. 44.
    358 Caputo, 7/10/95 Dep. p. 20.
    359 Caputo, 7/10/95 Dep. p. 20.
    360 Caputo, 7/10/95 Dep. pp. 23-24.
    361 McLarty, 8/7/95 Hrg. pp. 58-59.
    362 Williams, 7/7/95 Dep. pp. 23-24; Williams, 7/26/95 Hrg. 
pp. 290-291.
    363 Williams, 7/7/95 Dep. p. 25; Williams, 7/26/95 Hrg. p. 
291.
    364 Williams & Connolly Document 001.
    365 Williams & Connolly Document 001.
    366 Thomases, 8/8/95 Hrg., p. 116.
    367 Williams & Connolly Document 001.
    368 Burton, 12/13/95 Hrg., p. 42.
    369 Mathews, 12/13/95 Hrg. pp. 61-62.
    370 Williams & Connolly Document 001.
    371 Williams & Connolly Document 001.
    372 Williams & Connolly Document 001.
    373 Dickey, 2/12/96 Dep., p. 11.
    374 Dickey, 2/12/96 Dep. p. 12.
    375 Dickey, 2/12/96 Dep. p. 27.
    376 White House Document S020913.
    377 Dickey, 2/12/96 Dep. p. 37.
    378 Dickey, 2/12/96 Dep. p. 39.
    379 Dickey, 2/12/96 Dep. p. 49; 2/14/96 Hrg. p. 59.
    380 Dickey, 2/12/96 Dep. p. 50.
    381 Dickey, 2/12/96 Dep. p. 51.
    382 Dickey, 2/12/96 Dep. p. 54.
    383 Dickey, 2/12/95 Dep., p. 56.
    384 Dickey, 2/12/96 Dep. p. 67.
    385 Dickey, 2/12/96 Dep. p. 60.
    386 Dickey, 2/12/96 Dep., p. 61.
    387 Dickey, 2/12/96 Dep. p. 60.
    388 Dickey, 2/14/96 Hrg. p. 60.
    389 Letter from Jane Sherburne to Robert Giuffra, September 
30, 1995.
    390 Dickey, 2/12/96 Dep. p. 65.
    391 Letter from Jane Sherburne to Robert Giuffra, October 13, 
1995.
    392 Letter from Jane Sherburne to Robert Giuffra, October 13, 
1995.
    393 Letter from Viet Dinh to Sally Smith, November 21, 1995 
(confirming conversation).
    394 Letter from Viet Dinh to Sally Smith, November 22, 1995 
(confirming conversation).
    395 Letter from Jane Sherburne to Viet Dinh, February 27, 
1996.
    396 Dickey, 2/14/96 Hrg. pp. 59-60.
    397 Dickey, 2/14/96 Hrg. p. 61.
    398 Mathews, 7/25/95 Hrg. p. 50.
    399 Mathews, 6/27/95 Dep. p. 56.
    400 Mathews, 7/25/95 Hrg. p. 50; White House Document 
Z0000140.
    401 Mathews, 7/25/95 Hrg. p. 51; Mathews, 6/27/95 Dep. pp. 
103-104.
    402 S. Hrg. 8/9/95 p. 238; Nussbaum 7/12/95 Dep. pp. 50-52.
    403 S. Hrg. 7/25/95 p. 56.
    404 O'Neill, 6/23/95 Dep. pp. 115-120.
    405 O'Neill, 7/26/95 Hrg. p. 12.
    406 Mathews, 7/25/95 Hrg. p. 57.
    407 Mathews, 7/25/95 Hrg. p. 58.
    408 Mathews, 6/27/95 Dep. pp. 52-55, 77.
    409 Mathews, 7/25/95 Hrg. p. 59; O'Neill, 6/23/95 Dep. pp. 
120-122.
    410 Nussbaum, 7/12/95 Dep. p. 54.
    411 White House Document Z000651; S. Hrg., 7/25/95 p. 60.
    412 Thomasson, 7/25/95 Hrg. p. 196-198.
    413 Thomasson, 7/25/95 Hrg. p. 199.
    414 Thomasson, 7/25/95 Hrg. p. 199.
    415 Treasury Department Document 6495.
    416 Nussbaum, 7/13/95 Dep. p. 29.
    417 Nussbaum, 8/9/95 Hrg. p. 11; Nussbaum, 7/12/95 Dep. p. 30.
    418 Nussbaum, 8/9/95 Hrg. p. 11.
    419 Nussbaum, 8/9/95 Hrg. p. 11.
    420 Williams, 7/7/95 Dep. p. 26.
    421 Lieberman, 7/6/95 Dep. p. 38.
    422 Williams, 7/7/95 Dep. p. 26.
    423 Williams, 7/26/95 Hrg. p. 154.
    424 Thomasson, 7/25/95 Hrg. p. 194.
    425 S. Hrg., 7/25/95 pp. 194, 204.
    426 Thomasson, 7/25/95 Hrg. p. 205.
    427 Thomasson, 7/25/95 Hrg. p. 194.
    428 Thomasson, 7/25/95 Hrg. p. 194.
    429 Thomasson, 7/25/95 Hrg. p. 208; Thomasson, 7/11/95 Dep. 
pp. 46-48.
    430 Thomasson, 7/25/95 Hrg. p. 210.
    431 Thomasson, 7/25/95 Hrg. p. 195; Thomasson, 7/11/95 Dep. 
pp. 46-48.
    432 Thomasson, 7/25/95 Hrg. p. 195.
    433 Nussbaum, 8/9/95 Hrg. pp. 11-12.
    434 Nussbaum, 8/9/95 Hrg. p. 12.
    435 Nussbaum, 7/12/95 Dep. p. 35.
    436 Nussbaum, 7/13/95 Dep. p. 40; S. Hrg. 8/10/95 pp. 125.
    437 Williams 7/26/95 Hrg. p. 278; Williams, 7/7/95 Dep. p. 32.
    438 Williams, 7/26/95 Hrg. p. 279.
    439 Williams, 7/26/95 Hrg. p. 279; Williams, 7/7/95 Dep. p. 
32.
    440 O'Neill, 7/26/95 Hrg. p. 7; O'Neill, 6/23/95 Dep. p. 45.
    441 O'Neill, 7/26/95 Hrg. p. 11; White House Document 
Z0000598.
    442 O'Neill, 7/26/95 Hrg. p. 11.
    443 O'Neill, 7/26/95 Hrg. p. 11.
    444 O'Neill, 7/26/95 Hrg. p. 12.
    445 O'Neill, 7/26/95 Hrg. pp. 12-13.
    446 O'Neill, 7/26/95 Hrg. p. 16.
    447 O'Neill, 7/26/95 Hrg. p. 17; O'Neill, 6/23/95 Dep. p. 61.
    448 O'Neill, 7/26/95 Hrg. p. 17.
    449 O'Neill, 7/26/95 Hrg. p. 17-18.
    450 O'Neill, 7/26/94 Hrg. pp. 18-19.
    451 S. Hrg. 7/26/95 p. 22.
    452 O'Neill, 7/26/95 Hrg. p. 23.
    453 O'Neill, 7/26/95 Hrg. p. 22.
    454 O'Neill, 7/26/95 Hrg. p. 112.
    455 S. Hrg. 7/26/95 p. 95.
    456 O'Neill, 7/26/95 Hrg. p. 22; O'Neill, 6/23/95 Dep. pp. 48, 
54-55, 38-39, 81-83, 86-87.
    457 O'Neill, 7/26/95 Hrg. p. 23.
    458 White House Document Z0000598.
    459 Williams, 7/7/95 Dep. p. 56.
    460 Williams, 7/7/95 Dep. pp. 57-58.
    461 Bell Atlantic Document (unnumbered).
    462 Thomases, 7/17/95 Dep. p. 60.
    463 Hubbell, 7/13/95 Dep. p. 72.
    464 Hubbell, 7/13/95 1995 Dep. 73.
    465 Hubbell, 7/13/95 1995 Dep. p. 87.
    466 Hubbell, 7/13/95 1995 Dep. pp. 74-75.
    467 Burton, 7/5/95 Dep. p. 78.
    468 White House Document Z000450.
    469 Pond, 6/26/95 Dep. pp. 74, 77.
    470 Flynn, 6/21/95 Dep. pp.25-26.
    471 Pond, 6/26/95 Dep. pp. 81.
    472 Neuwirth, 7/10/95 Dep. p. 47.
    473 Neuwirth, 7/10/95 Dep. p. 49.
    474 Pond, 6/26/95 Dep. p. 84.
    475 Nussbaum, 7/12/95 Dep. p. 65.
    476 Tripp, 7/12/95 Dep. p. 67.
    477 Burton, 7/5/95 Dep. p. 72. Burton testified that ``there 
weren't three days when I lived in Washington that I didn't make the 
8:00 senior staff meeting.'' Burton, 7/5/95 Dep. p. 79.
    478 Burton, 7/5/95 Dep. p. 72, McLarty, 7/6/95 Dep. pp. 37-38.
    479 Gergen, 7/12/95 Dep. pp. 40-41; McLarty, 7/6/95 Dep. p. 
38, Burton, 7/5/95 Dep. p. 72.
    480 Gergen, 7/12/95 Dep. p. 41.
    481 Burton, 7/5/95 Dep. p. 72.
    482 Nussbaum, 7/12/95 Dep. p. 70.
    483 Nussbaum, 7/12/95 Dep. pp. 69-70; Neuwirth, 7/10/95 Dep. 
p. 58; Sloan, 7/7/95 Dep. pp. 90-91.
    484 Nussbaum, 7/12/95 Dep. pp. 69-70.
    485 Tripp 7/11/95 Dep. p. 87.
    486 Tripp 7/11/95 Dep. p. 87.
    487 Tripp 7/11/95 Dep. pp. 88-89.
    488 Flynn, 6/21/95 Dep. p. 25.
    489 Flynn, 6/21/95 Dep. pp. 41-42.
    490 Markland, 6/28/95 Dep. p. 39.
    491 Flynn, 6/21/95 Dep. p. 43.
    492 Treasury Document 6233.
    493 Castleton, 6/27/95 Dep. p. 76.
    494 Braun, 6/19/95 Dep. pp. 50, 51.
    495 Hines, 6/21/95 Dep. pp. 50-51.
    496 Hines, 6/21/95 Dep. p. 50; Langston, 6/27/95 Dep. p. 24.
    497 Langston, 6/27/95 Dep. p. 35.
    498 Langston, 6/27/95 Dep. p. 33.
    499 Markland, 6/28/95 Dep. p. 43.
    500 Markland, 6/28/95 Dep. p. 43.
    501 Langston, 6/27/95 Dep. p. 43.
    502 Langston, 6/27/95 Dep. pp. 42, 44.
    503 Flynn, 6/21/95 Dep. p. 46.
    504 Flynn, 6/21/95 Dep. p. 47.
    505 Flynn, 6/21/95 Dep. p. 47.
    506 Flynn, 7/21/95 Dep. p. 47.
    507 Flynn, 7/21/95 Dep. p. 48.
    508 Flynn, 6/21/95 Dep. p. 49; Markland, 6/28/95 Dep. p. 97.
    509 Hubbell, 7/18/95 Hrg. p. 142.
    510 Hubbell, 7/18/95 Hrg. p. 142.
    511 Hubbell, 7/18/95 Hrg. p. 142.
    512 Hubbell, 7/18/95 Hrg. p. 143.
    513 Nussbaum, 7/12/95 Dep. p. 85.
    514 Nussbaum, 7/12/95 Dep. p. 87.
    515 Nussbaum, 7/12/95 Dep. p. 94.
    516 Heymann, 7/21/95 Dep. p. 22.
    517 Heymann, 7/21/95 Dep. pp. 23-24.
    518 Heymann, 7/21/95 Dep. p. 24.
    519 Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 42.
    520 Heymann, 7/21/95 Dep. pp. 24-25.
    521 Heymann, 7/21/95 Dep. p. 26.
    522 Heymann, 7/21/95 Dep. p. 26.
    523 Hume, 6/29/95 Dep. p. 68.
    524 Heymann, 7/21/95 Dep. p. 21.
    525 Heymann, 7/21/95 Dep. p. 17.
    526 Heymann, 7/21/95 Dep. p. 41.
    527 Margolis, 8/10/95 Hrg. pp. 178-179.
    528 Adams, 6/29/95 Dep. p. 34; Flynn, 6/21/95 Dep. pp. 27-30;
    529 Margolis, 8/10/95 Hrg. p. 179.
    530 Adams, 7/27/95 Hrg. p. 94; Adams, 6/29/95 Dep. p. 35 (``I 
think as I have just described, the agreement was that David and I 
would look at each file and determine relevance or--or determine 
relevance first of all.'')
    531 Adams, 6/29/95 Dep. pp. 35-36; Adams, 7/27/95 Hrg. p. 94.
    532 Justice Document FBI-129.
    533 Margolis, 8/10/95 Hrg. p. 179.
    534 Adams, 7/27/95 Hrg. p. 95.
    535 Justice Department Document F 000149.
    536 Nussbaum, 8/9/95 Hrg. pp. 39-40.
    537 Nussbaum, 8/9/95 Hrg. p. 41.
    538 Nussbaum, 8/9/95 Hrg. p. 21.
    539 S. Hrg. 8/3/95 p. 118: Mr. Neuwirth: ``It was left without 
resolution with the understanding that there would be further 
discussion about it.'' Mr. Ben-Veniste: ``Mr. Sloan?'' Mr. Sloan: ``I 
don't recall a clear resolution on the 21st, Mr. Ben-Veniste.''
    540 Margolis, 8/10/95 Hrg. p. 181.
    541 Heymann, 9/2/95 Hrg. pp. 44-45.
    542 Adams, 6/29/95 Dep. p. 34.
    543 Flynn, 6/21/95 Dep. pp. 72-73.
    544 Flynn, 6/21/95 Dep. pp. 75-76.
    545 White House Document Z 001214.
    546 White House Document Z 001213.
    547 White House Document Z 001213.
    548 White House Document Z 001214.
    549 Park Police Document No. 30.
    550 Park Police Document 31.
    551 Park Police Document 32.
    552 Park Police Document 32.
    553 Park Police Document 32.
    554 Park Police Document 33.
    555 Park Police Document 33.
    556 Markland, 8/1/95 Hrg. p. 164.
    557 Markland, 8/1/95 Hrg. p. 164-165.
    558 8/1/95 Hrg. pp. 165-166.
    559 8/1/95 Hrg. pp. 165-166.
    560 Markland, 6/28/95 Dep. p. 165.
    561 Bell Atlantic Document (not numbered).
    562 Williams & Connolly Document 001.
    563 Thomases, 8/8/95 Hrg. p. 63.
    564 Williams & Connolly Document 001.
    565 Thomases, 8/8/95 Hrg. p. 9.
    566 Thomases, 8/8/95 Hrg. p. 10.
    567 Williams & Connolly Document 001.
    568 White House Document Z 000647.
    569 Thomases, 8/8/95 Hrg. p. 64; Nussbaum, 7/12/95 Dep. p. 
139.
    570 Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    571 Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    572 Williams, 7/7/95 Dep. p. 88.
    573 Williams, 11/2/95 Hrg. p. 21.
    574 Thomases, 8/8/95 Hrg. pp.12-13.
    575 Thomases, 8/8/95 Hrg. p. 64.
    576 Thomases, 8/8/95 Hrg. p. 64.
    577 Thomases, 8/8/95 Hrg. p. 64.
    578 Thomases, 8/8/95 Hrg. p. 68.
    579 Thomases, 8/8/95 Hrg. p. 68.
    580 Thomases, 11/2/95 Hrg. p. 51.
    581 Thomases, 11/2/95 Hrg. p. 57.
    582 Thomases, 11/2/95 Hrg. p. 52.
    583 Nussbaum, 7/12/95 Dep. p. 139.
    584 Nussbaum, 7/12/95 Dep. p. 142.
    585 Nussbaum, 8/9/95 Hrg. p. 58.; Nussbaum, 7/12/95 Dep. p. 
144.
    586 Nussbaum, 7/12/95 Dep. pp. 144-145.
    587 Nussbaum, 7/12/95 Dep. p. 142.
    588 Nussbaum, 8/9/95 Hrg. p. 17.
    589 Nussbaum, 8/9/95 Hrg. p. 60.
    590 Quinn, 7/14/95 Dep., p. 7; Nussbaum, 7/12/95 Dep., p. 177.
    591 Willkie, Farr & Gallagher Document ST000001-ST000006.
    592 Thomases, 8/8/95 Hrg. p. 102.
    593 Thomases, 11/2/95 Hrg. p. 95.
    594 Thomases, 11/2/95 Hrg. p. 52.
    595 Thomases, 11/2/95 Hrg. p. 99.
    596 Williams, 11/2/95 Hrg. p. 25.
    597 Treasury Document (unnumbered).
    598 Adams, 7/27/95 Hrg. pp. 96-97.
    599 Adams, 7/27/95 Hrg., p. 97.
    600 8/10/95 Hrg., pp. 182-183.
    601 Adams, 7/27/95 Hrg. p. 97; Margolis, 8/10/95 Hrg. p. 183.
    602 Margolis, 8/10/95 Hrg. p. 183.
    603 Margolis, 8/10/95 Hrg. p. 184.
    604 Heymann, 8/2/95 Hrg. p. 46.
    605 Heymann, 8/2/95 Hrg. p. 46.
    606 Heymann, 8/2/95 Hrg. pp. 46-47.
    607 Heymann, 8/2/95 Hrg. p. 47.
    608 Heymann, 8/2/95 Hrg. p. 48.
    609 Heymann, 8/2/95 Hrg. p. 48.
    610 Justice Department Document F000166.
    611 Nussbaum, 7/12/95 Dep. p. 174.
    612 Margolis, 8/10/95 Hrg. p. 188.
    613 Margolis, 8/10/95 Hrg. pp. 183-184.
    614 Margolis, 8/10/95 Hrg. pp. 183-184.
    615 Heymann, 7/21/95 Dep. p. 62.
    616 Heymann, 7/21/95 Dep. p. 62.
    617 Margolis, 8/10/95 Hrg. p. 185.
    618 Margolis, 8/10/95 Hrg. p. 185.
    619 Margolis, 8/10/95 Hrg. p. 186.
    620 Margolis, 8/10/95 Hrg. p. 186.
    621 Margolis, 8/10/95 Hrg. p. 186.
    622 Margolis, 8/10/95 Hrg. p. 186, p. 188.
    623 Margolis, 8/10/95 Hrg. p. 189.
    624 Nussbaum, 7/12/95 Dep. 175.
    625 Justice Department Document F 000149.
    626 Nussbaum, 7/12/95 Dep. pp. 176-177.
    627 Nussbaum 7/12/95 Dep. p. 176.
    628 Nussbaum, 7/12/95 Dep. p. 175.
    629 Nussbaum, 7/12/95 Dep. p. 177.
    630 Nussbaum, 7/12/95 Dep. p. 180.
    631 Nussbaum, 7/12/95 Dep. p. 180.
    632 Quinn, 8/7/95 Hrg. p. 45.
    633 Park Police Document 36.
    634 Margolis, 8/10/95 Hrg. p. 189.
    635 Nussbaum, 7/12/95 Dep. p. 172.
    636 Margolis, 8/10/95 Hrg. p. 189.
    637 Margolis, 8/10/95 Hrg. p. 185.
    638 Park Police Document 36; White House Document Z 000354.
    639 Adams, 7/27/95 Hrg. p. 102.
    640 Park Police Document 36.
    641 Markland, 8/1/95 Hrg. p. 167.
    642 Adams, 7/27/95 Hrg. p. 102; Margolis, 8/10/95 Hrg., pp. 
194-195.
    643 Markland, 8/1/95 Hrg pp. 167-168; Park Police Document 37.
    644 Swidler & Berlin Document (not numbered).
    645 Markland, 8/1/95 Hrg pp. 167-168.
    646 Park Police Document 37.
    647 Adams, 7/27/95 Hrg. p. 103.
    648 Margolis, 8/10/95 Hrg. p. 190.
    649 Margolis, 8/10/95 Hrg. p. 191.
    650 Margolis, 8/10/95 Hrg. p. 219.
    651 Salter, 7/27/95 Hrg. p. 105.
    652 Adams, 7/27/95 Hrg. p. 105.
    653 Park Police Document 37.
    654 Park Police Document 37.
    655 Park Police Document 37.
    656 Salter, 7/27/95 Hrg. pp. 106-107.
    657 Justice Department Document F 000150.
    658 Margolis, 8/10/95 Hrg. pp. 191-192
    659 Margolis, 8/10/95 Hrg. pp. 191-192
    660 Sloan, 8/3/95 Hrg. p. 66.
    661 Margolis, 8/10/95 Hrg. p. 195.
    662 Margolis, 8/10/95 Hrg. p. 109.
    663 Salter, 7/27/95 Hrg. p. 110.
    664 Adams, 7/27/95 Hrg. p. 106.
    665 Adams, 7/27/95 Hrg. p. 106.
    666 Justice Department Document F 000150.
    667 The notes state: ``M= what @ computer? Please review''. 
Swidler & Berlin Doc (not numbered).
    668 White House Document Z 000353.
    669 Salter, 7/27/95 Hrg. p. 107.
    670 White House Document Z000353.
    671 White House Document Z 001209.
    672 Tripp, 8/1/95 Hrg p. 35.
    673 Gorham, 8/1/95 Hrg. pp. 35-36.
    674 White House Documents Z 001210-Z001211.
    675 White House Document Z 001213.
    676 White House Document Z 001214.
    677 Adams, 7/17/95 Hrg. p. 107.
    678 Adams, 7/17/95 Hrg. p. 107.
    679 Salter, 7/17/95 Hrg. p. 108.
    680 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.
    681 Swidler & Berlin Document (unnumbered)
    682 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.
    683 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. 2.
    684 Memorandum from Michael E. Shaheen Jr to David Margolis, 
July 24, 1995, p. 1.
    685 Memorandum from Michael E. Shaheen Jr to David Margolis, 
July 24, 1995, pp. 2-3.
    686 Nussbaum, 8/10/95 Hrg. p. 59.
    687 Nussbaum, 8/10/95 Hrg. p. 59.
    688 Salter, 7/27/95 Hrg. pp 108-109.
    689 Adams, 7/27/95 Hrg. p. 107.
    690 Condon, 6/28/95 Dep. p. 56.
    691 Flynn, 6/21/95 Dep. p. 89.
    692 Hume, 8/1/95 Hrg. p. 218.
    693 Markland, 6/30/95 Dep. p. 213.
    694 Spafford, 7/11/95 Dep. p. 70.
    695 Markland, 6/28/95 Dep. p. 213; 8/1/Hrg. p. 172.
    696 Markland, 8/1/95 Hrg p. 172.
    697 Margolis, 8/10/95 Hrg. pp. 192-193.
    698 Nussbaum, 8/10/95 Hrg. p. 62.
    699 Burton, 7/5/95 Dep. p. 109; Neuwirth, 7/10/95 Dep. p. 187; 
Sloan, 7/7/95 Dep., p. 187. Sloan did testify that he had the 
impression on July 22 that the briefcase was empty, but he could not 
recall how he got that impression. Sloan, 7/7/95, Dep. p. 188.
    700 Burton, 7/5/95 Dep. p. 184.
    701 Hines, 6/21/95 Dep. p. 83.
    702 Markland Dep. p. 218.
    703 Markland, 6/28/95 Dep. pp. 251-252.
    704 Spafford, 7/27/95 Hrg. p. 19.
    705 Spafford, 7/27/95 Hrg. p. 20.
    706 Spafford, 7/27/95 Hrg. p. 18.
    707 Spafford, 7/27/95 Hrg. p. 22.
    708 Sloan, 8/3/95 Hrg. p. 67.
    709 Margolis, 8/10/95 Hrg. pp. 230-231.
    710 Salter, 7/27/95 Hrg. p. 112.
    711 Markland, 8/1/95 Hrg. p. 170.
    712 Margolis, 8/10/95 Hrg. p. 170.
    713 7/27/95 Hrg. p. 113.
    714 White House Document Z 000107.
    715 White House Document Z 000578.
    716 Spafford, 7/27/95 Hrg. p. 20.
    717 White House Document Z 000354.
    718 Sloan, 8/3/95 Hrg. p. 85.
    719 White House Document Z 000851.
    720 White House Document Z 000953.
    721 Williams, 7/26/95 Hrg. pp. 165.
    722 Nussbaum, 8/9/95 Hrg. p. 25.
    723 Nussbaum, 7/12/95 Dep. pp. 237-238.
    724 Nussbaum, 7/12/95 Dep. p. 240.
    725 Williams, Dep. p. 119.
    726 Williams, 7/26/95 Hrg. pp. 170-171.
    727 Williams, 7/7/95 Dep. p. 119.
    728 Williams, 7/7/95 Dep. pp. 122-123.
    729 Gorham, 8/1/95 Hrg. pp. 16-17.
    730 Gorham, 8/1/95 Hrg. pp. 16-17.
    731 Gorham, 8/1/96 Hrg. p. 18.
    732 Gorham, 8/1/96 Hrg. p. 18.
    733 Gorham, 8/1/96 Hrg. p. 18.
    734 Nussbaum, 7/12/95 Hrg. pp. 258-259.
    735 Williams, 7/26/95 Hrg. pp. 176-177.
    736 Gorham, 8/1/95 Hrg. p. 20.
    737 Gorham, 8/1/95 Hrg. p. 20.
    738 Gorham, 8/1/95 Hrg. p. 20.
    739 Tripp, 8/1/95 Hrg. p. 21.
    740 Williams, 7/26/95 Hrg. p. 167.
    741 Williams, 7/26/95 Hrg. pp. 179-180.
    742 Williams, 7/26/95 Hrg. p. 180.
    743 Williams, 7/26/95 Hrg. p. 181.
    744 Williams, 7/26/95 Hrg. p. 181.
    745 Williams, 7/26/95 Hrg. p. 182.
    746 Williams, 7/26/95 Hrg. pp. 183-184.
    747 Williams, 7/26/95 Hrg. p. 184.
    748 Williams, 7/26/95 Hrg. p. 184.
    749 Williams, 7/26/95 Hrg. p. 180.
    750 Williams, 7/26/95 Hrg. p. 221.
    751 Williams, 7/26/95 Hrg. p. 221.
    752 Nussbaum, 9/16/95 Dep. p. 238.
    753 Nussbaum, 7/12/95 Dep. p. 239.
    754 Nussbaum, 7/12/95 Dep. p. 239.
    755 Castleton, 8/3/95 Hrg. p. 33
    756 Castleton, 6/27/95 Dep. p. 132.
    757 Castleton, 8/3/95 Hrg. p. 8.
    758 Castleton, 8/3/95 Hrg. p. 11.
    759 Castleton, 8/3/95 Hrg. p. 12.
    760 Castleton, 8/3/95 Hrg. p. 12.
    761 Castleton, 8/3/95 Hrg. p. 12.
    762 Castleton, 8/3/95 Hrg. p. 13.
    763 Huber, 8/3/95 Hrg. p. 5.
    764 Huber, 8/3/95 Hrg. pp. 14-15.
    765 Huber, 8/3/95 Hrg. p. 15.
    766 Huber, 8/3/95 Hrg. p. 16.
    767 Huber, 8/3/95 Hrg. p. 17.
    768 Huber, 8/3/95 Hrg. p. 17.
    769 Huber, 6/29/95 Dep., p. 36.
    770 White House Document S 020915.
    771 Heymann, 7/21/95 Dep. pp. 85-86.
    772 Heymann, 7/21/95 Dep. pp. 85-86.
    773 Justice Department Document F 000166.
    774 Heymann, 7/21/95 Dep. pp. 170.
    775 Heymann, 7/21/95 Dep. pp. 170.
    776 Margolis, 8/10/95 Hrg. p. 212.
    777 Heymann, 7/21/95 Dep. pp. 154-155.
    778 Margolis, 8/10/95 Hrg. p. 233.
    779 Margolis, 8/10/95 Hrg. p. 233.
    780 Margolis, 8/10/95 Hrg. p. 232.
    781 Heymann, 8/2/95 Hrg. p. 51.
    782 Margolis, 8/10/95 Hrg. p. 230.
    783 Heymann, 8/2/95 Hrg. pp. 49-50.
    784 Justice Department Document F 000163.
    785 Heymann, 8/2/95 Hrg. p. 50.
    786 Heymann, 8/2/95 Hrg. p. 50.
    787 Heymann, 8/2/95 Hrg. p. 50.
    788 Nussbaum, 8/9/95 Hrg. p. 127.
    789 Neuwirth, 8/3/95 Hrg. pp. 121-122.
    790 Neuwirth, 8/3/95 Hrg. pp. 121-122.
    791 Neuwirth, 8/3/95 Hrg. pp. 121-122.
    792 Neuwirth, 8/3/95 Hrg. p. 124.
    793 Nussbaum, 7/12/95 Dep. pp. 278-279.
    794 Nussbaum, 7/12/95 Dep. pp. 278-279.
    795 Nussbaum, 7/12/95 Dep. pp. 278-279.
    796 Park Police Document 43.
    797 Park Police Document 68.
    798 The FBI conducted a comparison of the handwriting on the 
note and that of Vince Foster in various personal documents, and 
concluded that Foster wrote the note. I Foster Hearings, p. 257-258.
    799 Nussbaum, 7/12/95 Dep. pp. 282-283.
    800 Burton, 8/7/95 Hrg. p. 8.
    801 Burton, 8/7/95 Hrg. p. 9.
    802 Gorham, 8/1/95 Hrg. p. 27.
    803 Tripp, 8/1/95 Hrg. p. 29.
    804 Tripp, 8/1/95 Hrg. p. 29.
    805 Tripp, 8/1/95 Hrg. p. 29.
    806 Nussbaum, 8/10/95 Hrg. p. 19.
    807 Sloan, 8/3/95 Hrg. p. 97.
    808 White House Document Z 001206, Z 001208.
    809 White House Document Z 001213.
    810 White House Document Z 001214.
    811 Gorham, 8/1/95 Hrg. p. 31.
    812 Nussbaum, 8/10/95 Hrg. p. 12.
    813 Nussbaum, 8/9/95 Hrg. p. 18.
    814 Nussbaum, 7/12/95 Dep. p. 302.
    815 Nussbaum, 7/12/95 Dep. p. 303.
    816 Burton, 8/7/95 Hrg. pp. 49-49.
    817 Nussbaum, 7/12/95 Dep. p. 303.
    818 Burton, 8/7/95 Hrg. p. 51.
    819 Nussbaum, 7/12/95 Dep. pp. 303-305.
    820 Nussbaum, 7/12/95 Dep. pp. 303-305.
    821 Gergen, 7/12/95 Hrg. pp. 116-117.
    822 Gergen, 7/12/95 Dep. p. 137.
    823 Nussbaum, 7/12/95 Dep. pp. 298-299.
    824 S. Hrg., 8/7/95, p. 122.
    825 McLarty, 8/7/95 Hrg. p. 122-123.
    826 McLarty, 8/7/95 Hrg. p. 23.
    827 Nussbaum, 7/12/95 Dep. p. 299.
    828 Nussbaum, 7/12/95 Dep. pp. 287-288.
    829 Burton, 8/7/95 Hrg. p. 13.
    830 Burton, 8/7/95 Hrg. p. 13.
    831 Nussbaum, 7/12/95 Dep. p. 288.
    832 Thomases, 8/8/95 Hrg. p. 174.
    833 Thomases, 8/8/95 Hrg. p. 174.
    834 Nussbaum, 8/9/95 Hrg. p. 19.
    835 FBI Documents FBI-00000018--FBI 00000044.
    836 Neuwirth, 8/3/95 Hrg. pp. 102-103.
    837 Justice Department Document FBI-00000018--FBI-00000020.
    838 Justice Department Documents A139-A141.
    839 White House Document S 020562.
    840 Burton, 8/7/95 Hrg. p. 20.
    841 White House Document Z 001148.
    842 Burton, 8/7/95 Hrg. p. 19.
    843 Castleton, 8/3/95 Hrg. pp. 13-14.
    844 Castleton, 8/3/95 Hrg. p. 21.
    845 Castleton, 6/27/95 Dep. pp. 139-140.
    846 Castleton, 6/27/95 Dep. pp. 139-140.
    847 Williams, 7/26/95 Hrg. p 307.
    848 Williams, 7/26/95 Hrg. pp. 306.
    849 Castleton, 6/27/95 Dep., p. 21.
    850 Williams, 7/7/95 Dep. p. 150.
    851 Williams, 7/7/95 Dep. pp. 150-151, 170.
    852 Huber, 8/3/95 Hrg. pp. 18-19.
    853 Huber, 8/3/95 Hrg. p. 23.
    854 Huber, 8/3/95 Hrg. p. 23.
    855 Nussbaum, 7/13/95 Dep. p. 407-408.
    856 White House Document S 020562.
    857 Letter from Jane Sherburne to Robert Giuffra, February 12, 
1996.
    858 White House Documents S020921, S020927.
    859 Williams, 12/11/95 Hrg., p. 8.
    860 Williams, 7/7/95 Dep. p. 145.
    861 Williams, 7/7/95 Dep. p. 147.
    862 Barnett, 12/11/95 Hrg., p. 1.
    863 Barnett, 12/11/95 Hrg., p. 12.
    864 White House Document S012482
    865 White House Document S020921.
    866 Barnett, 12/11/95 Hrg., p. 17.
    867 Barnett, 12/11/95 Hrg., p. 15.
    868 Barnett, 12/11/95 Hrg., p. 19.
    869 Barnett, 12/11/95 Hrg., p. 20.
    870 White House Documents S020921, S020927, S020935.
    871 Barnett, 12/11/95 Hrg., pp. 12-23.
    872 White House Document S020921.
    873 Ingram, 12/11/95 Hrg., p. 28.
    874 Willkie, Farr & Gallagher document ST125.
    875 Thomases, 12/18/95 Hrg., p. 25.
    876 Treasury Document (unnumbered).
    877 White House document S020921.
    878 Willkie Farr & Gallagher Document No. ST120.
    879 Thomases, 12/18/95 Hrg., p. 27.
    880 Willkie Farr & Gallagher Document No. ST126.
    881 Willkie Farr & Gallagher Document ST 123.
    882 Willkie Farr & Gallagher Document No. ST131.
    883 Thomases, 12/18/95 Hrg., p. 31, 34.
    884 Solis, 5/14/96 Hrg., p. 28.
    885 Thomases, 12/18/95 Hrg., p. 41.
    886 12/07/95 Treasury fax; S020921.
    887 Willkie, Farr & Gallagher Document ST128.
    888 Gergen, 8/7/95 Hrg. p. 112.
    889 McLarty, 8/7/95 Hrg. p. 114.
    890 Gergen, 8/7/95 Hrg. p. 113.
    891 Hearings, August 7, p.114.
    892 Gergen, 7/12/95 Dep. p. 62.
    893 Gergen, 7/12/95 Dep. p. 62.
    894 Gergen, 7/12/95 Dep. p. 63.
    895 Gergen, 7/12/95 Dep. p. 63.
    896 Gergen, 7/12/95 Dep. p. 68.
    897 Gergen, 7/12/95 Dep. p. 68.
    898 Gergen, 7/12/95 Dep. p. 69.
    899 Gergen, 7/12/95 Dep. p. 69.
    900 Hearings, August 7, 145-146
    901 White House Document Z 000514.
    902 White House Document Z 000514.
    903 White House Document Z 000515.
    904 Burton, 8/7/95 Hrg. pp. 107-108.
    905 McLarty, 8/7/95 Hrg. p. 123.
    906 McLarty, 8/7/95 Hrg. p. 53; Gergen, 7/12/95 Dep. p. 63.
    907 McLarty, 8/7/95 Hrg. p. 126.
    908 Gergen, 7/12/95 Dep. p. 52.
    909 McLarty, 8/7/95 Hrg. pp. 126-127.
    910 Gergen, 7/12/95 Dep. p. 53.
    911 S. Hrg. 8/7/95, p.128.
    912 Gergen, 7/12/95 Dep. p. 117.
    913 Heymann, 8/2/95 Hrg. p. 53.
    914 Heymann, 8/2/95 Hrg. p. 53.
    915 Heymann, 8/2/95 Hrg. pp. 56-57.
    916 Heymann, 8/2/95 Hrg. p. 54.
    917 Department of Justice Document GRO466.
    918 White House document S020921.
    919 Department of the Treasury document dated 12/07/95.
    920 Thomases, 12/18/95 Hrg., p. 80.
    921 Thomases, 5/14/96 Hrg., p. 28-30.
    922 Thomases, 5/14/96 Hrg., p. 30.
    923 Hubbell, 7/13/95 Dep. p. 123.
    924 Hubbell 6/4/96 Dep. p. 22.
    925 Hubbell, 6/4/96 Dep. p. 23.
    926 Hubbell, 6/4/96 Dep. pp. 32-33.
    927 Heymann, 8/2/95 Hrg. pp. 54-55.
    928 Heymann, 8/2/95 Hrg. p. 55.
    929 Heymann, 7/21/95 Dep. p. 107.
    930 Heymann, 8/2/95 Hrg. p. 55.
    931 Heymann, 8/2/95 Hrg. p. 56.
    932 Margolis, 8/10/95 Hrg. p. 248.
    933 Heymann, 8/2/95 Hrg. p. 148.; Margolis, 8/10/95 Hrg. pp. 
252-253.
    934 Justice Department Document FBI-0000009.
    935 Heymann, 8/2/95 Hrg. pp. 56-57.
    936 Heymann, 8/2/95 Hrg. p. 58.
    937 Heymann, 7/21/95 Dep. p. 128.
    938 Gergen, 7/12/95 Dep. p. 101.
    939 Heymann, 7/21/95 Dep. pp. 128-129.
    940 Heymann, 7/21/95 Dep. pp. 128-129.
    941 Heymann, 7/21/95 Dep. pp. 128-129.
    942 House Document CGEPR0563.
    943 Report of the Independent Counsel In Re Vincent W. Foster 
Jr., June 30, 1994 [hereinafter ``Fiske Report''], p. 12, reprinted in 
I Hearings before the Committee on Banking, Housing, and Urban Affairs 
on the Death of Vincent W. Foster, Jr. [hereinafter ``Foster 
Hearings''], p. 187.
    944 House document CGE12287.
    945 House document CGE12287.
    946 Hubbell, 2/7/96 Hrg. p. 46.
    947 Williams & Connolly Document DKSN000481.
    948 Hearings before the Special Committee to Investigate 
Whitewater Development Corporation and Related Matters, administered by 
the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, on 
the Inquiry into whether Improper Conduct Occurred Regarding the Way in 
which White House Officials Handled Documents in the Office of White 
House Deputy Counsel Vincent W. Foster, Jr., 104th Cong., 1st Sess., 
July 18, 1995--August 10, 1995 [hereinafter ``S. Hrg.''], 8/8/95 p. 28; 
Williams & Connolly Document DKSN000482.
    949 Blair, 2/19/96 Dep. p. 79.
    950 Williams & Connolly Document DKSN000518.
    951 Seidman, II Foster Hearings, p. 1794.
    952 White House Document S9210.
    953 Nussbaum, 8/9/95 Hrg. p. 10.
    954 Hubbell, 2/7/96 Hrg. p. 46.
    955 Blair, 2/19/96 Dep. p. 79.
    956 Wright, 1/26/96 Dep. p. 157-159.
    957 Wright, 1/26/96 Dep. p. 157-159.
    958 Wright, 1/26/96 Dep. p. 164.
    959 Report of the Committee on Banking, Housing, and Urban 
Affairs, United States Senate, on the Communications between Officials 
of the White House and the U.S. Department of the Treasury or the 
Resolution Trust Corporation, January 3, 1995, [hereinafter Treasury 
Contacts Report], p. 3.
    960 Treasury Contacts Report, p. 3 & n. 7.
    961 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Production, pp. 1447-1449.
    962 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Production, pp. 1450-1455.
    963 Foren, 11/28/95 Hrg. p. 20.
    964 Foren, 11/28/95 Hrg. p. 23.
    965 Bowles, 11/28/95 Hrg. p. 24.
    966 Bowles, 11/28/95 Hrg. p. 24.
    967 Shepperson, 11/28/95 Hrg. pp. 23-24.
    968 White House Document S12334.
    969 II Foster Hearings, p. 1794.
    970 II Foster Hearings, p. 1794.
    971 II Foster Hearings p. 1794.
    972 II Foster Hearings p. 1794.
    973 S. Hrg., 7/20/95 p. 20; Braun, 6/19/95 Dep. pp. 24-25, 
121; Rolla, 6/20/95 Dep. pp. 54-55.
    974 Rolla, 7/20/95 Hrg. pp. 31-32.
    975 Hines, 7/20/95 Hrg. p. 25; Hines, 6/21/95 Dep. pp. 28-29, 
33.
    976 Mathews, 7/25/95 Hrg. pp. 73-74; Mathews, 6/27/95 Dep. pp. 
41-42; See also, White House Document Z000139.
    977 Mathews, 7/25/95 Hrg. pp. 73-74; Mathews, 6/27/95 Dep. p. 
67.
    978 Gergen, 7/12/95 Dep. p. 29-30.
    979 Gearan, 7/6/95 Dep. p. 48.
    980 Hubbell, 7/13/95 Dep. pp. 49-51.
    981 House Document CGE 12287.
    982 House Document CGE 12287.
    983 White House Document Z000139.
    984 White House Document Z000450.
    985 Thomasson, 7/25/95 Hrg. p. 199.
    986 House Document CGE 12287.
    987 Thomasson, 7/25/95 Hrg. p. 205.
    988 Williams, 7/26/95 Hrg. p. 154.
    989 Williams, 7/7/95 Dep. p. 56.
    990 Williams, 7/7/95 Dep. pp. 57-58.
    991 Thomases, 7/17/95 Dep. p. 60.
    992 O'Neill, 7/26/95 Hrg. p. 22.
    993 O'Neill, 7/26/95 Hrg. p. 23.
    994 Anderson, 7/31/95 Dep. Exh. 1.
    995 Anderson, 7/24/95 Dep. pp. 63, 77.
    996 Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 42.
    997 Margolis, 8/10/95 Hrg. pp. 178-179; Adams, 6/29/95 Dep. p. 
32
    998 Adams, 6/29/95 Dep. p. 34-35; Margolis 8/10/95 Hrg. p. 
179.
    999 Nussbaum, 8/9/95 Hrg. pp. 39-41; Neuwirth, 8/3/95 Hrg. p. 
132.
    1000 Margolis, 8/10/95 Hrg. p. 179.
    1001 Justice Department Document F000166.
    1002 Justice Department Document FBI-129.
    1003 Margolis, 8/10/95 Hrg. p. 179.
    1004 Heymann, 7/21/95 Dep. p. 24.
    1005 Bell Atlantic Document (not numbered); Williams & 
Connolly Document 001; White House Document Z 000647.
    1006 Nussbaum, 7/12/95 Dep. p. 142.
    1007 Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    1008 Thomases, 8/8/95 Hrg. p. 64.
    1009 Thomases, 8/8/95 Hrg. p. 68.
    1010 Transcript of Interview, ABC News 20/20, 1/12/96.
    1011 Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    1012 House Document CGE12287.
    1013 Castleton, 6/27/95 Dep. pp. 139-140.
    1014 Willkie Farr & Gallagher Document ST 000002.
    1015 Swidler & Berlin Document (unnumbered).
    1016 White House Documents Z000350--Z000351.
    1017 Wright, 1/26/96 Dep. p. 157-159.
    1018 Wright, 1/26/96 Dep. p. 164.
    1019 II Foster Hearings p. 1794.
    1020 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.
    1021 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.
    1022 Swidler & Berlin Document (unnumbered)
    1023 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. 2.
    1024 Gorham, 8/1/95 Hrg. p. 17.
    1025 White House Document Z 001109; White House Document Z 
001123.
    1026 White House Documents Z 001110--Z 001117.
    1027 Gorham, 8/1/95 Hrg. p. 60.
    1028 Gorham, 8/1/95 Hrg. p. 70.
    1029 Spafford, 7/27/95 Hrg. p. 19.
    1030 Spafford, 7/27/95 Hrg. p. 22-23.
    1031 Gorham, 8/1/95 Hrg. p. 30-31.
    1032 Gorham, 8/1/95 Hrg. p. 31.
    1033 Nussbaum, 8/10/95 Hrg. p. 12.
    1034 S. Hrg. 8/1/95 p. 31.
    1035 Hines, 6/21/95 Dep. p. 83.
    1036 Markland, 6/28/95 Dep. pp. 251-252.
    1037 Burton, 7/5/95 Dep. p. 184.
    1038 Margolis, 8/10/95 Hrg. pp. 230-231.
    1039 Castleton, 8/3/95 Hrg. pp. 13-14.
    1040 Nussbaum, 7/12/95 Dep. p. 237.
    1041 Williams, 7/26/95 Hrg. p. 220-221.
    1042 Williams, 7/26/95 Hrg. p. 182.
    1043 Huber, 8/3/95 Hrg. p. 15.
    1044 Williams, 7/26/95 Hrg. p. 184.
    1045 Huber, 8/3/95 Hrg. pp. 14-15.
    1046 Williams, 7/7/95 Dep. p. 141.
    1047 Nussbaum, 7/13/95 Dep. p. 407-408.
    1048 Nussbaum, 7/12/95 Dep. pp. 287-288.
    1049 Thomases, 8/8/95 Hrg. p. 174.
    1050 FBI Documents FBI-00000018--FBI 00000044.
    1051 Neuwirth, 8/3/95 Hrg. pp. 102-103.
    1052 Justice Department Documents A139-A141.
    1053 White House Document Z 1148.
    1054 See, e.g. Ann Devroy, Clinton Finds No Explanation to 
Aide's Death; Probes Continuing on Apparent Suicide, Wash. Post, July 
23, 1993, p. A4.
    1055 See, e.g., Frank J. Murray, White House Plays Down 
Suicide Probe, Wash. Times, July 23, 1993, p. A7; Ann Devroy, Clinton 
Finds No Explanation to Aide's Death; Probes Continuing on Apparent 
Suicide, Wash. Post, July 23, 1993, p. A4; Thomas L. Friedman, White 
House Aide Leaves No Clue About Suicide, N.Y. Times, July 22, 1993, p. 
A1; Ruth Marcus, Ann Devroy, Clintons Mystified by Aide's Death; Staff 
Shaken by Apparent Suicide, Wash. Post, July 22, 1993.
    1056 Department of Justice Document GRO466.
    1057 White House document S020921.
    1058 Department of Treasury document dated 12/07/95.
    1059 Thomases, 12/18/95 Hrg., p. 80.
    1060 Thomases, 5/14/96 Hrg., p. 28-30.
    1061 Thomases, 5/14/96 Hrg., p. 30.
    1062 Hubbell, 6/4/96 Dep. pp. 32-33.
    1063 Hubbell, 6/4/96 Dep. p. 22.
    1064 Hubbell, 6/4/96 Dep. p. 23.
    1065 Hubbell, 7/13/95 Dep. p. 123.
    1066 Hubbell, 6/4/96 Dep. pp. 32-33.
    1067 Williams, 7/26/95 Hrg. p. 154.
    1068 O'Neill, 7/26/95 Hrg. p. 112.
    1069 O'Neill, 7/26/95 Hrg. p. 23-24.
    1070 Williams, 7/7/95 Dep. p. 57.
    1071 Williams, 11/2/95 Hrg. p. 16.
    1072 Williams, 7/7/95 Dep. p. 57.
    1073 Williams, 11/2/95 Hrg. p. 17.
    1074 Williams, 7/7/95 Dep. p. 88.
    1075 Williams, 11/2/95 Hrg. p. 21.
    1076 Williams, 7/7/95 Dep. p. 58.
    1077 Willkie Farr & Gallagher Document 000001-000006.
    1078 Quinn, 7/15/95 Dep. p. 7; Nussbaum, 7/12/95 Dep. p. 177.
    1079 Williams, 11/2/95 Hrg. p. 25.
    1080 Treasury Document (unnumbered).
    1081 Nussbaum, 7/12/95 Dep. p. 240.
    1082 Gorham, 8/1/95 Hrg. pp. 16-17.
    1083 Williams, 7/26/95 Hrg. p. 220-221.
    1084 Nussbaum, 9/16/95 Dep. p. 238.
    1085 Williams, 7/26/95 Hrg. pp. 183-184.
    1086 Castleton, 8/3/95 Hrg. pp. 13-14.
    1087 Williams, 7/26/95 Hrg. pp. 306.
    1088 Huber, 8/3/95 Hrg. p. 23.
    1089 Williams, 7/7/95 Dep. pp. 150-151, 170.
    1090 Nussbaum, 7/13/95 Dep. p. 407-408.
    1091 Thomases, 8/8/95 Hrg., p. 132.
    1092 Thomases, 12/18/95 Hrg. pp. 46-47.
    1093 Thomases, 7/17/95 Dep. p. 60.
    1094 Bell Atlantic Records (unnumbered).
    1095 Thomases, 8/8/95 Hrg. p. 64.
    1096 Nussbaum, 7/12/95 Dep. p. 142.
    1097 Neuwirth, 7/10/95 Dep. p. 112; 8/3/95 Hrg. p. 75.
    1098 Thomases, 8/8/95 Hrg. p. 68.
    1099 Williams & Connolly Document 001.
    1100 White House Document Z 000647.
    1101 Thomases, 11/2/95 Hrg. p. 52.
    1102 Thomases, 11/2/95 Hrg. p. 57.
    1103 Thomases, 11/2/95 Hrg. p. 95.
    1104 Thomases, 11/2/95 Hrg. p. 99.
    1105 Thomases, 11/2/95 Hrg. p. 52.
    1106 Treasury Document (unnumbered).
    1107 White House Document Z001247.
    1108 Williams, 7/7/95 Dep. p. 145.
    1109 Thomases, 8/8/95 Hrg. p. 193.
    1110 Thomases, 11/2/95 Hrg. p. 72.
    1111 Treasury Contacts Report, p. 206.
    1112 Nussbaum, 7/12/95 Dep. p. 57.
    1113 Mathews, 7/25/95 Hrg. pp. 73-74; Mathews, 6/27/95 Dep. p. 
67.
    1114 White House Document Z000139.
    1115 Nussbaum, 7/12/95 Dep. p. 128-129, 174.
    1116 Heymann, 7/21/95 Dep. p. 24; 8/2/95 Hrg. p. 41-42.
    1117 Margolis, 8/10/95 Hrg. pp. 178-179.
    1118 Adams, 7/27/95 Hrg. p. 94; Adams, 6/29/95 Dep. p. 35 (``I 
think as I have just described, the agreement was that David and I 
would look at each file and determine relevance or--or determine 
relevance first of all.'')
    1119 Hume, 6/29/95 Dep. p. 68.
    1120 Nussbaum, 7/12/95 Dep. pp. 120-121.
    1121 Margolis, 8/10/95 Hrg. p. 179; Adams, 7/27/95 Hrg. p. 95.
    1122 Nussbaum, 8/9/95 Hrg. p. 60.
    1123 Nussbaum, 7/12/95 Dep. p. 174.
    1124 Nussbaum, 7/12/95 Dep. p. 174-175.
    1125 Nussbaum, 8/9/95 Hrg. p. 127-128.
    1126 Nussbaum, 8/10/95 Hrg. p. 19.
                     Phase 2--The Washington Phase

                                CONTENTS

                                                                   Page
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 pattern 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

                  Conclusions of the Special Committee

    ``Try to find out what's going on in Investigation''
    ``Vacuum Rose Law files WWDC docs-subpoena
     *Documents--> Never know go out quietly'' 1

          Handwritten notes of William Kennedy, former White 
        House Associate Counsel

    ``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

    ``HI  Spcl Counsel-3 major problems: (1) HRC adamantly 
opposed (2) Reno has shut the door (3) if we ask looks like we 
ducked.''
          Handwritten notes of Mark Gearan, former Director of 
        White House Communications.

    Our nation rests on the principle that all Americans are 
equal under the law. No one, including the President, is 
entitled to special treatment in a civil or criminal 
investigation of their conduct. The power of the presidency may 
not be used to obtain a legal defense for the President and his 
associates unavailable to other citizens.
    During the 1992 presidential campaign, questions surfaced 
about the relationship of then-Governor Clinton and Mrs. 
Clinton and James McDougal, the owner of Madison Guaranty 
Savings and Loan Association (``Madison Guaranty'') and the 
Clintons' partner in the Whitewater Development Corporation, 
Inc. (``Whitewater''). Within the past month, a jury in Little 
Rock, Arkansas convicted Mr. McDougal, his former wife, Susan, 
and Arkansas Governor Jim Guy Tucker of numerous federal crimes 
relating to the activities of Madison Guaranty and, in part, 
the operation of Whitewater.
    The McDougal-Tucker convictions grew out of an 
investigation begun during the 1992 presidential campaign by 
investigators of the Resolution Trust Corporation (``RTC''). 
This RTC investigation culminated in a series of criminal 
referrals to the United States Attorney's Office in Little Rock 
naming the Clintons as witnesses to suspected criminal 
activity. These significant convictions also rested on a 
parallel inquiry begun in 1992 by the Small Business 
Administration (``SBA'') of Capital Management Services, Inc. 
(``CMS''), a small business investment company.
    Within months of the inauguration of President Clinton, 
senior Administration officials began to take steps to minimize 
the legal and political damage to the Clintons arising from 
these investigations. These officials seriously misused their 
public offices for the Clintons' private benefit, obtained 
confidential law enforcement information from the RTC and SBA 
relating to investigations touching on the Clintons, and they 
attempted to interfere in ongoing law enforcement 
investigations.
    During hearings in the summer of 1994, the Senate Banking 
Committee examined--in deference to the investigation of 
Special Counsel Robert Fiske--only the propriety of certain 
communications in late 1993 and early 1994 between senior 
officials of the White House and the Treasury Department 
concerning confidential RTC criminal referrals involving 
Madison and Whitewater. The White House then claimed that its 
receipt of this confidential law enforcement information was 
appropriate to allow the President to respond to press 
inquiries and to protect the President from inadvertently 
engaging in meetings that later could prove embarrassing. No 
one--and certainly no member of the Banking Committee-- 
asserted that the President was entitled to use such 
information to further his personal legal interests.
    Rather than being limited to the narrow question before the 
Banking Committee in the 103rd Congress, and without objection 
by Independent Counsel Kenneth Starr, the Special Committee 
examined all aspects of the Clinton Administration's response 
to ongoing investigations of Whitewater and related matters. 
This broader inquiry revealed that in 1993 and 1994, senior 
Administration officials took steps that went far beyond what 
was necessary to respond to press inquiries. Indeed, when the 
full picture is examined, the claim that Administration 
officials were innocently gathering information so they could 
respond to press inquiries collapses entirely.
     After careful review of all the evidence, including 
evidence obtained by the Banking Committee during the summer of 
1994, the Special Committee concludes that senior 
Administration officials--in the White House, the Treasury and 
Justice Departments, the RTC and the SBA--engaged in a pattern 
of highly improper conduct in responding to investigations of 
the Clintons' involvement in Whitewater and related matters.
    This pattern cannot be explained as the result of a series 
of lapses in judgment. The Committee concludes that these 
Administration officials deliberately misused their public 
offices to advance the purely private interests of the 
President and Mrs. Clinton. Raising the possibility of 
obstruction of justice, they repeatedly attempted to hinder, 
impede and control investigations of Whitewater and related 
matters by the RTC, the Justice Department, the Inspectors 
General of the RTC and Treasury Departments, and even the 
Senate.
    Because of misdeeds of the White House, perhaps the 
American people will never know the full extent to which the 
highly improper actions of Administration officials prejudiced 
the outcome of inquiries involving Whitewater, Madison Guaranty 
and related matters. But the available facts clearly 
demonstrate that Administration officials improperly used the 
power of their offices in a wrongful attempt to ensure that 
ongoing federal investigations resulted in the least amount of 
legal and political damage to the President and Mrs. Clinton.
          * * * * * * *

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

    The pattern of concealment, interference and abuse of power 
surrounding the Clintons' response to federal investigations of 
Whitewater and Madison Guaranty began in the mid-1980s.
    On July 2, 1986, the Arkansas Securities Commissioner, 
Beverly Bassett Schaffer, warned Governor Clinton that federal 
regulators were about to remove James McDougal from the 
management of Madison Guaranty. Specifically, she wrote to the 
Governor's chief counsel that the S&L was in ``serious 
trouble.'' 2
    On July 14, just four days after the Federal Home Loan Bank 
Board removed Mr. McDougal from Madison, Mrs. Clinton 
terminated her law firm's relationship with Madison Guaranty 
and returned the unused portion of the S&L's retainer. 3 
That same day, Governor Clinton erroneously advised his Chief 
of Staff, Betsey Wright, that he and Mrs. Clinton were no 
longer partners of Mr. McDougal in the Whitewater real estate 
investment. 4
    In 1988, after federal regulators had taken over Madison 
Guaranty and were investigating insider dealing that 
contributed to the S&L's collapse, Mrs. Clinton took the 
questionable step of ordering the destruction of records 
reflecting her and her law firm's work for Madison. 5 At 
the time, Seth Ward, a former associate of Mr. McDougal, was 
suing Madison Guaranty over a land deal that federal regulators 
have described as a fraud. The Committee has recently obtained 
evidence indicating that Mrs. Clinton herself may have had 
greater involvement in creating documents that concealed 
irregular loans between Mr. Ward and Madison than her own 
statements admit. 6
    In late fall 1992, Mrs. Clinton learned of an RTC 
``criminal referral regarding a savings and loan official in 
Arkansas and * * * involv[ing] the Clintons.'' 7 After the 
election, her law partner and Mr. Ward's son-in-law, Webster 
Hubbell secretly and improperly removed the firm's client files 
for Madison without obtaining the approval of the firm or the 
RTC, which at this point owned them in its capacity as 
conservator of Madison Guaranty. 8 In anticipation of the 
possibility that the Clintons might need the Madison files (as 
well as other client files) to respond to an inquiry, Mr. 
Hubbell brought the records from Little Rock to Washington--
storing them in his basement for almost a year. In some 
instances, Mr. Hubbell left the firm with no copies of the 
relevant files, including billing records.
    By March 1993, senior Clinton Administration officials 
confirmed that the RTC had sent a criminal referral mentioning 
the Clintons to the Justice Department. Specifically, RTC 
Senior Vice President William Roelle advised Roger Altman, then 
Deputy Treasury Secretary and a close associate of the 
President, of the existence of the RTC referral involving the 
Clintons. 9
    In a pattern that would be repeated, Mr. Altman signaled 
the White House about this confidential RTC information which 
was not yet the subject of any press inquiries. On March 23 and 
24, Mr. Altman sent Mr. Nussbaum, by facsimile, two news 
articles, written the year before, concerning the Clintons' 
Whitewater investment. 10
    In early May 1993, again prior to any press inquiries, the 
White House learned of another investigation relating to 
President Clinton. Former SBA Associate Administrator Wayne 
Foren testified that David Hale, who was a key prosecution 
witness in the recently concluded McDougal-Tucker trial, told 
him that he had access and influence with Governor Tucker and 
President Clinton. 11 On May 5, Mr. Foren briefed Erskine 
Bowles, the new SBA Administrator, on the agency's 
investigation of CMS and Mr. Hale. 12 Mr. Foren and his 
deputy understood that Mr. Bowles passed this confidential 
information to White House Chief of Staff Mack McLarty. 13

2. The White House concealed damaging evidence about Whitewater and 
        Travelgate from career law enforcement officials investigating 
        Vincent Foster's death

    In July 1993, as described in Part I of this Report, senior 
White House officials engaged in highly improper conduct in 
handling the documents in the office of former White House 
Deputy Counsel Vincent Foster following his death. By the time 
of Mr. Foster's death, the Clintons and their associates were 
aware that the Clintons' involvement with Whitewater and 
Madison Guaranty might subject them to liability, and that Mr. 
Foster's office might contain damaging evidence about the 
Whitewater and Travelgate affairs. Over the objection of the 
Deputy Attorney General and at the direction of Mrs. Clinton, 
senior White House officials prevented law enforcement 
officials from examining Mr. Foster's records. Mrs. Clinton's 
Chief of Staff, Margaret Williams, then transferred damaging 
Whitewater files to the White House Residence for review by the 
President and Mrs. Clinton.

3. Senior White House officials improperly gathered confidential 
        information about investigations involving Whitewater and 
        Madison Guaranty

    By the summer of 1993, the White House began to obtain 
information about the looming Whitewater investigation. On 
August 17, Randy Coleman, David Hale's attorney, told Associate 
White House Counsel William Kennedy that Mr. Hale was under 
investigation by the Federal Bureau of Investigation, that he 
expected to be indicted soon, and that the investigation could 
affect the President. 14
    Several days later, Mr. Kennedy--not the Clintons' private 
counsel--called Mr. Coleman, who commented that if Heidi Fleiss 
``was madam to the stars, David Hale was the lender to the 
political elite in Arkansas.'' 15 Mr. Coleman told Mr. 
Kennedy that Mr. Hale's firm had made a number of improper 
loans involving politicians, including Governor Clinton. 
16 Mr. Kennedy advised Counsel to the President Bernard 
Nussbaum of Hale's allegations against the President. 17
    Sometime in September, the White House apparently obtained 
confidential information from the U.S. Attorney's Office in 
Little Rock, through Mr. McDougal's counsel, regarding the 
likelihood that Mr. McDougal would be indicted imminently. 
18
     By late September 1993, the RTC Office of Investigations 
in Kansas City prepared nine criminal referrals related to 
Madison Guaranty. The submission of the referrals to the 
Justice Department was, however, delayed by a week due to a 
demand by lawyers in the RTC's Professional Liability Section 
to perform a ``legal review'' of the referrals.
    During that week, Jean Hanson, the General Counsel of the 
Department of Treasury, which oversaw the RTC and its 
investigations, informed White House Counsel Bernard Nussbaum 
and Associate White House Counsel Clifford Sloan that there 
were several RTC referrals involving Madison, Whitewater, and 
the Clintons. 19 Ms. Hanson told Mr. Nussbaum that the 
President and Mrs. Clinton were identified as possible 
witnesses to the suspected crimes at issue in the referrals. 
20 Ms. Hanson also told Mr. Nussbaum that the referrals 
referenced possible improper campaign contributions from 
Madison to one of Mr. Clinton's gubernatorial campaign. 21 
Mr. Nussbaum admitted that Ms. Hanson provided him with 
nonpublic information about the referrals. 22
    This improper transmittal of confidential RTC information 
was a violation of clearly established RTC procedures as 
criminal referrals derived from records of financial 
institutions are subject to the restrictions of the Right to 
Financial Privacy Act. 23
    The day after this private conversation, on September 30, 
Ms. Hanson called Mr. Sloan to amplify on the confidential 
information she had provided 24 and informed him that the 
nine referrals, among other things, referred to Governor Jim 
Guy Tucker,25 named a Clinton gubernatorial campaign as a 
``co-conspirator,'' 26 and mentioned the Clintons as 
potential witnesses.27 In accordance with instructions 
from Mr. Nussbaum, Mr. Sloan relayed this information to Bruce 
Lindsey on or about September 30.28
    On October 4 or 5, 1993, Mr. Lindsey apprised President 
Clinton of the criminal referrals.29 It is highly likely 
that Mr. Lindsey told the President, a former Governor of 
Arkansas, that his immediate successor was mentioned in a 
criminal referral. When asked about President Clinton's 
response, Mr. Lindsey testified that ``it was certainly nothing 
other than just sort of, ' '' 30
    Two days later, President Clinton and Mack McLarty had 
meetings at the White House with Governor Tucker.31 
Although the President and Mr. McLarty have denied briefing 
Governor Tucker on the criminal referrals, senior White House 
officials undeniably put the President in the position where a 
legitimate question can be raised that such a briefing 
occurred. This fact wholly undermines the White House's claim 
that it was entitled to receive confidential information about 
the RTC criminal referrals to protect the President from 
embarrassing meetings with persons named in those referrals.
    On October 14, 1993, senior White House officials met again 
in Mr. Nussbaum's office with senior officials from the 
Treasury Department about the criminal referrals.32 The 
discussion included a detailed description of the referrals 
33 including the fact that one of the referrals ``involved 
four cashiers checks--each for $3,000, two made payable to the 
Clinton for Governor Campaign and two made payable to Bill 
Clinton.'' 34

4. A pivotal event: senior White House officials and private counsel 
        for the Clintons participate in an improper Whitewater defense 
        meeting

    On November 5, 1993, armed with details of the confidential 
RTC criminal referrals obtained from the Treasury Department--
as well as information on Mr. Hale's allegations obtained from 
the SBA--White House officials met with the Clintons' private 
lawyers, ``to impart information to the Clinton's personal 
lawyers,'' 35 and to arrange ``a division of labor between 
personal and White House counsel for handling future Whitewater 
issues.'' 36
    When asked whether the gathering was a legal defense 
meeting, Mr. Lindsey testified that ``that would accurately 
characterize the meeting.'' 37 The meeting was not, 
according to Mr. Lindsey, for the official purpose of 
responding to press inquiries.38 The participants, for 
example, discussed either ``vacuum[ing],'' or a ``vacuum'' in, 
the Rose Law Firm's files on Madison. In any event, members of 
the White House Counsel's office were clearly being employed in 
the service of the Clintons' private legal defense effort.
    Mr. Kennedy's contemporaneous notes of this meeting, which 
the Special Committee finally obtained after the full Senate 
voted to authorize the Senate Legal Counsel to institute a 
civil enforcement proceeding, indicate that a significant 
portion of the discussion was related to the confidential 
criminal referrals and the ongoing RTC investigation of 
Madison. Among the principal topics of the meeting was the 
referral related to illegal contributions to Mr. Clinton's 
gubernatorial campaigns.39
    The Kennedy notes indicate that the White House officials 
imparted to the private lawyers much of the knowledge they 
possessed with respect to Whitewater, including confidential 
information. As of November 5, the RTC considered the 
information about the referrals confidential and had not 
officially confirmed the accuracy of any press accounts about 
the referrals.40
    It was improper for White House officials to communicate 
confidential RTC or other law enforcement information to the 
Clintons' private lawyers to assist them in defending the 
Clintons against the RTC or any other potential civil or 
criminal enforcement actions. The investigations of Madison 
raised the possibility that the President or Mrs. Clinton 
personally could be held liable, financially or otherwise, in 
connection with Rose Law Firm's representation or the 
activities of Whitewater.
    The Special Committee concludes that the decision, as 
reflected in the November 5 meeting of White House officials 
and the Clintons' private counsel to cooperate in their 
response to the Whitewater investigations facing the Clintons 
represented a fundamental and disturbing turning point in the 
investigation. Although the Clintons faced adverse legal 
actions by the United States, they were relying on United 
States officials at the highest levels to defeat or avoid such 
actions. After the November 5 meeting, senior White House 
officials could no longer assert that their Whitewater efforts 
were solely intended to serve the government's official 
interests. The White House had completely obliterated the 
distinction between the public interest and the Clintons' 
private good.

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

    Although the White House has claimed that the purpose of 
the November 5 meeting was to ``pass the torch between White 
House lawyers who had been handling Whitewater to the newly 
hired attorney, David Kendall,'' 41 that clearly proved 
not to be the case. After the meeting, members of the White 
House Counsel's Office undeniably took affirmative steps to 
collect confidential information about the federal 
investigations into Whitewater--information that private 
counsel could not obtain.
    For example, on November 16, 1993, Mr. Eggleston obtained 
confidential information in the form of a stack of documents 
``approximately one foot high''--from the SBA about criminal 
referrals involving Mr. Hale.42 Mr. Eggleston reviewed 
these confidential documents for any references to President or 
Mrs. Clinton. The Justice Department later demanded that Mr. 
Eggleston return the documents to the SBA. Fraud Section Chief 
Gerald McDowell remarked: ``I've got to believe the WH counsel 
have done an incredibly stupid thing!'' 43 Contrary to Mr. 
Eggleston's denial, the Special Committee concludes that the 
evidence, particularly the documentary evidence, indicates that 
he shared this information with Bruce Lindsey, then the chief 
White House advisor on Whitewater.

6. Senior White House officials held formal ``Whitewater Response 
        Team'' meetings to protect the Clintons' private interests in 
        ongoing federal investigations

    In January 1994, a group of senior White House officials 
frequently met twice daily as a ``Whitewater Response Team.'' 
44 These meetings must be viewed in context. They went far 
beyond what was necessary to respond to press inquiries or to 
address other official matters. The meetings were held after 
the critical November 5 defense meeting with the Clintons' 
personal counsel. And, the Clintons' private defense counsel, 
Mr. Kendall, directly or indirectly participated in these 
meetings.
    During the initial Whitewater Response Meetings, senior 
White House officials debated the appointment of a special 
counsel to investigate Whitewater. Normally, the decision 
whether to ask for the appointment of a special counsel would 
be an official matter. The appropriateness of members of the 
Whitewater Response Team debating this matter, however, was 
fatally compromised by their earlier participation in the 
November 5 defense meeting. Thus, in discussions over the 
wisdom of appointing a special counsel, the assembled group 
undeniably considered matters relevant to the Clintons' 
personally--for example, whether the Clinton associates could 
be pressured into cooperating with the special counsel.
    Mrs. Clinton opposed the appointment of a special counsel, 
and her opposition was the source of considerable concern 
within the White House. 45 Notes taken by Communications 
Director Mark Gearan of a January 4, 1994 meeting reflect that 
Mrs. Clinton attended a meeting, then in progress, and said 
``this looks like a meeting I might be interested in.'' 46 
Mr. Gearan testified that Mrs. Clinton stayed for approximately 
15 minutes, 47 and expressed her view that no special 
counsel be appointed. 48
    Senior White House officials, and Mrs. Clinton in 
particular, feared that persons close to President Clinton 
might be indicted. At a January 7, 1993 meeting, Mr. Nussbaum 
curiously said, ``Indictments will be Betsey Wright.'' 49 
Ms. Wright was Governor Clinton's former Chief of Staff in the 
1980s and handled Whitewater and other Arkansas-related matters 
for the 1992 Clinton Presidential campaign. 50 A White 
House document marked ``Confidential: Second Draft, Summary of 
Arguments Re: Whitewater,'' dated January 10, 1994, listed 
reasons against the appointment of a prosecutor, 51 
including that a special counsel investigation ``may result in 
focus on friends and associates of the President, begin to 
squeeze them and may subject some to indictment.'' 52
    On January 8, 1994, Deputy Chief of Staff Harold Ickes 
expressed discontent with the manner in which career Justice 
Department prosecutors--Donald MacKay and Alan Carver--were 
then handling the ongoing federal investigations of the 
Clintons. 53 Mr. Ickes described Mr. Carver as a ``bad 
guy'' and actually said of Messrs. MacKay and Carver: ``Those 
guys are f------ us blue.'' 54
    The Whitewater Response Team assigned tasks to White House 
attorneys that should have been handled solely by the Clintons' 
private attorneys. For example, Mr. Eggleston prepared a legal 
analysis on the statute of limitations applicable to claims 
brought by the RTC and on the potential civil liability faced 
by the Clintons arising from their involvement with Madison 
Guaranty. 55 Another White House official was assigned the 
task of contacting Christopher Wade, the realtor of the 
Whitewater property, to gather information from him. 56
    The Whitewater Response Team was particularly concerned 
about the potentially adverse testimony of Beverly Bassett 
Schaffer, the former Arkansas Securities Commissioner who 
oversaw the regulation of Madison Guaranty in the mid-1980s. An 
RTC criminal referral expressly referenced Ms. Schaffer, and 
her contact with Mrs. Clinton in connection with Mrs. Clinton's 
representation of Madison Guaranty. At a January 7 meeting, Mr. 
Ickes exclaimed, ``[Beverly] Bassett [Schaffer] is so f----- 
important. [I]f we f--- this up, we're done.'' 57
    Even the President worried about Ms. Schaffer. In late 
December, he directed Messrs. Lindsey and McLarty: ``This is 
important to be on top of. Bassett did a good job in [campaign] 
on this--can she now?'' 58 In an effort to conceal the 
White House's involvement, the Response Team debated sending 
outside emissaries to speak with Ms. Schaffer. 59 Shortly 
thereafter, Mr. Lindsey's former law partner, John Tisdale, and 
another Clinton confidant, Skip Rutherford, contacted Ms. 
Schaffer. Mr. Tisdale reported back to Mr. Lindsey by 
memoranda, 60 and Mr. Rutherford discussed Ms. Schaffer 
with the White House. 61 Ms. Schaffer further testified 
that although Mr. Rutherford did not specifically indicate he 
was calling on behalf of the White House, she was aware that 
Mr. Rutherford was ``helping'' Mr. McLarty in some capacity. 
62

7. In early 1994, senior White House officials sought to manipulate the 
        RTC investigation of Madison Guaranty and the Rose Law Firm

    In early 1994, while the Whitewater Response Team was, in 
effect, plotting the Clintons' legal defense, there were 
substantial additional contacts between the Treasury Department 
and senior White House officials concerning RTC matters. In 
view of the totality of the White House's involvement in 
defending the Clintons' private interests in this period, the 
impropriety of these contacts can no longer be seriously 
debated. The Special Committee concludes that the contacts were 
improper, wrong and never should have occurred. In reaching 
this conclusion, the Special Committee places particular weight 
on the fact that as of the time of these additional contacts, 
the White House participants were members of the Whitewater 
Response Team and had discussed the concern that the 
investigators might pressure Clinton associates into 
cooperating.
    At a February 2 meeting, Deputy Treasury Secretary and 
Acting RTC CEO Roger Altman briefed key members of the 
Whitewater Response Team, who, by then, were in regular contact 
with the Clintons' private counsel on the status of the RTC's 
investigation into civil claims against the Clintons. 
Specifically, Mr. Altman provided the critical confidential 
information that the RTC investigation probably would not be 
finished prior to the expiration of the statute of limitations. 
Armed with this inside information, the Clintons could safely 
reject any RTC request for a tolling agreement.
    Also on February 2, having been told that the RTC would 
have to decide quickly, and with very incomplete information 
whether to bring civil claims against the Clintons, senior 
White House officials pressured Mr. Altman, a friend of the 
President, not to recuse himself. The White House feared that 
RTC General Counsel Ellen Kulka would be too tough and 
unreasonable. She could not be controlled, and the stakes were 
too high. Ultimately, Mr. Altman gave in to the pressure; his 
so-called ``de facto'' recusal was no recusal at all.
    The Special Committee concludes that this February 2 
meeting is indefensible. It never should have occurred. At the 
time, Mr. Nussbaum had functioned as a critical part of the 
Whitewater Response Team. He worked with private counsel for 
the Clintons. He was no longer in a position to provide 
dispassionate policy advice to Mr. Altman about recusal. 
Ironically, at this point, Mr. Nussbaum's conflict exceeded 
that of Mr. Altman. The Special Committee notes that RTC 
General Counsel Ellen Kulka, when asked to provide confidential 
information to Mr. Kendall, strongly objected. 63 At that 
time, senior White House officials failed to advise Ms. Kulka 
that they were already engaged in joint defense efforts with 
Mr. Kendall.
    The importance to the White House of keeping the friendly 
Mr. Altman in the loop on the Madison case is illuminated by 
the mysterious discovery of the Rose Law Firm billing records 
in the Book Room of the White House Residence. These records 
may explain why, as Mrs. Clinton's chief of staff, Margaret 
Williams, told Mr. Altman in early January 1994, ``HRC was 
`paralyzed' by [Whitewater].'' 64 The records may also 
explain why Deputy White House Chief of Staff Ickes and the 
White House Counsel's office prepared a memorandum on the Rose 
Law Firm's and the Clintons' potential civil liability relating 
to the failure of Madison.
    The billing records indicate that Mrs. Clinton--contrary to 
her previous statements--represented Mr. McDougal's S&L in 
connection with the Castle Grande project, which federal 
regulators have criticized as a series of sham land sales and 
insider transactions.65 In fact, after reviewing the 
records, former Madison chief loan officer, Harry Don Denton, 
recently told the federal investigators that he warned Mrs. 
Clinton in 1986 that loan transactions she was handling 
involving the Castle Grande project could be irregular, but he 
said she ``summarily dismissed'' his concern.66

8. Jay Stephens was removed from the investigation of possible civil 
        claims against parties associated with Madison Guaranty, 
        including the Clintons

    Early in February 1994, the RTC retained the law firm of 
Pillsbury, Madison & Sutro, (``Pillsbury'') including former 
Republican U.S. Attorney Jay Stephens, to investigate possible 
civil actions against parties associated with Madison Guaranty.
    On February 25, 1994, George Stephanopoulos, Senior Advisor 
to the President, and Josh Steiner, Chief of Staff to Secretary 
of the Treasury Lloyd Bentsen, discussed the RTC's decision to 
hire Mr. Stephens.67 Mr. Steiner testified that Mr. 
Stephanopoulos was ``angry'' and thought that Mr. Stephens 
should be disqualified from handling the matter because he had 
been a critic of the Clinton administration.68
    Treasury Department General Counsel Jean Hanson recalled 
that during one conversation Mr. Steiner told her: ``Do you 
believe those guys? They want to see if they can get rid of Jay 
Stephens.'' Ms. Hanson understood that ``those guys'' referred 
to various White House officials.69 Ms. Hanson further 
testified that on a separate occasion Mr. Steiner, himself, 
expressed the opinion that Ms. Kulka should be fired for hiring 
Mr. Stephens.70 Moreover, Mr. Steiner wrote in his diary 
about his conversation with Mr. Stephanopoulos:

          Simply outrageous that RTC had hired him [Stephens], 
        but even more amazing when George then suggested to me 
        that we needed to find a way to get rid of him. 
        Persuaded George that firing him would be incredibly 
        stupid and improper.71

    In hearings before the Senate Banking Committee, Mr. 
Steiner implausibly claimed that he lied in his diary.72 
In the weeks following this contact, Mr. Stephens' role in the 
civil investigation of Madison Guaranty came to a halt. The 
White House succeeded in what Mr. Steiner described as being 
``incredibly stupid and improper.'' 73
    Mr. Stephens' name was included in Pillsbury's initial 
proposal to the RTC as one of the three partners in charge of 
the matter.74 And during the early stages of the 
investigation in February 1994, Mr. Stephens attended meetings 
and was in daily contact with the RTC.75 After press 
reports about Mr. Steiner's conversation with Mr. 
Stephanopoulos appeared in the third week of March 1994, 
however, Mr. Stephens' role ``diminished substantially,'' and 
by the summer of 1994, he was ``virtually disengaged from the 
matter.'' 76 Mr. Stephens had no involvement in drafting 
the Pillsbury reports.77 He declined the RTC's request 
that he place his imprimatur on the final reports. Curiously, 
the RTC subsequently refused to authorize Pillsbury to correct 
the public misconception that Mr. Stephens authored these 
reports.
    Although the RTC ultimately concluded that it would not be 
cost effective to bring civil claims against the Clintons or 
Mrs. Clinton's law firm, the RTC was left to rely upon 
Pillsbury's incomplete analyses. In fact, Mr. Stephens himself 
was critical of the initial draft of the Pillsbury's report on 
Whitewater, and his criticisms were ignored.

9. Senior RTC officials sought to impede the criminal investigation of 
        Madison

    In March 1992, RTC criminal investigators based in Kansas 
City commenced an investigation into the failed Madison 
Guaranty Savings & Loan. The RTC subsequently produced 10 
criminal referrals related to Madison, one in 1992 and nine in 
1993. The lead criminal investigator on the case was Jean 
Lewis. Ms. Lewis and her two supervisors, Richard Iorio and Lee 
Ausen, signed all 10 referrals.
    The Special Committee concludes that the Kansas City RTC 
investigators were obstructed in their investigation and were 
forced to contend with an environment hostile to their inquiry. 
Ms. Lewis, testified that she ``believe[d] there was a 
concerted effort to obstruct, hamper and manipulate the results 
of our investigation of Madison.'' 78 The evidence 
suggests that Ms. Lewis' belief was well founded.
    The submission of the nine 1993 referrals to the Justice 
Department was delayed when attorneys in the RTC Professional 
Liability Section (``PLS'') demanded time to perform a ``legal 
review of them.'' During the week long delay that ensued, the 
White House learned about the referrals and some of the 
confidential information they contained. Shortly after this 
event, Ms. Lewis was removed as the lead criminal investigator 
on the Madison Guaranty case at the urging of PLS.
    On August 15, 1994, the three Madison investigators were 
placed on ``administrative leave'' by RTC upper 
management.79 The three were provided with no warning or 
explanation whatsoever for this action. Two weeks later, the 
three investigators were told to return to work.
    The Special Committee concludes that the most plausible 
explanation for this action is that it was taken in retaliation 
for the investigators' work on the Madison Guaranty case. An 
internal investigation by the Inspector General of the Federal 
Deposit Insurance Corporation (``FDIC'') (the successor to the 
RTC) is ongoing.
    The Special Committee also concludes that April Breslaw 
improperly intervened in, and attempted to affect, the outcome 
of investigations into Madison Guaranty.
    In 1989, Ms. Breslaw while an attorney with the FDIC hired 
the Rose Law Firm to handle a malpractice suit against Madison 
Guaranty's former accountants. Her decision came under fire 
when it was reported that Rose's representation of the 
government was fraught with conflicts of interest. By 1994, 
both the FDIC and the RTC had commenced investigations into the 
Rose conflicts issue. That year, Ms. Breslaw sought to 
discourage RTC employees from investigating issues related to 
Madison Guaranty and informed RTC investigators that senior RTC 
officials would prefer a certain outcome to any such 
investigation.
    In January 1994, Ms. Breslaw warned RTC civil fraud 
investigator Gary Davidson that certain RTC managers would take 
a ``dim view'' of him investigating Madison. Then, in February 
1994, Ms. Breslaw told Ms. Lewis in a tape recorded 
conversation that the ``head people'' at the RTC ``would like 
to be able to say Whitewater did not cause a loss to Madison.'' 
80
    Ms. Breslaw's testimony before the Special Committee 
regarding her statement to Ms. Lewis was wholly incredible. Ms. 
Breslaw refused to admit that she had said the comment 
attributed to her and implausibly claimed that she could not 
recognize her own voice on the tape.
    It is unclear who, if anyone, instructed Ms. Breslaw to 
``send these messages'' to the RTC investigators working on the 
Madison Guaranty and Rose Law Firm matters, although the 
telephone message pads of Webster Hubbell indicate that Ms. 
Breslaw and Mr. Hubbell were in contact on or about September 
29, 1993. Both Mr. Hubbell and Ms. Breslaw admit that they 
spoke about the investigation into the Rose Law Firm conflicts 
of interest relating to Madison. They deny, however, that they 
discussed the ``substance'' of the RTC investigations.
    Viewed cumulatively, the Special Committee concludes that 
Ms. Breslaw's actions, coupled with the improper actions taken 
toward the RTC investigators, illustrate a concerted effort to 
improperly obstruct the investigations relating to Madison 
Guaranty and Whitewater.

10. U.S. Attorney Paula Casey mishandled the RTC criminal referral 
        referencing the President and Mrs. Clinton

    The first criminal referral, Referral No. C0004, was made 
to Charles Banks, then U.S. Attorney, in September 1992. Mr. 
Banks did not take action on the referral, but on January 27, 
1993, he sent a recusal letter to the Executive Office of U.S. 
Attorneys, to which he never received a response.81 
Although a decision on a criminal referral is usually issued 
within 60-90 days after submission, the U.S. Attorney's Office 
did not render a prosecutorial opinion on Referral C0004 until 
October 27, 1993--over one year after its submission.82
    Senior Justice Department officials believed that Paula 
Casey, Mr. Banks' successor and a former student of President 
Clinton, should have recused herself because of her ties to the 
Clintons and to Governor Jim Guy Tucker. They communicated this 
view to her on several occasions. The director and agents of 
the FBI similarly expressed concern that U.S. Attorney Casey 
should recuse herself from Madison-related matters.
    Moreover, contrary to Justice Department policy, Ms. Casey 
did not notify Main Justice with an Urgent Memorandum when she 
learned that the case against David Hale might involve 
allegations against Governor Tucker and President Clinton. 
Senior officials were ``surprised'' that Ms. Casey had not 
alerted Main Justice to Mr. Hale's allegations about the 
President, and believed that Main Justice should have been 
involved in the case sooner.83
    Even after agreeing to recuse herself, Ms. Casey continued 
to participate actively in the Hale and Madison investigations. 
She attended FBI briefings involving the investigation of 
Madison Guaranty and Mr. Hale.84 She continued to 
correspond with Mr. Hale's attorney about a possible plea 
agreement and reject the efforts of Mr. Hale to negotiate with 
the government. Sometime between the middle and the end of 
October, she reviewed the nine new RTC criminal referrals 
relating to Madison Guaranty.85
    Finally, for reasons unknown, Ms. Casey formally declined 
prosecution on Referral C0004, even though she claimed that she 
already knew that she was going to recuse herself. Justice 
Department officials testified that this declination was a 
``substantive decision'' that someone who supposedly had 
recused herself from the matter should not have made.86
    No one in charge of handling Referral C0004 in the U.S. 
Attorney's office in Little Rock ever reviewed or analyzed the 
hundreds of pages of documentary exhibits attached to it. 
Indeed, neither Ms. Casey nor her First Assistant ever reviewed 
the exhibits to the referral prior to declining 
prosecution.87 Senior Justice Department officials 
testified that Ms. Casey should have conducted an independent 
review of the evidence prior to declining Referral C0004.
    Even after his recusal from the case in November 1993, 
88 Associate Attorney General Webster Hubbell, a close 
associate of the Clintons and now a convicted felon, 
possessed--in his basement--the Clintons' personal and campaign 
files on Whitewater, as well as Rose Law Firm client files on 
Madison that he improperly took from the firm. He was involved 
in the review and transfer of those files to the Clintons' 
personal attorney in November and December 1993.89 
Although Mr. Hubbell was in virtually daily contact with senior 
White House officials, he implausibly claimed that he was kept 
out of the loop on the Whitewater defense effort.
    The Special Counsel and then Office of the Independent 
Counsel took over responsibility for the investigations in 
1994. The work of the Independent Counsel is ongoing, and 
therefore, it is unknown whether the actions of the U.S. 
Attorney's Office or Ms. Casey ultimately tainted the 
investigations in any way. The Special Committee concludes, 
however, that the U.S. Attorney's Office mishandled the RTC 
criminal referrals and the Hale plea negotiations.

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

    During its hearings in the summer of 1994, the Banking 
Committee learned that the Treasury Inspector General (``IG'') 
furnished to the White House--at the White House's request and 
a full week before the Office of Government Ethics (``OGE'') 
opinion was publicly released--transcripts of all depositions 
conducted by the RTC and Treasury IGs in the course of their 
investigation into the propriety of White House-Treasury 
contacts.
    The Special Committee concludes that senior Administration 
officials improperly sought to manipulate this investigation of 
the Treasury and RTC IGs. This interference is particularly 
troubling given that the Treasury and RTC IGs were 
investigating the Administration's efforts to interfere in the 
underlying Whitewater/Madison investigation.
    Despite the fact that Department of Treasury General 
Counsel Jean Hanson was a subject of investigation, Francine 
Kerner, a member of the General Counsel's office, provided 
advance copies of the investigation transcripts to Ms. Hanson's 
staff. The transcripts were then disseminated to other senior 
Treasury Department officials.90 The transcripts contained 
confidential information about RTC criminal investigations and 
referrals that even Treasury Secretary Lloyd Bentsen should not 
have been permitted to review. RTC IG John Adair testified that 
the transcripts contained 90% of the substance of the criminal 
referrals.91
    Ms. Kerner also provided Ms. Hanson's staff with draft 
copies of the RTC-IG's conclusions and asked Ms. Hanson's staff 
to edit the proposed OGE report. 92 The Treasury IG's 
chief investigator, James Cottos, objected to Ms. Kerner's 
attempts to alter the draft investigative report. He told Ms. 
Kerner ``we were not the Jean Hanson defense team.'' In 
addition, according to Mr. Cottos, ``I felt they were slanting 
the facts or attempting to slant the facts.'' 93 Clark 
Blight, the chief investigator for the RTC IG, similarly 
testified that he was under the impression that Ms. Kerner was 
``an advocate for the White House.'' 94
    The Special Committee is deeply concerned that Treasury 
Department officials caused the transfer of confidential 
transcripts of investigative depositions to the White House. 
This disturbing action was taken without the knowledge or 
consent of the RTC IG. In fact, members of the RTC IG's office 
had voiced their opposition to such a transfer when the idea 
was raised. When they learned of the transfer, after the fact, 
they were ``shocked'' by the communication of this confidential 
information to the White House. 95
    During the Banking Committee's hearings, senior White House 
officials relied repeatedly on the OGE opinion as evidence that 
White House personnel had not engaged in improper conduct. 
96 The Special Committee discovered that this reliance was 
entirely misplaced.
    In particular, Stephen Potts, Director of OGE, testified 
that, contrary to statements made by White House Special 
Counsel Lloyd Cutler to the Banking Committee in August 1994, 
the OGE did not ``informally concur'' in Mr. Cutler's 
conclusion that White House officials did not violate ethical 
standards with regard to the communication of confidential RTC 
information from the Treasury Department to the White House. 
97
    Mr. Cutler admitted to the Special Committee that he may 
have ``transgressed'' and ``may have gone too far when he 
testified'' before the Banking Committee in August 1994. 
98

12. The White House delayed in producing documents to the Special 
        Committee

    The Special Committee confronted a number of obstacles that 
hindered the progress of its investigation. Among the most 
notable, certainly the most time-consuming, of these obstacles 
were (1) the withholding and delay in the production of 
documents directly relevant to the Committee's investigation 
and the noncooperation and resistance of a number of witnesses.
    Because the testimony of witnesses before the Special 
Committee was often contradictory as to important events and 
actions, the Special Committee placed particular emphasis on 
available documentary evidence. Unfortunately, throughout the 
course of its inquiry, the Special Committee had been hindered 
by parties unduly delaying the production of, or withholding 
outright, documents critical to its investigation.
    The White House did not live up to its repeated promise to 
cooperate with the Special Committee's investigation into 
Whitewater, Madison Guaranty and related matters. The White 
House and various individuals associated with the White House 
engaged in a pattern of activity designed to hinder the Special 
Committee's investigation.
    The White House withheld documents from the Special 
Committee or produced highly relevant documents very late in 
the Committee's investigation. For example, the White House 
failed to produce until January and February 1996 various notes 
taken by high level White House officials relating to the 
January 1994 Whitewater Response Team meetings.
    On January 29, 1996 the White House produced the notes of 
former White House Director of Communications Mark 
Gearan,99 and claimed that the notes ``were inadvertently 
moved to the Peace Corps with other personal effects in 
boxes.'' 100 On February 13, 1996, the White House 
produced the documents from the files of Mr. Waldman, Special 
Assistant to the President that Mr. Waldman discovered these 
documents in his office in a file marked ``WWDC'', Whitewater 
Development Corporation, in the course of an office 
move.101 Then, on February 20, 1996 the Special Committee 
received memoranda from the White House which were prepared by 
Harold Ickes, White House Deputy Chief of Staff and the leader 
of the Whitewater Response Team meetings. The White House 
represented that some were ``mistakenly overlooked.'' 102 
Finally, on March 1, 1996, lawyers for Deputy White House 
Counsel Bruce Lindsey ``which inadvertently were not produced'' 
previously.103
    The White House withheld notes of the November 5, 1993 
meeting of White House officials and the Clintons' private 
attorneys relating to Whitewater taken by Associate Counsel 
William Kennedy. Although President Clinton had made numerous 
statements that he would not claim executive privilege for 
matters relating to Whitewater, the White House withheld these 
notes based on an assertion of ``the attorney-client component 
of executive privilege.'' On December 20, 1995, the full Senate 
adopted Senate Resolution 199, directing the Senate Legal 
Counsel to initiate a civil action in federal District Court 
under 28 U.S.C. Sec. 1365 (1994). On December 22, 1995, before 
the Senate Legal Counsel initiated such action, the White House 
reversed its position, and Mr. Kennedy produced his notes to 
the Special Committee. The notes turned out to be highly 
relevant to the Special Committee's investigation. They 
provided evidence that the White House Counsel's office and the 
Clintons' private attorneys had joined forces and clearly were 
working as agents of the private counsel in a joint and wholly 
improper effort to serve the private interests of the Clintons.

13. Senior administration officials provided inaccurate and incomplete 
        testimony to the Senate

    The Special Committee concludes that senior Administration 
officials provided inaccurate and incomplete testimony to the 
Senate on a number of occasions.
    Most notably, Roger Altman, former Deputy Treasury 
Secretary and Acting CEO of the RTC, intentionally misled the 
Senate when he testified before the Banking Committee on 
February 24, 1994. Mr. Altman was specifically asked about 
contacts with the White House and whether the RTC briefed the 
White House about the criminal referrals. Mr. Altman's response 
was that there was only one substantive contact, and that it 
dealt with the procedure relating to the expiring statute of 
limitations. As detailed in the Banking Committee's report on 
Treasury-White House contacts, he failed to mention his other 
communications with the White House.104
    In addition, as set forth in the discussion of Foster Phase 
of its inquiry, the Special Committee believes that other 
senior Administration officials provided inaccurate and 
incomplete testimony to the Senate.
    With respect to matters bearing upon the Washington Phase 
of the Committee's inquiry, the Special Committee believes that 
Deputy White House Chief of Staff Harold Ickes repeatedly 
provided inaccurate and incomplete testimony.
    Mr. Ickes testified under oath to the Senate and to the 
Inspectors General of the Treasury Department and the RTC that 
he and other White House officials had no discussions about, or 
knowledge of, the statute of limitations for Madison-related 
civil claims prior to February 2, 1994. In light of newly 
discovered evidence, the Special Committee believes that this 
testimony was inaccurate.
    In January 1994, considerable public interest existed in 
issues relating to Whitewater and Madison. The statute of 
limitations for Madison-related civil claims involving fraud or 
intentional misconduct was scheduled to expire on February 28, 
1994. There was considerable congressional attention focused on 
the approaching expiration date. Prior to enactment of the law 
extending the statute of limitations, however, the RTC had to 
decide by February 28, 1994, whether to bring suit, to seek 
tolling agreements, or to allow the statute to expire without 
action. Because President and Mrs. Clinton faced potential 
liability relating to the failure of Madison, inside 
information regarding the status of the RTC investigation and 
its deliberations with respect to the statute of limitations 
was valuable to the White House and the Clintons in 
coordinating a defense strategy.
    During its 1994 investigation, counsel to the Banking 
Committee asked Mr. Ickes about his knowledge of issues 
surrounding the statute of limitations prior to its 
extension.105 Specifically, Mr. Ickes testified about a 
meeting on February 2, 1994, between senior White House 
officials and Roger Altman, then Deputy Secretary of the 
Treasury and Acting Chief Executive Officer of the RTC, and 
Jean Hanson, General Counsel to the Department of the Treasury. 
With respect to discussions about the statute of limitations at 
that meeting, Mr. Ickes testified, ``I, for one, had little 
knowledge, if any knowledge, about the situation,'' 106 
and that ``all this was new to me.'' 107 1
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    \1\ Similarly, when asked by the RTC-IG about this same February 2, 
1994, meeting, Mr. Ickes testified: ``Mr. Altman, as I recall, raised 
the issue of the upcoming--the possible--well, not the possible, but 
the fact that the statute of limitations, which I knew nothing about at 
the time, of the RTC in connection with an investigation that was 
apparently being conducted by the RTC on Madison Whitewater was about 
to expire.'' (Ickes, 7/15/94 RTC Dep. p. 7). Mr. Ickes emphasized that 
White House officials had no knowledge of the statute of limitations 
issue: ``There were questions about the statute of limitations, when it 
expired, under what conditions it expired. I don't think anybody in the 
room other than Mr. Altman and Ms. Hanson had a clear picture of what 
the statute of limitations situation was.'' (Ickes, 7/15/94 RTC Dep. p. 
8).
---------------------------------------------------------------------------
    Evidence newly uncovered by the Special Committee, however, 
strongly suggests that these statements were untrue when Mr. 
Ickes made them under oath. The evidence indicates that Mr. 
Ickes specifically assigned a subordinate to prepare, and later 
received, a memorandum on the statute of limitations for 
Madison-related civil claims and that he discussed the issue 
with other White House officials in January 1994, prior to the 
February 2 meeting with Mr. Altman and Ms. Hanson.
    On November 2, 1995, for example, the White House produced 
to the Special Committee a memorandum to Mr. Ickes from 
Associate Counsel to the President Neil Eggleston entitled 
``Statute of Limitations in Actions Brought by the Conservators 
of a Financial Institution.'' 108 The memorandum, which 
was dated January 17, 1994, discussed the statute of 
limitations generally applicable to claims filed by the RTC on 
behalf of failed thrift institutions. More important, Mr. 
Eggleston's memorandum discussed the statute of limitations as 
applied specifically to Madison and identified March 2, 1994, 
as the final date for the RTC to file civil tort claims on 
behalf of Madison, the type of action usually brought against 
outsiders in financial institution cases.109
    Beyond this, the Special Committee believes that Mr. Ickes 
provided inaccurate testimony under oath about Mrs. Clinton's 
knowledge in 1994 of her potential liability to the RTC arising 
from her representation of Madison. Mr. Ickes testified under 
oath to the Senate Banking Committee in July and August 1994 
that he did not know whether two memoranda detailing the 
potential liability of the President and Mrs. Clinton to the 
RTC had been sent to Mrs. Clinton. However, the Special 
Committee has discovered evidence indicating that, at about the 
same time of Mr. Ickes' testimony, his attorney transmitted 
information to the White House Counsel's Office that Mr. Ickes 
had specifically remembered sending the memoranda to Mrs. 
Clinton in response to repeated questions from the Clintons 
about their possible exposure in the RTC investigation. The 
foregoing, to be sure, do not exhaust the instances in which 
the Committee believes that Mr. Ickes was less than candid, but 
it amply demonstrates that Mr. Ickes provided inaccurate and 
incomplete testimony to the Senate.

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

    The Special Committee concludes that the use of the White 
House Counsel's Office to serve the private legal interests of 
the President and Mrs. Clinton was highly improper. As 
government lawyers, the attorneys in the White House Counsel's 
Office have a duty to represent the public interest. That duty 
is incompatible with the representation of any private 
parties--even the President or First Lady. Here, the interest 
of the United States with respect to these investigations in 
establishing civil and/or criminal liability was potentially 
adverse to the private interests of the Clintons in avoiding 
any such liability.
    The provision of legal services by government lawyers 
relating to the President's personal matters is contrary to the 
``Standards of Ethical Conduct'' promulgated by the Office of 
Government Ethics (``OGE''). The Standards of Ethical Conduct, 
which were issued pursuant to Executive Order 12674 and apply 
to all Executive Branch employees, establish that it is a 
misuse of government position to make ``[u]se of public office 
for private gain.'' 110 More specifically, a government 
employee ``shall not use his public office for his own private 
gain, . . . or for the private gain of friends, relatives, or 
persons with whom the employee is affiliated in a 
nongovernmental capacity.'' 111
    The underlying issues related to Whitewater and Madison 
arose prior to the inauguration of President Clinton. The only 
Whitewater issues arising after the inauguration of the 
President involve the improper contacts between the White House 
and various other government agencies that were investigating 
Madison and Whitewater, including the Treasury Department, the 
RTC, and the SBA. If such contacts had not taken place, there 
would be no investigation into events occurring after the 
President's inauguration. The Office of the White House Counsel 
cannot bootstrap its improper handling of information about 
Whitewater and Madison into a justification for its 
participation in underlying Whitewater matters.
    When he was appointed Special Counsel to the President by 
President Clinton, Lloyd Cutler explained the proper sphere of 
the White House Counsel's representation of the President: 
``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.'' 112
    The attempt of White House lawyers to obtain information 
and to communicate with witnesses is inconsistent with the need 
to maintain both the perceived or actual integrity of the 
ongoing federal investigations into Whitewater. It is also 
contrary to the OGE's Standards of Ethical Conduct for a public 
employee to misuse nonpublic information.113 Finally, it 
contravenes a regulation promulgated by the Executive Office of 
the President, which provides: ``For the purpose of furthering 
a private interest, an employee shall not . . . directly or 
indirectly, use, or allow the use of, official information 
obtained through or in connection with his Government 
employment which has not been made available to the general 
public.'' 114
    In sum, the Special Committee concludes that White House 
officials, in particular the Office of the White House Counsel, 
violated ethical standards and abused their official positions 
of public trust to assist in the Clintons' private legal 
defense effort. The Special Committee recommends that steps be 
taken to prevent such future abuses.

 Conclusions of the Special Committee on the Discovery of the Rose Law 
                          Firm Billing Records

    On January 5, 1996, the Special Committee received computer 
printouts of the Rose Law Firm's billings to Madison Guaranty. 
These records were discovered under mysterious circumstances in 
the Book Room of the White House Residence.
    The billing records constitute the best, and therefore most 
important, evidence concerning Mrs. Clinton's representation of 
Mr. McDougal's S&L in the mid-1980s--a relationship that was 
being investigated by at least three separate federal agencies. 
The records had been subject to several different federal 
subpoenas, besides that of the Special Committee, for nearly 
two years. When federal investigators served their subpoenas, 
some more than two years ago, the billing records were nowhere 
to be found. Despite extensive searches conducted by the Rose 
Law Firm, neither the originals nor copies were 
discovered.115 They were not in the firm's computers, its 
client files, or its storage facility.116

1. The Rose billing records provide the best evidence of the legal 
        services performed by Mrs. Clinton for Madison Guaranty

    The billing records provide the best evidence of the legal 
services performed by Mrs. Clinton for Madison Guaranty and, as 
a result of the failed memories of many Rose Law Firm 
attorneys, are the only source of detailed information about 
the services that the Rose Law Firm provided to Madison 
Guaranty. The computerized billing records are thus an 
invaluable asset in reconstructing Mrs. Clinton's actual 
involvement in the matter. In total, Mrs. Clinton billed 
Madison Guaranty for 89 tasks, including 33 conferences with 
Madison Guaranty officials, on 53 separate days.117
    Among the significant facts established by the billing 
records are the following, the significance of which are 
discussed more fully in the Special Committee's conclusions 
regarding the Arkansas Phase of its investigation:
     Mrs. Clinton, and others on her behalf, repeatedly 
made statements that Richard Massey brought in Madison Guaranty 
as a client and, even though she was the billing partner on the 
matter, she was merely a ``backstop'' because the firm did not 
permit associates to bill clients directly.118 Mr. Massey, 
however, directly contradicted Mrs. Clinton's account in sworn 
testimony before the Special Committee. The president of the 
S&L, John Latham, and a partner at the Rose law firm, David 
Knight, also contradicted Mrs. Clinton's account.
    The billing records substantially resolve this dispute in 
favor of the testimony of Messrs. Massey, Latham and Knight.
     During the 1992 campaign, allegations surfaced 
that Beverly Bassett Schaffer, who Governor Clinton appointed 
as Arkansas Securities Commissioner, gave preferential 
treatment to Madison Guaranty because of her relationship with 
the Governor and Mrs. Clinton. The Clinton campaign denied that 
Mrs. Clinton attempted to influence Commissioner Bassett.
    The billing records show that Mrs. Clinton called Ms. 
Schaffer the day before the Rose Law Firm submitted Madison's 
proposal for its preferred stock offering to the Arkansas 
Securities Department.119 The records reflect that Mrs. 
Clinton billed as much as one hour to the call.120 Ms. 
Schaffer notified Mrs. Clinton of the approval of the proposal 
two weeks later in a letter addressed, ``Dear Hillary.'' 
121
    In testimony before the Special Committee, former 
Commissioner Schaffer directly contradicted Mrs. Clinton and 
stated that the proposal was discussed during the telephone 
call. Mr. Massey similarly disputed Mrs. Clinton's account for 
the telephone call to Ms. Schaffer.122
     Mrs. Clinton has minimized her role in the Rose 
Law Firm's representation of Madison before the Arkansas 
Securities Department in connection with Madison's proposed 
stock offering. The billing records and Mr. Massey's testimony 
directly contradict Mrs. Clinton's claim that her role on the 
matter was merely to serve as a ``backstop.''
    The billing records show that Mrs. Clinton billed Madison 
for a total of approximately 60 hours of work. Mrs. Clinton 
billed 6.2 hours on the preferred stock deal for conferences 
alone that she had with Mr. McDougal, with Mr. Latham and Davis 
Fitzhugh, two other Madison S&L officers involved in the stock 
offering.123
    Mrs. Clinton had at least six conferences with Mr. Massey, 
the young Rose Law Firm attorney responsible for performing the 
associate type tasks on the matter.124 Mrs. Clinton also 
reviewed the amendments to the application submitted to the 
Arkansas Securities Department.125 Mr. Massey testified 
that he did his work under the supervision of Mrs. 
Clinton.126 According to Mr. Massey: ``Mrs. Clinton was 
the billing attorney and had a relationship with me such that 
she needed to know what I was doing so she could be prepared to 
update the client at any time.'' 127 When asked whether 
Mrs. Clinton's work on the stock proposal deal was ``minimal,'' 
Mr. Massey responded, ``In my own mind it's a significant 
amount of time.'' 128
     The billing records indicate that Mrs. Clinton's 
involvement in Castle Grande was much more extensive than she 
has thus far owned up to. Before the billing records were 
discovered, little was known about the nature of the Rose Law 
Firm's representation of Madison Guaranty in connection with 
the Castle Grande land transaction. Perhaps because Mrs. 
Clinton had ordered the destruction of Madison-related records 
in 1988, the Rose Law Firm no longer possessed any file related 
to the Castle Grande deal.
    Federal investigators described the Castle Grande 
transactions as a series of land flips and transactions that 
cost the American taxpayers $4 million.129 In 1995, when 
the RTC asked about her knowledge of Castle Grande, Mrs. 
Clinton stated ``I do not believe I knew anything about any of 
these real estate parcels and projects.'' 130
    The billing records identify Mrs. Clinton as the billing 
partner on the matter--even though Mrs. Clinton claimed that 
she has no idea how the Rose Law Firm became involved in the 
matter.131 These records indicate that Mrs. Clinton billed 
more time on the Castle Grande matter--29.5 hours, or 54 
percent of total billings on the matter--than any other lawyer 
at the Rose Law Firm. Indeed, nearly half of Mrs. Clinton's 
total billings to Madison were for work on Castle Grande. In 
the months following the initial transaction, Mrs. Clinton had 
at least 12 conferences with Mr. Ward and numerous meetings 
with Madison officials in connection with the subsequent sales 
that she billed to the IDC/Castle Grande matter.
    More important, the billing records were perhaps most 
illuminating with respect to the nature of Mrs. Clinton's work 
on Castle Grande. For his role as the ``straw man'' and other 
related services to the project, Mr. Ward was owed a 
commission. On March 31, 1986, Madison Guaranty loaned Mr. Ward 
$400,000.132 One week later, on April 7, 1986, Madison 
Financial executed two promissory notes, for $300,000 and 
$70,943, purporting to reflect loans from Mr. Ward to Madison 
Financial Corporation, Madison Guaranty's subsidiary service 
corporation.133 At about this time, bank examiners were 
scrutinizing Madison Guaranty's books. Mr. James Clark, the 
chief examiner, asked whether the three notes were 
related.134 He was assured by a Madison Guaranty official, 
probably Don Denton, that the notes were not related.135 
In fact, according to Madison official John Latham, the three 
notes were related, and the $400,000 March 31 loan from Madison 
Guaranty was intended to pay Mr. Ward's commissions.136
    The Rose Law Firm billing records revealed that on April 7, 
1986, the day the Madison Financial notes were executed, Mrs. 
Clinton billed 12 minutes to the IDC/Castle Grande matter for 
``Telephone conference with Don Denton.'' 137 A message 
slip produced by Mr. Denton reflects that Mrs. Clinton called 
him from the Rose Law Firm on April 7, 1986.138 On a June 
11, 1996 interview with FDIC investigators, Mr. Denton stated 
that Mrs. Clinton called seeking copies of the notes between 
Mr. Ward, Madison Financial, and Madison Guaranty.139 Mr. 
Denton told investigators that during the conversation he 
cautioned Mrs. Clinton that a problem might exist with respect 
to the April 7 notes to Mr. Ward because ``they constituted in 
effect a parent entity fulfilling the obligation of a 
subsidiary,'' 140 a violation of the so-called direct 
investment rule. Mrs. Clinton, however, ``summarily dismissed'' 
that concern in a way that he took to mean that ``he would take 
care of savings and loan matters, and she would take care of 
legal matters.'' 141
    And she did. The billing records showed that on May 1, 
1986, Mrs. Clinton billed Madison Guaranty for two hours of 
time for the following work: ``Conference with Seth Ward; 
telephone conference with Seth Ward regarding option; telephone 
conference with Mike Shauffler; prepare option.'' 142 
Indeed, a May 1 option agreement between Mr. Ward and Madison 
Financial bore a word processing code (``0190g'') that, 
according to the Rose Law Firm's counsel, indicates the 
document was created at the Rose Law Firm by or for Mrs. 
Clinton.143
    Mr. Clark, the bank examiner told investigators that, after 
reviewing the records and in light of Mr. Denton's testimony, 
he believed that the May 1 option prepared by Mrs. Clinton 
``was created `in order to conceal the connection--whatever it 
was--between' '' the March 31 and April 7 notes.144
    On June 13, 1996, the Special Committee requested that the 
First Lady attempt to refresh her recollection regarding the 
matters discussed by Mr. Denton and to inform the Committee of 
what she recalls about them.145 On June 17, 1996 the 
Special Committee received an affidavit from Mrs. Clinton 
accompanied by a letter from Mr. Kendall. In the affidavit, 
Mrs. Clinton gave no answer to the question posed by the 
Special Committee; instead, she simply referred to Mr. 
Kendall's letter ``addressing certain allegations recently made 
by Mr. Don Denton.'' 146 In his letter, Mr. Kendall 
maintained that Mr. Denton's recollection is ``wholly 
unreliable'' 2 but gave no indication as to the 
recollection of the First Lady.147 The First Lady 
therefore has neither confirmed nor denied Mr. Denton's 
testimony.
---------------------------------------------------------------------------
    \2\ Mr. Kendall based this assertion on the fact that Mr. Denton 
testified at two trials, Ward v. Madison Guaranty, and United States v. 
McDougal et al., yet did not mention his April 7, 1986 telephone 
conversation with Mrs. Clinton. Mr. Kendall, however, offered no 
indication whether Mr. Denton was asked questions about his 
conversations with Mrs. Clinton or, for that matter, whether such 
conversations and Mrs. Clinton's work for Madison were within the scope 
of the trials. (Letter from David Kendall to Senator Alfonse D'Amato, 
6/17/96 p. 2)
    What is clear, however, is that Mr. Denton recalled the 
conversation only after being shown Mrs. Clinton's billing records 
reflecting the 12 minute telephone call on April 7. When he was shown 
this record, on June 3, 1996, he did not recall the conversation. 
However, after the interview, he reviewed his files and discovered the 
April 7 message slip from Mrs. Clinton. His memory thus refreshed, he 
provided additional testimony to the FDIC-IG, all under a legal 
obligation of truthfulness, 18 U.S.C. Sec. 1001. (Denton, FDIC-IG 
Report of Interview, June 11, 1996.) Mr. Denton has no reason to 
mislead investigators, much less to go out of his way to give 
inaccurate testimony.
---------------------------------------------------------------------------
    The significance of the billing records as they relate to 
Castle Grande is perhaps best illustrated by the activities of 
Mrs. Clinton's legal defense team immediately after the 
discovery of the records. A message slip from John Tisdale, the 
Clintons' Arkansas lawyer to Alston Jennings, Seth Ward's 
former attorney on Castle Grande, indicate that, on June 5, 
1996, the day after Ms. Huber discovered the records in her 
White House office, Mr. Kendall called Mr. Tisdale and Mr. 
Jennings to arrange a meeting.148 One week after the 
records were discovered, on January 11, 1996, Mr. Kendall flew 
to Little Rock and met first with Mr. Jennings and then with 
Mr. Ward.149 The meeting with Mr. Ward lasted 30-40 
minutes.150 Curiously, Mr. Kendall had also contacted Mr. 
Jennings in August 1995. Subsequent to that contact, Mrs. 
Clinton summoned Mr. Jennings to the White House for a personal 
meeting on August 10, 1995, around the time that the billing 
records were placed in the Book Room of the White House 
residence.

2. The disappearance and mysterious reappearance of the Rose Law Firm 
        billing records was part of a larger pattern of removal, 
        concealment and, at times, destruction of records concerning 
        Mrs. Clinton's representation of Madison

    The mysterious discovery of the Rose billing records must 
be viewed in the context of the destruction and mishandling of 
other Rose Law Firm files concerning Madison between 1988 and 
1992. In 1988, Mrs. Clinton ordered the Rose Law Firm to 
destroy records relating to her representation of Mr. 
McDougal's Madison S&L.151 As described above, this was 
not a routine destruction of records because there was pending 
litigation relating to Castle Grande and federal regulators 
were investigating the operation and solvency of Madison in 
anticipation of taking over the troubled S&L.
    The mishandling of Madison documents continued after the 
1992 presidential campaign, when the firm's files on Madison, 
which were by now the property of the RTC as conservator of 
Madison, and 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,152 without obtaining the consent of the firm 
or the client.153

3. Vincent Foster is the last person known to have the billing records 
        in his possession

    During the 1992 presidential campaign, on February 12, 
1992, an unknown person printed out a set of the Rose Law 
Firm's computerized records of billings to Madison 
Guaranty.154 Mr. Hubbell asserted that either he or former 
Deputy White House Counsel Vincent Foster, also a Rose partner, 
directed the Rose accounting department to print the billing 
records for Madison.155 In addition to obtaining the 
computerized billing records, Mr. Hubbell also retrieved other 
files and documents relating to Mrs. Clinton's work for 
Madison.
    According to Mr. Hubbell, Mr. Foster was the last person he 
saw handling the billing records.156 Mr. Hubbell did not 
know who removed the records from the Rose Law Firm,157 or 
how they came to be left in the White House Residence.158 
He claimed not to have spoken with anyone about the billing 
records since the 1992 presidential campaign.159

4. The billing records mysteriously reappear in the Book Room of the 
        White House Residence in August 1995

    During the first two weeks of August 1995, Carolyn Huber, 
Special Assistant to the President and Special Director of 
Correspondence for the White House, saw the Rose Law Firm 
billing records for the first time.160 The billing records 
were in the Book Room, a small room on the third floor of the 
First Family's private quarters in the White House 
Residence.161
    In early August 1995, Ms. Huber was gathering newspaper and 
magazine clippings in the Book Room when she noticed the 
records in clear view on the edge of a table.162 The 
records were folded in half, and Ms. Huber recognized the 
records, from her experience at the Rose Law Firm, to be 
billing records.163
    For several months, Ms. Huber gave little thought to the 
records, which were moved in a box to her office. On the 
morning of January 4, 1996, Ms. Huber discovered the records 
when the table was removed that had concealed the box with the 
billing records for five months.164
    Immediately, Ms. Huber realized the billing records were 
related to Madison Guaranty.165 She was horrified because 
she understood their significance; she had seen several 
subpoenas calling for the production of Madison Guaranty 
records, including these very records.166

5. Only a limited number of people had access to Book Room of the White 
        House Residence

    The Special Committee's inquiry discovered that only a 
limited number of people had access to the Book Room, and no 
one admitted to placing the billing records in the Book Room of 
the White House Residence. Only a limited number of people had 
access. Moreover, it is highly unlikely that those with access 
would be leaving or disturbing documents in that private area 
of the White House.
    The Special Committee rejects as fanciful the suggestion 
that construction workers or residence staff were somehow 
responsible for leaving the records in the Book Room. 
Similarly, the denials by overnight guests are highly credible 
because none of them would have been likely to be carrying 
records into the Book Room or to disturb materials in the Book 
Room.
    Accordingly, the Special Committee concludes that most 
persons with access to the Book Room during the relevant period 
truthfully denied leaving the Rose billing records in the Book 
Room. They had neither the opportunity to possess the billing 
records nor the motive to conceal them from investigators for 
nearly two years.

6. Very few people had motive to be handling or reading the Rose 
        billing records in August 1995

    Few lay people would have understood the significance or 
content of the Rose billing records in August 1995. In fact, 
based on the evidence received by the Special Committee, only 
three people had previously shown an interest in and handled 
the billing records--Mrs. Clinton, Mr. Foster and Mr. Hubbell. 
Of these, Mr. Foster passed away on July 20, 1993, and Mr. 
Hubbell reported to federal prison on August 7, 1995.167
    Moreover, as discussed earlier in these Conclusions, the 
principal relevance of the billing records was to disclose the 
nature and extent of the legal work performed by Rose Law Firm 
partners for Madison Guaranty. As noted above, these records 
were particularly significant in evaluating work done by Mrs. 
Clinton. Again, this is an important factor in evaluating who 
would have had an interest in reviewing the records in August 
1995. Finally, the Committee is impressed by the fact that 
these records appeared on the table of the Book Room within 
days after the RTC-IG issued its report critical of the Rose 
Law Firm and its conflict of interest over Madison. As 
evidenced by the memorandum of March 1, 1994 from Mr. Ickes to 
Mrs. Clinton, this particular issue was of concern to Mrs. 
Clinton in connection with her possible exposure to personal 
liability.

7. Only a limited number of people were definitely within the chain of 
        custody of the billing records

    Although the absence of fingerprints does not rule out that 
a person handled documents, the presence of fingerprints 
positively establishes that someone was in the chain of 
custody. Of individuals positively within the chain of custody 
on these documents, only Mrs. Clinton and Mr. Foster are likely 
to have been interested in reading the billing records. Indeed, 
in an affidavit submitted to the Special Committee on June 17, 
1996, Mrs. Clinton stated: ``I recall discussing some of this 
legal work in 1992 with Mr. Vincent Foster and Mr. Webster 
Hubbell, as I sought to answer press questions about the 
Madison Guaranty representation during the Presidential 
Campaign. Prior to the recent release of FBI fingerprint 
information, I had stated that I might have been shown billing 
records in 1992.'' 168

8. Mrs. Clinton is more likely than any other known individual to have 
        placed the billing records in the Book Room in August 1995

    The Special Committee is mindful that the question of 
possession of the long lost and much sought Rose billing 
records has grave legal implications. Not surprisingly, no one 
has admitted to putting the documents in the Book Room. On the 
current state of the record, the Special Committee cannot state 
with certainty who put the records in the Book Room.
    Nevertheless, the pattern of past behavior in handling 
documents, the limited number of persons with access to the 
Book Room, the question of motive, and the chain of custody 
evidence, taken together, suggest that very few people were 
likely to have placed the Rose billing records in the Book Room 
in August 1995. With these factors in mind, the Special 
Committee concludes that Mrs. Clinton is more likely than any 
other known individual to have placed the records in the Book 
Room. Certainly, Mrs. Clinton fits the above criteria most 
closely.3
---------------------------------------------------------------------------
    \3\ On June 13, 1996, the Special Committee requested that Mrs. 
Clinton respond in writing, under oath, about ``any knowledge she may 
have concerning the Rose Law Firm billing records bearing Bates Stamp 
numbers DKSN028928 through DKSN029043, including whether she has 
reviewed, handled, or discussed (other than with counsel) these 
records, and her knowledge relating to the disappearance or discovery 
of the records.''
    On June 17, 1996, Mrs. Clinton responded: ``I do not know how the 
billing records (DKSN028928 through DKSN029043) came to be identified 
by Mrs. Huber at the White House on January 4, 1996, although I have 
read various media accounts.'' In light of the Special Committee's 
request for detailed and specific information relating to any knowledge 
she had concerning their disappearance or discovery, Mrs. Clinton's 
answer is incomplete. For example, she does not state whether she has 
any knowledge as to how the billing records were removed from the Rose 
Law Firm; who possessed the billing records between February 1992 and 
August 1995; where they were stored between February 1992 and August 
1995; and, most importantly, who placed them in the Book Room of the 
White House in August 1995. There is no mystery as to how Ms. Huber 
came to identify the records on January 4, 1996. These other, more 
important questions, however, remain to be answered.
    Mrs. Clinton's incomplete response, therefore, does not alter the 
Special Committee's conclusion.
---------------------------------------------------------------------------

                               Background

     I. Whitewater Development Corporation and Madison Guaranty S&L

    In August 1978, the Clintons and the McDougals purchased 
230 acres of land in Marion County, Arkansas for $202,000 with 
the intention of dividing the land into lots and selling them 
for a profit.169 At the time, Mr. Clinton was the Attorney 
General of Arkansas, and Mrs. Clinton was a young associate 
with the Rose Law Firm of Little Rock.170 In June 1979, 
the Clintons and the McDougals formed Whitewater Development 
Corporation and subsequently transferred the land to the 
company.171
    In October 1980, the year after Whitewater was formed, Mr. 
McDougal and others purchased a controlling interest in the 
Bank of Kingston, a small commercial bank located in Kingston, 
Arkansas, 172 and changed its name to Madison Bank and 
Trust.173 In January 1982, the McDougals purchased an 
interest in Woodruff County Savings and Loan, which they 
renamed Madison Guaranty Savings and Loan Association.174 
Madison Guaranty thereafter formed a service corporation, 
Madison Financial Corporation, to facilitate Madison Guaranty's 
investment in real estate development projects.175 In 
November 1983, the McDougals obtained a controlling interest in 
Madison Guaranty.176
    Madison Guaranty's financial condition was poor when the 
McDougals purchased it and only became worse in later years. In 
January 1984, the Federal Home Loan Bank Board (``FHLBB'') 
commenced a special examination of Madison Guaranty that 
culminated in a supervisory agreement to which Madison's Board 
of Directors consented in July 1984.177 In October 1984, 
Mr. and Mrs. McDougal resigned as directors and officers of 
Madison Guaranty, but Mr. McDougal remained as Chairman and 
President of Madison Financial.178 Mr. McDougal, however, 
retained control of Madison Guaranty and maintained his office 
there.179
    In March 1986, the FHLBB began another examination of 
Madison Guaranty which revealed that the thrift's problems had 
grown worse.180 At a meeting in Dallas, Texas on July 11, 
1986, the FHLBB instructed Madison Guaranty's Board of 
Directors to remove John Latham, the Chairman of Madison 
Guaranty, and Mr. McDougal from their positions at Madison 
Financial.181 The next month, the FHLBB entered a cease 
and desist order against the S&L.182 The FHLBB took over 
Madison Guaranty in February 1989 and, in November of that 
year, the RTC was appointed receiver.183
    The failure of Madison Guaranty cost American taxpayers in 
excess of $60 million. While Mr. McDougal was running Madison 
Guaranty between 1982-86, the Clintons made no payments toward 
the Whitewater debt.184
    In 1992, the RTC began to investigate improper activities 
at Madison Guaranty and, on September 1, 1992, sent a criminal 
referral to the U.S. Attorney's office highlighting possible 
criminal violations. The referral described ``numerous 
questionable cash flow and `loan' transactions'' between 
Madison and a dozen companies owned or controlled by the 
McDougals, including Whitewater.185 The referral named, 
among others, the Clintons and future Arkansas Governor Jim Guy 
Tucker as persons who stood to benefit from, and as potential 
witnesses to, the suspected criminal activity.186
    The Clintons, in a pattern that would recur, received 
advance notice of the confidential RTC referral. In late fall 
1992, Betsey Wright, 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'' 
187 which had been sent ``to the prosecutor in Little 
Rock.'' 188 Upon learning the news, Ms. Wright told Mrs. 
Clinton about the referral.189 It is with this knowledge 
of the confidential referral that the Clintons and their 
advisors came to Washington.
    By March 1993, senior Clinton Administration officials 
confirmed that the RTC had sent a criminal referral mentioning 
the Clintons to the Justice Department.190 Specifically, 
RTC Senior Vice President William H. Roelle, on or about March 
23, 1993, told Roger Altman, then Deputy Treasury Secretary, of 
the RTC referral involving the Clintons.191 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.'' 
192 The next day, Mr. Altman faxed to Mr. Nussbaum the 
same article and another Times report on Whitewater, dated 
March 8, 1992, entitled ``Clintons Joined S&L Operator in an 
Ozark Real-Estate Venture.'' 193 The link thus had been 
made between the RTC criminal referral and the Clintons' 
investment in Whitewater and their relationship with Mr. 
McDougal. This knowledge of the link between Whitewater and 
possible criminal investigations provides the subtext for a 
pattern of misconduct in the White House and elsewhere in the 
Clinton administration in an effort to contain potential damage 
from Whitewater and Madison.

             II. Capital Management Services and David Hale

    Whitewater was not the Clintons' only link to criminal 
investigations. In September 1978, David Hale, a former 
prosecutor and municipal court judge, formed Capital Management 
Services Inc., (``CMS'').194 In March 1979, the SBA 
licensed CMS as a Specialized Small Business Investment Company 
(``SSBIC'').195 On September 15, 1993, the SBA placed CMS 
into receivership after ``the company's accumulated losses 
exceeded its private capital by 171 percent.'' 196
    A SSBIC is a company that the SBA licenses to lend money to 
disadvantaged small businesses.197 SSBICs may not provide 
assistance to businesses that are not at least 50 percent 
owned, controlled, and managed by ``disadvantaged 
individuals.'' 198 To ensure that SSBICs comply with these 
requirements, the SBA requires firms to document that they 
qualify for SBA assistance.199
    Mr. Hale and his associates perpetrated a fraud on the SBA 
by using CMS to make loans to political insiders rather than 
``disadvantaged'' individuals.200 After the SBA would 
advance federal funds to CMS, Mr. Hale and his business 
associates would falsify loan applications in order to receive 
funds for their personal needs.201 Mr. McDougal and Jim 
Guy Tucker were among associates of Mr. Hale who participated 
in and benefitted from this fraud.202
    On April 3, 1986, Mr. Hale loaned $300,000 to Susan 
McDougal for the stated purpose of capitalizing Mrs. McDougal's 
new advertising firm, Master Marketing.203
    Wayne Foren, then Associate Administrator for Investment at 
the SBA and the program director for the SSBIC program, learned 
of the $300,000 loan.204 Mr. Foren also learned that some 
of the proceeds of the loan to Mrs. McDougal's Master Marketing 
benefitted Whitewater.205 Mr. Foren stated that records 
suggest that of the original $300,000 loan, $111,500 was 
diverted to make payments on the Flowerwood Farms account and 
another $25,000 was used to replace money, either directly or 
indirectly, that went into Whitewater.206
    At the McDougal and Tucker trial, Mr. Hale testified that 
he made these loans to Mr. McDougal as a favor to then-Governor 
Clinton and Mr. McDougal.207 After Mr. Hale's allegations 
implicating the President became public in September 1993, this 
$300,000 loan quickly became the center of the controversy 
surrounding CMS and its connections to Mr. McDougal and 
Whitewater. Although the accounts of Mr. McDougal and Mr. Hale 
differ regarding why the loan was made and the use of the 
proceeds, records clearly indicate that the money was used for 
purposes other than those stated on the loan application filed 
with the SBA.208 Mr. Hale's allegations concerning 
President Clinton have been refuted by Mr. McDougal's version 
of the events and President Clinton's own testimony at Mr. 
McDougal's trial, but neither has been verified by any outside 
source.209
    Mr. Foren testified that he became concerned about CMS when 
Mr. Hale attempted to obtain matching government funds for what 
Mr. Hale claimed was an increase in his capital resulting from 
a gift.210 Mr. Hale told Mr. Foren that people would give 
him money for his SSBIC because they knew he had ties to Jim 
Guy Tucker and then-Governor Clinton.211 These statements 
aroused Mr. Foren's suspicion and, after a discussion with Mr. 
Hale, he sent a referral to investigate Mr. Hale's SSBIC to the 
Inspector General's office.212
    In early 1993, the SBA began an internal inquiry into Mr. 
Hale and questionable activities at CMS, an inquiry which 
touched upon Mr. Hale's relationship with the Clintons.213 
Again, by the time the inquiry ripened into a referral for 
further investigative action, the White House received word. 
SBA Associate Administrator Wayne Foren testified that, in 
early May 1993, he briefed Erskine Bowles, the new SBA 
Administrator, about the agency's investigation of Mr. Hale and 
CMS because the case involved President Clinton.214 
Shortly thereafter, Mr. Bowles told Mr. Foren that he had 
briefed White House Chief of Staff Thomas (``Mack'') McLarty 
about the case.215
    On March 22, 1994, Mr. Hale pleaded guilty to two felony 
counts in connection to the granting of illegal loans.216 
In 1996, James McDougal, Susan McDougal, and Governor Jim Guy 
Tucker were indicted on charges stemming from dealings 
associated with Madison Guaranty and Capital Management 
Services.217 On May 28, 1996 all three were convicted; Mr. 
and Mrs. McDougal were both convicted of eight charges directly 
related to the illegal $300,000 loan from Mr. Hale.218

                        Summary of the Evidence

             part i: the handling of federal investigations

I. Mrs. Clinton learns of the RTC criminal referral on Madison Guaranty

    Before its charter expired at the end of 1995, the RTC was 
charged with investigating the cause of the failure of savings 
and loans under its control and to determine what civil claims, 
if any, should be pursued. The RTC, however, lacked the 
authority to initiate criminal prosecution of the failed S&Ls. 
Thus, it was the RTC's practice to notify the Justice 
Department--typically, the U.S. Attorney's office and the FBI 
Bureau for the jurisdiction in which the failed thrift was 
located--of any suspected crimes discovered by the agency. A 
``criminal referral'' is the formal document that the RTC and 
other federal agencies use to report suspected criminal 
activity to the Justice Department.219
    In 1992 and 1993, RTC investigators in Kansas City 
submitted to the U.S. Attorney for the Eastern District of 
Arkansas ten criminal referrals concerning the activities of 
Madison Guaranty. Several of the referrals identified Mr. and 
Mrs. McDougal, the Clintons' Whitewater partners, and Mr. 
Tucker, who succeeded Mr. Clinton as Governor of Arkansas, as 
targets. Two of the referrals specifically involved Whitewater 
Development Corporation, which maintained a checking account at 
Madison Guaranty. One of the referrals alleged that Madison 
Guaranty funds were used to make illegal contributions to then-
Governor Clinton's gubernatorial campaigns in the mid-1980s. 
Finally, the Clintons were named in three of the referrals as 
possible witnesses to suspected criminal activities.
            A. The RTC begins its criminal investigation of Madison 
                    Guaranty
    The RTC began its investigation of criminal activities 
related to Madison Guaranty after the publication of an article 
on the front page of the New York Times on March 8, 
1992.220 The article, written by investigative reporter 
Jeff Gerth, reported that Governor Clinton, then a leading 
Democratic candidate for president, and his wife were partners 
with Mr. McDougal in the Whitewater real estate venture.
    Mr. Gerth's article caused several RTC officials to 
question whether Whitewater had caused any of the financial 
losses suffered by the failed Madison Guaranty S&L. Mr. Gerth 
had written that ``at times money from Mr. McDougal's savings 
and loan was used to subsidize'' Whitewater. Mr. Gerth also 
wrote:

          It was during the period that Whitewater was making 
        the Clintons' loan payments that Madison Guaranty was 
        putting money into Whitewater.
          For example, Whitewater's check ledger shows that 
        Whitewater's account at Madison was overdrawn in 1984, 
        when the corporation was making payments on the 
        Clintons' loan. Money was deposited to make up the 
        shortage from Madison Marketing, an affiliate of the 
        savings and loan that derived its revenue from the 
        institution, records also show.221

    After publication of the article, the criminal 
investigations unit in the RTC's office in Tulsa, Oklahoma--the 
office responsible for investigating possible crimes involving 
failed savings and loans in Arkansas--received requests to 
investigate Madison Guaranty and Whitewater from both the 
Office of Investigations in the RTC Washington, D.C. office and 
from the director of the Tulsa office.222 In any event, a 
criminal examination of Madison Guaranty had already been 
slated to commence in December, 1992.223
    In March 1992, Mike Van Valkenberg, the head of 
investigations in the Tulsa office, assigned Laura Jean Lewis 
to be the lead RTC criminal investigator on the case.224 
At the time, Ms. Lewis was the RTC's only criminal investigator 
with responsibility for savings and loans in Arkansas.225
    From March through August 1992, Ms. Lewis examined Madison 
Guaranty records stored in a warehouse in Little Rock. 226 
She retraced and analyzed the flow of funds between several 
checking accounts at Madison Guaranty, including the Whitewater 
account, the McDougals' personal account, and the accounts of 
several other McDougal-related companies. 227
    Ms. Lewis testified that the investigation uncovered 
``substantial evidence of bank fraud.'' 228 Specifically, 
Ms. Lewis found numerous instances in which the McDougals would 
write a check on the Madison Guaranty account of one of their 
various enterprises with insufficient funds to satisfy the 
draft and then deposit another check in that account, also 
written on insufficient funds, from another Madison Guaranty 
account. 229 Ms. Lewis observed that although many of 
checks had the word ``loan'' written on them, they were written 
on accounts lacking sufficient funds. 230 Ms. Lewis 
testified that through this ``elaborate check kiting scheme'' 
the McDougals ``float[ed] worthless checks among specific 
accounts [so as] to create the appearance of legitimate 
balances.'' 231
            B. The first RTC criminal referral: C0004
    In July 1992, the investigation was interrupted briefly 
when the RTC office in Tulsa was closed and its investigations 
unit merged with the Kansas City office. 232 Ms. Lewis 
accepted an offer to transfer to the Kansas City office. 
233
    By early August 1992, Ms. Lewis had begun to draft a 
criminal referral based upon her investigation of Madison 
Guaranty. 234 On August 31, 1992, the referral was 
completed and assigned the number C0004. 235 The referral 
was signed by Ms. Lewis, and her two immediate supervisors in 
the Kansas City office: Lee O. Ausen, the head of the Criminal 
Investigations Department, and L. Richard Iorio, the Director 
of Investigations. 236
    On September 1, 1992, Mr. Iorio sent Criminal Referral 
C0004 to Charles Banks, the U.S. Attorney for the Eastern 
District of Arkansas, 237 and to Steven Irons, Supervisory 
Special Agent (``SSA'') of the FBI Little Rock Field Office. 
238 In the accompanying transmittal letter to Mr. Banks, 
Mr. Iorio wrote that ``[c]ertain matters have come to our 
attention which may constitute criminal offenses under Federal 
law. Enclosed is a report of Apparent Criminal Irregularity.'' 
239 The referral was accompanied by several hundred pages 
of documentary exhibits consisting of copies of checks, account 
statements, and other bank records.
    Prior to its submission to the Justice Department, Criminal 
Referral C0004 was reviewed not only by Mr. Iorio and Mr. 
Ausen, but also by James Thompson, the Deputy Regional Director 
of the RTC's Kansas City office. 240 James Dudine, the 
Director of the Office of Investigations in the RTC's 
Washington, D.C. office, also reviewed the referral after it 
was submitted to the Justice Department. 241 Both Thompson 
and Dudine testified that they thought C0004 met the standard 
for issuance of a criminal referral--i.e., that there was a 
reasonable basis for believing that a crime has been committed 
or attempted. 242 Mr. Iorio, who signed the referral, 
testified that he thought the referral met and exceeded the 
prescribed standard. 243
    Criminal Referral C0004 was a 20-page, single-spaced 
description of ``numerous questionable cash flow and `loan' 
transactions'' occurring in 1984 and 1985 among a dozen 
companies controlled by the McDougals, including Whitewater 
Development Corporation. 244 The referral alleged that 
crimes may have been committed in the course of these 
transactions; that some of the McDougal's business associates 
may have been aware of the criminal activity; and that the 
suspected criminal activity may have cumulatively contributed 
to the failure of Madison Guaranty:

          The transactions reviewed and discussed herein will 
        allege excessive overdrafts resulting in unauthorized 
        loans, check kiting, possible forgery (or at the very 
        least, extensive use of unauthorized signatures), 
        potential misappropriation of funds, possible illicit 
        campaign contributions, diversion of loan proceeds, and 
        potential bank fraud; each of these actions, compounded 
        by the extended time frame during which they occurred, 
        lends [credence] to the probability that some or all of 
        the McDougal's business associates and partners, the 
        collective principals of these combined companies, had 
        knowledge of these activities. The extensive nature of 
        these activities could allegedly constitute ongoing 
        criminal and regulatory violations which lasted for a 
        period of three or more years, and could have 
        ultimately contributed to the failure of the 
        Association. 245

    The referral alleged that the McDougals and Lisa Aunspaugh 
(an employee of Susan McDougal's), had committed, among other 
crimes, bank fraud, in violation of 18 U.S.C. 1344, and 
conspiracy, in violation of 18 U.S.C. 371. 246 The 
referral named the President and Mrs. Clinton, Governor Jim Guy 
Tucker, former U.S. Senator J.W. Fulbright, Stephen Smith, and 
Greg Young, as potential witnesses to suspected criminal 
activity. 247 The referral also identified the Clintons, 
Mr. Tucker, and Mr. Smith as persons who had stood to benefit 
from the suspected criminal activity. 248
    Ms. Lewis identified the Clintons as possible witnesses 
because they ``were business associates and involved in the 
Whitewater Corporation with Mr. McDougal, and as such, I think 
I would have been imprudent in my job had I not listed them as 
witnesses because they were part of Whitewater and could have 
easily had knowledge of what Mr. McDougal was doing with those 
funds.'' 249 Mr. Iorio agreed with Ms. Lewis' decision to 
list the Clintons as possible witnesses. 250
    The referral indicated that, during the mid-1980s, at least 
10 checks were written on the Whitewater's account at Madison 
Guaranty and that five of the checks totalling over $60,000 
were written on insufficient funds.251 The referral also 
noted that these overdrafts were cured by funds supplied by 
other McDougal entities, and that Madison Guaranty did not 
impose any service charges or fees in connection with the 
overdrafts.252
            C. Betsey Wright informs Mrs. Clinton of the RTC criminal 
                    referral
    At about the time when Ms. Lewis was preparing Criminal 
Referral C0004, Mrs. Clinton learned of its existence. Betsey 
Wright, the former Chief of Staff to Governor Clinton, 
testified that in the fall of 1992, while she was working on 
the Clinton presidential campaign, she was informed, from a 
person she could not remember, of an RTC Criminal ``Referral 
about an S&L officer which would implicate the Clintons in 
Arkansas.'' 253 Ms. Wright testified that ``she went 
scrambling trying to find out what on earth they were talking 
about.'' 254 Ms. Wright called Bob Wilson, a criminal 
defense attorney in Little Rock, to determine whether she could 
obtain information about the referral but was told that such 
information would be confidential.255
    Ms. Wright testified that she spoke with Mrs. Clinton and 
asked ``if she was aware of any friend of theirs in the savings 
and loan business who might be under criminal investigation, 
and we couldn't think of anybody.'' 256 Although national 
media attention was focused on the McDougals, Madison Guaranty, 
and Whitewater during the 1992 campaign, Ms. Wright claimed 
that Mr. McDougal's name was not discussed during her 
conversation with Mrs. Clinton.257

II. Criminal referral C0004 languishes at the Justice Department

    After a criminal referral is submitted to the U.S. 
Attorney, he or she must determine whether it warrants further 
investigation or the initiation of criminal 
proceedings.258 When the U.S. Attorney declines to proceed 
with a criminal referral, a ``declination letter'' is sent to 
the RTC.259
    Although RTC Criminal Referral C0004 was submitted to the 
U.S. Attorney's Office in Little Rock on September 1, 
1992,260 no action was taken on the referral for more than 
one year. Finally, in October 1993, the new U.S Attorney in 
Little Rock, Paula Casey, a former student and campaign worker 
for President Clinton, declined this referral.261 The 
referral was also reviewed by Justice Department officials in 
Washington, D.C., where the President's close friend, Webster 
Hubbell, was the Associate Attorney General, the third-highest 
position in the Justice Department.
            A. The U.S. Attorney sends Criminal Referral C0004 to the 
                    main Justice Department
    On September 2, 1992, the U.S. Attorney's Office in Little 
Rock received Criminal Referral C0004.262 The U.S. 
Attorney's Manual directs that a U.S. Attorney send an ``Urgent 
Memorandum'' to the attention of the Attorney General whenever 
a sensitive matter arises.263 Although Criminal Referral 
C0004 identified Governor Clinton, then the Democratic nominee 
for President, his wife, and Jim Guy Tucker, then the 
Lieutenant Governor, as potential witnesses, Mr. Banks did not 
send an ``Urgent Memorandum'' or even report the receipt of the 
referral to the Justice Department in Washington, D.C. (``Main 
Justice'').264 Mr. Banks claimed that he did not notify 
Main Justice of the referral immediately because he lacked 
``confidence'' in the referral and wanted more evidence before 
notifying persons outside of Little Rock.265
    At about the same time, on September 17, 1992, White House 
Cabinet Secretary Edie Holliday asked Attorney General William 
Barr whether he was aware of any matter involving one of the 
presidential candidates.266 Ms. Holiday later told Mr. 
Barr that the matter she had heard about involved a failed 
savings and loan and the Clintons. Mr. Barr asked Ira 
Raphaelson, then-Special Counsel for Financial Institutions 
Crimes,267 to ascertain whether the Justice Department was 
handling such an investigation.268 Mr. Raphaelson 
initially informed the Attorney General that no such case 
existed within the Department.269
    After Mr. Barr made a second request, however, Mr. 
Raphaelson discovered that ``there had been a referral down in 
Arkansas, but it had not been reported. In fact, it appeared 
that the office had withheld it from [Justice Department] 
headquarters.'' 270 Mr. Barr testified that he was angry 
that the U.S. Attorney's Office in Little Rock had deliberately 
failed to inform him of the matter:

          I basically said I was very angry that a matter which 
        I viewed as a sensitive matter, that should have been 
        reported to the Attorney General, was deliberately 
        withheld from the Attorney General. So I was angry, and 
        expressed my displeasure, and said that I'd be 
        interested in knowing why an urgent report was not 
        prepared for me and why I was not advised of this case, 
        and why it had been deliberately withheld.271

    Mr. Barr testified that Criminal Referral C0004 definitely 
met the criteria for the issuance of an Urgent Report:

          The criteria is really anything which involves--well, 
        includes anything that involves a public personage, a 
        celebrity or any kind of sensitive case that can 
        involve, for example, public officials in the state, 
        those kinds of things. It's inconceivable to me that 
        any U.S. Attorney would not immediately understand that 
        this case would require an Urgent Report.272

 Mr. Barr instructed Mr. Raphaelson to ensure that the matter 
was kept in the strictest confidence to prevent any leaks and 
was handled solely based on its merits.273
    On October 7, 1992, Floyd Mac Dodson, First Assistant to 
Mr. Banks, informed Lawrence McWhorter, Director of the 
Executive Office of United States Attorneys, that the U.S. 
Attorney's Office had been ``sitting on the referral for six 
weeks,'' and that he ``thought some further investigation was 
needed.'' 274 The next day, Mr. McWhorter transmitted an 
Urgent Memorandum, along with a copy of Criminal Referral 
C0004, to Attorney General Barr, stating that ``[i]t is the 
belief of the U.S. Attorney's Office that further investigation 
into this matter is warranted.'' 275
    On the same day, SSA Irons also sent a teletype to SSA 
Kevin Kendrick at FBI headquarters in Washington informing him 
about Criminal Referral C0004.276 The FBI teletype listed 
then-Governor and Mrs. Clinton and then-Lieutenant Governor Jim 
Guy Tucker among the possible witnesses.277 The teletype 
explained the reason for identifying the Clintons as potential 
witnesses:

          The activities of McDougal as they may have involved 
        Bill or Hillary Clinton are related to Whitewater 
        Development Corporation, Inc. (WWD) James and Susan 
        McDougal and Bill and Hillary Clinton were partners in 
        WWD . . .. [Pages of the referral] discuss the check 
        kiting activity involving the WWD account at 
        MGSL.278

According to the teletype, Mr. Banks had informed the FBI that 
he intended to research the referral and analyze the 300 
documentary exhibits submitted by the RTC.279
    On October 8, 1992, officials from FBI Headquarters and 
Main Justice met to discuss Criminal Referral C0004.280 
Present at the meeting were Mr. Raphaelson; Robert Mueller, 
Assistant Attorney General, Criminal Division; 281 Fred 
Verinder, Deputy Assistant Director, Criminal Division, at FBI 
Headquarters; 282 Mr. Kendrick; and Thomas Kubic, Section 
Chief, Banking Crimes Unit. Mr. Mueller indicated that even 
though the referral on its face did not contain enough 
information for the Justice Department to render an opinion, 
the FBI should investigate the matter to determine whether the 
case had merit.283 As a result of the meeting, FBI 
Headquarters instructed its Little Rock Field Office to conduct 
a limited investigation into the matters described in the 
Criminal Referral C0004 and specifically directed the office to 
review the exhibits.284
    Although Mr. Bank assured the FBI that he would review the 
300 exhibits, neither he nor Mr. Dodson ever reviewed 
them.285 On October 16, 1992, Mr. Banks wrote to Donald 
Pettus, Special Agent in Charge of the FBI Little Rock Field 
Office, to inform him that the U.S. Attorney's Office would not 
participate in any investigation regarding Criminal Referral 
C0004 until after the 1992 presidential election.286 Mr. 
Banks indicated that he believed no prosecutable case existed 
against any of the witnesses, and that ``the only allegations 
having any credibility are against the McDougals and 
Anspaugh.'' 287
    On the same day, the FBI Little Rock Field Office also 
notified Mr. Kendrick at FBI Headquarters by teletype that the 
limited data ``may indicate criminal activity on the part of 
the captioned subjects, James and Susan McDougal, and Lisa 
Anspaugh. However, USA is holding opinion of prosecutive 
opinion regarding these subjects in abeyance.'' 288
    Based on the decision of the U.S. Attorney's Office to 
defer any prosecutorial consideration, the Field Office also 
adopted a non-investigative posture on Criminal Referral 
C0004.289
            B. Criminal Referral C0004 gets lost at the Justice 
                    Department
    Criminal Referral C0004 remained in the U.S. Attorney's 
Office until January 27, 1993, when Mr. Banks requested, in a 
letter to Donna Henneman, Ethics Program Manager at the 
Executive Office for U.S. Attorneys, that Main Justice assume 
responsibility for any further action.290 Mr. Banks 
believed that his office had a conflict of interest because of 
its unsuccessful criminal prosecution of Mr. McDougal in 
1990.291 Mr. Banks concluded that ``[a] limited 
preliminary investigation of allegations pertinent to Mr. and 
Mrs. McDougal and Ms. Anspaugh should be considered,'' and that 
interviews of these individuals should determine whether there 
is merit to further investigation.292
    On February 9, 1993, Anthony Moscato, Director of the 
Executive Office of United States Attorneys, forwarded Mr. 
Banks' request to Stuart Gerson, then Acting Attorney General, 
through Douglas Frazier, Principal Associate Deputy Attorney 
General.293 Mr. Frazier prepared a recusal package and 
sent it to the Criminal Division for its 
recommendation.294
    On February 22, 1993, Gerald McDowell, Chief of the Frauds 
Section at Main Justice, directed a young trial attorney, Mark 
MacDougall, to analyze the criminal referral.295 Just one 
day later, on February 23, 1993, without even reviewing the 300 
exhibits, Mr. MacDougal prepared a memorandum in which he 
concluded that Criminal Referral C0004 did not appear to 
warrant any criminal investigation.296
     Main Justice officials decided against rendering an 
opinion on the merits of the referral. Instead, Main Justice 
rejected Mr. Banks' request for recusal and returned the 
referral to Mr. Banks to let his office decide whether to 
investigate further or to decline prosecution.297
    On March 19, 1993, Acting Assistant Attorney General John 
Keeney prepared a memorandum for Mr. Frazier rejecting recusal:

          We have reviewed the material in the package and have 
        concluded that there is no identifiable basis for 
        recusal by the United States Attorney. Further, we 
        would not question a decision by the United States 
        Attorney to decline further substantive action on the 
        referral.298

Main Justice wanted Mr. Banks to make the ultimate decision on 
the referral. Allen Carver, Deputy Chief of the Fraud Section, 
Criminal Division, testified that the memorandum prepared by 
Mr. MacDougall did not constitute a conclusion by Main Justice 
not to prosecute the case,299 and that the matter was sent 
to the U.S. Attorney's Office for a determinative 
opinion.300
    Although Mr. Frazier believed that he should have received 
Mr. Keeney's memorandum in March, he did not receive it until 
the end of May or June, when it suddenly ``appeared out of 
nowhere.'' 301 Thus, for more than two months, Mr. Banks 
was not advised of Main Justice's decision to reject his 
request for recusal.302
    By May 1993, the U.S. Attorney's Office still had not sent 
a response to Ms. Lewis on whether a decision had been made to 
decline or prosecute Criminal Referral C0004. After Mr. Banks' 
resignation in March 1993,303 Ms. Lewis wrote to Acting 
U.S. Attorney Richard Pence in Little Rock to inquire about the 
status of the referral. Mr. Pence notified Ms. Lewis that the 
matter had been referred to Main Justice.304
    Ms. Lewis then contacted Ms. Henneman of the Executive 
Office for U.S. Attorneys to ask about the status of Criminal 
Referral C0004. After a number of inquiries, Ms. Henneman 
located, within the Fraud Section at Main Justice, the March 19 
memorandum declining Mr. Banks' request for recusal. Ms. 
Henneman then forwarded a copy of the memorandum to Mr. 
Frazier.305 Finally, in July 1993, Main Justice sent a 
package of materials, including the March 19 memorandum, to the 
U.S. Attorney's Office in Little Rock.306
    Mr. Pence discussed Criminal Referral C0004 with Assistant 
United States Attorney Fletcher Jackson.307 He took no 
other action. Mr. Jackson advised Mr. Pence that he wanted to 
review the referral exhibits to determine whether any of the 
Madison Guaranty transactions were related to his ongoing 
investigation of David Hale and Capital Management Services, 
Inc.308
    Although a decision on a criminal referral is usually 
issued within 60-90 days after submission, the U.S. Attorney's 
Office did not render a prosecutorial opinion on Criminal 
Referral C0004 until October 27, 1993--over one year after its 
submission--when Ms. Casey formally declined the 
referral.309 The length of time that it took for the 
referral to be acted upon was unusually long in the experience 
of Mr. Iorio and Ms. Lewis. Mr. Iorio testified that the normal 
time period for a United States Attorney to act on an RTC 
criminal referral was around 60 days;310 Ms. Lewis 
testified that she generally received responses within 30 to 45 
days.311
    The final decision to decline prosecution was made without 
anyone having reviewed the exhibits. Indeed, no one at the U.S. 
Attorney's office in charge of handling Criminal Referral C0004 
ever reviewed or analyzed the 300 exhibits.312

III. Interference with the RTC's ongoing investigation of Madison

    From May through August 1993, while Crminal Referral C0004 
was in the hands of the Justice Department, Ms. Lewis, at the 
express direction of her supervisors--Mr. Ausen and Mr. Iorio--
continued to investigate Madison Guaranty.313 RTC Kansas 
City investigators Mike Caron, Ed Noyes, and Randy Knight 
joined Ms. Lewis in this effort.314

      According to Ms. Lewis, this phase of the RTC's 
investigation uncovered:

          several transactions involving insider abuse, self-
        dealing, money laundering, embezzlement, diversion of 
        loan proceeds, payments of excessive commissions, 
        misappropriation of funds, land flips, inflated 
        appraisals, falsification of loan records and board 
        minutes, chronic overdraft status of various 
        subsidiaries, joint ventures and real estate 
        investments, regulatory violations of investments in 
        subsidiaries, wire fraud, and illegal campaign 
        contributions.315

As a result, the RTC prepared nine new criminal referrals 
concerning Madison Guaranty.316 These referrals were 
completed on September 24, 1993.317
    The 1993 referrals alleged the commission of crimes 
involving, among other things, bank fraud, conspiracy, false 
statements, false documents, wire fraud, aiding and abetting, 
and misuse of position.318 The nine referrals identified 
multiple suspects of criminal wrongdoing--including Mr. and 
Mrs. McDougal, several former Madison Guaranty officers and 
borrowers, Mr. Tucker, and the Bill Clinton Political Committee 
Fund.319 President and Mrs. Clinton were listed as 
witnesses in three referrals,320; Beverly Bassett 
Schaffer, the former Commissioner of the Arkansas Securities 
Department, was listed in one referral;321
    Criminal Referral #730CR0192 alleged that Mr. McDougal 
embezzled money from Madison Guaranty, by channelling it 
through the Whitewater account.322 In April 1985, Mr. 
McDougal transferred $30,000 from the Whitewater account at 
Madison Guaranty to former Senator J.W. Fulbright.323 As 
the balance of the Whitewater account was $270, this transfer 
caused the account to be overdrawn.324 Later that month, 
the overdraft was cured when Madison Financial deposited 
$30,000 into the Whitewater account.325 According to 
minutes of a Madison Financial Board of Directors' meeting, the 
$30,000 was supposedly a prepayment of Mr. McDougal's annual 
bonus.326
    The referral stated that ``the unauthorized prepayment of 
McDougal's annual bonus was simply a method to allow McDougal 
to embezzle funds through manipulation of the accounts which he 
controlled. He clearly used the White Water account to pay his 
unknown obligation to J.W. Fulbright and schemed to deprive 
Madison Financial Corporation of funds to reimburse the White 
Water account.'' 327
    President and Mrs. Clinton were listed as potential 
witnesses to suspected criminal activity.328 Ms. Lewis 
testified that the Clintons were included as potential 
witnesses because, as owners of the closely-held Whitewater 
corporation, they might ``have had knowledge of what was going 
on with the finances of their corporation.'' 329
    A second referral, number 730CR0196, alleged that ``James 
B. McDougal, and MGS&L shareholder and former Director, Charles 
Peacock III, . . . conspired to misappropriate thrift funds for 
the purpose of making illegal campaign contributions to the 
benefit of Arkansas Governor Bill Clinton.'' 330 The 
referral named Mr. McDougal, Mr. Peacock, and the Bill Clinton 
Political Committee Fund as criminal suspects.331
    The referral identified four $3,000 checks, all of which 
were dated April 4, 1985, drawn on Madison Guaranty accounts, 
and deposited in the Bill Clinton Political Committee account 
at the Bank of Cherry Valley.332 The first check was 
written by Mrs. McDougal on the McDougals' personal checking 
account at Madison Guaranty and made payable to the ``Bill 
Clinton Political Committee.'' 333 The second check, a 
Madison Guaranty cashier's check purchased in the name of J.W. 
Fulbright, was also made payable to the ``Bill Clinton 
Political Committee.'' 334 The referral alleged that this 
check was funded by a check issued by Flowerwood Farms, one of 
the McDougals' companies.335
    The third and fourth checks were each $3,000 cashier's 
checks drawn on Madison Guaranty. The checks were purchased in 
the names of Ken Peacock and Dean Landrum, respectively, and 
made payable to Bill Clinton.336 The referral alleged that 
former Madison Guaranty director Charles Peacock III, the 
father of Ken Peacock and the business partner of Mr. Landrum, 
purchased these checks by diverting part of the proceeds of a 
$50,000 Madison Guaranty loan.337 The three cashier's 
checks were numbered sequentially--Q2496, Q2497 and Q2498--
338, and Mr. Landrum's first name, Dene, was misspelled on 
the check.339
    The referral further suggested that Mr. McDougal may have 
received benefits from then-Governor Clinton in exchange for 
$6,000 in campaign contributions. The referral observed that 
during the month the $3,000 checks were written, Mrs. Clinton, 
then a partner in the Rose Law Firm, had sent a letter to the 
Arkansas Securities Department seeking approval of Madison 
Guaranty's plan to issue a class of preferred stock.340 
The referral noted that the plan was approved the next month by 
the Arkansas Securities Commissioner, Beverly Bassett Schaffer, 
who had been appointed to her post by then-Governor 
Clinton.341 The referral also remarked that Madison 
Guaranty's request for approval to issue preferred stock came 
at a time when Madison Guaranty was badly in need of additional 
capital.342
    The referral named both Mrs. Clinton and Ms. Schaffer as 
possible witnesses.343
    Ms. Lewis believed that ``there was a very strong 
possibility of a quid pro quo in the selection of Ms. Bassett 
into [her] position'' 344 and that ``there was a 
possibility of a quid pro quo situation'' with respect to 
``Mrs. Clinton and the Rose firm representing Madison.'' 
345
    The nine referrals were submitted to the Justice Department 
on October 8, 1993. 346
    The verdicts in the McDougal and Tucker trial prove that 
actual criminal activity was identified in the RTC referrals. 
On August 17, 1995, a federal grand jury convened in the 
Eastern District of Arkansas returned a twenty-one count 
indictment against Mr. and Mrs. McDougal, and Governor Tucker 
alleging conspiracy, bank fraud, mail fraud, wire fraud, 
misapplication of funds, and the making of false statements and 
false entries.347 The Office of the Independent Counsel 
(``OIC'') prosecuted the three defendants and, on May 28, 1996, 
after a lengthy trial, a jury in Little Rock convicted Mr. 
McDougal on 18 of 19 counts in the indictment, Mrs. McDougal on 
four counts, and Governor Tucker on two counts.348
    Many of the felony counts on which the defendants were 
convicted were based on suspected criminal activity identified 
in the RTC referrals. Count one of the indictment, a criminal 
conspiracy charge on which both Mr. McDougal and Governor 
Tucker were convicted, involved a $260,000 loan obtained by Mr. 
Tucker from Madison Guaranty and the ``flip'' of property at 
1308 Main Street in Little Rock. This count closely tracked 
allegations made in RTC Criminal Referrals #730CR0190 and 
#730CR0198.349 The jury also convicted Mr. McDougal on 
charges of misapplication of funds (counts 17 and 18) and 
making false record entries (count 19) related to the land flip 
at 1308 Main Street--the suspected crime described in Criminal 
Referral #730CR0198.350
    Three additional charges on which Mr. McDougal was 
convicted--count 5 (mail fraud), count 6 (fraud), and count 7 
(false statement), tracked the suspected criminal activity 
identified in Criminal Referral #730CR0199. That referral 
outlined suspected crimes committed by Mr. McDougal in 
connection with his development of resort property on 
Campobello Island, off the coast of New Brunswick, 
Canada.4
---------------------------------------------------------------------------
    \4\ Another suspect identified in the referral, Larry Kuca, pleaded 
guilty to a misdemeanor charge of conspiracy to misapply funds.
---------------------------------------------------------------------------
    Finally, five of the counts on which the jury returned 
guilty verdicts--counts 1, 13, 14, 15, and 16--related to a 
fraudulent $300,000 loan made to Mrs. McDougal's company, 
Master Marketing, from Capital Management Services.351 The 
proceeds of that loan were tracked in the first Madison 
Guaranty referral, Criminal Referral C0004.
    Despite the proven success of the Kansas City 
investigators' efforts, they encountered a concerted effort to 
hamper their investigative efforts. Both Ms. Lewis and Mr. 
Iorio testified that obstacles were placed in the way of the 
RTC's investigation into Madison Guaranty and Whitewater. Ms. 
Lewis ``believe[d] there was a concerted effort to obstruct, 
hamper and manipulate the results of our investigation of 
Madison.'' 352
    Mr. Iorio shared that view.353 He also described as 
``unprecedented'' the ``scrutiny that had been focused on the 
efforts of preparing the referrals and the subsequent review of 
the referrals.'' 354 He explained:

          Through this arduous process, the Kansas City office 
        of investigations has been subjected to an alteration 
        of the work environment that included instigation of 
        special procedures, a new review critique mechanism, a 
        slow down of information flow, information leaks, and 
        for us, Jean Lewis, Lee Ausen, and myself, the 
        uncertainty of being placed on administrative leave, 
        without prior notification to RTC investigations 
        management in Washington, D.C. At that point, the 
        review of our work appeared to be more than an effort 
        to confirm or deny our findings. Instead, it appeared 
        that three of us had become the messengers of unwanted 
        news, and if history serves as a guide, are often the 
        targets of attack meant to deflect attention from the 
        information the messengers bring.355

    Part of the pattern of intimidation, interference, and 
outright obstruction was the subjecting of the second set of 
criminal referrals to an unprecedented written ``legal review'' 
by the Professional Liability Section (``PLS'') of the RTC. The 
second set of nine criminal referrals related to Madison 
Guaranty were completed and signed by September 24, 1993, and 
the Kansas City RTC investigators had planned to send the 
referrals to the Justice Department on October 1, 1993.356
    On September 30, 1993, however, Julie Yanda, the Chief of 
the Professional Liability Section 5 in the RTC Kansas 
City office, demanded that her staff be given the opportunity 
to conduct a ``legal review'' of the referrals.357 Ms. 
Lewis was concerned that the review was ``a delay tactic,'' 
358 and, on October 4, 1993, she shared her concerns with 
RTC Regional Inspector General Dan Sherry.359
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    \5\ The RTC's Professional Liability Section was responsible for 
handling civil claims relating to the legal liability of professionals, 
such as accountants, appraisers, and attorneys. (Lewis, 10/30/95 Dep. 
p. 125.)
---------------------------------------------------------------------------
    Two senior RTC PLS attorneys, Karen Carmichael and Philip 
Adams, prepared this so-called ``legal review''--a 13-page 
memorandum, dated October 7, 1993, and addressed to Ms. 
Yanda.360 For each referral, the memorandum posed between 
six and 12 brief questions stemming from the authors' 
``concerns'' about the referrals.361 The memorandum did 
not answer or analyze the questions it raised. And, it offered 
no suggestions for revising the referrals, gave no conclusions 
about the referrals, and contained no recommendations with 
respect to what action the RTC should take.362
    On October 8, 1993, PLS provided its legal review to the 
criminal investigators,363 and the nine referrals were 
submitted to the United States Attorney's Office.364 Thus, 
the only effect of this legal review was to delay the 
submission of the referrals by one week. The referrals were 
submitted exactly as they had been written prior to the PLS 
review.365
    Ms. Lewis and Mr. Iorio both described PLS's request to 
delay the submission of criminal referrals for a legal review 
as ``unprecedented.'' 366 According to Ms. Lewis, PLS had 
never before reviewed any other criminal referrals prepared by 
the Kansas City criminal investigations unit.367 Mr. Iorio 
similarly testified that ``[t]he request to do a critique of 
the referrals, that was the first time this had happened and it 
was with regard to the nine Madison criminal referrals.'' 
368 He also stated that subsequent referrals were not 
reviewed prior to their submission in all cases.369
    Ms. Yanda claimed that her request for a legal review of 
the Madison Guaranty referrals was based on a June 17, 1993 RTC 
memorandum on the handling of criminal referrals.370 That 
memorandum stated: ``[e]xcept in rare circumstances, criminal 
referrals shall be reviewed by RTC Investigations and Legal 
Division Criminal Coordinators before they are delivered to the 
U.S. Attorney and the FBI or any other investigative agency.'' 
371
    Other RTC officials had a different view of the June 17, 
1993 memorandum than Ms. Yanda. Mr. Iorio did not read the 
memorandum to require that the submission of criminal referrals 
be delayed pending PLS's review. According to Mr. Iorio, under 
the June 17 memorandum, PLS was ``to be provided with a copy of 
any outgoing criminal referrals for their review as a means to 
exchange information, but you are not dependent upon them 
critiquing your referrals and telling you it's all right to 
send them.'' 372 Mr. Iorio's understanding was based on 
conversations with Mr. Dudine and Carl Gamble, the criminal 
coordinator in the RTC Washington, D.C. office, who he 
understood to have authored the memorandum.373 Also, 
Kenneth Donahue of the RTC Office of Investigations in 
Washington, D.C., told Ms. Yanda that he helped draft the June 
17, 1993 memorandum, and that it had not been intended that PLS 
would prepare legal reviews of all referrals prior to their 
submission to the Justice Department.374
    Soon after the nine new criminal referrals were sent to the 
U.S. Attorney's Office, Ms. Lewis began to encounter more 
difficulties in conducting the Madison Guaranty investigation. 
In October 1993, Ms. Lewis was removed from the Madison 
Guaranty ``communications loop'' by the PLS criminal 
coordinator. 375 That same month, Mr. Iorio advised Ms. 
Lewis that PLS personnel had complained that she communicated 
directly with the U.S. Attorney's Office and the FBI in Little 
Rock, concerning Madison Guaranty. 376
    On November 9, 1993, at the direction of Ms. Yanda, Ms. 
Lewis was removed from the position as lead investigator on the 
Madison Guaranty criminal case. 377 According to Mr. 
Iorio, ``[t]here was some friction between Jean and Julie's 
criminal coordinator, Karen Carmichael, and Julie came to me 
and asked me to remove Jean.'' 378 When asked about this 
meeting, Ms. Yanda claimed that she ``laid out for Mr. Iorio a 
series of events that had troubled me greatly concerning Ms. 
Lewis and her failure to act as a team member and work with the 
legal division in concert to try to move matters along 
successfully to the benefit of the RTC.'' 379
    Mr. Iorio and Mr. Ausen told Ms. Lewis that she was being 
removed from the Madison Guaranty investigation ``to avoid me 
taking a bullet I didn't deserve.'' 380 On November 10, 
1993, Ms. Lewis wrote in an e-mail, ``[j]ust a heads up to let 
you know that Mike Caron, Senior Criminal Investigator, is now 
the lead investigator on Madison . . . The Powers that Be have 
decided that I'm better off out of the line of fire (and I 
ain't arguing).'' 381
    The removal of Ms. Lewis from the Madison Guaranty 
investigation was only part of a larger pattern of interference 
by senior officials in the RTC's investigation. April Breslaw, 
a PLS attorney, was at the center of this effort. Throughout 
1994, Ms. Breslaw sought to discourage RTC employees from 
investigating Madison Guaranty and informed RTC investigators 
that senior RTC officials preferred that any such investigation 
reach a certain outcome.
    Ms. Breslaw's first contact with Madison Guaranty was in 
1989. In March 1989, Ms. Breslaw--then an attorney in the FDIC 
Directors and Officers Liability Section--retained the Rose Law 
Firm to handle a malpractice suit against Madison Guaranty's 
former independent accountants, Frost & Company. 382 In 
January 1990, Ms. Breslaw was detailed to the RTC's 
Professional Liability Section. 383 In April 1991, the 
Frost case was settled. 384 In January 1994, Ms. Breslaw 
was put on a team of RTC attorneys reviewing Madison civil 
claims. 385 In March 1994, Ms. Breslaw recused herself 
from the Madison case. 386
    In late 1993 and early 1994, after public allegations arose 
that the Rose Law Firm had a conflict of interest, Ms. 
Breslaw's decision to hire the Rose Law Firm to represent the 
FDIC (and later the RTC) came under considerable scrutiny. 
387 In September 1993, Sue Schmidt, a Washington Post 
reporter, contacted Ms. Breslaw about Rose's representation of 
the RTC. 388 Later that fall, the FDIC Legal Division 
commenced a review of the hiring of the Rose Law Firm for the 
Frost case. 389 The Office of Investigations in the Kansas 
City RTC office also began that fall to examine Madison civil 
issues, including Rose Law Firm conflicts issues. 390 In 
January 1994, the RTC Office of Contractor Oversight and 
Surveillance also started to investigate Rose conflicts issues. 
391
    On January 12, 1994, Ms. Breslaw sent an e-mail message to 
Mr. Iorio and James Thompson, the Vice President of the Kansas 
City RTC office responsible for investigations. 392 In the 
e-mail, Ms. Breslaw stated that ``[i]t's my understanding that 
Kansas Investigations has attempted to evaluate the decision to 
hire the Rose Law Firm to represent the government against 
Frost & Co.'' 393 She then attempted to persuade Mr. 
Thompson and Mr. Iorio to call off the investigation:

          [Y]ou should be aware that the FDIC is conducting its 
        own investigation of this matter. Trial attorneys from 
        their Special Litigation unit are in the process of 
        both evaluating relevant documents and interviewing 
        witnesses. By all indications, this project is being 
        handled in a professional manner. . . . In light of all 
        of this, I suggest that Investigations discontinue its 
        inquiry into this matter. 394

    Within days of sending this e-mail, Ms. Breslaw warned RTC 
investigator Gary Davidson against pursuing an investigation of 
Madison, saying that certain RTC managers would take a ``dim 
view'' of such an investigation.395 In a February 18, 1994 
memorandum addressed to Mr. Iorio, Mr. Davidson recounted his 
conversation with Ms. Breslaw:

          On January 11, 1994, you requested that I conduct a 
        preliminary investigation into Madison Guaranty, for 
        possible Civil Fraud claims. . . . On January 13th or 
        14th, I called the assigned PLS attorney, April 
        Breslaw, for the purpose of asking whether she knew of 
        any fraudulent activity that was not addressed in the 
        Criminal Referrals.
          Before I could ask my intended question, April asked 
        if I was conducting an investigation into Madison 
        Guaranty. After acknowledging that I was, she indicated 
        that what she was about to tell me was being stated as 
        politely as she could. April felt that I should know 
        there are some RTC people in management positions that 
        would take a ``dim view'' of me investigating Madison 
        Guaranty. She also advised that I should be very 
        careful of who I talk to and what I say, because of the 
        people associated with Madison Guaranty.396

    Mr. Davidson came to Mr. Iorio within a few days after he 
had received Ms. Breslaw's warning that RTC management ``would 
take a `dim view' of [him] investigating Madison Guaranty.'' 
397 Mr. Iorio told Mr. Davidson to memorialize what Ms. 
Breslaw had said because he ``thought it was very unusual.'' 
398 Mr. Davidson interpreted Ms. Breslaw's comments as 
``definitely a threat.'' 399
    Ms. Breslaw recalled a conversation with Mr. Davidson but 
denied telling him that some RTC managers would take a ``dim 
view'' of him investigating Madison.400 She remembered 
only cautioning Mr. Davidson about speaking to the 
press.401 But Ms. Breslaw's testimony is contradicted by a 
July 12, 1994 memorandum she wrote to RTC Deputy General 
Counsel Andrew Tomback. In that memorandum, Ms. Breslaw 
admitted that she had told Mr. Davidson that some people 
``would take a dim view'' of an investigation in Rose Law Firm 
conflicts issues:

          Gary called me in 1994 to quiz me about the Rose Law 
        Firm. In response, I reminded Gary that the FDIC had 
        taken responsibility for evaluating Rose Firm conflicts 
        and that it was not appropriate for RTC Kansas 
        investigations to go further into that matter. I 
        believe I told Gary that the senior people would take a 
        dim view of further Kansas inquiry into Rose Law Firm 
        conflicts issues.402

    On February 2, 1994, at the direction of Mark Gabrellian, 
Counsel for the Legal Division of the RTC, Ms. Breslaw traveled 
to the Kansas City RTC Office of Investigations to review 
Madison documents in connection with the RTC's recently 
reopened Madison civil investigation.403 That afternoon, 
Ms. Breslaw and Ms. Lewis spoke for approximately 40 
minutes.404 Ms. Lewis recorded their conversation.6 
On the tape, a speaker who Ms. Lewis identified as Ms. Breslaw 
stated:

    \6\ Ms. Lewis testified that she did not intend to record the 
conversation initially. She testified that the tape recorder turned 
itself on, and that at some point during the conversation she noticed 
that it was on but chose to continue the recording. (Lewis, 10/30/95 
Dep. pp. 157-158, 196-197.)
    Ms. Breslaw was unaware that the conversation was being recorded. 
(Breslaw, 11/30/95 Hrg. p. 69.)
    Ms. Lewis turned the original tape over to the Office of the 
Independent Counsel (``OIC'') on March 31, 1994. (Lewis, 10/30/95 Dep. 
p. 241.) The OIC produced a copy of the tape to the Special Committee 
on November 20, 1995.
---------------------------------------------------------------------------
          I think if they can say it honestly, the head 
        people--Jack Ryan and Ellen Kulka, would like to be 
        able to say ``Whitewater did not cause a loss to 
        Madison.'' We don't know, you know, what Fiske is going 
        to find and we don't offer any opinion on it. But the 
        problem is nobody has been able to say to Ryan and 
        Kulka, ``Sure say that, that's fine.'' 405

At the time, Mr. Ryan was the RTC's CEO and Ms. Kulka was its 
General Counsel.
    Ms. Breslaw also was recorded saying:

          Well, you know, as I say--I feel self-conscious 
        asking that, because in some ways it is kind of a silly 
        question. But it's the kind of thing, they're looking 
        for what they can say, and I do believe they want to 
        say something honest, but I don't believe at all, and I 
        don't want to suggest at all, that they want us to move 
        to certain conclusions. I really don't get that 
        feeling. But there are answers they would be happier 
        about, you know, because it would get them, you know, 
        off the hook, you know, and that would sense 
        Whitewater. So that is why we keep getting asked the 
        same things.406

In Ms. Lewis's view, ``it is clear that Ms. Breslaw was there 
to deliver a message that `the people at the top would like to 
be able to say Whitewater did not cause a loss to Madison.' '' 
407
    Ms. Breslaw initially denied having made this statement to 
Ms. Lewis. On March 24, 1994, Representative James A Leach 
stated on the floor of the House of Representatives that ``[o]n 
February 2, 1994, the day Roger Altman briefed the White House 
on Madison Guaranty, April Breslaw, RTC Senior Attorney, 
visited the Kansas City office and said that Washington would 
like to say that Whitewater caused no losses to Madison.'' 
408 7 That same day, Ms. Breslaw sent an e-mail to several 
persons within the RTC, saying ``[a]s you may know, Congressman 
Leach made a statement regarding the so-called `Whitewater' 
affair on the floor of the Congress today. At one point he made 
specific reference to me. I want you to know that I 
categorically deny making the statement which he attributed to 
me. . . . I did not say that anyone from Washington `would like 
to say ' anything.'' 409
---------------------------------------------------------------------------
    \7\ Ms. Lewis testified that because she believed ``there was an 
effort underway to control, manipulate and even obstruct the Madison 
investigation,'' she met with Rep. Leach on February 18, 1994, and 
played the tape for him. (Lewis, 11/29/95 Hrg. p. 23); (Lewis, 10/30/95 
Dep. p. 236.)
---------------------------------------------------------------------------
    On March 25, 1994, the day after Representative Leach made 
his statement, Ms. Breslaw met with Ms. Kulka and Assistant 
General Counsel Thomas Hindes to discuss Representative Leach's 
statement. The notes of Ms. Kulka's secretary, Wilma 
Lekan,410 reflect that at the meeting Ms. Breslaw stated 
that she had discussed Whitewater with Ms. Lewis and mentioned 
both Ms. Kulka and Mr. Ryan but denied saying that the two 
wanted a particular outcome:

          April said that she told Jean that we had been 
        getting inquiri[es] in Washington about Whitewater. She 
        said she told her that Ellen and Jack Ryan had been 
        getting inquiries (she said that she was thinking of 
        the tolling agreements and the D'Amato letter.) April 
        said that this was the only point where she mentioned 
        Ellen Kulka and Jack Ryan.
          April says that she denies saying that Ellen Kulka or 
        Jack Ryan wanted a particular outcome or wanted the 
        loss numbers to be anything.411

    Before the Special Committee, Ms. Breslaw recalled speaking 
to Ms. Lewis on February 2, 1994,412 but she claimed that 
she did not recall making the statement that ``if they can say 
it honestly, the head people, Jack Ryan and Ellen Kulka, would 
like to be able to say Whitewater did not cause a loss to 
Madison.'' 413 8
---------------------------------------------------------------------------
    \8\ In prior testimony, Mr. Ryan has stated that he has no 
recollection of indicating to anyone at the RTC that he would prefer to 
be able to say that Whitewater did not cause losses to Madison. (Ryan, 
6/21/95 Dep. p. 42.) Ms. Kulka has also testified that she never 
indicated to Ms. Breslaw that she would prefer to be able to say that 
Whitewater did not cause a loss to Madison. (Kulka, 6/23/95 Dep. p. 
31.)
---------------------------------------------------------------------------
    Ms. Breslaw claimed that she was ``not sure'' whether it 
was her the voice on the tape recording.414 She 
implausibly testified that ``I don't know what my voice sounds 
like on the tape, or on a tape,'' 415 and that ``I guess 
all I can say is that I don't know what I sound like on tape.'' 
416 She finally admitted ``I have no reason to think that 
this is not my voice.'' 417
    In an e-mail dated June 28, 1994, Ms. Breslaw expressed 
concern about any production of documents to the Senate related 
to her conversation with Ms. Lewis:

          I have the impression that we're in the midst of 
        producing doc's to the Senate banking committee in 
        anticipation of the hearing scheduled for the end of 
        July. If anybody is considering producing anything that 
        has anything to do with my conversation with Jean 
        Lewis, I'd like to talk about whether its responsive to 
        the committee's request. It's my understanding that the 
        Senate rejected amendments which might have brought 
        this incident into the scope of the hearings.418

    On August 15, 1994, the three Madison investigators were 
placed on administrative leave for two weeks.419 The RTC 
took this action without any warning or explanation. On that 
fateful day, after Mr. Ausen and Mr. Iorio arrived at work, 
they were summoned to an office and told that they had been 
placed on administrative leave.420 The three investigators 
then were escorted to their offices and finally out of the 
building.421 They were told to stay off RTC 
property.422 Their offices were locked and sealed.
    On the night of August 15, Ms. Lewis, then in the hospital, 
received a call from Edward Noyes, a member of the Madison 
investigative team, who advised her Mr. Iorio and Mr. Ausen had 
been placed on administrative leave.423 Mr. Noyes told her 
that ``the purge has begun.'' 424 He telephoned later to 
let Ms. Lewis know that she had also been placed on 
leave.425
    The three Madison investigators each received an identical 
one-page memorandum, dated August 12, 1994, from Mr. 
Hindes.426 The memorandum stated ``[y]ou are hereby placed 
on Administrative Leave to be effective immediately upon 
receipt on August 15, 1994'' but offered no explanation for the 
adverse employment action.427 Although the August 12th 
memorandum indicated that ``[i]f you have any questions you may 
contact Randi L. Mendelsohn, Chief, Employee Relations, OHRM 
[Office of Human Resource Management],'' Ms. Mendelsohn refused 
to advise Mr. Iorio's counsel why he had been placed on 
administrative leave.428 Ms. Mendelsohn refused offers to 
have Mr. Iorio answer questions, provide documents, answer 
charges, or otherwise provide assistance.429 According to 
Ms. Lewis, the three were not contacted for interviews or 
information.430
    On August 29, 1994, Mr. Iorio, Mr. Ausen, and Ms. Lewis 
were told to return to work.431 The three still did not 
receive any explanation for why they were put on administrative 
leave.432
    The RTC never provided an explanation to Ms. Lewis, Mr. 
Ausen and Mr. Iorio, although Mr. Iorio believed the action was 
related to the Madison investigation.433
    In August 1994, Mr. Iorio and Ms. Lewis through counsel 
requested that the RTC OIG investigate the matter.434 John 
J. Adair, the Inspector General of the RTC, testified that in 
August 1994 his office received requests from attorneys for two 
or three of the Madison investigators and from Mr. Ryan to 
investigate the matter.435
    On the Friday before the administrative leave of the three 
Madison investigators was to end, Mr. Adair, received a 
telephone call from Andrew Tomback, Assistant General Counsel, 
and RTC attorney Erica Cooper, 436 who ``indicated to me 
that perhaps my office would want to, my agents would want to 
search the offices of the three individuals.'' 437 Mr. 
Adair told Mr. Tomback and Ms. Cooper that such a search 
``didn't seem to be an appropriate thing for us to do absent 
any really good reason to do that.'' 9 438
---------------------------------------------------------------------------
    \9\ Patrick I. Noble, the former Deputy Assistant Inspector General 
for the RTC, testified that Mr. Adair advised him of this conversation. 
(Noble, 10/20/95 Dep. pp. 33-34.) Mr. Noble recalled that Mr. Adair had 
said that ``it was not appropriate for the Inspector General's office 
to search those offices, and I believe he said he didn't believe there 
was any basis for that.'' (Noble, 10/20/95 Dep. p. 28.) Mr. Noble added 
that Mr. Adair's response was that a search would have been 
``[i]nappropriate in the sense [that] there was no legal basis for 
it.'' (Noble, 10/20/95 p.28).
---------------------------------------------------------------------------
    Before the RTC OIG could proceed with the investigation, 
the OIC advised that inquiry by the RTC IG into the 
administrative leave matter would interfere with the his 
work.439 Accordingly, the RTC OIG suspended its 
investigation.

IV. Paula Casey delays her recusal from Madison, handles the Hale pleas 
        negotiations, and declines to prosecute Criminal Referral C0004

            A. Investigations of Capital Management and David Hale
    During the summer of 1993, even before the RTC submitted 
its second set of criminal referrals relating to Madison 
Guaranty, the U.S. Attorney's Office for the Eastern District 
of Arkansas began investigating David Hale, a Little Rock 
municipal judge who owned a Small Business Investment 
Corporation (``SBIC'') called Capital Management Services, Inc. 
(``CMS''). Mr. Hale was accused of fraudulently obtaining SBA 
loans.
    On July 20, 1993, the date of Vincent Foster's death, the 
FBI obtained a search warrant and seized loan documents from 
Mr. Hale's CMS offices. Some of the documents contained 
references to Mr. Tucker, as well as a $300,000 loan to Mrs. 
McDougal d/b/a Master Marketing.440 As a result of 
information obtained in its investigation of Mr. Hale, by 
August 20, 1993, the Little Rock FBI had opened a separate 
fraud investigation of Mr. Hale and Mr. McDougal.441
    The SBA certified CMS as a Specialized SBIC on March 14, 
1979.442 Over the next 14 years, the SBA examined CMS 
eleven times.443 Although five examinations found no 
improprieties, six identified various areas of regulatory 
concern. Specifically, the SBA raised concerns about CMS's 
financing of businesses that did not qualify as socially or 
economically disadvantaged.444 The SBA also faulted CMS 
for lending to businesses that were controlled by Mr. Hale's 
associates.445
    In late 1992, despite its spotty compliance record, CMS and 
Mr. Hale applied for $6 million in additional leverage from the 
SBA.446 Mr. Hale represented to the SBA that he had a 
$13.8 million increase in CMS assets 447 in the form of 
non-cash assets that investors had provided to CMS.448 On 
October 28, 1992, the SBA rejected Mr. Hale's application for 
financing, and requested additional information relating to 
donated assets. Mr. Hale then informed the SBA that the donated 
assets consisted of $11.5 million in medical receivables of an 
investment pool and $2.3 million in stock of a company named 
National Building Supply.449 On December 8, 1992, the SBA 
gave Mr. Hale conditional approval for the capital increase--
that is, to accept the donated assets.450 The SBA, 
however, informed Mr. Hale that the assets could only be used 
for regulatory purposes--i.e, to support the $6 million in 
additional financing--until the assets were converted to cash 
and their value had been validated.451
    On February 19, 1993, at Mr. Hale's request, Wayne Foren, 
then the SBA's Associate Administrator for Investment, met with 
Mr. Hale in Washington, D.C. to withdraw his application for 
additional SBA financing for CMS.452 According to Mr. 
Foren: ``In other words, he wanted the problem to go away. He 
didn't want to answer the questions of where did the assets 
come from.'' 453 But Mr. Foren persisted in questioning 
Mr. Hale about the donated assets: ``And I said David, why 
would anybody give you tens of millions of dollars worth of 
assets? Doesn't make sense. . . . Either these assets are not 
worth the represented value, in which case you are perpetrating 
a fraud on SBA, or you are being bribed.'' 454
    Mr. Hale told Mr. Foren that he was close to the current 
governor of Arkansas, Jim Guy Tucker, and to President Clinton, 
455 and ``[t]hat he had access to both.'' 456 ``His 
answer was people gave him the money, would give him the money 
because he could do things for them in Arkansas.'' 457 Mr. 
Hale elaborated that an individual, who was interested in 
starting an insurance company in Arkansas, had put money into 
CMS by routing the funds through the Central Arkansas Community 
Development Corporation, a non-profit corporation.458 The 
money was given to Mr. Hale for ``[g]etting things done in 
Arkansas'' and to ``solve problems.'' 459 When Mr. Foren 
expressed concern over the arrangement, Mr. Hale replied, 
``well, Wayne, you have to understand this is the way we do 
business in Arkansas.'' 460
    Mr. Foren found Mr. Hale's statements regarding his 
relationship with Governor Tucker and President Clinton to be 
credible.461 Indeed, in May 1993, after Mr. Foren had 
referred the case to the SBA Inspector General (``SBA IG'') for 
further investigation, Mr. Hale called Mr. Foren and requested 
that he attend a meeting with Governor Tucker and a 
representative of the Arkansas Development Finance 
Authority.462 Mr. Foren declined to attend the meeting 
because ``[i]t is inappropriate for me to attend a meeting on 
this kind of a subject called by David Hale while we're--we 
have made a referral for investigation of his company.'' 
463
    On March 11, 1993, the SBA issued a regulatory compliance 
report on CMS that ``raised questions relative to the donated 
assets and the values'' on those assets.464 Specifically, 
the report identified the source of the $11.5 million 
investment pool certificate as an offshore company incorporated 
in the Grand Cayman Islands.465 According to Mr. Foren, 
the mysterious source of the assets raised ``another red flag'' 
for regulators.466 In addition, the SBA determined from 
documents that National Building Supply filed with the 
Securities and Exchange Commission that the stock donated to 
CMS was worthless; National Building Supply was 
bankrupt.467 On March 26, 1993, as a result of the 
examination report, the SBA sent Mr. Hale an examination letter 
468 disclosing the results of the examination and 
requiring Mr. Hale to provide additional information and/or 
take corrective action.469 On April 20, 1993, Mr. Hale 
responded that he disagreed with the conclusions and findings 
of the examination.
    On May 5, 1993, Mr. Foren referred the matter to the SBA IG 
for investigation.470 Arnold Hawkins, the SBA's Regional 
Inspector General, 471 determined that the case would 
require considerable investigative resources.472 Because 
the SBA IG did not have an office in Little Rock, Mr. Hawkins 
and other SBA officials decided to refer the matter directly to 
the FBI on May 20, 1993.473
    The FBI then proceeded to investigate CMS and Mr. Hale. On 
June 14, 1993, the FBI requested that the SBA provide documents 
concerning CMS and Mr. Hale.474 On July 20, 1993, the FBI 
obtained a search warrant for CMS records.475 The next 
day, the subpoena was served and loan documents were seized 
from the CMS offices.476 Some of the documents contained 
references to Mr. Tucker, while others referred to the $300,000 
CMS loan to Susan McDougal d/b/a Master Marketing.477
    On September 23, 1993, a grand jury indicted Mr. Hale on 
various federal charges relating to the operation of CMS. Mr. 
Hale has since pleaded guilty to two federal charges and he 
cooperated with the investigation by the OIC into alleged 
criminal conduct arising from the operation of CMS, Whitewater, 
and Madison. 478
            B. Plea negotiations with David Hale
    In May 1993, while the SBA and FBI were investigating Mr. 
Hale, President Clinton nominated Ms. Casey to be the new U.S. 
Attorney for the Eastern District of Arkansas. Ms. Casey had no 
prior prosecutorial experience, 479 but she had close ties 
to the President and Mrs. Clinton. She worked on Clinton 
gubernatorial campaigns 480, attended a law school class 
taught by President Clinton, and participated in a law clinic 
with Mrs. Clinton. 481 Governor Clinton also had appointed 
Ms. Casey to a special commission along with Mrs. Clinton, for 
the development of a new court system and a new juvenile law 
code, and to a separate juvenile advisory group. 482
    In addition, Ms. Casey was a longtime personal friend of 
Mr. and Mrs. Tucker. She had lobbied Governor Tucker's office 
in 1993 on behalf of the Arkansas Bar Association. 483 Ms. 
Casey's husband also had worked on Governor Tucker's political 
campaigns and had donated money to him. 484
    A short time before Ms. Casey took office on August 16, 
1993, 485 Randy Coleman, a Little Rock attorney 
representing Mr. Hale, met with Assistant U.S. Attorney 
Fletcher Jackson. 486 Mr. Coleman testified that he met 
with Mr. Jackson ``to try to determine what was happening since 
I didn't know at that point in time. I'd had very little 
opportunity to visit with my client to educate myself at that 
point.'' 487
    Several days later, Mr. Coleman met with Mr. Jackson again. 
488 Mr. Coleman expressed concern about the timing of the 
indictment of Mr. Hale and whether there would be any time for 
negotiations. 489 At this second meeting, Mr. Coleman told 
Mr. Jackson that Mr. Hale could offer the government 
information that might lead the U.S. Attorney's Office to Mr. 
McDougal and possibly to Governor Tucker and President Clinton. 
490 Mr. Coleman recalled that he specifically identified 
potential areas for cooperation: Madison Guaranty Savings & 
Loan, James McDougal, Susan McDougal, Master Marketing, 
President Clinton, Governor Tucker, Castle Water & Sewer, 
Southloop Construction Company and Campobello Realty. 491 
Mr. Coleman was also certain that he mentioned Whitewater to 
Mr. Jackson. 492
    Mr. Jackson recalled that Mr. Coleman told him that Mr. 
Hale could help him ``get Tucker,'' and that President Clinton 
might have some involvement in the Hale transactions. 493 
Based on his investigation of the CMS loan files, Mr. Jackson 
was aware that the Hale investigation might lead to Governor 
Tucker and President Clinton:

        [I]f I recall the correct words were--that I used were 
        that, from Hale, the path would lead to Mr. McDougal, 
        and then the road would divide, one branch would 
        possibly go over to Mr. Tucker, and the other branch 
        would go over possibly to Whitewater and the Clintons. 
        494


Mr. Jackson refused, however, to enter into any plea 
negotiations until Ms. Casey took office. 495
    After Ms. Casey was confirmed, Mr. Jackson briefed her on 
the Hale investigation. 496 He advised her that he planned 
to continue his investigation of other matters involving Mr. 
Hale that might ultimately lead to Madison Guaranty, the 
subject of the first RTC criminal referral. Mr. Jackson also 
informed Ms. Casey that Mr. Tucker might be a target or a 
witness in that investigation, 497 and that the RTC 
expected to make additional criminal referrals relating to 
Madison Guaranty. 498
    Ms. Casey admitted that ``Fletcher told me that his 
continued investigation of the David Hale matter could possibly 
involve Governor Tucker. I don't know that he told me 
specifically what that involvement might be.'' 499 But, 
Ms. Casey denied that Mr. Jackson advised her of the specific 
list of persons about whom Mr. Hale might offer evidence. 
500
    On September 7, 1993, Mr. Coleman met with Ms. Casey to 
discuss a possible plea negotiation for Mr. Hale. 501 In 
exchange for his cooperation, Mr. Coleman initially requested 
that Mr. Hale be granted immunity or charged with a 
misdemeanor. 502 Ms. Casey insisted that Mr. Hale enter a 
plea to an unspecified felony in exchange for a possible 
sentence reduction depending on the nature of the information 
offered. 503
    Mr. Coleman testified that he informed Ms. Casey that Mr. 
Hale had information regarding important Arkansas political 
figures. 504 According to Mr. Coleman, he specifically 
provided Ms. Casey with the names of President Clinton, 
Governor Tucker, Madison Guaranty, James McDougal, Susan 
McDougal, Castle Sewer & Water, Southloop Construction Company, 
Campobello Realty and Whitewater. 505 Mr. Coleman 
understood that Ms. Casey and Mr. Johnson ``had already talked 
with Fletcher and they were aware of some of these things 
[names of areas of possible cooperation] before I got there * * 
*.'' 506
    Mr. Coleman further testified that he also offered to make 
an informal or an ``attorney'' proffer. 507 In an 
``attorney proffer,'' Mr. Coleman would essentially provide a 
more detailed summary of evidence Mr. Hale might offer. 
508 Mr. Coleman testified that the government could have 
accepted his informal proffer without granting immunity to Mr. 
Hale: ``If I make an informal proffer to you through counsel 
and give you an idea of what is available, the negotiation can 
carry forward in some form from this point. I'm trying to get a 
dialogue started with these people, and I'm not getting 
anywhere.'' 509 Ms. Casey nonetheless gave no response to 
Mr. Coleman's offer for an informal proffer at the meeting or 
during the following week. 510
     Ms. Casey had a markedly different recollection of the 
September 7 conversation. She claimed that Mr. Coleman provided 
no names or concrete information,10 but merely 
``insinuated that Mr. Hale could give information about people 
who were too big for me to prosecute.'' 511 She did not 
inquire further about the ``big people'' because ``[i]t may 
have piqued my interest but my understanding of the way the 
process works is that his client should proffer his testimony 
to an agent for evaluation.'' 512 Ms. Casey claimed that 
even though she met with Mr. Jackson several times after her 
meeting with Mr. Coleman, she still never inquired about the 
``big people.'' 513
---------------------------------------------------------------------------
    \10\ On August 17 and 19, 1993, approximately two weeks before his 
meeting with Ms. Casey, Mr. Coleman discussed with Associate White 
House Counsel William Kennedy the federal investigation of Mr. Hale. 
(Coleman, 11/9/95 Dep. pp. 63-65; Coleman, 12/1/95 Hrg. pp. 10-16; 
Kennedy, 12/05/95 Hrg. pp. 11-16).
    Mr. Kennedy's contemporaneous notes of the two conversations 
clearly indicate that Mr. Coleman mentioned President Clinton, Mr. 
Tucker, Madison Guaranty, Whitewater, Southloop and Castle Grande. This 
documentary evidence adds further credibility to Mr. Coleman's version 
of the September 7, 1993 meeting.
---------------------------------------------------------------------------
    On September 15, 1993, after not hearing from Ms. Casey for 
a week, Mr. Coleman wrote to her to confirm that he had 
received no response to his offer of an informal 
proffer.514 The letter stated:

          I have offered an informal proffer of Mr. Hale's 
        information for evaluation of its quality and content, 
        but have reached absolutely no interest in the 
        process.515

Ms. Casey sent back a letter stating that plea negotiations 
were at ``an impasse''--reiterating the government's insistence 
that Mr. Hale plead guilty to a felony.516
    On September 20, 1993, Mr. Coleman sent another letter to 
Ms. Casey, in which he reiterated that he had provided a list 
of names to Mr. Jackson.517 When asked about this letter, 
Ms. Casey denied again that she ever received any specific 
names from Mr. Coleman, and claimed that the letter did not 
prompt her to discuss the matter with Mr. Jackson.518 Mr. 
Johnson similarly claimed that Mr. Coleman never offered any 
specific information during plea negotiations.519
    Thus, according to Mr. Coleman, he (1) provided specific 
names to Mr. Jackson and Ms. Casey--including the President and 
Governor Tucker--as areas of cooperation; (2) offered Ms. Casey 
an informal or attorney proffer; and (3) reiterated in writing 
that he had offered an informal proffer and given specific 
areas of cooperation. Yet, Ms. Casey did not notify Main 
Justice of, or express any interest in Mr. Coleman's overtures.
    Because of Ms. Casey's unwillingness to enter into plea 
negotiations, Mr. Coleman suggested in his September 15th 
letter that Ms. Casey recuse herself from the case: 520

          I cannot help but sense the reluctance in the U.S. 
        Attorney's office to enter into plea negotiations in 
        this case. . . I cannot help but believe that this 
        reluctance is borne out of the potential political 
        sensitivity and fallout regarding the information which 
        Mr. Hale would provide to your office, but at the same 
        time it is information which would be of substantial 
        assistance in investigating the banking and borrowing 
        practices of some individuals in the elite political 
        circles of the State of Arkansas, past and present. . .
          Would it not be appropriate at this point for your 
        office to consider terminating participation in this 
        investigation and to bring in an independent 
        prosecutorial staff, who are not so involved with the 
        histories and personalities and circumstances of this 
        case? 521

Mr. Coleman believed that Ms. Casey's recusal was appropriate 
because of her extensive involvement in Arkansas politics:

          I knew Paula had been active in the political arena 
        over the years. I knew her husband had. I think, at 
        least it was my impression, that all of us were fairly 
        aware at that point in time that there were some 
        substantially prominent folks involved here.
          You could look at the receipt on the search warrant 
        and the nature of the records that the FBI seized from 
        Mr. Hale's office and certainly gather at least that 
        Mr. Tucker's name was prominently displayed. 522

However, according to Ms. Casey, she did not need to recuse 
herself because Mr. Coleman did not proffer any specific 
information.523 Mr. Johnson seconded Ms. Casey's 
position.524
    By this time, Ms. Casey knew that Governor Tucker was 
referenced in both the Hale investigation and the ongoing 
Madison investigation.525 In addition, as early as August, 
Ms. Casey told Mr. Jackson that if the U.S. Attorney's Office 
prosecuted Governor Tucker or if the anticipated set of RTC 
referrals named Governor Tucker, she would have to recuse 
herself.526
    Ms. Casey never discussed Mr. Coleman's request for plea 
negotiations or immunity with Main Justice or notified Main 
Justice of information that Mr. Coleman said Mr. Hale could 
proffer.527 Even though Mr. Jackson told her that ``there 
was the potential that [Hale] could lead to some people,'' Ms. 
Casey claimed that ``for that matter I suppose every loan file 
at SBIC was a potential defendant.'' 528
    On September 17, 1993, New York Times reporter Jeff Gerth 
contacted a high ranking Justice Department official, Irv 
Nathan, Associate Deputy Attorney General,529 and an FBI 
Little Rock Field Agent, Robert M. Satowski, to inform them of 
his interview with Mr. Hale.530 Mr. Gerth told them that 
Mr. Hale was prepared to furnish specific information about 
sensitive matters, possibly involving the Clintons, including 
information about a $300,000 loan to Mrs. McDougal that was 
funneled to Whitewater Development Corporation.531
    On the same day, FBI Little Rock sent a teletype to FBI 
Director Louis Freeh about Mr. Hale's allegations. The teletype 
indicated that ``Gerth alluded that this was why the United 
States Attorney Casey would not deal with Coleman when he was 
attempting to work out a suitable deal for his client.'' 
532 In a separate memorandum, dated September 21, 1993, to 
FBI Director Freeh, Mr. Keeney outlined the substance of Mr. 
Hale's allegations that Mr. McDougal and then-Governor Clinton 
``encouraged Hale to provide funds to Madison Guaranty, prior 
to the audit, to bring the Whitewater loans acceptably up to 
date. Thereafter Hale, through his Small Business Investment 
Corporation, lent $300,000 to Susan McDougal, dba Madison 
Marketing.'' 533
    Meanwhile, on September 20, 1993, after learning of Mr. 
Hale's allegations about President Clinton, Mr. Keeney met with 
other high ranking officials at Main Justice to discuss the 
need for Ms. Casey to recuse herself from both the SBA fraud 
case against Mr. Hale and the investigation into Mr. Hale's 
allegations about Governor Tucker, the McDougals and President 
Clinton, as well as Criminal Referral C0004 relating to Madison 
Guaranty.534 Mr. Keeney, Principal Deputy Attorney 
General, Gerald McDowell, Chief of Frauds Section, and Joseph 
Gangloff, Chief of the Public Integrity Section, all agreed 
that Ms. Casey should recuse herself from the matter.535
    According to Mr. Gangloff, the criteria for recusal include 
past personal, political or financial relationships between the 
United States Attorney and the subject of an investigation. In 
fact, the mere appearance of a conflict justifies 
recusal.536 According to Mr. Gangloff, Main Justice 
officials knew Ms. Casey was close to President Clinton and, 
thus, she ``obviously'' should recuse herself under the 
circumstances.537 Mr. Gangloff was ``surprised'' that Ms. 
Casey had not advised Main Justice of Mr. Hale's allegations 
about the President, and believed that Main Justice should have 
been involved in the case sooner.538
    Mr. Keeney also believed Ms. Casey ``certainly should not 
be involved in the matter'' because ``she was the U.S. Attorney 
in Little Rock, Arkansas. She was appointed by the Clinton 
Administration. And we had a situation where somebody who was 
under investigation was suggesting . . . that he had 
information which would implicate the President who appointed 
her.'' 539 Mr. Keeney testified that it was important to 
him that ``she would in fact recuse herself, and that she would 
not be involved in taking any sort of proffer from David Hale'' 
or make any more substantive decisions on the case.540 Mr. 
Carver and Mr. McDowell also agreed.541
    At the time, Mr. Keeney based his opinion solely on the 
fact that Ms. Casey was appointed by President Clinton.542 
Mr. Keeney testified that although Ms. Casey may have ``said 
something'' about her relationship with Governor Tucker, she 
did not disclose the nature of her relationship with President 
Clinton.543 Ms. Casey did not disclose her August 
conversation with Mr. Jackson about the expected set of new 
referrals that might involve Governor Tucker or the fact that 
the Hale investigation would likely involve Madison 
Guaranty.544
    Mr. Keeney called Ms. Casey and told her that she should 
recuse herself from the Hale and Madison matters.545 Mr. 
Keeney expressed his opinion in ``strong terms.'' 546 Even 
though Mr. Keeney was Acting Assistant Attorney General and Ms. 
Casey was a newly appointed U.S. Attorney with no prior 
prosecutorial experience, she refused his advice to recuse 
herself.547 Mr. Keeney recalled that Ms. Casey told him: 
``Well, she said, in essence, I'm a fair person, I'm a person 
of integrity, I can handle this, this matter as my oath of 
office requires me to do so.'' 548
    According to Mr. Keeney, Ms. Casey told him that she 
``would have to think about'' recusal.549 Ms. Casey did 
not recall that she was considering recusing herself at the end 
of the conversation.550 Mr. Johnson opposed recusal by the 
office.551 Ms. Casey never contacted Mr. Keeney again to 
discuss the recusal matter.552
    During the same September 20th conversation with Mr. 
Keeney, Ms. Casey ``indicated that Coleman refused to make a 
proffer to the office in Little Rock because he didn't trust 
them.'' 553 Accordingly, Mr. Keeney thus advised Ms. Casey 
to convey to Mr. Coleman that he could make the proffer to Main 
Justice.554 Mr. Gangloff similarly testified that he 
understood that Ms. Casey would send a letter to Mr. Coleman to 
inform him that he had ``recourse to Washington'' and could 
make a proffer to Main Justice; he recalled ``detailed 
discussions'' about ensuring that Mr. Coleman knew about this 
option.555
    Ms. Casey did not recall any such request by Mr. Keeney. 
Although Ms. Casey did not dispute Mr. Keeney's recollection, 
she claimed that Mr. Keeney may have directed Mr. Johnson, not 
her, to relay this information to Mr. Coleman.556 Mr. 
Johnson also believed that Mr. Keeney may have suggested that 
he advise Mr. Coleman of Mr. Hale's recourse to Main Justice.
    Neither Ms. Casey nor Mr. Johnson followed Mr. Keeney's 
direction to inform Mr. Coleman that he had the option of 
dealing with Main Justice. None of the letters that Ms. Casey 
or Mr. Johnson sent to Mr. Coleman on September 20 or 21, 1993 
advised Mr. Coleman that he could contact directly Main Justice 
if he did not trust the U.S. Attorney's Office.557
    Ms. Casey and Mr. Johnson both admitted that they did not 
convey Mr. Keeney's message to Mr. Coleman.558 Mr. Coleman 
similarly testified that no one from the U.S. Attorney's Office 
ever informed him that he could speak to someone at Main 
Justice.559
    On September 23, 1993, the Arkansas Democrat-Gazette 
published Hale's allegations involving President Clinton, Mr. 
McDougal and Governor Tucker.560 That same day, the grand 
jury indicted Mr. Hale on two counts of conspiracy and two 
counts relating to the submission of false statements to the 
SBA.561
            C. Ms. Casey's declination of Criminal Referral C0004
    Even after her September 20, 1993 discussion with Mr. 
Keeney, Ms. Casey continued to participate actively in the Hale 
and Madison Guaranty investigations. By August 20, 1993, the 
FBI Little Rock Field Office had opened an investigation of Mr. 
McDougal and Mr. Hale as a result of information developed 
during the investigation of Mr. Hale.562 In July or August 
of 1993, an investigation was launched involving Dean Paul, 
Ltd. and Castle Grande and touching on Madison Guaranty and Mr. 
McDougal.563
    On September 24, 1993, only four days after Mr. Keeney 
advised Ms. Casey to recuse herself, FBI agents met with Ms. 
Casey to discuss the investigation of Madison Guaranty and Mr. 
Hale, as well as whether Ms. Casey should recuse herself from 
these matters because of her close ties to Governor Tucker, 
Seth Ward and Stephen Smith.564 According to SSA Irons, he 
and Mr. Jackson told Ms. Casey that her ``good friends'' were 
either subjects or material witnesses of the ongoing 
investigations.565 Ms. Casey admitted that they discussed 
allegations involving President Clinton and the 
McDougals.566 SSA Irons indicated in a memorandum, 
memorializing the meeting, that Ms. Casey stated that she would 
need to recuse herself from the matter because of her close 
friendship with Governor Tucker, Mr. Ward and Mr. 
Smith.567
    Ms. Casey agreed with SSA Irons' account except with 
respect to Mr. Ward. She testified, ``I told them that if the 
investigations led to Governor Tucker, that I would recuse. I 
don't know Seth Ward. I am an acquaintance of Steve Smith's.'' 
568
    Yet, once again, Ms. Casey did not provide the Special 
Committee with any real reason for her sudden change of mind 
regarding her recusal. Ms. Casey claimed that at the time of 
this meeting, she ``realized'' that the investigation had 
progressed to a point that ``there was a real'' possibility 
that Governor Tucker would become a subject of the 
investigation.569 Ms. Casey claimed that even though she 
knew that she had to recuse herself, she still had to decide 
the ``best time'' to do so.570 Mr. Johnson continued to 
urge Ms. Casey against recusal.571
    For some unknown reason, despite her conversation with Mr. 
Keeney only four days before, Ms. Casey did not advise 
officials at Main Justice that she had changed her position on 
recusal.572
    In addition, on October 5, 1993, after a briefing on the 
Hale investigation, the Director of the FBI indicated to senior 
FBI officials that he wanted Ms. Casey to recuse 
herself.573
    For the balance of September and October, Ms. Casey took no 
steps to recuse herself from the Hale or Madison investigations 
or her office.574 Rather, Ms. Casey continued to 
participate in the investigation and, amazingly, even attended 
a plea negotiation meeting with Mr. Coleman on October 21, 
1993.575 Mr. Keeney testified that once Ms. Casey had 
decided to recuse herself, ``she should not be making any 
decisions with respect to the matter.'' 576 Thus, as of 
September 24, 1993, Ms. Casey should not have participated in 
any way in the Hale and Madison investigations.
    When pressed about her continued involvement in such 
matters, Ms. Casey claimed that even though she ``knew I was 
going to recuse myself,'' she still wanted to wait for the 
receipt of the new referrals. She explained: ``If there was a 
case against--if there was a case against Tucker or Steve 
Smith, that's what I was going to do. And I expected those 
referrals to give me that.'' 577
    On October 8, 1993, the RTC forwarded nine new criminal 
referrals concerning Madison Guaranty to the U.S. Attorney's 
Office in Little Rock.578 Ms. Casey reviewed the second 
set of referrals.579 According to Ms. Casey, ``when the 
referrals came in, I probably talked with Michael again about 
the fact that they were there, that the names were there and I 
needed to recuse.'' 580 Mr. Johnson still advised Ms. 
Casey not to recuse herself from the case.581
    Again, Ms. Casey did not contact any official at Main 
Justice either to notify them that Governor Tucker was a target 
of an investigation or to inform them of her ``recusal.'' 
582 Ms. Casey offered no coherent reason for not advising 
Main Justice immediately, claiming only, ``I was waiting to 
talk--I was going to the orientation in November. I wanted to 
talk to someone at the Department of Justice whose opinion I 
could also trust.'' 583
    In September and October 1993, while Main Justice and FBI 
were urging Ms. Casey to recuse herself, the Little Rock U.S. 
Attorney's Office took no action on the first RTC Referral, 
number C0004. Ms. Casey testified that when she first read 
Criminal Referral C0004 in late August or September of 1993, 
she probably noticed Governor Tucker, Mr. McDougal and 
President Clinton were mentioned. But, the only action she took 
was to place the referral back into ``the vault.'' 584
    On October 27, 1993--over a year after the RTC had sent the 
referral to the U.S. Attorney's Office and at least two months 
after she first read it--Ms. Casey formally declined 
prosecution on Criminal Referral C0004.585 It is unclear 
why Ms. Casey believed that it was appropriate for her to make 
a substantive decision on the referral when she knew that she 
was going to recuse herself. Mr. Keeney testified that issuing 
the declination letter was a ``substantive decision'' that 
someone who supposedly had recused herself from the case should 
not have made.586
    Ms. Casey could not explain why she did not defer action on 
the first referral until after she had recused herself from the 
new set of referrals--which either had already arrived at the 
U.S. Attorney's Office or would arrive shortly thereafter: ``It 
was just a question of closing the books on the particular 
referral. Because, in my opinion, the books had already been 
closed on it. It was just a matter of relating that decision to 
the RTC.'' 587
    Even more peculiar, Ms. Casey's declination letter gave the 
impression that Main Justice had decided to decline the 
referral: ``I concur with the opinion of the Department 
attorneys (emphasis added) that there is insufficient 
information in the referral to sustain many of the allegations 
made by the investigators or to warrant the initiation of a 
criminal investigation.'' 588 In fact, Main Justice had 
not made any decision on the referral, but had returned it to 
the Little Rock office.
    When confronted with the fact that she reviewed the March 
19, 1993 memorandum from Mr. Keeney to Mr. Frazier prior to 
sending the declination letter, Ms. Casey admitted that she 
made the ``decision'' to decline prosecution on the 
referral.58911 Mr. Carver, Principal Deputy Chief of Fraud 
Section, Criminal Division, was ``amazed'' when he read a press 
article stating ``Paula Casey didn't participate in the 
decision making with regard to C0004'' because he knew she had 
been involved in the decision to decline the referral.590 
Moreover, Justice Department officials testified that the 
referral was returned to the U.S. Attorney's Office earlier in 
1993 for a decision,591 and that Main Justice never 
reviewed the declination letter before Ms. Casey sent 
it.592
---------------------------------------------------------------------------
    \11\ Q: Well, when you pulled the referral, you saw that the 
referral, in fact, had not been acted upon in Washington but had been 
returned to Little Rock for purposes of a final decision; correct?
    A: No, that's not the way I look at it--my view of that at the time 
was that it had been acted upon in the sense that it had been reviewed 
and that the opinion of the Department was it was not a good referral 
and should not be prosecuted. But that decision had never been relayed 
to RTC.
    Q: Didn't the memo actually indicate that although there would be 
no objection if the Little Rock office declined prosecution, it was to 
be a decision left in the hands of the Little Rock U.S. Attorney's 
office?
    A: That's what--that was--after I pulled Keeney's memo back out 
that was what I saw in his memo.
    Q: So you understood?
    A: Would not question the decision to decline, but there was no 
reason for the office to be recused.
    Q: So it became your decision; right?
    A: Yes.(Casey, 11/01/95 Dep. p. 183).
---------------------------------------------------------------------------
    Neither Ms. Casey nor Mr. Johnson, her First Assistant, 
ever reviewed the exhibits to the referral prior to declining 
prosecution. 593 Mr. Carver believed that Ms. Casey should 
have conducted an independent review of the evidence prior to 
declining Criminal Referral C0004.
    As of early November 1993, as Main Justice was 
``vigorously'' pursuing allegations about Mr. Hale, the 
McDougals and Mr. Ward 594, Ms. Casey still had not 
contacted Main Justice about her recusal.
    On November 3, 1993, Philip Heymann, Deputy Attorney 
General, called Ms. Casey to a meeting with other high ranking 
DOJ officials for the purpose of persuading Ms. Casey that she 
should recuse herself. 595 Mr. Heymann told Ms. Casey that 
she should recuse herself. This view was expressed by all 
Justice Department officials in attendance. 596
    Even though Ms. Casey earlier explained that her reason for 
not recusing herself immediately after reviewing the second set 
of referrals was that she needed to receive advice from a 
Justice Department official whom she could trust, Ms. Casey 
told Mr. Heymann that she would ``think it over'' and get back 
to them. 597 As of the end of the meeting, Ms. Casey still 
had not committed to recusal. 598
    Thus, notwithstanding the advice of the Deputy Attorney 
General and other high-ranking Justice Department officials, 
Ms. Casey still waited another two days before she finally 
recused herself on November 5, 1993. 599
    On November 9, 1993, the day after Ms. Casey's formal 
recusal, Mr. Keeney announced that Donald Mackay, a career 
prosecutor for the Justice Department, would lead the 
investigation of Mr. Hale and Madison Guaranty. 600 Mr. 
Mackay subsequently entered into plea negotiations with David 
Hale. 601 On January 3, 1993, Mr. Mackay sent a letter to 
Mr. Coleman outlining what the Justice Department would require 
as the terms of a proffer agreement. 602 After Special 
Counsel Fiske was appointed in January 1994, he entered into 
negotiations with Mr. Hale, and Mr. Hale entered a plea 
agreement on March 19, 1994.603

      Part II: White House Intervention in Federal Investigations

    Throughout the conduct of the various inquiries relating to 
Whitewater, Madison, and other matters relating to the 
Clintons, the White House engaged in a clearly discernible 
pattern of improper contacts, undue interference and, at times, 
outright obstruction with respect to the federal 
investigations.
    The pattern of abuse began with attempts to use the 
resources of the White House, especially the White House 
Counsel's Office, to gather as much information as possible on 
the pending investigations. The Office of the White House 
Counsel, in effect, served as Clintons' private law firm 
defending their personal interests. Beyond the impropriety of 
such diversion of public resources, attempts by White House 
lawyers to obtain information compromised the integrity of the 
federal investigations.
    The interests of the United States with respect to these 
investigations were potentially adverse to the private 
interests of the Clintons as witnesses or potential targets. 
Yet, whenever possible, White House lawyers obtained 
confidential information relating to the progress of the 
investigations and prospects for prosecution. The White House 
lawyers not only used the information to defend the private 
interests of the Clintons, but also shared the improperly 
obtained confidential information with the Clintons' private 
lawyers directly to assist in the coordinated defense effort.

I. White House Contacts Relating to Investigations of Madison and David 
        Hale

            A. The White House receives information on the ongoing SBA 
                    investigation of Mr. Hale
    In early May 1993, SBA Associate Administrator Wayne Foren, 
a career SBA employee, contacted Erskine Bowles, President 
Clinton's nominee for SBA Administrator, to discuss the 
agency's ongoing investigation of Capital Management Services 
and David Hale.604 According to Mr. Foren, he called Mr. 
Bowles on May 3, 4 or 5--right before Mr. Bowles' 
confirmation.605 Mr. Foren contacted Mr. Bowles because 
Mr. Hale, the president of CMS, had claimed to have access to 
President Clinton, Governor Jim Guy Tucker, and Arkansas 
Senator Dale Bumpers, then the chairman of the Senate Small 
Business Committee.606
    Mr. Foren realized the sensitivity of the matter and, 
accordingly, concluded that the only means to answer questions 
he had about the operations of CMS was to make ``a referral to 
the Office of the Inspector General so that they could proceed 
on an investigation and in an attempt to obtain the 
information.'' 607 According to Mr. Foren, ``[k]nowing 
that Erskine's confirmation hearing was imminent, I felt it was 
appropriate that he be briefed on this issue.'' 608 After 
Mr. Foren told Mr. Bowles about the case, Mr. Bowles ``agreed 
that the transfer [of the case to the Inspector General] should 
occur prior to the confirmation and that he wanted a briefing 
paper.'' 609 Mr. Foren referred the matter to the 
Inspector General on May 5, 1993.610
    At Mr. Bowles' instruction, Mr. Foren then prepared a 
briefing paper entitled ``Capital Management Services, Inc, 
Little Rock, Arkansas, License No. 06/06-5207.'' 611 The 
document outlined David Hale's 1992 application for additional 
funds from the SBA and stated that the value of the donated 
assets Mr. Hale used to justify additional funds from the SBA 
was ``questionable.'' 612 The briefing paper noted that 
``the matter has been referred to the Inspector General for 
investigation.'' 613 Mr. Foren provided the briefing paper 
to Kris Swedin, the SBA's Assistant Administrator for 
Congressional Relations.614 In Mr. Foren's view, the Hale 
investigation was ``very sensitive'' and ``very important.'' 
615
    On May 7, 1993, Mr. Bowles was confirmed as SBA 
Administrator.616 After Mr. Bowles' confirmation, Mr. 
Bowles advised Mr. Foren that he had briefed White House Chief 
of Staff, Thomas ``Mack'' McLarty, a longtime friend of the 
President, on the status of the CMS case.617 Mr. Foren 
advised his deputy, Charles Shepperson, of Mr. Bowles' 
communication of information to Mr. McLarty.618 Mr. 
Shepperson confirmed this account:

          My recollection was that Wayne had come back from a 
        meeting with Mr. Bowles on a subject I can't remember, 
        he had come back and said that Erskine had taken him 
        aside and indicated that he had spoken to Mr. McLarty, 
        and that Mr. McLarty had indicated that we should just 
        do what you normally do in situations like 
        this.619

    Mr. Bowles testified that he could not specifically deny 
Mr. Foren's and Mr. Shepperson's account, although Mr. Bowles 
could not recall Mr. Foren briefing him on CMS in May 
1993.620 He recalled that Mr. Foren and others briefed him 
at the Old Executive Office Building on SBA programs; he was 
not certain of the date, but believed that the briefing did not 
occur between May 4 and May 7.621 He remembered at some 
point being told that the Hale/CMS matter had been referred to 
the Inspector General or the Justice Department.622 He did 
not recall seeing the briefing paper that Mr. Foren used to 
brief him in May 1993.623
    In addition, Mr. Bowles did not recall advising Mr. Foren 
that he had spoken with Mr. McLarty about the CMS 
referral.624 Mr. Bowles recalled, however, that he saw Mr. 
McLarty on the morning of his confirmation hearing, when he 
visited the White House.625 Indeed, Mr. McLarty's schedule 
for May 6, 1993, contained the following entry: ``Erskine 
Bowles & his family will be touring the West Wing and will be 
stopping in very briefly to say hello some time around 8:45-
9:00 a.m.'' 626
    More important, Mr. Bowles saw Mr. McLarty on May 7, 1993, 
the date of his confirmation. According to Mr. Bowles, ``I saw 
Mack again, I believe on the 7th, the day I was actually 
confirmed by the Senate. And at that time, I went over there to 
get my marching orders, how should I go forward, how should I 
report, what do I do.'' 627 Mr. McLarty's schedule for May 
7, 1993 confirmed that, at 1:00 p.m., he had a meeting with Mr. 
Bowles.628 Yet, Mr. Bowles denied that he discussed not 
discuss CMS with Mr. McLarty. ``I don't believe I've ever 
discussed Capital Management with Mack McLarty.'' 629
    On May 19, 1993, Mr. Foren again briefed Mr. Bowles on CMS, 
when the SBA initiated foreclosure and liquidation proceedings 
against Capital Management.630 According to Mr. Foren, 
``[t]he event that occurred between the 5th and the 19th was an 
event where Capital Management defaulted on debentures, and we 
were then going to proceed to foreclose collateral and throw 
the company into liquidation.'' 631 Mr. Foren provided Mr. 
Bowles with a revised version of his earlier briefing paper, 
entitled ``Capital Management Services, Inc, Little Rock, 
Arkansas, License No. 06/06-5207, May 19, 1993.'' 632
    On August 5, 1993, Mr. Shepperson received a copy of a 
draft indictment of Mr. Hale from the U.S. Attorney's Office in 
Little Rock.633 He sent the draft indictment to Mr. 
Foren.634 On August 9, Mr. Foren sent yet another 
memorandum to Mr. Bowles on the progress of the investigation 
and attached a copy of the draft indictment to the 
memorandum.635 The memorandum, designated ``Privileged and 
Confidential,'' was signed by Mr. Foren and Deputy General 
Counsel Martin D. Teckler and addressed to Erskine 
Bowles.636
    Mr. Bowles did not recall receiving Mr. Foren's August 9 
memorandum,637 although ``Wayne very well could have sent 
it to me.'' 638
    In September 1993, Mr. Foren provided another briefing to 
Mr. Bowles about the Hale/CMS investigation, this time to 
advise him that Mr. Hale's indictment was imminent.639 Mr. 
Foren also provided Mr. Bowles with a memorandum,640 dated 
September 21, 1993, advising that on September 20, 1993, the 
SBA had closed CMS's bank accounts and seized its 
assets.641 The memorandum further advised that the U.S. 
Attorney's office is ``scheduled to make a presentation to the 
Grand Jury on Tuesday, September 21, 1993, at 3:00 p.m. and 
[is] expecting indictments to be returned on Tuesday or 
Wednesday, September 21 or September 22, 1993 against Judge 
Hale and two other individuals.'' 642
    Mr. Bowles did not recall receiving multiple briefings or 
memoranda from Mr. Foren on the Hale/CMS investigation, 
although he admitted to receiving the May 1993 briefing and a 
later briefing by Martin Teckler, the Deputy General Counsel of 
the SBA.643 According to Mr. Bowles, in September 1993, 
Mr. Teckler ``told me that we were getting ready to indict 
Judge Hale down in Arkansas for defrauding the SBA, and said 
that I might want to call the White House and give them a 
heads-up.'' 644 Mr. Bowles asked Mr. Teckler to describe a 
``heads-up,'' 645 and Mr. Teckler told him ``it was simply 
notification in case they got some inquiries.'' 646 Mr. 
Bowles claimed that he questioned the propriety of such 
notification, and Mr. Teckler replied that ``it was standard.'' 
647 Although Mr. Bowles told Mr. Teckler he would give a 
``heads up'' to the White House, Mr. Bowles maintained that he 
never called the ``White House'' about the case. He explained:
    I was often asked to take things to the White House. I 
often said I'll take care of it. Sometimes I felt the right way 
to take care of it was to throw it in the trash can. Sometimes 
it was to call somebody lower down. Sometimes it was to call 
somebody higher up. Sometimes I did it, sometimes I didn't. I 
just made a judgment.648
    In November 1993, Mr. Bowles claimed that he learned from 
news accounts that Mr. Hale alleged that, in 1986, then-
Governor Clinton had pressured Mr. Hale into making an illegal 
SBA loan to Susan McDougal.649 After hearing of this 
allegation, Mr. Bowles decided to recuse himself from the case. 
He communicated this decision orally to General Counsel John 
Spotila, but did not memorialize his recusal in writing until 
months later, on March 3, 1994.650 In fact, Mr. Spotila 
continued to provide Mr. Bowles with information concerning the 
Hale/CMS investigation in the weekly SBA Administrator's report 
through June 27, 1994, more than six months after Mr. Bowles 
purportedly decided to recuse himself from the CMS/Hale 
matter.651
    On April 11, 1994, Mr. Bowles responded to an inquiry by 
Congresswoman Jan Meyers, then the Ranking Member of the House 
Committee on Small Business, about his recusal from the CMS 
investigation.652 Mr. Bowles advised that he had verbally 
recused himself from the matter in late fall 1993, and had 
memorialized this decision in writing on March 4, 1994.653 
Mr. Bowles specifically claimed: ``I have never reviewed the 
Capital Management file.'' 654 The assertion was 
contradicted by Mr. Bowles' own admission that he was 
occasionally briefed on the CMS/Hale investigation.655 Mr. 
Foren believed that Mr. Bowles, as a practical matter, was 
knowledgeable about what was in the file.656 When asked 
about the seeming discrepancy between his letter to 
Congresswoman Meyers and his testimony, Mr. Bowles maintained 
that his statement to Congresswoman Meyers was accurate: ``I 
hadn't reviewed the file. I hadn't studied the file. I hadn't 
spent a long time going over it.'' 657
            B. Mr. Hale's lawyers contact the White House about Mr. 
                    Hale's ``mutual interest'' with President Clinton.
    On August 20, 1993, the Little Rock Field Office notified 
FBI Headquarters that the RTC planned to submit new referrals 
on Madison Guaranty.658 Special Agent Steven Irons advised 
Headquarters that ``Assistant United States Attorney assigned 
to the matter reported being told a Little Rock Attorney had 
traveled to Washington instant date to meet with unknown 
officials to attempt to have the investigation quashed.'' 
659 Mr. Irons testified that Fletcher Jackson told him 
that Richard Mayes, a Little Rock attorney had traveled to 
Washington to get the Hale investigation quashed.660 Mr. 
Irons advised FBI Headquarters to ``be alert if someone within 
the Department asked some questions about the Hale case or the 
upcoming Madison referrals,'' and in particular a close 
associate of President Clinton, Webster Hubbell, now the third 
highest official in the Department.661
    Mr. Hubbell had lunch or dinner with Mr. Mayes once or 
twice between January and September 1993.662 Mr. Mayes 
denied that he talked to Mr. Hubbell about the David Hale 
investigation or indictment.663
    On August 17, 1993, in the middle of the SBA's and the 
Justice Department's investigations into Capital Management and 
David Hale, Randy Coleman, Mr. Hale's attorney, called 
Associate Counsel to the President William Kennedy to advise 
the White House that the ongoing federal investigations might 
pose problems for President Clinton.664 Mr. Coleman told 
Mr. Kennedy that he wanted to talk about ``the mutual interests 
of our clients.'' 665
    The conversation was brief.666 Mr. Coleman told Mr. 
Kennedy that the FBI had raided Mr. Hale's CMS office and 
confiscated records containing information on the Clintons, 
Governor Tucker, the McDougals, Whitewater and Madison.667 
Mr. Coleman told Mr. Kennedy that if Heidi Fleiss was the 
``madam to the stars, David Hale was the lender to the 
political elite in Arkansas.'' 668
    Mr. Kennedy's notes indicate that Mr. Coleman mentioned 
President Clinton and Governor Tucker.12
---------------------------------------------------------------------------
    \12\ (White House Document S7375-S7377).
    A. David Hale--SBIC
    B. Investigation: Place raided and records seized, Loan 
Transactions
    Governor Tucker
    Heidi Fleiss Back door lender to the politicians
    Corollary:
    President--Governor Tucker
    David Hale criminal allegations not been indicted
    Feds: U.S. Attorney
    SBIC:
    Regulations:
    Seizure two weeks Ago
    * Asking for Anything.
---------------------------------------------------------------------------
    Mr. Kennedy was familiar with Madison and Whitewater from 
his work at Rose Law Firm and from his understanding of the 
Clintons' circle of friends.669
    Mr. Coleman and Mr. Kennedy had different recollections of 
the conclusion of the conversation. Mr. Coleman testified that 
after outlining some of the names contained in Mr. Hale's 
files,670 he informed Mr. Kennedy that he would be meeting 
with SBA officials in Washington, D.C., the next week and could 
also meet with Mr. Kennedy to discuss the matter 
further.671 According to Mr. Coleman, Mr. Kennedy then 
asked him whether there was anything that he wanted him to 
do.672 Mr. Coleman responded, ``I said I'm just trying to 
figure out where everybody is on this matter, and he said that 
he would visit with his clients and get back to me.673
    Mr. Coleman did not expect Mr. Kennedy to do anything 
``helpful'' for Mr. Hale.674 Instead, Mr. Coleman 
contacted Mr. Kennedy because the investigation might involve 
``folks other than just my client, and where that was the case 
it was always my habit to start making contact with attorneys 
for other people who might be involved to see where everybody 
stood and what the landscape looked like.'' 675 Mr. 
Coleman also believed that he might be able to confirm Mr. 
Hale's suspicion that ``there were some folks in the executive 
branch that wouldn't be, oh, looking out for his best 
interests.'' 676 Mr. Coleman wanted to make a 
``provocative phone'' call because White House officials ``had 
shown a propensity to make an ill-advised phone call or two in 
times past.'' 677
    Mr. Kennedy had a different recollection of key elements of 
the phone call. First, he denied offering to do anything for 
Mr. Coleman.678 Instead, he claimed that he was 
``uncomfortable'' talking to Mr. Coleman because he thought 
that Mr. Coleman might be seeking improper involvement on the 
part of the White House.679 Mr. Kennedy said that ``I told 
him I wasn't sure I could talk to him, but I would inquire and 
get back to him.'' 680
    The last entry in Mr. Kennedy's notes of the telephone 
call, however, appears to corroborate Mr. Coleman's testimony: 
``*Ask for anything.'' 681 Mr. Kennedy claimed that he did 
not know what he meant by this entry.682 Mr. Kennedy's 
notes do not indicate that Mr. Coleman was ``looking'' for 
something or expected Mr. Kennedy to do something ``helpful'' 
for Mr. Hale.683
    Second, Mr. Kennedy denied saying that he had to get back 
to his ``clients''--presumably President and Mrs. 
Clinton.684 But Mr. Coleman vividly remembered that Mr. 
Kennedy said ``clients'' in the plural because the reference 
struck him as odd since the entire discussion up to that point 
had been in terms of their respective individual 
clients.685
    After the telephone call, Mr. Kennedy spoke to Mr. 
Nussbaum.686 Mr. Kennedy claimed that he was concerned 
that it would be inappropriate for him to engage in any 
substantive discussion with Mr. Coleman.687 Mr. Nussbaum 
agreed,688 and instructed Mr. Kennedy to tell Mr. Coleman 
that the White House could not help him--but, somewhat 
inconsistently, also to find out ``a little more about what was 
going on.'' 689
    Two days later, on August 19, 1993, Mr. Kennedy contacted 
Mr. Coleman.690 Mr. Kennedy asked Associate White House 
Counsel Beth Nolan to listen to the conversation.691 
According to Mr. Coleman, this conversation lasted five or ten 
minutes.692 Mr. Coleman testified that Mr. Kennedy wanted 
to know more specific information about the 
investigation.693 Mr. Coleman recalled that Mr. Kennedy 
particularly wanted to know whether Mr. Hale was trying to 
``negotiate'' with the U.S. Attorney's Office 694 and 
would allege any ``face-to-face meetings'' with the 
President.695
    Mr. Kennedy claimed that he essentially told Mr. Coleman at 
the beginning of the call that he could not assist him.696
    But Mr. Kennedy's and Ms. Nolan's respective notes of the 
conversation clearly indicate that Mr. Kennedy was ``engaged in 
a discussion during which [Kennedy] asked [Coleman] a series of 
questions including, among other things, what was the 
anticipation of what David Hale would be charged with, where 
was this going to go, a conversation in which among other names 
mentioned were Whitewater Development and Jim Guy Tucker with 
which were familiar.'' 697 Mr. Kennedy also admitted that 
he sought to obtain information about the extent to which Mr. 
Hale was connected to Madison.698
    The notes of Ms. Nolan and Mr. Kennedy both indicate that 
Madison and Whitewater were discussed in detail.699 Mr. 
Kennedy's notes appear as the following:

          ``Nature of Investigation--propriety of loans made 
        past few years
          Informed that are loan transactions that relate to 
        Madison Guaranty
          All records liquidation of SBIC
          Both of them's names cropped up
          Whitewater Development Corp.: not stopping w/David/ 
        Hale
          Xactions: Southloop Castle Grande Water.'' 700

Mr. Kennedy claimed that he did not know at the time that 
Southloop and Castle Grande were Tucker real estate projects 
financed by Madison.701 Ms. Nolan's notes also indicate 
that Mr. Kennedy asked Mr. Coleman whether bad loans were 
``parked'' at Madison:

          BK: You mean Madison have parked bad loans w/ David?
          RC: Yep. You bet . . . The Madison deal is coming 
        back to life.702

Ms. Nolan's notes indicate that Mr. Coleman told Mr. Kennedy 
that ``they're not stopping at Whitewater, I can guarantee you 
that.'' 703
    Mr. Kennedy offered no explanation for his returned call to 
Mr. Coleman other than to admit that he sought ``to know a 
little bit more before'' he definitively could decide the 
propriety of other discussions.704 Mr. Kennedy explained, 
``I didn't think we would be able to help him, but I couldn't 
respond sort of fully until I knew a little bit more about what 
he was talking about, and he opened up a little bit.'' 705
    Although Mr. Kennedy claimed that he did not ask Mr. 
Coleman about plea negotiations or whether Mr. Hale would 
allege any ``face-to-face meetings'' with President 
Clinton,706 Ms. Nolan's notes indicate that the U.S. 
Attorney's office is ``going to know about mtgs. taking 
place.'' 707
    Mr. Kennedy's notes indicate that he discussed the 
President and Mrs. Clinton with Mr. Coleman: ``All records 
liquidation w/SBIC [arrow] both of them's names cropped up 
Whitewater Development Corp.: Not stopping w/David Hale.'' 
708 Ms. Nolan's notes also contain the following entry: 
``your C's name has cropped up [arrow] both of 'em, Whitewater 
Develop. Corp.'' 709 Mr. Kennedy denied that ``both'' 
refers to the President and Mrs. Clinton.710
    Ms. Nolan's notes specifically indicate that at the end of 
the conversation Mr. Kennedy thanked Mr. Coleman for the 
``head's up.'' 711
    After the second telephone conversation, Mr. Kennedy again 
briefed Mr. Nussbaum.712 Mr. Kennedy claimed that he told 
Mr. Nussbaum that he had never heard of ``the stuff'' in 
connection with Whitewater during the campaign and that, as a 
result, Hale's allegations were not credible.713 Mr. 
Kennedy claimed that he did nothing other than to report Mr. 
Coleman's information to Mr. Nussbaum.714 Mr. Kennedy 
maintained that Mr. Nussbaum took no further action.715 
Mr. Kennedy denied that he ever told President Clinton or Mrs. 
Clinton or anyone else at the White House.716
    Bruce Lindsey, then Director of Presidential Personnel, 
claimed that he first learned of Mr. Kennedy's conversations 
with Mr. Coleman from New York Times reporter Jeff 
Gerth.717 Mr. Lindsey then sought confirmation,718 
and Mr. Kennedy told Mr. Lindsey that Mr. Coleman had told him 
that he ``had a client who had mutual interests'' and suggested 
that they discuss the matter.719 Mr. Lindsey understood 
the ``client'' to be President Clinton.720
            C. The White House Obtains More Information About the Hale 
                    Investigation
    In late August or early September, Mr. Kennedy advised 
then-Associate Attorney General Webster Hubbell of the Coleman 
phone call.721 Mr. Hubbell's phone log indicates he had a 
ten-minute conversation with Mr. Kennedy on August 
18th.722 According to Mr. Hubbell, Mr. Kennedy wanted to 
know whether he had learned of any connection between Mr. Hale 
and Madison and James McDougal.723 Mr. Hubbell mistakenly 
told Mr. Kennedy there was no connection; Mr. Hubbell later 
remembered that he had become aware of such a connection in the 
course of representing the RTC in litigation against Madison's 
former accountants.724
    Mr. Kennedy claimed that in the course of a conversation 
with Mr. Hubbell about another matter, ``I simply asked him had 
he heard the name David Hale in connection with Whitewater, and 
he said no, and that was the sum and source of it.'' 725 
Mr. Kennedy claimed that he asked Mr. Hubbell about the Hale 
matter because he knew that Mr. Hubbell was familiar with the 
Whitewater issue from the 1992 presidential campaign.726 
13
---------------------------------------------------------------------------
    \13\ Mr. Kennedy claimed that Mr. Nussbaum did not instruct him to 
speak with Mr. Hubbell, and that he did not report back to Mr. Nussbaum 
his conversation with Mr. Hubbell. (Kennedy, 12/5/95 Hrg. p. 104.)
---------------------------------------------------------------------------
    On September 20, 1993, Jeff Gerth met with Senior White 
House officials Bruce Lindsey and Mark Gearan, and conveyed the 
same information.727 Mr. Gerth told Mr. Lindsey and Mr. 
Gearan that Mr. Hale alleged that he had three meetings with 
then-Governor Clinton in 1985 and 1986. According to Mr. Gerth, 
prior to meeting with Governor Clinton, Mr. Hale had several 
meetings with Mr. Tucker and Mr. McDougal.728 Mr. McDougal 
told Mr. Hale that Madison Guaranty was strapped for cash and 
scheduled to be audited, and that ``friends in the political 
family needed help.'' 729
    At the first meeting, on the steps of the Arkansas Capitol, 
Governor Clinton allegedly approached Mr. Hale and said 
something like ``are you going to be able to help Jim and I 
out? . . . I would really appreciate it.'' 730
    The second meeting allegedly took place at Mr. McDougal's 
trailer office at the Castle Grande land development.731 
Governor Clinton, who was dressed in a jogging outfit, and Mr. 
McDougal asked Mr. Hale to make a loan from CMS to ``clean up 
the books'' at Madison Guaranty.732 Governor Clinton 
warned Mr. Hale that his name could not ``show up anywhere,'' 
but that he might be able to provide security for the loan with 
some property in Marion County--the county where Whitewater was 
located.733
    Mr. Gerth then explained that Mr. Hale subsequently made a 
$300,000 SBA loan to Susan McDougal d/b/a Master Marketing on 
April 3, 1986.734 Mr. Hale understood that some of the 
money would be advanced to Whitewater. Indeed, records show 
that a portion of the proceeds from the loan was used by 
Whitewater to purchase land from International Paper 
Corporation in 1986.735
    At the third meeting, then-Governor Clinton allegedly saw 
Mr. Hale at a Little Rock shopping mall and asked him ``Have 
you heard what that f -- -- --  -- -w -- -- -- Susan has done 
with the money?'' 736 Mr. Gearan and Mr. Lindsey both 
claimed that Mr. Gerth was the first to tell them of Mr. Hale's 
allegations against President Clinton.737 Both senior 
White House officials further asserted that they learned for 
the first time of Mr. Kennedy's telephone calls with Mr. 
Coleman a month earlier.738
    After the meeting with Mr. Gerth, Mr. Lindsey asked 
President Clinton about Mr. Hale's allegations. The President 
denied that any of the meetings occurred.739
    On the same day, Mr. Lindsey called James Blair, the 
General Counsel of Tyson Food and a close associate of the 
President, twice to discuss Whitewater.740 Mr. Lindsey's 
contemporaneous notes of the first conversation indicate that 
Mr. Blair had previously contacted Mr. Heuer, Mr. McDougal's 
attorney, to discuss whether Mr. McDougal would be implicated 
in any case against Mr. Hale. Specifically, the notes indicate 
that Mr. Heuer ``asked Brent Bumpers [Assistant United States 
Attorney for EDAR] ...whether indictment against Hale, not 
McDougal.'' 741 Mr. Lindsey's notes of the second 
conversation shows: ``Fletcher Jackson-in charge of case-
immunity leaked. McDougal might become target. Blair Heard that 
$300,000 had been deposited in McDougal's account, jumped 
pretty high.'' 742 Mr. Lindsey could not interpret these 
entries in his notes, and particularly the notation ``jumped 
pretty high.'' 743
    Mr. Blair had no recollection of speaking with Mr. Lindsey, 
but admitted that they may have discussed David Hale.744 
14 He also could not recall any conversation with Mr. Heuer 
about whether Mr. McDougal would be indicted along with Mr. 
Hale, but admitted ``[t]hat's certainly a possibility. I have 
discussed with Heuer at times whether McDougal was actually 
going to be reindicted after his first acquittal.'' 745 
When asked whether he relayed the results of any conversation 
with Mr. Heuer back to the White House or elsewhere, Mr. Blair 
carefully claimed, ``I don't have any recollection of that. I'm 
not saying if I didn't hear something interesting, I might not 
have passed it on to Bruce Lindsey, but I have no specific 
recollection of that.'' 746
---------------------------------------------------------------------------
    \14\ Mr. Blair's memory lapse, however, appeared to be selective 
because he did recall other portions of his alleged conversation with 
Mr. Heuer. (Blair, 11/20/95 Dep. 11-14.) Mr. Blair also recalled 
another conversation with Mr. Heuer, most likely prior to Mr. Hale's 
indictment, in which Mr. Heuer informed him that ``Hale had supposedly 
been to see McDougal and tried to get McDougal to lie about various 
things that Hale wanted to claim was reality.'' (Blair, 11/20/95 Dep. 
p. 13) This other conversation between Mr. Blair and Mr. Heuer 
corresponds to a separate entry in the same page of Mr. Lindsey's 
notes. (Hogan & Hartson Document BL011718-011722.)
---------------------------------------------------------------------------
    When asked about any conversation between Mr. Heuer and 
Assistant U.S. Attorney Bumpers about the indictment of Hale, 
Mr. Blair professed that he did not ``know anything about any 
conversations between Mr. Heuer and Mr. Bumpers.'' 747 Mr. 
Blair claimed that Mr. Lindsey's notes did not refresh his 
recollection.748
    Although Mr. Bumpers did not recall Mr. Heuer asking 
whether Mr. McDougal would be indicted with Mr. Hale,749 
Mr. Bumpers may have had a brief conversation with another 
Assistant U.S. Attorney, Fletcher Jackson about Mr. Hale 
investigation prior to Mr. Hale's indictment.750 Mr. 
Bumpers also may have learned of the imminent indictment at a 
staff meeting.751
    The Special Committee was not able to depose Mr. Heuer 
because he was preparing for Mr. McDougal's criminal trial. 
Messrs. Blair and Bumpers could neither confirm nor deny that 
any of these conversations occurred. Mr. Lindsey's 
contemporaneous notes of his conversation with Mr. Blair 
immediately following Mr. Lindsey's conversation with Mr. Gerth 
about Mr. Hale's allegations against President Clinton indicate 
that Mr. Heuer received confidential information about the 
ongoing federal investigation of Mr. Hale, and that this 
confidential information was passed on to Mr. Blair and Mr. 
Lindsey.752

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

    Attempts by senior White House officials to gather 
information about investigations touching on the Clintons went 
beyond contacts with potentially adverse counsel (Mr. Coleman) 
or with close associates (Mr. Blair). Senior White House 
officials undertook a concerted and highly improper effort to 
contact investigative agencies about the ongoing investigations 
into Madison and Whitewater.
    During the period when the submission of the additional RTC 
referrals on Madison prepared by Ms. Lewis was being held up by 
the ``legal review'' by the RTC's Professional Liability 
Section, the White House received advance information on these 
referrals. At about the same time that the White House learned 
of Mr. Hale's allegations against President Clinton, on 
September 29, 1993, Jean Hanson, the General Counsel of the 
Department of the Treasury, which oversaw the RTC and its 
investigations, informed White House Counsel Bernard Nussbaum 
and Associate White House Counsel Clifford Sloan of the 
existence of several RTC referrals involving Madison, 
Whitewater, and the Clintons.753
    This improper transmittal of confidential RTC information 
to the White House violated clearly established RTC procedures. 
In a June 17, 1993 memorandum to all RTC attorneys and 
investigative staff on the handling of criminal referrals, RTC 
Director of Investigations James Dudine wrote: ``All criminal 
referrals are sensitive and must be handled with appropriate 
confidentiality and care.'' 754 Mr. Dudine advised that 
criminal referrals derived from records of financial 
institutions are also subject to the restrictions of the Right 
to Financial Privacy Act, 12 U.S.C Sec. 3412.755 William 
H. Roelle, the RTC Senior Vice President in charge of the 
Investigations Division,756 testified that, based on his 
25-years of experience with the FDIC and RTC, both the 
substance and the fact of a criminal referral are 
confidential.757 There is no exception for press 
inquiries.758
    The Treasury General Counsel, Jean Hanson, improperly 
conveyed the confidential RTC information about the Madison 
criminal referrals to the White House.759 Specifically, 
Ms. Hanson advised Mr. Nussbaum that the President and Mrs. 
Clinton were identified as possible witnesses to the suspected 
criminal activities described in the referrals.760 She 
further told Mr. Nussbaum that the referrals referenced 
possible improper campaign contributions from Madison to one of 
Mr. Clinton's gubernatorial campaigns.761 Mr. Nussbaum 
admitted that Ms. Hanson provided him with nonpublic 
information about the referrals.762
    The next day, on September 30, Ms. Hanson called Mr. Sloan 
to amplify on the confidential information she had provided to 
Mr. Nussbaum.763 Mr. Sloan's notes of this conversation 
recorded the following:

          ``9 referrals--allegations re: Fulbright--

         Jim Guy Tucker
         attempt to divert funds.''764

Mr. Sloan's notes further stated that the charges of conspiracy 
to divert funds were the ``most serious allegation[s],'' 
765 that the referrals named the Clinton 1985 campaign as 
``co-conspirators,'' 766 and, most important, that the 
``Clintons [were] mentioned in other charges as potential 
witnesses.'' 767
    Mr. Nussbaum instructed Mr. Sloan to relay Ms. Hanson's 
information to then Director of Presidential Personnel Bruce 
Lindsey, who was not a member of the press office, but rather a 
``damage control'' specialist.768 Mr. Sloan did so on the 
same day, September 30, or shortly thereafter.769 
Inexplicably, Mr. Lindsey claimed that Mr. Sloan did not advise 
him that Governor Tucker was named in the referrals as a 
target.770 Instead, Mr. Lindsey asserted that he did not 
learn that Governor Tucker was mentioned in the referrals until 
October 7 or 8, 1993.771
    On October 4 or 5, 1993, Mr. Lindsey passed the 
confidential RTC information directly to the President.772 
When asked about the President's response, Mr. Lindsey claimed 
implausibly that ``it was certainly nothing other than just 
sort of, `hmmmmmmm.''' 773
    Curiously, on October 6, 1993, President Clinton had a 
meeting at the White House with Governor Jim Guy 
Tucker.774 Former Deputy Assistant to the President Keith 
Mason testified that he attended this meeting,775 which 
was held late in the afternoon and lasted 30 to 45 
minutes.776 Mr. Mason asserted that no discussions 
occurred at the meeting about Whitewater, Madison or RTC 
criminal referrals.777 Prior to the meeting, Mr. Mason 
escorted Governor Tucker to the office of White House Chief of 
Staff Mack McLarty.778 Mr. Mason was present during part, 
but not all, of a meeting between Governor Tucker and Mr. 
McLarty.779 Mr. Mason claimed that at least while he was 
present Governor Tucker and Mr. McLarty did not discuss Madison 
Guaranty, the RTC criminal referrals or Whitewater.780
    Although Mr. Lindsey testified that he did not know that 
the criminal referrals mentioned Governor Tucker as of October 
6 and therefore did not pass this information onto the 
President, such information hardly would have been necessary. 
Notes taken by Susan Thomases during the 1992 campaign indicate 
that President Clinton had clear knowledge of the link between 
Whitewater and Governor Tucker. In notes taken of a February 
22, 1992 conversation relating to Whitewater, Ms. Thomases 
wrote:

          ``Have Gerth call Tucker
          BC tell me to call Tucker'' 781

On March 9, 1992, Jeff Gerth of the New York Times wrote to Ms. 
Thomases seeking additional information for his article on 
Whitewater and Madison. In the margin of the letter, Ms. 
Thomases had taken notes, apparently of a conversation with 
Bill Clinton.15 In one such note, next to Mr. Gerth's 
allegation that Mr. McDougal was subsidizing the Clintons' 
interest in the Whitewater investment, Ms. Thomases wrote: 
``Call Jim Guy Tucker.'' 782 Tellingly, as of the date of 
Ms. Thomases' notes, there had been no public allegation 
suggesting any link between Mr. Tucker and Whitewater, Madison, 
or Mr. McDougal.
---------------------------------------------------------------------------
    \15\ One margin note stated: ``BC has no recollection.'' Willkie, 
Farr & Gallagher Document ST000047.
---------------------------------------------------------------------------
    The Special Committee did not obtain testimony from 
Governor Tucker because he, along with James and Susan 
McDougal, was a defendant in a federal criminal proceeding. The 
Whitewater-related charges prosecuted by Independent Counsel 
Kenneth Starr in the Tucker-McDougal trial stemmed directly 
from the RTC criminal referrals prepared by Ms. Lewis--the 
substance of which was conveyed from Ms. Hanson, through Mr. 
Sloan and Mr. Lindsey, to President Clinton. On May 28, 1996, 
an Arkansas jury convicted Governor Tucker of conspiracy and 
mail fraud in connection with transactions involving Mr. 
McDougal and Mr. Hale; President Clinton testified as a defense 
witness in the trial.783
    On October 8, 1993, the RTC Professional Liability Section 
completed its legal review of the criminal referrals.784 
On the same day, the criminal referrals were transmitted to the 
U.S. Attorney's Office in Little Rock without any change from 
their original versions prepared by Ms. Lewis.785
    On October 14, 1993, senior White House officials met again 
in Mr. Nussbaum's office with senior officials from the 
Department of the Treasury to discuss the criminal 
referrals.786 Mr. Lindsey, Mr. Nussbaum, Mr. Sloan, 
Associate White House Counsel Neil Eggleston and White House 
Director of Communications Mark Gearan met with Ms. Hanson, 
Department of the Treasury Chief of Staff Joshua Steiner and 
Assistant Secretary of Treasury for Public Affairs Jack 
DeVore.787 Mr. Devore testified that it ``appear[ed] that 
someone in either Nussbaum's or Hanson's office called my 
secretary and asked her to schedule this meeting.'' 788 
During the meeting, Mr. DeVore explained to the group that he 
had received press inquiries about the criminal referrals, and 
a detailed description of the criminal referrals ensued. In a 
memorandum to file, entitled ``Whitewater Development 
Corporation,'' 789 Mr. Lindsey indicated that one of the 
referrals ``involved four cashiers checks--each for $3,000, two 
made payable to the Clinton for Governor Campaign and two made 
payable to Bill Clinton.'' 790 Mr. Lindsey further wrote 
that ``DeVore confirmed with the RTC that the referrals had 
been received in the Washington office, but had already 
forwarded on to the Little Rock U.S. Attorney's office.'' 
791

III. A Pivotal Event: The November 5, 1993 Meeting Between White House 
        Officials and the Clintons' Private Lawyers

    On November 5, 1993, armed with details of the confidential 
RTC criminal referrals and Mr. Hale's allegations against 
President Clinton, senior White House officials met with the 
Clintons' private lawyers. The stated purpose of this meeting 
was ``to impart information to the Clinton's personal 
lawyers.'' 792 The White House officials in attendance 
were Mr. Eggleston, Mr. Lindsey, Mr. Nussbaum, and Associate 
White House Counsel William Kennedy.793 The private 
lawyers were David Kendall of Williams & Connolly, Little Rock 
attorney Steven Engstrom, and James Lyons, the author of the 
Clinton campaign's 1992 Whitewater report.794 According to 
Mr. Lindsey, who characterized the gathering as a legal defense 
meeting, ``[t]he purpose of the meeting was Whitewater 
Development Corporation.'' 795
    Mr. Kennedy's notes of the meeting, which the Committee 
obtained after a protracted dispute with the White 
House,796 indicated that the White House officials 
provided the Clintons' private lawyers with much of the 
information they possessed concerning Whitewater, including 
confidential information relating to ongoing investigations by 
the SBA, RTC, and Justice Department.797 In essence, the 
White House officials used confidential information they gained 
by virtue of their positions of public trust to further the 
Clintons' private legal defense.
    A significant part of the discussion related to the ongoing 
RTC investigation of Madison.798 Among the principal 
topics of the meeting was the referral related to illegal 
contributions to Mr. Clinton's gubernatorial campaign.799 
16 Coincidentally, Mr. Lindsey, in his October 20 memorandum, 
appeared to be particularly concerned about one of the 
referrals, which ``involved four cashier checks--each for 
$3,000, two made payable to the Clinton for Governor Campaign 
and two made to Bill Clinton.'' Mr. Kennedy claimed, however, 
that Mr. Lindsey indicated during the meeting that the source 
of the information was press accounts: ``Basically, that Bruce 
is outlining, sort of the allegations, that the press was 
reporting wherein the referrals.'' 800
---------------------------------------------------------------------------
    \16\ The notes appear as follows in the White House's typed version 
of Mr. Kennedy's notes:
    ``III. RTC referral w/r/t McDougal
    Included a reference to 4 campaign checks 4/85 BC personally
    Campaign Committee
    3 checks written on Madison--all $3,000 4th check on McDougal 
personally--signed by Susan McDougal.'' (White House Document S12530).
    Later, his notes reflect the following entry:
    ``Charles Peacock--proceeds went from Charles for Clinton 
campaign--85
    made a donation (?)
    $3,000-$12,000 * Could all come from Charles Peacock
    Loan--$ siphoned off from the Loan
    Charles Peacock (Ken Peacock?)
    $1500 per election--$3,000
    Primary and general.'' (White House Document S12534).
---------------------------------------------------------------------------
    White House officials also discussed the fact that Governor 
Tucker was a target of the referrals. In two separate entries, 
Mr. Kennedy wrote ``Could be that JGT is target of RTC 
referral'' 801 and ``RTC-people trying to get BC and 
JGT.'' 802 Mr. Lindsey testified that he first learned 
that Mr. Tucker was a target in the RTC investigation during 
the October 14 meeting with RTC officials: ``I believe in the 
October 14th meeting that we had with certain people from the 
Treasury Department, that they indicated that Jeff Gerth had 
indicated that to them.'' 803 Notes taken by Susan 
Thomases indicate, however, that at least President Clinton 
identified Mr. Tucker with Whitewater in February and March 
1992. In notes taken from a February 22, 1992 conversation 
relating to Whitewater, Ms. Thomases wrote:

          ``Have Gerth call Tucker
          BC tell me to call Tucker'' 804

Likewise, Ms. Thomases' notes, apparently of a conversation 
with then-Governor Clinton, taken on a March 9, 1992 letter 
from Mr. Gerth seeking information on Whitewater recorded: 
``Call Jim Guy Tucker.'' 805 Mr. Tucker's ties to the 
McDougal and to Madison had not been publicized at the time.
    Another principal topic of discussion raised by Mr. Lindsey 
was Madison's retention of the Rose Law Firm and Mrs. Clinton's 
representation of Madison in connection with Madison's proposal 
for a preferred stock offering.806 17 Mr. Kennedy 
testified that Mr. Lindsey ``[i]s giving history, and it's 
basically that she has given authority for Madison to do both 
things, and Bruce is talking about, you know, the perception 
about Beverly Bassett.'' G5807 Under ``Beverly Basset,'' Mr. 
Kennedy wrote: ``too much coziness.'' G5808
---------------------------------------------------------------------------
    \17\ At the very beginning of Mr. Kennedy's notes appears the 
following entry:
    ``HRC representation of Madison--not much activity representing 
people before agencies
    2 RLF letters Beverly Bassett
    1. Madison
    2. PP of pfd stock
    Beverly Basset--Responded w/auth to do both
    Recently appointed BB as Sec Cer
    Brother early supported
    Too much coziness
    RLF--answered questions
    Did reconstruction.'' (White House Document S12529).
    Later, in his notes, there is an entry related to the Rose Law 
Firm's retainer:
    ``+ RLF--Madison Guaranty--Retainer at $2,000 per month
    ANN + Check drawn on WWDC--payable to HRC
    Bernie + Believe that it believes prob. represents confirmed 
payment of $2,000 # of months for 17 months
    [15 months for $2,000 per month--Retainer] Webb Hubbell.'' (White 
House Document S12533)
---------------------------------------------------------------------------
    Although senior White House officials' claimed that they 
communicated only general background information concerning 
Whitewater and Madison during the November 5th meeting, Mr. 
Kennedy's notes detail the financing of the Clintons' 
investment in Whitewater. Almost four pages of Mr. Kennedy's 
notes relate to the reconstruction of the Whitewater loans and 
transactions.809 The attendees were particularly 
interested, according to Mr. Kennedy's notes, in James Blair's 
involvement in the sale of the Clintons' interest in Whitewater 
in 1992,18 as well as Mr. Blair's possible involvement in 
Christopher Wade's payment of the outstanding bank loan on 
which the Clintons were guarantors.19 Mr. Blair had 
provided James McDougal with the $1000 to purchase the 
Clintons' Whitewater stock on December 22, 1992.810 The 
senior White House officials and the Clintons' private lawyers 
also discussed tax issues related to the Clintons' investment 
in Whitewater,20 and the chain of custody of certain 
Whitewater records that were used during the 1992 campaign to 
piece together specifics of the Clintons' investment.21
---------------------------------------------------------------------------
    \18\ Mr. Kennedy's notes show:
    ``Blair could have knowledge Could be source of money to allow McD 
to purchase stock.'' (White House Document S12531.)
    On the same page, the following entry appears:
    ``\3/4\ Times Heuer Blair contact
    Heuer
    \2/3\, 1992 Have 1
    Involved w/VF
    Try to arrange sale.'' (White House Document S12531.)
    \19\ Mr. Kennedy's notes read:
    ``Not Reconstruction--
    $11,000--
    Clinton not released until Fall of 1992
    Blair up--Chris Wade.'' (White House Document S12537).
    Although Mr. Wade assumed the McDougal's interest in Whitewater in 
1985, the Clintons were not released from their obligation until the 
balance of the debt was paid off.
    \20\ The following entry appears in Mr. Kennedy's notes:
    ``Report: Clinton had taken the deductions that WWDC had not taken
    Tax advantage of $2500
    Not repay government yet promise.'' (White House Document S12529).
    \21\ Mr. Kennedy's notes indicate the following discussion:
    ``End of '86--asked for records
    --McDougals say that all of
    Corp records to HRC
    Issue in campaign--86--Records to HRC
    RLF--Campaign Jim Lyons
    Loretta Lynch
    --Betsy Wright had those records--Took em home
    --Betsy Wright
    WH retrieved--records from BW
    Been at WH--Sent files related to WW
    Make a more complete reconstruction.'' (White House Document 
S012533-S012534.)
---------------------------------------------------------------------------
    Curiously, a notation at the bottom of the first page of 
Mr. Kennedy's notes suggested a possible link between the FBI's 
investigation of CMS, which allegedly made an illegal loan to 
James and Susan McDougal in 1986 at the request of then-
Governor Clinton, and the death of President Clinton's friend 
and counsel, Vincent Foster. Mr. Kennedy wrote:

          ``July 20th: FBI issued subpena & took records of 
        municipal judge named Hale
          Also the day that VF killed himself Factor'' 811

Mr. Kennedy claimed that ``by factor'' he meant: ``Simply that 
the coincidence had become a factor in all of the intense 
speculation surrounding Vince's suicide.'' 812
    The November 5th meeting also concerned ``a division of 
labor between personal and White House counsel for handling 
future Whitewater issues.'' 813
    In the middle of Mr. Kennedy's notes appears a cryptic 
reference to a remark by Mr. Kennedy that suggests the 
possibility of an effort to suppress critical evidence 
concerning Whitewater. 814 Mr. Kennedy wrote:

          ``Vacuum  Rose law Files  WWDC Docs--subpoena
          *Documents--never know go out
          Quietly(?)'' 815

    Mr. Kennedy claimed to the Special Committee that 
``vacuum'' was used in this meeting as a noun, not a verb:

          We were referring to at the meeting that there was an 
        information vacuum, that when you tried [to] get your 
        arms around Whitewater, in this case referring to the 
        real estate investment, it is impossible to do. The 
        records were a shambles. I had personal knowledge of 
        that. You are dealing with an information vacuum. The 
        Rose Law files, as they related to Whitewater 
        documents, would--if you had gotten you hands on them, 
        they would not have meant anything to you because of 
        the condition of the records.'' 816

    Mr. Kennedy denied that the entry ``WWDC Docs--subpoena'' 
reflected the concern of senior White House officials over the 
possibility that Whitewater records might be 
subpoenaed.817 Instead, Mr. Kennedy claimed:``The 
discussion was that if a subpoena were issued, files that had 
once been at the Rose Law Firm would no longer be there, with 
regard to Whitewater.'' 818 Mr. Kennedy asserted that `` 
*Documents--never go out/Quietly(?)'' actually referred to the 
handling of Rose Law Firm files during the campaign: ``It 
relates to the fact that there is--as far as I know, still is--
a mystery about how the Whitewater documents--again I wish to 
stress these are the corporate records and real estate records 
relating to Whitewater as an investment--got from the Rose Law 
Firm to the campaign in 1992.'' 819
    Regardless of whether ``vacuum'' is a verb or noun, records 
relating to Whitewater and Madison had been systematically 
removed from the Rose Law Firm during and after the 1992 
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, 
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 Webster Hubbell. Mr. 
Hubbell removed these files, at times taking the firm's only 
copies,820 without obtaining the consent of the firm or 
client.821
    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 Mr. 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. 822 The 
records contained the handwritten questions of Mr. Foster to 
Mrs. Clinton and notations by Mr. Hubbell. 823 Mrs. 
Clinton has recently stated through her lawyer that she may 
have reviewed the records 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.824 They were not in 
the firm computers, its client files, or the firm's storage 
facility. 825 The billing records, long lost, finally 
turned up in August 1995 in the Book Room of the White House 
Residence.
    When asked about Mr. Foster's removal of documents from the 
Rose Law Firm, Mr. Kennedy admitted that he knew Mr. Foster had 
searched for Madison files during the 1992 campaign,826 
but claimed that he was not aware of whether Mr. Foster had 
removed the files from the Rose Law Firm.827
    Mr. Kennedy also claimed that he wrote ``quality,'' not 
``Quietly,'' in his notes, and was talking about the condition 
of ``the Whitewater records that I once had in my possession, 
received from Ms. Clinton.'' 828 Mr. Kennedy admitted that 
the Rose Law Firm did not have custody of any Whitewater 
documents, but claimed that, ``The Whitewater files were Rose 
files when they were in my possession when I was performing 
legal work for Ms. Clinton.'' 829
    Finally, Mr. Kennedy's notes recorded the following 
command: ``Try to find out what's going on in Investigation,'' 
830 a directive that would inform the actions of White 
House officials throughout the Whitewater defense effort.

IV. The White House Obtains Confidential SBA Documents Relating to Mr. 
        Hale and Capital Management

    At the November 5 meeting, senior White House officials and 
the Clintons' private lawyers discussed David Hale and his 
allegations against President Clinton. For example, under the 
heading ``David Hale,'' Mr. Kennedy's notes reflect the 
following notations:

          ``Tunnel at Capitol--Clinton says McD will call you--
        DH--hope you'll help em
          145 Street Trailer--Jogging Shorts
          Shopping Malls--Clinton says do you know what bitch 
        Susan did with money-sed.'' 831

The notations reflect Mr. Hale's allegation that he saw then-
Governor Clinton three times in 1986. At the first meeting, on 
the steps of the Arkansas Capitol, Governor Clinton allegedly 
approached Mr. Hale and said that James McDougal would call Mr. 
Hale; Governor Clinton allegedly hoped that Mr. Hale would help 
Mr. McDougal. 832 The second meeting allegedly took place 
at Mr. McDougal's trailer office on 145th Street in Little 
Rock. 833 Governor Clinton, wearing a jogging outfit, 
asked Mr. Hale to make a loan to Mr. McDougal. Finally, in the 
third meeting, at a Little Rock shopping mall, Governor 
Clinton, agitated, allegedly asked Mr. Hale: ``Do you know what 
that bitch Susan did with the money?'' 834 Mr. Kennedy's 
notes recorded that:

          ``David Hale did make a $300,000 loan to Susan McD. 
        Jim McD says purchase land in Pulaski Co from IP 
        purchased in name of WW in 10/86.'' 835

    Three days after the November 5 Whitewater defense meeting, 
on November 8, Mr. Nussbaum directed Mr. Eggleston to a 
November 6 Washington Post story about a request from John 
LaFalce, Chairman of the House Committee on Small Business, to 
Mr. Bowles for information relating to CMS. 22 836 The 
report, according to Mr. Eggleston, noted that Chairman LaFalce 
asked for the requested information by November 15, 1995. 
837
---------------------------------------------------------------------------
    \22\ After Mr. Hale's allegations against the President was made 
public, the Capital Management investigation predictably attracted 
considerable attention. On November 4, 1993, Congressman John LaFalce, 
the Chairman of the House Committee on Small Business, wrote to Mr. 
Bowles and requested ``a full written report on Capital Management 
Services, Inc., including its licensing, private capital, ownership, 
SBA leverage, and individual financings made, including profit and loss 
statements.'' (SBA Document Not numbered). In addition, Chairman 
LaFalce asked that the SBA provide, under section 10(e) of the Small 
Business Act, the staff director and counsel of the Committee on Small 
Business with copies of the SBA's files on Capital Management. (SBA 
Document Not numbered).
---------------------------------------------------------------------------
    Mr. Bowles responded to Chairman LaFalce's inquiry on 
November 15, 1993 in a four-page letter that provided a 
detailed summary of the investigation into CMS and responded to 
the specific questions set forth in Chairman LaFalce's November 
4, 1993 letter. 838 More importantly, Mr. Bowles' letter 
was accompanied by twelve sets of attachments, which included, 
among other things, lists of all loans provided by CMS, all 
portfolio financing reports submitted by CMS in connection with 
its SBA loans, all eleven reports of SBA audits of Capital 
Management, Mr. Foren's May 5, 1993 referral of the case to the 
Inspector General, and the September 23, 1993 criminal 
indictment against David Hale. 839 In short, the 
attachments, ``approximately a foot high,'' 840 
essentially comprised the entire SBA file on the operation, 
regulation, and investigation of CMS and David Hale.
    On the morning of November 16, 1993, the day after Mr. 
Bowles replied to Chairman LaFalce, Mr. Eggleston called the 
SBA and spoke with the Office of Legislative Affairs. 841 
The SBA directed Mr. Eggleston's inquiry to John Spotila, the 
SBA General Counsel. Mr. Spotila advised that the SBA had 
responded to Chairman LaFalce's request late the night before. 
842 According to Mr. Eggleston, Mr. Spotila sent Mr. 
Eggleston via facsimile a copy of Mr. Bowles' letter to 
Chairman LaFalce at 11:20 a.m. 843 Mr. Spotila followed up 
with another facsimile at 3:20 p.m., enclosing an SBA press 
release about Mr. Bowles' response. 844 According to Mr. 
Eggleston, he then asked Mr. Spotila ``whether it would be 
appropriate for the White House to have whatever had been 
provided to Congress.'' 845
    John Spotila was a classmate of President Clinton at 
Georgetown. According to Mr. Spotila, ``I have known the 
President for quite a while. I was a classmate of his at 
Georgetown, and briefly at Yale, although my third year was his 
first year at the [law] school.'' 846 He also knew Mrs. 
Clinton. 847 Mr. Bowles testified that he selected Mr. 
Spotila as general counsel partly on Mrs. Clinton's 
recommendation. 848
    On November 16, 1993, Mr. Spotila testified that he ``faxed 
a copy of the press release that had been done and then the 
cover letter.'' 849 After receiving the facsimiles, Mr. 
Eggleston asked Mr. Spotila whether he could have the 
attachments that accompanied Mr. Bowles' letter. 850 Mr. 
Spotila testified that he consulted with Mark Stephens of his 
staff, who erroneously told Mr. Spotila that ``all of the 
documents were entirely routine and nonsensitive.'' 851
    In fact, at the top of the first page, Mr. Bowles' letter 
to Chairman LaFalce in bold type, contained the following 
notice:

          The information contained herein has been determined 
        to be confidential in nature and therefore not 
        releasable to unauthorized parties. Disclosure of this 
        information may violate Federal law (e.g., Privacy Act 
        of 1974, the Right to Financial Privacy Act of 1978, 
        and 18 U.S.C. Sec. 1905). Utmost discretion should be 
        exercised. 852

Beyond this, Mr. Spotila's one sentence transmittal letter to 
Mr. Eggleston also specified that the information was 
confidential: ``Enclosed is a copy of Erskine's letter 
yesterday to Chairman LaFalce (with confidential 
attachments).'' 853
    While Mr. Eggleston was seeking this confidential SBA 
information, he was also speaking with other senior White House 
officials. He left a message for Bruce Lindsey advising him of 
the confidential documents attached to the LaFalce letter:

          Neil Eggleston said the additional information is at 
        SBA and is approximately a foot high. He has a call in 
        to SBA to find out if it contains reference to either 
        the President or Hillary. He can obtain a copy of the 
        documents if it appears necessary but does not believe 
        it is problematic.854

Mr. Eggleston did not recall talking with Mr. Lindsey on 
November 16 about the SBA documents. Indeed, Mr. Eggleston 
implausibly claimed the message he left for Mr. Lindsey message 
led him to believe that he did not talk to Mr. Lindsey: ``I 
don't remember actually doing it, and this document leads me to 
conclude that I probably didn't, and that I communicated with 
Mr. Lindsey through his secretary, which happened fairly 
frequently because Mr. Lindsey is extremely difficult to get in 
touch with.'' 855 This testimony leaves open the obvious 
question of how Mr. Lindsey would have known what ``additional 
documents'' Mr. Eggleston was referring to in his message, if 
the two had not communicated previously about obtaining 
documents from the SBA.
    That afternoon, November 16, Associate White House Counsel 
Eggleston personally went over to the SBA offices and picked up 
the ``approximately a foot high'' 856 set of attachments 
from Mr. Spotila. When he returned to the White House, he 
curiously left another message for Mr. Lindsey, at 4:58 p.m. 
The message--captioned ``important'' by Mr. Lindsey's 
secretary--stated: ``Has some Whitewater documents to go over 
with you. Will come by about 6:00 p.m.'' 857
    Mr. Eggleston did not recall talking with Mr. Lindsey. ``As 
I've said repeatedly, I don't actually remember that happening. 
This would certainly make it seem as if I had two 
communications with his secretary on that day with regard to 
these documents, and that makes a lot of sense. I mean, that's 
the reason I was getting these.'' 858 Mr. Eggleston 
claimed that he did not show documents to Mr. Lindsey:

          I did not, as I recall, I never got to him with these 
        documents. I don't remember whether he got back to me 
        himself or through his secretary, but I recollect--and 
        again I don't know what Mr. Lindsey's recollection is--
        but I recollect that I never showed him these 
        documents.859

Mr. Lindsey did not believe that he saw the records.860
    Back at the SBA, Mr. Spotila met with Mr. Bowles and told 
him that he had provided the confidential documents to the 
White House.861 Immediately, Mr. Bowles said, ``I don't 
know if this is right or wrong, good or bad, up or down, but 
you better check with somebody with the Justice Department to 
see if it's okay.'' 862 Mr. Spotila instructed Mark 
Stephens to contact the Justice Department.863
    The next day, November 17, 1993, Allen Carver, Principal 
Deputy Chief of the Justice Department's Fraud Section, called 
Mr. Stephens to obtain a copy of Mr. Bowles' November 15 
response to Chairman LaFalce.864 Mr. Stephens advised Mr. 
Carver of the transfer of the confidential SBA 
documents.865 Mr. Carver and Mr. Stephens agreed to meet 
on November 18 at Mr. Carver's office with another attorney 
from the Fraud Section and an FBI agent working on the matter 
to discuss both Mr. Bowles report to Chairman LaFalce and the 
SBA's transfer of documents to the White House.866
    At that time, the Justice Department instructed the SBA to 
retrieve from the White House the confidential documents and 
any White House materials analyzing those documents: ``Carver 
said get docs back + get their notations as well as all copies 
+ list of people w/access to docs.'' 867 The notes also 
explained the reason for the Justice Department's objection: 
``Due to scope, they--part of investigative body of material 
related to allegedly naming Pres. WH should not get docs or 
apprised of investigation.'' 868
    The next day, November 19, Mr. Carver talked with Mr. 
Stephens to ascertain the progress of the document retrieval. 
According to Mr. Carver's contemporaneous memorandum about the 
call, Mr. Stephens said that ``he called and spoke with Neal 
Eggleston earlier in the day, about 1:55 p.m., and Mr. 
Eggleston said that he would discuss the matter with the Deputy 
Attorney General and would discuss the matter further with Mr. 
Stephens early the next week.'' 869
    Immediately, Mr. Carver called his supervisor, Fraud 
Section Chief Gerry McDowell, to advise him of Mr. Eggleston's 
conversation with Mr. Stephens. According to contemporaneous 
notes of the conversation, Mr. McDowell said, ``I've got to 
believe the WH counsel have done an incredibly stupid thing!'' 
870 Mr. McDowell immediately notified the Associate Deputy 
Attorney General David Margolis.871 Mr. McDowell also 
talked directly with the Deputy Attorney General Phillip 
Heymann, who agreed with Mr. McDowell that this ``could be an 
influence type situation.'' 872
    According to contemporaneous notes, Mr. Eggleston called 
Mr. Heymann that day and talked to Mr. Nathan, Mr. Heymann's 
deputy. Mr. Nathan apparently conveyed Mr. Heymann's strong 
sentiment to Mr. Eggleston, who, after the conversation, 
``wanted to get the documents back to the SBA as soon as 
possible.'' 873 Curiously, White House Counsel Bernard 
Nussbaum, Mr. Eggleston's supervisor, called Associate Attorney 
General Webster Hubbell at 10:29 a.m. on November 19.874
    Although Mr. Eggleston was instructed specifically by the 
Justice Department to return the confidential documents 
immediately, he inexplicably waited for several days.875 
Mr. Eggleston claimed that ``[b]y that time, it was obvious 
that we would return the documents, but I had to talk to my 
supervisor before agreeing to do so.'' 876 After speaking 
with the Justice Department, Mr. Eggleston stated that he 
became ``quite concerned, and spoke fairly quickly thereafter 
to Mr. Nussbaum and then worked hard to get the documents back 
as soon as I could.'' 877
    On May 21, Mr. Eggleston finally reached Mr. Stephens, and 
arranged for the return of the documents.878 Mr. Stephens 
met Mr. Eggleston at the street corner in front of the SBA, 
where Stephens took back the box of SBA documents.879
    Mr. Eggleston reviewed the SBA documents. He did not, 
however, ``see any documents that I thought were particularly 
sensitive or that would have alerted me to the notion that 
Department of Justice might have had a problem.'' 880 The 
career Justice Department prosecutors, however, had a different 
view of the matter. Because the documents concerned a case 
involving allegations against the President, Mr. Carver 
believed that the White House had no right to any confidential 
documents or to be apprised of facts relating to the ongoing 
investigation.881
    The Justice Department immediately commenced an 
investigation into the transfer of confidential information to 
the White House. On November 19, Mr. Carver discussed the 
investigation with the FBI. The FBI Chief of the Governmental 
Fraud Unit, Richard Wade, ``expressed concern over the 
possibility that the White House-SBA action, however, well-
intended, could look like White House intervention.'' 882 
Mr. Carver recommended that the FBI interview Mr. 
Eggleston,883 and also interview Mr. Kennedy concerning 
his conversations and contacts with Mr. Hale's attorney, Mr. 
Coleman, about the case.884
    This matter is still under investigation by the Office of 
the Independent Counsel.

V. The White House Begins to Hold Whitewater Defense Meetings

    By late 1993, in the wake of new revelations, members of 
Congress and the national press began to call for the 
appointment of a special counsel to investigate Whitewater and 
Madison Guaranty. At that time, although the statute governing 
a judicial appointment of an Independent Counsel had lapsed, 
the Attorney General could appoint a special counsel to 
investigate the matter.
    During the first weeks of January 1994, senior officials of 
the White House met twice daily in Whitewater Response Team 
meetings.885 Present were Deputy Chief of Staff Harold 
Ickes, who was hired in part to coordinate the Whitewater 
defense effort; Chief of Staff Thomas Mack McLarty; White House 
Counsel Bernard Nussbaum; Deputy White House Counsel Joel 
Klein; Senior Advisor to the President George Stephanopoulos; 
Counselor to the President David Gergen; Associate White House 
Counsel Neil Eggleston; and Director of White House 
Communications Mark Gearan.886 Significantly, Mrs. Clinton 
and her Chief of Staff, Margaret Williams, attended some of the 
meetings.887
    During the Banking Committee hearings in the summer of 
1994, senior White House officials provided evasive answers 
when asked to describe the purpose of the meetings.888 Mr. 
Lindsey and Mr. Nussbaum both failed to mention any specific 
subject discussed other than the handling of press inquiries 
related to Whitewater.889
    The Special Committee, however, obtained evidence this year 
that White House officials discussed far more than press 
inquiries at these twice daily meetings.890 
Contemporaneous and detailed notes of these meetings, prepared 
by Mr. Gearan reflect an extensive debate over whether an 
independent or special prosecutor should be appointed, and, if 
so, the scope and duration of such an independent 
investigation.891 The notes also reflect the willingness 
of senior White House officials to attempt to interfere in 
ongoing investigations, particularly regarding former Arkansas 
Securities Commissioner Beverly Bassett Schaffer's regulation 
of Madison.892 Finally, the notes indicate yet another 
instance of government lawyers providing private legal services 
to the President and Mrs. Clinton.
            A. Senior White House officials debated the appointment of 
                    a Special Counsel
    Mr. Gearan's notes reflect considerable debate within the 
White House on the appointment of a special counsel versus 
independent counsel. At a January 4, 1993 meeting, Mr. Gergen 
observed that the difference between independent counsels, 
appointed by a panel of federal judges, and special 
prosecutors, appointed by the Attorney General, is that 
independent counsels ``take on a life of their own.'' 893
    The next day, January 5, 1993, the debate continued. Mr. 
Nussbaum argued strenuously that no substantive difference 
existed between an independent counsel and a special 
prosecutor.894 In Mr. Nussbaum's view, both an independent 
counsel and a prosecutor are ``subject to no control [and] come 
[with the] desire to get someone.'' 895 Mr. Nussbaum 
expressed his ``adamant'' opposition to the appointment of any 
independent prosecutor.896
    Mr. Gearan recalled that Mr. Nussbaum, again continuing to 
exhibit his concern about control, compared an independent or 
special prosecutor to ``somewhat of an unguided missile.'' 
897 To illustrate his point, Mr. Nussbaum envisioned two 
scenarios--the ``good-hearted'' prosecutor and the ``bad-
hearted prosecutor.'' 898 The ``good hearted'' prosecutor 
would conduct an investigation and simply document his 
findings.899 In contrast, the ``bad-hearted'' prosecutor 
``goes in & decides a smell of corruption & can show some 
things of those people close around the principal.'' 900 
According to Mr. Gearan, the ``principal'' was President 
Clinton.901
    A significant, if not dominating, concern of the White 
House officials during the Whitewater defense meetings was Mrs. 
Clinton's opposition to the appointment of either an 
independent or a special prosecutor. Mr. Gearan's notes of 
January 4, 1994 show that Mrs. Clinton joined the meeting--
already in progress--and said ``this looks like a meeting I 
might be interested in.'' 902 Mrs. Clinton stayed for 
approximately 15 minutes,903 and opposed the appointment 
of a special counsel.904 After she left several officials 
expressed the view that it was pointless to debate the merits 
of an independent counsel versus a special counsel given Mrs. 
Clinton's steadfast opposition to the appointment of either 
type of prosecutor.905
    On January 5, Mr. McLarty and Mr. Ickes both supported Mrs. 
Clinton's position.906 Mr. McLarty advised that the group 
move off the discussion of a special prosecutor or counsel 
because ``HRC and BC don't want it.'' 907 Harold Ickes 
stated that the discussion ``was the biggest f------ waste of 
time.'' 908 Before the Special Committee, Mr. Ickes 
testified that, although he could not recall the specific 
meeting, ``it was well known that Mrs. Clinton had very, very 
grave reservations'' about the appointment of any type of 
prosecutor.909
    On January 7, senior White House officials discussed 
attempting to persuade Mrs. Clinton to reverse her position on 
the appointment of a special counsel.910 Mr. Ickes advised 
that Secretary of State Warren Christopher or attorney Robert 
Barnett might attempt to convince Mrs. Clinton that a 
prosecutor should be appointed.911
    Ultimately, however, Mr. Ickes thought that it was 
``impossible'' to ``reopen'' the discussion with Mrs. 
Clinton.912 Mr. Gearan recalled that everyone in 
attendance at the meeting agreed that it would be 
``impossible'' for anyone, including the President, to change 
Mrs. Clinton's mind.913
    Later that day, Mr. Ickes again stated Mrs. Clinton's 
strong opposition to the appointment of any prosecutor.914 
Mr. Gearan's notes of this second meeting indicate that Mr. 
Ickes regarded Mrs. Clinton's ``adamant[] oppos[ition]'' as one 
of the major problems with calling for a special 
counsel.915
    Senior White House officials and Mrs. Clinton feared that a 
special counsel might indict persons close to President 
Clinton. According to Mr. Gearan's notes of a January 7, 1993 
meeting, Mr. Nussbaum said, ``Indictments will be Betsy 
Wright.'' 916 Ms. Wright was Governor Clinton's former 
Chief of Staff in the 1980s and handled damage control for 
Whitewater and other Arkansas-related matters during the 1992 
Clinton presidential campaign.917 Mr. Gearan implausibly 
denied that any concern was expressed that Ms. Wright would be 
indicted: ``[A]t no time was I present in any conversation 
where Mr. Nussbaum suggested that there is any basis for Ms. 
Wright to be charged with anything like this.'' 918 Mr. 
Gearan claimed that Mr. Nussbaum identified Ms. Wright as an 
extreme example of someone who might face prosecution by a 
special counsel investigating Madison Guaranty and 
Whitewater.919
    In any event, senior White House officials were concerned 
about possible indictments. A White House document, entitled 
``Confidential: Second Draft, Summary of Arguments Re: 
Whitewater,'' dated January 10, 1994, lists reasons against the 
appointment of a prosecutor.920 The memorandum 
specifically states that a special counsel investigation ``may 
result in focus on friends and associates of the President, 
begin to squeeze them and may subject some to indictment.'' 
921 Mr. Ickes admitted that there ``may well have been'' 
concern among White House officials over possible 
indictments,922 and ``a lot of names came up'' in the 
discussion of persons who might be ``squeezed'' or ``hurt'' by 
an investigation.923
    Evidently Mr. Nussbaum, too, believed that associates of 
the Clintons might be vulnerable to criminal 
prosecution.924 Mr. Gearan's notes of a January 5, 1993 
meeting indicate that Mr. Nussbaum believed it would be 
possible for a criminal prosecutor to detect ``a smell of 
corruption and can show some things of those people close 
around the principal.'' 925 Mr. Gearan recalled this 
statement and admitted that ``principal'' referred to President 
Clinton.926
    During the debate over the appointment of a special 
counsel, senior White House officials apparently attempted both 
to influence Attorney General Reno's decision on the matter and 
to negotiate the scope of an impending investigation. As early 
as the January 4 meeting, White House officials feared that 
Attorney General Reno would appoint an independent prosecutor 
without the White House's input on the matter.927 Mr. 
Gearan's notes of the January 7 meeting indicate discussion 
about Attorney General Reno's decision,928 and preference 
for ``fewer [questions] to lessen the exposure.'' 929
    Later, that day, Mr. Gearan noted that all meeting 
participants agreed, except for Bernard Nussbaum, that ``Reno 
is boxed once Ind[ependent] C[ounsel] starts.'' 930 Mr. 
Gearan confirmed that senior White House officials feared that 
after the Attorney General appointed an independent counsel, 
the matter would be ``out of her hands'' with regard to the 
duration and scope of the investigation.931 The notes 
suggest that a problem with calling for a special counsel is 
that ``Reno has shut the door.'' 932 Mr. Gearan denied 
that this entry referred to any rejection by Ms. Reno of 
attempts by the White House to influence her decision on the 
support of a special counsel.933
    On January 8, 1994, Mr. Ickes expressed displeasure with 
regard to how career Justice Department prosecutors--Donald 
Mackay and Alan Carver--were handling the ongoing federal 
investigations of Madison Guaranty and Whitewater.934 Mr. 
Ickes described Mr. Carver as a ``bad guy'' because he put the 
Clintons' private counsel, Mr. Kendall, on a speaker phone with 
two FBI agents and another prosecutor, Jim Nixon, on the other 
end.935 Mr. Ickes believed that the career Justice 
Department prosecutors ``are f---------- us blue.'' 936
    Mr. Gearan claimed that Mr. Ickes' strong remarks were 
actually complimentary. Mr. Gearan asserted that his reference 
to ``Those guys are f---------- us blue'' meant that the 
Justice Department officials were ``tough'' on the White House 
and had acted ``independent[ly].'' 937
    Mr. Ickes similarly claimed that ``Those guys are f--------
-- us blue'' meant that ``they were probably doing an effective 
job.'' 938 Mr. Ickes denied that his remarks reflected 
White House irritation with Justice Department officials for 
spurning White House attempts to influence their 
investigation.939
    This testimony is contradicted, however, by handwritten 
notes of Roger Altman, Deputy Treasury Secretary and Interim 
CEO of the RTC. In fact, Mr. Altman's support the inference 
that certain White House officials sought to negotiate the 
scope of any investigation of Madison Guaranty and Whitewater, 
but that Attorney General Reno rebuffed their efforts.940
    Mr. Altman's notes record two conversations that he had 
with Mrs. Clinton's Chief of Staff Margaret Williams during the 
same period in which the Whitewater Response Team meetings were 
taking place. According to Mr. Altman's notes, dated January 6, 
1994, at or about that time, ``Maggie's strong inference was 
that the White House was trying to negotiate scope of an 
independent counsel with Reno and having enormous difficulty.'' 
941 Indeed, Ms. Williams told Mr. Altman that Mrs. Clinton 
herself did not want investigators ``poking into 20 years of 
public life in Arkansas.'' 942 According to notes of 
January 11, 1994, Ms. Williams told Mr. Altman: ``On 
Whitewater, HRC was paralyzed by it. If we don't solve this 
matter within the next two days, we don't have to worry about 
her schedule on Health Care.'' 943
    David Kendall, the Clintons' personal attorney, also 
participated in the White House discussions over the 
appointment of a special counsel, including whether the 
desirability of ``attempting to impose limitations'' on the 
investigation.944 In fact, Mr. Kendall drafted the very 
letter that Mr. Nussbaum ultimately sent to the Attorney 
General Reno requesting the appointment of a special 
counsel.945
    On January 12, 1994, after the President called for a 
special counsel, Attorney General Reno appointed Robert B. 
Fiske, Jr., to conduct the investigation into ``whether any 
individuals or entities [had] committed a violation of any 
federal criminal or civil law relating to [the Clintons'] 
relationship with Madison Guaranty Savings & Loan Association, 
the Whitewater Development Corporation, or Capital Management 
Services, Inc.'' 946
            B. White House contacts with former Arkansas Securities 
                    Commissioner Beverly Bassett Schaffer
    Senior White House officials feared that Beverly Bassett 
Schaffer, the Arkansas Securities Commissioner who regulated 
Madison Guaranty in the mid-1980s, would contradict Mrs. 
Clinton's statements concerning the nature and extent of Mrs. 
Clinton's representation of Madison Guaranty before the state 
regulator--as Ms. Schaffer did in testimony before the Special 
Committee. During the January 1994 Whitewater Response Team 
meetings, for example, senior White House officials recognized 
the importance of Ms. Schaffer's ``story'' and considered 
measures to ensure that she would continue to do a ``good job'' 
telling it.947
    During the 1992 presidential campaign, Ms. Schaffer's 
regulation of Madison became an issue.948 Ms. Schaffer 
allegedly ignored evidence of the S&L's insolvency and failed 
to close down Madison Guaranty.949 News reports also 
claimed that Ms. Schaffer approved a novel proposal submitted 
by Mrs. Clinton and her law firm on behalf of Madison Guaranty 
to raise needed capital by issuing preferred stock.950
    Questions also arose about whether Mrs. Clinton improperly 
benefitted from her representation of Madison.951 Mrs. 
Clinton wrote to Ms. Schaffer on behalf of Madison Guaranty on 
the novel preferred stock issue.952 Only two weeks later, 
in a letter to Mrs. Clinton addressed, ``Dear Hillary,'' Ms. 
Schaffer approved the proposal.953 Mrs. Clinton forwarded 
Ms. Schaffers' letter of approval to James McDougal, the 
Clintons' Whitewater business partner and the owner and 
operator of Madison Guaranty.954
    These contacts between Mrs. Clinton and Ms. Schaffer, and 
Mrs. Clinton and Mr. McDougal, raised the issue of the 
propriety of the Governor's spouse attempting to influence a 
state regulator appointed by her husband on behalf of a client 
and business partner.
    Mrs. Clinton and Ms. Schaffer both denied allegations that 
Madison Guaranty had received any special treatment. The 
Clinton campaign issued statements, attributed to Mrs. Clinton, 
expressly claiming that ``she had done legal work for Madison 
Guaranty, but that it was not related to the Savings & Loan's 
dealings with state regulators.'' 955 Ms. Schaffer, with 
the assistance of the Clinton campaign, composed statements, 
including two memoranda to the New York Times, denying any 
special treatment for Madison Guaranty.956
    In October 1993, the RTC sent a criminal referral to the 
U.S. Attorney's Office in Little Rock suggesting a connection 
between the preferred stock issue and campaign contributions to 
Governor Clinton.957 The referral noted that during the 
same month that Mrs. Clinton wrote to Ms. Schaffer, several 
questionable $3,000 Madison Guaranty cashier checks were 
written to the Bill Clinton Campaign.958 The referral 
stressed that Madison's preferred stock plan was approved 
quickly, and that Madison Guaranty's request to issue preferred 
stock occurred when Madison badly needed additional 
capital.959 The referral identified both Hillary Rodham 
Clinton and Beverly Bassett Schaffer as possible witnesses to 
criminal misconduct.960
    On September 29, 1993, the White House received a ``heads 
up'' about the substance of these referrals.961 At the 
November 5, 1993 meeting at Williams & Connolly, senior White 
House officials and private attorneys for the Clintons 
discussed Mrs. Clinton's representation of Madison Guaranty 
before the Arkansas Securities Department,962 particularly 
the ``coziness'' of the relationship.963
    On December 20, 1993, the New York Times published an 
editorial, entitled ``Open up on Madison Guaranty.'' 964 
The editorial described the close relationship between the 
McDougals and the Clintons and stated: ``Others, however, are 
mildly troubled by the fact that Mr. Clinton did not order his 
regulators to crack down on Mr. McDougal even after he was 
advised by his own banking commissioner in 1983 that the 
savings & loan operator was engaged in imprudent banking 
practices.965 In the margin of the editorial, the 
President wrote: ``This is important to be on top of. Bassett 
did a good job in [campaign] on this--can she now?'' 966 
The President then forwarded copies of the editorial containing 
his handwritten marginalia to Messrs. Lindsey and 
McLarty.967
    One week later, President Clinton and Mr. Lindsey attended 
a basketball game at the University of Arkansas with Ms. 
Schaffer and her husband.968 At the game, Mr. Lindsey 
asked Mr. Schaffer if she would be willing to answer press 
inquiries ``with respect to her role and what she did and get 
that story out.'' 969 Mr. Lindsey could not recall whether 
the President participated in the conversation.970
    On January 6, 1994, senior White House officials discussed 
Ms. Schaffer's role in connection with Madison's issuance of 
preferred stock.971 Associate White House Counsel Neil 
Eggleston recalled discussions about the importance to the 
President and Mrs. Clinton of Ms. Schaffer's statements ``about 
her role'' during the mid-1980s in regulating Madison 
Guaranty.972
    The next day, January 7, senior White House officials again 
discussed Ms. Schaffer. This time, White House officials 
considered sending Mr. Lindsey, Washington lawyer Michael 
Waldman, and Paul Berry, a former roommate of President 
Clinton, ``to [Arkansas] to meet [with] Beverly Bassett.'' 
973 Mr. Waldman recalled that the officials discussed 
``sending people down to talk to'' Ms. Schaffer.974 Mr. 
Berry, a lobbyist for Union National Bank of Little Rock, had 
instructed Harry Don Denton, the Bank's loan officer, to make a 
$20,000 Whitewater loan to Bill Clinton in 1978 because he was 
``an up and coming political star;'' 975 Mr. Denton 
testified that he would not have made the loan absent Mr. 
Berry's urging.976
    At a second January 7 meeting, senior White House officials 
expressed a sense of urgency about Ms. Schaffer's story beyond 
simple concern over a misperception in the press.977 
According to Mr. Gearan's notes, Mr. Ickes exclaimed: 
``[Beverly] Bassett is so f---- important. [I]f we f--- this 
up, we're done.'' 978 Mr. Ickes added, ``[L]et's not talk 
it to death-let's just get it done.'' 979
    Mr. Ickes and Mr. Gearan both claimed that Ms. Schaffer's 
story ``was so f------ important'' because the White House did 
not want ``to misstate anything.'' 980 Neither could 
recall the meaning of Mr. Ickes' comment ``let's get it done.'' 
981 Mr. Eggelston recalled, however, that ``people 
recognize[d] that if [Ms. Schaffer] were suddenly to change 
what she had said publicly . . . and change her story about it, 
that would be a bad development.'' 982 Mr. Eggleston 
confirmed that senior White House officials were concerned that 
Ms. Schaffer would ``change'' her ``story.'' 983
    After the discussion of Ms. Schaffer's importance, the 
senior White House officials again discussed sending an 
emissary to Ms. Schaffer. 984 Although Mr. Ickes rejected 
the earlier idea to send Messrs. Berry, Waldman, and Lindsey 
because ``it will come out,'' 985 he still wanted someone 
to go over her statement ``item by item'' to ``make sure her 
story is [okay].'' 23 986
---------------------------------------------------------------------------
    \23\ Instead of sending someone connected with the White House, the 
defense team discussed sending John Tisdale, Mr. Lindsey's former law 
partner; Skip Rutherford, a 1992 Clinton presidential official who 
continued to informally assist the White House regarding public 
relations aspects of Whitewater; a New York lawyer friend of Paul 
Begala; and Jack Quinn, Chief of Staff to Vice President Gore. 
(Rutherford, 2/29/96 Dep., pp. 5-10, 21-23; White House Document 
S020577.)
---------------------------------------------------------------------------
    The senior White House officials feared that the press 
might discover that the White House had dispatched operatives 
to contact Ms. Schaffer and the appearance of impropriety. 
987 Mr. Ickes was concerned that such a contact could 
``create an appearance that there was an effort to influence 
her.'' 988
    Both Mr. Ickes and Mr. Gearan denied that a decision was 
made to send someone to see Ms. Schaffer to ``make sure her 
story is ok.'' 24 989 In the end, the White House decided 
not to ``send people who were connected with the White House to 
talk to Ms. Schaffer.'' 990 Mr. Ickes claimed: ``As far as 
I know, no one was sent from the White House to talk to Ms. 
Schaffer.'' 991
---------------------------------------------------------------------------
    \24\ Mr. Ickes notes of the Whitewater Response Team tasking 
memorandum included the task of researching whether the President used 
pressure to aid Madison Guaranty--one of the issues involving Ms. 
Schaffer's actions. (Ickes, 2/22/96, Hrg. pp. 86-87.)
---------------------------------------------------------------------------
    Within a week of the January 9, 1994 meeting, however, at 
least two attendees reached out to Ms. Schaffer. 25 
According to an Associated Press article, Ms. Schaffer resisted 
pressure from Messrs. Lindsey, Begala, and Rutherford to hold a 
press conference in 1994 concerning her contacts on Madison's 
preferred stock offering. 992
---------------------------------------------------------------------------
    \25\ In addition to contacts with persons from Arkansas, the 
Schaffers attended a movie at the White House on January 28, 1994 at 
8:30 p.m. Attendees included, among others, the President, the First 
Lady, Mr. Lindsey, and Paul Berry, a close friend and confidant of the 
President. Mr. Berry was also a close friend of the Schaffers and has 
known the Bassett family since the early 1950s. (Berry, 5/10/96, Dep. 
p. 59.)
---------------------------------------------------------------------------
    In January 1994, Ms. Schaffer spoke to John Tisdale, the 
Clintons' attorney in Little Rock, and he suggested that she 
help prepare a chronology for the White House. 993 In the 
second week of January 1994, Mr. Tisdale forwarded a series of 
memoranda to Mr. Lindsey. 994 It is unclear whether Mr. 
Lindsey had requested that these memoranda be prepared. A 
January 13, 1994 memorandum reflects communications between Mr. 
Tisdale's firm and Ms. Schaffer. 995 It includes the 
background of Ms. Schaffer's dealings with Mrs. Clinton and 
``is based on our discussions with [Ms.] Schaffer.'' 996
    Also in January 1994, Skip Rutherford, a public relations 
advisor to the White House on Whitewater-related matters, 
contacted Ms. Schaffer and her husband, Archie, to discuss the 
possibility that Ms. Schaffer might hold a press conference. 
997 Ms. Schaffer stated that while Mr. Rutherford did not 
specifically indicate he was calling on behalf of the White 
House, she was aware that Mr. Rutherford was ``helping'' Chief 
of Staff McLarty in some capacity. 998 Deputy Chief of 
Staff Ickes denied knowledge of Mr. Tisdale's or Mr. 
Rutherford's contacts with Ms. Schaffer. 999
    At the same time that White House officials were meeting 
twice daily to coordinate the Whitewater defense effort, Betsey 
Wright, the 1992 Deputy Campaign Director and longtime 
associate of the President, travelled to Little Rock from 
Washington, D.C. Although Ms. Wright testified that she went to 
Little Rock to collect documents, she claimed that she was not 
asked by anyone at the White House to travel to Little Rock. 
Rather, Ms. Wright testified that she took it upon herself to 
collect these documents.
    Ms. Wright contacted Mr. Lindsey, Mr. Podesta, and Mr. 
Kendall and informed them of her intention to travel to Little 
Rock, 1000 and that the purpose of her trip was to collect 
campaign finance records. 1001
    When asked why she went to Little Rock, Ms. Wright said, 
``I was trying to pull together--we kept getting the--the White 
House and I kept getting press questions about some campaign 
finance questions.'' 1002 Ms. Wright testified that the 
documents would be a ``handy reference'' and could be used in 
Washington to ensure that she was speaking with a higher degree 
of factual understanding. 1003
    While in Arkansas searching through the documents, which 
were under the control of the Democratic National Committee, 
she ``located a box that when I opened it up it was Whitewater 
documents, and I brought it back to DC and gave it to Mr. 
Kendall.'' 1004 Ms. Wright also retrieved and made copies 
of the appointment files for Ms. Schaffer and gave those files 
to Mr. Kendall. 1005 In total, Ms. Wright testified that 
she had thirteen or fourteen boxes of documents shipped to her 
from Little Rock. 1006
    On January 6, after locating the documents at the storage 
facility, Ms. Wright called Mr. Lindsey. 1007 On January 6 
or 7, Ms. Wright spoke with Mrs. Clinton. 1008 The First 
Lady said to Ms. Wright, ``there is going to be an independent 
or special counsel. You need to get a lawyer. And that's how 
you should handle these documents.'' 1009
            C. The Whitewater Response Team assigns defense tasks to 
                    White House officials
    Records of the January Whitewater Response Team meetings 
reflected specific tasks assigned to the various members of the 
team. 1010
    Many of these assignments focused on the possible 
appointment of a special counsel, including the legal, 
historical, and practical aspects of appointing a special 
counsel. For example, a memorandum to the ``Whitewater Group'' 
from Mr. Ickes, dated January 10, 1994, assigned ``2-3 page 
argument why no special counsel'' to the White House Counsel's 
Office and Michael Waldman. 1011 In addition, however, 
there were a number of assignments related to the factual and 
legal issues involving Whitewater. Mr. Ickes claimed that this 
was all part of the White House effort to respond to press 
inquiries, but many of the tasks involved the Clintons' private 
legal defense issues. For example, ``synopsis of Whitewater/
Madison Guaranty matter'' was assigned to the White House 
Counsel's office, Bruce Lindsey and Mr. Waldman, and ``Memo re 
failure to take deduction on tax return for Whitewater losses'' 
was assigned to Mr. Waldman. 1012 Mr. Ickes also tasked 
Mr. Waldman to contact Chris Wade, the Whitewater real estate 
agent, to obtain Whitewater documents. 26
---------------------------------------------------------------------------
    \26\ Mr. Wade produced documents to the Special Committee, but 
exercised his Fifth Amendment right against self-incrimination when the 
Special Committee sent him a subpoena ad testificandum.
---------------------------------------------------------------------------
    Finally, Mr. Ickes assigned to the White House Counsel's 
Office a legal memorandum on the statute of limitation for 
civil actions to be brought against Mrs. Clinton or the Rose 
Law Firm in relation to the legal representation of Madison 
Guaranty. Obviously, this legal memorandum did not relate to 
press inquiries nor did it relate to the White House Counsel's 
appropriate role in representing the United States Government. 
Rather, it was legal analysis to assist President and Mrs. 
Clinton. After Mr. Eggelston drafted the memorandum, Mr. Ickes 
forwarded it to Mrs. Clinton.

VI: The Retention and Investigation of Pillsbury Madison & Sutro

    In November 1993, Congress enacted the RTC Completion Act 
of 1993, 1013 which extended the statute of limitations 
period for the RTC to initiate civil suits against failed 
savings and loans to February 1994. The statute extended the 
limitations period only for claims arising from fraud, or from 
intentional misconduct resulting in unjust enrichment or in 
substantial losses to the institution. 1014
    On February 4, 1994, the RTC issued an Order of 
Investigation into potential civil claims against Madison 
Guaranty. This investigation was intended to determine whether 
the RTC could bring civil claims against ``former officers, 
directors or others who provided services to, or otherwise 
dealt with, Madison Guaranty.'' 1015
     In January 1994, the RTC's General Counsel, Ellen Kulka, 
decided that the RTC should retain outside counsel to 
investigate any potential civil claims against Madison 
Guaranty, 1016 and she selected the law firm of Pillsbury, 
Madison & Sutro (the ``Pillsbury Firm'') as outside counsel. 
1017 RTC Counsel told Ms. Kulka that Charles E. Patterson 
and Jay Stephens, former United States Attorney for the 
District of Columbia, were two of the three partners at the 
Pillsbury Firm whom they anticipated would handle the 
investigation. 1018
             A. The White House expresses concern over the retention of 
                    Jay Stephens
    By February 1994, senior White House learned that the RTC 
had hired the Pillsbury Firm and Mr. Stephens to investigate 
Madison Guaranty. On February 25, 1994, George Stephanopoulos, 
Senior Advisor to the President, and Joshua Steiner, Chief of 
Staff to Treasury Lloyd Bentsen, discussed the RTC's decision 
to hire Mr. Stephens. 1019 According to Mr. Steiner, Mr. 
Stephanopoulos was ``angry'' and raised his voice during the 
conversation. 1020 Mr. Stephanopolous told Mr. Steiner 
that Mr. Stephens should be disqualified from handling the 
matter because Mr. Stephens had been a critic of the Clinton 
Administration. 1021
    Jean Hanson, General Counsel to the Department of Treasury, 
testified that Mr. Steiner subsequently told her: ``[D]o you 
believe those guys, they want to see if they can get rid of Jay 
Stephens.'' 1022 Ms. Hanson understood that ``those guys'' 
referred to various senior White House officials. 1023 Ms. 
Hanson further testified that on a separate occasion Mr. 
Steiner expressed the view that Ms. Kulka should be fired for 
hiring Mr. Stephens. 1024

          In his diary, Mr. Steiner described his conversation 
        with Mr. Stephanopolous:
          Simply outrageous that RTC had hired him [Stephens], 
        but even more amazing when George then suggested to me 
        that we needed to find a way to get rid of him. 
        Persuaded George that firing him would be incredibly 
        stupid and improper. 1025

Subsequently, Mr. Steiner disavowed his diary entry, claiming 
that he merged two conversations in one entry. 1026
            B. Mr. Stephens is removed from the RTC investigation
    Mr. Stephens was included in Pillsbury's initial proposal 
to the RTC as one of the three partners in charge of the 
matter. 1027 During the early stages of the investigation 
in February 1994, Mr. Stephens attended meetings and was in 
daily contact with the RTC. 1028
    However, after numerous press reports describing Mr. 
Steiner's conversation with Mr. Stephanopolous appeared in the 
third week of March 1994, Mr. Stephens' role ``diminished 
substantially and probably by the summer of '94, [he] was 
virtually disengaged from the matter.'' 1029 Billing 
records of the Pillsbury Firm confirm that Mr. Stephens' work 
on the matter dropped off significantly.
    After March 1994, Mr. Stephens was told that it was no 
longer necessary for him to attend meetings with the RTC in 
Washington, D.C. 1030 In addition, the documents relating 
to the investigation were moved from the Pillsbury Firm's 
Washington D.C. office, where Mr. Stephens resided, to its West 
Coast offices in Los Angeles and San Francisco. 1031
     After March 1994, Mr. Patterson, the partner in charge of 
managing the Madison Guaranty investigation, did not assign any 
further work to Mr. Stephens. 1032 Mr. Stephens did not 
draft the reports eventually submitted to the RTC and has no 
basis for either agreeing or disagreeing with any of the 
conclusions of the reports. 1033 Mr. Stephens did not 
attend any presentations to the RTC about the findings in the 
reports. 1034 Mr. Stephens conducted no depositions and no 
witness interviews, except for one interview relating to a 
request for documents. 1035
    Mr. Patterson spoke to Mark Gabrellian, Counsel to the RTC 
Legal Division, about Mr. Stephens' diminished role, but denied 
that anyone at the RTC asked him to remove Mr. Stephens from 
the case.1036 He did, however, advise Bruce Ericson, the 
billing partner on the Madison investigation, that Ms. Kulka 
had disliked something that Mr. Stephens had said during a 
meeting. Mr. Patterson had the impression that ``there was a 
personality conflict'' between Mr. Stephens and Ms. 
Kulka.1037 Mr. Gabrellian similarly testified that Ms. 
Kulka and Mr. Stephens ``were not getting along all that 
well.'' 1038 Ms. Kulka admitted that she discussed Mr. 
Stephens with Mr. Patterson, but claimed that her only concern 
was with the quality of Mr. Stephens' work.1039
            C. The White House makes inaccurate claims about the 
                    Pillsbury report
    Although Mr. Stephens was removed from the Madison Guaranty 
investigation, the RTC still wanted Mr. Stephens to review and 
approve the final version of the reports in December 1995. Mr. 
Stephens, however, refused to do so:

          Well in fact the RTC asked me to read the reports 
        when the reports were filed in December, I declined to 
        do that because I had not been involved in the 
        engagement, I thought it was improper and inappropriate 
        for me to review those reports simply so the RTC could 
        have my imprimatur on those reports.1040

Mr. Ericson confirmed that Mr. Stephens had no involvement in 
the handling of the matter after the summer or at the latest 
fall 1994--over one year prior to the completion of the final 
reports.1041
    Moreover, on May 17, 1996, in a hearing before the Special 
Committee, Mr. Patterson and Mr. Ericson both admitted that Mr. 
Stephens did not ``head the inquiry.'' 1042 Both partners 
also agreed that statements indicating that the report was 
``written by Republican Jay Stephens'' are entirely baseless 
and inaccurate.1043 The following exchange occurred at the 
Special Committee's hearings with lawyers from the Pillsbury 
firm:

          Senator D'Amato: Let me read to you from the Chicago 
        Sun Times. . . . Dated January 21st [1996] . . . 
        Headline: Facts Fight Fiction Over Whitewater.
          Mr. Patterson: Yes.
          Senator D'Amato: What's the byline?
          Mr. Patterson: Hillary Clinton.
          Senator D'Amato: Let me take you down to the last 
        sentence in the first page. You want to start reading 
        that?
          Mr. Patterson: Would you like me to read it Senator?
          Senator D'Amato: Yes, please.
          Mr. Patterson: Since most Americans never heard about 
        this report, let me fill you in.
          Senator D'Amato: This is referring to the report that 
        your, this is the Pillsbury, Madison & Sutro report. Go 
        ahead.
          Mr. Patterson: It was conducted by the RTC by one of 
        the nation's leading law firms, Pillsbury, Madison & 
        Sutro. It took more than two years to complete and cost 
        nearly $4 million. A prominent republican, former U.S. 
        Attorney, Jay Stephens, headed the inquiry.
          Senator D'Amato: Mr. Stephens, did you head this 
        inquiry?
          Mr. Stephens: No, I did not.
          Senator D'Amato: Mr. Patterson, did he head the 
        inquiry?
          Mr. Patterson: No, he did not Senator.
          Senator D'Amato: Mr. Ericson, did he head the 
        inquiry?
          Mr. Ericson: No.1044

Indeed, after Mr. Stephens was identified in public statements 
as the author of the reports, he raised the following concern:

          On one or two occasions, I probably raised I believe 
        most likely with Mr. Ericson, some concern that I had 
        that the factual record wasn't clear or that I felt it 
        was a little inappropriate that somehow or other either 
        I was getting the credit or the blame for the reports, 
        since I hadn't written the reports.1045

However, ``the sense was the client [the RTC] did not want to 
get involved in making public statements about the firm's 
involvement.'' 1046
    Contrary to White House claims, the final report of the 
Pillsbury firm did not exonerate the Clintons. The Pillsbury 
investigation focused only on the narrow question whether it 
would be cost-effective for the RTC to bring any civil lawsuits 
against Madison to recover damages arising from the S&L's 
failure.1047 The authors of the Pillsbury report--Mr. 
Patterson and Mr. Ericson--testified that the reports do not 
exonerate anyone.1048 As Mr. Ericson put it, ``I don't 
think our reports exonerated anybody of anything.'' 1049
    After reviewing a draft of the supplemental Whitewater 
Report in November 1994,1050 Mr. Stephens told Mr. Ericson 
that the report did not consider the ``totality of the issues 
related to Madison because it was looking at Whitewater in 
isolation rather than looking at sort of the mosaic of real 
estate transactions that Madison was involved in and how 
Whitewater might tie in or relate to that.'' 1051

          I believe I made some general comment that in my 
        reading through the report that it either didn't 
        highlight or didn't focus on the potential liability 
        that might arise from a difference of equity 
        participation by the partners in the Whitewater 
        venture. . . . And in doing that, the partners still 
        maintain the same general equitable interest in the, or 
        legal interest in the partnership, and as a 
        consequence, one partner was benefitting substantially 
        by the financial contributions of the other, and that 
        there may be some issue that really raised a question 
        about liability.1052

Mr. Stephens further told Mr. Ericson the Pillsbury Firm should 
interview more witnesses who ``might have added perspective or 
input in trying to understand those transactions.'' 1053 
According to Mr. Stephens, the report was essentially ``an 
accounting analysis.'' 1054
    Pillsbury never examined many witness. Some asserted their 
Fifth Amendment right not to testify: James and Susan McDougal, 
the Clintons' Whitewater business partners, Jim Guy Tucker, 
Chris and Rosalee Wade, Whitewater real estate agents.1055 
The OIC asked Pillsbury not to interview John Latham, President 
and CEO of Madison Guaranty, or David Hale, President of 
Capital Management Services, Inc.1056
    Other witnesses who provided important testimony to the 
Special Committee, however, were simply not contacted by the 
Pillsbury firm.1057 Because of the limited scope of 
Pillsbury's representation, there were a number of areas that 
they did not explore, and therefore a number of witnesses that 
the Pillsbury Firm did not interview. For example, the 
Pillsbury Firm did not interview many of the bankers involved 
in making or extending the Whitewater loans.27
---------------------------------------------------------------------------
    \27\ Meanwhile, Frank Burge, James Patterson, and Robert Ritter, 
all of whom were Presidents of Citizen's Bank of Flippin (``Citizen's 
Bank'') at one time during the existence of the Whitewater loan, 
provided substantial testimony to the Special Committee on the initial 
Whitewater loan made by Citizen's Bank. Mr. Burge testified that the 
Clintons and the McDougals never notified Citizen's Bank that the 
$20,000 down payment on the Whitewater loan was borrowed from another 
bank, Union National Bank, and, thus, Citizen's Bank was not aware that 
the Clintons and McDougals invested no money into the original 
mortgage. (Burge, 5/8/96 Hrg. pp. 19-20.)
    Mr. Ritter testified that he had two meetings with Mrs. Clinton 
between 1979 and 1982 about the Whitewater mortgage. Mr. Ritter 
testified that Mrs. Clinton asked several questions about the loans and 
interest rates and seemed quite knowledgeable about the transaction. 
(Ritter, 5/8/96 Hrg. pp. 34-35.)
    Paul Berry and Donald Denton, Senior Vice Presidents of Union 
National Bank, also provided illuminating testimony to the Special 
Committee. Mr. Berry testified that President Clinton approached him 
about making the $20,000 loan for the down payment on the Whitewater 
property. Mr. Denton testified that either Mr. Berry, or another bank 
official, instructed him to make the $20,000 unsecured loan--against 
his better judgment. (Denton, 5/8/96 Hrg. p. 66.)
    After the discovery of the Rose Law Firm billing records in the 
White House Residence in January 1996, the FDIC Inspector General 
reexamined Mr. Denton. His memory refreshed, Mr. Denton specifically 
recalled an April 7, 1986 telephone conversation with Mrs. Clinton 
relating to Castle Grande, a sham transaction. During the conversation, 
Mr. Denton cautioned Mrs. Clinton that the transaction may pose a 
problem because they could violate an Arkansas banking regulation. 
According to Mr. Denton, Mrs. Clinton ``summarily dismissed'' Mr. 
Denton's warning. She replied in a manner he took to mean that ``he 
would take care of savings and loan matters, and she would take care of 
legal matters.'' (Denton, 6/11/96 FDIC-OIG Interview, p. 3.)
---------------------------------------------------------------------------

    Part III. White House Interference With Congressional Inquiries

I. Mr. Ickes Provided Incomplete and Inaccurate Testimony to the Senate 
        Banking Committee

    Before the Senate Banking Committee in summer 1994, Mr. 
Ickes testified that he and other senior White House officials 
did not discuss the statute of limitations for Madison-related 
civil claims prior to February 2, 1994. Documentary evidence 
obtained by the Special Committee indicates, however, that, in 
January 1994, Mr. Ickes and other White House officials were 
concerned about and discussioned when the statute of 
limitations would run on possible civil claims the RTC might 
bring against the Mrs. Clinton and the Rose Law Firm.1058
    In January 1994, considerable public interest existed in 
issues relating to Whitewater and Madison. The RTC was 
investigating possible civil claims arising from the $60 
million failure of Madison, and on January 20, 1994, a Special 
Counsel was appointed to investigate possible criminal conduct 
relating to Whitewater and Madison. The statute of limitations 
for Madison-related civil claims involving fraud or intentional 
misconduct was scheduled to expire on February 28, 1994. On 
February 12, 1994, Congress enacted Public Law 103-211, which 
extended the statute of limitations to December 31, 1995.
    Prior to the extension of the statute of limitations, the 
RTC had to decide by February 28, 1994, whether to bring suit, 
to seek tolling agreements, or to allow the statute to expire 
without action. Because President and Mrs. Clinton faced 
potential liability relating to the failure of Madison, 
information regarding the status of the RTC investigation and 
its deliberations with respect to the statute of limitations 
was valuable to the Clintons in their defense effort.1059
    During its 1994 investigation, the Senate Banking Committee 
examined the state of knowledge of White House officials in 
January 1994 with respect to the statute of limitations for 
Madison-related civil claims.1060 Mr. Ickes testified 
about a meeting on February 2, 1994, between senior White House 
officials and Roger Altman, then Deputy Secretary of the 
Treasury and Acting Chief Executive Officer of the RTC, and 
Jean Hanson, General Counsel to the Department of the 
Treasury.1061 With respect to discussions about the 
statute of limitations at that meeting, Mr. Ickes testified: 
``I, for one, had little knowledge, if any knowledge, about the 
situation.'' 1062
    Similarly, when asked by the Inspectors General of the 
Treasury Department and the RTC about this same February 2, 
1994, meeting, Mr. Ickes testified: ``Mr. Altman, as I recall, 
raised the issue of the upcoming--the possible--well, not the 
possible, but the fact that the statute of limitations, which I 
knew nothing about at the time, of the RTC in connection with 
an investigation that was apparently being conducted by the RTC 
on Madison Whitewater was about to expire.'' 1063 Mr. 
Ickes emphasized that White House officials had no knowledge of 
the statute of limitations issue: ``There were questions about 
the statute of limitations, when it expired, under what 
conditions it expired. I don't think anybody in the room other 
than Mr. Altman and Ms. Hanson had a clear picture of what the 
statute of limitations situation was.'' 1064
    Evidence uncovered by the Special Committee shows, however, 
that in January 1994, Mr. Ickes assigned and received a 
memorandum on the statute of limitations for Madison-related 
civil claims. Moreover, he discussed the issue with other 
senior White House officials prior to the February 2 meeting 
with Mr. Altman and Ms. Hanson.
    Among the evidence newly uncovered by the Special Committee 
is a memorandum to Mr. Ickes from W. Neil Eggleston, Associate 
Counsel to the President, entitled ``Statute of Limitations in 
Actions Brought by the Conservators of a Financial 
Institution.'' 1065 The memorandum, dated January 17, 
1994, discussed the statute of limitations generally applicable 
to claims filed by the RTC on behalf of failed thrift 
institutions. More important, Mr. Eggleston's memorandum 
discussed the statute of limitations as applied specifically to 
Madison and identified March 2, 1994,28 as the final date 
for the RTC to file civil tort claims on behalf of Madison, the 
type of action usually brought against outsiders in financial 
institution cases.1066
---------------------------------------------------------------------------
    \28\ Mr. Eggleston incorrectly identified March 2, 1989, as the 
date on which the statute of limitations began to run for Madison-
related civil claims. The RTC was appointed conservator of Madison on 
February 28, 1989, and actual intervention occurred on March 2, 1989. 
The statute of limitations began to run on ``the date of the 
appointment of the Corporation as conservator or receiver.'' 12 U.S.C. 
Sec. 1821(d)(14)(B)(i) (1995).
---------------------------------------------------------------------------
    On February 20, 1996, the White House produced to the 
Special Committee memoranda from Mr. Ickes to the ``Whitewater 
group,'' dated January 9 and January 10, 1994. Both memoranda, 
which recorded assignments for various White House officials on 
matters related to Whitewater, listed the following item:

          ``11. Memo re statute of limitations for civil 
        actions (counsel--assigned 1/8)'' 1067

These documents thus indicate that Mr. Ickes assigned Mr. 
Eggleston to research and write a memorandum on the statute of 
limitations issue, which Mr. Eggleston completed and submitted 
to Mr. Ickes on January 17, 1994.

    Also on February 20, 1996, the White House produced to the 
Special Committee notes taken by Mr. Ickes of a Whitewater 
meeting at the home of Vernon Jordan.1068 This meeting 
took place on January 16, 1994, proximate to Mr. Eggleston's 
memorandum to Mr. Ickes and before the February 2, 1994, 
meeting with Mr. Altman and Ms. Hanson.
    Although Mr. Ickes testified that ``I can only recall what 
I have on my notes,'' 1069 the notes indicate that the 
statute of limitations was one of three topics of discussion at 
the meeting. Those notes read in relevant part:

          ``(2) Statute of limitations
          --no allegation that Clintons have broken any law & 
        therefore
          --we don't know what civil refers to
        --always exception for fraud'' 1070
          

The documentary evidence thus contradicts Mr. Ickes' prior 
testimony that he did not discuss the statute of limitations 
issue prior to February 2, 1994.
    In addition, Mr. Ickes testified to Senate Banking 
Committee in July and August 1994 that he did not know whether 
two memoranda detailing the potential liability of the 
President and Mrs. Clinton to the RTC had been sent to Mrs. 
Clinton. The Special Committee has discovered, however, 
evidence indicating that, at about the same time of Mr. Ickes' 
testimony, his attorney, presumably based on information from 
Mr. Ickes, informed the White House Counsel's office that Mr. 
Ickes had indeed sent the memoranda to Mrs. Clinton and that 
Mrs. Clinton had asked him questions about the 
memoranda.1071

II. The White House Interfered with Treasury IG and RTC IG 
        Investigations into White House-Treasury Contacts

    On March 3, 1994, in response to the public disclosure of 
possible improper contacts between Treasury and White House 
officials concerning the RTC criminal referrals, Treasury 
Secretary Lloyd Bentsen publicly announced that he would seek 
an opinion from the Office of Government Ethics (``OGE'') about 
the propriety of those contacts.1072 When Secretary 
Bentsen contacted the OGE about conducting an investigation, 
the OGE informed him that the agency had no investigation 
capability, but could opine on the propriety of certain conduct 
if provided with the factual background.1073 The OGE 
suggested that an investigation into the relevant facts be 
conducted by the RTC's Office of Inspector General (``RTC-IG'') 
and the Treasury Department's Office of Inspector General 
(``Treasury IG'') (collectively ``IGs'').1074 Secretary 
Bentsen then requested that the IGs conduct an ``independent'' 
investigation of contacts.
    Thus, on July 1, 1994, the RTC-IG and the Treasury IG 
commenced a joint investigation of the White House-Treasury 
contacts.1075 The joint IG investigation included 
examining White House, Treasury Department and RTC officials to 
determine ``what the purpose of these contacts between the 
Treasury officials was, whether or not the purpose of the 
contact was to further some public interest or some private 
interest.'' 1076
            A. Independence of IG investigation is compromised
    On June 22, 1994, prior to the commencement of the joint IG 
investigation, James Cottos, the Assistant Treasury IG in 
charge of the investigation, expressed concerns to the Acting 
Treasury IG Robert Cesca about involvement in the investigation 
by Francine Kerner, the Treasury IG Counsel.1077 
Specifically, Mr. Cottos indicated that there might be a 
conflict because Ms. Kerner, a member of the Treasury's Office 
General Counsel (``Treasury OGC''), reported to Deputy Treasury 
General Counsel Dennis Foreman and to Treasury General Counsel 
Jean Hanson--the persons whose actions were at issue in the 
investigation.1078 Mr. Cottos believed that because Ms. 
Kerner's overall evaluation would be performed by the Treasury 
OGC's--the very office being investigated--she might have 
divided loyalties.1079
    Others involved in the investigation shared Mr. Cottos' 
concerns about Ms. Kerner's independence. Clark Blight, the 
chief investigator for the RTC-IG, testified that, ``[e]arly on 
it seemed like she was an advocate for the White House.'' 
1080 Patricia Black, Counsel to the RTC-IG, testified that 
she ``had concerns because she [Kerner] was located 
organizationally within the Office of General Counsel, and this 
was an investigation of the highest ranking members of that 
office.1081 And John Adair, the RTC Inspector General, was 
sufficiently concerned about Ms. Kerner's involvement in the 
investigation that on or around June 2, 1995, he called Acting 
Treasury IG Robert Cesca, to suggest that Ms. Kerner be removed 
from the case. Mr. Adair suggested that Ms. Black act as 
counsel for both offices.1082 Because, unlike Ms. Kerner, 
Ms. Black had no potential conflicts of interests since she was 
not in a reporting chain with anyone whose conduct was a 
subject of the investigation.
    Although Mr. Cesca refused to remove Ms. Kerner from the 
investigation, he recognized the need to insulate the 
investigation from the influence of the Treasury OGC. On June 
27, 1994, Mr. Cesca sent a memorandum to Ms. Hanson stating 
that Ms. Kerner and her staff would ``report solely to the 
Inspector General on any matters relating to the 
investigation.'' 1083 In addition, neither Ms. Kerner nor 
her staff were to ``communicate any information about the 
substance of this inquiry without specific authorization from 
the Inspector General.'' 1084 Assistant Treasury IG James 
Cottos was not satisfied, however, that the terms of the June 
27, 1994 memorandum would protect against actual or perceived 
conflicts of interest related to Ms. Kerner's participation in 
the investigation, because her overall evaluation ``would still 
be done by the general counsel's office.'' 1085
    Mr. Cottos became even more concerned about Ms. Kerner's 
participation in the investigation when he learned that during 
the course of ``three or four'' witness interviews, attorneys 
for witnesses told the IG investigators that they had reached 
agreements with Ms. Kerner limiting the scope of 
interviews.1086
    Ms. Kerner's interaction with witnesses' attorneys raised 
questions. For example, on July 11, 1994, at 10:44 p.m. the 
night before the deposition of Treasury Chief of Staff Joshua 
Steiner, a central figure in the investigation, Ms. Kerner sent 
an e-mail to Mr. Cottos with proposed questions for the 
interview.1087 Ms. Kerner was scheduled to meet with Mr. 
Steiner's attorney, Reid Weingarten, 15 minutes later, at 11:00 
p.m. that same night.1088 Ms. Kerner did not specifically 
recall meeting with Mr. Weingarten on the night of July 11th, 
but she testified that she did have two meetings with 
him.1089 Ms. Kerner could not explain why she met with Mr. 
Weingarten at 11:00 p.m. the night before Mr. Steiner's 
deposition.
    Mr. Cottos knew that Ms. Kerner had met with Mr. Steiner's 
attorney but he was not aware that she had met with him after 
she had suggested deposition questions to him by e-mail. When 
he was informed about the timing of the meeting, Mr. Cesca 
admitted that if she had met with Mr. Weingarten shortly after 
sending the e-mail, ``there is a perception that there could be 
a compromise.'' 1090
    Meanwhile, on June 30, 1994, the Assistant Treasury IG 
James Cottos, Chief Investigator for RTC-IG Clark Blight and 
their respective investigative staffs learned that Treasury OGC 
officials wanted to obtain copies of witness interview 
transcripts to assist in preparing Treasury witnesses prepare 
for upcoming congressional hearings. According to Mr. Blight, 
there was ``a general agreement on the investigative side that 
the transcripts would be kept with the investigators, would not 
be released. And that it is my recollection that Cottos was 
supportive of that.'' 1091
    Despite this agreement the Treasury OGC began to receive 
deposition transcripts form Ms. Kerner in early July. According 
to Assistant General Counsel Kenneth Schmalzbach, Ms. Kerner 
provided deposition transcripts to him sometime between July 8, 
1994 and July 13, 1994.1092
    This exchange took place even though Mr. Schmalzbach and 
Ms. Kerner both knew that the June 27, 1994 memorandum had 
erected a ``wall'' with respect to Ms. Kerner's communication 
to the Treasury OGC.1093 According to Mr. Cottos, Ms. 
Kerner was not supposed to communicate with members of the 
Treasury OGC about the transcripts.1094.
    Because the transcripts contained information about the 
``substance'' of the investigation, this transfer of 
information from Ms. Kerner to Treasury OGC directly violated 
the terms of the June 27 memorandum. According to RTC-IG John 
Adair, the transcripts contained 90% of the substance of the 
investigation 1095, including sensitive information about 
the ongoing investigation.1096
    Ms. Kerner made this prohibited exchange of confidential 
RTC information without asking any of the other investigators, 
including Acting Treasury Inspector General Cesca, who only 
learned that the transcripts were forwarded to the Treasury OGC 
on July 18, 1994, when Ms. Kerner transferred the transcripts 
to Mr. Schmalzbach.1097 Mr. Cottos similarly was not 
informed about the transfer until July 18.1098 Neither Mr. 
Cottos nor Mr. Cesca recalled any conversation with Ms. Kerner 
about transferring transcripts to the Treasury OGC prior to 
July 18,1099 and Mr. Cottos testified that he had objected 
to providing any transcripts to the Treasury OGC.1100 This 
transfer violated the terms of the June 27th memorandum.
    Members of the RTC-IG's office working on this ``joint'' 
and ``independent'' investigation were not consulted about Ms. 
Kerner's surrender of the confidential deposition transcripts 
to Ms. Hanson's staff.1101 The RTC-IG was not told about 
the transfer of the transcripts to the Treasury OGC until they 
were delivered.1102 In fact, RTC-IG John Adair had a 
conversation with Ms. Kerner on July 19, 1994 and she failed to 
mention the previous day's release of the transcripts to the 
Treasury OGC.1103 Mr. Blight, Chief Investigator for the 
RTC-IG, was surprised that the Treasury OGC had received copies 
of the transcripts, because he thought that the investigative 
staffs had agreed during the June 30, 1994 meeting that 
``nothing would be released until we had a final report.'' 
1104 According to Ms. Black, transferring transcripts to 
the office that was under investigation violated standard 
investigatory procedures 1105: ``One the investigation was 
not complete and as everybody has said, was still open, and the 
second concern that I had was that the transcripts had 
privileged information in them . . . information concerning the 
underlying RTC criminal investigation.'' 1106
    Mr. Schmalzbach and other members of the Treasury OGC 
prepared Treasury Secretary Bentsen and other Treasury 
witnesses, including Mr. Altman and Ms. Hanson, for 
Congressional testimony.1107 Mr. Schmalzbach first gained 
access to Ms. Hanson's deposition transcript ``sometime after 
July 8 but before July 13.'' 1108 The Senate Banking 
Committee deposed Ms. Hanson on July 14, 16 and 17, 1994.
    Mr. Schmalzbach admitted that he attempted to obtain 
information from the IGs' investigation and fact finding, and 
to provide that information to the Treasury witnesses so they 
could prepare for Congressional testimony.1109 He further 
admitted that he knew Mr. Foreman and Ms. Hanson were to be 
``walled off,'' but believed he could use the transcripts to 
prepare Mr. Foreman and Ms. Hanson without advising them of the 
source of his information.1110 Mr. Altman's testimony as 
to whether he was told that President Clinton was upset about 
the manner of his recusal changed between the time of his 
deposition and his hearing testimony.1111
    The supposedly ``independent report'' submitted by the IGs 
to the OGE was edited by Treasury OGC. On July 22, 1995, Acting 
Treasury Inspector General Cesca sent an initial draft of the 
joint IG report--the report that would provide the factual 
basis for the OGE opinion--to Treasury Secretary 
Bentsen.1112
    During the drafting process, Mr. Cottos identified signs of 
bias on the part of Ms. Kerner toward the investigation of Ms. 
Hanson and others in the Treasury OGC.51113 Ms. Kerner edited 
the draft IGs report.1114 Mr. Cottos felt that Ms. 
Kerner's proposed edits ``were slanting the facts or attempting 
to slant the facts that we had gathered in the initial draft.'' 
1115 Mr. Cottos explained to Ms. Kerner ``that we were not 
the Jean Hanson defense team.'' 1116 After the OGC 
obtained a draft of the IGs report, Stephen McHale, Deputy 
Assistant General Counsel, and two other OGC members sent 
suggested changes to Ms. Kerner,1117 and she then sent 
them to the IGs.1118
    The suggested edits of the Treasury OGC were offered at a 
drafting session held by the IGs on July 28, 1995.1119 Ms. 
Kerner claimed that at the meeting she identified these as 
``some suggested edits from Mr. Schmalzbach's office.'' 
1120 According to Mr. Cottos, Ms. Kerner did not state 
that the suggestions were made by the OGC, but rather that the 
suggested changes were her own.1121
    Counsel to the RTC-IG Black was disturbed when she learned 
what had happened because, ``again information had gone outside 
the investigation.'' Ms. Black stated that the IGs do not 
normally give a report to a general counsel's office for 
commentary.1122
    Treasury Secretary Bentsen was not aware that members of 
the Treasury OGC took advance copies of the transcripts or the 
draft report, or made substantive changes to the draft report 
that the IGs sent to the OGE.1123
    At the July 28 meeting, the IGs also agreed that, although 
the transcripts would be appended to the final report submitted 
to the OGE, all confidential information concerning the RTC 
criminal referrals would be redacted.1124 During the 
meeting, Ms. Kerner left twice to call Mr. Schmalzbach to 
inform him that the RTC-IG was insisting that the transcripts 
be redacted before any public release.
    Ms. Kerner also called Mr. Schmalzbach to warn him that Ms. 
Kulka, General Counsel to the RTC, was threatening to testify 
that the investigation had come under the sway of the Treasury 
Secretary's office. In an e-mail to Edward Knight, Secretary 
Bentsen's Executive Secretary, at 10:44 a.m. on July 28, Mr. 
Schmalzbach reported:

          I just heard from IG Counsel Francine Kerner, who is 
        meeting with RTC IG people to determine final changes 
        in the IG's chronology. At 11:30, that group will meet 
        with Ellen Kulka, who is expected to argue that the 
        transcripts of the IG's interviews should not be 
        released at all with the IG's report . . . Accordingly 
        you need to place the call to Jack Ryan, the deputy CEO 
        at RTC, and not to Jack Adair . . . You also need to be 
        aware of a piece of background. Counsel to RTC's IG, 
        Pat Black, is telling the morning's gathering of the IG 
        people working on the report that if Kulka fails to win 
        on the issue of not making the transcripts public, she 
        is prepared to testify at the hearings that the IGs 
        group has been under the sway of the Secretary in 
        performing their investigation.1125

    Ms. Kerner admitted that Ms. Black advised her of Ms. 
Kulka's threat to reveal that the joint IG investigation was 
under the Treasury Secretary's sway, but she claimed that she 
did not recall contacting Mr. Schmalzbach to warn him.1126
            B. Confidential information is provided to the White House
    Meanwhile, President Clinton named Lloyd Cutler as Special 
Counsel to the President to replace Bernard Nussbaum, who had 
resigned from the position of White House Counsel. The 
President and White House Chief of Staff Mack McLarty 
instructed Mr. Cutler to conduct an internal investigation of 
the propriety of the conduct of White House personnel in 
connection with the White House-Treasury contacts. 1127
    On June 21, 1994, Secretary Bentsen met with Mr. Cutler and 
agreed to share information gathered during the joint IG 
investigation with the White House. 1128 Mr. Cutler 
indicated to Treasury Secretary Bentsen that the White House 
would like to obtain all of the IGs' interview transcripts, not 
just the transcripts of witnesses that the White House did not 
interview. 1129 Mr. Cutler would coordinate the exchange 
of transcripts through Mr. Knight or by other members of Mr. 
Cutler's staff with Treasury Secretary Bentsen's staff. 
1130 Although Secretary Bentsen admitted that he had 
ordered the investigation to be under the control of the IGs, 
he had two or three meetings with Mr. Cutler about providing 
transcripts, and he ``assured'' Mr. Cutler that the Treasury 
would provide the transcripts to the White House in an 
expedited manner. 1131
    Mr. Knight testified that he was not aware that Mr. Cutler 
made a request to Secretary Bentsen to receive copies of the 
transcripts. 1132 Mr. Knight specifically stated that ``as 
far as requests [for transcripts] coming to me or the 
Secretary, I am aware of none.'' 1133 Mr. Knight also 
denied that he had any discussions with anyone in the White 
House Counsel's Office about the transcripts in July of 1994. 
1134 He went as far to say that, ``I think I have a fairly 
good recollection of when I talked to the counsel to the 
President of the United States. I have no recollection of 
talking to him during the month of July. Absolutely none.'' 
1135
    Mr. Knight's testimony, however, was contradicted both by 
the documentary evidence and the testimony of Mr. Cutler. 
29 When asked about a July 5, 1994 meeting between the 
White House Counsel's Office, OGE, RTC-IG and Treasury IG--a 
meeting at which White House Special Associate Counsel Jane 
Sherburne asked to receive copies of the transcripts and was 
rebuffed--Mr. Cutler stated: ``I remember calling Mr. Knight on 
a number of occasions in this time period on the issue of when 
we were going to receive the transcripts.'' 1136 Mr. 
Cutler's calendar indicated that on July 6, 1994 he met with 
Mr. Knight and Treasury Assistant General Counsel Robert 
McNamara. Mr. Cutler recalled that the meeting involved a 
discussion of the White House's ``need to get transcripts and 
the fact that we had an understanding to that effect.'' 
1137 Mr. Cutler stated that the meeting resulted from a 
previous conversation he had with Mr. Knight about the RTC's 
objection to providing transcripts to the White House. 
1138
---------------------------------------------------------------------------
    \29\  Phone logs kept by Mr. Cutler's office indicate that Mr. 
Knight called Mr. Cutler on July 15, 1994 and that Mr. Cutler spoke 
with Mr. Knight on July 18, July 20, July 21 and July 22. (White House 
Documents S007922, S007923, S007924, S007928 and S007929.)
---------------------------------------------------------------------------
    Mr. Cutler stated that his plan in conducting the White 
House investigation rested on the Treasury's stated willingness 
to provide its deposition transcripts. Indeed, by early July, 
officials in the White House Counsel's Office decided not to 
interview certain witnesses because they would obtain 
transcripts of those witnesses' depositions from Treasury. 
1139
    When asked about any restrictions that may have been put on 
the use of the transcripts at the beginning of the 
investigation, Mr. Cutler once again referred to substantive 
conversations he had with Mr. Knight: ``My recollection is I 
had discussions with Mr. Knight about the timing of when we 
would receive the transcripts in which he indicated to me that 
there were some objections from within the Treasury at lower 
levels as to delivering us the transcripts on a seriatim basis. 
1140 Mr. Cutler testified that at the time he began the 
White House internal investigation in early July, he understood 
that there was an agreement that the White House would be 
getting all the transcripts of the all the IGs depositions. 
1141
    Secretary Bentsen did not recall whether he consulted 
either the RTC-IG Adair or the Acting Treasury IG Cesca about 
his decision to release the transcripts. 1142 Mr. Cesca 
testified that he was not aware that Secretary Bentsen had 
agreed to provide the White House with the confidential 
transcripts. 1143
    During the July 5, 1994, Ms. Black told Ms. Sherburne that 
the White House could not have the transcripts. 30 1144 
Ms. Black explained that ``we were adamantly opposed to the 
transcripts going outside of the investigatory circle.'' 
1145 Ms. Black testified that handing over the transcripts 
to either the Treasury OGC or the White House would have 
``violated our processes, it was not a normal investigative 
technique and of course, it can affect other witnesses' 
testimonies if they know what other witnesses have said.'' 
1146
---------------------------------------------------------------------------
    \30\ In addition, Ms. Sherburne first requested that White House 
attorneys be able to sit in on OIG depositions. Ms. Black strongly 
opposed this suggestion, because she wanted to keep the investigation 
independent, and she stated, ``if we agreed to have them (the White 
House Counsel) sitting in on the interviews, that would be contrary to 
our standard method of conducting investigations.'' (Black, 10/12/95 
Dep. 77.) Ms. Black stated that ``although we conduct all 
investigations by the book, this one, above all other investigations, 
had to be conducted by the book in order to give any validity to 
whatever we found. (Black, 10/12/95 Dep. p. 62.)
---------------------------------------------------------------------------
    Mr. Cottos expressed similar concerns stating, ``I objected 
from the beginning about transcripts being given to anyone.'' 
1147 He worried about ``other witnesses being able to read 
someone's testimony and possibly tailoring their own'' 
testimony before the Senate Banking Committee.1148
    Ms. Black informed RTC Inspector General Jack Adair that 
the White House made a request for transcripts, and that Ms. 
Sherburne's request had been rebuffed. Mr. Adair believed that 
the issue had been settled.1149 Neither Mr. Adair nor Ms. 
Black were consulted prior to the surrender of the transcripts 
to the White House.1150
    On July 18, 1994, Ms. Kerner sent Mr. Cottos an e-mail 
informing him that Ms. Sherburne had requested again to see 
IGs' transcripts to determine ``whether there are 
inconsistencies with White House interviews.'' 1151 On 
July 19, Mr. Cottos stated his opposition to Ms. Sherburne's 
request, and noted that, if anything, the IGs should be given 
copies of the White House's interviews.1152 Thus, as of at 
least July 19, 1995, Ms. Kerner was on notice that Mr. Cottos 
opposed providing the White House with deposition transcripts.
    Nevertheless, on July 23, 1994, Treasury OGC delivered 
copies of IG transcripts to members of the White House 
Counsel's Office.1153 On July 23, 1994, Mr. McHale of 
Treasury OGC sent a transmittal letter to Ms. Sherburne that 
documented that the Treasury OGC provided the White House 
copies of transcripts of depositions taken by the IGs' 
investigators. pursuant to certain restrictions placed on the 
use of the transcripts.1154 These transcripts contained 
confidential information related to the RTC criminal 
investigation of Madison Guaranty.1155
    Secretary Bentsen testified that he ``made the final 
judgment'' to send the transcripts to the White House.1156
    Acting Treasury IG Cesca, testified that on July 23, 1994, 
he learned that Mr. Cutler had requested the transcripts, and 
that this request came to him via the Treasury Secretary's 
office.1157 Mr. Cesca decided that it was not appropriate 
to release the transcripts to the White House. As he put it, 
``[m]y concern centered around the fact that that was the 
essence of what we were investigating'' 1158 and would 
raise the ``same issue that we were investigating in terms of 
contacts between the Treasury and the White House.'' 1159
    Shortly thereafter, Mr. Cesca had a conference call with 
Ms. Kerner and Mr. McHale, who told him that Mr. Knight had 
called to inform him of ``the [Treasury] Secretary's desire to 
release the transcripts to Lloyd Cutler.'' 1160 Following 
this conversation, Mr. Cesca agreed to release the transcripts 
with certain restrictions.1161
    Whether or not the Acting Treasury IG's approval was needed 
is unclear in light of the testimony given by Mr. Cutler and 
Treasury Secretary Bentsen that they had already reached an 
agreement that the White House would receive the transcripts. 
According to Mr. Knight, he did not know about the agreement to 
provide the transcripts until November 7, 1995,1162 the 
day before his testimony before the Special Committee. Mr. 
Knight claimed that he was approached by the Acting Treasury IG 
to ask Secretary Bentsen's opinion as to whether the 
transcripts should be released,1163 and that the Secretary 
then told him that he thought it would be reasonable to 
cooperate with Mr. Cutler.1164
    Although Mr. Cottos was the Treasury IG investigator 
responsible for investigation, and despite his previous 
objections to releasing the transcripts, he was not told about 
the transfer until two days after it occurred.1165 Mr. 
Cottos was ``not very happy about'' the transfer, and asked why 
he had not been consulted.1166 Mr. Cottos was still of the 
opinion that the transcripts should not have been released to 
anyone outside the investigation, ``whether it be the White 
House, the Secretary, anyone else.'' 1167
    The RTC-IG officials testified that they were ``shocked'' 
when they learned that the transcripts had been turned over to 
the White House.1168 Ms. Black was ``astounded'' and 
``angry'' when she was told of the transfer.1169 According 
to Ms. Black:

          We had vehemently objected to that, and it was done 
        over our expressed objections without any consultation. 
        And this was--again, to go back to the fundamentals, 
        this was an investigation that we were doing into 
        Treasury's leak of information to the White House, and 
        they had done it again.1170

Similarly, Mr. Blight was ``shocked that it happened . . . It 
is not something you do . . . The investigation was still open. 
I mean the investigation was about the Treasury giving 
information to the White House, and here it goes again, the 
same thing.'' 1171 Mr. Adair emphasized that it was not 
appropriate for the White House to seek access to unredacted 
transcripts because the ``unredacted transcripts contained 
information about the criminal referrals, which basically was 
the reason we were conducting the investigation in the first 
place, to see whether any of that information had been provided 
by Treasury to the White House.'' 1172
    The transmittal letter accompanying the transcripts 
contained the stipulation that the transcripts ``are being 
provided solely to assist you in the preparation for Mr. 
Cutler's testimony before the House and Senate Banking 
Committees.'' 1173 But, according to a May 8, 1995 
Associated Press story, Mr. Cutler used the confidential 
transcripts to brief witnesses at the White House prior to 
their testimony before the House and Senate Banking 
Committees.1174 The article revealed that Mr Cutler stated 
that he would ``confront'' witnesses about discrepancies in 
their testimony, but denied that he would tell witnesses where 
he got his information; Mr. Cutler was quoted as saying, ``I 
think it was perfectly appropriate to say that `this is your 
testimony to us. There is conflicting testimony. Are you sure 
that's what you said?' '' 1175.
    Before the Special Committee, Mr. Cutler initially tried to 
distance himself from the comments attributed to him in the 
Associated Press story. He stated that despite the suggestion 
in the May 8 article that the White House used the information 
they learned from the transcripts to prepare witnesses before 
they appeared before the Senate Banking Committee, they ``did 
not do so.'' 1176 But Mr. Cutler ultimately admitted that, 
``[w]e had the information from the transcripts in our heads 
and all we did was to say there may be some conflicting 
testimony, are you sure of what you've told us?'' 1177 In 
addition, the transcripts were used in preparing a report that 
was shown during a July 24, 1994 meeting at the White House for 
the private lawyers for the White House witnesses. The report 
contained a White House ``version'' of the events.1178
    The Treasury OGC also transmitted summaries of deposition 
transcripts 31 to the White House.1179 Inexplicably, 
these summaries were sent without a transmittal 
letter.1180 Mr. McHale, who supervised the preparation of 
the summaries,1181 did not know how the summaries were 
sent to the White House.1182 Four other Treasury 
witnesses--Mr. Knight, Mr. Schmalzbach, Mr. McHale and Mr. 
Dougherty--also did not know.1183 Mr. Dougherty, an OGC 
attorney, denied that he delivered the summaries to the White 
House, stating, ``I have no recollection of ever providing any 
summaries to anyone.'' 1184
---------------------------------------------------------------------------
    \31\ The summaries were prepared when the OGC knew that the IG 
objected to the transfer of transcripts. (Dougherty, 11/8/95 Hrg/. p. 
156.) Mr. Cottos testified that he had not been consulted about the 
propriety of the summaries. (Cottos, 11/8/95 Hrg. p. 29.) Not 
surprisingly, Ms. Kerner was aware that Mr. McHale and others in the 
OGC, were working on the summaries, and was actually given a copy of 
them. (Kerner, 11/8/95 Hrg. p. 29.) Sarah Jones, a Tres. OGC attorney 
who worked on the team that summarized the transcripts, reported 
directly to John Bowman, Jean Hanson's Assistant General Counsel for 
Banking and Finance. (Dougherty, 11/6/95 Dep. p. 27.) Mr. Bowman was 
also a fact witness in the investigation.
---------------------------------------------------------------------------
    In a July 27, 1994 memo to Ms. Sherburne, Sharon Conaway, 
an attorney in the White House Counsel's Office, described a 
conversation she had with Mr. Dougherty. Ms. Conaway wrote that 
Mr. Dougherty ``gave me summaries of the transcripts he did not 
realize we did not have and told me that the transcripts could 
be given to witnesses and their counsel.'' 1185 Mr. 
Dougherty did not recall saying that to Ms. Conaway.1186 
Ms. Sherburne testified that:

          On July 27th, 1994, I asked Sharon Conaway, a lawyer 
        on our team, to ask Treasury whether it had lifted its 
        condition on our use of the IG transcripts so that we 
        could send the transcripts of Mr. Katsanos's IG 
        testimony to counsel for Ms. Caputo (Mrs. Clinton's 
        press secretary). I recall that Ms. Conaway informed me 
        that she spoke with David Dougherty, a lawyer in the 
        general counsel's office at Treasury. He advised her 
        that Treasury had not lifted the restrictions on the 
        transcripts themselves, but she told me that Treasury 
        had a form of summary that it evidently believed did 
        not raise the same concerns that caused it to restrict 
        the use of the underlying transcripts. And that there 
        accordingly were no restrictions on the dissemination 
        of these summaries. Ms. Conaway told me that Dougherty 
        offered to give these summaries to our review team, and 
        that he did so. She also told me based on Mr. 
        Dougherty's advice, she sent the summary of Katsanos's 
        IG deposition to Ms. Caputo's lawyer.1187

    Ms. Sherburne claimed that the White House received the 
summaries with the understanding that they were 
unrestricted.1188 Secretary Bentsen testified, however, 
that the summaries should have been subject to the same 
restrictions that applied to the transcripts.1189 That is, 
they could ``be used only by his [Mr. Cutler's] staff and only 
for his testimony before the committee.'' 1190
    At least one deposition summary was sent directly to 
William Taylor, an attorney for a White House witness, Lisa 
Caputo, the Press Secretary to the First Lady.1191 The 
transfer of transcripts to the lawyers for one of the White 
House officials directly violated the restrictions contained in 
the July 23 transmittal letter, which prohibited the White 
House from disclosing the transcripts ``to individuals (other 
than Mr. Cutler) who may be called as witnesses by either 
Committee. Similarly, you have agreed not to disclose these 
transcripts to counsel for any such individuals.'' 1192
    During the 1994 Congressional hearings, held on the 
propriety of White House-Treasury contacts, Mr. Cutler also 
relied on the OGE opinion as evidence that no White House 
personnel had engaged in improper conduct.1193 Mr. Cutler 
represented to the Senate Banking Committee on August 4, 1994 
that he had found no evidence of wrongdoing, and he said that 
the OGE had ``informally concurred'' with his conclusion that 
``no violation of any ethical standard . . . occurred.'' 
1194
    According to Stephen Potts, the Director of OGE, the OGE 
``did not do an analysis of the conduct of White House 
officials as to whether or not they violated the code of 
conduct.'' 1195 In a November 8, 1995 letter, Mr. Potts 
confirmed that the ``OGE did not `informally concur' in Mr. 
Cutler's conclusion that no violation of ethical standards 
occurred by any White House official.'' 1196 Another OGE 
official, Jane Ley also testified that, ``we didn't make any 
conclusions about the conduct of individuals in the White 
House.'' 1197
    When confronted with Mr. Potts' statements that the OGE had 
not ``informally concurred'' with Mr. Cutler's findings that no 
White House officials had violated any ethical standards, Mr. 
Cutler admitted:

          Now, I may have gone too far when I testified before 
        this Committee on August the 5th . . .. When I said 
        that the Office of Government Ethics has informally 
        concurred that they don't think any White House 
        official has violated these ethical standards.1198 
        32
---------------------------------------------------------------------------
    \32\ On May 20, 1996, more than six months after he testified 
before the Special Committee, Mr. Cutler provided the Special Committee 
with a letter in which he sought to recast the sworn testimony that he 
gave on both August 5, 1995, before the Senate Banking Committee, and 
on November 9, 1995, before the Special Committee.

    When he was directly questioned about the inconsistencies 
between his August statements, and the assertions made by the 
OGE in November 8, 1995, letter, Mr. Cutler again admitted he 
may have ``transgressed.33 ''
---------------------------------------------------------------------------
    \33\ Chairman D'Amato: ``I suggest to you that, when you come as 
the White House counsel and you say that informally that we have been--
we being the White House--White House officials have the blessing of 
the Office of Government Ethics as it relates to no violations of any 
ethical standards occurred, and thereafter every--just about every 
White House official comes in and waves it, that was just not accurate.
    Mr. Cutler: What I said in my testimony before you on August the 
5th was that the OGE had reviewed the factual findings of the Treasury 
Inspector General and issued its formal opinion concurring that no 
violation of any ethical standard--these are the so-called standards of 
ethical conduct for the executive branch--occurred by any current 
Treasury or RTC official. Then I said, I have reached the same 
conclusions as to White House officials, and based on the facts as I 
reported to them to this nonpartisan Office of Government Ethics, that 
office has informally concurred. Now that may have been where I 
transgressed. (Cutler, 11/9/95 Hrg. pp. 33-34.)
---------------------------------------------------------------------------

III. White House Interfered with the Special Committee's 1995-96 
        Investigation

    On January 5, 1994, in the midst of White House discussions 
over the appointment of a special counsel, James Hamilton 
advised President Clinton:

          The White House should say as little and produce as 
        few documents as possible to the Press. Statements and 
        documents likely will be incomplete or inconclusive, 
        and could just fuel the fires.1199

Clearly, senior White House officials followed Mr. Hamilton's 
advice in producing documents to the Special Committee.
    On June 2, 1995, the Special Committee sent its first 
request for documents to the White House. Documents continued 
to trickle in from the White House until as late as May 11, 
1996. Some agencies, notably the RTC and the Justice 
Department, should be applauded for their efforts to produce 
documents. The RTC produced more documents than any agency and 
did so in a timely manner. Unfortunately, the White House and 
various persons associated with the White House were not nearly 
as forthcoming in producing their documents. The Special 
Committee was forced to engage in protracted efforts to obtain 
documents. Even worse, documents often were produced months 
after they were first requested or subpoenaed.
            A. The refusal of William Kennedy to comply with the 
                    Special Committee's subpoena for his notes of the 
                    November 5, 1993 White House defense meeting
    In response to a subpoena from the Special Committee on 
October 26, 1995, commanding the production of all documents in 
the White House's custody or control related to Whitewater, 
Madison Guaranty, CMS and related matters, the White House 
advised the Special Committee on November 2, 1995, that it 
would not produce a number of responsive documents on the 
grounds of privilege. The withheld documents included notes 
taken by former Associate Counsel to the President William 
Kennedy at an important November 5, 1993 meeting of White House 
officials and the Clintons' private attorneys concerning 
Whitewater and Madison Guaranty.
    On December 5, 1995, Mr. Kennedy, citing the attorney-
client privilege, refused to answer the Special Committee's 
questions about the substance of meetings.1200
    On December 8, 1995, the Special Committee issued a 
subpoena duces tecum to Mr. Kennedy directing him to 
``[p]roduce any and all documents, including but not limited 
to, notes, transcripts, memoranda, or recordings, reflecting, 
referring or relating to a November 5, 1993 meeting attended by 
William Kennedy at the offices of Williams & Connolly.'' Mr. 
Kennedy refused to comply with the Special Committee's 
subpoena. On December 14, 1995, after careful consideration, 
the Chairman overruled the objections to the subpoena, and the 
Special Committee voted to order Mr. Kennedy to produce the 
responsive documents by 9:00 a.m. on December 15, 1995. After 
Mr. Kennedy failed to comply with this order and after 
unsuccessful efforts to reach agreement with the White House, 
the Special Committee voted on December 15, 1995, to report the 
matter to the Senate.1201
    On December 20, 1995, the full Senate adopted Senate 
Resolution 199, directing the Senate Legal Counsel to initiate 
a civil action in federal District Court pursuant to 28 U.S.C. 
Sec. 1365 (1994), for an order requiring the witness to produce 
the subpoenaed documents. If the district court determines that 
the witness has no valid reason to withhold the subpoenaed 
documents, the court would direct the witness to produce them. 
If a witness disobeys that order, the witness could be found in 
contempt of court. The district court, in its discretion, could 
order sanctions against the witness to induce compliance with 
its order to produce the documents.
    On December 22, 1995, before the Senate Legal Counsel 
commenced a civil contempt proceeding, the White House reversed 
course, and Mr. Kennedy produced his notes to the Committee. 
The notes were highly relevant to the Committee's 
investigation. They provided evidence that confidential 
information, which the White House had inappropriately gathered 
from various agencies investigating Whitewater and Madison, was 
passed to the private lawyers representing President and Mrs. 
Clinton to assist their personal legal defense. Although the 
White House claimed that certain confidential RTC information 
contained in the notes had also been reproduced in the press, 
the White House had information from Treasury officials with 
which to judge whether those press accounts were, in fact, 
accurate. Beyond this, the notes contained details that 
identified additional investigative avenues for the Committee.
            B. White House delays in producing highly relevant 
                    documents to the Special Committee
    On January 29, 1996 the White House produced the notes of 
White House Director of Communications Mark Gearan from 
meetings of the Whitewater defense team in January 
1994.1202 These notes were relevant to inquiries by the 
Banking Committee during its hearings in 1994 as well as the 
inquiries of the Inspectors General from the Department of 
Treasury and the RTC. When asked to explain the sudden 
appearance of these notes, Mr. Gearan stated that the notes 
``were inadvertently moved to the Peace Corps with other 
personal effects in boxes.'' 1203 The White House 
Counsel's Office had told Mr. Gearan that they would take 
responsibility for document production from his White House 
files.1204
    In October 1993, Mr. Gearan learned that the notes were 
removed from the White House and instructed an assistant to 
return these notes to the White House.1205 For reasons 
unknown, the notes were not returned:

          The next point in time where this came to my 
        attention was at the end of January, January 31st, I 
        believe, where there was--in conversations with my 
        counsel, who had been talking to the White House 
        counsel, they had indicated to my counsel that they 
        were having difficulty finding my files at the White 
        House, which of course we found surprising, at which 
        point I went back to the area where they were stored 
        and found that the had not been returned as I had 
        thought. So, I called counsel and we immediately 
        returned them to the White House counsel.1206

Mr. Gearan came across the notes while going through his 
personal effects looking for pictures and other materials to 
put on his walls at the Peace Corps.1207 The White House 
eventually produced the notes to the Special Committee on 
January 29, 1996 and February 7, 1996.
    As a result of reviewing Mr. Gearan's notes, the Special 
Committee questioned several witnesses. At least two of the 
witnesses, Mr. Lindsey and Mrs. Schaffer, had appeared before 
the Special Committee just weeks prior to the production of Mr. 
Gearan's notes.
    On February 13, 1996, the White House produced important 
documents from the files of Mr. Waldman, Special Assistant to 
the President. Mr. Waldman claimed that he discovered these 
documents in his office in a file marked ``WWDC''--Whitewater 
Development Corporation--in the course of an office 
move.1208 It is unclear why, if Mr. Waldman or the White 
House had conducted a proper search for documents, documents 
from a file marked ``WWDC'' were overlooked.
    Then, on February 20, 1996, the White House produced 
documents prepared by Mr. Ickes in January 1994. In an 
explanatory letter for this production, the White House wrote 
that ``two of the documents among this material had been 
provided by Mr. Ickes to the Counsel's Office in March of 1994. 
Unfortunately, in the course of our review, we mistakenly 
overlooked them . . . As to the remainder of the material 
produced today, all from the early 1994 period, Mr. Ickes was 
under the mistaken belief that this material had been provided 
to the Counsel's Office and his private counsel in March of 
1994.'' 1209
    Finally, on March 1, 1996, the day after funding for the 
Special Committee expired under S. Res. 120, Bruce Lindsey, 
Deputy Counsel to the President, produced notes concerning the 
November 5, 1993 Whitewater defense team meeting and other 
responsive documents. The transmittal for Mr. Lindsey's notes 
stated cryptically that the documents ``inadvertantly were not 
produced to you or the White House Counsel's office.'' 
1210

               Part IV. The Rose Law Firm Billing Records

    Late in the afternoon on Friday, January 5, 1996, a 
messenger delivered a large, yellow manila envelope to the 
Special Committee. Inside were 114 pages of documents, most 
measuring 11 by 17 inches, accompanied by a letter from David 
Kendall, lawyer for the Clintons. Mr. Kendall wrote: ``I 
enclose documents which we have stamped DKSN028928 to 
DKSN029043. These documents were discovered yesterday by Ms. 
Carolyn Huber, Special Assistant to the President/Special 
Director of Correspondence.'' 1211 The matter-of-fact tone 
of Mr. Kendall's prose belied the significance of this 
production. The 114 enclosed pages, computer printouts of the 
Rose Law Firm's billings to Madison Guaranty, constitute the 
best, and therefore most important, evidence concerning Mrs. 
Clinton's representation of James McDougal's S&L in the mid-
1980s--a relationship that was under investigation by at least 
three separate federal agencies.
    The records had been subject to several different federal 
subpoenas, besides that of the Special Committee, for nearly 
two years. When federal investigators served their subpoenas, 
the billing records were nowhere to be found. Despite extensive 
searches conducted by the Rose Law Firm, neither the originals 
nor copies were discovered.1212 The billing records were 
not in the firm's computers, its client files, or its storage 
facility.1213 The disappearance was not isolated, but 
rather occurred in the context of a larger pattern of removal, 
concealment and, at times, destruction of records concerning 
Mrs. Clinton's representation of Madison.

I. The Destruction and Mishandling of Rose Law Firm Files

    In 1988, Mrs. Clinton ordered the Rose Law Firm to destroy 
records relating to her representation of Madison.1214 
This was not a routine destruction of records. At the time, 
federal regulators were investigating the operations and 
solvency of Madison, in anticipation of taking over the 
institution. These Rose Law Firm records, which, after 
Madison's failure would belong to the RTC,1215 would have 
been 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. 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 suing Mr. 
McDougal over the Castle Grande land deal that federal 
regulators have described as a fraud.1216 Mrs. Clinton had 
performed work on the project, including numerous telephones 
calls and meetings with Mr. Ward, and the law firm's records of 
her work and the transactions surrounding this land deal 
certainly would have been highly relevant to the conduct of 
that suit.
    The pattern recurred only a few years later. According to 
the Rose Law Firm, Mr. Hubbell obtained some billing records 
reflecting Rose's representation of Madison in 1989 or 1990. 
The Rose Law Firm represented to the Special Committee that a 
firm partner, then representing the RTC in litigation 
concerning Madison Guaranty, provided all billing records for 
Madison to Mr. Hubbell to ascertain whether the firm had a 
potential conflict of interest.1217 According to the Rose 
Law Firm: ``The Rose partner was assured by Mr. Hubbell a few 
days later that the prior representation had been disclosed to 
the RTC. Rose does not know what Mr. Hubbell did with the 
records.'' 1218
    The mishandling of Madison documents 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, Mrs. Clinton's then-law partner, Vincent Foster, 
collected all the information he could on the Madison 
representation from the Rose Law Firm's files. At the 
conclusion of the campaign, the firm's files on Madison, which 
were by now the property of the RTC as conservator of Madison, 
as well as certain 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, some of which were 
the firm's only copies,1219 without obtaining the consent 
of the firm or client.1220

II. The ``Disappearance'' and ``Discovery'' of the Rose Law Firm 
        Billing Records

    During the 1992 presidential campaign, on February 12, 
1992, an unknown person printed out a set of the Rose Law 
Firm's computerized records of billings to Madison 
Guaranty.1221 These computerized records were the only 
source of detailed information about the services that the Rose 
Law Firm provided and billed to Madison Guaranty. The records 
provide information well beyond that reflected in bills sent to 
Madison--such as the date services were performed, the amount 
of time expended by particular lawyers, and precise services 
performed, including the identity of persons with whom Rose 
lawyers spoke or met in the course of representing 
Madison.1222
    Mr. Hubbell asserted that either he or former Deputy White 
House Counsel Vincent Foster, also a Rose partner, directed the 
Rose accounting department to print the billing records for 
Madison.1223 In addition to obtaining the computerized 
billing records, Mr. Hubbell also retrieved other files and 
documents relating to Mrs. Clinton's work for Madison:

          I recall in 1992 that the issue regarding our 
        representation of Madison and specifically our work 
        before the Arkansas Securities Department was of 
        interest to Mr. Gerth of The New York Times, and that 
        our firm was being questioned by people within the 
        campaign about her work in that regard. We did some 
        work in trying to organize and pull up the files. And 
        in connection with that, bills were pulled and reviewed 
        by myself and Mr. Foster and Mr. Massey, I 
        believe.1224

Because of allegations that Mrs. Clinton had a conflict of 
interest in appearing before her husband's appointee, Beverly 
Bassett Schaffer, Arkansas Securities Commissioner, Mr. Hubbell 
reviewed the records in 1992. During his review, Mr. Hubbell 
made notations next to entries in the bills related to the 
firm's work in connection with Madison's novel proposed 
preferred stock offering before the Arkansas Securities 
Department. 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.'' 1225
    Indeed, in notes taken during the 1992 campaign concerning 
Whitewater, Susan Thomases recorded a February 24, 1993 
conversation with Mr. Hubbell about the Rose Law Firm's 
representation of Madison. According to her 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 Mr. McDougal, Madison President John Latham, and Rick 
Massey, then a junior associate at the firm.1226 Ms. 
Thomases' also indicated that Mrs. Clinton had reviewed some 
documents and that she had at least one telephone conversation 
with Ms. Schaffer in April 1985.1227 Ms. Thomases recorded 
in the margin of her notes next to this entry: ``Acc. to time 
Rec.'' She testified that ``[t]his is my notation for according 
to time records,'' 1228 and that the notation reflected 
what Mr. Hubbell had indicated to her.1229
    Ms. Thomases asserted, however, that she herself did not 
see the billing records,1230 nor did she ever ask to see 
the time records.1231 Ms. Thomases further claimed that, 
other than her conversations with Mr. Hubbell in 1992, she 
never had any discussions with anyone about the billing 
records.1232 She contended that she had no knowledge 
concerning the handling of billing records and how records were 
transported from Little Rock to the White House 
Residence.1233
    In addition to Ms. Thomases, Mr. Hubbell discussed the 
contents of the records in 1992 with Loretta Lynch, an attorney 
working on Whitewater issues for the Clinton campaign.1234 
Ms. Lynch testified that, in response to press inquiries, she 
talked to Ms. Schaffer and reviewed the files of the Arkansas 
Securities Department in an attempt to reconstruct Mrs. 
Clinton's role in representing Madison before state 
regulators.1235 During the course of this investigation, 
she and Ms. Thomases agreed that they should ask members of the 
Rose Law Firm about billing records.1236 Ms. Lynch talked 
to Mr. Hubbell about Mrs. Clinton's work for and billings to 
Madison Guaranty,1237 who advised her that he had reviewed 
the Rose Law Firm's billing records concerning Madison 
Guaranty.1238 Ms. Lynch also knew that Mr. Foster had 
reviewed the billing records,1239 but she does not recall 
speaking with anyone else at the Rose Law Firm regarding the 
billing records.1240 Ms. Lynch testified that she did not 
handle any records reflecting billings by the Rose Law Firm to 
Madison Guaranty, and that she had no knowledge regarding how 
those records came to be deposited in the White House 
Residence.1241
    When Mr. Hubbell and Mr. Foster reviewed the billing 
records in 1993, they spoke with each other about the Rose Law 
Firm's representation of Madison. Mr. Hubbell identified the 
notes written by Mr. Foster in red ink on the billing records 
found in the White House Residence--e.g., ``HRC--this suggests 
1st matter'' 1242 or ``HRC I believe there was a 
subsequent bill''. 1243 These notes suggested to Mr. 
Hubbell that ``[w]e were both working on it, and this is what 
he did to ultimately give it to somebody to indicate what was 
going on, what the records showed highlighted.'' 1244 As 
of the time Mr. Hubbell handled the records, Mr. Foster had not 
written or made any notations on the records.1245
    According to Mr. Hubbell, Mr. Foster was the last person he 
saw handling the billing records.1246 Mr. Hubbell did not 
know who removed the records from the Rose Law Firm,1247 
or how they came to be left in the White House 
Residence.1248 He claimed not to have spoken with anyone 
about the billing records since the 1992 presidential 
campaign.1249
    Mr. Hubbell stated that he may have spoken with Carolyn 
Huber, Special Assistant to the President and Special Director 
of Correspondence for the White House, about the records when 
she was the administrator of the Rose Law Firm, but not when 
she was at the White House.1250 When Mr. Hubbell learned 
that Ms. Huber had discovered the billing records in her 
office, ``I kind of smiled.'' 1251 According to Mr. 
Hubbell, ``I know Ms. Huber, and it just didn't surprise me 
that all of a sudden she discovered them.'' 1252 He 
explained, somewhat cryptically: ``First of all, I felt sorry 
for her, but just that all of a sudden, oh, you're looking for 
the billing records, here they are. You know, it just wouldn't 
surprise me that something like that happened. I read about it, 
but I just smiled about it.'' 1253
    During the first two weeks of August 1995, while the 
Special Committee was holding hearings into the handling of 
documents in Mr. Foster's office at the time of his death, Ms. 
Huber testified that she saw the Rose Law Firm billing records 
for the first time.1254
    The billing records, which were subject to several 
different federal subpoenas, were in the Book Room, a small 
room on the third floor of the First Family's private quarters 
in the White House Residence.1255 The room is adjacent to 
Mrs. Clinton's private office and is accessible only to a 
limited number of private guests and staff.1256 Gifts, 
book, and memorabilia are stored in the Book Room until they 
can be catalogued and put away.1257 In the center of the 
room sits a large table where such memorabilia are 
piled.1258
    In early August 1995, Ms. Huber was gathering newspaper and 
magazine clippings in the Book Room when she noticed the 
records in clear view on the edge of the table.1259 The 
records were folded in half, and Ms. Huber recognized the 
records, from her experience at the Rose Law Firm, to be 
billing records.1260 Ms. Huber recalled that, 
specifically, the records were not on the table a week or two 
earlier when Ms. Huber was last in the Book Room.1261 
Because Ms. Huber thought that the billing records were left in 
the Book Room for her to file,1262 she placed the records 
in a box to be taken to her office without studying 
them.1263 White House ushers carried this box, along with 
several others, and placed them on the floor of Ms. Huber's 
office.1264 Later, a table was placed over these 
boxes.1265
    For several months, Ms. Huber forgot about the records. 
Meanwhile, the Special Committee, continuing its investigation 
into activities and transactions relating to Whitewater and 
Madison, held several hearings in December 1995 on the extent 
of Mrs. Clinton's role in the Madison representation. The 
billing records figured prominently in these hearings. On 
December 1, 1995, Mr. Hubbell was unable to provide complete 
answers about the Mrs. Clinton's role in the Rose Law Firm's 
representation of Madison because he did not have the billing 
records to refresh his memory.1266 Likewise, Ms. Thomases 
testified on December 18, 1995, about her work during the 
campaign and her notes about billing records relating to Mrs. 
Clinton's work for Madison.
    On the morning of January 4, 1996, Ms. Huber was having new 
furniture placed in her office in the East Wing of the White 
House.1267 In the process, the table that had concealed 
the box containing the billing records for five months was 
removed.1268 Once the boxes were uncovered, Ms. Huber 
began to file the contents of the boxes.1269 As she was 
filing, Ms. Huber pulled the billing records out of their box 
and examined them more closely.1270
    Immediately, Ms. Huber realized the billing records were 
related to Madison Guaranty.1271 She was horrified because 
she understood their significance; she had seen several 
subpoenas calling for the production of Madison Guaranty 
records, including these very records.1272 She had also 
assisted the President and Mrs. Clintons' personal counsel, 
David Kendall in searching and reviewing documents in the White 
House responsive to those subpoenas.1273 Ms. Huber 
contacted Mr. Kendall and asked him to meet her in her office 
as soon as possible because she had found some 
documents.1274 After calling Mr. Kendall, Ms. Huber called 
her attorney, Henry Shuelke.1275
    Early in the afternoon on January 4, Ms. Huber met with Mr. 
Kendall.1276 She gave him the records and explained her 
discovery.1277 Worried, Ms. Huber asked Mr. Kendall 
whether she had done the right thing in contacting 
him.1278 Mr. Kendall assured Ms. Huber that she had made 
the correct decision.1279 Mr. Kendall examined the billing 
records and asked Ms. Huber whether she could identify the 
handwriting in red ink.1280 Ms. Huber identified some of 
the notations as Mr. Foster's handwriting.1281 Mr. Kendall 
then told Ms. Huber to maintain custody of the 
records,1282 and that he would contact White House counsel 
and meet with her later in the day.1283
    Mr. Kendall then contacted Special Counsel to the President 
Jane Sherburne and Mr. Shuelke, who agreed to meet around 5:00 
p.m. in Ms. Huber's office.1284 Ms. Sherburne informed her 
supervisor, Deputy Chief of Staff Harold Ickes, and her staff 
of the discovery of the billing records.1285 No one 
contacted the Independent Counsel or any other investigative 
agency, including the Special Committee. Mr. Kendall and Ms. 
Sherburne claimed that they did not inform Mrs. Clinton on 
January 4 about the discovery of the billing records.1286
    Ms. Huber, Mr. Kendall, Ms. Sherburne and Mr. Shuelke met 
that evening.1287 Ms. Huber once again explained her 
discovery of the records.1288 Ms. Huber told the assembled 
attorneys--as she also had testified to before the Special 
Committee--that she clearly recalled seeing the records in 
early August 1995. Ms. Huber and the lawyers together examined 
the billing records page by page.1289 Ms. Huber identified 
for them some of the handwriting on the billing records as Mr. 
Foster's and some as the Rose Law Firm bookkeeper.1290 In 
view of Mr. Foster's notes in red ink, the billing records were 
obviously a copy of the original records.1291 Other 
handwritten notes appear to have been made on the original and 
then copied.1292
     At one point in the meeting, Ms. Sherburne asked to speak 
with Mr. Kendall and Mr. Shuelke in the hallway.1293 Ms. 
Sherburne raised the issue of how the documents should be 
reproduced and whether the integrity of the documents should be 
preserved in case the records would later be examined for 
fingerprints.1294 The attorneys never considered 
contacting the Independent Counsel for advice on how best to 
proceed.1295
    Mr. Kendall and Mr. Shuelke returned to Ms. Huber's office 
and photographed the box in which Ms. Huber found the records 
earlier in the day.1296 Ms. Sherburne and Ms. Huber 
searched for a color copier in the White House 
offices.1297 After finding a copier, Ms. Huber made 
copies, while Ms. Sherburne collated and checked for 
completeness.1298 Two color copies of the billing records 
were made.1299 Mr. Kendall took the original set of the 
billing records and one copy with him that evening. Ms. 
Sherburne took the other copy of the billing records to examine 
and to keep for White House records.1300
    The next morning, January 5, 1996, Mr. Kendall and Ms. 
Sherburne notified the Independent Counsel of the discovery of 
the billing records.1301 That same morning, Ms. Sherburne 
informed President Clinton of their discovery.1302 Later 
that afternoon, Mr. Kendall produced a copy of the billing 
records to the Special Committee.1303 Copies of the 
billing records were also produced to the other investigative 
agencies.1304

III. Mrs. Clinton's Statements in Light of the Rose Law Firm Billing 
        Records

    The billing records provide the best evidence of the legal 
services performed by Mrs. Clinton for Madison Guaranty and, as 
a result of the failed memories of many Rose Law Firm 
attorneys, are the only source of detailed information about 
the legal services rendered to Madison. Whereas the bills and 
statements sent to clients indicate only the total amount due 
and the general services performed, these computerized billing 
records provide detailed information on the specific task 
performed, the date that it was performed, the person who 
performed the task, and the amount of time expended on the 
task.1305 The computerized billing records are thus an 
invaluable asset in reconstructing Mrs. Clinton's actual 
involvement in the matter. This is especially so with respect 
to Mrs. Clinton's billings to Madison, because her timesheets 
were apparently destroyed in 1988.1306
    In total, Mrs. Clinton billed Madison Guaranty for 89 
tasks, including 33 conferences with Madison Guaranty 
officials, on 53 separate days.1307
            A. Madison's retention of the Rose Law Firm
    During the 1992 campaign, the Clinton campaign sought the 
facts surrounding the Rose Law Firm's retainer with Madison 
Guaranty in 1985 and 1986. In a March 18, 1992 memorandum to 
senior campaign officials Bruce Lindsey and David Wilhelm, 
Loretta Lynch noted that the campaign had conducted an 
exhaustive review of available documents, but certain questions 
regarding the retainer remain that ``simply must be answered by 
Hillary and Bill themselves.'' Among these questions were:

          1. Did Bill Clinton solicit a retainer agreement for 
        the Rose Law Firm from Jim McDougal? If so, when did 
        that happen and what were its terms? Who, other than 
        Jim and Susan were privy to that discussion?
          * * * * * * *
          7. When was the Rose Law Firm put on retainer by McD 
        and for what business (LL has asked Webb Hubbell this 
        question numerous times. The answer continues to 
        change, despite the repeated press inquiries on this 
        exact point).1308

    This memorandum was prepared after the Clinton campaign had 
already released a fact sheet stating that Richard Massey, a 
young associate in the Rose Law Firm in 1985, was responsible 
for the retainer--not Mrs. Clinton:

          The Rose Law Firm was retained to represent Madison 
        Guaranty. The business was brought to the firm not by 
        Hillary Clinton but by Richard Massey, long time friend 
        of John Latham, Madison's CEO.1309

    The circumstances surrounding the Rose Law Firm's retainer 
with Madison were not resolved during the 1992 campaign. Mrs. 
Clinton, and others on her behalf, have repeatedly made 
statements that Mr. Massey brought in Madison Guaranty as a 
client and that, even though she was the billing partner on the 
matter, she was merely a ``backstop'' because the firm did not 
permit associates to bill clients directly.1310
    During a press conference on April 22, 1994, Mrs. Clinton 
stated that Mr. Latham, the President of Madison Guaranty, 
asked Mr. Massey whether he would be interested in representing 
Madison in connection with a proposed stock offering. Mrs. 
Clinton claimed that she became involved in the matter only 
because Mr. Massey ``needed a partner to serve as his backstop, 
and that was one of the rules of our firm.'' 1311 Mrs. 
Clinton further explained that Mr. Massey was aware that she 
knew Mr. McDougal, so ``he came to me and asked if I would talk 
with Jim to see whether or not Jim would let the lawyer and the 
officer go forward on this project. I did that, and I arranged 
that the firm would be paid $2,000 retainer.'' 1312
    In an unsworn statement to the RTC in November 1994, Mrs. 
Clinton similarly told investigators that ``she recalled Massey 
came to her and asked her to be the billing attorney which was 
a normal practice when an associate was handling the matter. . 
. . Mrs. Clinton recalled that a Madison official (individual 
unknown) approached Rick Massey regarding a preferred stock 
offering in an effort to raise capital.''
     In a sworn response to an RTC interrogatory in May 1995, 
Mrs. Clinton elaborated on her story. Mrs. Clinton stated that 
Mr. Massey approached her because ``certain lawyers'' in the 
Rose Law Firm were ``opposed'' to representing Mr. McDougal 
until Mr. McDougal paid an outstanding bill, and he was aware 
that Mrs. Clinton knew Mr. McDougal. Mrs. Clinton wrote:

          In the spring of 1985, Massey came to see me because 
        he had learned that certain lawyers at the firm were 
        opposed to doing any more work for Jim McDougal or any 
        of his companies until he paid his bill and then only 
        if Madison Guaranty agreed to prepay a certain sum. . . 
        I believe Massey approached me about presenting this 
        proposal to Jim McDougal because he was aware that I 
        knew him.

    Mr. Massey, however, directly contradicted Mrs. Clinton's 
account in sworn testimony before the Special Committee. 
According to Mr. Massey, he was not responsible for bringing in 
Madison as a client.1313 Mr. Massey testified specifically 
that Mr. Latham never offered him Madison's business,1314 
and that he did not recall approaching Mrs. Clinton with a 
proposal to represent Madison.1315 Mr. Massey also 
indicated that he did not ask Mrs. Clinton, as she claimed, to 
be the billing attorney.1316
    David Knight, a former Rose partner specializing in 
securities law, testified that he attended the lunch meeting 
during which, according to Mrs. Clinton, Mr. Latham allegedly 
retained Mr. Massey and the Rose Law Firm.1317 Mr. Knight 
confirmed Mr. Massey's testimony that Mr. Latham did not ask 
Mr. Massey to represent Madison on the preferred stock 
offering. Quite to the contrary, according to Mr. Knight, the 
subject of that stock offering never arose.1318 In fact, 
Mr. Latham informed Messrs. Knight and Massey at the lunch that 
Mr. McDougal made all hiring decisions and that Madison already 
had outside counsel.1319
    Mr. Latham testified that Mr. McDougal, not he, made the 
decision to retain the Rose Law Firm.1320 In an interview 
with RTC investigators, Mr. Latham similarly stated that 
``McDougal had friends over there and he suggested we use them. 
When asked who the friends were Latham said that they were 
Hillary Rodham Clinton and others.'' 1321
    Mr. McDougal has also contradicted Mrs. Clinton's account 
about the retainer. Mr. McDougal has stated that he put Mrs. 
Clinton on retainer as a favor to then-Governor Clinton. In 
1992, Mr. McDougal told Jim Blair and Loretta Lynch that 
Governor Clinton, wearing jogging pants, visited his office and 
told him that he and Mrs. Clinton were pressed for money and 
asked Mr. McDougal to give some work to Mrs. Clinton.1322 
Two hours later, Mrs. Clinton visited Mr. McDougal to set up 
the retainer.1323 According to notes taken by Mr. Blair, 
Mr. McDougal said that he remembered the encounter 
``explicitly'' because Governor Clinton, in his exercise 
clothes, left a permanent stain on Mr. McDougal's ``new leather 
contour chair.'' 1324
    In 1993, Mr. McDougal repeated this account of the so-
called ``jogging'' incident to the Los Angeles Times. Governor 
Clinton reportedly dropped by Mr. McDougal's trailer office, 
told Mr. McDougal that the Clintons were financially strapped, 
and asked Mr. McDougal to throw some work to Mrs. 
Clinton.1325 Mr. McDougal also repeated to the newspaper 
what he had told Mr. Blair: ``I hired Hillary because Bill came 
in whimpering they needed help.'' Mr. McDougal said he had no 
specific legal work in mind when he hired Mrs. 
Clinton.1326 That same day, Mrs. Clinton visited Mr. 
McDougal's office, and Mr. McDougal put her on retainer for 
$2,000 a month.
    On May 8, 1996, during the Tucker-McDougal trial in Little 
Rock, Mr. McDougal revised his story somewhat. He testified 
that President Clinton came by one morning and, ``I said to 
Bill something to the effect of, `We're needing more legal 
work. Would it help Hillary if we gave some of the work to the 
Rose Firm?' And he said yes.'' 1327 Mr. McDougal did not 
recall telling Mr. Blair that Bill Clinton specifically said he 
``needed'' money.1328 Although Mr. McDougal denied stating 
in an FBI interview that ``Clinton came in claiming he had 
financial problems,'' 1329 he did recall that Mrs. Clinton 
``came by the same day'' to set up the retainer.1330
    At the Tucker-McDougal trial, President Clinton testified 
that he recalled visiting Mr. McDougal, but did not recall 
asking Mr. McDougal to place Mrs. Clinton on retainer.1331
    Mrs. Clinton's account of her role in connection with the 
Madison retainer turns on the alleged existence of a debt that 
Mr. McDougal's Madison Bank & Trust owed to the Rose Law Firm 
in 1985. According to Mrs. Clinton, she insisted on the $2000 
per month retainer to assure her partners that Mr. McDougal 
would pay the firm's fees--an issue that, she claims, arose 
because of Mr. McDougal's failure to pay fees owed to the Rose 
Law Firm in connection with its representation of Madison Bank 
& Trust.
    Documentary evidence and testimony provided to the Special 
Committee, however, indicate that the outstanding balance of 
Rose's bill to Madison Bank & Trust was paid in late October 
1984, many months prior to Mrs. Clinton's retainer in April 
1985.
    Gary Bunch, President of Madison Bank & Trust since 1970, 
provided the Special Committee with documents showing that the 
legal fees owed to the Rose Law Firm were paid in late October 
1984. The Minutes of Madison Bank & Trust for October of 1984 
indicate that $5,000 in legal fees were owed to the Rose Law 
Firm for work on the ``Huntsville move appeal,'' 1332 a 
matter concerning the relocation of the bank, and that ``Mr. 
McDougal seconded that Mr. Bunch will negotiate settlement with 
the firm.'' 1333 Mr. Bunch confirmed that Mr. McDougal 
directed him to pay the outstanding Rose Law Firm bill for the 
Madison Bank & Trust matter in full in October 1984.1334
    A receipt from Madison Bank & Trust's debit ledger show 
$5,000 in legal fees were paid on October 23, 1984.1335 In 
addition, the bank's minutes for November 27, 1984 confirm this 
payment: ``The reduction in earnings was attributed to heavy 
accounting fees for the audit and a payment of legal fees from 
1983 lawsuit.'' 1336
    Among the billing records discovered in the Book Room of 
the White House Residence was a 1981 bill from the Rose Law 
Firm to Madison Bank & Trust. This bill, for over $13,000, was 
marked ``Paid.'' A note in Mr. Foster's hand, however, stated: 
``HRC I believe there was a subsequent bill.'' 1337
    Following the discovery of the billing records and the 
testimony of Mr. Massey before the Special Committee, Mrs. 
Clinton changed her story in a February 1996 interview with RTC 
investigators. According to Mrs. Clinton, the late Vincent 
Foster, not Mr. Massey, first informed her that Mr. Massey 
wanted to do work for Madison: ``I believe it was Vince Foster 
who came to me, who said that Mr. Massey wanted to do this 
work, but the partners didn't want him to do it.'' 1338 
When asked who suggested that she approach Mr. McDougal, Mrs. 
Clinton answered: ``I don't have a specific recollection. I 
believe it was Vince Foster, but I'm not positive.'' 1339
            B. Mrs. Clinton's contacts with regulator Beverly Bassett 
                    Schaffer
    In 1985, the Rose Law Firm represented Madison in 
connection with a proposal for a preferred stock offering 
before the Arkansas Securities Department. During the 1992 
campaign, allegations surfaced that Beverly Bassett Schaffer, 
who Governor Clinton appointed as Arkansas Securities 
Commissioner, gave preferential treatment to Madison Guaranty 
because of her relationship with the Governor and Mrs. Clinton. 
The Clinton campaign denied that Mrs. Clinton attempted to 
influence Commissioner Bassett.
    The billing records show that Mrs. Clinton called Ms. 
Schaffer the day before the Rose Law Firm submitted Madison's 
proposal for its preferred stock offering to the Arkansas 
Securities Department.1340 The records reflect that Mrs. 
Clinton billed as much as one hour to the call.1341 Ms. 
Schaffer notified Mrs. Clinton of the approval of the proposal 
two weeks later in a letter addressed to ``Dear Hillary.'' 
1342
    Prior to the discovery of the billing records, Mrs. Clinton 
claimed in her sworn responses to RTC interrogatories in May 
1995 that she called the Arkansas Securities Department to find 
out ``to whom Mr. Massey should direct any inquiries.'' 
1343 She did not recall to whom she spoke.1344
    In testimony before the Special Committee, former 
Commissioner Schaffer directly contradicted Mrs. Clinton and 
stated that the proposal was discussed during the phone call. 
According to Ms. Schaffer:

          [Mrs. Clinton] called and said they had a proposal, 
        and what it was about; and I said I'm familiar with 
        that; I've already looked at that. You know, I agree 
        with the--basically I have no problem with that 
        position, and you'll be getting a letter soon to that 
        effect. . . . I think in substance I said, basically, I 
        agree with the position--I mean, that preferred stock 
        can be issued pursuant to the Business Corporation 
        Code.1345

    Mr. Massey similarly disputed Mrs. Clinton's account of the 
phone call to Ms. Schaffer. Mr. Massey testified that he 
drafted the proposal and knew exactly to whom the proposal 
should be sent.1346 Mr. Massey further testified that Mrs. 
Clinton never instructed him about whom to address the 
transmission letter.1347 Mr. Massey did not recall asking 
Mrs. Clinton to make such an inquiry and was not aware that she 
had.1348
            C. Mrs. Clinton's role in Madison's proposed preferred 
                    stock deal
    Mrs. Clinton has minimized her role in the Rose Law Firm's 
representation of Madison before the Arkansas Securities 
Department in connection with Madison's proposed stock 
offering. Although she was the billing partner, Mrs. Clinton 
has denied that she handled much of the workload on the matter. 
When asked about the subject during a press conference on April 
22, 1994, Mrs. Clinton told reporters that ``the young 
attorney, the young bank officer did all the work. . . . It was 
not an area that I practiced in it was not an area that I 
really know anything to speak of about.'' 1349
    In a 1994 sworn statement to the FDIC, Mrs. Clinton 
similarly stated:

          While I was the billing partner on the matter, the 
        great bulk of the work was done by Mr. Richard Massey, 
        who was then an associate at the Rose Law Firm and 
        whose specialty was securities law. I was not involved 
        in the day to day work on that project. . . . Mr. 
        Massey primarily handled the matter. . . . I was not 
        involved in any meetings with state regulators. . . 
        .1350

    Mrs. Clinton likewise told RTC investigators in 1994 that 
Mr. Massey was the lead attorney on the matter.1351 And, 
in sworn interrogatories to the RTC in May 1995, Mrs. Clinton 
stated, ``While I was the billing partner on the matter, the 
great bulk of the work was done by Mr. Richard Massey, who was 
then an associate at the Rose Law Firm and whose specialty was 
securities law.'' Mrs. Clinton added that ``I was not in charge 
of the Rose Law Firm's work for Madison Guaranty in 1985-86, 
although I was the billing partner.'' 1352
    The billing records and Mr. Massey's testimony directly 
contradict Mrs. Clinton's claim that her role on the matter was 
merely to serve only as a ``backstop.'' Mrs. Clinton billed 6.2 
hours on the preferred stock deal for conferences alone that 
she had with Mr. McDougal, with Mr. Latham and Davis Fitzhugh, 
two other Madison S&L officers involved in the stock 
offering.1353 In addition, Mrs. Clinton had at least six 
conferences with Mr. Massey, the young Rose Law Firm associate 
on the matter.1354 Mrs. Clinton also reviewed the 
amendments to the application submitted to the Arkansas 
Securities Department.1355
    Mr. Massey testified that he did his work under the 
supervision of Mrs. Clinton.1356 According to Mr. Massey, 
``Mrs. Clinton was the billing attorney and had a relationship 
with me such that she needed to know what I was doing so she 
could be prepared to update the client at any time.'' 1357 
When asked whether Mrs. Clinton's work on the stock proposal 
deal was ``minimal,'' Mr. Massey responded, ``In my own mind 
it's a significant amount of time.'' 1358
            D. Mrs. Clinton's role in the Castle Grande transaction
    Before the billing records were discovered, little was 
known about the nature of the Rose Law Firm's representation of 
Madison Guaranty in connection with the Castle Grande land 
transaction. Perhaps because Mrs. Clinton had ordered the 
destruction of Madison-related records in 1988, the Rose Law 
Firm no longer possessed any file related to the Castle Grande 
deal.
    Federal investigators described the Castle Grande 
transactions as a series of land flips and transactions that 
cost the American taxpayers $4 million.1359 The land deal 
was designed to conceal Madison Guaranty's investment in Castle 
Grande through its subsidiary, Madison Financial Corporation. 
Mr. Ward was the ``straw man'' purchaser in the project--one 
who lends his name to the title, but does not actually have an 
ownership interest.1360 Arkansas regulations limited an 
S&L's direct investment in its subsidiaries or affiliates to 6 
percent of total assets.1361 Mr. Ward was needed as the 
straw man because ``had MGSL purchased Castle Grande directly, 
they would have exceeded their direct investment limit.'' 
1362 Madison, in effect, paid for Mr. Ward's share in the 
venture, and was promised $300,000 in commissions for lending 
his name.
    In 1995, when the RTC asked about her knowledge of Castle 
Grande, Mrs. Clinton stated ``I do not believe I knew anything 
about any of these real estate parcels and projects.'' 
1363 The billing records suggest otherwise.
    The billing records identify Mrs. Clinton as the billing 
partner on the matter--even though Mrs. Clinton claimed that 
she had no idea how the Rose Law Firm became involved in the 
matter.1364 These records indicate that Mrs. Clinton 
billed more time on the Castle Grande matter--29.5 hours, or 54 
percent of total billings on the matter--than any other lawyer 
at the Rose Law Firm. Indeed, nearly half of Mrs. Clinton's 
total billings to Madison were for work on Castle Grande. In 
the months following the initial transaction, Mrs. Clinton had 
at least 12 conferences with Mr. Ward and numerous meetings 
with Madison officials in connection with the subsequent sales 
that she billed to the IDC/Castle Grande matter. One of the 
conferences with Mr. Ward even related to ``the purchase from 
Brick Lile,'' the seller of the IDC/Castle Grande property. 
Mrs. Clinton also had conferences with two attorneys who were 
involved in the initial transaction--Thomas Thrash, the 
associate at the Rose Law Firm who attended the closing, and 
Daryl Dover, the attorney for the seller.
    In January 1986, Mrs. Clinton tripled Rose's bill to 
Madison for her work on the Castle Grande/IDC matter without 
providing any supporting information. Mrs. Clinton has claimed 
that this fee, representing 14.5 hours, was for work that she 
did between January 15 and January 30, 1986, which she forgot 
to enter on her time sheets as ``work in progress.'' 1365
    After the discovery of the billing records, Mrs. Clinton 
attempted to explain the apparent contradiction between her 
statements about her minimal involvement in the Castle Grande 
transaction and the billing records. In a television interview, 
Mrs. Clinton explained that she did not know the Castle Grande 
property by this name, and that the matter she worked on was 
known by the name of the seller, IDC. She explained that it was 
a ``separate deal'' entirely:

          Again, there's not a contradiction. Castle Grande was 
        a trailer park on a piece of property that was about 
        1,000 acres big. I never did work for Castle Grande. 
        Never at all. And so, when I was asked about it last 
        year, I didn't recognize it, I didn't remember it. The 
        billing records show I did not do work for Castle 
        Grande. I did work for something called IDC, which was 
        not related to Castle Grande. . . . Separate deal 
        completely.1366

    When asked by the Pillsbury Firm what she meant by 
``separate deal,'' Mrs. Clinton gave a similar answer:

          Well, my understanding is that the work for Madison 
        concerned property that was referred to then at the 
        time and continually by the Rose Firm as IDC or 
        Industrial Development Corporation property. I know 
        that work as IDC. That's how it was billed. And I did 
        not know that there was something called Castle Grande, 
        to the best of my recollection, until it came to my 
        attention through these investigations, the entire 
        thousand acres that we referred to as IDC was being 
        called Castle Grande . . . .
          I was informed sometime within the last year or two 
        that there was a trailer park on the IDC property 
        called Castle Grande Estates. To the best of my 
        recollection, that was the first I had ever heard of 
        Castle Grande Estates.1367

    Substantial evidence, however, contradicts Mrs. Clinton's 
statements concerning the name of this project. Madison 
Guaranty officials and federal regulators all commonly referred 
to the entire parcel of land as ``Castle Grande.'' Television 
advertisements in Little Rock promoting the land development 
referred to the land as ``Castle Grande.'' Susan McDougal told 
ABC news that the entire development was considered ``Castle 
Grande.'' Internal Madison Board Minutes dated September 12, 
1985, referred to ``Castle Grande Estates.'' Harry Don Denton, 
a Madison officer, testified at the Tucker-McDougal trial that 
the entire property was named Castle Grande immediately after 
its purchase from IDC.1368 Finally, records reflecting a 
meeting between Alston Jennings, former attorney for Mr. Ward, 
and Mr. Kendall, the Clintons' attorney, on January 11, 1996--
the week after the billing records were discovered--referred to 
``Castle Grande.'' 1369 No mention was made of 
IDC.1370
    More important than the mere extent of her services related 
to the Castle Grande, however, is the nature of her work. For 
his role as the ``straw man'' and other related services to the 
project, Mr. Ward was owed a commission. On March 31, 1986, 
Madison Guaranty loaned $400,000 to Mr. Ward.1371 One week 
later, on April 7, 1986, Madison Financial Corporation, a 
subsidiary of Madison Guaranty, executed two promissory notes, 
for $300,000 and $70,943, purporting to reflect loans from Mr. 
Ward to Madison Financial.1372 Thus, except approximately 
$30,000 for administrative expenses, the two Madison Financial 
notes offset Mr. Ward's debt to Madison Guaranty. At the end of 
the day, Mr. Ward kept the bulk of the $400,000 as his 
commission for the Castle Grande fraud.
    At about this time, bank examiners were auditing Madison 
Guaranty's books, and James Clark, the chief examiner, asked 
whether the three notes were related.1373 Madison 
official, Mr. Denton, assured him that these notes were not 
related.1374 According to Madison official John Latham, 
however, the three notes were related, and the $400,000 March 
31 loan from Madison Guaranty was intended to pay Mr. Ward's 
commissions.1375
    The Rose Law Firm billing records revealed for the first 
time that on April 7, 1986, the day the Madison Financial notes 
were executed, Mrs. Clinton billed 10 minutes to the IDC/Castle 
Grande matter for ``Telephone conference with Don Denton.'' 
1376 A message slip produced by Mr. Denton reflects that 
Mrs. Clinton called him from the Rose Law Firm on April 7, 
1986.1377 In a June 11, 1996 interview with FDIC 
investigators, Mr. Denton stated that Mrs. Clinton called 
seeking copies of the notes between Mr. Ward, Madison 
Financial, and Madison Guaranty.1378 Mr. Denton told 
investigators that during the conversation he cautioned Mrs. 
Clinton that a problem might exist with respect to the April 
7th notes to Mr. Ward because ``they constituted in effect a 
parent entity fulfilling the obligation of a subsidiary,'' 
1379 a violation of the so-called direct investment rule. 
Mrs. Clinton, however, ``summarily dismissed'' that concern in 
a way that he took to mean that ``he would take care of savings 
and loan matters, and she would take care of legal matters.'' 
1380
    The billing records showed that on May 1, 1986, Mrs. 
Clinton billed Madison Guaranty for two hours for the following 
work: ``Conference with Seth Ward; telephone conference with 
Seth Ward regarding option; telephone conference with Mike 
Shauffler; prepare option.'' 1381 Indeed, a May 1 option 
agreement between Mr. Ward and Madison Financial bore a word 
processing code (``0190g'') that, according to the Rose Law 
Firm's counsel, indicates the document was created at the Rose 
Law Firm by or for Mrs. Clinton.1382 The May 1st agreement 
gave Madison an option from Mr. Ward to convey his portion of 
the Castle Grande property back to Madison. Mr. Clark, the bank 
examiner, told investigators that, after reviewing the records 
and in light of Mr. Denton' testimony, he believed that the May 
1st option prepared by Mrs. Clinton ``was created `in order to 
conceal the connection--whatever it was--between' '' the March 
31st and April 7th notes.1383
    On June 13, 1996, in light of the significant new evidence 
offered by Mr. Denton and Mr. Clark relating to the extent and 
nature of Mrs. Clinton's role in Castle Grande, the Special 
Committee requested that Mrs. Clinton ``refresh her memory 
about these transactions, and to inform the Special Committee 
of what she recalls about them'' in writing, under oath.'' 
1384 In her response affidavit, Mrs. Clinton did not 
answer the question, but simply referred to her attorney's 
transmittal letter ``addressing certain allegations recently 
made by Mr. Don Denton.'' 1385 In his letter, Mr. Kendall 
maintained that Mr. Denton's recollection is ``wholly 
unreliable'' 34 but gave no indication as to the 
recollection of the First Lady.1386 Mrs. Clinton, 
therefore, has neither denied nor confirmed Mr. Denton's 
account.
---------------------------------------------------------------------------
    \34\ Mr. Kendall based this assertion on the fact that Mr. Denton 
testified at two trials, Ward v. Madison Guaranty, and United States v. 
McDougal et al., yet did not mention his April 7, 1986 telephone 
conversation with Mrs. Clinton. Mr. Kendall, however, offered no 
indication whether Mr. Denton was asked questions about his 
conversations with Mrs. Clinton or, for that matter, whether such 
conversations and Mrs. Clinton's work for Madison were within the scope 
of the trials.
    What is clear, however, is that Mr. Denton recalled the 
conversation only after being shown Mrs. Clinton's billing records 
refelcting the 12 minute telephone call on April 7. When he was shown 
this record, on June 3, 1996, he did not recall the conversation. 
However, after the interview, he reviewed his files and discovered the 
April 7 message slip from Mrs. Clinton. His memory thus refreshed, he 
provided additional testimony to the FDIC-IG, all under a legal 
obligation of truthfulness, 18 U.S.C. Sec. 1001. (Denton, FDIC-IG 
Report of Interview, June 11, 1996.) Mr. Denton has no reason to 
mislead investigators, much less to go out of his way to give 
inaccurate testimony.
---------------------------------------------------------------------------

IV. The Federal Investigations into the Rose Law Firm's Representation 
        of Madison

    When the FDIC assumed control of Madison in 1989, Madison 
had a pending lawsuit against its former independent 
accountants, Frost & Company (``Frost'').1387 The suit was 
filed in 1988 by the Memphis law firm of Gerrish & McCreary and 
alleged malpractice on the part of Frost in connection with its 
audits of Madison performed in 1984 and 1985.1388 The 
Frost litigation was assigned to FDIC attorney April Breslaw, 
who removed Gerrish & McCreary from the case and hired the Rose 
Law Firm to handle the matter.1389 Rose partner Webster 
Hubbell was the billing partner and lead trial counsel on the 
case.1390 Although the original claim was for $10 million, 
Rose settled the case in late February 1991 for $1.025 
million.1391 The firm was paid $375,380 for its 
work.1392
    In 1994, the FDIC Office of the Inspector General (``FDIC-
IG'') and the RTC-IG began investigations into possible 
conflicts of interests related to the Rose's representation of 
those agencies in the Frost litigation.
    During a February 24, 1994 hearing before the Senate 
Banking Committee, Ranking Member Alfonse D'Amato raised 
questions about a February 17, 1994 report of the FDIC Legal 
Division regarding the FDIC's hiring of Rose as counsel with 
respect to Madison.1393 This report was prompted by 
stories appearing in the media in late 1993 and early 1994 
alleging that Rose had failed to disclose conflicts related to 
its representation of Madison before the Arkansas Securities 
Department and the litigation against Madison brought by Mr. 
Hubbell's father-in-law, Seth Ward.1394 The FDIC Legal 
Division concluded that neither Rose's representation of 
Madison before the Arkansas Securities Department nor Mr. 
Ward's suit against Madison constituted a conflict.1395 At 
Senator D'Amato's urging,1396 then FDIC Acting Chairman 
Andrew C. Hove agreed to ask the FDIC-IG to conduct an 
investigation.1397
    On February 8, 1994, the RTC's Office of Contractor 
Oversight and Surveillance (``OCOS'') issued a report 
dismissing allegations of conflicts of interest related to 
Rose's representation of the RTC in the Frost case.1398 On 
February 24, 1994, RTC Interim Chief Executive Officer 
(``CEO'') Roger Altman agreed to ask the RTC-IG to review the 
OCOS Report.1399 On March 2, 1994, RTC Deputy and Acting 
CEO John Ryan requested that the RTC-IG investigate the matters 
raised in the OCOS Report.1400
    The FDIC-IG issued its report on July 28, 1995, days before 
Ms. Huber discovered the billing records in the Book Room of 
the White House Residence. In the course of its investigation, 
the IG reviewed (1) the alleged conflicts of interest related 
to the FDIC's retention of Rose; (2) the FDIC Legal Division's 
conflicts report; (3) and certain legal fee payments made by 
the FDIC to Rose.1401
    With respect to the conflicts related to the FDIC's 
retention of Rose, the IG concluded that the Rose Law Firm and, 
specifically, that Mr. Hubbell had failed, as required by 
ethical rules, to disclose the firm's prior representation of 
Madison. The FDIC-IG reported:

          The results of our investigation evidenced 
        conflicting relationships among the Rose Law Firm, Rose 
        partner Webster L. Hubbell, and Mr. Hubbell's father-
        in-law since 1971, Seth Ward. During the time that Mr. 
        Hubbell represented the Madison Conservatorship on 
        behalf of the FDIC, Mr. Hubbell's father-in-law was 
        engaged in litigation adverse to the Madison 
        Conservatorship. We found that neither the Firm nor Mr. 
        Hubbell had informed FDIC of these relationships when 
        the Firm was hired in March 1989 to handle the lawsuit 
        against Frost or while the Firm was acting as litigator 
        for the Madison Conservatorship.1402

    The report further found that Mr. Hubbell's representation 
of the FDIC was improper in light of Rose's prior 
representation of Mr. McDougal's S&L:

          The results of our investigation also evidenced 
        conflicting representations on the part of the Rose Law 
        Firm with respect to its representation of FDIC 
        regarding the Madison Conservatorship. Specifically, we 
        found that the Firm had represented Madison and its 
        wholly owned subsidiary, Madison Financial Corporation, 
        in 1985 and 1986 on various legal matters, including 
        representation of Madison in 1985 before the Arkansas 
        Securities Department (ASD). During its 1985 
        representation of Madison the Firm submitted materials 
        to the ASD which were prepared by Frost, the firm that 
        was later sued by Rose on behalf of FDIC for the 
        Madison Conservatorship. We further found that for many 
        years the Rose Law Firm represented Mr. Hubbell's 
        father-in-law, Seth Ward, or Mr. Ward's companies 
        regarding various legal matters. However, there was no 
        evidence to show that Mr. Hubbell or the Rose Law Firm 
        disclosed these representations to FDIC when the Firm 
        was hired or during its representation of the Madison 
        Conservatorship in the Frost lawsuit.1403

    In its review of the FDIC Legal Division's February 17, 
1994 Report, the FDIC-IG determined that the Legal Division 
failed to consider certain conflicts criteria and additional 
evidence obtained by the IG.1404
    The RTC-IG, after a separate investigation, issued its 
report on August 3, 1995--again days before someone placed the 
billing records in the Book Room.35 The RTC-IG found that 
``Rose Law Firm did not disclose actual or potential conflicts 
relating to Madison and another six of the 17 institutions for 
which the firm represented FDIC and RTC.''1405
---------------------------------------------------------------------------
    \35\ The Rose Law Firm resisted the RTC OIG's investigation. After 
Rose declined a request to provide client identity information, the OIG 
issued a subpoena calling for the production of documents that would 
establish the identities of Rose's clients between 1985 and 1994. In 
April 1994, Rose filed suit against the RTC and the OIG, seeking to 
enjoin the OIG's conflicts investigation and bar enforcement of the 
subpoena. The suit was dismissed in August 1994. In November 1994, a 
federal district court ordered Rose to comply with the subpoena. See 
Adair v. Rose Law Firm, 867 F. Supp. 1111 (D.D.C. 1994); (RTC OIG 
Report p. I-1--I-2; Black, 8/10/95 Hrg. pp. 119-121.)
---------------------------------------------------------------------------
    Among the ``undisclosed'' matters identified by the RTC-IG 
Report related to Rose's involvement in the Castle Grande land 
deal:

          At the time it assisted MADISON GUARANTY with the 
        CASTLE GRANDE deal, ROSE LAW FIRM was aware of 
        regulatory concerns about the soundness of the 
        institution, particularly its net worth, through its 
        representation of MADISON GUARANTY on applications with 
        the ARKANSAS SECURITIES DEPARTMENT to issue preferred 
        stock and to commence broker/dealer operations. 
        Although FROST & COMPANY's defense called the conduct 
        of MADISON GUARANTY management into question and ROSE 
        LAW FIRM had represented MADISON GUARANTY/MADISON 
        FINANCIAL/SETH WARD in an acquisition of property 
        orchestrated by that management and subsequently 
        heavily criticized by the regulators, ROSE LAW FIRM did 
        not disclose fully its relationship with MADISON 
        GUARANTY in the purchase and development of the IDC 
        property to FDIC or RTC when it was retained in the 
        suit against FROST & COMPANY.1406

    Mr. Adair, Inspector General of the RTC, provided further 
explanation of the conflicts problem posed by Rose's 
involvement in Castle Grande in his testimony before the House 
Banking Committee in August 1995:

          Arkansas State Regulations had prohibited Madison 
        Guaranty from acquiring a tract of property that became 
        known as Castle Grande, and as an entity the Rose Law 
        Firm was aware of this restriction because it had 
        previously represented Madison Guaranty in other work 
        involving the Arkansas Securities Department.
          According to a subsequent Home Loan Bank Board 
        examination that was done, to avoid this restriction, 
        Madison Guaranty assigned the right to purchase part of 
        the property to an employee of the institution who was 
        the father-in-law of a Rose partner.
          Madison Guaranty financed 100 percent of that 
        employee's purchase, providing over $1 million in non-
        recourse financing and obtained an option from the 
        employee to convey the property back to Madison 
        Guaranty.
          Essentially, the purchase appears to have been 
        structured to avoid violation of state law by Madison 
        Guaranty. Madison Guaranty paid the Rose Law Firm for 
        legal services in connection with the transaction.
          In a report of examination of March 1986, Federal 
        Home Loan Bank Board examiners identified this 
        transaction as one of a series of fictitious 
        transactions causing losses to Madison Guaranty.
          When Madison Guaranty's independent public accountant 
        was sued by FDIC for its part in the failure of the 
        institution, the accounting firm's defense called the 
        conduct of Madison Guaranty's management into question 
        for several transactions including Castle Grande.
          Although the Rose Law Firm had earlier assisted 
        Madison Guaranty management in the original Castle 
        Grande transaction, the Rose Law Firm did not disclose 
        its role in that transaction when later retained by the 
        FDIC in the malpractice suit against Madison Guaranty's 
        independent public accountant.1407

    On December 29, 1995, RTC General Counsel William Collishaw 
informed the Arkansas Supreme Court Committee on Professional 
Conduct that the RTC-IG Report ``provides a sufficient 
indication of the existence of possible undisclosed conflicts 
of interest by the Rose Law Firm such that it raises concerns 
about the Rose Law Firm's compliance with the Arkansas Rules of 
Professional Conduct.''1408 The matter is still pending 
before the Committee on Professional Conduct.1409
    Relying primarily on the report of the RTC-IG, the 
Pillsbury Firm reviewed Rose's representation of the FDIC and 
the RTC.1410 Pillsbury determined that ``[b]etween the 
time the Rose Law Firm was substituted in and the time the 
Frost case settled, the Rose Law Firm developed an 
impermissible conflict of interest, which it neither fully 
disclosed to its client, the RTC, nor had waived.'' 1411 
Pillsbury concluded that ``[a] claim could be asserted against 
the Rose Law Firm with respect to the conflict of interest.'' 
1412 Specifically, Pillsbury identified Seth Ward and the 
Castle Grande transaction as among the factors leading to its 
conclusion that Rose had a conflict of interest.1413
    Ms. Black, counsel to the RTC-IG, stressed the significance 
of the billing records found in the Book Room of the White 
House to her investigation. She explained that the records 
related to the key transactions at issue in the allegations of 
conflicts of interest:

          The investigation which we were performing in 1994 
        and completed in the summer of 1995 was an 
        investigation of actual or potential conflicts that the 
        Rose Law Firm might have had with regard to its work 
        for initially the FDIC and then the RTC. As a part of 
        that investigation, we looked at the firm's work for 
        Madison Guaranty. We also looked at the firm's work, if 
        any, for Seth Ward.
          We looked at various transactions, including Castle 
        Grande, IDC, the Frost litigation, the representation 
        before the Arkansas Security Department and general 
        work that they did for Madison Guaranty. These 
        records--the records that were available to us at the 
        time we were doing our investigation were very sparse. 
        It was very difficult for us to understand what the 
        Rose Law Firm had in fact done. We had no more than a 
        handful of invoices, five or six.1414

    Ms. Black stated that the billing records were the best 
available evidence of the work Rose performed for Madison and 
that those records were ``considerably more detailed than what 
was available to us before.''1415
    Ms. Black testified that if the RTC-IG had the billing 
records during its investigation, ``certainly there would have 
been questions that we asked witnesses that we did not ask. 
There would have been lines of inquiry that we would have 
pursued that we did not pursue. There might have been witnesses 
that we would have asked to interview that we did not ask to 
interview.''1416
    In particular, the Rose billing records increased the RTC-
IG's knowledge of Mrs. Clinton's role in Rose's representation 
of Madison. When Ms. Black testified before the House Banking 
Committee in August 1995 about her report, all that she could 
say was that Mrs. Clinton worked for Madison. ``We don't know 
what it was. The bills that were submitted by Rose had the 
names of attorneys who did the work at the top, and then they 
had a block discussion of the activities that occurred, and we 
don't know who did what.''1417 Ms. Black further testified 
in 1995 that ``[w]e have no evidence that she [Hillary Clinton] 
worked on Castle Grande.''1418
     After the billing records were discovered, Ms. Black 
testified that the RTC-IG learned, for the first time, of the 
following relevant matters:
          Mrs. Clinton's role in drafting the May 1, 1986 
        option agreement between Madison and Seth Ward;
          Mrs. Clinton's telephone conference with Beverly 
        Bassett Schaffer the day before the Rose Law Firm sent 
        a letter to Ms. Schaffer requesting approval of 
        Madison's plan to issue a series of preferred stock;
          Mrs. Clinton's review of a letter discussing the 
        Arkansas banking regulation which limited direct 
        investments by an S&L in an affiliate or subsidiary; 
        and
          Mrs. Clinton's 15 conferences, either in person or on 
        the telephone, with Seth Ward, the key player in the 
        Castle Grande deal.1419
    Ms. Black stated that the RTC-IG would have interviewed 
Mrs. Clinton if it had the billing records during its 
investigation.1420

V. The Special Committee's Investigation into the Circumstances 
        Surrounding the Discovery of the Billing Records

    The FDIC-IG issued its report on the Rose Law Firm's 
conflicts of interest stemming from its representation of 
Madison on July 28, 1995. The RTC-IG issued its report on the 
same matter on August 3, 1995. During the two week period 
following the publication of these reports, Ms. Huber first saw 
the billing records in the Book Room of the White House 
Residence, next to Mrs. Clinton's office.
    The Special Committee conducted hearings in December 1995 
into matters relating to the Rose Law Firm and Mrs. Clinton's 
representation of Madison. Specific questions were raised 
regarding the existence of the billing records. Mr. Hubbell 
claimed that he could not provide complete answers about the 
Mrs. Clinton's representation of Madison because he did not 
have the billing records to refresh his memory.1421 Ms. 
Thomases similarly testified about her campaign notes relating 
to billing records reflecting Mrs. Clinton's work for 
Madison.1422 About two weeks later, on January 4, 1996, 
Ms. Huber examined the records she recovered from the Book Room 
and realized that they were the missing billing 
records.1423
    Because of the importance of the records and the mysterious 
circumstances of their disappearance and discovery, the Special 
Committee conducted an exhaustive investigation to identify the 
person or persons who removed them from the Rose Law Firm in 
1992 and who placed them in the Book Room of the White House 
Residence in August 1995.
    The White House produced to the Special Committee records 
reflecting all persons who entered the White House Residence 
from July 20 through August 14, 1995.1424 The White House 
provided lists of construction workers who were on the payroll 
of contractors performing renovations in the White House 
Residence during this period.1425 Finally, the White House 
produced lists of overnight guests of President and Mrs. 
Clinton during this period.1426
    The White House informed the Special Committee that 
approximately 206 persons had access to the Book Room during 
the relevant period from July 20 to August 14, 1995, when Ms. 
Huber testified she found the billing records.1427
    Of the 206 persons with access to the Bookroom during the 
relevant period, 28 were White House Residence Staff.1428 
The Chief Usher, Gary Walters, testified that the Residence 
staff may not place documents in, or move documents around, the 
White House Residence without authorization.1429 According 
to Mr. Walters, it is highly unlikely that a member of the 
Residence staff placed the records in the Book Room.1430 
Because the White House Residence employees would have had 
little opportunity to gain access to the billing records and no 
reason to place them in the Book Room, the Special Committee 
concluded that no residence employee placed the billing records 
in the Book Room.
    After eliminating the 28 members of the Residence Staff, 
178 persons remained. Of those, approximately 30 construction 
workers, who were involved in ongoing work in the Book Room or 
in the adjacent Exercise Room, were given access to the Book 
Room. Dennis Freemyer, the Deputy Head Usher in charge of 
construction projects, testified that the construction workers 
and outside contractors were all instructed not to touch or 
move anything in the White House Residence.1431 According 
to Mr. Freemyer: ``They are asked not to touch anything. If 
they need something moved, they're to ask either the National 
Park Service or a member of our staff, if they are present.'' 
1432 All construction workers and outside contractors were 
escorted by either Secret Service or White House Ushers at all 
times while they were in the Residence.1433 For security 
reasons, the escorts specifically check at the completion of 
each day's work to ascertain whether the workers had left 
anything behind.1434 According to Mr. Freemyer, it is 
highly unlikely that a construction worker or outside 
contractor placed the records in the Book Room.1435 
Because the outside contractors had no opportunity to gain 
access to the billing records or reason for placing them in the 
Book Room, the Special Committee concluded that no outside 
contractor placed the records in the Book Room.
    After eliminating the construction workers, 148 persons 
remained, including 55 public officials.1436 These public 
officials included 24 U.S. mayors, President and Mrs. Kim of 
South Korea, and various Cabinet officials and National 
Security Staff.1437 Given their official positions and 
their lack of access to the billing records or motive to place 
them in the Book Room, the Special Committee concluded that 
none of these individuals placed the Rose Law Firm billing 
records in the Book Room.
    Of the remaining 93 persons who had access to the White 
House residence during the period from July 20 through August 
14, 1995, records of the Secret Service and the White House 
Usher's Office identified 60 Residence guests.1438 The 
Special Committee sent interrogatories to these guests. Each 
guest responded that he or she did not handle the records, have 
any discussions about the records, or have any knowledge of how 
they came to appear in the Book Room of the White House 
Residence.
    Apart from the Residence guests, construction workers, and 
staff, the remaining 33 individuals who had access to the Book 
Room during the relevant period had a past or present working 
relationship with the President and the First Lady. Of these 33 
persons, the Special Committee received evidence from all 
except the President and the First Lady. Ten were sent 
interrogatories, and the others gave testimony directly to the 
Special Committee. All denied having handled the records, 
having any discussions about the records,36 or having any 
knowledge about how the records appeared in the Book Room of 
the White House Residence.
---------------------------------------------------------------------------
    \36\ Susan Thomases testified that she talked with Mr. Hubbell in 
1992 about Mrs. Clinton's work for Madison, and he indicated to her 
that he had reviewed time records. With respect to reviewing the 
records herself, however, Ms. Thomases testified, ``I never saw them. . 
. . I never heard what happened to them.'' (Thomases, 12/18/95 Hrg. pp. 
54-55.)
---------------------------------------------------------------------------
    The President and Mrs. Clinton are the only persons on the 
list of 206 persons having access to the White House Residence 
from whom the Special Committee has not received evidence. On 
June 13, 1996, the Special Committee requested that Mrs. 
Clinton respond in writing, under oath, about ``any knowledge 
she may have concerning the Rose Law Firm billing records 
bearing Bates Stamp numbers DKSN028928 through DKSN029043, 
including whether she has reviewed, handled, or discussed 
(other than with counsel) these records, and her knowledge 
relating to the disappearance or discovery of these records.'' 
1439
    On June 17, 1996, Mrs. Clinton responded: ``I do not know 
how the billing records (DKSN028928 through DKSN029043) came to 
be identified by Mrs. Huber at the White House on January 4, 
1996, although I have read various media accounts.'' In light 
of the Special Committee's request for detailed and specific 
information relating to any knowledge she had concerning the 
disappearance or discovery of these records, Mrs. Clinton's 
answer is incomplete. For example, she does not state whether 
she has any knowledge as to how the billing records were 
removed from the Rose Law Firm; who possessed the billing 
records between February 1992 and August 1995; where they were 
stored between February 1992 and August 1995; and, most 
importantly, who placed them in the Book Room of the White 
House in August 1995. There is no mystery as to how Ms. Huber 
came to identify the records on January 4, 1996. These other, 
more important questions, however, remain to be answered.
    On June 4, 1996, the FBI informed the Special Committee 
that the fingerprints of six persons were found on the Rose 
billing records discovered in the Book Room.1440 In 
addition to fingerprints of Ms. Huber and Marc Rolfe, a 
Williams & Connolly legal assistant who stamped numbers on the 
records to prepare them for production,1441 the FBI also 
identified the fingerprint of Sandra Hatch, a Rose Law Firm 
file clerk assigned to Mr. Foster in 1992,1442 and a palm 
print of Mildred Alston, Mrs. Clinton's Rose Law Firm secretary 
and currently Special Assistant for White House Personal 
Correspondence.1443
    Ms. Hatch testified that, as Mr. Foster's file clerk, she 
was often asked by Mr. Foster or his secretary to photocopy 
documents and files--which, on occasions, included timesheets 
and billing records of the size and description similar to 
those found in the White House Book Room.1444 She did not, 
however, recall a specific instance when Mr. Foster asked her 
to photocopy or handle such records.1445 She did not 
recall handling, discussing, or overhearing any discussions 
about records specifically relating to the Rose Law Firm's work 
for Madison.1446 Ms. Hatch testified that although she 
packed some of Mr. Foster's personal files from the Rose Law 
Firm for shipment to the White House in January 1993, she did 
not see any records resembling the billing records discovered 
in the Book Room.1447 She had no knowledge of how the 
billing records got to the White House Residence.1448 When 
asked to speculate how her fingerprint got onto the billing 
records, Ms. Hatch replied, ``It's very possible I could have 
been asked to pick them up. I don't know. It would just be a 
guess.'' 1449
    Mildred Alston testified that, although she had been to 
Mrs. Clinton's office on the third floor of the White House 
Residence, she had never been to the adjacent Book 
Room.1450 Prior to her appearance before the Grand Jury in 
1996, Ms. Alston had never seen the billing records discovered 
in the Book Room since she came to Washington.1451 She did 
see and handle records resembling those found in the Book Room 
while she worked at the Rose Law Firm, 1452 and speculated 
that ``I'm sure if the tests indicate that my palm print is 
wherever on this piece of paper, or on the original of this 
piece of paper, then I handled them, or touched them or leaned 
on them'' while she was at the Rose Law Firm.1453 Ms. 
Alston testified that, in January 1992, she helped pack Mrs. 
Clinton's documents and left some of them in the custody of Amy 
Stewart, a Rose lawyer, to be shipped to the White 
House.1454 Ms. Alston did not know whether the billing 
records found in the Book Room were among the files shipped to 
the White House from Mrs. Clinton's office at the Rose Law 
Firm. 1455
    The FBI also identified the fingerprints of Mrs. Clinton 
and Vincent Foster on the billing records.1456 Mr. Foster 
received the billing records during the 1992 Presidential 
campaign, and was the last known person to have handled the 
records.1457 Lawyers for the Clintons, both from the White 
House and from Williams & Connolly, have stated that Mrs. 
Clinton ``may have handled the billing records in 1992.'' 
1458 What is left unanswered by this statement, however, 
are the critical questions concerning the mystery of the 
billing records: when did Mrs. Clinton handle them? Why did she 
handle them? And specifically, what information was she 
attempting to glean from them?
    A close analysis of the billing records, Mr. Foster's 
notations, and the location of Mrs. Clinton's and Mr. Foster's 
fingerprints reveal at least some answers to these questions. 
The records disclose Mrs. Clinton's role in advising Mr. 
McDougal's Castle Grande transaction and they indicate Mrs. 
Clinton's and Mr. Foster's concern over Mrs. Clintons' 
involvement in the transactions.
    Mrs. Clinton left her fingerprints at two places on the 
billing records. The FBI identified ``[o]ne fingerprint located 
on the front bottom near the left edge of the page DEK 
014950.'' 1459 At approximately this location on the 
page,37 is an entry reflecting that Mrs. Clinton 
participated in a ``teleconference with B. Bassett, Securities 
Commissioner.'' 1460 The entry is underlined in an 
unidentified hand, but the presence of Mrs. Clinton's 
fingerprint at this approximate location, and the absence of 
any other identifiable finger print on the page,1461 
strongly suggest that Mrs. Clinton made the markings.
---------------------------------------------------------------------------
    \37\ DEK 014950 was produced to the Special Committee as 
DKSN028943. (Facsimile from Nicole Seligman to Robert Giuffra, June 5, 
1996.)
---------------------------------------------------------------------------
    This entry on the billing records, for upwards of one hour 
on the day before Rose submitted Madison's novel preferred 
stock proposal to Ms. Schaffer,1462 contradicts Mrs. 
Clinton's response to RTC interrogatories that in May 1995, 
when she called the Arkansas Securities Department to find out 
``to whom Mr. Massey should direct any inquiries,'' she did not 
recall to whom she spoke.1463 Mrs. Clinton's sworn 
statement is contrary to the testimony of the other two 
participants in the telephone conference, Ms. Schaffer and Mr. 
Massey.1464 Ms. Schaffer, in particular, testified that 
she substantively discussed the legality of the preferred stock 
proposal.1465
    Mrs. Clinton's fingerprints and the markings on the billing 
records at this entry indicate that Mrs. Clinton was aware of 
the nature of her contact with Ms. Schaffer as recently as 
February 1992, three years before her sworn answer to the RTC 
interrogatories. Ms. Schaffer recalled the substance of the 
conversation from over ten years ago, and it is unclear why 
Mrs. Clinton provided inaccurate information to the RTC on the 
conversations about which she had substantive knowledge as 
recently as 1992.
    Mr. Foster's fingerprints on the billing records indicate 
his attention to Mrs. Clinton's role with respect to the Castle 
Grande transaction, a ``land flip'' deal that federal 
regulators have described as a fraud costing the taxpayers $4 
million.1466 The transaction was fraudulently structured 
to evade Arkansas' ``direct investment'' rule, which limits an 
S&L's investment in its subsidiaries and service 
corporations.1467
    The FBI identified ``[o]ne fingerprint on the front lower 
right corner of page DEK 014969'' belonging to Mr. 
Foster.1468 At approximately this location on the 
page,38 is an entry reflecting that Mr. Massey 
participated in a conference with Sarah Hawkins, a Madison 
official, and the Federal Home Loan Bank ``regarding brokerage 
activities and direct investment rule.'' 1469 The entire 
entry is circled, most probably by Mr. Foster, given the 
presence of his fingerprint proximate to the entry. The 
markings suggest that Mr. Foster recognized the significance of 
the direct investment rule as it related to the activities of 
Madison.
---------------------------------------------------------------------------
    \38\ This document was produced to the Special Committee as 
DKSN028962. (Facsimile from Nicole Seligman to Robert Giuffra, June 5, 
1996.)
---------------------------------------------------------------------------
    The importance of Mr. Foster's recognition as it related to 
Mrs. Clinton's representation of Madison becomes clear with the 
FBI's identification of ``[o]ne fingerprint on the front upper 
right corner of page DEK 015030'' belonging to Mr. 
Foster.1470 At approximately this location on the page 
39 is an entry reflecting that Mrs. Clinton had a 
telephone conference with Donald Denton, a Madison official, 
for approximately 12 minutes on April 7, 1986.1471 
Someone, apparently Mr. Foster, circled the name of the 
attorney on the entry: ``HRC.'' 1472
---------------------------------------------------------------------------
    \39\ This document was produced to the Special Committee as 
DKSN029024. (Facsimile from Nicole Seligman to Robert Giuffra, June 5, 
1996.)
---------------------------------------------------------------------------
    This telephone call is among the critical events in 
illuminating the nature of Mrs. Clinton's work in connection 
with the fraudulent Castle Grande transaction. The land deal, 
as noted above, was a sham transaction designed to conceal 
Madison Guaranty's investment in Castle Grande through its 
subsidiary, Madison Financial. Mr. Ward was the ``straw man'' 
purchaser in the project--one who lends his name to the title, 
but does not actually have an ownership interest.1473 In 
order to conceal the commissions owed to Mr. Ward for his 
services, Madison Guaranty, Madison Financial, and Mr. Ward 
executed three promissory notes purporting to evidence loans 
but, in fact, were a means to pay Mr. Ward for his commissions. 
Two of these notes were executed on April 7, 1986.
    That same day, Mr. Denton, Madison's loan officer, received 
a message from Mrs. Clinton.1474 According to Mr. Denton, 
Mrs. Clinton called seeking copies of the April 7th notes 
between Mr. Ward and Madison Financial.1475 When Mr. 
Denton cautioned Mrs. Clinton that the April 7th notes from 
Madison to Mr. Ward may pose a problem because ``they 
constituted in effect a parent entity fulfilling the obligation 
of a subsidiary,'' 1476 Mrs. Clinton ``summarily 
dismissed'' Mr. Denton's warning.1477 She replied in a 
manner he took to mean that ``he would take care of savings and 
loan matters, and she would take care of legal matters.'' 
1478
    She indeed took care of matters. The Rose Law Firm billing 
records indicate that, three weeks later, on May 1, 1986, Mrs. 
Clinton prepared an option agreement between Mr. Ward and 
Madison Financial.1479 The word ``HRC'' in the entry was, 
as in the April 7th entry, circled apparently by the same 
hand.1480 Based on the new evidence derived from Mr. 
Denton and the billing records, the federal regulator who 
examined Madison in 1986 believed that Mrs. Clinton's May 1 
option ``was created `in order to conceal the connection--
whatever it was--between' '' the March 31 and April 7 
notes.1481
    On June 13, 1996, the Special Committee requested that the 
First Lady attempt to refresh her recollection regarding the 
matters discussed by Mr. Denton and to inform the Committee of 
what she recalls about them.1482 On June 17, 1996 the 
Special Committee received an affidavit from Mrs. Clinton 
accompanied by a letter from Mr. Kendall. In the affidavit, 
Mrs. Clinton gave no answer to the question posed by the 
Special Committee; instead, she simply referred to Mr. 
Kendall's letter ``addressing certain allegations recently made 
by Mr. Don Denton.'' 1483 In his letter, Mr. Kendall 
maintained that Mr. Denton's recollection is ``wholly 
unreliable'' 40 but gave no indication as to the 
recollection of the First Lady.1484 The First Lady thus 
has neither confirmed nor denied Mr. Denton's testimony.
---------------------------------------------------------------------------
    \40\ Mr. Kendall based this assertion on the fact that Mr. Denton 
testified at two trials, Ward v. Madison Guaranty, and United States v. 
McDougal et al., yet did not mention his April 7, 1986 telephone 
conversation with Mrs. Clinton. Mr. Kendall, however, offered no 
indication whether Mr. Denton was asked questions about his 
conversations with Mrs. Clinton or, for that matter, whether such 
conversations and Mrs. Clinton's work for Madison were within the scope 
of the trials.
    What is clear, however, is that Mr. Denton recalled the 
conversation only after being shown Mrs. Clinton's billing records 
reflecting the 12 minute telephone call on April 7. When he was shown 
this record, on June 3, 1996, he did not recall the conversation. 
However, after the interview, he reviewed his files and discovered the 
April 7 message slip from Mrs. Clinton. His memory thus refreshed, he 
provided additional testimony to the FDIC-IG, all under a legal 
obligation of truthfulness, 18 U.S.C. Sec. 1001. (Denton, FDIC-IG 
Report of Interview, June 11, 1996.) Mr. Denton has no reason to 
mislead investigators, much less to go out of his way to give 
inaccurate testimony.
---------------------------------------------------------------------------
    The significance of the billing records as they relate to 
Castle Grande is perhaps best illustrated by the activities of 
Mrs. Clinton's legal defense team immediately after the 
discovery of the records. A message slip from John Tisdale, the 
Clintons' Arkansas lawyer to Alston Jennings, Seth Ward's 
former attorney on Castle Grande, indicate that, on June 5, 
1996, the day after Ms. Huber discovered the records in her 
White House office, Mr. Kendall called Mr. Tisdale and Mr. 
Jennings to arrange a meeting.1485 One week after the 
records were discovered, on January 11, 1996, Mr. Kendall flew 
to Little Rock and met first with Mr. Jennings and then with 
Mr. Ward.1486 The meeting with Mr. Ward lasted 30-40 
minutes.1487 Curiously, Mr. Kendall had also contacted Mr. 
Jennings in August 1995. Subsequent to that contact, Mrs. 
Clinton summoned Mr. Jennings to the White House for a personal 
meeting on August 10, 1995, around the time that the billing 
records were placed in the Book Room of the White House 
residence.
    Mrs. Clinton, as the billing partner and lead attorney for 
Rose on the matter, most likely would have appreciated the 
importance of the billing records and the information they 
impart on Castle Grande. What remains unanswered is how Mr. 
Foster gained knowledge of the significance of these 
transaction--sufficient knowledge apparently to highlight the 
entry on the billing records for Mrs. Clinton's April 7th 
telephone call with Mr. Denton and for her preparation of the 
May 1 option. Given that Mr. Foster directed his handwritten 
notes on the billing records to Mrs. Clinton, the most 
reasonable inference is that Mrs. Clinton shared her 
recollection of the transactions with Mr. Foster, and the two 
collaborated in reviewing the billing records some time after 
February 1992. If that is so, then the question arises as to 
why Mrs. Clinton stated to investigators in 1995 that ``I do 
not believe I knew anything about any of these real estate 
parcels and projects.'' 1488
    The billing records, and the evidence from Mr. Denton which 
the entries on the billing records elicited, indicate that Mrs. 
Clinton either had knowledge of or consciously avoided the fact 
that the Castle Grande transactions potentially violated bank 
regulations. That knowledge provides a powerful motive to 
protect the billing records from careful scrutiny by 
investigators. Because Mrs. Clinton had ordered the destruction 
of other documents relating to Mrs. Clinton's representation of 
Madison--including her timesheets and other work files directly 
relating to Castle Grande--the billing records were the only 
documentary evidence available which reflected the true extent 
and nature of Mrs. Clinton's role with respect to the 
fraudulent scheme.
    The evidence strongly suggests that Mr. Foster and Mrs. 
Clinton, at some time after February 1992, worked together to 
reconstruct Mrs. Clinton's role in Castle Grande. The evidence 
also indicates that Mr. Foster and Mrs. Clinton appreciated the 
significance of Mrs. Clinton's April 7 telephone call to Mr. 
Denton and her preparation of the May 1 option, in the words of 
a federal regulator, ``to conceal'' the true nature of the 
transaction.1489 Both had a powerful motive to protect the 
billing records from scrutiny. Mr. Foster is now deceased.

                                Endnotes

    1 White House Production S 12517.
    2 O'Melveny & Myers Document CCBW-884
    3 Williams & Connolly Document DKSN001168-001169.
    4 Williams & Connolly Document DKSN013309.
    5 RTC Document FDICHRC 162-163.
    6 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    7 Wright, 1/26/96 Dep. p. 157-159.
    8 Clark, 1/18/96 Hrg. pp.162-164..
    9 Treasury Contacts Report, p. 3 & n. 7.
    10 IX Hearing Before the Committee on Banking, Housing, and 
Urban Affairs, Document pp. 1450-1455.
    11 Foren, 11/13/95 Dep. p. 107.
    12 Foren 11/14/95 Dep. p. 107
    13 Foren, 11/28/95 Hrg. p. 23.
    14 Coleman, 11/9/95 Dep. pp. 63-68; Coleman, 12/1/95 Hrg. pp. 
11-12.
    15 Coleman, 12/1/95 Hrg. p. 16; see also Coleman, 11/9/95 Dep. 
p. 70; Kennedy, 11/1/95 Dep. p. 12; Kennedy, 12/5/95 Hrg. p. 69
    16 Kennedy, 11/1/95 Dep. pp. 22-23; Kennedy, 12/5/95 Hrg. 
pp.16-20.
    17 Kennedy, 11/1/95 Dep. pp. 12-14; Kennedy, 12/5/95 Hrg. pp. 
13-15.
    18 Hogan & Hartson Document BL011722.
    19 S. Rep. 103-433, ``Madison Guaranty S&L and the Whitewater 
Development Corporation, Washington, D.C. Phase, Report of the 
Committee on Banking, Housing, and Urban Affairs, United States Senate, 
on the Communications Between Officials of the White House and the U.S. 
Department of the Treasury or the Resolution Trust Corporation,'' 103rd 
Cong., 2d Sess., January 3, 1995 pp. 9-13 (hereinafter, ``S. Rep. 103-
433'').
    20 S. Rep. 103-433 p. 11.
    21 S. Rep. 103-433 p. 11.
    22 S. Rep, 103-433 p. 12.
    23 RTC Document TH705.
    24 Sloan, 7/21/94 Dep. p. 44-47, S. Hrg. 103-889, Vol. V, pp. 
680-682.
    25 White House Document X983, S. Hrg. 103-889, Vol. IX, p. 
1086.
    26 White House Document X984 S. Hrg. 103-889, Vol. IX, p. 
1087.
    27 White House Document X984, S. Hrg. 103-889, Vol. IX, p. 
1087; S. Rep. 103-433, Vol. 11, p. 16.
    28 S. Rep. 103-433 pp. 12-13. Check cite.
    29 S. Rep. 103-433 p. 18.
    30 Lindsey, 7/21/94 Dep. p. 219, S. Hrg. 103-889, Vol. V, p. 
451.
    31 S. Rep. 103-433 p. 18.
    32 S. Rep. 103-433 pp. 26-34.
    33 White House Document X534, S Hrg. 103-889, Vol. VIII, p. 
641.
    34 White House Document X534, S Hrg. 103-889, Vol. VIII, p. 
641.
    35 Kennedy, 12/5/95 Hrg. p. 46.
    36 12/12/95 Submission of Williams & Connolly to the Special 
Committee p. 13, reprinted in Kennedy Notes Report, S. Rep. 104-191 p. 
70.
    37 Lindsey, 11/28/95 Hrg. p. 205.
    38 Lindsey, 11/28/95 Hrg. p. 204.
    39 Kennedy, 1/15/96 Dep., pp. 145-146.
    40 Black, 11/7/95 Hrg. pp. 168, 190.
    41 New York Post, 11/29/95, p. 16.
    42 Eggleston, 11/4/95 Dep. pp. 61-58; Spotila, 11/6/95 Dep. 
pp. 52-65.
    43 Justice Department Document TTK-157.
    44 Gearan, 2/15/96 Hrg. pp. 9-12.
    45 White House Production S020567.
    46 White House Production S 020566; Gearan, 02/15/96 Hrg., p. 
15.
    47 Gearan, 2/15/96 Hrg. p. 15.
    48 Gearan, 02/15/96 Hrg., pp. 15-16; Ickes, 02/22/96 Hrg., pp. 
68-69.
    49 White House Production S020578.
    50 Wright, 1/26/96 Dep. p. 13.
    51 White House Production S 02084. (CHECK)
    52 White House Production S 02084. (CHECK)
    53 White House Production S 020579.
    54 White House Production S 020579.
    55 White House Document S020760-020761.
    56 White House Document S020760-020761.
    57 White House Production, ?, S020576.
    58 White House Production, ?, (Not Numbered).
    59 Gearan, 02/15/96 Hrg., p. 182.
    60 Schaffer, 04/29/96 Dep., pp. 38-39.
    61 Rutherford, 2/29/96, Dep. p. 43.
    62 Schaffer, 04/29/96 Dep., p. 26.
    63 S. Rerp. 103-433, p. 81.
    64 Altman Diary, Treasury Doc. No. 2987; S. Rep. 102-433, p. 
65-67.
    65 Pillsbury Madison & Sutro, A Report on Certain Real Estate 
Loans and Investments Made By Madison Guaranty Savings & Loan and 
Related Matters, 12/19/95, p. 39.
    66 Denton, 6/11/96 FDIC OIC Interview p. 3.
    67 Stephanopoulos, 07/19/94 Dep. p. 40.
    68 Steiner, 07/18/94 Dep., pp. 199-200.
    69 Hanson, 07/17/94 Dep., p. 652.
    70 Hanson, 07/17/94 Dep., p. 651.
    71 S. Rep. 103-433, p. 145.
    72 S. Rep. 103-433, Vol. II, p. 145; Steiner, 7/18/94, Dep. 
pp. 205-206.
    73 S. Rep. 103-433, Vol. II, p. 145; Steiner, 7/18/94, Dep. 
pp. 205-206.
    74 Stephens, 05/15/96 Dep. p. 13.
    75 Stephens, 05/15/96 Dep. p. 21.
    76 Stephens, 05/17/96 Hrg., p. 19.
    77 Stephens, 05/17/96 Hrg., pp. 7-8.
    78 Lewis, 11/29/95 Hrg. p. 6.
    79 Iorio, 10/20/95 Dep. p. 123; Lewis, 11/29/95 Hrg. p. 26.
    80 11/27/95 Transcript of Conversation Between L. Jean Lewis 
and April Bristle, p. 59.
    81 DOJ Doc. A7049-50. Banks dep. 91.
    82 Iorio and Lewis, 11/29/95 Hrg., p. 28.
    83 Gangloff, date, pp. 72-74.
    84 Department of Justice Production FBI-00001545.
    85 DOJ Production 014277.
    86 Keeney, 12/06/95 Hrg., p. 28.
    87 Casey, house dep. p. 112; Johnson, date, pp. 55-56.
    88 DOJ Doc. 16848.
    89  Hubbell Dep. 10/26/95, Dep. pp. 96-99, 149-151.
    90 Hrg. 11/8/95, p. 8.
    91 Adair, 11/7/95 hrg., p. 123.
    92  Hrg. 11/7/95, p. 124.
    93 Cottos, 11.8.95 Hrg. p. 35-36.
    94  Blight, 11/7/95 Hrg. pp. 108-109.
    95 Hrg. 11/7/95, pp. 119-20.
    96 S. Hrg. 103-889, Vol. IV, pp. 90, 432, 461, 735 & 743.
    97  Potts, 11/8/95 Hrg., pp. 226-27.
    98 Cutler, 11/9/95 Hrg. p. 34.
    99 White House Production, Cover Letter, 1/29/96.
    100 Gearan, 2/12/96, Dep. p.12.
    101 Waldman, 2/21/96, pp. 15-17.
    102 White House Production, 2/20/96, Cover Letter.
    103 Letter from Allen Snyder to Robert Giuffra, Mar. 1, 1996, 
p. 1.
    104 S. Rep. 103-433, Vol. II, pp. 125-135.
    105 Ickes, 7/24/94 Dep. pp. 118-126.
    106 Ickes, 7/24/94 Dep. p. 119.
    107 Ickes, 7/24/94 Dep. p. 123.
    108 White House Document S9908-S9911.
    109 White House Document S9909.
    110 5 C.F.R. Sec. 2635.701(a).
    111 5 C.F.R. Sec. 2635.702. See also Office of Government 
Ethics, Report to the Secretary of the Treasury pp. 2-4 (July 31, 
1994).
    112 The White House, Remarks by the President in Appointment 
of Lloyd Cutler for Special Counsel to the President, March 8, 1994.
    113 See 5 C.F.R. Sec. 2635.703 (``An employee shall not . . . 
allow the improper use of nonpublic information to further his own 
private interest or that of another, whether through advice or 
recommendation, or by knowing unauthorized disclosure.'').
    114 3 CFR Sec. 100.735-18.
    115 Clark, 1/18/96 Hrg. p. 90
    116 Clark, 1/18/96 Hrg. p. 90.
    117 Williams & Connolly Document DKSN028928-DKSN029043.
    118 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    119 Williams & Connolly Document DKSN028943.
    120 Williams & Connolly Document DKSN028943.
    121 Williams & Connolly Document DKSN0128940.
    122 Massey, 1/11/96 Hrg. pp. 184-185.
    123 Williams & Connolly Document DKSN028928-DKSN029043.
    124 Williams & Connolly Document DKSN028928-DKSN029043.
    125 Williams & Connolly Document DKSN028943.
    126 Massey, 1/11/96 Hrg. p. 93.
    127 Massey, 1/11/96 Hrg. p. 93.
    128 Massey, 1/11/96 Hrg. pp. 96-97.
    129 Pillsbury Madison & Sutro, A Report on Certain Real Estate 
Loans and Investments Made by Madison Guaranty Savings & Loan and 
Related Matters, 12/19/95, p. 39.
    130 Hillary Rodham Clinton Answer to RTC Interrogatory Number 
29, p. 73, 5/24/95, RTC Document 74.
    131 RTC Supplemental Interrogatories, 1/20/96, RTC Document 
SINNTR00100.
    132 Clark, 6/10/96 FDIC-IG Interview p. 9.
    133 Clark, 6/10/96 FDIC-IG Interview p. 9.
    134 Clark, 6/10/96 FDIC-IG Interview p. 9.
    135 Clark, 6/10/96 FDIC-IG Interview p. 9.
    136 RTC Document, SEN 32912-32913.
    137 Williams & Connolly Document DKSN029024.
    138 Denton Document, DD000000241.
    139 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    140 Id. at 3.
    141 Id.
    142 Williams & Connolly Document, DKSN029026.
    143 12/28/95 Pillsbury Report p. 74.
    144 Clark, 6/10/96 FDIC-IG Interview p. 9.
    145 6/13/96 letter from Senators Alfonse D'Amato, Richard 
Shelby, Christopher Bond, Connie Mack, Lauch Faircloth, Robert Bennett, 
Rod Grams, Pete Domenici, Orrin Hatch, and Frank Murkowski to David 
Kendall.
    146 Affidavit of Hillary Rodham Clinton, June 17, 1996, p. 2.
    147 6/17/95 Letter from David Kendall to Alfonse D'Amato, p. 
2.
    148 Letter from Alston Jennings to Viet Dinh, February 7, 
1996, attachment.
    149 February 7, 1996 letter from Alston Jennings to Viet Dinh.
    150 Ward, 2/12/96 Dep. p. 102.
    151 Vinson & Elkins Document RS237A.
    152 Hubbell, 2/7/96 Hrg. p. 169.
    153 Clark, 1/18/96 Hrg. pp. 162-164.
    154 Williams & Connolly Document DKSN28929.
    155 Hubbell, 2/7/96 Hrg. p. 48.
    156 Hubbell, 2/7/96 Hrg. p. 56.
    157 Hubbell, 2/7/96 Hrg. p. 52.
    158 Hubbell, 2/7/96 Hrg. p. 53.
    159 Hubbell, 2/7/96 Hrg. p. 54.
    160 Huber, 1/18/96 Hrg. p. 5.
    161 Huber, 1/18/96 Hrg., pp. 5, 8.
    162 Huber, 1/18/96 Hrg. p. 9.
    163 Huber, 1/18/96 Hrg. pp. 16-17, 28.
    164 Huber, 1/18/96 Hrg. pp. 17-18.
    165 Huber, 1/17/96 Dep. p. 85.
    166 Huber, 1/18/96 Hrg. p. 19; Huber, 1/17/96 Dep. pp. 85.
    167 Hubbell, 6/4/95 Dep. p. 95.
    168 Affidavit of Hillary Rodham Clinton to the Special 
Committee, June 17, 1996, p. 1.
    169 Pillsbury Madison & Sutro, ``Madison Guaranty Savings & 
Loan and Whitewater Development Company, Inc.: A Preliminary Report to 
the Resolution Trust Corporation,'' April 24, 1995, pp. 15-16, and p. 
25 (hereinafter, ``4/24/95 Pillsbury Report'').
    170 4/24/95 Pillsbury Report p. 11.
    171 4/24/95 Pillsbury Report p. 19.
    172 4/24/95 Pillsbury Report p. 32.
    173 4/24/95 Pillsbury Report p. 32.
    174 4/24/95 Pillsbury Report p. 43.
    175 Pillsbury Madison & Sutro, ``General Report on the 
Investigation of Madison Guaranty Savings & Loan and Related 
Entities,'' December 28, 1995, p. 7 (hereinafter, ``Pillsbury General 
Report'').
    176 4/24/95 Pillsbury Report p. 44.
    177 Pillsbury General Report pp. 7-8.
    178 Pillsbury General Report p. 8.
    179 Pillsbury General Report p. 8.
    180 Pillsbury General Report p. 8.
    181 Pillsbury General Report p. 9.
    182 Pillsbury General Report p. 9.
    183 Pillsbury General Report p. 9.
    184 4/25/95 Pillsbury Report, p. 4.
    185 RTC Document PLS0020S.
    186 RTC Document PLS0033S.
    187 Wright, 1/26/96 Dep. pp. 157-159.
    188 Wright, 1/26/96 Dep. pp. 157-159.
    189 Wright, 1/26/96 Dep. p. 164.
    190 Madison Guaranty S&L and the White Water Development 
Corporation: Washington, DC, Phase, Report of the Committee on Banking, 
Housing, and Urban Affairs on the Communications between Officials of 
the White House and the U.S. Department of the Treasury or the 
Resolution Trust Corporation, S. Rep. 103-433, Jan. 3, 1995, p. 3 & n. 
7.
    191 Treasury Contacts Report, p. 3 & n. 7.
    192 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Document, pp. 1447-1449.
    193 IX Hearing before the Committee on Banking, Housing, and 
Urban Affairs, White House Document, pp. 1450-1455.
    194 Office of Special Investigations, GAO/OSI-94-23, 
``Inadequate Oversight of Capital Management Services, Inc.,--an SSBIC, 
p. 2 (hereinafter GAO/OSI-94-23).
    195 GAO/OSI-94-23, p. 2.
    196 GAO/OSI-94-23, p. 2.
    197 GAO/OSI-94-23, p. 2.
    198 ``SBA Policy and Procedure Release #2017'' (reprinted in 
GAO/OSI-94-23, p. 22).
    199 ``SBA Policy and Procedure Release #2017'' (reprinted in 
GAO/OSI-94-23, p. 23).
    200 ``SBA Policy and Procedure Release #2017'' (reprinted in 
GAO/OSI-94-23, p. 4).
    201 ``SBA Policy and Procedure Release #2017,'' reprinted in 
GAO/OSI-94-23, p. 5; see also McDougal Transcript, 4/11/96 p. 4501.
    202 ``SBA Policy and Procedure Release #2017'' (reprinted in 
GAO/OSI-94-23, p. 5).
    203 GAO/OSI-94-23, p. 11.
    204 Foren, 10/26/95 Dep. pp. 161-162.
    205 Foren, 10/26/95 Dep. pp. 162-163.
    206 Foren, 10/26/95 Dep. pp. 162-163.
    207 DOJ Document 007763-007765.
    208 Foren, 10/26/95 Dep. pp. 162-164; DOJ Document 007763-
007765.
    209 Clinton's trial testimony p. 21 April 28, 1996.
    210 Foren, 10/26/95 Dep. pp. 30-33.
    211 Foren, 10/26/95 Dep. pp. 31-32.
    212 Foren, 10/26/95 Dep. pp. 33-34, 49-50.
    213 Foren, 10/26/95 Dep. pp. 80-81.
    214 Foren, 11/28/95 Hrg. p. 20.
    215 Foren, 11/28/95 Hrg. p. 23.
    216 1/31/96 OIC Document (2/17/94 Hale Indictment).
    217 1/31/96 OIC Document (2/17/94 Hale Indictment).
    218 DOJ Document 007763-007765.
    219 S. Rep. 103-433 p. XIII.
    220 Jeff Gerth, ``Clintons Joined S&L Operator in an Ozark 
Real-Estate Venture,'' New York Times, March 8, 1992, p. A1.
    221 Jeff Gerth, ``Clintons Joined S&L Operator in an Ozark 
Real-Estate Venture,'' New York Times, March 8, 1992, p. A1.
    222 Lewis, 11/29/95 Hrg. p. 6; Iorio, 10/20/95 Dep. pp. 10, 
16, 176-181.
    223 Iorio, 10/20/95 Dep. p. 38.
    224 Lewis, 10/30/95 Dep. p. 22; Lewis, 10/31/95 Dep. p. 336; 
Lewis, 11/29/95 Hrg. p. 7.
    225 Lewis, 10/30/95 Dep. p. 31.
    226 Lewis, 11/29/95 Hrg. pp. 7-9.
    227 Lewis, 11/29/95 Hrg. p. 8.
    228 Lewis, 11/29/95 Hrg. p. 9.
    229 Lewis, 11/29/95 Hrg. pp. 8-9.
    230 Lewis, 11/29/95 Hrg. p. 8.
    231 Lewis, 11/29/95 Hrg. p. 8.
    232 Lewis, 11/29/95 Hrg. p. 9.
    233 Lewis, 11/29/95 Hrg. pp. 9-10.
    234 Lewis, 10/30/95 Dep. p. 25.
    235 Lewis, 11/29/95 Hrg. p. 10; see RTC Document PLS0016S-
PLS0035S.
    236 RTC Document PLS0035S; Iorio, 11/28/95 Hrg. p. 70.
    237 DOJ Document JDA 000200.
    238 DOJ Document JDA 000200.
    239 DOJ Document JDA 000200.
    240 Thompson, 10/24/95 Dep. p. 13; R. Knight, 10/19/95 Dep. p. 
8.
    241 Dudine, 10/19/95 Dep. p. 17.
    242 Thompson, 10/24/95 Dep. p. 14; Dudine, 10/19/95 Dep. pp. 
13, 18, 32.
    243 Iorio, 11/29/95 Hrg. p. 74.
    244 RTC Document PLS0020S.
    245 RTC Document PLS0020S.
    246 RTC Document PLS0016S.
    247 RTC Document PLS0033S.
    248 RTC Document PLS0032S.
    249 Lewis, 11/29/95 Hrg. pp. 79-80; 10/30/95 Dep. pp. 35, 447.
    250 Iorio, 11/29/95 Hrg. p. 82.
    251 RTC Document PLS0022S.
    252 RTC Document PLS0022S.
    253 Wright, 4/25/96 Hrg. p. 117.
    254 Wright, 1/26/96 Dep. p. 162.
    255 Wright, 4/25/96 Hrg. pp. 119-120.
    256 Wright, 1/26/96 Dep. p. 164.
    257 Wright, 4/25/96 Hrg. p. 124.
    258 S. Rep. 103-433 p. XIV.
    259 DOJ Document 10/27/93 (Not Numbered) letter from Paula J. 
Casey to L. Jean Lewis declining to take action on referral.
    260 RTC Document 09/01/92 (Not Numbered) letter from L. 
Richard Iorio to Charles A. Banks.
    261 DOJ Document 10/27/93 (Not Numbered) letter from Paula J. 
Casey to L. Jean Lewis declining to take action on referral.
    262 DOJ Document JDA 000200.
    263 McWhorter, 10/17/95 Dep. p. 13.
    264 McWhorter, 10/17/95 Dep. p. 31; Banks 10/24/95 Dep. p. 56.
    265 Banks, 10/24/95 Dep. p. 56.
    266 Barr, 11/13/95 Dep. pp. 10-13.
    267 Raphaelson, 10/26/95 Dep. p. 5.
    268 Barr, 11/13/95 Dep. pp. 11-13.
    269 Raphaelson, 10/26/95 Dep. pp. 12-17, 34-35.
    270 Barr, 11/13/95 Dep. p. 14.
    271 Barr, 11/13/95 Dep. pp. 14-15.
    272 Barr, 11/13/95 Dep. p. 22.
    273 Barr, 11/13/95 Dep. p. 43.
    274 DOJ Document 7214.
    275 DOJ Document 017458.
    276 FBI Document 00000986-996.
    277 FBI Document 00000988.
    278 FBI Document 0000991-00000992.
    279 FBI Document 00000986-996.
    280 FBI Document 1031; Kendrick, 10/30/95 Dep. p. 16.
    281 Mueller, 10/11/95 Dep. p. 8.
    282 Verinder, 10/31/95 Dep. p. 6.
    283 Kendrick, 10/30/95 Dep. p. 18.
    284 FBI Document 1031, 523-525; Kendrick, 10/30/95 Dep. pp. 
18-19.
    285 Banks, 12/05/95 Hrg. p. 165.
    286 DOJ Document 7051-7052.
    287 DOJ Document 7051-7052.
    288 FBI Document 00000527.
    289 Kendrick, 10/30/95 Dep. p. 22.
    290 Banks, 10/24/95 Dep. pp. 82-84.
    291 DOJ Document 7049-7050.
    292 DOJ Document 7049.
    293 DOJ Document 6671-6672.
    294 Frazier, 10/12/95 Dep. p. 15; DOJ Document 001484.
    295 McDowell, 09/15/95 House Dep. pp. 18-19.
    296 DOJ Document 7041-7045.
    297 DOJ Document 7039.
    298 DOJ Document 7039.
    299 Carver, 10/17/95 Dep. pp. 69-72.
    300 Carver, 12/06/95 Hrg. pp. 41-42.
    301 Frazier, 12/05/95 Hrg. pp. 171-173.
    302 Frazier, 12/05/95 Hrg. pp. 171-173.
    303 DOJ Document 000030.
    304 DOJ Document 00031.
    305 Henneman (O'Dowd), 10/13/95 Dep. pp. 16-19.
    306 Pence, 10/18/95 Dep. pp. 19-20.
    307 Pence, 10/18/95 Dep. pp. 22-23.
    308 Pence, 10/18/95 Dep. p. 22.
    309 Iorio and Lewis, 11/29/95 Hrg. p. 28.
    310 Iorio, 11/29/95 Hrg. p. 68.
    311 Lewis, 11/29/95 Hrg. 68.
    312 Banks, 12/05/95 Hrg. p. 165; Dodson, 10/18/95 Dep. p. 59.
    313 Lewis, 10/30/95 Dep. p. 82.
    314 R. Knight, 10/19/95 Dep. p. 8.
    315 Lewis, 11/29/95 Hrg. p. 14.
    316 Lewis, 11/29/95 Hrg. p. 14.
    317 Lewis, 10/30/95 Dep. p. 87.
    318 Lewis, 11/29/95 Hrg. p. 14.
    319 Lewis, 11/29/95 Hrg. pp. 14-15.
    320 RTC Document PLS0050S (RTC Referral #730CR0192); RTC 
Document PLS0081S (RTC Referral #730CR0196).
    321 RTC Document PLS0081S (RTC Referral #730CR0196).
    322 Lewis, 10/30/95 Dep. p. 95.
    323 RTC Document PLS0048S.
    324 RTC Document PLS0048S.
    325 RTC Document PLS0049S.
    326 RTC Document PLS0049S.
    327 RTC Document PLS0049S.
    328 RTC Document PLS0050S.
    329 Lewis, 10/30/95 Dep. p. 96.
    330 RTC Document PLS0075S.
    331 RTC Document PLS0069S-PLS0072S.
    332 RTC Document PLS0073S-PLS0075S.
    333 RTC Document PLS0073S-PLS0075S.
    334 RTC Document PLS0073S.
    335 RTC Document PLS0077S.
    336 RTC Document PLS0077S.
    337 RTC Document PLS0073S.
    338 RTC Document PLS0073S.
    339 RTC Document PLS0077S.
    340 RTC Document PLS0075S.
    341 RTC Document PLS0075S.
    342 RTC Document PLS0075S.
    343 RTC Document PLS0081S.
    344 Lewis, 10/30/95 Dep. p. 104.
    345 Lewis, 10/30/95 Dep. pp. 109-110.
    346 Lewis, 10/30/95 Dep. p. 88.
    347 United States of America v. James B. McDougal, Jim Guy 
Tucker, and Susan H. McDougal, No. LR-CR-95-173 (E.D. Ark.).
    348 Stephen Labaton, ``Clinton Partners in Arkansas Deal 
Convicted by Jury,'' New York Times, May 29, 1996, p. A1; Glenn R. 
Simpson, ``Three Defendants in Whitewater Case are Found Guilty on 
Fraud Charges,'' Wall Street Journal, May 29, 1996, p. A3.
    349 OIC Document, 8/17/95 (not numbered) Grand Jury Indictment 
of James B. McDougal, Jim Guy Tucker and Susan H. McDougal.
    350 OIC Document, 8/17/95 (not numbered) Grand Jury Indictment 
of James B. McDougal, Jim Guy Tucker and Susan H. McDougal.
    351 R.H. Melton and Michael Haddigan, ``Three Guilty in 
Arkansas Fraud Trial,'' The Washington Post, 5/27/96, p. A1.
    352 Lewis, 11/29/95 Hrg. p. 6.
    353 Iorio, 10/20/95 Dep. pp. 95-96.
    354 Iorio, 11/29/95 Hrg. pp. 38-39.
    355 Iorio, 11/29/95 Hrg. p. 39.
    356 Lewis, 11/29/95 Hrg. p. 15.
    357 Lewis, 11/29/95 Hrg. pp. 15-16; Iorio, 10/20/95 Dep. p. 
53.
    358 Lewis, 10/30/95 Dep. p. 132.
    359 Lewis, 11/29/95 Hrg. p. 18; Lewis, 10/30/95 Dep. p. 131.
    360 RTC Document PLS0001S-PLS0013S.
    361 RTC Document PLS0001S-PLS0013S; Iorio, 10/20/95 Dep. p. 
54.
    362 RTC Document PLS0001S-PLS0013S.
    363 Lewis, 10/30/95 Dep. p. 137.
    364 Lewis, 11/29/95 Hrg. p. 15; Lewis, 10/30/95 Dep. p. 142.
    365 Iorio, 10/20/95 Dep. pp. 257-259; Lewis, 10/30/95 Dep. p. 
142.
    366 Lewis, 11/29/95 Hrg. p. 17; Lewis, 10/30/95 Dep. pp. 131-
132; Iorio, 10/20/95 Dep. p. 56.
    367 Lewis, 10/30/95 Dep. p. 127.
    368 Iorio, 10/20/95 Dep. p. 51.
    369 Iorio, 10/20/95 Dep. p. 57.
    370 Yanda, 11/30/95 Hrg. p. 13.
    371 RTC Document TH0704.
    372 Iorio, 10/20/95 Dep. p. 52.
    373 Iorio, 10/20/95 Dep. pp. 52, 72, 235-236.
    374 Yanda, 11/02/95 Dep. pp. 67-68; see also RTC Document 
JY0009.
    375 Lewis, 11/29/95 Hrg. p. 24.
    376 Lewis, 10/31/95 Dep. pp. 120-121; Lewis, 11/29/95 Hrg. pp. 
163-164.
    377 Lewis, 10/30/95 Dep. p. 144.
    378 Iorio, 10/20/95 Dep. p. 63.
    379 Yanda, 11/02/95 Dep. pp. 81-82.
    380 Lewis, 10/30/95 Dep. pp. 146-147.
    381 RTC Document RI0204.
    382 Resolution Trust Corporation, Office of Inspector General, 
Report of Investigation Concerning Rose Law Firm, File No. WA-94-0016, 
August 3, 1995, p. I-13 (hereinafter, ``RTC OIG Report'').
    383 Breslaw, 10/23/95 Dep. p. 8.
    384 Breslaw, 06/06/95 House Dep. p. 32.
    385 Breslaw, 06/06/95 House Dep. p. 56.
    386 Breslaw, 06/06/95 House Dep. p. 89.
    387 Federal Deposit Insurance Corporation, Office of Inspector 
General, Report of Investigation of Alleged Conflicts of Interest by 
the Rose Law Firm, Case No. IO-94-096, July 28, 1995, p. 1 
(hereinafter, ``FDIC OIG Report'').
    388 RTC Document AB0257.
    389 Breslaw, 06/06/95 House Dep. p. 41; FDIC OIG Report p. 54.
    390 RTC Document TH1009.
    391 RTC OIG Report Volume II.
    392 RTC Document TH1009.
    393 RTC Document TH1009.
    394 RTC Document TH1009.
    395 RTC Document RI0109.
    396 RTC Document RI0109.
    397 Iorio, 11/29/95 Hrg. p. 60; Iorio, 10/20/95 Dep. p. 111.
    398 Iorio, 11/29/95 Hrg. pp. 61-62.
    399 Iorio, 10/20/95 Dep. p. 113.
    400 Breslaw, 11/30/95 Hrg. pp. 44-46.
    401 Breslaw, 11/30/95 Hrg. p. 45.
    402 RTC Document AB0502, AB0505.
    403 Breslaw, 11/30/95 Hrg. p. 65; Breslaw, 10/23/95 Dep. pp. 
187-188.
    404 Lewis, 10/30/95 Dep. pp. 156-157.
    405 11/27/95 Transcript of Conversation Between L. Jean Lewis 
and April Breslaw, p. 59.
    406 Transcript of Conversation prepared for Committee on 
Banking and Financial Services, U.S. House of Representatives, pp. 10-
11. The transcript of the tape prepared for the Senate similarly states 
(pp. 66-67):
        ``Well, like I said, I feel self conscious asking that because 
in some ways it's kind of a silly question. But, you know, it's the 
kind of thing that they're looking for what they can say. And I do 
believe they want to say something honest. I don't believe at all and I 
don't want to suggest at all that they want us to reach a certain 
conclusion. I really don't get that feeling. But--(Inaudible)--happier 
than others, you know, because it would get them off the hook.'' --
(Inaudible.)
    407 Lewis, 11/29/95 Hrg. p. 22.
    408 140 Cong. Rec. H1999, H2003 (1994) (statement of Rep. 
James A. Leach).
    409 RTC Document AT0128.
    410 RTC Document EK5867-EK5870.
    411 RTC Document EK5868.
    412 Breslaw, 11/30/95 Hrg. pp. 108-109.
    413 Breslaw, 11/30/95 Hrg. pp. 56-57, 106-108, 121.
    414 Breslaw, 11/30/95 Hrg. pp. 54-56, 87-88, 109.
    415 Breslaw, 11/30/95 Hrg. p. 56.
    416 Breslaw, 11/30/95 Hrg. p. 87.
    417 Breslaw, 11/30/95 Hrg. p. 146.
    418 RTC Document MG0472.
    419 Iorio, 10/20/95 Dep. p. 123; Lewis, 11/29/95 Hrg. p. 26.
    420 Iorio, 11/29/95 Hrg. p. 26.
    421 Iorio, 11/29/95 Hrg. p. 26.
    422 Iorio, 11/29/95 Hrg. p. 26.
    423 Lewis, 11/29/95 Hrg. p. 26; Lewis, 10/30/95 Dep. pp. 164-
165.
    424 Lewis, 11/29/95 Hrg. p. 26; Lewis, 10/30/95 Dep. pp. 164-
165.
    425 Lewis, 11/29/95 Hrg. p. 26; Lewis, 10/30/95 Dep. pp. 164-
165.
    426 Lewis, 11/29/95 Hrg. pp. 26-27; Iorio, 10/20/95 Dep. pp. 
126-128; see RTC Document RI0003, RI0012, RI0017.
    427 RTC Document RI0003, RI0012, RI0017.
    428 Iorio, 10/20/95 Dep. pp. 134-135.
    429 Iorio, 10/20/95 Dep. pp. 134-135.
    430 Lewis, 11/29/95 Hrg. p. 27.
    431 Lewis, 11/29/95 Hrg. p. 27.
    432 Iorio, 10/20/95 Dep. p. 138; Lewis, 11/29/95 Hrg. p. 27.
    433 Lewis, 11/29/95 Hrg. p. 27; Iorio, 11/20/95 Hrg. p. 70; 
Iorio, 10/20/95 Dep. pp. 131-132.
    434 Lewis, 11/29/95 Hrg. p. 27.
    435 Adair, 10/26/95 Dep. pp. 89-90.
    436 Adair, 11/26/95 Dep. p. 92.
    437 Adair, 10/26/95 Dep. pp. 92-93.
    438 Adair, 10/26/95 Dep. pp. 92-93.
    439 Adair, 10/26/95 Dep. pp. 90-91.
    440 Jackson, 10/19/95 Dep. pp. 27-29.
    441 DOJ Document 007724.
    442 GAO/OSI-94-23, p. 2.
    443 GAO/OSI-94-23, p. 4.
    444 GAO/OSI-94-23, p. 4.
    445 GAO/OSI-94-23, p. 4.
    446 Foren, 10/26/95 Dep. at 13; Foren Document, 10/26/95 (Not 
Numbered).
    447 Foren, 10/26/95 Dep. p. 13.
    448 Foren, 10/26/95 Dep. p. 13.
    449 Foren, 10/26/95 Dep. p. 20-21.
    450 Foren, 10/26/95 Dep. p. 21.
    451 Foren, 10/26/95 Dep. p. 22.
    452 Foren, 10/26/95 Dep. p. 26.
    453 Foren, 10/26/95 Dep. p. 27.
    454 Foren, 10/26/95 Dep. pp. 30-31.
    455 Foren, 10/26/95 Dep. p. 31; 11/28/95 Hrg. p. 17.
    456 Foren, 10/26/95 Dep. p. 31.
    457 Foren, 11/28/95 Hrg. p. 16.
    458 Foren, 10/26/95 Dep. pp. 32-33; 11/28/95 Hrg. p. 16.
    459 Foren, 10/26/95 Dep. p. 33.
    460 Foren, 10/26/95 Dep. p. 33.
    461 Foren, 10/26/95 Dep. pp. 153-54; 11/28/95 Hrg. pp. 17-18.
    462 Foren, 11/28/95 Hrg. p. 18.
    463 Foren, 10/26/95 Dep. p. 107.
    464 Foren, 10/26/95 Dep. p. 25.
    465 Foren, 10/26/95 Dep. p. 25.
    466 Foren, 10/26/95 Dep. p. 25.
    467 Foren, 10/26/95 Dep. p. 41.
    468 Foren, 10/26/95 Dep. p. 37.
    469 Foren, 10/26/95 Dep. p. 37.
    470 Foren, 10/26/95 Dep. p. 42; DOJ Document GAC2706.
    471 Hawkins, 11/27/95 Dep. p. 14.
    472 Hawkins, 11/27/95 Dep. p. 15.
    473 Hawkins, 11/27/95 Dep. p. 15.
    474 Foren Document, 10/26/95 (not numbered).
    475 Foren Document, 10/26/95 (not numbered).
    476 Foren Document, 10/26/95 (not numbered).
    477 Jackson, 10/19/95 Dep. pp. 27-29.
    478 David Hale Plea Agreement, 3/19/94.
    479 Casey, 11/1/95 Dep. pp. 14-19.
    480 Casey, 11/1/95 Dep. pp. 33-41.
    481 Casey, 09/28/95 House Dep. pp. 5-6.
    482 Casey, 09/28/95 House Dep. p. 45.
    483 Casey, 11/01/95 Dep. p. 39-41.
    484 Casey, 11/01/95 Dep. p. 41.
    485 Casey, 11/1/95 Dep. p. 19.
    486 Coleman, 12/01/95 Hrg. pp. 5-7.
    487 Coleman, 12/01/95 Hrg. p. 6.
    488 Coleman, 12/01/95 Hrg. p. 7.
    489 Coleman, 12/01/95 Hrg. pp. 7-8.
    490 Jackson, 10/19/95 Dep. 41-44.
    491 Coleman, 12/01/95 Hrg. p. 9.
    492 Coleman, 11/9/95 Dep. p. 16.
    493 Jackson, 10/19/95 Dep. pp. 44-46.
    494 Jackson, 12/01/96 Hrg. pp. 224-25.
    495 Coleman, 12/01/96 Hrg. p. 10.
    496 Casey, 11/1/95 Dep. p. 28.
    497 Casey, 11/01/95 Dep. p. 32; 12/1/95 Hrg. 221.
    498 Casey, 12/01/95 Hrg. pp. 198-99.
    499 Casey, Hrg. 12/01/95 p. 221.
    500 Casey, 11/01/95 Dep. pp. 58-59, 258.
    501 Coleman, 11/9/95 Dep. p. 21.
    502 Coleman, 11/9/95 Dep. pp. 37-38.
    503 Coleman, 12/1/95 Hrg. 20; Casey, 12/10/95 Hrg. 196.
    504 Coleman, 12/1/95 Hrg. p. 19.
    505 Coleman, 11/9/95 Dep. pp. 22-23.
    506 Coleman, 11/9/95 Dep. pp. 22-23.
    507 Coleman, 11/09/95 Dep. p. 34.
    508 Coleman, 12/01/95 Hrg. p. 70.
    509 Coleman, 11/9/95 Dep. pp. 38-39.
    510 Coleman, 11/9/95 Dep. pp. 24-25, 39.
    511 Casey, 12/01/95 Hrg. p. 196.
    512 Casey, 11/01/95 Dep. pp. 66-68.
    513 Casey, 11/1/95 Dep. pp. 71-74.
    514 Coleman, 11/9/95 Dep. p. 27; Coleman, 12/01/95 Hrg. p. 23.
    515 DOJ Document 007640-41.
    516 Casey, 12/01/95 Hrg. pp. 275-76.
    517 DOJ Document 17493.
    518 Casey, 11/1/95 Dep. pp. 141-145.
    519 Johnson, 12/01/95 Hrg. p. 212; Johnson, 10/24/95 Dep. pp. 
30-31.
    520 OIC Document 1074.
    521 DOJ Document 7640.
    522 Coleman, 12/01/95 Hrg. p. 24.
    523 Casey, 12/01/95 Hrg. p. 197.
    524 Johnson, Hrg. 12/01/95 pp. 226-228.
    525 Casey, 11/1/95 Dep. p. 73.
    526 Casey, 12/01/95 Hrg. p. 200.
    527 Casey, 11/1/95 Dep. pp. 64-65.
    528 Casey, 12/01/95 Hrg. pp. 230-32.
    529 Nathan, 10/27/95 Dep. p. 7.
    530 DOJ Document 004660.
    531 DOJ Document 004661.
    532 DOJ Document 007719-27.
    533 DOJ Document 004660-62.
    534 Keeney, 12/06/95 Hrg. pp. 13, 19.
    535 Keeney, 12/06/95 Hrg. p. 15-16; Gangloff, 12/06/95 Hrg. p. 
17; McDowell 12/06/95 Hrg., p. 17.
    536 Gangloff, 12/6/95 Hrg. pp. 16-20.
    537 Gangloff, 12/6//95 Hrg. 62-71.
    538 Gangloff, 12/6/95 Hrg. pp. 72-74.
    539 Keeney, 12/06/95 Hrg. pp. 15-16.
    540 Keeney, 12/06/95 Hrg. pp. 21-22.
    541 Carver, 12/06/95 Hrg. p. 23; McDowell, 12/06/95 Hrg. p. 
23.
    542 Keeney, 12/6/95 Hrg. p. 18.
    543 Keeney, 12/06/95 Hrg. p. 19.
    544 Johnson, 12/1/95 Hrg. pp. 226-228.
    545 Keeney, 12/06/95 Hrg. pp. 17, 19.
    546 Keeney, 12/6/95 Hrg. p. 17.
    547 Casey, 11/01/95 Dep. pp. 122-27.
    548 Keeney, 12/6/95 Dep. pp. 17-18.
    549 Keeney, 12/06/95 Hrg. p. 19.
    550 Casey, 11/1/95 Dep. p. 127.
    551 Johnson, 12/01/95 Hrg. p. 212-13.
    552 Casey, 11/1/95 Dep. p. 177-78.
    553 Keeney, 12/06/95 Hrg. p. 23.
    554 Keeney, 12/06/95 Hrg. 23; Keeney, 10/20/95 p. 51-52.
    555 Gangloff, 12/06/95 Hrg. p. 23-24.
    556 Casey, 12/01/95 Hrg. p. 245.
    557 DOJ Document 007637.
    558 Casey, 12/01/95 Hrg. p. 247; Johnson, 12/01/95 Hrg. p. 
247.
    559 Coleman, 11/1/95 p. 54.
    560 DOJ Document 007763-65.
    561 DOJ Document 007811.
    562 DOJ Document 007724.
    563 Jackson, 10/19/95 Dep. pp. 83-86.
    564 DOJ Document FBI-00001545, 00001287.
    565 FBI Document 00001287; Irons, 12/05/95 Hrg. p. 140.
    566 Casey, 11/1/95 Dep. pp. 154-155.
    567 FBI Document 00001545-1546; Casey, 12/01/95 Hrg. pp. 238-
240.
    568 Casey, 12/01/95 Hrg. p. 238; Casey, 11/1/95 Dep. p. 154.
    569 Casey, 11/1/95 p. 154.
    570 FBI Document 00001545; Irons, 12/05/95 Hrg. p. 139.
    571 Johnson, 10/24/95 Dep. p. 141-42.
    572 Keeney, McDowell, Gangloff and Carver, 12/06/95 Hrg. p. 
20-21.
    573 FBI Document 00001322.
    574 Casey, 11/1/95 Dep. p. 173.
    575 Casey, 11/1/95 pp. 170-193.
    576 Keeney, 12/06/95 Hrg. p. 22.
    577 Casey, 11/01/95 Dep. pp. 174-175.
    578 DOJ Document 014277.
    579 Casey, 11/01/95 Dep. p. 251.
    580 Casey, 11/01/95 Dep. p. 176.
    581 Johnson, 10/24/95 Dep. pp. 143-44.
    582 Casey, 11/01/95 Dep. pp. 176-77.
    583 Casey, 11/01/95 Dep. pp 177.
    584 Casey, 11/1/95 Dep. pp. 78-79.
    585 RTC Document, 10/27/93 Letter to Ms. Lewis declining the 
referral.
    586 Keeney, 12/06/95 Hrg. p. 27.
    587 Casey, 11/01/95 Dep. pp. 184-85.
    588 DOJ Document 006767. (emphasis added).
    589 Casey, 11/01/95 Dep. p. 182.
    590 Carver, 12/06/95 Hrg. p. 28.
    591 See e.g., Keeney, 12/06/95 Hrg. p. 26; Carver, 11/17/95 
Dep. p. 68; McDowell, 12/06/95 Hrg. p. 29; Gangloff, 12/06/95 Hrg. p. 
29.
    592 Carver, 12/06/95 Hrg. p. 27; Keeney, 12/06/95 Hrg. p. 27; 
McDowell, 12/06/95 Hrg. p. 27.
    593 Casey, House Dep. p. 112; Johnson, 10/24/95 Dep. pp. 55-
56.
    594 DOJ Document 2204-2205.
    595 McDowell, 12/06/95 Hrg. p. 32.
    596 McDowell, 12/06/95 Hrg. pp. 31-32.
    597 Casey, 11/1/95 Dep. p. 195.
    598 McDowell, 12/06/95 Hrg. p. 33.
    599 DOJ Document 005136.
    600 DOJ Document 000327.
    601 DOJ Document 188879-80.
    602 Coleman, 12/01/95 Hrg. pp. 60-61.
    603 OIC Document, 3/19/94 Plea Agreement
    604 Foren, 11/28/95 Hrg. p. 20.
    605 Foren, 11/28/95 Hrg. pp. 20-21.
    606 Foren, 10/26/95 Dep. pp. 80-81.
    607 Foren, 11/28/95 Hrg. p. 20.
    608 Foren, 11/28/95 Hrg. p. 20.
    609 Foren, 11/28/95 Hrg. p. 21.
    610 Foren, 11/28/95 Hrg. p. 21; DOJ Document GAC 2796.
    611 Foren, 11/28/95 Hrg. p. 21; Foren Document (Not Numbered); 
SBA Document (Not Numbered).
    612 Foren, 11/28/95 Hrg. p. 21; Foren Document (Not Numbered); 
SBA Document (Not Numbered).
    613 Foren Document (Not Numbered); SBA Document (Not 
Numbered).
    614 Foren, 11/28/95 Hrg. p. 22.
    615 Foren, 11/28/95 Hrg. p. 64.
    616 Bowles, 11/28/95 Hrg. p. 25.
    617 Foren, 11/28/95 Hrg. p. 23.
    618 Foren, 11/28/95 Hrg. p. 23.
    619 Shepperson, 11/28/95 Hrg. pp. 23-24.
    620 Bowles, 11/28/95 Hrg. p. 24.
    621 Bowles, 10/31/95 Dep. pp. 30-31.
    622 Bowles, 10/31/95 Dep. p. 38.
    623 Bowles, 10/31/95 Dep. pp. 32-33.
    624 Bowles, 11/28/95 Hrg. p. 24.
    625 Bowles, 11/28/95 Hrg. pp. 24-25.
    626 White House Document S012334.
    627 Bowles, 11/28/95 Hrg. p. 25.
    628 White House Document S 012334.
    629 Bowles, 11/28/95 Hrg. p. 25.
    630 Bowles, 11/28/95 Hrg. p. 25.
    631 Foren, 11/28/95 Hrg. p. 26.
    632 Foren, 11/28/95 Hrg. p. 26; Foren Document (Not Numbered); 
SBA Document (Not Numbered).
    633 Shepperson, 11/28/95 Hrg. p. 82.
    634 Foren, 11/28/95 Hrg. p. 83.
    635 Foren, 11/28/95 Hrg. p. 26-27; Foren Document (Not 
Numbered); SBA Document (Not Numbered).
    636 Foren, 11/28/95 Hrg. p. 26-27 Foren Document (Not 
Numbered); SBA Document (Not Numbered).
    637 Bowles, 11/28/95 Hrg. p. 27.
    638 Bowles, 11/28/95 Hrg. p. 27.
    639 Foren, 11/28/95 Hrg. p. 27.
    640 Foren Document (Not Numbered); SBA Document (Not 
Numbered).
    641 Foren Document (Not Numbered); SBA Document (Not 
Numbered).
    642 Foren Document (Not Numbered); SBA Document (Not 
Numbered).
    643 Bowles, 11/28/95 Hrg. p. 28.
    644 Bowles, 11/28/95 Hrg. p. 29.
    645 Bowles, 11/28/95 Hrg. p. 29.
    646 Bowles, 11/28/95 Hrg. p. 29.
    647 Bowles, 11/28/95 Hrg. p. 29.
    648 Bowles, 11/28/95 Hrg. p. 31.
    649 Bowles, 11/28/95 Hrg. p. 32.
    650 SBA Document (Not Numbered).
    651 SBA Document (Not Numbered).
    652 SBA Document (Not Numbered).
    653 SBA Document (Not Numbered).
    654 SBA Document (Not Numbered).
    655 Bowles, 11/28/95 Hrg. p. 37.
    656 Foren, 11/28/95 Hrg. p. 94.
    657 Bowles, 11/28/95 Hrg. p. 37.
    658 FBI Document 00001542.
    659 FBI Document 00001542-1543.
    660 Irons, 12/05/95 Hrg. p. 135.
    661 Irons, 12/05/95 Hrg. p. 188.
    662 Hubbell, 10/26/95 Dep. p. 38.
    663 Mays, 11/21/95 Dep. p. 29.
    664 Coleman, 12/1/95 Hrg. pp.10-11; 11/9/95 Dep. pp. 63-66.
    665 Kennedy, 12/5/95 Hrg. pp. 8-9.
    666 Coleman, 12/1/95 Hrg. p. 12.
    667 Coleman, 12/1/95 Hrg. p. 12; 11/9/95 Dep. pp. 66-67.
    668 Coleman, 12/1/95 Hrg. p. 16.
    669 Kennedy, 12/5/96 Hrg. pp. 31-32; Coleman, 12/1/95 Hrg. p. 
24-25.
    670 Coleman, 12/1/95 Hrg. p. 12.
    671 Coleman, 12/1/95 Hrg. p. 14.
    672 Coleman, 12/1/95 Hrg. p. 12.
    673 Coleman, 12/1/95 Hrg. p. 12.
    674 Coleman, 11/9/95 Dep. p. 139.
    675 Coleman, 11/9/95 Dep. pp. 63-64; 12/1/95 Hrg. pp. 16-17.
    676 Coleman, 12/1/95 Hrg. pp. 16-17; 11/9/95 Dep. pp. 139-142.
    677 Coleman, 12/1/95 Hrg. p. 17.
    678 Kennedy, 12/5/95 Hrg. p. 12-13.
    679 Kennedy, 12/5/96 Hrg. p. 14.
    680 Kennedy, 12/5/95 Hrg. p. 13.
    681 White House Document S007375.
    682 Kennedy, 12/5/95 Hrg. p. 13.
    683 Kennedy, 12/5/95 Hrg. pp. 22-23.
    684 Kennedy, 12/5/95 Hrg. pp. 23-24; 100-101.
    685 Coleman, 12/1/95 Hrg. pp. 14-15.
    686 Kennedy, 11/9/95 Dep. pp. 12, 18.
    687 Kennedy, 12/5/95 Hrg. pp. 15-16, 21.
    688 Kennedy, 12/5/95 Hrg. p. 22.
    689 Kennedy, 12/5/95 Hrg. pp. 15-16.
    690 Kennedy, 12/5/95 Hrg. pp. 15-16.
    691 Kennedy, 12/5/95 Hrg. pp. 15-16.
    692 Coleman, 12/1/95 Hrg. p. 16.
    693 Coleman, 12/1/95 Hrg. p. 13.
    694 Coleman, 12/1/95 Hrg. p. 13.
    695 Coleman, 12/1/95 Hrg. pp. 13-14.
    696 Kennedy, 12/5/95 Hrg. p. 22; Kennedy, 11/9/95 Dep. p. 21.
    697 Kennedy, 12/5/95 Hrg. p. 32.
    698 Kennedy, 12/5/95 Hrg. pp. 103-104.
    699 White House Document. S 007376-77; S 007956-57.
    700 Kennedy, 11/9/95 Dep. pp. 38-39.
    701 Kennedy, 11/9/95 Dep. pp. 40-41.
    702 White House Document S 007956.
    703 Kennedy, 12/5/95 Hrg. p. 102.
    704 Kennedy, 12/5/95 Hrg. p. 22.
    705 Kennedy, 11/9/95 Dep. p. 21.
    706 Kennedy, 12/5/95 Hrg. pp. 20-22.
    707 White House Document S 007957.
    708 White House Document S 007376.
    709 White House Document S 007956.
    710 Kennedy, 12/5/95 Hrg. pp. 100-101.
    711 White House Document S 007957.
    712 Kennedy, 11/9/95 Dep. p. 25.
    713 Kennedy, 11/1/95 Dep. pp. 25-26.
    714 Kennedy, 12/5/95 Hrg. p. 32.
    715 Kennedy, 11/9/95 Dep. pp. 27-29.
    716 Kennedy, 12/5/95 Hrg. pp. 25-26, 39.
    717 Lindsey, 11/3/95 Dep. p. 15.
    718 Lindsey, 11/3/95 Dep. p. 15.
    719 Lindsey, 11/3/95 Dep. p. 16.
    720 Lindsey 11/3/95 Dep. p. 16; Kennedy, 12/05/95 Hrg. pp. 
105-107.
    721 Hubbell, 12/1/95 Hrg. p. 127.
    722 DOJ Document A000507.
    723 Hubbell, 12/1/95 Hrg. p. 127.
    724 Hubbell, 12/1/95 Hrg. p. 127.
    725 Kennedy, 12/5/95 Hrg. p. 40.
    726 Kennedy, 12/5/95 Hrg. pp. 32-33, 40.
    727 Hogan & Hartson Document BL011718.
    728 Hogan & Hartson Document BL011718.
    729 Hogan & Hartson Document BL011718.
    730 Hogan & Hartson Document BL011719.
    731 Hogan & Hartson Document BL011720.
    732 Hogan & Hartson Document BL011720-011721.
    733 Hogan & Hartson Document BL011721.
    734 Lindsey 11/28/95 Hrg. pp. 105-110.
    735 GAO/OSI-94-23, pp. 11-13.
    736 Hogan & Hartson Document BL011722.
    737 Lindsey, 11/28/95 Hrg. pp. 103-104.
    738 Lindsey, 11/28/96 Hrg. p. 107.
    739 Lindsey, 11/21/95 Dep. pp. 10-11.
    740 Hogan & Hartson Document BL011722.
    741 Hogan & Hartson Document BL011722.
    742 Lindsey, 11/28/95 Hrg. pp. 120-121.
    743 Lindsey, 11/28/95 Hrg. pp. 123-25.
    744 Blair, 11/20/95 Dep. p. 10.
    745 Blair, 11/20/95 Dep. p. 36.
    746 Blair, 11/20/95 Dep. p. 37.
    747 Blair, 11/20/95 Dep. p. 18.
    748 Blair, 11/20/95 Dep. pp. 58-59.
    749 Bumpers, 11/20/95 Dep. p. 24.
    750 Bumpers, 11/20/95 Dep. pp. 11-13.
    751 Bumpers, 11/20/95 Dep. pp. 11-12.
    752 Hogan & Hartson Document BL011718-011722.
    753 S. Rep. 103-433, ``Madison Guaranty S&L and the Whitewater 
Development Corporation, Washington D.C. Phase, Report of the Committee 
on Banking, Housing, and Urban Affairs, United States Senate, on the 
Communications Between Officials of the White House and the U.S. 
Department of the Treasury or the Resolution Trust Corporation,'' 103rd 
Cong., 2d Sess., January 3, 1995 pp. 9-13) (hereinafter, ``S. Rep. 103-
433'').
    754 RTC Document TH704.
    755 RTC Document TH705.
    756 Roelle, 7/20/94 Dep. pp. 12-15, S. Hrg. 103-889, Vol. VII, 
p. 423.
    757 Roelle, 7/20/94 Dep. p. 96, S. Hrg. 103-889, Vol. VII, p. 
463.
    758 Roelle, 7/20/94 Dep. p. 97-98, S. Hrg. 103-889, Vol. VII, 
p. 464.
    759 Treasury Department Document 4420 (1994), S. Hrg. 103-889, 
Vol. XII, p. 2715.
    760 S. Rep. 103-433 p. 11.
    761 S. Rep. 103-433 p. 11.
    762 S. Rep. 103-433 p. 12.
    763 Sloan, 7/21/94 Dep. p. 44-47, S. Hrg. 103-889, Vol. V, pp. 
680-682.
    764 White House Document X983, S. Hrg. 103-889, Vol. IX, p. 
1086.
    765 White House Document X983, S. Hrg. 103-889, Vol. IX, p. 
1086.
    766 White House Document X984, S. Hrg. 103-889, Vol. IX, p. 
1087.
    767 White House Document X984, S. Hrg. 103-889, Vol. IX, p. 
1087; S. Rep. 103-433, Vol. II, p. 16.
    768 S. Rep. 103-433 pp. 12-13.
    769 S. Rep. 103-433, Vol. II, p. 17.
    770 S. Rep. 103-433, Vol. II, p. 18.
    771 S. Rep. 103-433, Vol. II, p. 18.
    772 S. Rep. 103-433 p. 18.
    773 Lindsey, 7/21/94 Dep. p. 219, S. Hrg. 103-889, Vol. V, p. 
451.
    774 S. Rep. 103-433 p. 18.
    775 Mason, 10/25/95 Dep. p. 18.
    776 Mason, 10/25/95 Dep. pp. 25-26.
    777 Mason, 10/25/95 Dep. pp. 46-47, 50-51.
    778 Mason, 10/25/95 Dep. p. 26.
    779 Mason, 10/25/95 Dep. p. 27.
    780 Mason, 10/25/95 Dep. p. 48.
    781 Willkie Farr & Gallagher Document ST000036.
    782 ST0000047.
    783 Stephen Labaton, ``Clinton Partners in Arkansas Deal 
Convicted By Jury.'' New York Times, 5/29/96 p. A1.
    784 Carmichael, 10/25/95 Dep. pp. 76-77.
    785 Carmichael, 10/25/95 Dep. p. 78.
    786 S. Rep. 103-433 pp. 26-34.
    787 White House Document X534, S. Hrg. 103-889, Vol. VIII, p. 
641.
    788 DeVore, 7/20/94 Dep. p. 174, S. Hrg. 103-889, Vol. VI, p. 
949.
    789 White House Document X534, S Hrg. 103-889, Vol. VIII, p. 
641.
    790 White House Document X534, S Hrg. 103-889, Vol. VIII, p. 
641.
    791 White House Document X535, S Hrg. 103-889, Vol. VIII, p. 
642.
    792 Kennedy, 12/5/95 Hrg. p. 46.
    793 Kennedy Notes Report, S. Rep. 104-191, pp. 44-45.
    794 Kennedy Notes Report, S. Rep. 104-191, pp. 44-45.
    795 Lindsey, 11/28/95 Hrg. pp. 204-205.
    796 Report of the Special Committee to Investigate Whitewater 
Development Corporation and Related Matters, S. Rep. 104-204, Jan. 22, 
1996, pp. 16-18.
    797 White House Document S012529-S012438.
    798 White House Document S012529-S012538.
    799 Kennedy, 1/15/96 Dep. pp. 145-146.
    800 Kennedy, 1/15/96 Dep. pp. 146-47, 189.
    801 White House Document S12535.
    802 White House Document S12534
    803 Lindsey, 1/16/96 Hrg. p. 59.
    804 Willkie Farr & Gallagher Document ST000036.
    805 Willkie Farr & Gallagher ST0000047.
    806 Kennedy, 1/15/96 Dep. p. 135.
    807 Kennedy, 1/15/96 Dep. p. 141.
    808 White House Document S12529.
    809 White House Document S12535-S12538.
    810 Mark Hosenball & Michael Isikoff, ``A Churning Scandal,'' 
Newsweek, Jan. 8, 1996, p. 43.
    811 White House Document S12529.
    812 Kennedy, 1/16/96 Hrg. pp. 58-59; 1/15/96 Dep. p. 143.
    813 Williams & Connolly Memorandum to the Special Committee, 
12/12/95, at p. 13.
    814 Kennedy, 1/16/96 Hrg. pp. 296-297.
    815 White House Document S12534.
    816 Kennedy, 1/16/96 Hrg. pp. 56, 68, 81-82.
    817 Kennedy, 1/15/96 Dep. pp. 60-61.
    818 Kennedy, 1/16/96 Hrg. p. 61.
    819 Kennedy, 1/16/96 Hrg. pp. 63-64.
    820 Hubbell, 2/7/96 Hrg. p.169.
    821 Clark, 1/18/96 Hrg. pp.162-164
    822 Black, 2/6/96 Hrg. p.89.
    823 Hubbell, 2/7/96 pp.20, 50-51
    824 Clark, 1/18/96 Hrg. p.90
    825 Clark, 1/18/96 Hrg. p. 90.
    826 Kennedy, 1/16/96 Hrg. pp. 64-65.
    827 Kennedy, 1/16/96 Hrg. pp. 65-66.
    828 Kennedy, 1/16/96 Hrg. pp. 67-68, 292-294.
    829 Kennedy, 1/16/96, Hrg. pp. 295-96.
    830 White House Document S12517.
    831 White House Document S12529.
    832 White House Document S012530.
    833 White House Document S012530.
    834 White House Document S012530.
    835 White House Document S12532.
    836 Eggleston, 11/28/95 Hrg. pp. 137-138.
    837 Eggleston, 1/28/95 Hrg. pp. 138-139.
    838 SBA Document, 11/4/93 (not numbered).
    839 Department of Justice Document GAC 2401.
    840 White House Document S11399.
    841 Eggleston, 11/28/95 Hrg. p. 138-139.
    842 Eggleston, 11/28/95 Hrg. p. 139.
    843 SBA Document, 11/16/93 (Not Numbered).
    844 SBA Document, 11/16/93 (Not Numbered).
    845 Eggleston, 11/28/95 Hrg. p. 139.
    846 Spotila, 11/6/95 Dep. p. 13.
    847 Spotila, 11/6/95 Dep. pp. 14-15.
    848 Eggleston, 11/28/95 Hrg. pp. 35-36.
    849 Spotila, 11/28/95 Hrg. pp. 151-152.
    850 Spotila, 11/28/95 Hrg. p. 152.
    851 Spotila, 11/28/95 Hrg. p. 149.
    852 SBA Document, 11/15/96 (Not Numbered).
    853 SBA Document 11/16/96 (Not Numbered)
    854 White House Document S11399.
    855 Eggleston, 1/16/96 Hrg. p. 14.
    856 White House Document S11399.
    857 White House Document S12604.
    858 Eggleston, 1/16/96 Hrg. p. 20.
    859 Eggleston, 1/16/96 Hrg. pp. 22-23.
    860 Lindsey, 1/16/96 Dep. p. 93.
    861 Spotila, 11/28/95 Dep. p. 152.
    862 Bowles, 11/28/96 Hrg. pp. 76-77.
    863 Spotila, 11/28/95 Hrg. p. 152.
    864 DOJ Document JDA81.
    865 DOJ Document JDA82.
    866 DOJ Document JDA82.
    867 DOJ Document FBI-1951.
    868 DOJ Document FBI-1951.
    869 DOJ Document JDA 75.
    870 DOJ Document TTK-157.
    871 DOJ Document JDA 75.
    872 DOJ Document TTK-158.
    873 DOJ Document No. JDA 67.
    874 DOJ Document JDA 67.
    875 Eggleston, 11/28/95, Hrg. pp. 142-143.
    876 Eggleston, 11/28/95 Hrg. p. 142.
    877 Eggleston, 11/28/95 Hrg. p. 142.
    878 Eggleston, 11/28/95 Hrg. p. 143.
    879 Eggleston, 11/28/95 Hrg. p. 144; DOJ Document JDA 67.
    880 Eggleston, 11/28/95 Hrg.p. 144.
    881 DOJ Document FBI-1951.
    882 DOJ Document JDA 70.
    883 DOJ Document JDA70.
    884 DOJ Document JDA70.
    885 Gearan, 02/15/96 Hrg. pp. 262-63.
    886 Gearan, 02/15/96 Hrg. pp. 262-63.
    887 Ickes, 2/22/96 Hrg. p. 219.
    888 Ickes, 2/22/96 Hrg. p. 8; Lindsey, 7/21/94 Dep. p. 128; 
Nussbaum, 7/23/94 Dep. p. 171.
    889 Ickes, 2/22/96 Hrg. p. 8; Lindsey, 7/21/94 Dep. p. 128; 
Nussbaum, 7/23/94 Dep. p. 171.
    890 Gearan, 02/12/96 Dep. p. 80.
    891 White House Document S020565-S020570, S020575-S020577.
    892 White House Document S020565-S020585.
    893 White House Document S020565.
    894 White House Document S020567.
    895 White House Document S020567.
    896 Gearan, 02/15/96 Hrg. pp. 17-18.
    897 Gearan, 02/15/96 Hrg. p. 18.
    898 White House Document 020567.
    899 White House Document S020567.
    900 White House Document S020567.
    901 White House Document S020567; Gearan, 02/15/96 Hrg. pp. 
19-20.
    902 White House Document S020566; Gearan, 02/15/96 Hrg. p. 15.
    903 Gearan, 2/15/96 Hrg. p. 15.
    904 Gearan, 02/15/96 Hrg. pp. 15-16; Ickes, 02/22/96 Hrg. pp. 
68-69.
    905 White House Document S020569.
    906 White House Document S020569.
    907 White House Document S020569.
    908 White House Document S020569; Gearan, 02/15/96 Hrg. pp. 
21-23.
    909 Ickes, 2/22/96 Hrg. p. 69.
    910 White House Document S020578.
    911 White House Document S020578.
    912 White House Document S020578.
    913 Gearan, 02/15/96 Hrg. pp. 22-23.
    914 White House Document S020576.
    915 White House Document S020576.
    916 White House Document S020578.
    917 Wright, 1/26/96 Dep. p. 13.
    918 Gearan, 2/15/96 Hrg. p. 28.
    919 Gearan, 2/15/96 Hrg. p. 28-30.
    920 White House Document S02084.
    921 White House Document S02084.
    922 Ickes, 02/22/96 Hrg. pp. 129-131.
    923 Ickes, 02/22/96 Hrg. p. 132.
    924 White House Document S020567; Gearan, 02/15/96 Hrg. pp. 
19-20.
    925 White House Document 020567.
    926 White House Document S020567; Gearan, 02/15/96 Hrg. pp. 
19-21.
    927 White House Document S020565.
    928 White House Document S020576.
    929 White House Document S020576.
    930 White House Document S020576.
    931 Gearan, 02/25/96 Hrg. p. 63.
    932 White House Document S020576.
    933 Gearan, 02/15/96 Hrg. pp. 65-66.
    934 White House Document S020579.
    935 White House Document S020579.
    936 White House Document S020579.
    937 Gearan, 02/15/96 Hrg. pp. 62, 88.
    938 Ickes, 02/22/96 Hrg. pp. 152-53.
    939 Ickes, 2/22/96, Hrg. pp. 152-153.
    940 Department of Treasury Document 2987.
    941 Treasury Document 2987 (1994 Production).
    942 Treasury Document 2987 (1994 Production).
    943 Treasury Document 2987 (1994 Production).
    944 Ickes, 02/22/96 Hrg. pp. 92-93; White House Document S 
020797.
    945 White House Document S 020801-02.
    946 A.G. No. 1844-94, 59 F.R. 5321-22 (1994).
    947 White House Document S 020574.
    948 Jeff Gerth, ``The 1992 Campaign: Personal Finances; 
Clintons Joined S.&L. Operator in an Ozark Real-Estate Venture,'' 3/8/
92 New York Times, p. A1; ``Conflicted Americans,'' 3/18/92 Los Angeles 
Times.
    949 Jeff Gerth, ``The 1992 Campaign: Personal Finances; 
Clintons Joined S.&L. Operator in an Ozark Real-Estate Venture,'' 3/8/
92 New York Times, p. A1.
    950 Jeff Gerth, ``The 1992 Campaign: Personal Finances; 
Clintons Joined S.&L. Operator in an Ozark Real-Estate Venture,'' 3/8/
92 New York Times, p. A1.
    951 ``Conflicted Americans,'' 3/18/92 Los Angeles Times.
    952 Vinson & Elkins Document RLF1 03182-03183.
    953 Vinson & Elkins Document RLF1 03184.
    954 House Document 00010787.
    955 ``Conflicted Americans,'' 3/18/92 L.A. Times.
    956 O'Melveny & Myers Document CCBW 771-775, 776-788, 881-883.
    957 RTC Document PLS0068S-83S.
    958 RTC Document, PLS0075S.
    959 RTC Document, PLS0075S.
    960 RTC Document, PLS0081S.
    961 S. Rep. 103-433, ``Madison Guaranty S&L and the Whitewater 
Development Corporation, Washington D.C. Phase, Report of the Committee 
on Banking, Housing, and Urban Affairs, United States Senate, on the 
Communications Between Officials of the White House and the U.S. 
Department of the Treasury or the Resolution Trust Corporation,'' 103rd 
Cong., 2d Sess., January 3, 1995 pp. 9-13) (hereinafter, ``S. Rep. 103-
433'').
    962 White House Document S 012517.
    963 Lindsey, 1/10/96 Dep. pp. 59-60.
    964 Dec. 20, 1993, New York Times Editorial, (Cited privilege, 
not produced by the White House. White House permitted the Special 
Committee to review document.)
    965 Dec. 20, 1993, New York Times Editorial, (Cited privilege, 
not produced by the White House. White House permitted Special 
Committee to review document.)
    966 Dec. 20, 1993, New York Times Editorial, (Cited privilege, 
not produced by the White House. White House permitted Special 
Committee to review document.)
    967 Lindsey, 1/10/96 Dep. pp. 5-6.
    968 Lindsey, 1/16/96 Hrg. pp. 196-198.
    969 Lindsey, 1/16/96 Hrg. p. 197.
    970 Lindsey, 1/16/96 Hrg. p. 197-200.
    971 White House Document S 020574.
    972 Eggelston, 03/04/96 Dep. p. 34.
    973 White House Document S 020575.
    974 Waldman, 02/21/96 Dep. p. 69.
    975 Denton, 5/8/96 Hrg. p. 23.
    976 Denton, 5/8/96 Hrg. p. 24.
    977 White House Document S 020576.
    978 White House Document S 020576.
    979 White House Document S 020576.
    980 Gearan, 2/15/96 Hrg. pp. 158-159; Ickes, 2/22/96 Hrg. pp. 
87-88.
    981 Gearan, 2/15/96 Hrg. pp. 158-159; Ickes, 2/22/96 Hrg. pp. 
87-88.
    982 Eggelston, 3/04/96 Dep. p. 35.
    983 Eggleston, 3/4/96 Dep. pp. 33-35.
    984 White House Document S 020576-77.
    985 White House Document S 020577.
    986 White House Document S 020577.
    987 Waldman, 2/21/96 Dep. 83-84.
    988 Ickes, 02/22/96 Hrg. pp. 207-08; Gearan, 02/15/96 Hrg. p. 
48.
    989 Ickes, 2/22/96 Hrg. 88; White House Document S 020577.
    990 Ickes, 2/22/96 Hrg. p. 88.
    991 Ickes, 2/22/96 Hrg. 89.
    992 Schaffer, 4/29/96 Dep. p. 56.
    993 Schaffer, 04/29/96 Dep. p. 14, 38-39.
    994 Schaffer, 04/29/96 Dep. pp. 38-39.
    995 Lindsey Document BL005910.
    996 Lindsey Document BL005910.
    997 Rutherford, 2/29/96 Dep. pp. 20-24.
    998 Schaffer, 04/29/96 Dep. p. 26.
    999 Ickes, 02/22/96 Hrg. p. 102.
    1000 Wright, 1/26/96 Dep. p. 174.
    1001 Wright, 1/26/96 Dep. pp. 10-11.
    1002 Wright, 1/26/96 Dep. p. 74.
    1003 Wright, 1/26/96 Dep. p. 75.
    1004 Wright, 1/26/96 Dep. pp. 71-72.
    1005 Wright, 1/26/96 Dep. p. 171.
    1006 Wright, 1/26/96 Dep. p. 172.
    1007 Wright, 1/26/96 Dep. p. 188.
    1008 Wright, 1/26/96 Dep. p. 17.
    1009 Wright, 1/26/96 Dep. p. 17.
    1010 White House Document S 020760.
    1011 White House Document S 020760.
    1012 White House Document S 020760-61.
    1013 Pub. L. 103-204.
    1014 12 U.S.C. sec. 1441, modified by, RTC Completion Act of 
1993, Public Law 103-204.
    1015 General Report on the Investigation of Madison Guaranty 
Savings & Loan and Related Entities, Pillsbury, Madison & Sutro, 
December 28, 1995, p. 1. (hereinafter 12/28/95 PMS General Report).
    1016 Kulka, 07/19/94 Dep., pp. 89-90.
    1017 Kulka, 07/19/94 Dep., p. 91.
    1018 Kulka, 07/19/94 Dep., p. 91.
    1019 Stephanopolous, 07/19/94 Dep. p. 40. Depositions of White 
House Officials, Hearing Before the Committee on Banking, 103rd 
Congress, Volume V, p. 186.
    1020 Steiner, 07/18/94 Dep., pp. 199-200.
    1021 Steiner, 07/18/94 Dep., pp. 199-200.
    1022 Hanson, 7/17/94, Dep. pp. 650-653.
    1023 Hanson, 07/17/94 Dep. p. 652.
    1024 Hanson, 07/17/94 Dep. p. 651.
    1025 S. Hrg. 103-889, Vol. VI, pp. 859-860.
    1026 S. Rep. 103-433, Vol. II, p. 145; Steiner, 07/18/94 Dep. 
pp. 205-206.
    1027 Stephens, 05/15/96 Dep. p. 13.
    1028 Stephens, 05/15/96 Dep. p. 21.
    1029 Stephens, 05/17/96 Hrg. p. 19.
    1030 Stephens, 05/15/96 Dep. p. 92.
    1031 Stephens, 05/15/96 Dep. p. 62.
    1032 Ericson, 05/10/96 Dep. pp. 32-33; Patterson, 05/14/96 
Dep. pp. 138-40; Stephens, 05/17/96 Hrg. pp. 61-62.
    1033 Stephens, 05/17/96 Hrg. pp. 7-8.
    1034 Patterson, 5/14/96 Dep. p. 66.
    1035 Stephens, 05/17/96 Hrg. pp. 8-9.
    1036 Patterson, 5/14/96 Dep. p. 22; Patterson, 05/17/96 Hrg. 
p. 37.
    1037 Patterson, 05/17/96 Hrg. p. 89.
    1038 Gabrellian, 05/29/96 Dep. p. 39.
    1039 Kulka, 05/29/96 Dep. pp. 30-31.
    1040 Stephens, 05/17/96 Hrg. p. 126.
    1041 Ericson, 05/10/96 Dep. p. 34.
    1042 Patterson, 05/17/96 Hrg. pp. 81-82; Stephens, 05/17/96 
Hrg. p. 82; Ericson, 05/17/96 Hrg. p. 82.
    1043 Patterson, 05/17/96 Hrg. pp. 81-82; Stephens, 05/17/96 
Hrg. p. 82; Ericson, 05/17/96 Hrg. p. 82.
    1044 Hrg., 5/17/96 pp. 81-82.
    1045 Stephens, 5/17/96 Hrg. p. 9-10.
    1046 Stephens, 05/17/96 Hrg. p. 9.
    1047 Ericson, 05/10/96 Dep. pp. 44-45.
    1048 Patterson, 5/17/96 Hrg. p. 80.
    1049 Ericson, 05/17/96 Hrg. p. 88.
    1050 Stephens, 05/17/96 Hrg. p.22.
    1051 Stephens, 05/17/96 Hrg. pp. 23-27.
    1052 Stephens, 05/17/96 Hrg. pp. 23-27.
    1053 Stephens, 05/17/96 Hrg. pp. 23-27.
    1054 Stephens, 05/17/96 Hrg. pp. 23-27.
    1055 Ericson, 05/17/96 Hrg. p. 92.
    1056 Ericson, 05/17/96 Hrg. p. 93.
    1057 Report to the RTC on Madison Guaranty Savings & Loan and 
Whitewater Development Corporation, Inc., Pillsbury, Madison & Sutro, 
April 24, 1995, pp. 140-141.
    1058 White House Document S 020819, S 020888.
    1059 S. Rep. 103-433, Vol. II, pp. 217-218.
    1060 Ickes, 7/24/94 Dep., S.Rep. 103-889, Vol IX, pp. 1720-
1727.
    1061 Ickes, 7/24/94 Dep.
    1062 Ickes, 7/24/94, Dep. p. 119; see also Ickes, 7/24/94, 
Dep. p. 123: ``all this was new to me'', S.Rep. 103-889, Vol V, p. 
1414.
    1063 Ickes, 7/24/94, Dep., S.Rep. 103-889, Vol. V, p. 1414.
    1064 Ickes, 7/24/94, Dep., S.Rep. 103-889, Vol. V, p. 1414.
    1065 White House Document S 9908-S9911.
    1066 White House Document S 9909.
    1067 White House Document S 20819, S 20888.
    1068 White House Document S 20790; Ickes, 2/22/96 Hrg. p. 49.
    1069 Ickes, 2/22/96 Hrg. p. 50.
    1070 White House Document S 20790; Ickes, 2/22/96 Hrg. p. 52.
    1071 White House Document S 20783-S 20784.
    1072 Treasury Document 014941.
    1073 Potts, 10/11/95 Dep. pp. 27-29.
    1074 Cottos, 10/18/95 Dep. p. 15.
    1075 Treasury IG Document 391.
    1076 Blight, 10/10/95 Dep. pp. 20-21.
    1077 Cottos, 11/8/95 Hrg. p. 15; Treasury IG Document 444-446.
    1078 Cottos, 11/8/95 Hrg. p. 15.
    1079 Cottos, 11/8/95 Hrg. pp. 15-16.
    1080 Blight, 10/10/95 Dep. p. 90.
    1081 Black, 11/7/95 Hrg. pp. 116-117.
    1082 Adair, 11/7/95 Hrg. p. 109.
    1083 Cottos, 11/8/95 Hrg. pp. 16-17.
    1084 Cottos, 11/8/95 Hrg. p. 17.
    1085 Cottos, 11/8/95 Hrg. p. 16
    1086 Cottos, 11/8/95 pp. 81-82.
    1087 Treasury OIG Document 2171.
    1088 Treasury Document 16012.
    1089 Kerner, 11/8/95 Hrg. p. 79.
    1090 Cesca, 11/8/95 Hrg. pp. 80, 83.
    1091 Blight, 10/10/95 Dep. pp. 62-65.
    1092 Schmalzbach, 11/8/95 p. 135.
    1093 Schmalzbach, 11/8/95 Hrg. p. 130.
    1094 Cottos, 11/8/95 Hrg. pp. 17-18.
    1095 Adair, 11/7/95 Hrg. p. 123.
    1096 Black, 11/7/95 Hrg. p. 157.
    1097 Cesca, 11/8/95 Hrg. p. 19.
    1098 Cottos, 11/8/95 Hrg. p. 20.
    1099 Cesca, 11/8/95 Hrg. p. 20.
    1100 Cottos, 11/8/95 Hrg. p. 26.
    1101 Black, 11/7/95 Hrg. p. 119.
    1102 Blight, 10/10/95 Dep. p. 74.
    1103 Adair, 10/26/95 Dep. p. 56.
    1104 Blight, 10/10/95 Dep. p. 75.
    1105 Black, 11/7/95 Hrg. p. 119.
    1106 Black, 11/7/95 Hrg. p. 122.
    1107 Cottos, 11/8/95 Hrg. p. 27.
    1108 Schmalzbach, 10/20/95 Dep. p. 119.
    1109 Schmalzbach, 11/8/95 Hrg. p. 131.
    1110 Schmalzbach, 11/8/95 Hrg. pp. 132-134.
    1111 S. Rep. 103-433 p. 141.
    1112 Treasury Document 014931-014938.
    1113 Cottos, 11/8/95 Hrg. p. 35.
    1114 Kerner, 11/8/95 Hrg. p. 30.
    1115 Cottos, 11/8/95 Hrg. p. 35.
    1116 Cottos, 11/8/95 Hrg. p. 36.
    1117 Kerner, 11/8/95 Hrg. p. 30.
    1118 McHale, 10/19/95 Dep. p. 98
    1119 Kerner, 11/8/95 Hrg. p. 32.
    1120 Kerner, 11/8/95 Hrg. p. 32.
    1121 Cottos, 11/8/95 Hrg. p. 36.
    1122 Black, 11/7/95 Hrg. pp. 123-125.
    1123 Bentsen, 11/7/95 Hrg. p. 30.
    1124 Black, 10/12/95 Dep. p. 160-161.
    1125 Treasury Document 11124.
    1126 Kerner, 11/8/95 Hrg. p. 46.
    1127 Cutler, 11/6/95 Dep. pp. 9-10.
    1128 Cutler, 11/6/95 Dep. pp. 36-37.
    1129 Cutler, 11/6/95 Dep. pp. 37-39.
    1130 Cutler, 11/6/95 Dep. p. 37.
    1131 Bentsen, 11/7/95 Hrg. pp. 32-33.
    1132 Knight, 10/25/95 Dep. p. 38.
    1133 Knight, 10/25/95 Dep. p. 40.
    1134 Knight, 10/25/95 Dep. p. 31.
    1135 Knight, 10/25/95 Dep. p. 126.
    1136 Cutler, 11/6/95 Dep. p. 65.
    1137 Cutler, 11/6/95 Dep. p. 69.
    1138 Cutler, 11/6/95 Dep. p. 69.
    1139 Cutler, 11/11/95 Dep. pp. 18-19.
    1140 Cutler, 11/6/95 Dep. p. 49.
    1141 Cutler, 11/6/95 Dep. p. 44.
    1142 Bentsen, 11/7/95 Hrg. p. 63.
    1143 Cesca, 11/8/95 Hrg. p. 119.
    1144 Black, 11/7/95 Hrg. p. 191.
    1145 Black, 11/7/95 Hrg. p. 117.
    1146 Black, 11/7/95 Hrg. p. 117.
    1147 Cottos, 11/8/95 Hrg. p. 26.
    1148 Cottos, 11/8/95 Hrg. pp. 26-27.
    1149 Adair, 11/7/95 Hrg. pp. 117-118.
    1150 Black, 11/7/95 Hrg. p. 119.
    1151 Treasury OIG Document 365.
    1152 Treasury OIG Document 367.
    1153 Dougherty, 11/8/95 Hrg. p. 165.
    1154 RTC OIG Document 6877.
    1155 Adair, 10/26/95 Dep. p. 140; Blight, 10/10/95 Dep. pp. 
80-81; Black, 10/12/95 Dep. pp. 149-150.
    1156 Bentsen, 11/7/95 Hrg. p. 31.
    1157 Cesca, 10/13/95 Dep. p. 153.
    1158 Cesca, 10/13/95 Dep. pp. 155-156.
    1159 Cesca, 10/13/95 Dep. p. 158.
    1160 Cesca, 10/13/95 Dep. p. 173.
    1161 Cesca, 10/13/95 Dep. pp. 176-177.
    1162 Knight, 11/8/95 Hrg. p. 144.
    1163 Knight, 11/8/95 Hrg. p. 145.
    1164 Knight, 11/8/95 Hrg. p. 145.
    1165 Cottos, 10/18/95 Dep. p. 143.
    1166 Cottos, 10/18/95 Dep. p. 143.
    1167 Cottos, 10/18/95 Dep. pp. 144-145.
    1168 Adair, Black, Blight, Switzer, November 7, 1995 Hrg. pp. 
120-121.
    1169 Black, 11/7/95 Hrg. p. 192.
    1170 Black, 11/7/95 Hrg. p. 192.
    1171 Blight, 10/10/95 Dep. p. 59.
    1172 Adair, 10/26/95 Dep. p. 140.
    1173 Treasury Document 6877.
    1174 Associated Press, May 5, 1995.
    1175 Associated Press, May 5, 1995.
    1176 Cutler, 11/9/95 Hrg. p. 11.
    1177 Cutler, 11/9/95 Hrg. pp. 115, 119-120.
    1178 Cutler, 11/9/95 Hrg. pp. 10, 13; Sherburne, 11/9/95 Hrg. 
p. 90.
    1179 Dougherty, 11/8/95 Hrg. p. 156.
    1180 Knight, 11/8/95 Hrg. p. 199.
    1181 McHale, 11/8/95 Hrg. p. 197.
    1182 McHale, 11/8/95 Hrg. p. 202.
    1183 Knight, Schmatzbach, McHale, Dougherty, 11/8/95 Hrg. p. 
197.
    1184 Dougherty, 11/8/95 Hrg. p. 192.
    1185 Dougherty, 11/8/95 Hrg. p. 161.
    1186 Dougherty, 11/8/95 Hrg. p. 161.
    1187 Sherburne, 11/9/95 Hrg. pp. 17-18.
    1188 Sherburne, 11/9/95 Hrg. p. 88.
    1189 Bentsen, 11/7/95 Hrg. pp. 65-66.
    1190 Bentsen, 11/7/95 Hrg. p. 65.
    1191 White House Document S 007108.
    1192 Treasury Document 6877.
    1193 S. Rep. 103-889, Vol. IV, pp. 90, 432, 461, 735 & 743.
    1194 S. Rep. 103-899, Vol. IV, p. 735.
    1195 Potts, 11/8/95 Hrg. p. 231.
    1196 OGE, 11/8/95 (No Number).
    1197 Ley, 11/8/95 Hrg. p. 230.
    1198 Cutler, 11/9/95 Hrg. p. 29.
    1199 White House Document, S012512.
    1200 Kennedy, 12/5/95 Hrg. pp. 42-47, 59-61.
    1201 S. Rep. 104-191, 12/19/95, p. 20.
    1202 White House Document, Cover Letter, 1/29/96.
    1203 Gearan, 2/12/96 Dep. p. 12.
    1204 Gearan, 2/12/96 Dep. p. 13.
    1205 Gearan, 2/12/96 Dep. p. 14.
    1206 Gearan, 2/12/96 Dep. p. 15.
    1207 Gearan, 2/12/96 Dep. p. 16.
    1208 Waldman, 2/21/96 pp. 15-17.
    1209 White House Document, 2/20/96 Cover Letter.
    1210 Letter from Allen Snyder to Robert Giuffra, Jr., 3/1/96, 
p. 1.
    1211 Williams & Connolly, 1/5/96 (Cover Letter).
    1212 Clark, 1/18/96 Hrg. p.90
    1213 Clark, 1/18/96 Hrg. p. 90.
    1214 Vinson & Elkins Document RS237A.
    1215 Clark, 1/18/96 Hrg. p. 163.
    1216 Hubbell, 2/7/96 Hrg. p. 101.
    1217 Response of Rose Law Firm to Interrogatory Propounded by 
the Special Committee to Investigate Whitewater Development Corporation 
and Related Matters, Jan. 17, 1996, p. 4.
    1218 Response of Rose Law Firm to Interrogatory Propounded by 
the Special Committee to Investigate Whitewater Development Corporation 
and Related Matters, Jan. 17, 1996, p. 4.
    1219 Hubbell, 2/7/96 Hrg. p. 169.
    1220 Clark, 1/18/96 Hrg. pp. 162-164.
    1221 Williams & Connolly Document DKSN28929.
    1222 Williams & Connolly Document DKSN 28934; Massey, 1/11/96 
Hrg. p. 226.
    1223 Hubbell, 2/7/96 Hrg. p. 48.
    1224 Hubbell, 2/7/96 Hrg. p. 42.
    1225 Hubbell, 2/7/96 Hrg. p. 46.
    1226 Willkie, Farr & Gallagher Document ST32.
    1227 Willkie, Farr & Gallagher Document ST32.
    1228 Thomases, 12/18/95 Hrg. p. 53.
    1229 Thomases, 12/18/95 Hrg. p. 53.
    1230 Thomases, 12/18/95 Hrg. p. 69.
    1231 Thomases, 12/18/95 Hrg. p. 70.
    1232 Thomases, 5/14/96 Hrg. p. 49.
    1233 Thomases, 5/14/96 Hrg. p. 49.
    1234 Hubbell, 2/7/95 Hrg. p. 54.
    1235 Lynch, 5/14/96 Dep. pp. 94, 107-108.
    1236 Lynch, 5/14/96 Dep. p. 111.
    1237 Lynch, 5/14/96 Dep. p. 104.
    1238 Lynch, 5/14/96 Dep. p. 104.
    1239 Lynch, 5/14/96 Dep. p. 112.
    1240 Lynch, 5/14/96 Dep. p. 111.
    1241 Lynch, 5/14/96 Dep. p. 158.
    1242 Williams & Connolly Document DKSN28934.
    1243 Williams & Connolly Document DKSN28933.
    1244 Hubbell, 2/7/96 Hrg. p. 47.
    1245 Hubbell, 2/7/96 Hrg. p. 47.
    1246 Hubbell, 2/7/96 Hrg. p. 56.
    1247 Hubbell, 2/7/96 Hrg. p. 52.
    1248 Hubbell, 2/7/96 Hrg. p. 53.
    1249 Hubbell, 2/7/96 Hrg. p. 54.
    1250 Hubbell, 2/7/96 Hrg. p. 54.
    1251 Hubbell, 2/7/96 Hrg. p. 56.
    1252 Hubbell, 2/7/96 Hrg. pp. 56-57.
    1253 Hubbell, 2/7/96 Hrg. p. 57.
    1254 Huber, 1/18/96 Hrg. p. 5.
    1255 Huber, 1/18/96 Hrg., pp. 5, 8.
    1256 Huber, 1/18/96 Hrg. pp. 6-7.
    1257 Huber, 1/18/96 Hrg. p. 5.
    1258 Huber, 1/18/96 Hrg. pp. 5, 13.
    1259 Huber, 1/18/96 Hrg. p. 9.
    1260 Huber, 1/18/96 Hrg. pp. 16-17, 28.
    1261 Huber, 1/18/96 Hrg. pp. 10, 14.
    1262 Huber, 1/18/96 Hrg. p. 12.
    1263 Huber, 1/18/96 Hrg. pp. 9, 12.
    1264 Huber, 1/18/96 Hrg. p. 9.
    1265 Huber, 1/18/96 Hrg. p. 18.
    1266 Hubbell, 12/1/95 Hrg. pp. 149-150.
    1267 Huber, 1/18/96 Hrg. pp. 17-18.
    1268 Huber, 1/18/96 Hrg. pp. 17-18.
    1269 Huber, 1/18/96 Hrg. p. 18.
    1270 Huber, 1/18/96 Hrg. p. 18.
    1271 Huber, 1/17/96 Dep. p. 85.
    1272 Huber, 1/18/96 Hrg. p. 19; Huber, 1/17/96 Dep. pp. 85.
    1273 Huber, 1/18/96 Hrg. pp. 19-20.
    1274 Huber, 1/18/96 Hrg. p. 57; Kendall, 2/8/96 Hrg. p. 4; 
Huber, 1/17/96 Dep. p. 86.
    1275 Huber, 1/17/96 Dep. p.86.
    1276 Kendall, 2/8/96 Hrg. p. 48.
    1277 Kendall, 2/8/96 Hrg. p. 48.
    1278 Kendall, 2/8/96 Hrg. p. 49.
    1279 Kendall, 2/8/96 Hrg. p. 49.
    1280 Kendall, 2/8/96 Hrg. p. 49.
    1281 Kendall, 2/8/96 Hrg. p. 49; Huber, 1/18/96 Hrg. p. 25.
    1282 Kendall, 2/8/96 Hrg. p. 49.
    1283 Kendall, 2/8/96 Hrg. pp. 49-50.
    1284 Sherburne, 2/8/96 Hrg. pp. 4-5.
    1285 Sherburne, 2/6/96, Dep. pp. 21-22.
    1286 Kendall, 2/8/96 Hrg. pp. 66-70; Sherburne, 2/8/96 Hrg. 
pp. 66-70; Sherburne, 2/6/96 Dep. pp. 19-20; Kendall, 2/7/96 Dep. p. 
19.
    1287 Sherburne, 2/8/96 Hrg. p. 5.
    1288 Huber, 1/18/96 Hrg. pp. 58-59.
    1289 Kendall, 2/8/96 Hrg. pp. 53.
    1290 Huber, 1/18/96 Hrg. p. 71.
    1291 Huber, 1/18/96 Hrg. p. 25; Kendall, 2/8/96 Hrg. p. 4.
    1292 Huber, 1/18/96 Hrg. p. 71.
    1293 Sherburne, 2/8/96 Hrg. p. 57.
    1294 Sherburne, 2/8/96 Hrg. pp. 57-58.
    1295 Kendall, 2/8/96 Hrg. pp. 66-70; Sherburne, 2/8/96 Hrg. 
pp. 66-70.
    1296 Kendall, 2/7/96 Dep. pp. 57-58.
    1297 Huber, 1/18/96 Hrg. pp. 43-44; Kendall, 2/8/96 Hrg. pp. 
55-56.
    1298 Huber, 1/18/96 Hrg. pp. 43-44; Kendall, 2/8/96 Hrg. p. 
56.
    1299 Kendall, 2/8/96 Hrg. p. 56.
    1300 Kendall, 2/8/96 Hrg. p. 56; Sherburne, 2/8/96 Hrg. pp. 
58-59.
    1301 Sherburne, 2/8/96 Hrg. p. 60.
    1302 Sherburne, 2/8/96 Hrg. pp. 58-59.
    1303 Kendall, 2/8/96 Hrg. p. 60.
    1304 Kendall, 2/8/96 Hrg. pp. 6-7.
    1305 Williams & Connolly Document DKSN 28934; Massey, 1/11/96 
Hrg. p. 226.
    1306 Response of the Rose Law Firm to Interrogatory Propounded 
by the Special Committee to Investigate Whitewater Development 
Corporation and Related Matters, Jan. 17, 1996, p. 3.
    1307 Williams & Connolly Document DKSN028928-DKSN029043.
    1308 Williams & Connolly Document DKSN028158.
    1309 Williams & Connolly Document DKSN028065.
    1310 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    1311 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    1312 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    1313 Massey, 01/11/96 Hrg. p. 233.
    1314 Massey, 1/11/96 Hrg. pp. 18-19.
    1315 Massey, 1/11/96 Hrg. pp. 25-26.
    1316 Massey, 1/11/96 Hrg. pp. 29, 222-23.
    1317 Knight, 05/16/96 Hrg. p. 10.
    1318 Knight, 05/16/96 Hrg. p. 12.
    1319 Knight, 05/16/96 Hrg. p. 10.
    1320 Latham, 05/16/96 Hrg. p. 15.
    1321 Latham, 7/12/95 RTC Interview p. 105.
    1322 Sidley & Austin Document 000637.
    1323 Sidley & Austin Document 000637.
    1324 Sidley & Austin Document 000637.
    1325 William C. Rempel and Douglas Frantz, ``Fallout From 
Collapse of S&L Shadows Clinton,'' L.A. Times, 11/7/93, p. A17.
    1326 William C. Rempel and Douglas Frantz, ``Fallout From 
Collapse of S&L Shadows Clinton,'' L.A. Times, 11/7/93, p. A17.
    1327 J. McDougal, 5/8/96 McDougal Trial Testimony p. 7298.
    1328 J. McDougal, 5/8/96, McDougal Trial Testimony pp. 7299-
7300.
    1329 J. McDougal, 5/8/96, McDougal Trial Testimony p. 7303.
    1330 J. McDougal, 5/8/96, McDougal Trial Testimony p. 7303.
    1331 W. Clinton, 4/25/96 Dep. McDougal Trial Testimony, p. 
120.
    1332 Bunch Document, 5/14/96 (Not Numbered).
    1333 Bunch Document, 5/14/96 (Not Numbered).
    1334 Bunch, 05/16/96 Hrg. pp. 18-21.
    1335 Bunch Document, 5/14/96 (Not Numbered).
    1336 Bunch Document, 5/14/96 (Not Numbered).
    1337 Williams & Connolly Document DKSN28933.
    1338 1996 Pillsbury Madison & Sutro interview of Hillary 
Rodham Clinton, pp. 27-31, Resolution Trust Corporation Document S-
INTV000628-632.
    1339 1996 Pillsbury Madison & Sutro interview of Hillary 
Rodham Clinton, pp. 27-31, Resolution Trust Corporation Document S-
INTV000628-632.
    1340 Williams & Connolly Document DKSN028943.
    1341 Williams & Connolly Document DKSN028943.
    1342 Williams & Connolly Document DKSN0128940.
    1343 Hillary Rodham Clinton Answers to Interrogatories, 5/24/
95 p. 41, RTC Document 42.
    1344 Hillary Rodham Clinton Answers to Interrogatories, 5/24/
95 p. 41, RTC Document 42.
    1345 Schaffer, 1/25/96 Hrg. pp. 24-28.
    1346 Massey, 1/11/96 Hrg. pp. 184-185.
    1347 Massey, 01/11/96 Hrg. p. 113.
    1348 Massey, 01/11/96 Hrg. p. 113.
    1349 Associated Press, ``Text of the First Lady Hillary Rodham 
Clinton's News Conference in the State Dining Room of the White 
House,'' 4/22/94.
    1350 Hillary Rodham Clinton, 11/10/94 FDIC interview p. 6.
    1351 Hillary Rodham Clinton, 11/10/94 RTC Interview.
    1352 Hillary Rodham Clinton Answer to RTC Interrogatory, 5/24/
95, RTC Document 36.
    1353 Williams & Connolly Document DKSN028928-DKSN029043.
    1354 Williams & Connolly Document DKSN028928-DKSN029043.
    1355 Williams & Connolly Document DKSN028943.
    1356 Massey, 1/11/96 Hrg. p. 93.
    1357 Massey, 1/11/96 Hrg. p. 93.
    1358 Massey, 1/11/96 Hrg. pp. 96-97.
    1359 Pillsbury Madison & Sutro, A Report on Certain Real 
Estate Loans and Investments Made by Madison Guaranty Savings & Loan 
and Related Matters, 12/19/95, p.39.
    1360 Clark, 1/30/96 Hrg. pp. 17-18.
    1361 Pillsbury Madison & Sutro, A Report on the Representation 
of Madison Guaranty Savings & Loan by the Rose Law Firm, 12/28/95, pp. 
53-58.
    1362 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1363 Hillary Rodham Clinton Answer to RTC Interrogatory Number 
29, p. 73, 5/24/95, RTC Document 74.
    1364 RTC Supplemental Interrogatories, 1/20/96, RTC Document 
SINNTR00100.
    1365 Hillary Rodham Clinton, 2/14/96 PMS Interview, p. 64, RTC 
Document SINTV00649.
    1366 Hillary Rodham Clinton, 1/12/96 Barbara Walters 
interview.
    1367 Hillary Rodham Clinton, 2/14/96 PMS Interview, pp. 50-53, 
RTC Documents SINTV00651-654.
    1368 Denton, 3/18/96 McDougal Trial Testimony p. 1029.
    1369 Jennings, 2/13/96 (Letter and attachment).
    1370 Jennings, 2/13/96 (Letter and attachment).
    1371 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1372 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1373 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1374 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1375 RTC Document, SEN 32912-32913.
    1376 Williams & Connolly Document DKSN029024.
    1377 Denton Document, DD000000241.
    1378 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    1379 Denton, 6/11/96 FDIC OIG Interview pp. 3.
    1380 Denton, 6/11/96 FDIC OIG Interview pp. 3.
    1381 Williams & Connolly Document, DKSN029026.
    1382 12/28/95 Pillsbury Report p. 74.
    1383 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1384 Letter from Alfonse M. D'Amato, Richard Shelby, 
Christopher S. Bond, Connie Mack, Lauch Faircloth, Robert F. Bennett, 
Rod Grams, Pete V. Domenici, Orrin G. Hatch, and Frank H. Murkowski to 
David Kendall, June 13, 1996, p. 3.
    1385 Affidavit of Hillary Rodham Clinton, June 17, 1996, p.2.
    1386 6/17/95 Letter from David Kendall to Alfonse D'Amato, 
p.2.
    1387 Pillsbury Madison & Sutro, ``A Report on the Rose Law 
Firm's Conduct of Accounting Malpractice Litigation Pertaining to 
Madison Guaranty Savings & Loan,'' December 28, 1995, p. 3.
    1388 Resolution Trust Corporation, Office of Inspector 
General, Report of Investigation, Investigation Concerning Rose Law 
Firm, File Number WA-94-0016, August 3, 1995, pp. III-3, III-34 
(hereinafter ``RTC OIG Report'').
    1389 RTC OIG Report p. I-13.
    1390 RTC OIG Report p. I-13.
    1391 Pillsbury, Frost Report pp. 7, 17.
    1392 FDIC OIG, Report of Investigation, Alleged Conflicts of 
Interest by the Rose Law Firm, Case Number IO-94-096, July 28, 1995, 
pp. 6-7 (hereinafter, ``FDIC OIG Report'').
    1393 FDIC OIG Report p. 9.
    1394 FDIC OIG Report, pp. 1, 54.
    1395 FDIC OIG Report p. 54.
    1396 FDIC OIG Report p. 9.
    1397 FDIC OIG Report p. 9.
    1398 RTC OIG Report p. I-1.
    1399 RTC OIG Report p. I-1.
    1400 RTC OIG Report p. I-1.
    1401 FDIC OIG Report p. 1.
    1402 FDIC OIG Report p. 2.
    1403 FDIC OIG Report p. 4.
    1404 FDIC OIG Report pp. 5-6.
    1405 Adair, 8/10/95 Hrg. Before House Banking Comm. p. 23; see 
also RTC OIG Report p. I-3 & Appendix 1; Black, 2/5/96 Dep. pp. 126-
127.
    1406 RTC OIG Report pp. I-4--I-5.
    1407 Adair, 8/10/95 Hrg. pp. 23-24.
    1408 FDIC Document (Not Numbered), Letter from RTC to Arkansas 
Supreme Court Committee on Professional Conduct, 12/29/95.
    1409 Black, 2/5/96 Dep. p. 250.
    1410 Pillsbury, Frost Report pp. 1-2.
    1411 Pillsbury, Frost Report p. 2.
    1412 Pillsbury, Frost Report p. 2-3.
    1413 Pillsbury, Frost Report p. 8.
    1414 Pillsbury, Frost Report p. 18-19.
    1415 Pillsbury, Frost Report p. 25.
    1416 Pillsbury, Frost Report p. 27.
    1417 Pillsbury, Frost Report p. 27.
    1418 Black, 8/10/95 Hrg. p. 52.
    1419 Black, 2/5/96 Dep. pp. 35-36, 51, 83, 99, 132-133, 231-
233.
    1420 Black, 2/5/96 Dep. p. 235.
    1421 Hubbell, 12/1/95 Hrg. pp. 149-150.
    1422 Thomases, 12/18/95 Hrg. p. 50.
    1423 Huber, 1/18/96 Hrg. pp. 17-18.
    1424 White House Document S020072-83, S020330-390.
    1425 White House Document S020087-291.
    1426 White House Document S020001-61, S020321-29.
    1427 White House Document S020001-61, S020072-83, S020287-291, 
S020321-390.
    1428 Walters, 2/2/96 Dep. p. 181-182.
    1429 Walters, 2/8/96 Hrg. p. 179.
    1430 Walters, 2/8/96 Hrg. p. 179.
    1431 Freemyer, 2/8/96 Hrg. pp. 177-178.
    1432 Freemyer, 2/5/96 Dep. p. 42.
    1433 Freemyer, 2/8/96 Hrg. p. 177.
    1434 Freemyer, 2/5/96 Dep. p. 102.
    1435 Freemyer, 2/8/96 Hrg. p. 179.
    1436 White House Document S000250, S2000075.
    1437 White House Document S000250, S2000075.
    1438 White House Document S020001-61, S020321-29.
    1439 Letter from Alfonse M. D'Amato, Richard Shelby, 
Christopher S. Bond, Connie Mack, Lauch Faircloth, Robert F. Bennett, 
Rod Grams, Pete V. Domenici, Orrin G. Hatch, and Frank H. Murkowski to 
David Kendall, June 13, 1996, p. 3.
    1440 Collingwood, 6/4/96, (Letter).
    1441 Affidavit of Marc Rolfe, June 6, 1996, p. 2.
    1442 Hatch, 6/7/96 Dep. p. 14.
    1443 Alston, 6/7/06 Dep. p. 6.
    1444 Hatch, 6/7/96 Dep. p. 20.
    1445 Hatch, 6/7/96 Dep. p. 20.
    1446 Hatch, 6/7/96 Dep. p. 27.
    1447 Hatch, 6/7/96 Dep. p. 30.
    1448 Hatch, 6/7/96 Dep. p. 43.
    1449 Hatch, 6/7/96 Dep. p. 38.
    1450 Alston, 6/7/96 Dep. p. 12.
    1451 Alston, 6/7/96 Dep. p. 43.
    1452 Alston, 6/7/96 Dep. p. 45.
    1453 Alston, 6/7/96 Dep. p. 45.
    1454 Alston, 6/7/96 Dep. p. 49.
    1455 Alston, 6/7/96 Dep. p. 56.
    1456 Letter from David Collingwood to Robert Giuffra, June 4, 
1996.
    1457 Hubbell, 2/7/96 Hrg. p. 56.
    1458 Nancy Mathis, ``Clinton gives taped testimony in McDougal 
bank fraud trial, Houston Chronicle, April 26, 1996, p. A1.
    1459 Letter from David Collingwood to Robert Giuffra, June 4, 
1996, p. 1.
    1460 Williams & Connolly Document DKSN028943.
    1461 Letter from David Collingwood to Robert Giuffra, June 4, 
1996, p. 1.
    1462 Williams & Connolly Document DKSN028934.
    1463 Hillary Rodham Clinton Answers to Interrogatories, 5/24/
95 p. 41, RTC Document.
    1464 Massey, 1/11/96 Hrg. pp.184-185; Schaffer, 1/25/96 Hrg. 
pp. 24-28.
    1465 Schaffer, 1/25/96 Hrg. pp. 24-28.
    1466 Pillsbury, 12/19/95 p. 39.
    1467 12/28/95 Pillsbury Report p. 56.
    1468 Letter from David Collingwood to Robert Giuffra, June 4, 
1996 p. 1.
    1469 Williams & Connolly Document DKSN028962.
    1470 Letter from David Collingwood to Robert Giuffra, June 4, 
1996 p. 1.
    1471 Williams & Connolly Document DKSN029024.
    1472 Williams & Connolly Document DKSN029024.
    1473 Clark, 1/30/96 Hrg. pp. 17-18.
    1474 Denton Document DD000000241.
    1475 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    1476 Denton, 6/11/96 FDIC OIG Interview p. 3.
    1477 Denton, 6/11/96 FDIC OIG Interview p. 3.
    1478 Denton, 6/11/96 FDIC OIG Interview p. 3.
    1479 Williams & Connolly Document DKSN029026.
    1480 Williams & Connolly Document DKSN029026.
    1481 Clark, 6/10/96 FDIC-IG Interview p. 9.
    1482 6/13/96 letter from Senators Alfonse D'Amato, Richar 
Shelby, Christopher Bond, Connie Mack, Lauch Faircloth, Robert Bennett, 
Rod Grams, Pete Domenici, Orrin Hatch, and Frank Murkowski to David 
Kendall.
    1483 Affidavit of Hillary Rodham Clinton, June 17, 1996, p. 2.
    1484 6/17/95 Letter from David Kendall to Alfonse D'Amato, p. 
2.
    1485 Letter from Alston Jennings to Viet Dinh, February 7, 
1996, attachment.
    1486 February 7, 1996 letter from Alston Jennings to Viet 
Dinh.
    1487 Ward, 2/12/96 Dep. p. 102.
    1488 Hillary Rodham Clinton Answer to RTC Interrogatory Number 
29, p. 73, 5/24/95, RTC Document 74.
    1489 Clark, 6/11/96 FDIC-OIG Interview p. 9.
                      Phase 3--The Arkansas Phase

                                CONTENTS

                                                                   Page
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..............   355
        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 Lo372
Part V: The Lending Activities of Perry County Bank in the 1990 
  Clinton Gubernatorial Campaign.................................   375

                  Conclusions of the Special Committee

    ``White Water stock (McDougal's company)
    ``Do you still have? (pursuant to Jim's current problems)
    ``If so, I'm worried about it.'' 1
    ``No--Do not have any more--B.'' 2 --July 14, 1986 
from Betsey Wright and Governor Clinton's response.
    ``Jim McDougal is my partner and I have to trust him . . . 
Back off, leave it alone'' 3 --Governor Clinton to Gaines 
Norton, his personal accountant.
    ``His caution was `summarily dismissed' by Clinton. . . he 
was to take care of savings & loan matters and she would take 
care of the legal matters.'' 4 --Don Denton, Chief Lending 
Officer at Madison on discussion with Mrs. Clinton about Castle 
Grande.
    ``Cut in Lasater for 15 percent'' 5 --Charles Stout, 
Chairman of ADHA Board, describing a statement by Bob Nash, 
Governor Clinton's Chief Economic Advisor.
    ``Loan went to Clinton Campaign, Signed lease to state, 
Alot of people going to prison!!'' 6 --Notes taken by 
attorney Lance Miller.
    The Special Committee's Arkansas Phase focused on the core 
allegations of improprieties and criminal misconduct concerning 
the activities of Madison Guaranty Savings and Loan Association 
(``Madison Guaranty''), Whitewater Development Corporation 
(``Whitewater''), Capital Management Services, Inc. (``CMS'') 
and Lasater & Co. The Arkansas Phase was the last phase of the 
Committee's inquiry, and, in deference to the Independent 
Counsel's ongoing investigation, the Committee did not 
investigate thoroughly certain matters specified in Resolution 
120, particularly the lending activities of the Perry County 
Bank in connection with 1990 Arkansas gubernatorial election.
    The convictions of three of the President and Mrs. 
Clinton's close Arkansas business and political associates in 
the recently concluded Tucker-McDougal trial in Little Rock 
marked a key turning point in the ongoing Whitewater affair. 
The jury's guilty findings against Governor Jim Guy Tucker and 
James and Susan McDougal, the Clintons' Whitewater business 
partners, demonstrate the seriousness of the matters under 
investigation in the Committee's Arkansas Phase. Simply put, 
Whitewater can no longer be responsibly dismissed as ``a cover-
up without a crime.''
    The Arkansas jury unanimously concluded that James McDougal 
operated Madison Guaranty as, in effect, a criminal enterprise. 
The failure of Madison Guaranty cost American taxpayers more 
than $60 million. It is now clear that Madison and CMS, a small 
business investment company run by David Hale, were piggy banks 
for the Arkansas political elite.
    Eight of the 24 counts of conviction relate directly to the 
Clintons' investment in Whitewater. The jury convicted on all 
of the counts concerning a loan from CMS to Susan McDougal's 
firm, Master Marketing. According to the testimony of an FBI 
agent at the Tucker-McDougal trial, approximately $50,000 of 
the loan was used to pay the expenses of Whitewater. Moreover, 
Mr. Hale testified at the trial that he discussed this 
fraudulent loan with then-Governor Clinton. Unfortunately, the 
Committee never heard the important testimony of Mr. Hale, who 
asserted his constitutional right not to testify. The Committee 
was unable to secure sufficient votes to grant Mr. Hale limited 
use immunity.
    The recently-discovered Rose Law Firm billing records 
provide important new evidence relating to the Arkansas Phase. 
The records reveal Mrs. Clinton's previously undisclosed 
personal representation of Mr. McDougal's S&L before state 
regulators, seeking permission to raise additional money 
through the sale of stock. The records also show that Mrs. 
Clinton was repeatedly called on to do work related to the 
Madison land deal, known as Castle Grande, which federal S&L 
regulators found involved a series of fraudulent transactions. 
The Special Committee concludes that Mrs. Clinton's work on 
Castle Grande related to an effort to conceal the true nature 
of activities at Madison Guaranty.
    The Special Committee also uncovered evidence that Mr. 
Clinton himself took an active role in obtaining one of the 
original Whitewater loans--one apparently approved as a favor 
after the bank's political lobbyist intervened. And Mr. 
Clinton's accountant testified that when he raised objections 
to early parts of Mr. McDougal's Whitewater proposal, Mr. 
Clinton pulled him aside and told him to ``back off.''
    During the 1980s, Mr. McDougal and his allies obtained 
favorable results from their dealings with the Arkansas state 
government under Governor Clinton. At a time when Mr. McDougal 
was carrying the Clintons on their Whitewater loans, Mr. 
McDougal had a say in the making of state appointments, enjoyed 
personal access to the Governor and won valuable state leases 
for Madison. The Special Committee concludes that Governor 
Clinton's official and personal dealings with Mr. McDougal 
raised an apparent, if not an actual, improper conflict of 
interest.
    Finally, the Clinton were not ``passive'' investors in the 
Whitewater real estate venture, as they have claimed. Indeed, 
the Clintons participated in important meetings concerning the 
Whitewater investment. The Special Committee concludes that the 
Clintons took an active role in obtaining and extending 
Whitewater-related loans.
          * * * * * * *

1. Mrs. Clinton's legal work on Castle Grande related to an effort to 
        conceal the true nature of the activities at Madison Guaranty

    The Castle Grande land development consisted of more than 
1,000 acres of property near Little Rock purchased by Seth 
Ward, Webster Hubbell's father-in-law, and Madison Financial 
Corp. (``MFC'')--Madison Guaranty's wholly-owned 
subsidiary.7 The land was sold in a series of transactions 
that caused nearly $4 million in losses to Madison Guaranty--
losses ultimately borne by U.S. taxpayers.8
    Federal regulators have determined that Seth Ward acted as 
a ``straw'' man in the fraudulent Castle Grande transaction who 
simply held property in his name until MFC could find a 
buyer.9 In this way, Madison Guaranty was able to 
circumvent an Arkansas regulation that limited investment in 
real estate by a savings and loan.10 For his part in this 
sham deal, Mr. Ward earned over $300,000 in commissions on the 
sale of property.11
    Prior to the discovery of the Rose Law Firm billing records 
in the White House Residence, the nature and extent of Mrs. 
Clinton's work on Castle Grande was virtually unknown. The 
evidence obtained in the course of the Special Committee's 
investigation now establishes that Mrs. Clinton had direct and 
substantial involvement in Castle Grande.
    The Rose billing records reflect that on April 7, 1986, 
Mrs. Clinton had a telephone conference with Madison Guaranty's 
chief loan officer, Don Denton.12 The records also reflect 
that on May 1, 1986, Mrs. Clinton prepared an option agreement 
under which MFC obtained the right to buy from Mr. Ward a small 
piece of property called Holman Acres for $400,000.13
    The background to the questionable transaction is as 
follows. In spring 1986, Mr. Ward approached John Latham, the 
President of Madison Guaranty, about collecting his commissions 
from the sham sales of real estate at Castle Grande. At the 
time, however, Madison Guaranty had come under scrutiny from 
federal banking regulators, who were examining the thrift and 
would have questioned the payment of such commissions.14
    Therefore, Seth Ward, Madison Guaranty, and Madison 
Financial executed a series of crossing loan transactions and 
promissory notes designed to pay Mr. Ward his commissions and 
fool the S&L's regulators. On March 31, 1986, Madison Guaranty 
loaned $400,000 to Mr. Ward.15 On April 7, 1986, MFC gave 
two promissory notes to Mr. Ward--one for $300,000 and the 
other for $70,943.16 Thus, Mr. Ward received his 
commissions from the $400,000 loan from Madison Guaranty, and 
MFC's notes effectively canceled his obligation to repay the 
loan and was the means by which he was able to keep his 
commissions.
    The chief federal S&L examiner, James Clark, discovered the 
March 31 loan and April 7 notes during a 1986 examination and 
became concerned that there might be a connection between the 
crossing notes.17 Specifically, he suspected that the 
notes might represent a payment to Mr. Ward and thus a possibly 
improper investment by Madison Guaranty in MFC.18 Such 
investments by Madison Guaranty in its service corporation, 
MFC, were subject to a regulation limiting Madison's ability to 
invest in real estate.
    When Mr. Clark inquired about the March 31 and April 7 
notes, however, he was told that these notes were completely 
unrelated.19 He was told that the April 7 notes were 
related to MFC's plan to purchase Holman Acres from Mr. Ward. 
This transaction was to be accomplished through an as yet 
undrafted option agreement that would replace the notes, which 
existed simply to guarantee MFC's performance.20 In 
effect, the option agreement was a fictitious transaction 
designed to conceal the relationship between the March 31 loan 
and the April 7 notes.
    According to Mr. Clark, the May 1, 1986 option prepared by 
Mrs. Clinton was used to disguise the fact that the crossing 
notes between Seth Ward, MFC, and Madison Guaranty were devised 
to pay commissions to Mr. Ward. In Mr. Clark's view, ``the 
option was created `in order to conceal the connection' '' 
between the notes.21
    On April 7, 1986, Don Denton received a message that Mrs. 
Clinton had called.22 He returned the call and they 
discussed about the notes between Mr. Ward, MFC, and Madison 
Guaranty.23 Mr. Denton believed that Mrs. Clinton was 
preparing a $400,000 note between MFC and Mr. Ward, and he told 
her that such a note had already been prepared and 
executed.24 Mrs. Clinton asked him to send her whatever 
notes the S&L had executed with Mr. Ward.25 Mr. Denton did 
so, sending copies to Mrs. Clinton of the notes by 
courier.26
    Mr. Denton recalled that during this April 7 conversation 
he expressed concern to Mrs. Clinton with respect to the March 
31 and April 1 notes because the note appeared to represent the 
payment by Madison Guaranty of an MFC obligation.27 Mrs. 
Clinton, however, ``summarily dismissed'' that Mr. Denton's 
concern in a manner that Mr. Denton took to mean that he ought 
to ``take care of savings and loan matters, and she would take 
care of legal matters.'' 28
    In sum, the Special Committee concludes that Mrs. Clinton's 
own work product--the May 1 option--was used to conceal the 
very transactions about which Mr. Denton expressed concern. 
This fact raises serious questions with respect to Mrs. 
Clinton's state of knowledge of the deceptive aspects of the 
transaction.
    First, the billing records indicate that Mrs. Clinton was 
aware of the Arkansas regulation limiting the extent of 
Madison's investment in MFC. Indeed, the records reflect that 
on June 17, 1985, she reviewed a memorandum prepared by a Rose 
associate, Richard Massey, touching upon this regulation. More 
important, her conversation with Don Denton put her on notice--
prior to the drafting of the critical May 1 option--that the 
notes exchanged by Mr. Ward, MFC, and Madison Guaranty were 
questionable. Thus, it appears that Mrs. Clinton was apprised 
of both the relevant law and facts that made the Castle Grande 
transaction irregular. Accordingly, an inference can be drawn 
that Mrs. Clinton might well have known that these documents 
were designed to conceal the true nature of the Madison-Ward 
transactions or that she consciously avoided the knowledge. At 
the very least, she was on notice to inquire further.
    On June 13, 1996, the same day that the Special Committee 
received Mr. Denton's testimony, the Committee in a letter 
addressed to Mr. Kendall, Mrs. Clinton's counsel, requested 
that the First Lady attempt to refresh her recollection 
regarding the matters discussed by Mr. Denton and inform the 
Committee of what she recalls about them. (29) The Special 
Committee's request was made in response to an earlier offer by 
Mrs. Clinton through a White House spokesman to answer in 
writing questions regarding the subject of the Special 
Committee's work.
    On June 17, 1996 the Special Committee received an 
affidavit from Mrs. Clinton accompanied by a letter from Mr. 
Kendall. In the affidavit, Mrs. Clinton gave no indication as 
to her recollection regarding the subject matter of Mr. 
Denton's testimony. Instead, she simply requested that Special 
Committee refer to Mr. Kendall's letter ``addressing certain 
allegations recently made by Mr. Don Denton.'' (30) In his 
letter, Mr. Kendall maintained that Mr. Denton's recollection 
is ``wholly unreliable'' but gave no indication as to the 
recollection of the First Lady. (31) In sum, the First Lady has 
neither confirmed nor denied Mr. Denton testimony.
    Examination of Mrs. Clinton's involvement in Castle Grande 
cannot be viewed in isolation. The Special Committee also takes 
into account Mrs. Clinton's apparent failure to be more 
forthcoming about her role in Mr. McDougal's Castle Grande 
deal. When asked in 1995 about her knowledge of Castle Grande 
and some other land deals, Mrs. Clinton swore, under oath, ``I 
do not believe I knew anything about any of these real estate 
parcels and projects.'' (32) In light of the billing records, 
that statement appears incorrect on its face.
    The Rose billing records reflect that Mrs. Clinton billed 
almost 30 hours to Castle Grande matters during the course of 
her representation of Madison Guaranty--more time than any 
other Rose attorney. (33) And, in addition to the May 1 option 
and the phone call with Mr. Denton, Mrs. Clinton had 15 face-
to-face or telephone conferences with Seth Ward, including one 
``regarding purchase from Brick Lile,'' the chairman of the 
company that sold the property to Mr. Ward and MFC.34
    In a sworn statement in 1996, Mrs. Clinton sought to 
explain her prior categorical denial of knowledge about Castle 
Grande by saying that she knew of the 1,000+ acre tract as 
``IDC''--the name of the company that sold the property and the 
matter to which she charged her billings. She further stated 
that she knew a small portion of the Castle Grande property, a 
trailer part, as Castle Grande Estates.35 The Committee 
finds it implausible that Mrs. Clinton would fail to recognize 
the name ``Castle Grande'' a referring to the larger 
development, given the testimony of Madison Guaranty insiders 
and federal regulators that the entire development was commonly 
known as Castle Grande.36
    The secreting of the Rose Law Firm billing records could 
have been motivated by a desire to conceal Mrs. Clinton's 
involvement in Castle Grande and, in particular, her 
involvement in work on the questionable April 7 notes and May 1 
option, could have motivated the secreting of the Rose Law Firm 
billing records. The jury in the recently concluded Tucker-
McDougal trial convicted the defendants for crimes relating to 
the Castle Grande project. Prior to the discovery of the Rose 
billing records, Mrs. Clinton's role in Castle Grande was 
unknown. The desire to keep her role secret might have been the 
cause of the long absence of the billing records.

2. Webster Hubbell was significantly more involved in Castle Grande 
        than he admitted in his Senate testimony

    Former Associate Attorney General and former Rose Law Firm 
partner Webster Hubbell has testified before the Special 
Committee and in other fora on several occasions. With respect 
to his testimony regarding his involvement in Castle Grande, 
Mr. Hubbell altered his story when he learned that Seth Ward 
was a nominee purchaser for MFC. In a December 1995 with the 
RTC, Mr. Hubbell stated that he understood as of September 
1985, from Mr. Ward, that ``Madison had limits on what it could 
own in its own name, and so Mr. Ward was going to own part of 
it until it could be sold.'' 37
    And, in an interview with the RTC Office of Inspector 
General, Mr. Hubbell ``said that Ward told him that he was 
negotiating on behalf of Madison to buy the IDC property, which 
would then be split up between Madison and Ward.'' 38 In 
testimony before the Special Committee, however, Mr. Hubbell 
repeatedly testified that he was not aware of the deal between 
Madison and Ward until after the closing in early October 
1985.39
    Mr. Hubbell was reluctant to answer questions regarding his 
own view of the legality of his father-in-law's role in the 
purchase of the IDC property. When asked if Mr. McDougal used 
Mr. Ward to evade a regulatory restriction, Mr. Hubbell 
answered, ``I have never represented an S&L. I don't know 
whether it's illegal or not.'' 40 When he was asked if he 
considered this transaction as a classic parking or warehousing 
transaction, Mr. Hubbell answered, ``I think of parking and 
warehousing a little bit differently.'' 41 When asked if 
he thought Mr. Ward could be considered a ``straw man,'' Mr. 
Hubbell testified, ``I didn't give it any consideration, you 
know. 'Straw man' means, to me, somebody who you clear title 
through.'' 42
    Mr. Hubbell has denied advising Mr. Ward on the Castle 
Grande transaction.43 Specifically, he denied preparing a 
backdated September 24, 1985 letter or advising Mr. Ward on its 
preparation.44 There is evidence, however, that Mr. 
Hubbell may have prepared the backdated September 24, 1985 
letter, which was found in his files at the Rose Law 
Firm.45 Martha Patton, Mr. Hubbell's secretary at Rose, 
has stated that although she does not recall typing the letter 
she believes that she did because the type is similar to that 
of the IBM typewriter that she used then, and the second page 
of the document is formatted in the style she used while a Rose 
secretary.46 She added that the letter appears to be ``her 
style of typing.'' 47
    There is also some indication that Mr. Hubbell was supposed 
to prepare the May 1, 1986 option agreement. Handwritten notes 
taken by James Clark, the chief FHLBB examiner during the 1986 
examination of Madison Guaranty, reflect the following:

          MFC Commitment to buy land at corner of Route 145 . . 
        . Option will be prepared, atty out of town (Hubbell) 
        to replace note.48

    This note strongly suggests a previously unknown 
involvement in Castle Grande by Mr. Hubbell.
    Former Madison chief loan officer Don Denton has indicated 
that Mr. Hubbell advised Mr. Ward on the Castle Grande 
matter.49
For example, Mr. Denton believed that the wording on the note, 
dated October 15, 1985, stating that Mr. Ward was not 
personally responsible for the note was prepared by Mr. 
Hubbell.50 Also, Mr. Denton believed that he had some 
conversations with Mr. Hubbell about the February 28, 1996 
transaction.51
    Furthermore, Mr. Denton indicated in a recent interview 
that Mr. Hubbell was involved in the March 31 and April 7, 1986 
notes between Mr. Ward, Madison Guaranty, and Madison 
Financial. He stated that he was ``reasonably confident'' that 
when Mrs. Clinton called him regarding these notes she was 
acting on Mr. Hubbell's behalf.52 Mr. Denton refused to 
say whether he ever dealt with Mr. Hubbell on the matter of the 
notes.53 He also declined to answer whether he had visited 
Mr. Hubbell's office at Rose regarding Mr. Ward or Madison 
Guaranty.54
    Mr. Hubbell may have provided inaccurate statements about 
his legal work on other occasions. In 1989 when the Rose Law 
Firm was retained to represent the FDIC in an action against 
Madison Guaranty's former accountants,55 Mr. Hubbell 
failed to disclose to regulators Rose's prior work for Madison. 
And in 1993 when he failed to disclose information he had 
learned the previous year from reading the Rose Law Firm 
billing records to FDIC investigators looking into the 1989 
retention of Rose.56 The Special Committee questions Mr. 
Hubbell's implausible claim that he did not advise Mr. Ward 
with respect to Castle Grande.

3. In 1985, Mr. McDougal retained Hillary Clinton to represent Madison 
        Guaranty; the work was not brought in by a young associate

    The Special Committee concludes, based upon the substantial 
weight of the evidence, that Mr. McDougal hired Mrs. Clinton to 
represent Madison Guaranty Savings & Loan. Mrs. Clinton's 
statements that Richard Massey, then a young Rose Law Firm 
associate at the time, brought the client into the firm are not 
supported by the documentary or testimonial evidence received 
by the Committee.
    Mr. McDougal made statements during the 1992 Clinton 
presidential campaign, as well as to the Los Angeles Times in 
1993, that he put Mrs. Clinton on retainer as a favor to Bill 
Clinton. These McDougal statements are supported by others and 
by documentary evidence. Former Madison CEO John Latham 
confirmed that Mr. McDougal made the decision to retain the 
Rose Law Firm.57 Moreover, although President Clinton does 
not recall asking Mr. McDougal to place Mrs. Clinton on 
retainer,58 Mr. McDougal performed other favors for 
President Clinton when he was Governor by, among other things, 
substantial contributions, on behalf of the Clintons, on 
Whitewater loans.
    Mrs. Clinton's markedly different account of how the 
business came to the Rose Law Firm, is not confirmed by any 
attorney at the Rose Law Firm, including Mr. Massey. For 
example, Mrs. Clinton, has repeatedly stated that Mr. Massey, 
then a first year associate at the Rose Law Firm, brought in 
Madison Guaranty as a client.59 She claims that Mr. Latham 
asked Mr. Massey whether he would be interested in representing 
Madison in connection with a proposed stock offering. Mrs. 
Clinton further explained that Mr. Massey was aware that she 
knew Mr. McDougal, so ``he came to me and asked if I would talk 
with Jim to see whether or not Jim would let the lawyer and the 
officer go forward on this project. I did that, and I arranged 
that the firm would be paid $2,000 retainer.'' 60
    Both Mr. Massey and Mr. Latham contradict Mrs. Clinton's 
version of events. Moreover, David Knight, 61 a former 
partner of the Rose Law Firm, testified that he was involved in 
this meeting between Mr. Latham and Mr. Massey, and Mr. Latham 
did not hire Mr. Massey.62
    In a statement to the FDIC OIG in November 1994, Mrs. 
Clinton similarly told investigators that ``she recalled Massey 
came to her and asked her to be the billing attorney which was 
a normal practice when an associate was handling the matter . . 
. Mrs. Clinton recalled that a Madison official (individual 
unknown) approached Rick Massey regarding a preferred stock 
offering in an effort to raise capital.'' 63 In a sworn 
response to an RTC interrogatory in May 1995, Mrs. Clinton 
elaborated on her story. Mrs. Clinton stated that Mr. Massey 
approached her because ``certain lawyers'' in the Rose Law Firm 
were ``opposed'' to representing Mr. McDougal until Mr. 
McDougal paid an outstanding bill, and he was aware that Mrs. 
Clinton knew Mr. McDougal.
    Mr. Massey, however, directly contradicted Mrs. Clinton's 
account stating that he was not responsible for bringing in 
Madison as a client.64 Specifically, Mr. Massey testified 
that Mr. Latham never offered him Madison's business 65 
and that he did not recall approaching Mrs. Clinton with a 
proposal to represent Madison.66 Contrary to Mrs. 
Clinton's unsworn statement of November 1994 to the RTC, Mr. 
Massey also testified that he did not ask Mrs. Clinton to be 
the billing attorney.67 Mr. Knight agrees that Mr. Massey 
did not secure an offer of business, and he--Mr. Knight--
further testified that he would have expected to know about 
such an offer if it had happened.
    Mrs. Clinton claimed that she became involved in 
discussions about the Madison retainer because of an 
outstanding debt Mr. McDougal, through his Madison Bank & 
Trust, owed to the Rose Law Firm in 1985.
    Documentary evidence and testimony provided to the Special 
Committee, however, indicated that the outstanding balance of 
Rose's bill to Madison Bank & Trust was paid in November 1984, 
months prior to Rose's retainer in April 1985. Furthermore, 
Gary Bunch, President of Madison Bank & Trust provided the 
Special Committee with documents showing that the legal fees 
owed to the Rose Law Firm were paid in late October 
1984.68 Mr. Bunch further testified that Mr. McDougal 
directed him in October 1984 to pay the outstanding Rose Law 
Firm bill for the Madison Bank & Trust matter in full.69
    Following the discovery of the Rose billing records and the 
testimony of Mr. Massey before the Special Committee, Mrs. 
Clinton's story changed in a February 1996 interview with RTC 
investigators. She claimed, for the first time, that the late 
Vincent Foster initially informed her that Mr. Massey wanted to 
do legal work for Madison.70
    Mrs. Clinton's statements conflict internally and with the 
testimony of others involved in the events surrounding Rose's 
Madison retainer. Over the next several months, it was Mrs. 
Clinton--not Mr. Massey--that officials at Madison Guaranty, 
including Seth Ward and Jim McDougal, sought out for 
representation. Finally, Mr. Massey, Mr. Knight, Mr. Latham and 
Mr. Bunch, all unrelated and with no apparent reason to mislead 
the Special Committee, contradict Mrs. Clinton's assertion that 
she did not bring Madison Guaranty to the Rose Law Firm as a 
client.

4. Mrs. Clinton had a substantive contact with Beverly Bassett Schaffer 
        about Madison Guaranty's proposal to issue preferred stock

    The Rose billing records and Beverly Bassett Schaffer 
contradict Mrs. Clinton's statements that she did not speak 
directly to Beverly Bassett Schaffer, the Arkansas Securities 
Commissioner in charge of state regulation of Madison Guaranty, 
about Madison Guaranty's proposed preferred stock transaction.
    Prior to the discovery of the billing records, Mrs. Clinton 
claimed in her sworn responses to RTC interrogatories in May 
1995 that she called the Arkansas Securities Department to find 
out ``to whom Mr. Massey should direct any inquiries'' on the 
proposed stock deal, but she did not recall to whom she 
spoke.71
    The Rose billing records reflect that Mrs. Clinton called 
Ms. Schaffer the day before the Rose Law Firm submitted 
Madison's proposal to do preferred stock offering to the 
Arkansas Securities Department.72 In testimony before the 
Special Committee, Ms. Schaffer directly contradicted Mrs. 
Clinton and stated that the substance of the proposal was 
discussed during the phone call, and that Ms. Schaffer told 
Mrs. Clinton that her agency would approve the proposal.73
    Mr. Massey likewise contradicted Mrs. Clinton's account of 
this important telephone call. Mr. Massey testified that he 
drafted the proposal and knew exactly to whom the proposal 
should be sent.74 Mr. Massey also testified that Mrs. 
Clinton never gave any instructions to him about whom he should 
address the transmission letter.75
    This conversation has at least the appearance of an attempt 
by the then-Governor's wife to lobby to influence the 
activities of state regulators on behalf of private clients. 
Thus, both Ms. Schaffer and Mrs. Clinton may have motive to 
hide this event from public scrutiny. The fact that Ms. 
Schaffer recalls that the phone call included a discussion of 
the substance of Madison Guaranty's stock proposal, which she 
approved two weeks later, supports the Special Committee's 
conclusion that a substantive call occurred.

5. Governor Clinton's official and personal dealings with James 
        McDougal raised an apparent, if not an actual, improper 
        conflict of interest

    Governor Clinton's official and personal dealings with Jim 
McDougal, beyond appearances, raised an apparent, if not 
actual, conflict of interest. Although Mr. McDougal was 
carrying the Clintons on the Whitewater loans, then Governor 
Clinton--using the power of his high political office--
consistently acted favorably on Mr. McDougal's other business 
ventures and accepted many of the recommendations Mr. McDougal 
made regarding proposed state action. These favors took the 
form of influence in appointments 76, the awarding of 
lucrative state leases 77, and beneficial decisions 
relating to state regulators.78 This favoritism was 
critical to Mr. McDougal, whose savings & loan was experiencing 
serious financial trouble.
    Of course, from the standpoint of Governor Clinton, if 
Madison Guaranty failed or Mr. McDougal experienced financial 
troubles, the Clintons could be liable for the full Whitewater 
debt. Thus, Governor Clinton had reason to act in a way to 
ensure the viability of Mr. McDougal's savings & loan, even if 
such action was adverse to the interests of the state. For 
example, documents indicate that Governor Clinton played a role 
in the award of contracts for state leases to Madison.79
    Perhaps the most blatant example of the problems created by 
this conflict of interest related to certain legislation. In 
1987, Governor Clinton vetoed a water bill that favored a 
utility, Castle Sewer & Water, owned by R.D. Randolph and Jim 
Guy Tucker, two business associates of Mr. McDougal.80 Mr. 
Randolph and Mr. Tucker threatened Governor Clinton by 
reminding him of a questionable 1985 Madison fundraiser,81 
and the possibility of litigation related to Rose's 
representation of Madison on the utility issue.82 Shortly 
thereafter, Governor Clinton called the legislature into a 
special session and the signed the bill, as Mr. McDougal's 
associates desired.

6. The Clintons took an active role in obtaining and extending 
        Whitewater-related loans; they were not ``passive'' investors 
        in Whitewater

    The Clintons were not ``passive investors'' in the 
Whitewater real estate venture. Indeed, they actively sought 
and obtained Whitewater loans and extensions. Based largely on 
Mr. Clinton's official position, state bankers routinely gave 
the Clintons beneficial treatment on Whitewater-related loans, 
often disregarding banking regulations and sound lending 
practices.
    Whitewater was a ``no cash'' deal. Mr. Clinton actively 
participated in obtaining the initial down payment loan the 
Whitewater investment. He enlisted bank lobbyist Paul Berry to 
grant him and James McDougal an unsecured loan for the down 
payment.83 This loan was just one of the Whitewater loans 
that would not have been made under what the lending officer 
characterized as ``ordinary circumstances.'' 84
    Moreover, the Clintons actively participated in key 
meetings concerning the Whitewater real estate investment. At 
the outset of the investment, Mr. Clinton met with Mr. McDougal 
about the structure of the financing.85 When Mr. Clinton's 
personal accountant, Gaines Norton, raised serious questions 
about the lawfulness of Mr. McDougal's plans, Mr. Clinton told 
him to ``back off.'' 86 This indicates a conscious 
avoidance of learning the facts about the Whitewater 
transactions.
    Also early in the investment, Mrs. Clinton had at least two 
meetings with bank officials to renew Whitewater loans.87 
Although few payments of principal were being made, and the 
Clintons often refused to provide the required loan documents 
and financial statements, Mrs. Clinton's continued meetings and 
conversations with reluctant bank officials helped to secure 
the extension of Whitewater loans.88 Again and again, 
bankers looked the other way when the Clintons failed to make 
principal payments on the Whitewater loan or failed to submit 
the required financial statements, many times due to Governor 
Clinton's public office.89 Finally, after 1986, Mrs. 
Clinton essentially took control of the Whitewater 
investment.90 Mrs. Clinton sought power of attorney over 
the investment, paid back taxes and attempted to collect all 
the Whitewater documents.
    In fact, it appears that in many instances where the 
Clintons got involved with the Whitewater loans, the banking 
regulations were either ``bent'' or broken. For example, 
federal and state regulators cited Mrs. Clinton's irregular out 
of territory and often past due loan in connection with 
Whitewater Lot 13 and prohibited the bank from renewing the 
loan.91 Governor Clinton's Bank Commissioner Marlin 
Jackson may have assisted the Clintons in obtaining a new loan 
at a bank he then regulated.92 Later, Mr. Jackson 
improperly used government stationary in connection with 
securing loan renewals for the Clintons.93 Mr. Jackson 
used his government position to act as a go-between for the 
Clintons in their dealings with a state-regulated bank was 
clearly inappropriate.94 This action raises serious 
questions of whether Mr. Jackson misused his official position 
to influence improperly bank action to benefit the wholly 
private interests of the Clintons.

7. Governor Clinton's office steered state bond work to Dan Lasater

    The Special Committee was very concerned about Governor 
Clinton's troubling relationship with Arkansas businessman, Dan 
Lasater. In 1980, Mr. Lasater entered the securities business 
with the firm of Collins, Locke & Lasater. In January 1985, a 
Little Rock paper reported that a federal bankruptcy judge 
found, in open court, that Mr. Lasater lied under oath during 
the bankruptcy trial of his former business partner, George 
Locke, and also found that Mr. Lasater was involved in a 
conspiracy to defraud Mr. Locke's creditors. In February 1985, 
widely-reported accounts of sworn testimony of federal court 
put Governor Clinton on notice that Mr. Lasater was a cocaine 
user and the subject of a drug investigation. On October 23, 
1986, Mr. Lasater was indicted on drug charges for possession 
and distribution of cocaine.
    Mr. Lasater contributed substantial sums of money to 
Governor Clinton,95 ``loaned'' $8,000 to the Governor's 
brother, Roger, to pay a drug debt,96 and, at the 
Governor's request, gave Roger a job.97
    The Special Committee identified three instances in which 
Governor Clinton or his aides inappropriately sought to take 
actions intended to benefit Mr. Lasater. First, in February 
1983, Senior Economic Adviser to the Governor, Bob Nash, while 
acting in his official capacity, improperly directed Charles 
Stout, the Chairman of the Arkansas Housing Development Board 
(``AHDA''), to grant lucrative state bond underwriting 
contracts to Mr. Lasater's firm, Collins, Locke & 
Lasater.98 Mr. Nash directed AHDA Chairman Stout to award 
15% of AHDA's bond-business to Mr. Lasater's firm. This order 
represented an unprecedented interference by the Governor's 
office into the otherwise independent and competitive 
underwriting selection process of the agency 99. Mr. Nash 
did not suggest that the AHDA should include other Arkansas 
firms. Rather, Mr. Nash's order specifically directed that Mr. 
Lasater's firm be included. Mr. Nash's directive had the weight 
and influence of the Governor's office behind it,100 and, 
as a result, the AHDA Board bowed to the Governor's order 
awarded a substantial amount of state bond business to Mr. 
Lasater's firm.101 Prior to Mr. Stout's order, Mr. 
Lasater's firm had not received AHDA bond business. In 
addition, the Stephens firm, the largest bond firm in Little 
Rock, questioned whether Mr. Lasater's firm was qualified to 
participate in these offerings.
    Second, in late 1983, Governor Clinton sought to use the 
power of his office to benefit Mr. Lasater when the Governor 
personally called and asked Linda Garner, the State Insurance 
Commissioner, to include Collins, Locke and Lasater as a 
manager for the multi-billion dollar securities portfolio for 
which she was acting as receiver in connection with her 
responsibilities as Insurance Commissioner.102 Governor 
Clinton did not attempt to intervene on behalf of any other 
financial firms.103 The Committee has concluded that this 
contact represents another instance where Governor Clinton 
inappropriately tried to influence an appointed state official 
to direct business opportunities to Mr. Lasater.
    Third, the Governor's office extended itself to monitor and 
to facilitate Mr. Lasater's company's efforts to secure the 
underwriting contract for a $29 million dollar bond financing 
for a police radio system in 1985.104
    In each of these three instances, the Special Committee 
concludes that Mr. Lasater received inappropriate assistance 
from the Governor and his office. Given Mr. Lasater's past 
problems, it is far from clear why Mr. Lasater would be 
entitled to preferential treatment.

8. The Clintons took a series of erroneous tax deductions related to 
        Whitewater

    The Special Committee concludes that the Clintons took a 
series of erroneous Whitewater deductions, often in error, on 
their personal federal income tax returns. From 1978 to the 
early 1990s, the Clintons invested a total of $42,192 in 
Whitewater.105 During this same period, the Clintons 
deducted $42,656 of their Whitewater related expenses on their 
federal income tax returns--almost $500 more than their total 
investment in the corporation. From 1992 to this date, the 
Clintons have admitted taking improper deductions of $7,928 and 
omitting income of $8,171 on their federal income tax returns 
during the period of their Whitewater investment. Based on its 
analysis of the available evidence, the Special Committee 
concludes that the Clintons could have understated their income 
on Whitewater-related items by as much as an additional 
$33,771, for a total increase in taxable income of $49,870.

                        Summary of the Evidence

               Part I: Whitewater Development Corporation

    While running Senator Fulbright's election campaign in 
1968, Jim McDougal was introduced to William Jefferson Clinton 
who, at the time, was a young student at Georgetown University 
and was working for Senator Fulbright on the staff of the 
Foreign Relations Committee.106 Several years later, in 
1973, after Clinton had graduated from Yale Law School, he 
returned to Arkansas and took a university teaching 
position.107 In 1974, Mr. Clinton ran unsuccessfully for a 
congressional seat in Arkansas and, in 1976 he ran for, and 
won, the office of Attorney General for Arkansas.108 
During the campaign for Attorney General, Mr. Clinton re-
established his relationship with Mr. McDougal, who was then a 
professor at Ouachita Baptist University.
    During 1977, Mr. Clinton entered into his first real estate 
investment with Mr. McDougal. This was a profitable investment. 
Specifically, on January 25, 1977, Mr. Clinton purchased 20 
acres of land from Rolling Manor, Inc., a company owned and 
controlled by Mr. McDougal for a price of $11,400. In 1978, Mr. 
Clinton sold that land for $19,985, netting a profit of $8,585 
in just over one year--a 75% return on his initial 
investment.109 This transaction convinced Mr. Clinton that 
investing with Mr. McDougal could bring quick profits. At the 
time, Mr. Clinton, in the midst of his campaign for Attorney 
General, was still paying off educational loans and debt he had 
acquired in his congressional election loss. Shortly afterward, 
Mr. Clinton was elected Attorney General.110
    Near the end of Mr. Clinton's term as Attorney General, in 
1978, the Clintons, impressed by their profit from Mr. 
Clinton's first investment with Mr. McDougal, joined Mr. 
McDougal in the Whitewater investment. Mr. Clinton and Mr. 
McDougal borrowed $20,000 and used the money as a down payment 
on the purchase of 230 acres of land along the White 
River.111 The rest of the $203,000 purchase price was 
financed by another loan taken out by the Clintons and the 
McDougals.112 At the time of the origination of the loans, 
the McDougals' financial statements showed a net worth of 
$551,000, with total assets of $975,000.113 The Clintons, 
on the other hand, did not submit a financial statement, but 
their tax return for 1978 indicates earned income of 
$54,593.114
    The following year, on June 18, 1979, the McDougals and 
Clintons incorporated Whitewater Development Corporation and 
transferred the land that they had purchased along the White 
River to this company, subject to the mortgages.115 Stock 
in Whitewater was to be evenly distributed between the Clintons 
and the McDougals, but because of conflicting documentation it 
is difficult to determine the exact distribution of 
ownership.116 One thing that is certain, however, is that 
the Clintons and the McDougals believed they would share 
equally in any profits.117
    Sales at the Whitewater real estate project did not meet 
the Clintons' and the McDougals' expectations. Not only was 
there no profit, but from the early days onward, the investment 
did not take in enough money to service the debt. As a result, 
the Clintons were forced to attend several meetings with bank 
officials in order to extend the loans.
    Between June 1979 and October 1985, the Clintons signed at 
least 10 renewals on various Whitewater loans at Union National 
Bank, Citizens Bank of Flippin, and Security Bank. On December 
16, 1980, Mrs. Clinton took out a $30,000 loan from Mr. 
McDougal's Madison Bank and Trust to finance the purchase of a 
model home for Whitewater lot 13. It was hoped that the model 
home would spur lot sales.
    The Clintons did not put any funds into Whitewater 
Corporation during the period that Mr. McDougal was running 
Madison Guaranty. Instead, the Clintons allowed Mr. McDougal to 
make the payments. Mr. McDougal made substantial payments. He 
often used funds from Madison Guaranty to service the 
Whitewater debt. Whitewater did not generate sufficient cash 
flow because of lagging lot sales. Thus, if Mr. McDougal was 
unable to cover the debt personally, the Clintons would have 
been liable for the total amount of the mortgage if the bank 
refused to renew the notes. Thus, the Clintons had an interest 
in the economic well-being of the McDougals.
    Since questions surrounding the Clintons' investment in 
Whitewater first arose, the Clintons have stated they were 
``passive investors'' in this investment.118 In May 1995, 
in a sworn response to interrogatories propounded by the RTC, 
Mrs. Clinton testified that ``the McDougals exercised control 
over the management and operation of WDC for the period of its 
existence. . . . As was contemplated from the inception of the 
venture, we were passive investors and relied upon the 
McDougals to manage and operate it.'' 119 (emphasis 
added).
    Since the 1992 campaign, the Clintons have continued to 
attempt to distance themselves from Mr. McDougal. The Clintons 
have repeatedly maintained that they were passive investors in 
Whitewater. Similarly, Mrs. Clinton sought to minimize the 
extent of her involvement in the representation of Madison 
Guaranty while a partner of the Rose Law Firm.

I. Whitewater: The Early Years

            A. The Clintons' Previously Undisclosed Land Deal with 
                    James McDougal
    In 1977, President Clinton made his first real estate 
investment with Mr. McDougal. The Clintons' 1978 federal income 
tax return reported two real estate sales: a cash sale of a 
five-acre parcel of land purchased by the Clintons on January 
25, 1977, and an installment sale of 15 acres of land also 
purchased that same day.120
    President Clinton testified, however, that while he had no 
recollection of the particular investment, he recalled that he 
was involved in a five-acre land deal with Mr. McDougal that 
was sold for $5000 and resulted in a capital gain of $2150. In 
his May 24, 1995 sworn interrogatory responses to the RTC, 
President Clinton stated:

          I believe I made a real estate investment or 
        investments in 1977, which are reported in our 1978 
        income tax return. I can recall nothing specific about 
        this investment or investments, except that at least 
        one involved the purchase of land near Jacksonville. . 
        . . As reported in our 1978 tax return, a five acre 
        parcel of land was sold on May 17, 1978, for $5000, 
        resulting in a capital gain of $2150. To the best of my 
        recollection, this was a real estate investment I had 
        with Jim McDougal, and, while small, it was a 
        profitable one. This confirmed my impression that he 
        was capable of putting together successful real estate 
        transactions.121

    This 1977 transaction was President Clinton's first real 
estate investment venture, and his success was a factor in his 
decision to purchase the real estate in Marion County, Arkansas 
that came to be known as Whitewater.
    Documentary evidence, including the Clintons' 1978 federal 
income tax return, indicates that the 1977 transaction between 
then-Attorney General Clinton and Mr. McDougal was 
significantly larger, longer and more profitable than 
previously described by the Clintons. According to President 
Clinton, a five-acre parcel purchased on January 25, 1977 was 
sold for $5,000 on May 17, 1978, netting the Clintons a gain of 
$2,150 in just under 16 months.122 The schedules to the 
Clintons' 1978 tax returns also report, however, an installment 
sale of 15 acres of unimproved land. This 15-acre parcel was 
purchased on the same date as the five-acre parcel, January 25, 
1977, and was sold for $14,985 on July 23, 1978, netting the 
Clintons a gain of $6,435 in just under 18 months.123 
Thus, according to their 1978 federal income tax return, the 
Clintons purchased 20 acres of land on January 25, 1977, with a 
reported cost of $11,400 and sold all 20 acres of the land by 
July 23, 1978 for $19,985, netting them a profit of $8,585--a 
75 percent return on their total investment--in just under a 
year and a half.
    The land was purchased from Rolling Manor Inc., a company 
owned by Mr. McDougal and Senator Fulbright.124 A January 
25, 1977 Purchaser's Agreement between Rolling Manor Inc., the 
seller, and Mr. Clinton, the buyer, states that Rolling Manor 
Inc. agreed to sell Tract Number 74 to Mr. Clinton for 
$11,400.125 This $11,400 equals the adjusted cost for the 
5-acre parcel ($2,850) and the 15-acre parcel ($8,550) reported 
on the Clintons' 1978 personal income tax return.126 The 
terms of the purchase agreement called for Mr. Clinton to pay 
$400 in cash and execute an $11,000 note to finance the balance 
of the purchase price. A January 25, 1977 installment note 
between Rolling Manor, Inc. and Mr. Clinton in the face amount 
of $11,000 was prepared by Rolling Manor, Inc.127 Mr. 
Clinton was obligated to pay 96 monthly installments of $155.51 
beginning on April 1, 1977 at an annual percentage rate of 
eight percent and continuing until May 1985.1
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    \1\ Although the documents are signed by Mr. and Mrs. McDougal, but 
are not signed by President Clinton, the information reported by the 
Clintons on their 1978 federal income tax return corresponds exactly 
with the cost and date information on the purchase agreement and 
installment note, indicating that the transaction was consummated on 
January 25, 1977. (See Williams & Connolly Prod. DKSN022069; Haddon 
Morgan & Foreman Document LP01547.)
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    Mr. McDougal wrote to then-Attorney General Clinton on 
February 4, 1977 requesting the down payment of $400 ``if you 
have it to spare'' 2 and giving notice that the first 
monthly payment on the note was coming due on April 1, 
1977.128
---------------------------------------------------------------------------
    \2\ There is no independent documentary evidence that the $400 down 
payment was made, but a deposit ticket from 1st Jacksonville Bank of 
Jacksonville, Arkansas indicates that Rolling Manor Inc. deposited a 
$155.51 payment by then-Attorney General Clinton into its bank account 
on April 22, 1977. (Williams & Connolly Document DKSN022068; Haddon 
Morgan & Foreman Document LP01546).
---------------------------------------------------------------------------
    A First Jacksonville Bank deposit slip that was marked 
``paid by'' Bill Clinton indicates that the $11,000 note was 
fully paid off by November 9, 1977--less than ten months after 
Mr. Clinton purchased the 20-acre parcel from Rolling Manor 
Inc. and more than eight months prior to the sale of the 15-
acre parcel on July 23, 1978.129 Because the property was 
not sold until 1978, the source of the $9000 payment to Rolling 
Manor Inc. in 1977 to completely pay off the $11,000 3 
Rolling Manor note is not known.4 In sworn testimony, 
Gaines Norton, the Clintons' personal accountant who prepared 
their 1978 tax return, admitted that ``the tax return which the 
President makes mention of in his interrogatories . . . makes 
it quite clear that there was a second investment or a second 
part of this investment with Mr. McDougal that involved a 
larger piece of property and a larger profit.'' 130 Mr. 
Norton also admitted that the President's answer in the 
interrogatory is ``incomplete.'' 131
---------------------------------------------------------------------------
    \3\ The deposit ticket, which was stamped by the bank, indicates 
that the outstanding balance on the note was $10,917.82, consistent 
with what the balance of the note would be after the first monthly 
payment of $155.51 is applied to interest and principal. Williams & 
Connolly Prod. DKSN022068; Haddon Morgan & Foreman Document LP01546.
    \4\ Based on information reported in their 1977 federal income tax 
return, the Clintons' adjusted gross income in 1977 was just $41,731. 
After accounting for adjusted itemized deductions ($9,688) and other 
adjustments, e.g., federal taxes withheld, ($8,835), the Clintons' 
disposable income in 1977 was $23,208, before any expenditures for such 
items as principal payments on their mortgage, food, and clothing. 
Thus, a $9,500 payment would have equaled more than 40 percent of their 
total disposable income in 1977.
---------------------------------------------------------------------------
            B. Whitewater: A ``No Cash'' Deal
    In 1978, the Clintons and the McDougals purchased the 
Whitewater land development in an entirely leveraged 
transaction. The Clintons and McDougals invested no money in 
the original mortgage. As a result of Mr. Clinton's political 
position, it appears that bank officers routinely gave 
preferential treatment to Whitewater loans, often violating 
sound banking practices concerning timely payments and proper 
loan documentation.
    Early on, then-Attorney General Clinton was made aware of 
the problems with Mr. McDougal's Whitewater tax scheme by his 
personal accountant, Gaines Norton.132 Mr. Clinton asked 
Mr. Norton to sit in on a meeting with Mr. McDougal 133 to 
``look at an investment he was making.'' 134 During the 
meeting, Mr. McDougal explained how the transaction would be 
arranged so that even though no money was invested in the 
deal--they would use ``a hundred percent borrowed money'' 
135--the McDougals and the Clintons ``would immediately be 
able to take personal tax deductions.'' 136
    Mr. Norton, a certified public accountant, immediately 
advised both men that the proposed tax deduction would be 
illegal.137 Mr. McDougal would not listen, 138 
however. Curiously, after the meeting, Mr. Clinton told Mr. 
Norton that he ``had to rely on his partner to structure [the 
deal] tax-wise properly'' and ``to back off and leave the issue 
alone.'' 139
    Thus, against the advice of his personal accountant, the 
Clintons joined with the McDougals in investing in the 
Whitewater land venture. The deal was financed by two banks: 
Citizen's Bank of Flippin (``Citizen's Bank''), a small bank 
located near by the Whitewater property, and Union National 
Bank, a larger bank in Little Rock.140 Because the 
Whitewater mortgage exceeded the legal lending limit of 
Citizen's Bank, the transaction was structured as a loan 
participation with the larger Little Rock Union National Bank. 
Thus, Citizen's Bank and Union National Bank each financed half 
of the $182,611 loan that was closed on August 2, 1978.141
    Frank Burge, a Vice President and loan officer at Citizen's 
Bank, who handled the Whitewater loan, testified that the 
Whitewater loan was not a typical loan for the small bank, 
whose portfolio was composed of residential and consumer 
loans.142
    In addition, the Clintons and McDougals never notified 
Citizen's Bank that Union National Bank also extended a $20,000 
unsecured loan for the down payment on the Whitewater mortgage. 
Citizen's Bank was not aware that the Clintons and McDougals 
invested no money into the original mortgage.143 This loan 
violated Citizen's Bank's practice of not making real estate 
loans without an equity contribution by the borrower.144 
Mr. Burge explained that ``(s)ound banking tenets said you 
should have equity on all real estate lending.'' 145 
Similarly, Don Denton, the loan officer at Union National Bank 
responsible for the Whitewater loans, thought that this 
transaction was a potential regulatory problem.146
    In fact, the Union National loan was made only as an 
``accommodation'' to Mr. Clinton, who had actively sought to 
obtain it.147 According to Mr. Denton, he was instructed 
by a Union Bank lobbyist to make this loan--against Mr. 
Denton's judgment--to Mr. Clinton, because Mr. Clinton was an 
``up and coming political . . . rising star in the State of 
Arkansas.'' 148 Paul Berry, a Union Bank lobbyist and Mr. 
Clinton's former college roommate admitted that Mr. Clinton had 
approached him about obtaining the money for the down payment 
on the Whitewater deal, but claimed that he made the loan 
because it was ``good business.'' 149 Mr. Denton 
testified, however, that he would not have made the loan, given 
the Clintons' and the McDougals' financial condition, ``had it 
been an arms' length loan by a client walking off the street.'' 
150 According to Mr. Burge, Mr. Clinton's political 
position also influenced his decision to make the loan at 
Citizen's Bank.151
    Despite the fact that Mr. McDougal and Governor Clinton 
ignored repeated requests for payments of principal, Union 
National Bank renewed the Clintons' Whitewater loan a number of 
times.152 Rather quickly, Citizen's Bank became concerned 
over the Whitewater loan. Robert Ritter, who became the 
President of Citizen's Bank in September 1979, was concerned 
early on that the Whitewater loan would become ``an item either 
on an examination or it became a reportable item to the Board 
at a particular time.'' 153 His apprehension was 
compounded by problems that Citizen's Bank faced obtaining 
personal financial statements for the Clintons and the 
McDougals.154
    During the early 1980s, Mr. Ritter recalled meeting twice 
with Mrs. Clinton and twice with Mr. Clinton.155 Mr. 
Ritter met once with Mrs. Clinton and Mrs. McDougal to obtain 
signatures on loan renewal documents.156 Mr. Ritter 
testified that he believes they discussed loan repayment 
plans.157 Mr. Ritter also recalled a second meeting 5 
at the bank with Mrs. Clinton and Mrs. McDougal--probably 
occasioned by a loan renewal.158 He testified that Mrs. 
Clinton appeared knowledgeable about the Whitewater real estate 
development and the Whitewater loan, and, in fact, she remarked 
on the sharp rise in the interest rate on the loan.159 Mr. 
Ritter also recalled contacting Mr. Clinton twice concerning 
loan documentation.160
---------------------------------------------------------------------------
    \5\ Mr. Ritter's recollection of these meeting is vague, and if 
these meeting were held to execute loan renewals, the dates of these 
meetings do not comport with the available documentary evidence. If 
both of these meetings were convened to execute loan renewal documents 
it is possible that they occurred one or two years later than Mr. 
Ritter recollects (for instance the interest rate first increased in 
1980, but did not increase significantly until 1981). Mr. Ritter left 
Citizen's Bank at the end of 1983.
---------------------------------------------------------------------------
    The Clintons have stated that they have no recollection of 
meeting with officers of Citizen's Bank to discuss their 
troubled Whitewater loan.161
    In June 1980, the Clintons were released from their 
personal obligation on the Union National Bank loan when Mr. 
McDougal retired the loan with proceeds borrowed from the Bank 
of Cherry Valley.162
            C. Lot 13: Irregularities in Madison Bank's loan to Mrs. 
                    Clinton
    In December 1980, the Clintons and the McDougals sought to 
boost lagging Whitewater lot sales by building a model home on 
lot 13. Mrs. Clinton borrowed $30,000 from Madison Bank and 
Trust in Kingston, Arkansas (``Madison Bank''), which was 
controlled by Mr. McDougal, to finance the construction of the 
model home.163 As with the earlier loans, this loan also 
was obtained under unusual circumstances.
    Madison Bank approved the loan even though Mrs. Clinton was 
not a pre-existing customer, and she lived outside the bank's 
lending area.164 According to Mr. Bunch, the loan was 
underwritten in a manner that was contrary to sound banking 
practices: ``we probably didn't have anything in the file but a 
signed note. I'm sure there wasn't a financial statement. No 
documentation at all.'' 165
    Although Mrs. Clinton's Madison Bank loan was scheduled to 
mature on December 16, 1981, the loan apparently was extended 
for six-months to June 1, 1982. From the origination of the 
loan to its maturity, Madison Bank received only $285 in 
monthly interest payments. This amount was far less than the 
$373 in interest owed per month.166
    On August 5, 1982, two months after the June extension had 
expired, Theresa Pockrus, executive vice-president of Madison 
Bank, who was responsible for monitoring delinquent loans, 
wrote to Mrs. Clinton notifying her of the loan's past due 
status, and that a ``satisfactory agreement needs to be worked 
out.'' 167 Ms. Pockrus was concerned about the upcoming 
Federal Deposit Insurance Corporation (``FDIC'') audit.168 
On August 11, Mrs. Clinton told Ms. Pockrus to speak with Mr. 
McDougal because he would personally take care of the 
situation. According to Mrs. Clinton, Mr. McDougal had been 
handling the payments the entire time.169 Coincidentally, 
after Ms. Pockrus spoke to Mr. McDougal, Madison Bank shortly 
thereafter received a $699 payment from an unknown 
payor.170
    No principal payments were made, however, on the 
loan.171 Ms. Pockrus believed that ``the loan should have 
been taken out of the bank all together'' because it was too 
risky, and would have recommended that the Board ``not extend 
it . . . because a $5 million bank has no business loaning 
money to people in Little Rock.'' 172
    On April 7, 1983, Madison Bank consented to a cease and 
desist order with the FDIC that, among other things, restricted 
Madison Bank's out-of-territory lending.173 The order 
effectively prohibited Madison Bank from extending Mrs. 
Clinton's Lot 13 loan.174 In January 1983, Mr. Clinton was 
sworn in as the Governor of Arkansas, and, in February, he 
appointed Marlin Jackson, former president of Security Bank of 
Paragould, to be the Commissioner of the Arkansas State Bank 
Department (``ASBD'').175
    On June 27, 1983, the ASBD released the results of its 
examination of Madison Bank, identifying Mrs. Clinton's loan as 
a problem.176 The ASBD later joined the FDIC in ordering 
Madison Bank to close out its out-of-territory loans.177 
Thus, Madison Bank was forced to remove Mrs. Clinton's out-of-
territory loan from its portfolio.178 Afterward, Mr. 
Jackson saw Governor Clinton in the State Capitol and told him 
about Madison Bank's deteriorating condition.179 Mr. 
Jackson did not normally advise the Governor of the results of 
bank examinations.180
    Meanwhile, the Whitewater debt remained outstanding and 
sales were slow. Mr. Jackson admitted that he directed Governor 
Clinton to seek a loan with Security Bank of Paragould 
(``Security Bank'').181 Indeed, on September 30, 1983, 
Governor Clinton obtained an unsecured $20,800 loan from 
Security Bank and used the proceeds to pay off Mrs. Clinton's 
Madison Bank loan.6
---------------------------------------------------------------------------
    \6\ The remaining $6,052 balance of Mrs. Clinton's loan was paid 
off in two payments--one in the amount of $285 from the man who had 
purchased the property from Mrs. Clinton, and the other, $5,797, from 
an unknown payor.
---------------------------------------------------------------------------
    When Mrs. Clinton asked for a loan extension, Security Bank 
offered a one-year extension to September 30, 1985.182 On 
October 11, 1985, after Mrs. Clinton failed to meet her 
payments, Security Bank extended the note again to September 
30, 1986.183 On November 1, 1985, Mr. Jackson wrote to 
Charles Campbell, vice-president of Security Bank, on the 
official letterhead of the State Banking Commissioner, 
enclosing the extension agreement.184 When asked about the 
propriety of Mr. Jackson's communicating to a bank on official 
stationary about the Governor's loan, William Lyon, a friend of 
Mr. Jackson's, a bank owner, and former member of the ASBD 
testified: ``[i]t was not right for him to do that. He should 
never have done this.'' 185
    On November 20, 1986, Security Bank again sent Mrs. Clinton 
a notice that payment was past due on the loan, now in the 
amount of $15,435.51.186 On March 2, 1987, Mr. Jackson 
telephoned Mrs. Clinton to give her William Fisher's telephone 
number.187 Three days later, Mr. Fisher, the president of 
Security Bank, sent a new note to Mrs. Clinton for $14,117.59, 
due on March 5, 1988, and requested financial 
statements.188 On March 31, Mr. Jackson sent another 
letter to Mrs. Clinton, enclosing the extension agreement and 
telling her not to hesitate to contact Mr. Fisher.189
    The Special Committee finds that it was clearly 
inappropriate for someone in Mr. Jackson's position to act as a 
go-between for the Clintons in their dealings with Security 
Bank, and, Mr. Jackson's involvement, at the very least, raises 
questions of whether improper influence was used to benefit the 
Clintons. The letters sent and received by Mr. Jackson reveal a 
continuing pattern of activity by him on behalf of the Clintons 
while he was a Clinton-appointed state employee (who happened 
to own controlling interest in a bank that he was charged with 
regulating which, coincidentally, took over a loan that had 
been a problem for the Clintons).
    Governor Clinton's loan at Security Bank of Paragould was 
frequently delinquent, and the bank constantly sought to either 
collect or extend the loan. The loan officers experienced some 
difficulty in obtaining documents needed from the Clintons to 
complete the extension agreements.

II. The Clintons' Continued Involvement in Whitewater: 1987-1992

            A. The Clintons' Active Involvement in the Management of 
                    Whitewater After 1986
    By early 1982, both the Governor and Mrs. Clinton had 
attended meetings with bankers on the Whitewater loan renewals. 
Therefore, the Clintons should have been aware that the cash 
flow from Whitewater was not covering the debt, and that lot 
sales were not going well (hence, the need for the December 
1980 lot 13 prefab home in Mrs. Clinton's name to try to 
attract purchasers).190
    Indeed, by May 1985, only 20 of the Whitewater 44 lots were 
under contract for deed.191 Whitewater realtor Christopher 
Wade and Dr. E. Russell Webb, through Ozark Air Services, Inc. 
(``Ozark Air''), acquired the remaining twenty-four lots in 
Whitewater.192 In exchange for the twenty-four lots, Ozark 
Air agreed to repay $35,000 of the remaining Whitewater loan to 
1st Ozark (the Clintons and McDougals remained personally 
obligated on the note),193 and transferred title to a 1979 
Piper Seminole airplane to James McDougal.194 Mrs. Clinton 
admitted in RTC interrogatories that McDougal informed her in 
1986 that the remaining Whitewater lots had been sold to Chris 
Wade in 1985.195
    Between 1982 and 1986, while Mr. McDougal was running 
Madison Guaranty, the Clintons made no cash payments toward the 
Whitewater loans.196 After Mr. McDougal was removed from 
Madison Guaranty in July 1986, Mrs. Clinton took a more active 
role in Whitewater.
    Wesley Strange, who became President of 1st Ozark National 
Bank in 1986, testified that Mrs. Clinton, rather than Susan or 
James McDougal, was his primary contact person on the 
Whitewater loan,197 beginning sometime in the fall of 
1986.198 Thereafter, Mr. Strange and Mrs. Clinton had 
numerous contacts relating to taxable income from Whitewater, 
loan documentation and the corporate records of 
Whitewater.199
    Yet, the Clintons continued their pattern of failing to 
provide requested financial statements. Obtaining relevant 
information for the credit file, particularly financial 
statements, regarding the Clintons and McDougals was a 
recurring problem for Citizen's Bank and its successor, 1st 
Ozark National Bank.200 1st Ozark loan officers hesitated, 
however, to press the Clintons for missing or delinquent 
information and ``walked softly'' with regard to this loan so 
as not to irritate Governor Clinton or the board of directors 
at the bank.201
    By 1987, 1st Ozark loan officers Ronald Proctor and Vernon 
Dewey both realized that the bank should not renew the 
Clintons' original Whitewater mortgage without first receiving 
current financial statements for the Clintons and establishing 
an escrow account to reduce the principal balance of the 
loan.202 Nevertheless, the bank continued to exercise 
forbearance, granting waivers on the provision of financial 
information to both the Clintons and the McDougals. The bank 
also failed to undertake minimal efforts to ensure that the 
Clintons and the McDougals had sufficient collateral for the 
loan; for instance, there was no evidence of an appraisal or 
inspection of the Whitewater property (the primary source of 
collateral for the bank) between the summer of 1978 and 
December 1986.203
    On November 28, 1988, Mrs. Clinton wrote to Mr. McDougal 
seeking power of attorney for matters concerning the Whitewater 
investment. The letter said: ``I am enclosing a Power of 
Attorney for you to sign, authorizing me to act on your behalf 
with respect to matters concerning Whitewater Development 
Corp.'' Mrs. Clinton's letter also indicated that the Clintons 
at the time were actively involved in attempts to dispose of 
the remaining Whitewater property: ``We are trying to sell off 
the property that is left and get out from under the 
obligations at both Flippin and Paragould.'' 204
    On June 21, 1990, Mrs. Clinton signed the legal forms 
indicating that, as of December 31, 1987, and December 31, 
1988, she was the President of Whitewater Development 
Corp.205
            B. Governor Clinton's Approval of Special Legislation 
                    Benefitting his Whitewater Banker
    On February 15, 1984, Citizen's Bank, which continued to 
hold the original Whitewater mortgage, was sold to TC 
Bancshares.206 This acquisition was significant for 
several reasons. First, on January 1, 1986, Citizen's Bank's 
charter was converted into a national bank chartered and 
subject to examination by the Office of the Comptroller of the 
Currency (the ``OCC'') and became known as 1st Ozark National 
Bank.207 This conversion significantly changed the 
regulatory environment for the bank holding the Whitewater 
mortgage. OCC examinations were precise and demanding; loan 
management and credit file maintenance were subject to greater 
scrutiny.208
    Second, TC Bancshares' flagship bank was Twin City Bank 
(``TCB'') of North Little Rock, one of the largest state-
chartered banks in Arkansas.209 TCB's President, Edward 
Penick, and its Chairman, Terry Renaud, became members of 1st 
Ozark's board of directors,210 and Susan Sisk, a senior 
lending officer at TCB, was assigned to review the decisions of 
the 1st Ozark officer's loan committee and, because of the loan 
committee's requirement for unanimous action, could exercise 
virtual veto power.211
    In the mid-1980's, TCB sought to amend Arkansas' 
restrictive bank branching laws.212 TCB's growth was 
limited because of the restrictions that Arkansas law placed on 
branching; TCB, which was headquartered in North Little Rock, 
could not branch into Little Rock. As early as May 26, 1986, 
Mr. Penick began to look for solutions to this problem. After 
meeting with State Banking Commissioner Marlin Jackson, it 
became apparent to Mr. Penick that TCB's desire for expanded 
branching powers could not be realized without 
legislation.213 During the 1987 Arkansas Legislative 
session, legislation was introduced that would permit TCB to 
enter the lucrative Little Rock market.
    On April 1, 1987, this legislation, Act 539, was 
approved.214 Act 539 amended Arkansas bank branching law 
to allow banks located in counties with populations of greater 
than 200,000 people to branch anywhere in that county. Because 
Pulaski County (which includes Little Rock and North Little 
Rock) was the only county in Arkansas with a population over 
200,000, this law implicated the Arkansas Constitution's 
prohibition against local legislation.215
    Act 539 was passed without widespread support from the 
Arkansas banking industry. Mr. Penick recalled that a majority 
of the state's banks opposed this bill, and that both Arkansas 
Bankers Association and Independent Bankers Association opposed 
this legislation.216 Nevertheless, Act 539 did enjoy 
support from two major banks with connections to the financing 
of Whitewater--TCB and Union National Bank (the bank that 
loaned the Clintons and McDougals the down payment for 
Whitewater, and financed half of the mortgage loan for the 
Whitewater property). Mr. Penick testified that he was 
``proactive'' in his lobbying on behalf of Act 539.217 Mr. 
Penick worked closely with Paul Berry--Governor Clinton's 
former roommate who had helped secure the Whitewater down 
payment loan--on passage of this bill. Mr. Berry admitted that 
he contacted Governor Clinton to encourage him not to veto this 
legislation.218
    This same time period--from the middle of 1986 through the 
spring of 1987--was an important time for Whitewater 
Development Corp. The Dallas Federal Home Loan Bank had forced 
James McDougal out of Madison in July 1986, 219 and 
Whitewater Development Corp. had accrued $90,000 in 
unrecoverable losses. In a November 14, 1986 letter, Mr. 
McDougal apprised the Clintons of these losses and cash flow 
problems. In this letter, Mr. McDougal suggested that the 
Clintons transfer their Whitewater shares to him, and that he 
would assume the losses.220 The Clintons refused the 
offer, and the Whitewater loan at 1st Ozark matured on December 
3, 1986.221
    Thus, in December 1986, in light of past criticism from 
federal regulators about the quality of loan documentation, 
Ronald Proctor, the 1st Ozark lending officer primarily 
responsible for the Whitewater loan, drove to the Whitewater 
property to conduct an inspection. Mr. Proctor testified that 
collateral inspections were ``very common'' when a real estate 
development loan came up for renewal.222 Mr. Proctor's 
supervisor, Mr. Strange, agreed, testifying that such 
inspections would have been ``prudent.'' 223 Nevertheless, 
this was the first time that Mr. Proctor inspected the 
property.224 In fact, there is no evidence in the 
Whitewater credit file of any other independent appraisal of 
the property between 1978 and December 1986, and Mr. Proctor's 
1984 work sheet employs the $1,100 per acre value from the 1978 
appraisal.225
    Mr. Proctor's inspection showed that the value of 
Whitewater had declined precipitously, from $1,100 per acre to 
no more than $750 per acre.226 Thus, since the Whitewater 
loan had two primary sources of security--the property that 
collateralized the loan, and the guarantees of the Clintons and 
McDougals--the value of the guarantees of the Clintons and 
McDougals was now of greater importance to 1st Ozark in 
considering whether to renew the loan. In order to make a 
decision on loan renewal, financial statements are necessary; 
indeed, sound banking policy dictates annual submission of 
updated financial statements to ensure a borrower's financial 
condition is not deteriorating.227 Nevertheless, 1st Ozark 
did not possess current financial statements for the Clintons. 
Because there was real concern about renewing the Whitewater 
loan without receiving current financial statements, 1st Ozark 
conditioned the loan extension on, among other things, the 
provision of financial statements by the Clintons and 
McDougals.228 Vernon Dewey believed that 1st Ozark should 
have required repayment of the loan and shared his concern with 
Ron Proctor. Nevertheless, Mr. Dewey voted to approve the 
renewal because it was for the Governor.229
    Despite the fact that the Whitewater loan's renewal was 
conditioned on the provision of financial statements, 1st Ozark 
once again experienced difficulty obtaining them. Mr. Strange, 
1st Ozark's president, mentioned this problem to Governor 
Clinton but still no financial statements were 
forthcoming.230 At some point in early 1987, the absence 
of financial statements for the Clintons was brought to the 
attention of 1st Ozark's chairman, and TCB's president, Mr. 
Penick. Mr. Penick agreed to help in securing the necessary 
financial information from the Clintons.231 Mr. Penick 
decided to take steps to obtain the financial information from 
the Clintons. He testified that he mailed the to Mrs. Clinton 
Twin City Bank financial statement form, although no such 
correspondence was produced to the Special Committee.232
    Ronald Proctor and Vernon Dewey, who were both members of 
the loan committee that required the financial statement as a 
condition for renewal, recalled that Mr. Penick offered to have 
Margaret Davenport, who was a friend of Mrs. Clinton's, contact 
Ms. Clinton to obtain the financial statement.233 Mr. 
Penick claimed he did not recall soliciting Ms. Davenport's 
assistance to obtain the financial statement.234
    Mrs. Clinton' handwritten notes indicate, however, that she 
discussed the Whitewater loan with Ms. Davenport in 1987. The 
information regarding the status of the loan makes it clear 
that the notes relate to the 1987 extension. 235 Ms. 
(Davenport) Eldridge claimed that she did not recall this 
conversation, even after reviewing these notes.236 1st 
Ozark finally obtained the Clinton's financial statement, 
237 on a TCB form, and the Clinton's guaranty agreement, 
both dated March 26, 1987.238 Curiously, four days after 
the loan was renewed, Governor Clinton signed Act 539 into law.
    The next year, banking legislation affecting TCB came 
before the Arkansas legislature. Although the Legislature was 
not scheduled to meet in 1988, the Banking industry was 
pressing for a special session to consider an ``omnibus banking 
bill.'' The catalyst for this push was the United States Court 
of Appeals for the 5th Circuit's decision in Department of 
Banking v. Clarke. In effect, the Clarke decision authorized 
Mississippi national banks to branch based on the more liberal 
branching laws that applied to Mississippi savings associations 
(rather than the branching laws that applied to Mississippi-
chartered commercial banks).239 The Arkansas banking 
industry was concerned that the OCC would employ the Clarke 
decision to grant national banks expansive branching powers, 
and thereby give national banks in Arkansas a competitive 
advantage over state banks.240
    Governor Clinton was not eager to call a special session; 
both his Chief of Staff, Betsey Wright and a close associate, 
Bruce Lindsey advised against it.241 Governor Clinton and 
his staff were apprised that TCB was among a small group of 
banks that opposed the special session and the omnibus banking 
bill.242 TCB's concern was that the 1988 bill might be 
used to close the loophole that Act 539 had created in the so-
called ``300 feet rule.'' Act 539 had removed restrictions on 
branching in Pulaski County, including a restriction on opening 
a branch within 300 feet of another bank. This provision 
allowed TCB to open a branch in downtown Little Rock, within 
300 feet of the offices of First Commercial Bank.243 First 
Commercial had sought an Attorney General's opinion regarding 
Act 539's constitutionality and had initiated a lawsuit, 
claiming that Act 539 was unconstitutional local 
legislation.244 The Governor's office was apprised of both 
these actions.245
    In early 1988, draft legislation was circulated and 
Hartsfield and the Arkansas Bankers Association began working 
on building support for the special session.246 TCB's 
concern that the 1988 bill might be used to reimpose the 300 
foot rule on TCB was well-founded. While the initial draft of 
this legislation probably did not contain language closing this 
loophole, Bill Bowen of First Commercial continued his efforts 
to close the loophole.247 At some point in the process, he 
was able to obtain language in draft legislation to close the 
loophole. TCB maintained its opposition to the special session 
throughout spring 1988. Mr. Bowen told the Governor's 
assistant, Samuel Bratton, that TCB was ``attempting `to be a 
spoiler'.'' 248 Clearly, there was a conflict between TCB 
and First Commercial with respect to the 300 feet rule, or, 
more aptly, the presence of TCB's downtown Little Rock branch.
    While the disputes regarding the Special Session ensued, 
the Whitewater loan was coming up for renewal. Under the March 
1987 extension, the loan matured on April 3, 1988.249 In 
February 1988, Mr. Proctor began to seek financial statements 
needed for the renewal from the Clintons and McDougals. During 
telephone conversation with Mrs. McDougal, Mr. Proctor 
``implied'' that the loan would not be renewed without updated 
financials.250 A loan extension agreement was prepared for 
signature on April 3, 1988, but was not signed. Apparently, the 
McDougals, who were the officers of Whitewater Development 
Corp. and the only persons authorized to sign the renewal 
documents, could not be located to sign them. 1st Ozark 
enlisted Mrs. Clinton in an attempt to locate the McDougals and 
to obtain the necessary signatures for renewing the 
loan.251
    On July 3, 1988 Governor Clinton called a special session 
of the Arkansas Legislature to consider the banking 
bill.252 The TCB/First Commercial conflict over the 300 
feet issue remained unresolved; however, documentary evidence 
in the Committee's possession indicates that this issue was 
shortly resolved when Governor Clinton intervened on TCB's 
behalf. There are notes of a July 5, 1988 meeting (that appear 
to be in Mr. Bratton's handwriting) regarding revisions to the 
Banking Bill. These notes include the following notation: ``p 
16--`300 feet' provision--BC will call Bowen.'' 253 That 
same day, Betsey Wright sent a memorandum to Governor Clinton 
and Mr. Bratton regarding the ``300 foot'' issue. Suggesting 
that the Governor had intervened, Wright wrote that:

        ``(n)either Sam nor I understands what your next step/
        followup with Bill Bowen is on the 300, issue. The bill 
        which is being delivered to this office in the morning 
        by the Bankers Association/Bill Ford does not contain 
        the 300, provision based on their conversation with you 
        this morning.'' 254

    A July 5th draft delivered to the Governor's office 
contains the same ``grandfather clause'' that Ed Penick had 
suggested to Marlin Jackson in a May 23, 1988 letter.255 
Also on July 5, 1988, Mr. Penick sent a note to ``Bill'' 
thanking him for his assistance on the 300 feet 
provision.256 When questioned regarding this note, Mr. 
Penick suggested that it was not a note to Governor Clinton, 
but rather Banking Commissioner Bill Ford. The available 
documentary evidence undermines Mr. Penick's recollection. 
First, this handwritten note was discovered among the 
Governor's papers. The Banking Department's records were 
subpoenaed and this note was not produced (despite the fact 
that Bill Ford is still Commissioner). Second, this note 
contains the notation ``GOV,'' as well as the check mark that 
Governor Clinton frequently used to indicate that he had 
reviewed an item. Mr. Penick testified that he was more likely 
to address Governor Clinton as ``Governor'' than ``Bill.'' 
257 Mr. Penick's recollection on this count also is called 
into question by the documentary evidence; notably, the 
Committee obtained a June 6, 1988 note from Mr. Penick to 
Governor Clinton in which the salutation is also to ``Bill.'' 
258
    On July 7, 1988, Bill Bowen responded to Governor Clinton's 
proposal to remove ``300 feet language'' from the proposed 
bill. While Mr. Bowen committed himself to support the total 
package, he indicated in his letter that the package as 
proposed (including the 300 feet provision) enjoyed the support 
of 80% of bank CEO's in attendance at a March 1988 industry 
meeting, and that the ``300-feet'' specific provision enjoyed 
overwhelming support among the leadership of the Arkansas 
Bankers Association.259
    Nevertheless, TCB carried the day. On July 15, 1988, the 
banking bill became law. As enacted, the bill did not contain 
Mr. Penick's suggested grandfather provision, but it did 
contain language that protected TCB's presence in Little Rock's 
downtown business area.260
    Again curiously, that same day, the Clintons received a 
loan extension from 1st Ozark for their Whitewater loan for 
three years, through November 3, 1991. This renewal occurred 
three months after the loan term had matured.261 Mrs. 
Clinton, who had been unable to contact either of the 
McDougals, signed for Whitewater Development Corp. 1st Ozark 
waived the financial statement requirement for both the 
McDougals and the Clintons. The waiver for the Clintons would 
appear to be unusual--with the McDougals out of the picture, 
the Clintons were the sole guarantors of the loan's repayment.
    Granting this waiver to the McDougals and Clintons 
represented a change in policy for 1st Ozark. Mr. Proctor, who 
wrote to Mrs. McDougal for financial statements in February 
1988 (nearly two months before the loan came due), was unable 
to explain why this same information was not necessary in July 
1988.262

III. The Clintons' Handling of Whitewater During the 1992 Presidential 
        Campaign

            A. The Focus on Whitewater During the 1992 Campaign
    During the 1992 presidential campaign, questions arose 
about Whitewater, Madison, and the Clintons' relationship with 
the McDougals. On March 8, 1992, the front page of the New York 
Times carried the 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.263
    In anticipation of the Gerth article and in response to the 
subsequent media interest in the story, the Clinton campaign 
organized a team of senior advisors to gather facts about from 
other candidates. Susan Thomases, the New York lawyer and 
confidant of Mrs. Clinton, involved in matters surrounding the 
handling of documents in Vincent Foster's office following his 
death, and Loretta Lynch, a campaign official, reconstructed 
Whitewater-related records and coordinated the response 
effort.264 Webster Hubbell and Vincent Foster, both then 
partners at the Rose Law Firm, were responsible for collecting 
materials from Rose relating to Mrs. Clinton's work for Mr. 
McDougal and his S&L.265
    The campaign's effort to contact the McDougal and other 
principals associated with Whitewater-related transaction was 
headed by James Blair, General Counsel of Tyson Foods, and a 
close friend of the Clintons. Mr. Blair had also known Mr. 
McDougal for over 30 years.266 After Whitewater surfaced 
in the campaign, Mr. Blair contacted Mr. McDougal's lawyer, Sam 
Heuer, and arranged a meeting for Mr. Blair, Ms. Lynch, Mr. 
McDougal, and Mr. Heuer.267
    Several days after the first New York Times article was 
published, on March 11, Mr. Blair and Ms. Lynch went to Mr. 
Heuer's office.268 When they arrived, Mr. Heuer met the 
pair outside and escorted them upstairs into his 
office.269 After some pleasantries, Mr. Blair asked Mr. 
McDougal why he talked to Mr. Gerth from the New York Times.'' 
270 Mr. McDougal replied that, based on his experience an 
assistant to former Senator Fulbright, ``when the press had 
something it was better to talk and simply give it all to 
them.'' 271
    When Mr. Blair asked whether Mr. McDougal would stop 
talking to the press, Mr. McDougal stated that he would ``but 
indicated he didn't want to be bashed in the press.'' 272
    Mr. Blair then travelled to Flippin to interview 
Christopher Wade, the Whitewater real estate agent, and to 
obtain some records. It is not clear exactly what documents Mr. 
Blair collected from the Wades or whether Mr. Blair took notes 
of his conversations with Mr. Wade. The campaign file 
containing the notation--``WWDC Jim Blair Flippin Trip'' 
273--was empty.274 When asked about his interview of 
Mr. Wade, Blair testified that he discussed the fact that Mr. 
Wade had not discharged his obligation on the $35,000.275
    Mr. Blair also accused Mr. Wade of taking advantage of Mr. 
McDougal's situation in the 1985 transfer of the 24 Whitewater 
lots, 276 and Mr. Blair questioned Mr. Wade about why he 
had not paid off the Whitewater mortgage. On May 11, 1992, 
shortly after the visit from Mr. Blair, Ozark Air obtained a 
loan from River Valley Bank & Trust (``River Valley''), 
formerly Citizens Bank of Lavaca, for $10,500.277 As 
collateral for this loan, Ozark Air relied on the escrow 
contracts on lots 2, 9, 23, 30, 37, 43, and 44 of Whitewater 
Estates.278 On May 12, 1992, Ozark Air wrote a check to 
1st Ozark for $9,628.67 to close out the remaining Whitewater 
mortgage.279
    By paying off the Whitewater loan with another bank loan, 
Mr. Wade merely exchanged one liability (his contractual 
obligation to assume $35,000 of the outstanding debt on the 
mortgage) for another (his obligation to River Valley Bank to 
repay a loan that was secured by the same collateral securing 
the Whitewater mortgage loan). However, this transaction 
accomplished one significant goal--it released the Clintons, 
who were guarantors of the Whitewater loan, from personal 
liability.280 Mr. Wade asserted his Fifth Amendment right 
against self-incrimination, so the Committee was unable to 
examine him regarding this loan.281
    Mr. Wade obtained the loan that he used to pay-off the 
Whitewater loan through former Citizen's Bank President James 
Patterson who was then the President of River Valley.282 
After Mr. Wade called Mr. Patterson, he was granted this loan 
over the phone.283 Mr. Patterson, who admitted he did not 
even like Mr. Wade,284 claimed that he did not recall the 
purpose of the loan or whether the bank received 
collateral.285 Mr. Patterson admitted that the loan to Mr. 
Wade was outside of River Valley's lending territory.286
    It is unclear why Mr. Patterson would make this loan to Mr. 
Wade when Mr. Wade was in bankruptcy.7 Mr. Patterson 
initially testified that Wade had emerged from bankruptcy by 
the time this loan was made.287 When asked whether he 
understood that a person in bankruptcy is not supposed to 
engage in financial transactions without court supervision, 
Patterson claimed that he ``didn't understand that if somebody 
had filed bankruptcy that they couldn't go make a new deal.'' 
288 In fact, Mr. Patterson continued to assert that he 
made this loan to Mr. Wade, a man who was in involuntary 
bankruptcy, because ``(h)e was worth the loan.'' 289
---------------------------------------------------------------------------
    \7\ On November 1, 1989, Mr. Wade filed for Chapter 11 bankruptcy 
protection. On August 27, 1990, Mr. Wade's bankruptcy was converted to 
an involuntary bankruptcy under Chapter 7. Wade's involuntary 
bankruptcy remained open as late as 1995. ( 4/24/95 Pillsbury Report p. 
124).
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            B. The Lyons Report
    In February or early March 1992, James Lyons, a senior 
partner at the Denver, Colorado law firm of Rothgerber, Appel, 
Powers & Johnson, was asked by the Clinton campaign to 
investigate the Clintons' investment in Whitewater.290 Mr. 
Lyons specialized in complex civil litigation.291 He was 
also a friend and political supporter of the Clintons since the 
late 1970s 292 and was the ad hoc chair of a group of 
lawyers from around the country who provided support and 
volunteer legal advice and services to the Clinton 
campaign.293
    Mr. Lyons reviewed the available Whitewater ``documents and 
information . . . that had been assembled by campaign staff 
after the issue had been raised by Mr. Jeff Gerth of the New 
York Times.'' 294 Based on his preliminary analysis of the 
documents, Mr. Lyons determined that the campaign ``needed 
accounting help to assist in a financial reconstruction.'' He 
``made a recommendation to campaign staff and to Governor and 
Mrs. Clinton . . . to engage Patten, McCarthy & Associates,'' 
295 a Denver financial consulting firm.
    In early March 1992, Mr. Lyons contacted Leslie Patten, a 
certified public accountant and president of Patten, McCarthy & 
Associates,296 and engaged his firm, on behalf of the 
Clintons, to conduct ``a financial reconstruction of Whitewater 
Development Corporation from the then available books and 
records.'' 297 Mr. Lyons and Mr. Patten were ``friends'' 
and ``had a professional relationship for a number of years.'' 
298 Mr. Patten's firm provided ``consultation on banking, 
financial, accounting and tax matters arising from business 
litigation and expert witness testimony on such issues.'' 
299 On March 10, 1992 the Patten firm began working on its 
analysis of Whitewater.300 Mr. Patten and Norris Weese, 
another certified public accountant and the firm's vice 
president, were the only professionals who performed work on 
the document that became the final report.301 Mr. Weese 
went to Arkansas to gather documents and began the financial 
analyses, and Mr. Patten reviewed the financial analyses and 
drafted the document that became the final report.302
    Work on the so-called Lyons report proceeded rapidly, with 
the involvement of Mrs. Clinton. On March 18, 1992, just eight 
days after Mr. Patten and Mr. Weese began work on the project, 
a draft of the final report was completed,303 and was 
faxed the next day to Mr. Lyons, Mrs. Clinton, Loretta Lynch 
and James Hamilton, a lawyer working with Mr. Lyons on the 
Clinton campaign.304 The fax to Mrs. Clinton and Ms. Lynch 
was 55 pages long and contained over 30 pages of work papers 
prepared by the Patten firm. On March 20, a revised draft was 
faxed to Mrs. Clinton, Mr. Hamilton, and John Klusaritz, 
another Clinton campaign lawyer.305 Later that day, Mr. 
Patten faxed to Mrs Clinton a revised report, dated March 20, 
1992 and addressed to Governor Bill Clinton and Hillary Rodham 
Clinton, that contained six type-written pages. The report was 
signed by Mr. Patten and Mr. Weese.306 According to Mr. 
Patten, ``the substance of the report was pretty much final at 
that point,'' but ``I think we were premature in signing it 
because we had not obtained everybody's comments.'' 307 
During this period, Mr. Patten testified that he ``was in 
fairly regular communication with Mr. Lyons,'' who ``was 
anxious to get this project completed and was seeking periodic 
updates as to where we were in the process.'' 308
    Then, on March 20 or March 21, 1992, Mr. Lyons contacted 
Mr. Patten and told him that he wanted two versions of the 
report prepared, a summary version that only addressed specific 
questions raised by the press and a full report addressed to 
him. According to Mr. Patten's testimony:

          It's at this approximate point [in] time when Mr. 
        Lyons advised me that he wanted a summary report 
        prepared. . . . The essence of it was that Mr. Lyons 
        indicated that he [would] like to have a summary report 
        in addition to the full report which would be addressed 
        to him. . .  . My understanding was that the purpose of 
        the summary report was to address two or three specific 
        questions that had been raised by the press.309

    Mr. Lyons testified that the Patten firm ``prepared a 
single report and a summary of it'' 310 and that ``[o]ne 
is simply shorter and in my opinion was more responsive to the 
issues that were then being put forward by the press.'' 
311 On March 21, 1992, Mr. Patten faxed a shorter version 
of the report to Mrs. Clinton.312 As with the version of 
the report faxed to Mrs. Clinton the day before, this version 
of the report, dated March 21, 1992, was addressed to the 
Clintons and was signed by Mr. Patten and Mr. Weese, but it was 
almost three pages shorter than the previous day's 
version.313 On March 22, 1992, Mr. Patten faxed even 
shorter versions of the report, dated March 23, 1992 and signed 
by Mr. Weese and Mr. Patten, to Mrs. Clinton and Ms. 
Lynch.314
    On March 23, 1992, Mr. Patten faxed Mrs. Clinton the final 
summary version of the Patten firm's report, which contained 
three type-written pages and two pages of charts.315 A one 
page cover letter from Mr. Patten to the Clintons states: 
``Pursuant to the request of James Lyons, Esq., enclosed please 
find Patten McCarthy & Associates, Inc's report pursuant to our 
recent engagement.''
    In a March 23, 1992 letter to the Clintons, Mr. Lyons 
notified the Clintons that his review of Whitewater had been 
completed. He noted the findings of the summary report, 
including that the Clintons had ``invested approximately 
$70,000 in the corporation.'' 316 The Clinton campaign 
only released the final summary version of the Patten firm's 
report to the press,317 and Mr. Patten testified that Mr. 
Lyons ``is the only individual that received both versions of 
the report.''318
    On April 10, 1992, Mr. Lyons sent the Clintons the final 
complete version 319 of the Patten firm's report, which 
contained seven type-written pages and three pages of 
charts.320 In his cover letter, Mr. Lyons states:

          Enclosed please find the complete report prepared by 
        Patten, McCarthy & Associates concerning Whitewater 
        Development. A summary of this report was previously 
        sent to you and released to the press along with a 
        cover letter from me on March 23, 1992. I have deferred 
        sending this complete report until now to avoid any 
        confusion or possible inadvertent production. The only 
        copies of this report which exist (other than the 
        enclosed original) are in my file and the confidential 
        files of Les Patten.321
          He then explained that the summary report omitted 
        several items:
          Please note the enclosed report discusses such things 
        as the $9,000 interest deduction taken by you in 1980, 
        lot 13 and borrowings associated with it, and the sale 
        of 24 lots in 1985 to Ozark Air for assumption of the 
        mortgage and an airplane. None of these items is set 
        out in the summary report which was released to the 
        press. Similarly, the summary report released to the 
        press did not contain Schedule 1, which details loans 
        and advances by the McDougals and the Clintons from 
        1980-1991.322

    Mr. Lyons concluded his letter by noting: ``Accordingly, 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.'' (emphasis added) 323
    Mr. Lindsey testified that the complete report was not 
released to the press as of late 1993.324 According to his 
testimony, ``it turned out later [after late 1993] at least one 
reporter, through other sources, probably Independent Counsel, 
who knows, reported on the longer version of the Lyons report, 
but at that time I don't think anyone had reported on it.'' 
325
    In March 1994, almost two years to the date after the 
Patten firm issued its report, it was discovered that the 
report had overstated the Clintons investment in Whitewater by 
$22,244.65.326 The $68,900 investment in Whitewater by the 
Clintons reported by the Patten firm included a check paid by 
Mr. Clinton to Madison Bank and Trust in 1982 on a loan used to 
purchase a house for his mother in Hot Springs, 
Arkansas.327 Thus, the Patten firm overstated the 
Clinton's Whitewater investment by more than 30 percent.
    Less than two weeks after this error was first 
acknowledged, Mr. Patten, in a November 4, 1993 memorandum to 
Mr. Lyons, explained the problems that his firm had encountered 
in its analysis. Mr. Patten noted that his firm's work ``did 
not and could not constitute an audit, review, compilation or 
the application of agreed upon procedures as those terms are 
understood within the accounting profession.'' He further wrote 
that ``source documentation was not available in many instances 
and we had to utilize the next best available documentation,'' 
and that ``[t]he financial statements that we reconstructed 
took into consideration monies paid by the Clintons, the 
McDougals and others that had not been reflected in the 
accountant's workpapers or tax returns.'' 328
            C. The Clintons Finally Get Out of Whitewater
    Among the documents in Mr. Foster's office at the time of 
his death was his handwritten note: ``Get out of White Water. 
'' 329 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.330
    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.'' 331 
According to Mr. Blair, he suggested that Mr. McDougal pay a 
nominal amount to buy the Clintons' interest in 
Whitewater:332 ``I think we settled on a thousand dollars 
as an appropriate nominal amount.'' 333 There was one 
problem: ``McDougal doesn't have a thousand dollars.'' 334 
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.'' 335 
The loan was made without interest,336 and Mr. McDougal 
has never repaid Mr. Blair.337
    On December 22, 1993, Mr. McDougal and the Clintons 
executed the transaction to get the Clintons out of 
Whitewater.338 Mr. Foster obtained the Clintons' signature 
for the documents executing the sale.339 It is unclear 
whether Mr. Foster, Mr. McDougal, or the Clintons knew that Mr. 
Blair gave Mr. McDougal the $1000 to buy the Whitewater shares 
from the Clintons.340
    Mr. Blair then assigned Mr. Foster the task of contacting 
the accountants and preparing the Clintons' tax 
returns.341 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.
    Also among the documents in Mr. Foster's office at the time 
of death were his notes of conversations with the Clintons' 
accountant, Yoly Redden.342 The notes, in Mr. Foster's 
hand, identified the tax problem as a ``can of worms you 
shouldn't open.'' 343 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'' 
        344

    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.345 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 346

    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.347

    Therein lay the problem. To claim a loss based on economic 
assumptions, as the Lyons report did, was one thing.8 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.348

    \8\ 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.
---------------------------------------------------------------------------
          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'' 
        349

    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.'' 350 
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.351 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.352 The main focus of these numerous 
communications was the tax basis for the Clintons' 
contributions to Whitewater and how to treat the $1000 
payment.353
    The Clintons' final tax returns for 1992 reported a capital 
gain of $1000 from the sale of stock to Mr. McDougal.354 
According to Ms. Redden, ``I think we need to claim no gain or 
a loss.'' 355 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.'' 
356

IV. The Clintons' Questionable Tax Treatment of Whitewater: A History 
        of Unreportable Income and Improper Deductions

    During the years that the Clintons owned an interest in 
Whitewater, the Clintons adopted an aggressive approach to the 
tax treatment of their investment. This approach sometimes 
resulted in errors on their federal income tax returns. From 
1978 to the early 1990s, the Clintons invested a total of 
$42,192 in Whitewater.357 During this same period, the 
Clintons deducted $42,656 of their Whitewater related expenses 
on their federal income tax returns--almost $500 more than 
their total investment in the corporation.
    The Special Committee's analysis of the Clintons' treatment 
of individual Whitewater-related items on their federal income 
tax returns reveals that the Clintons took a number of 
questionable tax positions relating to Whitewater. From 1992 to 
the present, the Clintons have admitted taking improper 
deductions of $7,928 and omitting income of $8,171 on their 
federal income tax returns during the period of their 
Whitewater investment. Therefore, the Clintons have admitted 
understating their income by $16,099 during this period. Based 
on its analysis of the available evidence, the Special 
Committee concluded that the Clintons could have understated 
their income on Whitewater related items by an additional 
$33,771, for a total increase in taxable income of $49,870.
    The Clintons have explained that errors on their tax 
returns relating to Whitewater were due to mistakes made by 
their accountants. The Clintons did not fully disclose, 
however, all of their financial information to their 
accountants,358 did not discuss the details of important 
financial transactions with them,359 and sometimes simply 
ignored their accountant's advice.360
    Gaines Norton, the Clintons' personal accountant from 1978 
to 1984, stated that the Clintons provided him with the 
information used to prepare their tax returns.361 
According to Mr. Norton, a former IRS revenue agent and a 
certified public accountant, the Clintons did not provide him 
with underlying documents, but instead provided him with 
summaries,362 such as handwritten lists on 
notepads.363 In one case, Mr. Norton raised specific tax 
concerns about the structure of Whitewater and Mr. Clinton told 
him ``to back off and leave the issue alone.'' 364 The 
errors and questions discussed in this section, therefore, 
cannot be dismissed as merely mistakes by the Clintons' 
personal accountants.
            A. 1978: The Clintons' Unreported Income of $5,405 from 15-
                    Acre Installment Sale
    The Clintons may have unreported income of $5,405 from 
their 1978 installment sale of 15 acres of land originally 
purchased from Rolling Manor Inc., a company owned and 
controlled by Mr. McDougal. On January 25, 1977, then-Attorney 
General Clinton purchased 20 acres of land from Rolling Manor 
Inc. for $11,400.365 The Clintons' 1978 federal income tax 
return reports that they sold 20 acres of land in 1978 in two 
separate transactions, a cash sale of five acres and an 
installment sale of 15 acres. On May 17, 1978, the Clintons 
sold five acres on a cash basis for $5,000, resulting in a gain 
of $2,150, which was properly reported on Schedule D (Capital 
Gains or Losses) of their 1978 return.366 On July 23, 
1978, the Clintons sold 15 acres of unimproved land on the 
installment method for $14,985, resulting in a gain of 
$6,435.367 Since the Clintons elected to report this 
$6,435 gain on the installment method, only $886 of the gain 
was taxable in 1978 and was reported by the Clintons on their 
return.368 The $5,549 balance of the gain ($6,435--$886) 
from this 15-acre land sale was to be reported in future years 
as the Clintons received the payments from the buyer.
    $5,405 of the $5,549 deferred gain reported on the 
Clintons' 1978 return does not appear, however, in their 
subsequent federal income tax returns. The Clintons did not 
report any income from the 15-acre installment sale on their 
1979 tax return.369 The Clintons did report $144 in 
capital gains from an installment sale on Schedule D (Capital 
Gains and Losses) of their 1980 tax return.370 The 
Clintons did not report any income from the 15-acre installment 
sale on any of their tax returns after 1980.9 How the 
Clintons collected a total of $2,066 in 1978 on the sale of 
this 15 acre tract of land, collected no funds in 1979, 
collected a total of $335 in 1980, of which $144 was reported 
as a gain on their 1980 tax return, and then collected no other 
funds from the buyer remains unexplained.
---------------------------------------------------------------------------
    \9\ Haddon Morgan & Foreman Document LP 00690-95 (Clinton 1981 
income tax return); Haddon Morgan & Foreman Document LP 00696-719 
(Clinton 1982 income tax return); Haddon Morgan & Foreman Document LP 
00720-739 (Clinton 1983 income tax return); Haddon Morgan & Foreman 
Document LP 00740-762 (Clinton 1984 income tax return); Haddon Morgan & 
Foreman Document LP 00763-786 (Clinton 1985 income tax return); Haddon 
Morgan & Foreman Document LP 00787-815 (Clinton 1986 income tax 
return); Haddon Morgan & Foreman Document LP 00816-860 (Clinton 1987 
income tax return). Haddon Morgan & Foreman Document LP 00861-894 
(Clinton 1988 income tax return); Haddon Morgan & Foreman Document LP 
00895-942 (Clinton 1989 income tax return); Haddon Morgan & Foreman 
Document 133-00005495-5503 (Clinton 1990 amended income tax return); 
Haddon Morgan & Foreman Document 133-00005520-5583 (Clinton 1990 income 
tax return); Haddon Morgan & Foreman Document 133-00005827-5904 
(Clinton 1991 income tax return); Haddon Morgan & Foreman Document 133-
00006319-6346 (Clinton 1992 income tax return).
---------------------------------------------------------------------------
    If the Clintons collected the funds due from the buyer of 
the 15-acre parcel, they were required to report a portion of 
each payment as a gain on their tax returns, just as they 
reported a $144 gain on their 1980 return.10 As described 
above, the Clintons reported no other gains on any of their 
subsequent returns. Of course, if the Clintons did not receive 
payments from the buyer, they would not have been required to 
report gains on their income tax returns. If the buyer of the 
property defaulted, however, the Clintons could have foreclosed 
on the property and then resold the property to another buyer, 
but there is no evidence on any of their subsequent tax returns 
that such action was taken by the Clintons. In addition, if the 
buyer defaulted, the Clintons could have taken a $7,194 
deduction for their remaining basis in the 15 acres, but there 
is no evidence of such a deduction on any of the Clintons 
subsequent tax returns.11 Moreover, if the property was 
foreclosed upon and not sold, then the Clintons would still own 
it, but this property is not shown on the Clintons 1991 Federal 
Election Disclosure form.371
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    \10\ Internal Revenue Code Sec. 453 allows, under certain 
conditions, taxpayers to pay gains on the sale of property on the 
installment method.
    \11\ The gross profit percentage on this transaction was 42.9%. 
Haddon Morgan & Foreman Document LP 00672 (Installment Gain on Sale 
Schedule--attachment to Clinton 1978 income tax return). Since the 
remaining gain was $5,405, the basis would be $7,194.
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            B. 1979: The Clintons' Improper Interest Deduction of 
                    $2,400
    The $2,400 interest deduction claimed by the Clintons on 
their 1979 tax return may have been improper under federal 
income tax law. On December 7, 1979, Whitewater deposited in 
its account a check from the Clintons in the amount of 
$2,900.372 On the books of Whitewater, this check was 
recorded as $500 for capital and $2,400 as ``Loan--Bill 
Clinton''.373 According to its books, Whitewater's first 
interest payment in the amount of $4,352.63 was made to 
Citizen's Bank of Flippin on May 5.374 On their 1979 
federal income tax return, the Clintons claimed an interest 
deduction of $11,749 for payments to ``Bank and Loan 
Companies.'' 375 This amount included the Clintons' $2,400 
payment to Whitewater.376
    Federal income tax law allows a deduction for ``all 
interest paid or accrued within the taxable year on 
indebtedness,'' 377 but the burden of proof for 
establishing the propriety of an interest deduction is on the 
taxpayer.12 In this case, there is no evidence that the 
Clintons' $2,400 payment to Whitewater was for interest on 
indebtedness. Indeed, the only available evidence, the $2,900 
deposit slip and the entries on Whitewater's books, indicates 
that the $2,400 payment was a loan to the corporation, which 
the corporation had an obligation to repay, and not an interest 
payment. Moreover, Whitewater did not make its first interest 
payment to a bank until May 5, 1980, almost five months after 
the Clintons' payment of $2,400 was deposited, and there is no 
evidence that Whitewater's first interest payment of $4,352.63 
included the Clintons $2,400.378
---------------------------------------------------------------------------
    \12\ Treas. Regs. Sec. 1.6001-1(a) states that taxpayers shall keep 
records which ``are sufficient to establish the amount of gross income, 
deductions, credits . . .'' on the taxpayer's return.
---------------------------------------------------------------------------
    An IRS audit of the Clintons' 1979 income tax return 
resulted in no changes. However, there is no evidence that the 
revenue agent reviewed all of the relevant documents regarding 
this interest deduction.379 Absent proof that Whitewater's 
books and records were made available to the revenue agent by 
the Clintons, the result of the 1979 audit is inconclusive on 
this issue. Indeed, it is possible that the revenue agent would 
have reviewed only a canceled check or bank records, determined 
that less than the full payment was deducted, and accepted this 
as sufficient evidence to verify the deduction.
            C. 1980: The Clintons' Improper Interest Deduction of 
                    $9,000
    The $9,000 interest deduction claimed by the Clintons on 
their 1980 tax return may have been improper under federal 
income tax law. On August, 23, 1980, Mrs. Clinton wrote a 
personal check in the amount of $9,000.380 The Clintons 
deducted this $9,000 payment on their 1980 federal income tax 
return as interest paid to ``James McDougal.'' 381 A 
third-party endorsement by Citizens Bank of Flippin, dated 
September 5, 1980, is on the reverse side of the Clintons' 
check.382
    Federal income tax law allows a deduction for ``all 
interest paid or accrued within the taxable year on 
indebtedness,'' 383 but the burden of proof for 
establishing the propriety of an interest deduction is on the 
taxpayer. In this case, there is no evidence that the Clintons' 
$9,000 payment was used to pay interest on indebtedness. Nor is 
there evidence on the face of this check that it was intended 
to be used to pay interest. The payee on the check was left 
blank, and there is no designation or notation on the check 
that it was intended to be used to pay interest.384 In 
addition, the absence of a notation on the check that it was 
for interest is particularly probative, since Mrs. Clinton made 
such a notation on the other checks that she wrote to pay 
interest on the Whitewater debt. Mrs. Clinton wrote at least 
four other personal checks to pay interest on Whitewater 
related debt--three before and one after the $9,000 check, and, 
on each of these checks, Mrs. Clinton wrote a notation that the 
checks were for interest.13 Moreover, the Clintons' 
checkbook entry designates this check as a ``land payment,'' 
not an interest payment.385 ``Land payment'' could refer 
either to a principal or interest payment. Since Mrs. Clinton 
generally noted when a payment was for interest, however, her 
notation that this check was for a ``land payment'' would tend 
to confirm that this payment was for principal, not interest.
---------------------------------------------------------------------------
    \13\ Haddon Morgan & Foreman Document LP 00523 (check 697, dated 
December 28, 1978, issued to Great Southern Land Company, Inc. in the 
amount of $10,130.58 states ``Reimbursement for six months interest''; 
check 396, dated December 29, 1979, issued to Citizens Bank & Trust in 
the amount of $4,752.88 states ``Interest Payment''; check 395, dated 
December 29, 1979, issued to James B. McDougal in the amount of $237.50 
states ``Reimbursement of Interest pd.''). Haddon Morgan & Foreman 
Document 00528 (check 1623, dated December 30, 1986, issued to Security 
Bank in the amount of $1,635.51 states ``Int on note 957585.'').
---------------------------------------------------------------------------
    Analyses of the available bank records also indicate that 
the $9,000 check was used to pay principal, not interest. A 
report prepared by Patten, McCarthy & Associates, a Denver 
accounting firm hired by the 1992 Clinton Presidential 
Campaign, states:

          In our telephone conversation with her [Mrs. Clinton] 
        and you [James Lyons] on March 18, 1992, she reaffirmed 
        that she believed that it was an interest payment. 
        Based on our reconstruction of the probable 
        amortization of the mortgage loan at Citizens Bank & 
        Trust, we believe the $9,000 went to reduce 
        principal.386

    The report of Pillsbury, Madison & Sutro is even more 
conclusive on this point. It states:

      On August 23, 1980, the Clintons paid $9,000 to an 
unknown payee. Through a reconstruction of the Citizens Bank 
mortgage, it has been determined that this payment was applied 
as principal to the outstanding balance of the Citizens Bank 
loan.387

Thus, the available evidence indicates that the bank applied 
the $9,000 to reduce principal, not interest.
    According to the report prepared by the President and Mrs. 
Clinton's counsel, David Kendall, since the Clintons ``owed 
interest to Citizens Bank of Flippin, WDC [Whitewater] or the 
McDougals, if they intended that their $9,000 check represents 
the interest, then Mr. and Mrs. Clinton accurately deducted the 
$9,000 payment as interest.'' 388 However, there is no 
evidence of any unconditional and legally enforceable 
indebtedness between the Clintons and Whitewater or Mr. 
McDougal at the time of this payment. While an indebtedness did 
exist between the Clintons and Citizens Bank, Mrs. Clinton's 
intent that a payment on the note was for interest is not 
sufficient to support an interest deduction under federal 
income tax law.
    Courts generally will give effect to an arrangement between 
a creditor and a debtor allocating payments on an indebtedness 
to principal and/or interest where that arrangement is bona 
fide and done at arm's length.389 There is no evidence of 
that such an arrangement existed between Mrs. Clinton and 
Citizen's Bank. Nor is there evidence that Mrs. Clinton 
communicated to the bank or any other party that the payment 
was for interest. Absent such an arrangement, payments by a 
debtor are first allocated to accrued but unpaid interest and 
then to principal.390
    The available evidence indicates that no accrued but unpaid 
interest was due on the Citizens Bank loan when the Clintons' 
$9,000 check was endorsed by Citizens Bank on September 5, 
1980. One month earlier, on August 5, 1980, the Citizens Bank 
note was extended and modified and, at the same time, the 
Clintons paid Citizens Bank the quarterly interest owing and 
due of $4,350, which they properly deducted on their 1978 
return.391 No principal payment had been made on the loan 
as of the date of its renewal.392 Just 18 days later, Mrs. 
Clinton wrote the $9,000 check for ``land payment.'' The next 
quarterly interest payment on the note would not have been due 
until November 5, 1980, two months after Citizens Bank endorsed 
the Clintons' $9,000 check.
            D. 1980: The Clintons' Unreported Income of $10,000 from 
                    Whitewater payment of the $20,000 Union Bank Note
    Whitewater's 1980 payment of a 1978 $20,000 unsecured, 
personal note of Mr. McDougal and Mr. Clinton may have resulted 
in $10,000 of income to the Clintons that was not reported on 
their 1980 federal income tax return. On June 19, 1978, Mr. 
McDougal and Mr. Clinton obtained a $20,000 unsecured, personal 
loan (Loan # 0004197) from Union National Bank of Little 
Rock.393 The proceeds of this loan were used to make the 
down payment on the 230 acres of land in Marion County, 
Arkansas that became Whitewater.394 On December 17, 1979, 
the Union National Bank note was renewed for 6 months, with a 
new maturity date of June 16, 1980.395 As of the date of 
that renewal, the principal of the note remained 
$20,000.396 On June 10, 1980, Mr. McDougal borrowed 
$20,000 from the Bank of Cherry Valley in Cherry Valley, 
Arkansas,397 and deposited those funds in Whitewater's 
account at the Union National Bank.398 On June 23, 1980, 
Whitewater disbursed $21,346.29 to Union National Bank, using a 
corporate check with the notation ``For Note # 0004197 Plus 
interest thru 6/23/80,'' to pay off the accrued interest and 
principal owed personally by Mr. McDougal and Mr. Clinton to 
Union National Bank.399
    Section 61 of the Internal Revenue Code states that ``gross 
income means all income from whatever source derived, including 
. . . income from discharge of indebtedness.'' 400 Courts 
have ruled that amounts expended by a corporation for an 
individual taxpayer's benefit would constitute income to the 
taxpayer.401 Section 108(e)(4)(A) of the Code states that 
income is realized if debt is discharged or acquired by a 
related entity.402
    The central issue is whether Whitewater's payment to Union 
National Bank discharged any debt owed by Mr. Clinton. Mr. 
McDougal and Mr. Clinton were jointly and severally liable on 
the Union National Bank note.403 Whitewater's 
incorporation did not change this, since the Union National 
Bank note was not transferred to Whitewater.404 Therefore, 
Whitewater's payment to Union National Bank eliminated Mr. 
Clinton's obligation to that bank.
    However, if Mr. Clinton was an obligor on the Bank of 
Cherry Valley note, from which Whitewater received the funds to 
pay Union National Bank, then Whitewater's debt would not have 
discharged any debt owed by Mr. Clinton. In this case, the debt 
simply would have shifted from Union National Bank to the Bank 
of Cherry Valley.405 14 On the other hand, if Mr. Clinton 
was not an obligor on the Bank of Cherry Valley note, then 
Whitewater's payment would have discharged debt owed by Mr. 
Clinton. In this case, the Union National Bank debt, on which 
Mr. Clinton was jointly and severally liable, would have been 
replaced by the Bank of Cherry Valley debt, on which Mr. 
Clinton was not liable. In the latter case, Mr. Clinton would 
owe the IRS additional taxes on the $10,000 of discharged debt, 
his share of the Union Bank debt.
---------------------------------------------------------------------------
    \14\ There is also no evidence that the Clintons had an obligation 
to repay, or did repay, Whitewater. Whitewater's books for the year 
ending May 31, 1981 do not show that the corporation reduced the 
Clintons' notes payable that was established when the land was 
transferred into the corporation. Nor do they show that the 
corporations recorded a receivable from the Clintons. Haddon Morgan & 
Foreman Documents LP 01957-69.
---------------------------------------------------------------------------
    Was Mr. Clinton an obligor on the Bank of Cherry Valley 
note? Mr. Clinton has stated that ``any shift of this $20,000 
loan from Union Bank did not affect its character as an 
acquisition loan, for which my wife and I considered ourselves 
equally responsible with the McDougals for repayment.'' 
406 However, testimony by the Bank of Cherry Valley's 
former President, Maurice Smith, indicates that the loan was 
made to Mr. McDougal individually, and most of the bank 
documents support his testimony. Indeed, Mr. Smith testified 
that the bank ``just loaned it to Jim McDougal'' and that Mr. 
Clinton did not make payments on the loan.407
    Most of the available loan documents indicate that Mr. 
McDougal was the sole obligor on the Bank of Cherry Valley 
note.408 Mr. McDougal's name, and not Mr. Clinton's, is 
typed on each of the documents, and Mr. McDougal signed each of 
the documents.409 Only one loan document appears to have 
Mr. Clinton's signature on it, and Mr. Clinton's name is not 
typed on that document.410 Moreover, that document is 
dated more than two years after the note was 
originated.411
            E. 1982: The Clintons' Unreported Income of $5,691 for 
                    Whitewater Payment of Citizens Bank of Jonesboro 
                    Note
    A 1982 payment by Whitewater of the principal and interest 
on a $5,000 note between the Citizens Bank of Jonesboro and Mr. 
Clinton may have resulted in $5,691.20 of income to the 
Clintons that was not reported on their 1982 federal income tax 
return. A May 21, 1981 personal financial statement of the 
Clintons lists a $5,000 note payable to Citizens Bank of 
Jonesboro as a liability under the heading ``general debt.'' 
412 On February 17, 1981, Mr. Clinton wrote a personal 
check in the amount of $243.82 to Citizens Bank, which had a 
notation ``Interest on Note #585-270.'' 413 On February 
22, 1982, Whitewater disbursed a check in the amount of 
$5,691.20 to Citizens Bank.414 The notation on the check 
states ``Note 585-270,'' 415 and the Whitewater checkbook 
entry designates this check as payment of ``Note #585-270--Bill 
Clinton.'' 416
    Section 61 of the Internal Revenue Code states that ``gross 
income means all income from whatever source derived, including 
. . . [i]ncome from discharge of indebtedness.'' 417 
Courts have ruled that amounts expended by a corporation for an 
individual taxpayer's benefit would constitute income to the 
taxpayer.418 Whitewater paid Mr. Clinton's note at 
Citizens Bank of Jonesboro, but Mr. Clinton has stated that 
``[i]t is possible that it was a WDC-related loan.'' 419 
If Mr. Clinton invested the proceeds of this loan in Whitewater 
and Whitewater then repaid the loan, Mr. Clinton would have 
received no personal benefit from Whitewater's payment of the 
note, and, therefore, would not have been required to recognize 
income from discharge of indebtedness.
    The evidence is inconclusive on whether this Citizens Bank 
of Jonesboro loan was related to Whitewater. A March 1, 1982 
letter from Jim McDougal to Bill Clinton states:

          I have paid from the Whitewater Development 
        Corporation the note you owed Citizens Bank of 
        Jonesboro. You are correct in your belief that the sum 
        of money borrowed was part of your investment in 
        Whitewater. 420

    Yet, there is no evidence on Whitewater's books that it 
received $5,000 from either the Clintons or Citizens Bank of 
Jonesboro.421 15 Indeed, when Whitewater disbursed $5,691 
to Citizens Bank of Jonesboro, it recorded the full amount as 
``interest'' paid, which indicates that the corporation had 
never recorded a liability that could be reduced upon payment 
of the note.422
---------------------------------------------------------------------------
    \15\ There is also no evidence that the Clintons had an obligation 
to repay, or did repay, Whitewater. Whitewater's books for the year 
ending May 31, 1982 do not show that the corporation reduced the 
Clintons' notes payable that was established when the land was 
transferred into the corporation. Nor do they show that the 
corporations recorded a receivable from the Clintons. Haddon Morgan & 
Foreman Documents LP 01957-88.
---------------------------------------------------------------------------
    Although the evidence is inconclusive on whether these 
funds were invested in Whitewater, under federal income tax law 
the Clintons would bear the burden of proof that this payment 
did not result in any benefit to them personally. It is unclear 
whether the March 1, 1982 McDougal letter would be considered 
sufficient proof that the Clintons invested the funds received 
from the Citizens Bank of Jonesboro in Whitewater. If found 
insufficient, the Clintons would have unreported income of 
$5,691.20, excluding any interest and penalties.
            F. 1984: The Clintons' Improper Deduction of $144 for Real 
                    Estate Taxes
    On their 1984 federal income tax return, the Clintons 
improperly deducted $144 for real estate tax payments for which 
they were reimbursed by Whitewater. On October 10, 1984, the 
Clintons paid $144 to Marion County for the payment of real 
estate taxes on Whitewater lot 13. On November 4, 1984, 
Whitewater reimbursed the Clintons for this amount.423 
Since the Clintons were reimbursed for the taxes paid, this 
deduction was improper. On May 24, 1996, the Clintons 
acknowledged this error and repaid the federal taxes owed to 
the Bureau of Public Debt and the state taxes owed to an 
Arkansas charity.424
            G. 1984 and 1985: The Clintons' Improper Interest 
                    Deductions of $2,811 and $2,322
    On their 1984 and 1985 federal income tax returns, the 
Clintons improperly deducted $5,133 for interest payments made 
paid by Whitewater, not the Clintons.425 In 1984 and 1985, 
Whitewater made interest payments to the Security Bank of 
Paragould in the amounts of $2,811 and $2,322, respectively, 
that the corporation deducted on its corporate tax 
returns.426 The Clintons also claimed these same interest 
deductions on their 1984 and 1985 federal income tax 
returns.427 Since Whitewater made the interest payments to 
the bank, it, and not the Clintons, was entitled to those 
deductions. On December 28, 1993, almost two years after the 
errors were first reported, the Clintons repaid the taxes owed 
due to these errors.428 The Clintons did not explain the 
delay.429
            H. 1987: The Clintons' Improper Interest Deduction of 
                    $2,561
    On their 1987 federal income tax return, the Clintons 
improperly deducted $1,636 for interest which they also 
deducted on their 1986 federal income tax return. On December 
30, 1986, Mrs. Clinton wrote a check in the amount of $1,635.51 
to Security Bank of Paragould.430 On their 1986 federal 
income tax return, the Clintons deducted $1,636 for interest 
paid to ``Security Bank.'' 431 In 1987, Security Bank of 
Paragould sent the Clintons a statement of interest paid on 
their loan during 1987, which listed interest paid of 
$2,561.33. 432 On their 1987 Federal income tax return, 
the Clintons deducted $2,561 in interest paid to ``Security 
Bank.'' 433
    The $2,561 of interest deducted on the Clintons' 1987 tax 
return improperly included the $1,635.51 payment made by the 
Clintons in 1986 and deducted on their 1986 tax return. The 
$925 balance of this amount ($2,561-$1,636) was also improperly 
deducted by the Clintons on their 1987 tax return. This 
interest was paid by Hillman Logan, the owner of Whitewater lot 
13. On May 24, 1996, the Clintons acknowledged these errors and 
repaid the Federal taxes owed to the Bureau of Public Debt and 
state taxes owed to an Arkansas charity.434
    Documents show that these Mrs. Clinton may have discussed 
this error with her personal accountant, Yoly Redden, and 
Loretta Lynch on March 23, 1992--almost four years before the 
Clintons acknowledged the error. Notes taken by Ms. Redden of a 
March 23, 1992 telephone conversation between herself, Mrs. 
Clinton and Ms. Lynch state:

        Clinton Campaign--Issue discussed with HC & Loretta 
        Lynch 
        1987 $2,651 deducted per return to Security Bank of 
        Paragould. [found  canceled check from Clintons dated 
        12/30/86 check # 1623 for 1635.51.]
        1986 1,636 paid [an arrow in Ms. Redden's notes points 
        from this entry to the 1987 entry] 435

    Ms. Redden testified that in this conversation she had 
discussed with Mrs. Clinton and Ms. Lynch whether or not 
certain deductions had been ``double-counted'' on the Clintons' 
1986 and 1987 federal income tax returns and that this issue 
had been discussed even prior to this conversation.436
            I. 1988: The Clintons' Improper Deduction of $1,275 for 
                    Real Estate Taxes
    The $1,275 real estate tax deduction claimed by the 
Clintons on their 1988 tax return may have been improper under 
federal income tax law. On October 28, 1988, Mrs. Clinton 
reimbursed Ozark Realty $1,275.15 for real estate taxes due on 
several Whitewater lots.437 On their 1988 federal income 
tax return the Clintons deducted $1,275 as real estate 
taxes.438 Generally, only the owner of real property is 
entitled to deduct real property taxes on the property, since 
those taxes are the liability of the owner under federal income 
tax law.439 Since the Clintons did not own the property on 
which the taxes were assessed, they were not entitled to a 
deduction for the payment of those real estate taxes. A 
taxpayer who owns a beneficial interest in property and who 
pays taxes thereon to protect that interest may deduct the 
taxes, even though legal title is in another.440 
Beneficial interest is narrowly defined, however, and does not 
appear to the Clintons interest, if any, in the lots on which 
these real estate property taxes were assessed. Therefore, the 
Clintons' $1,275 payment to Ozark Realty for real estate taxes 
may not be an allowable deduction.
            J. 1988: The Clintons' Unreported Income of $1,673 from the 
                    Sale of Lot 13
    On May 24, 1996, the Clintons acknowledged that they under-
reported the capital gain from the sale of a Whitewater lot 
owned by Mrs. Clinton by $1,673 on their 1988 federal income 
tax return.441 On that return, the Clintons reported a 
$1,640 long-term capital gain from the sale of lot 13.442 
In computing the capital gain from this sale, the Clintons 
included in their basis calculation payments made by the 
previous owner of the lot.443 As a result, the cost of the 
property was artificially inflated by $1,673, reducing the gain 
reported by the Clintons by this same amount on their 1988 tax 
return. The have repaid the federal taxes owed to the Bureau of 
Public Debt and the state taxes owed to an Arkansas 
charity.444

   part II. governor clinton's questionable relationship with james 
                                mCdougal

    While Mr. McDougal was carrying the Clintons share on the 
Whitewater loans, Governor Clinton, using the power of his 
political office, acted favorably on Mr. McDougal's other 
business ventures and accepted Mr. McDougal's recommendations 
regarding state action. These favors took the form of granting 
Mr. McDougal influence in appointments to state 
positions,445 steering lucrative state leases to Madison 
Guaranty,446 and making decisions for Mr. McDougal 
concerning state regulators.447 This pattern of favoritism 
was important to Mr. McDougal, whose thrift was experiencing 
serious financial trouble.
    The motive for this favoritism is clear. From the 
standpoint of Governor Clinton, if Madison Guaranty failed or 
Mr. McDougal experienced financial troubles, the Clintons could 
be liable for the full Whitewater debt. Thus, Governor Clinton 
had a reason to act to ensure the viability of Mr. McDougal's 
savings & loan, even if such action was adverse to the 
interests of the state.

I. James McDougal's Madison Guaranty: A Corrupt Savings & Loan

    In January 1982, James and Susan McDougal, along with 
several others, purchased 90% of the stock of the Woodruff 
County Savings & Loan Association for $246,500, which they 
renamed Madison Guaranty Savings & Loan Association (``Madison 
Guaranty'').448 To finance the purchase of Madison 
Guaranty, the McDougals borrowed $70,000 from Worthen Bank. Mr. 
McDougal inaccurately indicated on the change of control 
applications that he had obtained the money through ``funds 
received from closely held corporations.'' 449 In June 
1983, the McDougals borrowed another $142,186 from Worthen Bank 
to acquire stock belonging to other investors in Madison 
Guaranty in order to acquire exclusive control over the 
S&L.450
    Mr. McDougal's true interest was always real estate 
investments, and his control of Madison Guaranty allowed him to 
pursue such investments. On the other hand, Madison Bank & 
Trust, Mr. McDougal's other federal institution, was prohibited 
from such investments.451 In early 1982, Mr. McDougal 
incorporated Madison Financial Corporation as a subsidiary of 
Madison Guaranty for the sole purpose of real estate 
investment.452
     From the beginning, Mr. McDougal viewed Madison Guaranty 
as a personal ``candy store.'' 453 Soon after its purchase 
Mr. McDougal began to borrow personally from Madison Guaranty 
to pay down other loans including financing Whitewater.454
     In 1984, the Federal Home Loan Bank Board (``FHLBB'') 
examined Madison Guaranty and concluded that ``[t]he viability 
of the institution is jeopardized through the institution's 
current investment and lending practices in real estate 
development projects.'' The FHLBB attempted to force Madison, 
through a cease and desist order and a supervisory agreement, 
to stop lending money to the McDougals or any McDougal-
controlled entity, and require Madison Guaranty to raise 
additional capital.
    Shortly thereafter, Mr. McDougal hired Mrs. Clinton and the 
Rose Law Firm to represent Madison Guaranty and then-Governor 
Clinton appointed Beverly Bassett Schaffer to the position of 
Arkansas Securities Commissioner, based possibly on Mr. 
McDougal's recommendation. Mrs. Clinton and Ms. Schaffer 
discussed--and Ms. Schaffer approved--a novel proposal for 
Madison Guaranty to raise capital through the issuance of 
preferred stock. Ms. Clinton and the Rose Law Firm also 
represented Madison Guaranty in connection with land 
transactions and real estate investments, notably Castle 
Grande.
    Beginning in March 1986, the FHLBB again examined Madison 
Guaranty.455 James Clark, the examiner-in-charge, 
testified that the examiner discovered ``a group of insiders 
was obtaining cash in what amounted to a pyramid scheme'' led 
by the principal insider, James McDougal.456
    Mr. Clark testified that in his 20 years as a bank 
examiner, Madison Guaranty was on of the top five worst 
financial institutions that he examined in terms of self 
dealing by insiders.457 The 1986 examination report 
concluded that ``management blatantly disregarded numerous 
regulations,'' ``ignored'' parts of the Supervisory 
Agreement.458 Moreover the report stated that Mr. 
McDougal's effective control of Madison Guaranty ``enabled 
[him] to use corporate resources to develop large land 
developments [and] to divert substantial amounts of funds from 
the projects to himself and others.'' 459 The examiners 
cited Campobello, Maple Creek, and Castle Grande as problematic 
projects.460 Although Madison Guaranty's financial 
statements indicated that the institution was in the black, the 
FHLBB report noted that improper accounting appeared to be the 
source of the profit, not successful investing. The report 
stated that, ``[i]f profits [of the real estate projects] were 
booked properly, the Institution would be, in fact, 
insolvent.'' 461
            A. Madison's Fraudulent Land Deals
    Examiner Clark testified that Mr. McDougal ``had total 
control of Madison Guaranty funds'' and that Mr. McDougal could 
``dispense those funds at any time he wished, and he did so 
through the land development projects.'' 462 The 1986 
federal examination uncovered several instances where Madison 
Guaranty insiders engaged in ``sham transactions'' or acted as 
a ``straw man,'' an arrangement whereby the ``purchaser of the 
property would obtain legal title to a property without having 
any actual financial interest in the property simply as a means 
to hide true ownership of the property.'' 463 The sham 
transactions were used as a means to place phony profit on the 
books in attempt to falsely inflate net worth.464
    For example, the 1986 examination found that the Castle 
Grande project was ``purchased and sold in a series of 
fictitious transactions'' to straw buyers.465 At the 
recently concluded McDougal-Tucker trial, Don Denton, chief 
lending officer of Madison, testified that Seth Ward was a 
``nominee'' buyer in the purchase of part of the land.466 
These transactions were structured in this way to enable 
Madison Guaranty to violate the Arkansas state regulation 
prohibiting Madison Guaranty from investing more than 6% of its 
assets into Madison Financial Corporation.467
    Bank examiners also found that Madison Guaranty insiders 
obtained financing for real estate projects that were fully 
funded by Madison Guaranty.468 In addition, insiders 
received real estate commissions that they did not 
earn.469
            B. Madison's Phony Books and Records
    The 1984 examination of Madison Guaranty had concluded that 
the books and records were ``inadequate.'' 470 The books 
and records at Madison Guaranty were ``poor, missing, and in 
some cases, intentionally misleading.'' 471 The loan files 
did not sufficiently document the disbursements of the loan 
proceeds.472 Mr. Denton testified that prior to the 
arrival of the examiners in March 1986, the staff of Madison 
Guaranty went through the loan files to find out what was 
missing, back dated documents, and had phony appraisals 
prepared.473 Robert Palmer, a Madison appraiser, confirmed 
that he prepared several inflated appraisals for Madison 
Guaranty and backdated several appraisals.474 Moreover, 
Mr. Clark testified that the appraisals were ``wholly 
inadequate'' and ``the reports seemed to us to be essentially 
shams, some documents to put into the loan file.'' 475
    The 1986 FHLBB examination of Madison Guaranty lasted from 
March through September of 1986, as opposed to the three to 
four weeks that it would normally take for an S&L that size, 
because ``Madison Guaranty's problems were so severe and its 
records were so poor.'' 476 Moreover, Madison Guaranty's 
management actively obstructed the examination by retaining 
needed loan files or withholding information.477
            C. Federal Regulators Oust Mr. McDougal from Madison
    On June 19, 1986, Walter Faulk, the FHLBB's Supervisory 
Agent responsible for Madison Guaranty, issued the preliminary 
report of the examination.478 This report was so 
devastating that the Arkansas Securities Commissioner Beverly 
Bassett Schaffer believed it ``effectively put Madison out of 
business.'' 479
    Curiously, on July 2, 1986, Ms. Schaffer forwarded a letter 
which Mr. Faulk had sent to Madison Guaranty, to Samuel 
Bratton, then Counsel to Governor Clinton, with a personal note 
attached. The note stated, ``Madison Guaranty is in pretty 
serious trouble. Because of Bill's relationship with McDougal 
we probably ought to talk about it.'' 480 Mr. Bratton, who 
had already spoken with Governor Clinton several times about 
Madison Guaranty's financial difficulties, was well aware of 
the Governor's personal ties to Mr. McDougal.481 After Mr. 
Bratton received the note, he spoke with Ms. Schaffer about the 
possible closure of Madison Guaranty by the FHLBB, 482 and 
the upcoming FHLBB meeting in Dallas on July 24 where Madison's 
financial problems would be discussed.483 After Mr. 
Bratton received Ms. Schaffer's memorandum he contacted 
Governor Clinton, telling him of the FHLBB's plans.484 Mr. 
Bratton also went to see Betsey Wright, the Governor's Chief of 
Staff, and they ``together carried this to the Governor rather 
than my sending it in his normal mail.'' 485
    Although the exact date of Governor Clinton's receipt of 
the copy of the FHLBB's letter is unknown, he certainly 
received it before July 14, 1986.486 It is clear that 
Governor Clinton knew that Mr. McDougal--his business partner, 
friend, and client of his wife's law firm--was in serious 
financial trouble before it was ever made public.
    Results of an examination by the FHLBB are to be kept 
confidential, and ``[t]he law requires that release of an exam 
report be restricted.'' 487 Bank regulators should not 
share the results of exams with anyone outside of the 
regulatory agency. James Clark, the FHLBB examiner, could not 
think of one reason why it would be appropriate for a state 
bank regulator to tip off the governor's office with regard to 
an ongoing bank examination.488 Moreover, Mr. Clark 
testified that, given Governor Clinton's business relationship 
with Mr. McDougal, the ``tip off'' from Ms. Schaffer certainly 
``had the appearance of a conflict.'' 489
    On July 11, 1986 the Federal Home Loan Bank Board met to 
discuss Madison. Ms. Schaffer, her associate Charles Handley, 
nine persons from the FHLBB, and the Madison Board of Directors 
were all present.490 Mr. and Mrs. McDougal were not 
present.491 Mr. Clark expressed some concerns about Ms. 
Schaffer's presence at the FHLBB meeting because she had 
performed legal work for Madison Guaranty when she was in 
private practice, and he viewed that as a conflict with her 
oversight capacity as the Arkansas Securities 
Commissioner.492
    During the meeting, Dawn Pulcer of the FHLBB mentioned that 
she thought Ms. Schaffer's conduct during the meeting was 
peculiar. Ms. Pulcer's contemporaneous notes of the meeting 
reflect that during the course of discussion at the FHLBB 
meeting Ms. Schaffer appeared to be frowning, and asked only 
one question: ``[w]ho is representing the McDougals?'' 493 
Ms. Pulcer stated that she ``[t]hought it was a little odd. I, 
too, would have expected her to say something in support of the 
actions that the Federal Home Loan Bank Board supervisory 
authorities were taking.'' 494
    At this meeting, FHLBB determined that Mr. McDougal and Mr. 
Latham should be removed from Madison. On July 14, 1986, just 
three days after this meeting, Ms. Wright wrote a telling 
message to Governor Clinton that reads:

         White Water stock (McDougal's company)
         Do you still have? (pursuant to Jim's current problems
         If so, I'm worried about it.495

    Governor Clinton responded by writing ``No-Do not have any 
more--B.'' 496 Ms. Wright claimed it was then well known 
that Mr. McDougal had been removed from the bank. But the local 
newspaper did not report the event until July 25, 1996, eleven 
days later.497
    Curiously, on the very same day that Ms. Wright inquired 
about Governor Clinton's relationship with Mr. McDougal, Mrs. 
Clinton wrote a letter to Mr. McDougal and Mr. Latham 
terminating the Rose Law Firm's retainer agreement with Madison 
Guaranty.498 Along with the letter, Mrs. Clinton sent a 
check from the Rose Law Firm refunding Madison Guaranty's 
outstanding retainer balance.499
    Mrs. Clinton has given at least two different accounts 
regarding why she terminated the Rose Law Firm's representation 
of Madison Guaranty.500 In a press conference on April 22, 
1994, Mrs. Clinton said that the Rose Law Firm's relationship 
with Madison Guaranty was terminated because Madison Guaranty 
could not meet the requirements imposed by Ms. Schaffer for the 
issuance of preferred stock.501 However, in response to 
interrogatories on February 4, 1994, Mrs. Clinton said that the 
representation of Madison Guaranty was terminated due to ``the 
increasing work the Rose Law Firm was doing for FSLIC ... the 
firm had decided in early July, 1986, generally to avoid taking 
on any new or expanded representations of S&L's.'' 502 In 
Mrs. Clinton's February 14, 1996 interview with the FDIC, Mrs. 
Clinton stated that the letter to Madison Guaranty was written 
in direct response to a memorandum written by Herb Rule, then 
the managing partner of the Rose Law Firm, to all 
attorneys.503

II. Governor Clinton Provides Benefits to James McDougal and Madison 
        S&L

    During the time when Mr. McDougal was running Madison 
Guaranty and carrying the Clintons on the Whitewater 
investment, Governor Clinton acted favorably on Mr. McDougal's 
various proposals before the state. Indeed, substantial 
evidence supports Mr. McDougal's claims that he had ``clout'' 
with the Governor.504
            A. Governor Clinton Steers Valuable State Leases to Madison
    Governor Clinton exercised the power of his office to steer 
two lucrative lease contracts to Madison Guaranty.505 
Helen Herr, the former Leasing Administrator for Arkansas State 
Building Services (``ASBS''), testified that she first learned 
in January or February 1984 that Madison Guaranty was 
interested in leasing space to Arkansas Housing Development 
Agency (``AHDA'') during a meeting in the office of Paul 
Mallard.506 Mr. Mallard, the Director of ASBS called Ms. 
Herr into his office to meet Susan McDougal. Mr. Mallard told 
Ms. Herr that the McDougals were developing a building on South 
Main Street in Little Rock, in Quapaw Quarter, and that they 
had additional office space that they wanted to rent.507 
This office space was difficult to lease because it was located 
in an unsafe part of Little Rock and the real estate market in 
Little Rock was soft. Many commercial landlords were eager to 
fill their office space with long term tenants.508
    In fall 1983, AHDA developed a need for additional office 
space. ASBS was considering office space on Brookwood Drive 
that the Director of AHDA, Wooten Epes, felt would be 
suitable.509 After meeting with Mrs. McDougal, Mr. Mallard 
instructed Ms. Herr to examine the Madison office 
space.510
    When Mr. Epes, AHSA's Director, complained to Ms. Herr 
about the Madison space, she recommended that he state his 
complaints in writing. On March 5, 1984, Mr. Epes wrote a 
letter to Ms. Herr rejecting the proposal that AHDA lease the 
office space from Madison.511 Mr. Epes was concerned that 
the Madison space was not sufficiently large and was not 
located in a safe part of Little Rock.512 When Ms. Herr 
brought Mr. Epes' letter to Mr. Mallard's attention, Mr. 
Mallard told her that the leasing contract was going to Madison 
Guaranty because the McDougals were ``friends'' of the 
Governor.513 Ms. Herr specifically testified: ``When I 
presented the objections from Mr. Epes about the Madison space, 
[Mallard] said that the governor's office wants us to lease 
that space ... and that the McDougals were friends'' of 
Governor and Mrs. Clinton.514 Mr. Mallard also told her 
that ``they weren't going to consider other proposals'' because 
the ``governor's office wants us to lease this space and that's 
the way it's going to be.'' 515 Mr. Epes took his concerns 
to the Governor.516 Mr. Epes testified that Governor 
Clinton refused to overrule Mr. Mallard's decision, and that 
was the Governor's final word.517
    On April 1, 1984, the AHDA entered into a lease with 
Madison Guaranty.518 The lease was for a 60-month term at 
$4,800 per month.519 The contract realized nearly $300,000 
in payments to Madison.520
    In 1985 AHDA became the Arkansas Development Finance 
Authority (``ADFA'').521 ADFA subsequently sought to lease 
additional office space for their new employees.522 As a 
result of this change, ADFA entered into another contract with 
Madison.523 In August 1987, however, ADFA canceled its 
lease with Madison because it needed still more space, which 
was the concern that Mr. Epes had from the beginning.524
    Moreover, the State of Arkansas, through ASBS, leased space 
in an additional building from Mr. McDougal, in Quapaw Quarter, 
to house the Arkansas Revenue Department.525 Other than 
the three leases entered into with McDougal-owned entities, Ms. 
Herr could not recall any other leases the state entered for 
office space in the lease in Quapaw Quarter.526
    Don Denton, a Madison loan officer, believed that the state 
leases were a political payback by Governor Clinton to the 
McDougals. Mr. Denton testified that the connection ``[s]tood 
out like a beacon at night.'' 527
            B. McDougal Holds a Questionable 1985 Fundraiser for 
                    Clinton
     On April 4, 1985, James McDougal hosted a fundraiser for 
Governor Clinton at Madison Guaranty to raise money to pay off 
the Governor's outstanding personal debt from his 1984 
gubernatorial campaign.528 In the closing days of that 
race, Governor Clinton had obtained an unsecured personal loan 
in the amount of $50,000 from the Bank of Cherry 
Valley.529
    The exact amount of money raised at the event is not known. 
The campaign finance report listing the contributions received 
at the fundraiser is missing from the Pulaski County Clerk's 
office and has never been located. By all accounts, however, 
the fundraiser netted more than $30,000 to pay off Governor 
Clinton's personal debt.16
---------------------------------------------------------------------------
    \16\ Betsey Wright, who ran Governor Clinton's 1984 campaign, 
testified that $30,500 was raised at the event. (Wright, 1/26/96 Dep. 
p. 278.) Ms. Wright, the custodian of records for that campaign, she 
based that figure on checks from 17 persons or entities that she said 
had been collected in connection with the fundraiser. (O'Melveny & 
Myers Production CCBW-0017-24.) Mr. McDougal has stated in various 
interviews that the fundraiser raised about $35,000. (E.g. New York 
Times, 12/15/93 p. B8.) Notes taken by Susan Thomases in 1992 of a 
conversation she had with Sherry Curry reflect that ``MacD FR raised 
$39,150.'' (Willkie Farr & Gallagher Production ST 45.)
---------------------------------------------------------------------------
    Four $3,000 checks were collected at the 
fundraiser.530 The names on the checks were James B. and 
Susan McDougal, J.W. Fulbright, Ken Peacock, and Dean 
Landrum.531 J.W. Fulbright is the late former Senator. Ken 
Peacock is the son of former Madison director and borrower 
Charles Peacock.532 Dene Landrum, who is now deceased, was 
Mr Peacock's business associate.533 His first name was 
misspelled on the check as ``Dean.'' 534
    All four checks were dated April 4, 1985.535 The James 
McDougal check was written on the McDougal's personal checking 
account at Madison Guaranty and was signed by Susan 
McDougal.536 The Fulbright, Peacock, and Landrum checks 
were Madison Guaranty cashier's checks bearing numbers 2496, 
2497, and 2498, respectively.537
    There is strong evidence suggesting that the $3,000 check 
in Senator Fulbright's name was purchased by Mr. McDougal out 
of funds from his Flowerwood Farms account. Senator Fulbright 
did not attend the fundraiser, although he was expected 
to.538 In 1994, Kent Goss, an RTC investigator, questioned 
Senator Fulbright's lawyer, a former aide to the Senator, about 
the $3,000 check.539 17 Mr. Goss wrote that although it 
was ``evident'' that Senator Fulbright was ``a meticulous 
record-keeper,'' there was no record of any charitable donation 
in the amount of $3,000 between 1984 and 1991.540 Nor did 
Senator Fulbright's bank statements reflect a $3,000 debit 
during the relevant time.541 Senator Fulbright's lawyer 
added that he believed that the Senator had ``no knowledge'' of 
a $3,000 contribution to Governor Clinton.542
---------------------------------------------------------------------------
    \17\ Senator Fulbright himself could not be interviewed because he 
had a stroke several years ago and died in February 1995.
---------------------------------------------------------------------------
    The Pillsbury Madison & Sutro Report on Madison Guaranty 
and Whitewater commissioned by the Resolution Trust Corporation 
attempted to trace the source of funds of the Fulbright 
check.543 According to this report, on April 4, 1985, the 
same day that the Fulbright check was issued, a $3,000 check 
payable to Madison Guaranty was written on Flowerwood Farms' 
account at Madison Guaranty.544 The Flowerwood Farms check 
was apparently deposited in the Madison cashier's check 
account, as it was encoded with ``7001312''--the number of that 
account.545 A $3,000 deposit was posted in the account 
7001312 on April 4, 1985.546
    Despite this evidence, the Pillsbury Report erroneously 
concluded that the link between the Flowerwood Farms check and 
the Fulbright check ``has not been conclusively confirmed'' 
because Madison Guaranty issued two other cashier's checks for 
$3,000 on April 4, 1985, i.e., those in the names of Ken 
Peacock and Dean Landrum.547 However, Charles Peacock, an 
attendee and donor at the fundraiser, has admitted to 
purchasing those two checks.548 The Pillsbury report 
recognized: ``[I]f the Ken Peacock and Dene Landrum cashier's 
checks were funded by Charles Peacock III, the Flowerwood Farms 
check could have funded the remaining $3,000 cashier's check, 
the one from Fulbright.'' 549
    Mr. Peacock's testimony establishes, and the documentary 
evidence confirms, that he caused the checks to be issued. Mr. 
Peacock admitted that he purchased the $3,000 checks in the 
names of his son and Dene Landrum.550 Mr. Peacock said he 
bought the check in his son's name because he thought it might 
help his son secure a job with Governor Clinton.551 He 
testified that he bought the check in Mr. Landrum's name 
because Mr. Landrum wanted to help the child of a friend 
receive a scholarship awarded by Governor Clinton.552
    The documentary evidence is consistent with Mr. Peacock's 
admission that he procured the checks. On April 4, 1985, Mr. 
Peacock wrote a $6,000 counter check payable to Madison 
Guaranty, apparently on his account #15253.553 The check 
was encoded with ``7001312''--the number of the Madison 
cashier's checking account. That same day, Mr. Peacock 
purchased a cashier's check for $4.554 Madison Guaranty 
charged a $2 fee for cashier's checks.555 When asked 
whether he bought this cashier's check to pay the $4 fee on the 
two $3,000 checks, Mr. Peacock said, ``I'm sure that's what 
happened.'' 556 It seems clear that since Mr. Peacock 
purchased two of the $3,000 cashiers checks, the third $3,000 
check was purchased with proceeds from Flowerwood Farms.
    There is evidence that Mr. Peacock purchased the Ken 
Peacock and Dean Landrum checks with proceeds diverted from 
loans made by Madison Guaranty.
    On the day of the fundraiser, April 4, 1985, Dixie 
Continental Leasing, a company owned by Mr. Peacock, purchased 
29.77 acres of land on Woodson Lateral Road for 
$335,000.557 Most of the sale was financed by Madison 
Guaranty with a $297,000 mortgage.558 Mr. Peacock borrowed 
an additional $50,000 from Madison Guaranty in his own name to 
fund the down payment on the property.559 The loan was 
executed on April 5, 1985, but was funded on April 4, 1985, 
with a $50,000 Madison Guaranty check payable to Mr. 
Peacock.560 The loan was secured by commercial air 
conditioning equipment appraised at $273,000 but ultimately 
sold as scrap by Madison Guaranty for $1,500.561
    On April 5, 1985, Mr. Peacock wrote a check for $38,940 to 
Quapaw Title Co. to pay the down payment on the Woodson Lateral 
Road property.562 The check was deposited in Madison 
Guaranty.563 There is no documentary evidence indicating 
what happened to the remaining $11,060. Mr. Peacock does not 
remember how the remaining $11,060, a sum sufficient to fund 
the checks to Governor Clinton, was spent.564 Moreover, he 
does not recall what funds he used to pay for the cashier's 
checks: ``I don't remember how I paid for them, whether I paid 
for them with a check or whether I paid for them out of funds 
or what I did.'' 565
    The Pillsbury Report concludes that the source of funds for 
Mr. Ken Peacock's and Mr. Landrum's checks ``cannot be 
established from the available documentation,'' 566 
because Mr. Peacock's April 1985 Madison Guaranty bank 
statement is missing.567 Thus, it is not possible to 
ascertain what Mr. Peacock's balance was when he wrote the 
$6,000 check to Madison Guaranty, or what it would have been 
absent the infusion of an extra $11,060.568 Nevertheless, 
the Pillsbury Report does indicate that ``it is possible that a 
portion of this $11,060 could have been used to reimburse 
Charles Peacock III for the campaign contributions he funded 
that were made in the names of Ken Peacock and Dene Landrum.'' 
569
    In spring 1987, after Mr. McDougal was ousted from Madison 
Guaranty, the S&L filed several suits against Mr. Peacock, 
other members of his family, and related entities to recover on 
unpaid loans.570 On March 12, 1987, Madison Guaranty filed 
suit against Dixie Continental Leasing to recover on the loan 
executed on the day of the fundraiser.571 On April 1, 
1987, Madison Guaranty filed four additional suits against the 
Peacocks and their companies.572 In all, Madison Guaranty 
sought to recover approximately $500,000 from the Peacocks with 
these suits.573
    Madison Guaranty was represented in these actions by Lance 
Miller of the law firm of Mitchell, Williams, Selig & Tucker 
(``Tucker Firm'').574 Patricia Heritage, a Madison 
Guaranty collections officer, was the Madison Guaranty liaison 
to the Mitchell Williams attorneys with respect to these 
cases.575
    On April 21, 1987, Greg Hopkins, Mr. Peacock's attorney, 
visited Ms. Heritage in her office.576 Ms. Heritage 
testified that Mr. Hopkins was obviously angry and made certain 
allegations to her involving, the Dixie Continental loan, Mr. 
McDougal, and the Clinton campaign.577 Immediately after 
Mr. Hopkins left, Ms. Heritage called Mr. Miller to relate Mr. 
Hopkins' allegations.578
    Mr. Miller took contemporaneous notes of his conversation 
with Ms. Heritage,579 which he then memorialized in a 
three-page memorandum, addressed to John Selig, the partner on 
the matter.580 Ms. Heritage confirmed that Mr. Miller's 
memorandum accurately reflects what Mr. Hopkins said to 
her.581
    Mr. Miller's memorandum reflects that Mr. Hopkins claimed 
that there had been ``substantial wrongdoing'' at Madison 
Guaranty as a result of which people were ``going to go to 
prison.'' 582 Mr. Hopkins also made the serious allegation 
that ``a portion of the loan proceeds made to Dixie Continental 
Leasing went to Bill Clinton's campaign and that in return for 
the substantial campaign contribution, Bill Clinton assured Jim 
McDougal that a state agency would lease space from Madison 
Guaranty at its headquarters on Main Street in Little Rock.'' 
583
    There is every reason to believe that Mr. Hopkins actually 
made the serious and troubling allegations attributed to him, 
and that Mr. Miller's memo accurately reflects what Mr. 
Hopkins. Ms. Heritage's memory of the conversation is 
vivid.584 Indeed, Ms. Heritage testified that Mr. Hopkins 
``was angry and shouting'' at her, and that ``that's the sort 
of thing that would stick out'' in her mind.585
    It appears that Mr. Hopkins did not make these allegations 
out of whole cloth. Ms. Heritage testified that, with respect 
to the allegations about campaign contributions to Governor 
Clinton, she ``thought it was entirely possible that it was 
true.'' 586 She thought Mr. Hopkins may have been 
``posturing,'' but not lying.587
    Although Mr. Hopkins did not recall speaking with Ms. 
Heritage in April 1987 or making allegations, he did not 
dispute that he may have done so and has no reason to doubt Ms. 
Heritage's recollection.588
    Mr. Hopkins testified that he could not think of a 
``conceivable reason for making up an allegation about the 
Governor and Jim McDougal exchanging money for favors.'' 
589 He also testified that ``it was not [his] habit to lie 
or make up baseless allegations.'' 590 He acknowledged 
that the allegations about Governor Clinton are serious and not 
the sort of thing that he would say without a basis for doing 
so.591 Mr. Hopkins admitted that he ``probably had 
suspicions.'' 592
    Moreover, Mr. Hopkins was likely in a position to learn 
about the diversion of loan proceeds to Governor Clinton and 
Madison Guaranty's award of a lease contract through his 
representation of Mr. Peacock, who owned Dixie Continental and 
was a Madison director. However, Mr. Hopkins, invoked the 
attorney-client privilege and refused to answer questions about 
what Mr. Peacock has told him.593
    If Mr. Hopkins did make the statements attributed to him, 
and they were false, he would be in violation of an Arkansas 
ethical rule.594 The Rule states: ``In the course of 
representing a client a lawyer shall not knowingly . . . make a 
false statement of material fact or law to a third person.''
    The memorandum written by Mr. Miller reflects that Mr. 
Hopkins said that ``in return for the substantial campaign 
contribution, Bill Clinton assured McDougal that a state agency 
would lease space from Madison Guaranty at its headquarters on 
Main Street in Little Rock.'' 595 Indeed, on August 13, 
1985, the State of Arkansas awarded a contract to expand the 
Madison lease office space in its Main Street office to the 
Arkansas Development Finance Authority (ADFA).596 Governor 
Clinton had previously used his influence to steer an ADFA 
lease contract to Madison Guaranty.597
            C. Governor Clinton Vetoes Legislation For McDougal 
                    Business Partners
    The 1985 McDougal fundraiser appears to have been used as 
leverage to secure action by Governor Clinton on proposed state 
legislation. On February 14, 1986, Castle Sewer & Water 
Company--an entity owned by Jim Guy Tucker and R.D. Randolph--
entered an agreement to purchase the sewer and water system at 
Castle Grande for $1.2 million.598 On July 15, 1986, 
following Mr. McDougal's removal from the Madison Guaranty, 
there was a special meeting of its Board of Directors.599 
At the meeting, Mr. Tucker explained to the board that he had 
an old agreement with Mr. McDougal for 110 utility hook-ups per 
year and that, although the utility company was not a 
registered public utility under Arkansas Law, it was not a 
problem.
    Mr. Tucker raised a number of issues in the July 15, 1986 
meeting. Some of the concerns voiced by Mr. Tucker brought into 
question the validity of legal work performed by Hillary 
Clinton and the Rose Law Firm.
    Mrs. Clinton supervised Rose Law Firm associate Rick 
Donovan's analysis on the need for Castle Sewer and Water to 
register as a public utility with the Arkansas Public Service 
Commission.600 The memorandum concluded that the cost of 
becoming a ``public utility''--and thus being regulated by the 
Public Service Commission--would be greater than the risk of 
being reported by a resident to the Public Service 
Commission.601 Such a citizen report would simply require 
the payment of a civil fine.602 Mrs. Clinton, after 
reviewing various memoranda and billing records, recalled that 
she supervised Mr. Donovan on certain ``questions relating to 
the provisions of water and sewer service by a utility which 
was located within IDC property.'' 603
    It is not clear exactly what work was performed by the Rose 
Law Firm on the utility issues related to Castle Grande because 
Mrs. Clinton ordered those client records destroyed in July 
1988.604 But, the work performed by Mrs. Clinton clearly 
became an issue when Mr. Tucker threatened to sue Madison 
Guaranty, which was under then the ``close scrutiny of FSLIC'' 
605, for recision.606
    The sale of the sewer and water system occurred on February 
28, 1986.607 Yet, the Rose Law Firm continued to do work 
on utility related issues and continued to bill Madison 
Guaranty.608 Six days after the final transfer of the 
Industrial Service Corporation stock to Castle Sewer, Mr. 
Donovan wrote a memorandum on whether ``Madison Guaranty/IDC'' 
can provide services to customers inside Little Rock's city 
limits.609 Mr. Donovan could not explain why he was 
preparing a legal memorandum for a client who had sold the 
utility a week earlier.610
    The Rose Law Firm charged Madison Guaranty thousands of 
dollars for work on utility issues.611 There may have been 
work performed on utility issues in January 1986, the bill 
which reflected 14.5 hours of unaccounted billing by Mrs. 
Clinton for Madison.612
    Two years later, the utility work performed by the Rose Law 
Firm became an issue when Mr. Tucker threatened to sue Madison 
Guaranty for recision of contract, based on the fact that ``a 
utility, subject to regulation by the Public Service 
Commission, is prohibited from mortgaging utility property 
without permission of the Public Service Commission.'' 613 
This threat would have directly called into question the legal 
work performed by the First Lady and the Rose Law Firm.
    Mr. Tucker refused to rescind his purchase contract for 
Industrial Services Corporation unless legislation was enacted 
barring the Public Service Commission from regulating Castle 
Sewer and Water's rates.614 On February 24, 1987, Mr. 
Tucker wrote a memorandum to Representative Mike Wilson 
outlining a proposed bill, a copy of which was attached to the 
memorandum.615 This proposal, House Bill 1780, passed both 
houses of the State legislature without a single dissenting 
vote.616
    Governor Clinton, however, vetoed the bill. According to 
the Governor's Chief Counsel, Samuel Bratton, Governor Clinton 
vetoed the bill because it was local and specific and this 
violated the Arkansas constitution.617 Prior to the veto, 
the Governor was not aware that the legislation was designed to 
help Madison Financial, Mr. Tucker, Mr. Randolph, and 
tangentially The Rose Law Firm and Mrs. Clinton.618
    In early April 1987, Mr. Randolph spoke with Mr. Bratton 
about a way to reverse the Governor's veto of House Bill 
1780.619 Unable to resolve the matter, Mr. Randolph went 
to see the Governor.620
    On April 14, 1987, because the Governor was unavailable, 
Mr. Randolph left a message with 621 Nancy Hernreich, the 
Governor's scheduler.622 The message indicated that Mr. 
Randolph had spoken with the Governor the previous Sunday, and 
that he wanted to know if the water bill veto was going to 
stand.623 Mr. Randolph advised Ms. Hernreich that the 
Governor should call Mr. Tucker about the legislation. Ms. 
Hernreich's message indicates that Mr. Randolph ``mentioned a 
meeting between you [Governor Clinton], Tucker, and Jim 
McDougal a couple of years ago which involved $33,000.'' 
624
     The evidence indicates that Mr. Randolph was referring to 
the April 4, 1985 fundraiser at Madison Guaranty. This 
``meeting'' involving $33,000 appears to be the 1985 
fundraiser. Mr. Randolph, Mr. Tucker and Mr. McDougal 
contributed at the April 5, 1985 fundraiser,625 which was 
almost exactly ``a couple of years'' before Mr. Randolph's 
visit to the mansion. Also, $33,000 is approximately what was 
raised at the event.
    Ms. Wright, Governor Clinton's Chief of Staff, read the 
memorandum, and wrote, ``see if Sam Bratton will call him.'' 
626 The Governor wrote ``ugh'' in response.
    Mr. Tucker wrote a letter to Governor Clinton requesting 
that he or the representatives who sponsored the legislation be 
given the opportunity to speak with the staff person who 
recommended the veto.627 Mr. Tucker met with or had 
conversations over the telephone with Mr. Bratton to discuss 
Castle Sewer's need for a legislative remedy.628 On May 
13, 1987, Representative Walker called the Governor's office 
and left a message ``Rep Walker want and appt with BC ASAP. He 
wants to bring Jim Guy Tucker and R.D. Randolph.'' 629 
Underneath the typed message Governor Clinton wrote ``This is 
B.S. I thought Sam, called J. Guy, did he? I thought PSC not 
regulating this project, right?'' 630 There is no doubt 
that the Governor was aware of the problems his veto created 
for Castle Sewer.
    On May 19, 1987, Mr. Bratton prepared a memorandum to 
Governor Clinton related to ``Sewer District legislation/Jim 
Guy Tucker-R.D. Randolph, Mike Wilson, Bill Walker.'' 631 
The memorandum is revealing about the true nature of the 
discussions between Mr. Bratton and Mr. Tucker. The first 
paragraph contains a discussion of the fact that Madison 
Guaranty could not legally own and operate a utility, and this 
limitation was the reason the S&L sold it.632 In addition, 
the first paragraph mentions that the problem stems from the 
fact that a utility regulated by the Public Service Commission 
was barred from mortgaging utility property without permission 
of the Public Service Commission. Therefore, in Mr. Tucker's 
opinion, the mortgage was invalid because the utility had not 
obtained approval of the mortgage.633 The entire first 
paragraph mentions nothing about legislation remedying the cost 
of the Public Service Commission regulation or the burdens that 
such regulation places on small utilities.
    It was Mr. Bratton's position that Representative Walker 
was interested in seeing the legislation passed because it 
could save money for the citizens of the City of 
Wrightsville.634 Mr. Tucker informed Mr. Bratton that if 
the legislation were not passed that litigation ``would result 
because of the question of the validity of the mortgage and the 
fact that the S&L is now being operated under the close 
scrutiny of FSLIC and is no longer controlled by McDougal, et. 
al.'' 635 Thus, there was a threat of a lawsuit involving 
Madison Guaranty calling into question the legal work performed 
by the Rose Law Firm because the mortgage was invalid.636 
In none of these subsequent paragraphs is there any mention of 
the merit of the legislation.
    In the last paragraph, Mr. Bratton indicated that he spoke 
with Robert Johnston, at the Public Service Commission and 
asked Mr. Johnston to review options available to solve the 
``Tucker/Randolph problem short of the deregulation proposed by 
H.B. 1780.'' 637
    On June 12, 1987, Act 37 of 1987 was enacted into 
law.638 Act 37 of 1987 divests the Public Service 
Commission of regulatory authority over small sewer and water 
companies.639 Interestingly, six days after the 
legislation was signed, Castle Sewer indicated to Madison 
Guaranty that they were prepared to enter into a new 
contract.640
            D. Clinton Promises to McDougal on Brewery Legislation
    Mr. McDougal consistently turned to Governor Clinton and 
Mrs. Clinton when he faced state regulatory obstacles involving 
his land development projects.
    McDougal had many creative ideas for developing real 
estate. At Castle Grande, he proposed to build a brewery with a 
tasting room 641 that he hoped would become a profitable 
local tourist attraction.642 Mr. McDougal spoke with 
William Lyon, an Arkansas developer, who had borrowed $300,000 
from Madison Guaranty.643 Mr. Lyon had already invested 
the money he borrowed from Madison Guaranty in a brewery in 
Little Rock.644 At that time, Mr. Lyon was interested in 
expanding his existing brewery so he could serve and sell 
alcohol on the same premises.645 However, existing 
Arkansas state law prohibited the sale of alcohol at a 
manufacturing facility.
    Mr. Lyon and Mr. McDougal discussed the potential for 
success of a ``brew pub'' and the need to change the current 
state law in order to implement this plan. Mr. Lyon testified 
that he discussed the change in the law with Mr. McDougal 
because he knew Mr. McDougal had ``clout'' with then-Governor 
Clinton.646 Mr. Lyon believed that ``Jim McDougal thought 
that he owned Bill Clinton.'' 647
    Indeed, Mr. McDougal assured Mr. Lyon that he would be able 
to take care of the regulatory problems that prevented Mr. Lyon 
from building a brew-pub. Mr. McDougal intended to rely on his 
contacts in the state government, and particularly his 
friendship with Bill Clinton.648
    On December 12, 1984, Mr. McDougal wrote a letter to Betsey 
Wright, Governor Clinton's chief of staff, about a bill that 
had been pre-filed with the Arkansas State Senate. The letter 
states: ``Governor Clinton has made a commitment concerning 
this bill which I need to discuss with you at your 
convenience.'' 649 The bill provided exactly the type of 
legislative relief necessary for Mr. Lyon to successfully build 
his brew-pub.650
    On February 18, 1985, the state senator sponsoring the bill 
withdrew it due to lack of support from the ABC Board.651 
Mr. McDougal assured Mr. Lyon, however, that he could have the 
alcohol regulation changed instead through the ABC 
Board.652
    Two days later, on February 20, 1985, the ABC Board enacted 
a regulation that permitted the tasting of alcohol on the 
premises of a manufacturing facility.653 As promised, Mr. 
McDougal was able to provide the necessary changes in the state 
regulations.
    Later that year, Mr. Lyon and Mr. McDougal discussed the 
prospect of moving Mr. Lyon's brewery to Castle Grande and 
placing it in a building that was already on the Castle Grande 
property.654 Unfortunately, Castle Grande was located in a 
``dry'' township and another change in the Arkansas state law 
or regulations was needed in order to open a brew-pub on the 
property. Mr. McDougal again told Mr. Lyon that he would ``take 
care'' of the necessary regulatory changes.655 In a letter 
dated November 20, 1985, Mr. McDougal informed Seth Ward, who 
was involved in Mr. McDougal's Castle Grande development, that 
Governor Clinton would help obtain approval for the brewery. 
Mr. McDougal wrote: ``I have spoken with the Governor [Clinton] 
on this matter and expect it will be approved.'' 656
     Shortly thereafter, Mr. McDougal enlisted Mrs. Clinton's 
assistance in performing some legal analysis on the ``wet/dry'' 
issue. In a January 3, 1986 memorandum from Rick Donovan, a 
Rose Law Firm associate, to Mrs. Clinton,657 Mr. Donovan 
confirmed that Castle Grande was in a ``dry'' township. The 
memorandum reported that the only way to change the ``dry'' 
status was to pass a referendum in the township, or to seek a 
regulatory change through the ABC Board. This memorandum was 
followed by an undated handwritten note from Hillary Clinton. 
The note states:

          ``Rick--
          I visited with Seth Ward and gave him a copy of your 
        memo and with Ken Shemin. Please see Ken about a 
        strategy to approach the ABC to argue the ``dissolved 
        township'' theory.
          Thanks,
          Hillary 658

    Mr. Ward passed the January 3 memorandum on to Mr. 
McDougal. The Rose Law Firm billing records mysteriously 
discovered in the White House Residence indicate that Hillary 
Clinton billed for a ``conference with Mr. Ward and Mr. 
Shemin'' on January 7, 1996, and charged it to the Madison/IDC 
matter number.659 Mr. Donovan continued to research the 
wet/dry issue, writing a second memorandum to Mrs. Clinton 
January 23, 1986. In his second memo, Mr. Donovan again 
concluded that without a regulatory change or a vote, the 
Castle Grande property would still be considered ``dry.'' 
660 On February 7, 1986, Mr. McDougal wrote a memo to Jim 
Guy Tucker, ``It looks like our township is dry. Attached is a 
legal opinion Seth got from his attorney.'' The legal opinion 
attached is Mr. Donovan's January 3rd memorandum.
    At the end of February, the federal S&L examiners arrived 
at Madison Guaranty, and Mr. McDougal was removed from the S&L 
before his plans for the brewery could be successfully 
completed.
            E. McDougal Asks Governor Clinton to Fire Tough State 
                    Regulators
    Mr. McDougal asked Governor Clinton for assistance related 
to Madison and his real estate projects. For example, after Mr. 
McDougal received unfavorable treatment from Health Department 
officials monitoring Maple Creek Farms Land Development, 
Governor Clinton's assistance directly resulted in the removal 
of the state employees regulating the project.
    Maple Creek Farms was one of Mr. McDougal's real estate 
projects that he intended to subdivide into single-family lots. 
On June 23, 1983, however, shortly after McDougal had purchased 
Maple Creek Farms, Lex Dobbins, a Saline County Health Unit 
Sanitarian, wrote to Mr. McDougal warning about the instability 
of the soils and the inadequate absorption fields.661 Mr. 
Dobbins suggested that ``individual sewage disposal permit[s] 
be obtained prior to any construction,'' in order to ensure the 
safety of the sewage system.662 As a result, Mr. McDougal 
signed a ``Memorandum of Agreement'' pledging that each lot 
would be individually evaluated and approved for a septic tank 
system and that the lots would not be less than 3 acres in 
size.663 Without obtaining the permits required by the 
Memorandum of Agreement, Mr. McDougal began construction on 
Maple Creek Farms in February of 1984. Mr. Dobbins reminded him 
of the need for the proper permits and maintaining lots of at 
least 3 acres in size 664 and again urged Mr. McDougal to 
consider installing a community sewer system instead of septic 
tanks.665
    Mr. McDougal wrote to Mr. Dobbins on March 6, 1984, 
assuring him that the customers would contact the Health 
Department before beginning construction and that the community 
sewer system would be available to any lot where a septic 
system failed.666 On April 26, 1984, Mr. McDougal signed 
another agreement with the Health Department, which stated, 
``The Department of Health agrees to issue temporary permits 
with a condition that property owner shall connect to the 
sewerage system when said system is available.'' 667
    After seeing no significant improvement in the situation at 
Maple Creek Farms, Mr. Dobbins wrote to his supervisor, William 
Teer, Director of Sanitarian Services, of the problems.668 
In response to Mr. Dobbins' memorandum, Mr. Teer wrote to Mr. 
McDougal on July 3, 1984, instructing him to correct the 
problems.669 Two weeks later, Mr. McDougal wrote back 
stating: ``We are in agreement on your recommendations as to 
site protection and site drainage and are in the process of the 
continued implementation of these recommendations.'' 670
    Despite Mr. McDougal's assurances that the problems at 
Maple Creek would be alleviated, the situation was not. On July 
2, 1985, one year later, Mr. Teer informed Mr. McDougal that, 
absent corrective action, the Department of Health would not 
issue additional temporary individual sewage disposal permits 
in the poorly drained areas.671 Contrary to the agreements 
he had signed and letters he had written promising to correct 
the sewage problems on Maple Creek Farms, Mr. McDougal 
continued to ignore the warnings of the Health Department.
    By January 1986, Mr. McDougal was so frustrated by the 
persistent reprimands from the Health Department that he met 
with Governor Clinton. Mr. McDougal provided Governor Clinton 
with a list of detailed grievances that he had with health 
regulators.672 Governor Clinton granted a meeting with Mr. 
McDougal and called Mr. Butler in order to summon the state 
workers as well.673 Mr. Butler recalled Governor Clinton 
telling him during the call: ``the reason I think some of your 
staff is messing with this development is because this 
gentlemen [McDougal] has been a supporter of mine since I ran 
for Congress and has never asked me for anything.'' 674
    On March 4, 1986, Dr. Saltzman, Director of the Health 
Department, Jerry Hill, Environmental Chief of the Health 
Department, Janice Choate, an aide to Governor Clinton, Mr. 
Butler, Mr. McDougal and the Governor met in Governor Clinton's 
office.675 As a result of this meeting, Mr. Butler removed 
the three sanitation workers from their positions regulating 
Maple Creek. A memorandum from Ms. Choate informed the Governor 
of this action and noted: ``I believe they took their cue from 
you when you told them that Jim was your friend of 20 years who 
had never asked for a favor.'' 676
    No witnesses denied that Governor Clinton ``ordered'' the 
firing of the sanitation workers,677 and the documentary 
evidence indicates that the termination decisions were made in 
response to the Governor's wishes.
            F. McDougal Helps Select S&L Regulators
    In addition to obtaining the removal of state health 
regulators, Mr. McDougal was able to select some of the state 
regulators charged with overseeing Madison Guaranty. The 
evidence indicates that Governor Clinton looked to Mr. McDougal 
to provide him with the names of appointees for banking board 
positions. A handwritten memo about appointments on Governor's 
Office stationary reads, ``Banking Board--ask McDougal.'' 
678
    In fact, the Governor's staff contacted Mr. McDougal for 
his recommendations for the State Savings and Loan 
Board.679 On February 7, 1985, Mr. McDougal wrote a 
memorandum to Governor Clinton recommending that John Latham, 
Chairman of Madison Guaranty, and Jerry Kendall be appointed to 
the Savings and Loan Board.680 A memorandum announcing 
Governor Clinton's appointments on March 4, 1985 reflected that 
Mr. Latham and Dr. Kendall were named to the Savings and Loan 
Board.681 Mr. McDougal had an obvious interest in having 
his own employee, Mr. Latham, appointed to a board that would 
have direct regulatory control over Madison Guaranty.
    Indeed, the evidence indicates that, with then-Governor 
Clinton's assistance, Mr. McDougal consistently pushed through 
the appointments of persons who would be favorable to him and 
Madison Guaranty. This pattern is demonstrated by the troubling 
case of William Lyon, an Arkansas developer and business 
associate of Mr. McDougal. Mr. Lyon testified that: ``Mr. 
McDougal called me, literally out of the blue, and asked if I 
would be on the Arkansas State Bank Board.'' 682 Mr. 
McDougal informed Mr. Lyon that he could get then-Governor 
Clinton to appoint Mr. Lyon, ``and he did.'' 683
    During Mr. Lyon's term, however, Mr. McDougal informed him 
that it ``would be more beneficial'' if he sat on a different 
board--the Savings and Loan Board--which would be voting on 
whether Madison Guaranty could issue preferred stock in order 
to raise capital.684 Mr. McDougal made it clear to Mr. 
Lyon that the Governor would support Mr. McDougal in his effort 
to have the preferred stock issue passed.685
    Mr. McDougal told Mr. Lyon that if he did not agree to 
serve on the Savings and Loan Board he would be asked to resign 
from the Bank Board.686 Mr. Lyon believed the preferred 
stock deal was ``a rip-off of the stockholders'' and told Mr. 
McDougal the he would not go over to the Savings and Loan 
Board.687 Ultimately, Mr. Lyon rejected Mr. McDougal's 
offer to move to the Savings and Loan Board because he did not 
want anyone controlling his vote.688
    Mr. McDougal asked Mr. Lyon to resign but Mr. Lyon ``told 
him that he no longer had anything to do with the State of 
Arkansas'' and therefore only the Governor could ask him to 
resign.689 Mr. McDougal then informed Mr. Lyon that he 
would ask Governor Clinton to ask Mr. Lyon to resign. Perhaps 
not coincidentally, Governor Clinton called Mr. Lyon a month or 
so later and told Mr. Lyon that he had spoken with Mr. 
McDougal, and that the Governor wanted Mr. Lyon to 
resign.690 Mr. Lyon resigned from the State Bank Board in 
February 1984.691
    Documents indicate that later that year, Mr. McDougal 
played a role in the appointment of the Arkansas Securities 
Commissioner, Beverly Bassett Schaffer, who ultimately did 
approve Mr. McDougal's proposal for preferred stock. Woody 
Bassett, Ms. Schaffer's brother, wrote to the Governor several 
times recommending her for the position of Securities 
Commissioner, however, on a letter dated November 26, 1984, 
Governor Clinton wrote: ``she'd be good but may need to do 
something else--B.'' 692 After a December 22, 1984, 
message for the Governor from Mr. McDougal, however, in which 
he recommended Ms. Schaffer for the position of Securities 
Commissioner,693 Governor Clinton appointed Ms. Schaffer 
to the position of directly overseeing Madison Guaranty.
            G. McDougal Hires Mrs. Clinton and Her Law Firm

           1. The Questionable Retention of the Rose Law Firm

    Perhaps as a favor to then-Governor Clinton and Mrs. 
Clinton, and in an effort to obtain a favorable state 
regulatory ruling from Ms. Schaffer, in April 1985, Mr. 
McDougal retained Mrs. Clinton and the Rose Law Firm to 
represent Madison Guaranty in its proposal for the issuance of 
preferred stock.
    Mrs. Clinton has provided several versions of how the Rose 
Law Firm came to be retained by Madison Guaranty contradicted 
both her own statements and those of others. Mr. McDougal made 
statements during the 1992 Clinton Presidential campaign and to 
the press in 1993 that he put Mrs. Clinton on retainer as a 
favor to Bill Clinton. In 1992, Mr. McDougal told James Blair, 
a longtime Clinton friend and legal advisor to the campaign, 
and Loretta Lynch, a campaign lawyer who worked on the 
Whitewater-Madison matters, that Governor Clinton, in jogging 
pants, visited Mr. McDougal's office and told him that he and 
Mrs. Clinton were pressed for money and asked Mr. McDougal to 
give some work to Mrs. Clinton.694 According to Mr. 
McDougal, two hours later, Mrs. Clinton came by to set up the 
retainer.695 According to notes taken by Mr. Blair, Mr. 
McDougal said that he remembered the encounter ``explicitly'' 
because Governor Clinton, in his exercise clothes, left a 
permanent stain on Mr. McDougal's ``new leather contour 
chair.'' 696 In 1993, Mr. McDougal gave a similar account 
of the incident to the Los Angeles Times. President Clinton 
does not recall asking Mr. McDougal to place Mrs. Clinton on 
retainer.697
    Mrs. Clinton has given a markedly different account of the 
circumstances surrounding Madison Guaranty's retention of the 
Rose Law Firm. According to Mrs. Clinton, Richard Massey, then 
a first year associate at the Rose Law Firm, brought in Madison 
Guaranty as a client. Mrs. Clinton claims that although she was 
the Madison Guaranty billing partner on the matter, she was 
merely acting as a ``backstop'' because the firm did not permit 
associates to bill clients directly.698
    During a press conference on April 22, 1994, Mrs. Clinton 
stated that Mr. Latham, Chief Executive Officer of Madison 
Guaranty, asked Mr. Massey whether he would be interested in 
representing Madison in connection with a proposed stock 
offering. Mrs. Clinton further explained that Mr. Massey was 
aware that she knew Mr. McDougal, so ``he came to me and asked 
if I would talk with Jim to see whether or not Jim would let 
the lawyer and the officer go forward on this project. I did 
that, and I arranged that the firm would be paid $2,000 
retainer.'' 699 In a statement to the RTC in November 
1994, Mrs. Clinton similarly told investigators that ``she 
recalled Massey came to her and asked her to be the billing 
attorney which was a normal practice when an associate was 
handling the matter. . . Mrs. Clinton recalled that a Madison 
official (individual unknown) approached Rick Massey regarding 
a preferred stock offering in an effort to raise capital.''
     In a sworn response to an RTC interrogatory in May 1995, 
Mrs. Clinton elaborated on her story. Mrs. Clinton stated that 
Mr. Massey approached her because ``certain lawyers'' in the 
Rose Law Firm were ``opposed'' to representing Mr. McDougal 
until Mr. McDougal paid an outstanding bill, and he was aware 
that Mrs. Clinton knew Mr. McDougal. Mrs. Clinton wrote:

          In the spring of 1985, Massey came to see me because 
        he had learned that certain lawyers at the firm were 
        opposed to doing any more work for Jim McDougal or any 
        of his companies until he paid his bill and then only 
        if Madison Guaranty agreed to prepay a certain sum. . . 
        I believe Massey approached me about presenting this 
        proposal to Jim McDougal because he was aware that I 
        knew him.700

    Mr. Massey, however, contradicts Mrs. Clinton's account in 
sworn testimony before the Special Committee. According to Mr. 
Massey, he was not responsible for bringing in Madison as a 
client.701 Mr. Massey stated specifically 18 that Mr. 
Latham never offered him Madison's business,702 and that 
he did not recall approaching Mrs. Clinton with a proposal to 
represent Madison.703 Contrary to Mrs. Clinton's unsworn 
statement of November 1994 to the RTC, Mr. Massey also 
indicated that he did not ask Mrs. Clinton to be the billing 
attorney.704
---------------------------------------------------------------------------
    \18\ Mr. Chertoff. Did Mr. Latham come to you and offer you work 
for the Madison Guaranty Savings & Loan?
    Mr. Massey. I don't believe so.
    Mr. Chertoff. Did Mr. Latham come to you and ask you to help him--
come to you directly, that is to say, before you'd been assigned to the 
matter, and ask you to help him with an effort by the savings and loan 
to issue preferred stock?
    Mr. Massey. Sir, I don't remember that. It could have happened, but 
I don't remember that.
---------------------------------------------------------------------------
    David Knight, a former Rose partner specializing in 
securities law, testified that he attended the lunch meeting 
during which, according to Mrs. Clinton, Mr. Latham allegedly 
hired Mr. Massey.705 Mr. Knight confirmed Mr. Massey's 
testimony that Mr. Latham did not ask Mr. Massey to represent 
Madison on the preferred stock offering. Quite to the contrary, 
according to Mr. Knight, the subject of the stock offering 
never arose.706 Indeed, according to Mr. Knight, Mr. 
Latham informed him and Mr. Massey at the lunch that Mr. 
McDougal made all hiring decisions and that Madison Guaranty 
already had outside counsel.707
    Mr. Latham confirmed that Mr. McDougal made the decision 
19 to retain the Rose Law Firm.708
---------------------------------------------------------------------------
    \19\  In an interview with RTC investigators, Mr. Latham stated 
that ``McDougal had friends over there and he suggested we use them. 
When asked who the friends were Latham said that they were Hillary 
Rodham Clinton and others.''
---------------------------------------------------------------------------
    The essence of Mrs. Clinton's account of the Madison 
retainer was that she became involved due to an alleged 
outstanding debt that Mr. McDougal's Madison Bank & Trust owed 
to the Rose Law Firm in 1985. Mrs. Clinton claimed that it was 
to relieve the concerns of her partners that she insisted on 
the $2000 per month retainer.
    Documentary evidence and testimony provided to the Special 
Committee, however, indicate that the outstanding balance of 
Rose's bill to Madison Bank & Trust was paid in November 1984, 
months prior to Mrs. Clinton's retainer in April 1985.
    Gary Bunch, President of Madison Bank & Trust, produced 
documents evidencing the bank's payment of the Rose legal fees 
in late October of 1984. Minutes of Madison Bank for October 
1984 indicate that $5,000 in legal fees are owed to the Rose 
Law Firm for work on the ``Huntsville move appeal,'' 709 
litigation relating to the relocation of the bank. The minutes 
state: ``Mr. McDougal seconded that Mr. Bunch will negotiate 
settlement with the firm.'' 710 Mr. Bunch testified that 
Mr. McDougal directed him to pay the outstanding Rose Law Firm 
bill for the Madison Bank & Trust matter in full in October 
1984.711
    Following the discovery of the Rose billing records and the 
testimony of Mr. Massey before the Special Committee, Mrs. 
Clinton's story changed in a February 1996 interview with RTC 
investigators. 20 Mrs. Clinton claimed the late Vincent 
Foster first informed her that Mr. Massey wanted to do work for 
Madison: ``I believe it was Vince Foster who came to me, who 
said that Mr. Massey wanted to do this work, but the partners 
didn't want him to do it.'' 712 When asked who suggested 
that she approach Mr. McDougal, Mrs. Clinton replied, ``I don't 
have a specific recollection. I believe it was Vince Foster, 
but I'm not positive.'' 713
---------------------------------------------------------------------------
    \20\ Well as I have said consistently since 1992. . . my 
recollection is that Mr. Massey wanted to do the work he had discussed 
with Mr. Latham, that some partners, I believe in the securities 
section, had advised Mr. Massey that they were not enthusiastic about 
undertaking the representation on behalf of Jim McDougal and Madison 
because of some problems in having work paid for in the past, and that 
there were discussions among partners.
    I believe it was Vince Foster who came to me, who said that Mr. 
Massey wanted to do this work, but the partners didn't want him to do 
it . . . And I was asked, as someone who knew McDougal, if I could 
intervene and perhaps set up an opportunity for Mr. Massey to do this 
work.
    So I talked with Mr. Massey about the work. Mr. Massey told me, as 
his testimony relates, that he had a talk with Mr. Latham, but it 
wasn't up to Mr. Latham, and he wasn't getting any support from others 
within the firm, and I told him I would talk to Mr. McDougal, which I 
did. (1996 Pillsbury, Madison & Sutro Interview of Hillary Rodham 
Clinton, pp. 27-31, Resolution Trust Corporation Document S-INTV000628-
632.)
---------------------------------------------------------------------------

  2. Mrs. Clinton Asks the Arkansas S&L Regulator to Approve a Novel 
                              Stock Issue

     The Rose Law Firm billing records belatedly discovered in 
the White House Residence show that Mrs. Clinton called Ms. 
Schaffer the day before the Rose Law Firm submitted to the 
Arkansas Securities Department Madison's proposal to offer 
preferred stock in order to raise badly need capital.714 
Ms. Schaffer notified Mrs. Clinton of the approval of the 
proposal two weeks later in a letter addressed to ``Dear 
Hillary.'' Ms. Schaffer and Mrs. Clinton both denied that 
Madison was given any preferential treatment.715
    Prior to the discovery of the billing records, Mrs. Clinton 
claimed in her sworn responses to RTC interrogatories in May 
1995 that she called the Arkansas Securities Department to find 
out ``to whom Mr. Massey should direct any inquiries'' but she 
did not recall to whom she spoke.716
    In testimony before the Special Committee, Ms. Schaffer 
directly contradicted Mrs. Clinton and stated that the proposal 
was discussed during the phone call. According to Ms. Schaffer,

          She called and said they had a proposal, and what it 
        was about; and I said I'm familiar with that; I've 
        already looked at that. You know, I agree with the--
        basically I have no problem with that position, and 
        you'll be getting a letter soon to that effect .. . I 
        think in substance I said, basically, I agree with the 
        position--I mean, that preferred stock can be issued 
        pursuant to the Business Corporation Code.717

    Mr. Massey likewise contradicted Mrs. Clinton's account of 
the phone call. Mr. Massey testified that he drafted the 
proposal and knew exactly to whom the proposal should be 
sent.718 Mr. Massey also said that Mrs. Clinton never gave 
any instructions about addressing the transmittal 
letter.719 Mr. Massey did not recall asking Mrs. Clinton 
to make such an inquiry and was not aware that she had.720
    Prior to the Rose Law Firm's engagement of Madison, the law 
firm, Mitchell, Williams, Selig, Jackson & Tucker started to 
perform research related to a preferred stock proposal.721 
The firm even opened a file labelled ``Madison Guaranty--Sale 
of Stock'' on February 6, 1985.722 For some reason, then, 
Mr. McDougal decided to send the work to the Rose Law Firm.
    On April 30, 1985, The Rose Law Firm wrote a letter to 
Charles Handley, Assistant to the Arkansas Securities 
Commissioner.21 to request an opinion as to whether 
Madison Guaranty was authorized to issue nonvoting preferred 
stock.723 Mr. Massey drafted the letter.724 This was 
the first time the Arkansas Securities Department was asked to 
make a determination on the ability of a savings and loan to 
issue preferred stock.725 After receiving the letter from 
the Rose Law Firm, Mr. Handley, an accountant, wrote, in a 
routing memorandum on May 6, 1985, that ``perhaps one of our 
attorneys should review the matter and issue a legal opinion.'' 
726 Ms. Schaffer forwarded a copy to William Brady, who 
was the only staff attorney at the Arkansas Securities 
Department.727 Attached to the letter was a memorandum 
from Ms. Schaffer which said ``Brady: Please review and draft 
reply to Hillary 6 May 1985.'' 728 It was Mr. Brady's 
understanding that this was to be an approval letter.729 
Therefore, any review was merely to get an understanding of the 
issues, because he believed it had already been determined that 
the proposal would be approved.
---------------------------------------------------------------------------
    \21\ The Rose Law Firm letter had misspelled Mr. Handley's name; 
they wrote ``Hanley''.
---------------------------------------------------------------------------
    Mr. Brady did not draft a reply. Instead he drafted a 
memorandum to Ms. Schaffer explaining his objection to the 
plan. 730 ``The more I looked into the Rose Law Firm 
request concerning the issuance of preferred stock . . . the 
less I supported the position presented in the Rose Law Firm.'' 
731 Because the plan had never been done in Arkansas 
before, Mr. Brady disagreed with the Rose Law Firm analysis: 
``I was not sure it was permissible.'' 732 Mr. Brady 
believed the Arkansas Securities Commission should seek an 
opinion from the Arkansas Attorney General.733
    Mr. Handley was also concerned about the right of Arkansas 
savings and loan associations to issue preferred stock. Mr. 
Handley testified that after receiving the Rose Law Firm's 
letter his ``initial belief was that Madison guaranty could not 
issue preferred stock because under the Arkansas State Savings 
and Loan Act, state institutions could only issue common 
stock.'' 734 Mr. Handley relented after his supervisor, 
Ms. Jones, disagreed.735
    On May 14, 1985, just two weeks after receiving this unique 
proposal, and despite the objections of her staff attorney, Ms. 
Schaffer approved the Rose Law Firm's position that Madison 
Guaranty could issue preferred stock.736
    Over the course of the next seven months, the Rose Law Firm 
continued to prepare the documents for a preferred stock 
offering. 737 Madison Guaranty, however, had lost interest 
in issuing preferred stock. Instead, Madison tried to raise 
capital through property syndication and a proposed offering 
22 of subordinated debt.
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    \22\ In addition, starting on May 14, 1985 and until the end of 
1985, the Rose Law Firm attempted to secure approval for a broker-
dealer subsidiary for Madison. (Massey, 6/15/95 RTC Statement p. 3). 
The proposal was submitted to the Arkansas Savings and Loan Board 
Association.
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III. The Castle Grande Land Deal: A Series of Fraudulent Loans

    The land development commonly known as ``Castle Grande'' 
consisted of about 1,050 acres of property near Little Rock. 
Madison Guaranty's wholly-owned subsidiary, Madison Financial 
Corporation, and Seth Ward, Webster Hubbell's father-in-law, 
jointly purchased the property for $1.7 million and then sold 
the land in parcels to various Madison insiders.738 Almost 
all of the sales were financed by loans from Madison Guaranty, 
and most of the loans were not repaid. As a consequence, the 
Castle Grande deal caused nearly $4 million in losses to 
Madison Guaranty.739 These losses were borne ultimately by 
U.S. taxpayers.
    Numerous transactions related to Castle Grande were 
fraudulent, criminal, or both. Indeed, the recent convictions 
of Mr. McDougal, Mrs. McDougal, and Governor Jim Guy Tucker on 
criminal fraud and conspiracy charges stemmed in part from 
certain aspects of the Castle Grande deal.
    Under this sham transaction, Mr. Ward purchased 60% of the 
available land--with 100% nonrecourse financing by Madison 
Guaranty--and Madison Financial had the right to buy the 
property from him once it had found other buyers. The inclusion 
of Mr. Ward in the deal was intended to, and had the effect of, 
circumventing an Arkansas regulation that limited investment in 
a service corporation such as MFC by a savings and loan. In 
essence, Mr. Ward was nothing more than as ``straw man'' who 
held the property in his name for Madison Financial because 
Madison could not own it all. As compensation for his role, Mr. 
Ward earned hundreds of thousands of dollars in commissions on 
the sale of the Castle Grande property.
    New evidence indicates that Mrs. Clinton played a direct 
role in transactions involving Castle Grande and has never 
admitted the extent of her role. The billing records discovered 
in the White House Residence in January 1996 indicate that 
between late 1985 and early 1986 Mrs. Clinton had numerous 
conferences with Mr. Ward about the matter and billed Madison 
for approximately 30 hours of work related to Castle 
Grande.740 Of importance, the billing records indicate 
that Mrs. Clinton drafted an option agreement dated May 1, 
1986, between Mr. Ward and Madison. Mrs. Clinton drafted this 
option at a time when Madison Guaranty was intense scrutiny 
from federal regulators. According to James Clark, the chief 
examiner of the 1986 Federal Home Loan Bank Board examination 
of Madison Guaranty, the May 1 option ``was created in order to 
conceal'' the true purpose of questionable notes executed 
between Seth Ward, Madison Guaranty, and Madison 
Financial.741
    The use to which Mrs. Clinton's work product was put raises 
questions about the state of her knowledge concerning what was 
going on at Madison Guaranty. The Special Committee has 
identified one occasion where Mrs. Clinton was apparently put 
on notice of suspect loans related to Castle Grande. When 
Madison Guaranty's top lending official, Don Denton, expressed 
concerns to Mrs. Clinton about questionable notes involving 
Seth Ward, she ``summarily dismissed'' his concerns.742 
Mr. Denton gathered from her response that she was saying he 
should ``take care of savings and loan matters and she would 
take care of legal matters.'' 743
    Furthermore, the Rose Law Firm billing records indicate 
that Mrs. Clinton had spent time studying a letter prepared by 
the Rose Law Firm explaining why the Ward notes were 
questionable--i.e., the rule limiting direct investment by a 
savings and loan in real estate ventures. Thus, it is 
reasonable to conclude that Mrs. Clinton was apprised of both 
the law and the facts that made Castle Grande an illegal 
transaction.
    In the view of the Special Committee, Mrs. Clinton's role 
in the Castle Grande deal cannot be assessed in isolation from 
her reluctance to be forthcoming about the extent of that role. 
Mrs. Clinton's role in the Castle Grande transactions was all 
but unknown prior to the discovery of her billing records in 
the White House residence in January 1996. Indeed, in a sworn 
interrogatory given to the RTC in May 1995, Mrs. Clinton 
represented that she knew nothing about Castle Grande.744 
In light of the billing records and other evidence, the 
Committee finds that Mrs. Clinton's representation is difficult 
to credit.
            A. Structuring of the Acquisition of the Castle Grande 
                    Property to Evade State Regulations
    Mr. Ward and Madison Financial purchased the Castle Grande 
together in fall 1985 from Industrial Development Company of 
Little Rock (``IDC'') for $1.75 million.745 Mr. Ward, who 
was working as a part-time consultant for Madison Financial, 
brought the possible purchase of this property to Mr. 
McDougal's attention.746 On September 13, 1985, Madison 
Financial and IDC entered into a purchase agreement, which Mr. 
Ward signed on behalf of Madison Guaranty.747 The closing 
was held on October 4, 1985.748
    At an early stage, Rose Law Firm attorneys were involved in 
the deal. Rose partner Thomas Thrash was involved in the 
acquisition of the IDC property for Madison Financial and 
attended the closing, although he has no recollection of 
it.749 In addition, the Rose Law Firm billing records 
reflect that, on November 14, 1985, Mrs. Clinton had a 
``conference with Seth Ward regarding purchase from [IDC 
Chairman] Brick Lile.'' 750
    Although some aspects of the deal struck by Mr. Ward and 
Madison Financial are disputed, the following is not in doubt. 
Madison Financial purchased the property south of 145th 
Street--about 40% of the total land area--plus some other 
parcels for $600,000.751 Mr. Ward purchased most of the 
land north of 145th Street, plus the property's sewer and water 
utility, for $1.15 million.752 The entire purchase was 
financed by Madison Guaranty, which loaned Mr. Ward the $1.15 
million on a nonrecourse basis.753
    Madison Financial and Mr. Ward agreed that the property 
would be parceled, developed, and sold as quickly as possible; 
that proceeds from sales would be applied toward the mortgage 
on the property; and that Mr. Ward would receive a commission 
on any sale, whether the land belonged to him or Madison 
Financial.754 Finally, Madison Financial had the right to 
purchase all or some of Mr. Ward's property from him.755
            B. The fraudulent nature of the Castle Grande purchase
    The purchase of the Castle Grande property by Madison 
Financial and Seth Ward has been described by federal 
regulators as a fraudulent transaction. In essence, Mr. Ward 
warehoused the property to allow Madison Guaranty to evade 
regulatory limitations upon its investment in real estate.
    Under Section V of the Rules and Regulations of the 
Arkansas Savings and Loan Association Board, Arkansas thrifts 
may establish service corporations to pursue real estate 
development ventures.756 Madison Financial Corporation, 
Madison Guaranty's wholly-owned subsidiary, was such a service 
corporation.
    Section V(C), however, limits a savings and loan's 
investment in its service corporation to 6% of the thrift's 
assets. This rule is known as the 6% rule or the direct 
investment rule. Section V(C) provides:

          An association may make any investment under this 
        section if its aggregate outstanding investment in the 
        capital stock, obligations, or other securities of 
        service corporations and subsidiaries thereof * * * 
        would not exceed thereupon six (6%) percent of the 
        association's assets.757

    According to James Clark, the Examiner-in-Charge of the 
1986 Federal Home Loan Bank Board (``FHLBB'') examination of 
Madison Guaranty,758 the purpose of the direct investment 
rule was ``[t]o limit the amount of risk that Madison Guaranty 
or any Arkansas thrift could take. Direct investments in 
service corporations or in property are considered to be more 
risky than just lending on property.'' 759
    The FHLBB's May 8, 1986 examination report on Madison 
Guaranty sharply criticized the purchase of Castle Grande as 
having been structured to circumvent the direct investment 
rule:

          Ward apparently warehoused this land to reduce 
        Madison Financial's investment and the attendant 
        borrowing from Madison Guaranty. In this way, 
        limitations on Madison Guaranty's investment in its 
        Service Corporation are avoided * * *. By using this 
        circuitous route, additional Madison Guaranty 
        investment in Madison Financial was disguised as a loan 
        to Ward.760

    In a recent interview with the FDIC's Office of Inspector 
General, Mr. Clark stressed that ``had MGSL purchased Castle 
Grande directly, they would have exceeded their direct 
investment limit.'' 761 In hearings before the Special 
Committee, Mr. Clark expressed the view that Mr. Ward was a 
``straw purchaser,'' 762 or someone ``who obtains legal 
title to a property without having any actual financial 
interest in the property simply as a means to hide the true 
ownership of the property.'' 763 Mr. Clark also explained 
that as a federal examiner he was concerned about the state 
direct investment rule because ``internal FHLBB procedures 
called on an institution to be in compliance with state 
regulations'' and ``violating the state regulation would mean 
that the institution was not operating safely and soundly.'' 
764
    Others have confirmed that the purchase of Castle Grande 
was structured to evade the direct investment rule. Don Denton, 
Madison Guaranty's Chief Lending Officer, testified in the 
McDougal trial that ``[t]here was a limitation on the amount of 
investment that Madison Financial Corp. could make, so Madison 
took the amount it could legally take and the balance of the 
acquisition was taken by Seth Ward.'' 765 And in a recent 
interview, Mr. Denton ``said that it was his understanding that 
Ward was acting as a `nominee' purchaser in the acquisition of 
the IDC property, acting on behalf of the institution and 
carrying the property at no risk.'' 766 In a deposition 
taken in connection with the Ward v. Madison case, Madison 
Guaranty's CEO, John Latham testified that the purchase was 
divided between Madison Financial and Mr. Ward to escape the 
direct investment rule.767
    In sum, the Special Committee finds that substantial 
evidence demonstrates that the purchase of the Castle Grande 
property was a fraudulent transaction that violated the direct 
investment rule and involved the use of Mr. Ward as straw 
man.23 Mr. Ward testified to the Special Committee that he 
had no knowledge of the limitation on direct investment at the 
time of the Castle Grande purchase or that limitation dictated 
the structure of the transaction.768 That testimony, 
however, is contrary to a statement that Mr. Ward made to 
investigators working for the Pillsbury law firm. An April 29, 
1994 interview reflects that ``Ward indicated with respect to 
Castle Grand [sic] that he understood when he purchased the 
property that the money was being loaned to him and the 
property purchased in his name because of a limitation on 
Madison Financial Corporation's investments.'' 769
---------------------------------------------------------------------------
    \23\ The Pillsbury law firm reached the conclusion that ``a court 
might hold that the acquisition, as structured, was fraudulent,'' and 
noted that ``the use of Seth Ward as a straw has some of the earmarks 
of a fraudulent or intentional attempt to violate the law.'' 2/6/96 
Pillsbury Report pp. 142, 146.
---------------------------------------------------------------------------
    Moreover, Webster Hubbell, Mr. Ward's son-in-law--with whom 
Mr. Ward talked about business constantly770--has stated 
that he was aware in September 1985 ``based on what Mr. Ward 
told me'' was that ``Madison had limits on what it could own in 
its own name, and so Mr. Ward was going to own part of it until 
it could be sold.'' 771 In another interview, Mr. Hubbell 
indicated that Mr. Ward may have told him that there was a 
regulatory limit on what Madison could purchase.772
    Finally, in a December 1986 interview of James McDougal 
conducted by the Memphis, Tennessee law firm Borod & Huggins 
(which had been retained as special counsel by Madison 
Guaranty's Board of Directors), McDougal indicated that 
``Madison Financial took the property south of 145th Street and 
Ward took the property north of 145th Street. This split was 
done because the entire project would have been beyond the 
capacity of Madison Financial due to bank board regulations.'' 
773 It seems likely that if Mr. McDougal knew about the 
limiting regulation he communicated this to Mr. Ward.
    The sham perpetrated in connection with Castle Grande did 
not end with the purchase of the property in the fall of 1985. 
In subsequent months, the property was sold in a series of 
transactions.774 In most cases, the property was sold to 
Madison insiders and friends of the McDougals with 100% Madison 
financing. Because many of these loans were not repaid, Madison 
Guaranty suffered large financial losses. These losses were 
passed on to the American taxpayer after the institution's 
failure. The RTC estimated that Castle Grande caused losses in 
excess of $3.8 million.775
    Under his agreement with Madison Financial, Seth Ward 
reaped sizable commissions on all Castle Grande sales, which 
ultimately totalled over $300,000.776 The last of these 
sales took place in late February 1986, when 486 acres were 
sold to former Senator J.W. Fulbright for $77,600, and the 
Castle Grande sewer and water utility was sold to a company 
owned by Jim Guy Tucker and R.D. Randolph for $1.2 
million.777 After these sales, there remained only two 
parcels, both owned by Mr. Ward. One of these was tracts 27 and 
28 of Holman Acres.778
    According to Don Denton, after February 28, 1986, Ward 
began to demand his commissions for Castle Grande sales but 
Madison Guaranty lacked ready funds to pay him.779 It 
seems likely that an even greater obstacle to the payment of 
the commissions was the presence of federal savings & loan 
regulators, who commenced their examination of Madison Guaranty 
and moved into its offices on or around March 4, 1986.780 
Indeed, Mr. Latham testified in the Ward v. Madison trial that 
the presence of the examiners was a concern in this 
regard.781
    As a result of these difficulties, Madison Guaranty, 
Madison Financial, and Seth Ward executed a series of notes and 
loan transactions. On March 31, 1986, Madison Guaranty loaned 
$400,000 to Mr. Ward.782 Notably, the loan was secured by 
the mortgage on the Holman Acres property. Mr. Ward returned 
$100,000 within a week or so, leaving him with 
$300,000.783 Then, on April 7, 1986, MFC gave--but did not 
fund--two promissory notes to Seth Ward, one for $300,000, the 
other for $70,943.784
    According to Mr. Denton, the exchange of these offsetting 
notes was intended to pay Mr. Ward his commissions.785 
That is, the $400,000 loan (less the $100,000 that was 
returned) satisfied the commissions and the notes from Madison 
Financial offset any obligation by Mr. Ward to repay that loan. 
Similarly, in the Ward trial, Mr. Ward testified that the 
$370,943 in notes was intended to document for the regulators 
his entitlement to commissions.786 24
---------------------------------------------------------------------------
    \24\ At trial, Mr. Ward took the position that the notes worth 
$370,943 were evidence of his entitlement to unpaid commissions, but he 
denied that the $400,000 loan was related to any commissions. That 
loan, he maintained, was separate and fully discharged when he 
quitclaimed the property securing the mortgage--Holman Acres--back to 
Madison. 12/28/95 Pillsbury Report pp. 31-32.
---------------------------------------------------------------------------
    In September 1987, after he had a falling out with Mr. 
McDougal, Mr. Ward filed suit against Madison Guaranty claiming 
that he was entitled to collect unpaid commissions on the sale 
of Castle Grande property.787 He was represented in that 
action by Alston Jennings, a prominent local attorney in the 
Little Rock law firm of Wright, Lindsey & Jennings.788
    The Ward v. Madison case is significant because the meaning 
of several documents bearing upon the Castle Grande 
transaction, including the May 1 option drafted by Mrs. 
Clinton, was disputed at the trial. Specifically, Mr. Latham, 
testifying for the defense, took the position that the option 
was related to Mr. Ward's unpaid commissions.789 Mr. Ward 
maintained at the trial that the option had nothing to do with 
his commissions and claimed that Madison Financial had simply 
wanted the right to purchase Holman Acres from him.790
    The jury returned a verdict in Mr. Ward's favor and awarded 
him over $391,000.791 In 1993, however, Mr. Ward and the 
RTC as the successor to Madison Guaranty reached a settlement 
under which Mr. Ward agreed to pay $325,000 to the RTC in 
exchange for a release from all liability.792
    Prior to the trial, Madison Guaranty had suggested in a 
document filed with the court that the underlying transactions 
as to which Mr. Ward claimed an entitlement to commissions were 
questionable. Specifically, Madison Guaranty indicated that it 
might argue that it did not owe any commissions to Mr. Ward 
because of his own ``unclean hands.'' By way of explanation, 
Madison Guaranty stated in its court filing: ``With knowledge, 
the Plaintiff [Mr. Ward] agreed to purchase a section of the 
Undeveloped Property in his name so that Madison Financial 
Corporation would not exceed its investment limitation, imposed 
by the FHLBB, of 6% of the assets of the corporation. In 
effect, Plaintiff acted as a straw man for the real estate 
purchase for the mutual benefit of himself, Jim McDougal and 
other individuals.'' No witness at the trial, however, 
suggested that Mr. Ward's commissions were ill-gotten and 
Madison Guaranty's lawyers made no such argument.
            C. The September 24, 1985 Letters
    The essential terms of the initial agreement between Mr. 
McDougal and Mr. Ward as described above were set forth in a 
letter dated September 24, 1985 from Seth Ward to Jim 
McDougal.793 Two versions of this document exist. 
According to Seth Ward, one of the letters was typed on 
September 24, 1985, by Susan Strayhorn, James McDougal's 
secretary, and the other version was prepared sometime 
thereafter and then backdated.794 Ms. Strayhorn agreed 
that she typed the first letter at Mr. Ward's 
direction.795 Mr. Ward has testified that he had the 
backdated letter prepared or prepared it himself.796
    The major difference between the two versions of the 
September 24 letter concerns Madison Financial's right to 
purchase Seth Ward's property. While the original letter gave 
Madison Financial the right to purchase all of Mr. Ward's 
property, the backdated letter excluded from Madison's reach a 
22\1/2\ acre parcel known as Holman Acres. A detailed legal 
description of the 22\1/2\ acre parcel--identified as ``Part of 
Tracts 27 & 28, Holman Acres, Pulaski County, Arkansas''--was 
attached as an addendum to the letter.
    Although Seth Ward testified that the backdated version of 
the September 24, 1985 letter was prepared within several weeks 
or a month of that date,797 there is substantial evidence 
that it was created much later than that. Former Madison 
President John Latham has testified that he had never seen the 
letter until Mr. Ward brought it to his attention in May or 
June of 1986.798 Ms. Strayhorn testified that the document 
was not in the S & L's files, and that she had never seen it 
before 1987.799 Don Denton, who initially refused to state 
whether he had any knowledge about the backdating of the letter 
for fear of ``digging a hole for myself'', later said that 
``I'll go so far as to say [it was] drawn after July, 1986.'' 
800 And James Clark, lead investigator for the 1986 
examination of Madison Guaranty, has stated that he does not 
recall ever seeing the document during the time he was at the 
savings and loan.801
            D. The May 1 Option Disguises the Questionable Payments to 
                    Seth Ward
    While Mr. Clark examining Madison Guaranty, Madison 
insiders did not disclose to him that commissions might be owed 
to Seth Ward, and Mr. Clark was not aware of this issue until 
he discovered by chance the original September 24, 1985 letter 
in a desk drawer.802 The letter was the first indication 
Mr. Clark had that Seth Ward might be owed commissions.803
    Mr. Clark also saw the March 31 and April 7 notes during 
the examination and became concerned that there might be a 
connection between the notes.804 Specifically, his 
suspicion was that the crossing notes might represent a payment 
to Mr. Ward and thus constitute ``independent financing of MFC 
by Madison Guaranty'' 805 Such ``independent financing'' 
would raise the concerns underlying the direct investment 
limitation.806
    When Mr. Clark inquired about the March 31 and April 7 
notes, however, he was told that they were unrelated, 
``completely separate deals.'' 807 Instead, the April 7 
notes--evidencing the $373,000 debt from Madison Financial to 
Mr. Ward--were said to be related to a plan by Madison 
Financial to purchase Holman Acres from Mr. Ward. The 
transaction was to be accomplished through an as yet undrafted 
option agreement which would replace the notes. The notes, Mr. 
Clark was told, existed simply to guarantee that Madison 
Financial would go through with the deal pending preparation of 
the option and would be canceled after the exercise of the 
option.808
    According to Mr. Clark, if he had known that the exchange 
of notes was a device to pay Mr. Ward's commissions--and 
thereby transfer money from the savings and loan to the service 
corporation--it would have affected his examination in several 
respects. Mr. Clark said ``that if he and known about the 
commissions, at the very least he would have called it a direct 
investment by Madison Guaranty into MFC because MGSL would be 
funding MFC's obligations, and he would have been asking what 
Ward did to earn the commissions.'' 809 He also expressed 
the view that ``the commissions would [have] been a further 
indication that Ward was a `straw' buyer in the IDC purchase'' 
and that ``if the loan had been made to pay commissions, he 
would have considered the loan `deceptive on its face. ''' 
810
    An option was prepared on May 1, 1986, and entitled 
``Option To Purchase Real Estate.'' 25 811 Under the May 1 
option--which was executed by Mr. Ward and Mr. Latham--Madison 
Financial had the right to purchase tracts 27 and 28 of Holman 
Acres from Mr. Ward for $400,000 and Mr. Ward was to be paid 
$35,000 for extending this option to Madison Financial.812
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    \25\ As with the September 24, 1985 letter, there is a second 
version of the May 1 option. (RTC Document SW1-070--SW1-74). The only 
substantive difference between the two is that the property at issue in 
the second option is not Holman Acres, but a 6.67 acre parcel of land 
containing the Levi Strauss Building. (RTC Document SW1-070-SW1-074).
---------------------------------------------------------------------------
    That Mrs. Clinton was involved in the creation of this 
option is indisputable. The Rose Law Firm billing records 
reflect that on May 1, 1986, Mrs. Clinton billed Madison 
Guaranty for two hours of time for the following work: 
``Conference with Seth Ward; telephone conference with Seth 
Ward regarding option; telephone conference with Mike Shauffle; 
prepare option.'' 813 Furthermore, there appears in the 
lower left hand corner of the option a word processing code 
(``0190g'') that, according to the Rose Law Firm's counsel, 
indicates the document was created at the Rose Law Firm by or 
for Mrs. Clinton.814 Mrs. Clinton, however, has sworn that 
she has no recollection of the option agreement or the 
transaction it reflects.815
    According to Mr. Clark, the May 1, 1986 option prepared by 
Mrs. Clinton was used to disguise the fact that the crossing 
notes between Seth Ward, Madison Guaranty, and Madison 
Financial were designed to funnel commissions to Mr. Ward. He 
stated that ``based upon what he has now learned the option was 
created `in order to conceal the connection--whatever it was--
between''' the notes.816
    When Mrs. Clinton prepared the May 1 option, she may have 
known about the relationship involving the May 1 option and its 
use to disguise the fact that Madison Guaranty had paid Mr. 
Ward's commissions. A message slip produced by Mr. Denton 
reflects that Mrs. Clinton called him from the Rose Law Firm on 
April 7, 1986.817 Mr. Denton returned the call and spoke 
to Mrs. Clinton.818 The subject of the conversation was 
the notes between Mr. Ward, Madison Financial, and Madison 
Guaranty.819 Mr. Denton had the sense that Mrs. Clinton 
was preparing a $400,000 note involving Madison Financial and 
Mr. Ward and he told her that such a note had already been 
prepared and executed.820 Mrs. Clinton asked him to send 
whatever notes there were to her and Mr. Denton did so, sending 
copies of the notes by courier.821
    Mr. Denton recalled that during the conversation he 
indicated to Mrs. Clinton that a problem might exist with 
respect to the Ward notes because ``they constituted in effect 
a parent entity fulfilling the obligation of a subsidiary.'' 
822 Mrs. Clinton, however, ``summarily dismissed'' that 
concern in a way that he took to mean that ``he would take care 
of savings and loan matters, and she would take care of legal 
matters.'' 823
    On June 13, 1996, the same day that the Special Committee 
received Mr. Denton's testimony, the Committee in a letter 
addressed to Mr. Kendall, Mrs. Clinton's counsel, requested 
that the First Lady attempt to refresh her recollection 
regarding the matters discussed by Mr. Denton and inform the 
Committee of what she recalls about them.824 The Special 
Committee's request was made in response to an earlier offer by 
Mrs. Clinton through a White House spokesman to answer in 
writing questions regarding the subject of the Special 
Committee's work.
    On June 17, 1996 the Special Committee received an 
affidavit from Mrs. Clinton accompanied by a letter from Mr. 
Kendall. In the affidavit, Mrs. Clinton gave no indication as 
to her recollection regarding the subject matter of Mr. 
Denton's testimony. Instead, she simply requested that Special 
Committee refer to Mr. Kendall's letter ``addressing certain 
allegations recently made by Mr. Don Denton.'' 825 In his 
letter, Mr. Kendall maintained that Mr. Denton's recollection 
is ``wholly unreliable'' but gave no indication as to the 
recollection of the First Lady.826 In sum, the First Lady 
has neither confirmed nor denied Mr. Denton's testimony.
            E. Mrs. Clinton's previously unknown legal work for 
                    questionable Castle Grande transactions
     Prior to the discovery of the Rose Law Firm billing 
records in the White House Residence, the nature and extent of 
Mrs. Clinton's work on Castle Grande matters was virtually 
unknown. Indeed, Patricia Black, former Counsel to the RTC 
Office of Inspector General, testified in 1995 that ``[w]e have 
no evidence that she [Hillary Clinton] worked on Castle 
Grande.'' 827 The evidence obtained in the course of the 
Special Committee's investigation now establishes that Mrs. 
Clinton had substantial direct involvement in Castle Grande.
    From the billing records, the Special Committee learned 
that, over a seven month period from late 1984 to mid 1985, 
Mrs. Clinton billed almost 30 hours of time to Castle Grande 
related matters while representing Madison Guaranty--more than 
any other Rose Law Firm attorney; 828 that she had 15 
conferences with Seth Ward, the central figure in the 
transaction--seven of them occurring within 18 days in 
December, 1985; 829 that she had a telephone conference 
with Don Denton on April 7, 1986; 830 and that she drafted 
an option agreement between Seth Ward and Madison Financial 
Corporation on May 1, 1986.831 Because Mrs. Clinton has no 
recollection of any of these events, however, the Special 
Committee's understanding was limited. But just days before the 
conclusion of its investigation, the Special Committee obtained 
new evidence illuminating Mrs. Clinton's Castle Grande-related 
work on April 7 and May 1, 1986.
    From Jim Clark, the FHLBB examiner in charge of the 1986 
examination of Madison Guaranty, the Special Committee now 
knows that the option drafted by Mrs. Clinton, in his view, 
``was created in order to conceal'' a direct investment in 
Madison Financial through the payment of questionable 
commissions to Seth Ward.
    From Don Denton, Madison's former chief lending officer, 
the Special Committee has learned that apparently on April 7 
Mrs. Clinton ``summarily dismissed'' concerns he expressed to 
her by Mr. Denton about questionable notes involving Seth 
Ward--notes she apparently was set to prepare had they not 
already been drafted. Mr. Denton understood from Mrs. Clinton's 
response that she was saying he should ``take care of savings 
and loan matters and she would take care of legal matters.''
    The Rose billing records also suggest that Mrs. Clinton 
learned of the direct investment rule by June 1985. In a letter 
dated June 17, 1985, Richard Massey, then a Rose associate 
working with Mrs. Clinton, wrote a letter to officials of the 
Arkansas Securities Commission (``ASC'') regarding Madison 
Guaranty's application to engage in brokerage 
activities.832 The letter was a response to a May 22, 1985 
ASC memorandum about the same matter in which the ASC discusses 
the 6% ``assets limitation which is set forth in Rule V(C),'' 
833 i.e., the direct investment rule found in Rule V(C) of 
the Rules and Regulations of the Arkansas Savings and Loan 
Association Board (``ASLAB''). Mr. Massey's June 17 letter 
likewise refers to ``the limitation set forth in Rule V(C).'' 
834 It concludes by saying, ``[w]ith this response, 
Madison hereby amends the Application.'' 835 The billing 
records indicate that on June 17, 1985, Mr. Massey billed time 
to ``draft/revise response to ASLAB application,'' 836 and 
Mrs. Clinton billed time to ``review applications amendments.'' 
837 Mrs. Clinton would have become aware of the direct 
investment rule through this review of Mr. Massey's letter.
    The use to which Mrs. Clinton's work product was put raises 
questions about her knowledge of the state of affairs at 
Madison Guaranty. The billing records suggest that Mrs. Clinton 
should have been aware of the rule against excessive direct 
investments. Furthermore, from her conversation with Don 
Denton, Mrs. Clinton apparently was put on notice--prior to the 
drafting of the option--that Mr. Ward was taking part at 
Madison in transactions that were at least questionable if not 
fraudulent. Unless she was engaged in conscious avoidance, Mrs. 
Clinton should have known these facts when she drafted the May 
1 option, which concealed from the regulators the very 
transactions Mr. Denton warned her about.
    In 1995, when asked about her knowledge of Castle Grande 
and several other land developments, Mrs. Clinton stated, under 
oath, ``I do not believe I knew anything about any of these 
real estate parcels and projects.'' 838
    The billing records, however, revealed that Mrs. Clinton 
performed a substantial amount of legal work for Madison 
Guaranty related to the Castle Grande property and billed this 
time to a matter called ``I.D.C.'' The records indicated, for 
example, that Mrs. Clinton had more than a dozen conferences 
with Seth Ward. Mrs. Clinton's claim that she did not know 
anything about Castle Grande appears contrary to the billing 
records.
    In response to a set of supplemental interrogatories 
propounded by the RTC in 1996, Mrs. Clinton sought to explain 
her prior blanket denial of knowledge of Castle Grande by 
saying that she thought of the larger property as ``IDC'' and a 
small portion of the property as Castle Grande Estates.

          In the RTC's interrogatories which I answer on May 
        24, 1995, the term ``Castle Grande'' was not defined, 
        and we construed this reference to be to Castle Grande 
        Estates, a mobile home development which I now 
        understand to be a portion of the 1050-acre tract. In 
        these responses to the Supplemental Interrogatories, I 
        will refer to the entire tract not as Castle Grande but 
        as the ``IDC property'', because ``IDC'' was the 
        billing name for work involving that property at the 
        Rose Law Firm.839

    Mrs. Clinton's attempt to claim she had misunderstood the 
name of the project appears contrary to a wealth of evidence to 
the effect that the entire 1000+ acre tract was known as 
``Castle Grande.'' That is the term by which Madison Guaranty 
officials and federal regulators commonly referred to the 
parcel.
    The minutes of a MFC Board of Directors meeting dated 
September 12, 1985, reflect that the Board discussed the 
purchase of 400 acres of land on 145th Street for $600,000 and 
that ``[a]fter a lengthy discussion, the Board unanimously 
approved the purchase of this development to be known as Castle 
Grande Estates.'' 840 Consistent with these minutes, Don 
Denton testified at the McDougal trial that the property ``was 
renamed Castle Grande shortly after the acquisition'' from 
IDC.841 At the same trial, Mr. McDougal said that Castle 
Grande was the name of ``about a thousand acres'' of 
property.842 And Susan McDougal, denying any distinction 
between Castle Grande and IDC, has stated that ``[i]t was 
always the same thing. As far as I know, IDC and Castle Grande 
were one and the same.'' 843
    Two former FHLBB examiners who participated in the 1986 
examination of Madison and scrutinized the Castle Grande 
transaction, James Clark and Dawn Pulcer, testified that 
Madison insiders referred to the whole project as Castle 
Grande.844
    Finally, Davis Fitzhugh, a former Madison Financial Vice 
President, testified that he understood all of the property 
south of 145th Street to be Castle Grande.845 But Mr. 
Fitzhugh agreed that the $50,000 check he used to make the down 
payment on his purchase of the Levi Strauss building--which is 
located north of 145th Street--carried the notation, ``For: 
sale of bldg C Castle Grande.'' 846
    In the summer of 1988, Mrs. Clinton ordered the destruction 
of her files related to Castle Grande. A July 21, 1988 
memorandum from Mary Russell to Mrs. Clinton reflects that the 
Rose Law Firm was in the process of making retention decisions 
with respect to the files of closed cases.847 The 
memorandum gave Mrs. Clinton three options with regard to any 
file: keep it intact, microfilm and then destroy it, or destroy 
it without microfilming. The memorandum asked for a response by 
August 9, 1988.
    Mrs. Clinton requested destruction, without microfilming, 
of four Madison Guaranty files, including two related 
specifically to the ``I.D.C.'' matter and the ``Ward Option.'' 
The Special Committee finds it troubling that in July or August 
of 1988 Mrs. Clinton would order the destruction of these 
files. Because the Ward v. Madison case was ongoing at the 
time, Mrs. Clinton might well have destroyed evidence relevant 
to the case. Indeed, the May 1 option drafted by Mrs. Clinton 
was an important piece of evidence in the trial. It seems 
reasonable to assume, moreover, that Mrs. Clinton was aware of 
the Ward v. Madison litigation, involving as it did her former 
clients. Moreover, Webster Hubbell, her law partner and close 
friend, attended at least some of the trial.848
            F. Webster Hubbell's mysterious role in structuring 
                    questionable Castle Grande transactions
    It is unclear the extent of the involvement Webster 
Hubbell, Seth Ward's son-in-law, with respect to providing 
legal advice to Mr. Ward relating to the Castle Grande 
transaction. Mr. Hubbell's statements on this matter are 
contradictory to each other, contradictory to the testimony of 
other witnesses and contradictory to documentary evidence. His 
statements also defy common sense. Even Mr. McDougal's 
secretary, Ms. Strayhorn, expressed surprise when told that Mr. 
Hubbell did not prepare the May 1 option for his father-in-
law.849 In a hearing before the Special Committee she 
asked, ``Why wouldn't he [Ward] have his son-in-law prepare the 
document?'' 850
    Mr. Hubbell was in frequent contact with Mr. Ward. Mr. 
Hubbell said that Mr. Ward and he talked about business 
constantly.851 Mr. Hubbell testified that Mr. Ward 
``talked to [Hubbell] a lot about deals,'' and ``you couldn't 
stop him basically'' from talking about business.852
    With respect to the Castle Grande transaction, Mr. Hubbell 
altered his story with respect to when he learned that Mr. Ward 
was a nominee purchaser for Madison Financial. First, Mr. 
Hubbell testified that he understood in September 1985 based on 
what Mr. Ward told him that ``Madison had limits on what it 
could own in its own name, and so Mr. Ward was going to own 
part of it until it could be sold.'' 853 Also, in an 
interview with the RTC Inspector General, Mr. Hubbell ``said 
that Ward told him that he was negotiating on behalf of Madison 
to buy the IDC property, which would then be split up between 
Madison and Ward.'' 854 In testimony before the Special 
Committee, however, Mr. Hubbell repeatedly testified that he 
was not aware of the deal between Madison and Ward until after 
the closing in early October 1985.8556
    Mr. Hubbell was reluctant to answer questions regarding his 
own view of the legality of Mr. Ward's role in the purchase of 
the IDC property. When asked if he viewed it as a way to evade 
a regulatory restriction, Mr. Hubbell answered, ``I have never 
represented an S&L. I don't know whether it's illegal or not.'' 
856 When he was asked if he considered this transaction as 
a classic parking or warehousing transaction, Mr. Hubbell 
answered, ``I think of parking and warehousing a little bit 
differently.'' 857 When asked if he thought Mr. Ward could 
be considered a ``straw man,'' Mr. Hubbell testified, ``I 
didn't give it any consideration, you know. `Straw man' means, 
to me, somebody who you clear title through.'' 858
    Mr. Hubbell has denied advising Mr. Ward with respect to 
the transaction.859 He specifically denied preparing the 
backdated September 24, 1985 letter or advising Mr. Ward with 
respect to its preparation.860 Mr. Hubbell claimed that 
although he was aware of his father-in-law's deal with Mr. 
McDougal and discussed it with Mr. Ward, he does not recall 
discussing the September 24th letter.861 Mr. Hubbell 
claimed, ``I recall discussing the nature of his deal with 
Madison, but not the letter, no.'' 862
    There is evidence, however, that Mr. Hubbell may have 
prepared a backdated September 24, 1985 letter, which was found 
in his files at the Rose Law Firm.863 Martha Patton, Mr. 
Hubbell's secretary at the Rose Law Firm, has stated that 
although she does not recall typing the letter she believes she 
did because the type is similar to that of the IBM typewriter 
she used and the second page of the document is formatted in 
the style she used while a Rose secretary.864 She added 
that the letter appears to be ``her style of typing.'' 865 
Mr. Hubbell testified that ``it's certainly possible'' that his 
secretary typed the agreement.866 26 And Alston Jennings 
testified that Mr. Ward told him that Mr. Hubbell's secretary 
had typed the letter.867
---------------------------------------------------------------------------
    \26\ Mr. Hubbell stated that ``I remember that Mr. Ward would come 
to my office and on occasion, ask my secretary to type letters that he 
had handwritten or had been drafted somewhere else.'' Hubbell, 2/7/96 
Hrg. p. 11.
---------------------------------------------------------------------------
    There is also some indication that Mr. Hubbell was supposed 
to prepare the May 1, 1986 option agreement. Handwritten notes 
taken by James Clark, the examiner in charge of the 1986 
examination of Madison Guaranty, reflect the following:

          MFC Commitment to buy land at corner of Route 145 * * 
        *
          Option will be prepared, atty out of town (Hubbell) 
        to replace note.868

The note strongly suggests a hitherto unknown involvement in 
Castle Grande by Mr. Hubbell.
    Mr. Clark has stated that he believes that the information 
reflected in the above note came from former Madison chief loan 
officer Don Denton.869 Although Mr. Denton does not 
believe that he was the source of information recorded by Mr. 
Clark, Mr. Denton has implied at other times that Mr. Hubbell 
advised Mr. Ward on the Castle Grande matter.870 For 
example, Mr. Denton believed that the wording on the note dated 
October 15, 1985 stating that Mr. Ward was not personally 
responsible for the note was prepared by Mr. Hubbell.871 
Also, Mr. Denton believed that he had some conversations with 
Mr. Hubbell about the February 28, 1996 transaction.872
    Furthermore, Mr. Denton implied in his recent interview 
that Mr. Hubbell was involved in the March 31 and April 7 notes 
between Mr. Ward, Madison Guaranty, and Madison Financial. He 
stated that he was ``reasonably confident'' that when Mrs. 
Clinton called him regarding these notes she was acting on Mr. 
Hubbell's behalf.873 Mr. Denton would not testify as to 
whether he ever dealt with Mr. Hubbell on the matter of the 
notes.874 He also declined to answer whether he had 
visited Mr. Hubbell's office at Rose regarding Mr. Ward or 
Madison Guaranty.875
    Mr. Hubbell has not provided complete and accurate 
statements about his legal representation on other occasions. 
He did so in 1989 when the Rose Law Firm was retained to 
represent the FDIC in the case against Madison Guaranty's 
former accountants.876 April Breslaw, the RTC attorney who 
hired the Rose Law Firm for the Frost litigation, testified 
that when she asked Mr. Hubbell about Mr. Ward, Mr. Hubbell 
informed her that he did not represent Mr. Ward. He also told 
her ``that his relationship with his father-in-law was not 
close.'' 877 Ms. Breslaw was asked whether she believed 
Mr. Hubbell lied to her when she hired him, and she replied, 
``Yes, sir. I do.'' 878 Even Mr. Hubbell admitted that he 
did not disclose to Ms. Breslaw his knowledge of the IDC 
transactions.879
    Mr. Hubbell did not provide complete and accurate 
statements about his legal representation again in 1993 when he 
failed to disclose information he had learned the previous year 
from reading the Rose Law Firm billing records to FDIC 
investigators looking into the 1989 retention of Rose.880 
In 1993, FDIC investigators reported that in 1985, the Rose Law 
Firm represented Madison Guaranty before the Arkansas 
Securities Department on two matters.881 Mr. Hubbell 
admitted, however, that he was aware of additional matters on 
which the Rose firm had worked, including the IDC closing and 
the option agreement, on behalf of Madison, and that he did not 
disclose it to investigators.882
    In view of the foregoing, the Special Committee has no 
confidence in Mr. Hubbell's claim that he did not advise Mr. 
Ward with respect to Castle Grande.

PART III. Governor Clinton's Questionable Relationship With Dan Lasater

I. Governor Clinton's Close Personal Relationship With Dan Lasater

    After Governor Clinton was defeated for re-election in 
1980, he met with Dan Lasater, George Locke and David Collins, 
Mr. Lasater's partners 27 in Collins, Locke & Lasater, 
28 later changed to Lasater & Co., a newly formed 
investment bank. 883 According to Mr. Locke: ``[I]t was a 
short time after the election, in fact I want to think maybe 
the next day * * * [H]e didn't take a day off.'' 884 Mr. 
Clinton wanted to see ``if Dan would support him in his efforts 
to regain the governor's seat.'' 885
---------------------------------------------------------------------------
    \27\ All three were subsequently arrested and convicted for 
felonies involving drug use and distribution.
    \28\ Mr. Lasater testified that he was first introduced to 
President Clinton by the President's mother Virginia Kelly at Oaklawn 
Racing Park in Hot Springs Arkansas in the 1970's. Lasater, 5/1/96 Hrg. 
p. 10.
---------------------------------------------------------------------------
    The meeting lasted a ``couple'' of hours, and the main 
topic of conversation was Mr. Clinton's plan to run for 
governor.886 Mr. Locke believed that Mr. Clinton 
approached Mr. Lasater because Stephens, Inc., Little Rock's 
largest financial firm, had supported Mr. Clinton's opponent, 
Frank White.887 Mr. Lasater claimed that he did not recall 
the meeting.888
    In 1983, Roger Clinton, the Governor's brother, went to 
work for Mr. Lasater at his horse racing farm in Ocala, 
Florida.889 Mr. Lasater first met Roger Clinton when Roger 
was working as a musician in Hot Springs,890 sometime in 
the late 1970's or early 1980's,891 and that either 
Governor Clinton or his mother, Virginia Kelly, asked Mr. 
Lasater to hire Roger.892 In a 1986 FBI interview, 
however, Mr. Lasater stated that Governor Clinton, as opposed 
to Mrs. Kelly, asked him to hire Roger.893 Similarly, 
White House Deputy Director of Personnel Patsy Thomasson, Mr. 
Lasater's long-time friend and associate,894 testified 
that sometime in 1982 or 1983 Governor Clinton asked Mr. 
Lasater to give Roger Clinton a job.895
    Mr. Lasater supported Roger Clinton when he had trouble 
paying a drug-related debt. In late February 1985, Roger 
Clinton was a witness at a friend's cocaine distribution trial 
in which he testified that Mr. Lasater, after learning of Roger 
Clinton's drug debts, loaned him $8,000 to retire them.896 
Ms. Thomasson confirmed that Mr. Lasater provided Roger Clinton 
with a check for an amount ``between $5,000 and $10,0000,'' 
897 and Mr. Lasater admitted that he loaned Roger Clinton 
$8,000 to pay a debt to drug dealers.898 According to Mr. 
Lasater:

          Roger came to me and said that he owed a drug dealer 
        $8,000, and that the drug dealer had threatened him, 
        his mother and his brother [Governor Clinton] if they 
        didn't pay and wanted to know if I would loan him the 
        money, and I did.899

    Mr. Drake testified that Mr. Lasater provided him with 
cocaine while he was an employee of Lasater & Company, and that 
he believed that Mr. Lasater used cocaine as a tool to 
manipulate people.900 Mr. Lasater admitted before the 
Special Committee that he did give drugs to his 
employees.901
    On December 12, 1986, Mr. Lasater entered a guilty plea to 
the felony of ``knowingly and intentionally conspiring to 
possess and to distribute cocaine.'' 902 He served a 30-
month sentence in prison.903
    Mr. Lasater claimed ``that it has never been alleged that I 
committed any fraudulent act or lied in the course of any 
investigation.'' 904 A federal bankruptcy judge, however, 
found, in open court, that Mr. Lasater lied under oath during 
the bankruptcy trial of his former business partner, George 
Locke, and also found that Mr. Lasater was involved in a 
conspiracy to defraud Mr. Locke's creditors.905 In January 
1985, a Little Rock paper reported the judge's 
findings.906 During the same period of time, Mr. Lasater 
was attempting to secure the bond underwriting for the Arkansas 
State Police Radio bond financing.907 When asked about 
these findings, Mr. Lasater told the Special Committee, ``I had 
forgotten about that.'' 908 Mr. Lasater also admitted that 
he did not disclose to the state police his involvement in the 
conspiracy.909
     In 1984, Mr. Lasater sponsored a fundraiser for Governor 
Clinton in 1984.910 This fundraiser, held for over 100 
people in Little Rock, raised approximately $50,000.911 
Mr. Lasater testified that he and his family contributed a 
total of $8,000 to Governor Clinton in 1984, and that he also 
bought a table at a fundraiser for the Governor that cost 
between $6,000 and $12,000.912 Mr. Lasater believed that 
in 1982 he only contributed between $4,000 and $5,000 to Mr. 
Clinton.913 An affidavit that was supplied to the FDIC by 
Mrs. Clinton's attorney, David Kendall, identified at least 
$8,000 in contributions that were made by Mr. Lasater and 
Lasater controlled entities in 1982.914 Mr. Kendall's 
affidavit also listed $4,000 in contributions that Mr. Lasater 
and Lasater controlled entities gave to Governor Clinton in 
1985.915 In addition, according to Mr. Lasater, Mr. 
Lasater provided Governor Clinton free use of Lasater owned 
aircraft.916
    Mr. Lasater testified that he saw Governor Clinton only 
infrequently, and that he was ``not a close friend'' of 
Governor Clinton.917 Mr. Lasater claimed that he only 
visited Governor Clinton at the Mansion on two occasions, and 
that they ``were both social events. They weren't one-on-one 
meetings.'' 918 There is evidence to the contrary. 
Arkansas State trooper Barry Spivey has testified that while he 
was assigned to Governor's security unit from 1982-
1984,919 he observed Mr. Lasater visiting Mr. Clinton at 
the Governor's Mansion, and that 920 the Governor went 
``to Dan's a lot. We went down there more than Dan came down 
there I would say.'' 921 Mr. Spivey has testified that he 
normally did not enter Mr. Lasater into the Mansion's security 
logs ``because I knew that he and Bill were friends, that they 
visited socially. I had flown on his plane. I knew that Bill 
spent a lot of time at Dan's office, and that Dan spent time at 
the Mansion.'' 922 According to Trooper Spivey, ``I 
probably saw Dan [at the Mansion] half a dozen times at least. 
And I'm going to say that I took him by his office even more 
than that, just me personally.'' 923 Mr. Spivey has 
testified that he took the Governor to visit Mr. Lasater's 
offices:

          I remember a lot of times taking Bill down to Dan's 
        office and he would jump out and I'd circle and wait 
        until he came back and, or I would go inside and stay 
        in the lobby.924

Mr. Lasater did not recall Governor Clinton visiting the 
Lasater & Co. offices.925

II. Governor Clinton Provides Favors to Dan Lasater

            A. Dan Lasater's special access to Governor Clinton
    Mr. Lasater further claimed that he felt he ``never 
received any special treatment from Governor Clinton or anyone 
on his staff.'' 926 Governor Clinton's staff, however, 
paid attention to recommendations to state board appointment by 
Mr. Lasater.927 For example, the Governor received a list 
of persons 928 recommended by Mr. Lasater and his firm, 
Lasater & Co., for appointment or re-appointment to the 
Arkansas Housing Development Agency (``AHDA'') Board, the 
agency to which Lasater & Co. submitted proposals to 
participate as underwriters in state bond issues.929
    Documentary evidence indicates Mr. Lasater met with 
Governor Clinton. On February 15, 1985, for example, Mr. 
Lasater wrote to Governor Clinton in part to thank him ``for 
the opportunity to sit down and visit with you.'' 930 Mr. 
Lasater admitted that the meeting referred to in the letter is 
``more than likely'' a one-on-one meeting in January or 
February 1985 that he had with the Governor in his office in 
the State Capitol.931 One of the subjects raised in the 
letter deals with discussions held between the Governor and Mr. 
Lasater about the appointment of one of Mr. Lasater's AHDA 
Board candidates, Donald Spears.932
    Mr. Lasater also requested that Lasater & Company be 
advised ``of all financing proposals effecting the state,'' 
prior to public announcement and stated that:

         we would be more comfortable if you would take the 
        opportunity or ask someone on your staff to take the 
        opportunity to appraise me or my staff of any actions 
        by you or your staff prior to any public announcements 
        so that we will not be surprised or in some instances 
        embarrassed because of the announcement.'' 933

    On at least one occasion, Governor Clinton wrote a note to 
Chief of Staff Betsey Wright, Maurice Smith and ``CG,'' on a 
piece of Lasater & Company stationary that appears to state, 
``need to fill their [Lasater & Co.] recs for SEC [Securities 
Commissioner]/ AHDA.'' 934 The Lasater & Co. stationary 
was attached to a written presentation that was prepared by 
Lasater & Co. and EF Hutton for a meeting that they had with 
the Governor on January 10, 1985 at the Legacy Hotel in Little 
Rock.935 An agenda for the meeting listed appointments for 
the Arkansas Securities Commissioner and the Arkansas Housing 
Development Agency as the first two orders of business.936
            B. The Governor's office steers valuable State bond 
                    business to Dan Lasater
    The Special Committee is troubled by documentary and 
testimonial evidence indicating that Governor Clinton's office 
directed board members of the AHDA to award bond underwriting 
contracts to Mr. Lasater's firm, and that the Governor's office 
monitored and assisted Lasater & Co.'s efforts to secure the 
underwriting contract for the $29.2 million bond financing of a 
state police radio system.
    Prior to 1983, Collins, Locke & Lasater did not participate 
as an underwriter for any AHDA bond offerings.937 On 
February 17, 1983, the AHDA Housing Subcommittee selected 
Collins, Locke & Lasater to serve as an underwriter for one of 
the agency's housing bond financing.938 Charles Stout, who 
was Chairman of the agency's board at the time, described the 
circumstances surrounding the inclusion of Collins, Locke & 
Lasater as a member of the AHDA's Single Family Housing 
underwriting team.
    According to Mr. Stout, thirty minutes before an AHDA Board 
meeting, he received a telephone call from Bob Nash, who was 
Governor Clinton's assistant for economic issues:29
---------------------------------------------------------------------------
    \29\ Mr. Nash is currently the Director of the White House 
Personnel Office.

          He was on the governor's staff over there. We had 
        selected underwriters for an issue, and he called over 
        and asked me to cut in Lasater for 15 percent. I said 
        Bob that's not right, the governor's office is not to 
        interfere with this agency. And he said, well, that's 
---------------------------------------------------------------------------
        the way we want it anyway.939

    The Governor's office directive to award Collins, Locke and 
Lasater fifteen percent of the underwriting contract concerned 
Mr. Stout for a number of reasons. He stated that ``he 
[Lasater] was a local underwriter and rather inexperienced, 
that was what I didn't like about it.'' 940 The AHDA had 
also already selected the group of underwriters that it wanted 
to cover the offering in question.941 Mr. Stout had 
difficulty recalling with specificity that the phone call was 
received on February 17, but he did know that Collins, Locke & 
Lasater had not participated as an underwriter for any AHDA 
offerings prior to Mr. Nash's call.942
    Linda Chandler, formerly Linda Trent, then acting executive 
director of AHDA and a Lasater-recommended appointee, testified 
that the Lasater firm had never been a member of an 
underwriting team prior to February 17, and that she had never 
even heard of the firm prior to the firm's inclusion in the 
single family underwriting.943
    Mr. Stout was upset by the instructions from the Governor's 
office to choose the Lasater firm, and he told his fellow Board 
member Mort Hardwicke:30 ``I thought it was wrong for the 
governor's office to tell us how to run our business over 
there.'' 944 Mr. Stout further testified: ``[w]ell the 
governor's office doesn't interfere with the directors of the 
Arkansas Housing Development Agency and tell them what 
underwriter to use. That business is the director's business, 
nobody else's.'' 945
---------------------------------------------------------------------------
    \30\ Mr. Hardwicke was appointed by Governor Clinton to the AHDA 
board, and served from 1980 to 1986 or 1987. Hardwicke, 2/15/96 Dep. p. 
6. Mr. Hardwicke testified that he has been a ``pretty close'' personal 
friend of Bill Clinton since 1974. Hardwicke, 2/15/96 Dep. p. 11.
---------------------------------------------------------------------------
    Mr. Nash's directive had surprised Mr. Stout, and he 
believed that the request threatened the independence of the 
AHDA.946 Mr. Stout was not aware of any previous instances 
where the governor's office had ever inserted itself into the 
underwriting selection process--particularly to tell the board 
``what underwriter to use.'' 947 The request threatened 
the independence of the agency in fulfilling its 
responsibilities.948
    Mr. Stout recognized the significance of Mr. Nash's 
directive, and he asked Mr. Hardwicke to pick up another 
telephone receiver to listen to the call.949 Mr. Hardwicke 
claimed in his deposition that he had no knowledge that the 
Governor's office identified an individual firm that it wanted 
to receive AHDA business.950 When Mr. Hardwicke was 
confronted with Mr. Stout's testimony that he had actually 
listened to the phone conversation that took place between Mr. 
Stout and Mr. Nash, he said that he did not ``recall the 
incident,'' but he did not doubt Mr. Stout's testimony.951 
After Mr. Stout and Mr. Hardwicke got off the phone with Mr. 
Nash, they discussed what Mr. Nash had told Mr. Stout to do and 
decided that they would have to approach each of the board 
members individually and tell them that Mr. Nash had given the 
directive to include the Lasater firm in the 
underwriting.952
    After Mr. Nash told Mr. Stout to ``cut in'' Lasater for 15 
percent of the underwriting for the 1983 Series A $26,365,000 
Single Family issue that was discussed during the February 17 
Housing Sub-Committee meeting, Mr. Stout informed him that the 
board would comply with the governor's office's 
request.953 In fact, the minutes of the Subcommittee show 
that Collins, Locke & Lasater received 13\1/3\ percent of the 
bond underwriting contract.954
    Mr. Stout also explained that Mr. Nash's request to include 
the Lasater firm as an underwriter was not limited to the one 
issue that was considered on February 17. Mr. Nash's directive 
required that Collins, Locke & Lasater be included as an 
underwriter in ``any future issues for 15 percent.'' 955 
Mr. Stout confirmed that Mr. Lasater's firm was included in 
subsequent issues in compliance with Mr. Nash's 
directive.956 Mr. Lasater's company participated as an 
underwriter in $637 million dollars worth of AHDA/ADFA bond 
offerings between 1983 and 1986.957
    According to the minutes of the AHDA Executive Board 
minutes for April 12, 1983, the Board unanimously approved the 
recommendation of the Multi-family Housing Sub-Committee to 
retain Merrill Lynch as the lead underwriter and to include 
Stephens Inc. and TJ Raney & Sons as the local underwriters for 
the agency's Multi Family Housing issue.958 31 The AHDA 
Special Executive Board minutes from April 19, 1983, show that 
Collins, Locke & Lasater was added to the ``underwriting team 
for the agency's proposed 1983 Multi-Family Issue.'' 959
---------------------------------------------------------------------------
    \31\ The Multi-Family Sub-Committee made this recommendation after 
considering both oral and written proposals from eight financial firms. 
ADFA Document 10/19/95 (Not Numbered).
---------------------------------------------------------------------------
    Linda Chandler, AHDA's Executive Director, agreed that 
before Collins, Locke and Lasater was added to the Multi-Family 
Housing issue, that the board had already ``carefully 
considered and discussed'' which local firms would participate 
in the offering.960 The last-minute inclusion of Mr. 
Lasater's firm into this bond underwriting syndicate was a 
circumvention of the normal process of careful debate that was 
part of the AHDA's underwriter selection process.961 In 
fact, Ms. Chandler agreed that during her four years at the 
agency, she is not aware of any other ``circumstance where, at 
the last minute, after the recommending committee had made up 
its lists of participants,'' another firm was added to the 
syndicate.962
    After Collins, Locke & Lasater's unprecedented inclusion on 
the underwriting team, Stephens, Inc., one of the firms that 
had been chosen during the April 12 Executive Board meeting, 
withdrew from the deal in protest.963 Ms. Chandler said 
that no financial firms had ever withdrawn from an AHDA 
underwriting because they were upset that the normal process of 
selection had been violated.964 Mr. Nash denied that he 
ever directed Mr. Stout to award business to the Lasater 
firm.965
    In 1984, an Arkansas state trooper was shot and killed 
during a traffic stop in a section of Arkansas that was not 
covered by the state's antiquated communications 
system.966 Although the state police had recognized the 
need to acquire a new communications system as early as two 
years before the trooper's death, this event served as a 
catalyst for the police to plan for the acquisition of a new 
system.967 On the way to the trooper's funeral with 
Governor Clinton, Colonel Tommy Goodwin, the Director of the 
Arkansas State Police (``ASP''), approached the Governor about 
the need for the state to acquire a new communications 
system.968 Colonel Goodwin informed the Governor that a 
new system would cost the state an estimated $17-$18 million 
and the Governor indicated he would support the acquisition of 
a new system.969
    On April 4, 1985, Governor Clinton signed into law Act 817, 
``An act authorizing the leasing of communications equipment 
for the Department of the Arkansas State Police; providing for 
the payment and security of the costs of the equipment; and for 
other purposes.'' 970 This legislation established, among 
other things, the methods of financing that could be used in 
connection with providing the state with a new police 
communications system.
    Flight logs maintained for Mr. Lasater's aircrafts show 
that Governor Clinton received a free flight on a Lasater-owned 
plane shortly after he signed the enabling legislation.971 
On May 10, 1985 the Arkansas State Police Commission 
(``Commission'') voted to award the underwriting contract for 
the financing of the new system to a syndicate of financial 
firms that included Lasater & Company.972 Lasater & Co.'s 
share of the fees for this project was $115,040.00.973
    The Special Committee has obtained information indicating 
that the Lasater syndicate obtained an unfair advantage over 
the other firms competing for this lucrative underwriting 
contract. The Lasater group worked closely with the law firm 
that advised the Governor's office on this matter and drafted 
the actual legislation.974 Moreover, once the legislation 
was passed, the governor's office monitored the Lasater firm's 
progress in the bidding process.975 Later, the same law 
firm that had represented Lasater and drafted the legislation, 
was retained to write an opinion on the meaning of the law; the 
opinion would, in large measure, determine which firm won the 
underwriting contract.976 Not surprisingly, the statement 
the firm favored the Lasater firm, which was awarded a portion 
of the lucrative contract.977
    Michael Drake, an executive vice president at the Lasater 
firm testified that Lasater, T.J. Raney, and E.F. Hutton formed 
a syndicate to compete for the financing contract for the 
police radio project ``right after Bill [Clinton] was elected 
to his second term [of office].'' 978 Bob Snider of T.J. 
Raney testified that he first discussed this offering with Mr. 
Drake in November 1984, and that Mr. Drake indicated to him 
that the Lasater firm had already been working on ``the state 
police deal.'' 979 Mr. Snider was under the impression 
that Mr. Drake had been engaged in discussions with Samuel 
Bratton, Governor Clinton's Counsel, about the police radio 
project prior to a meeting that Mr. Snider had with Mr. Bratton 
in November.980
    According to Mr. Drake, Lasater & Co. was approached by 
T.J. Raney because of Mr. Lasater's relationship with Governor 
Clinton:

        One, they knew that while Bill was [out of] office, 
        that there were two firms in Little Rock that--two 
        investment firms that helped him with a variety of 
        different things. One was Lasater & Company--one was 
        Dan Lasater, and the other was Doobie Sullivan.981

Mr. Snider testified that Mr. Lasater's strong political 
connections was one of the reasons that his firm decided to 
include them in the syndicate.982
    After Mr. Drake was contacted by T.J. Raney, he told Mr. 
Lasater that T.J. Raney had approached Lasater & Co. ``because 
of your relationship with Bill, to try to get this legislation 
passed.'' 983 Mr. Drake said he then identified for Mr. 
Lasater the steps that he thought were necessary in order to 
secure the underwriting contract for the police radio 
financing. The three steps he identified included finding a law 
firm to draft the legislation, working with the Governor's 
office, and explaining to the state police ``what we are trying 
to do.'' 984
    Betsey Wright, the Governor's Chief of Staff testified that 
she was under the impression that the Mitchell, Williams firm 
was working on the legislation for the Governor's office, and 
that they were not working for the Lasater syndicate.985 
Ms. Wright further stated that she was not aware that the 
Lasater firm had retained Mitchell, Williams to represent them 
in connection with their efforts to secure the underwriting 
contract.986
    Billing records from Mitchell, Williams, however, indicate 
that the law firm had numerous meetings and conferences with 
members of the Governor's staff on behalf of the Lasater group, 
and that the Governor's office likely knew that Mr. Lasater had 
engaged the Mitchell firm.987 In fact, in a letter dated 
January 23, 1985 that Mr. Lasater sent to the Governor, Mr. 
Lasater informed the Governor that he was working with Bill 
Woodyard, a Mitchell, Williams attorney, ``to help work out 
financing details.'' 988 Mr. Young testified that Mr. 
Lasater engaged Mitchell, Williams to ``develop the legislation 
and other things to implement the transaction.'' 989 32
---------------------------------------------------------------------------
    \32\ Mitchell Williams billed Lasater & Co. $32,150.93 for legal 
services performed related to ``legislative advice'' and the ``leasing 
proposal.'' TJ Raney Production 72.
---------------------------------------------------------------------------
    During the May 10, 1985 ASP Commission meeting where the 
Lasater group was chosen to perform the underwriting for the 
financing of the project,990 ``some'' of the firms that 
had given presentations to the Commission, ``requested 
permission to revise their proposals as they felt there had 
been some misunderstanding of the Act.'' 991 This dispute 
centered around the fact that the Lasater group's proposal 
called for annual and semi-annual lease payments, and First 
Capital's proposal called for monthly lease payments.992 A 
proposal that incorporated deferred payments, ``allowed for 
more arbitrage to be credited against that present value 
cost.'' 993
    In an apparent effort to quiet the controversy surrounding 
the different interpretations of the law, the Mitchell--Mr. 
Lasater's firm--was retained by the Arkansas Office of State 
Purchasing to render a legal opinion as to ``whether Section 
Five of the Act requires Lease Payments, as defined in Section 
Three of the Act, are required to be made on a monthly basis to 
investors who purchase an interest in a Lease Agreement 
authorized by the Act.'' 994 This issue had been raised by 
the First Capital firm and was the basis for their request for 
a chance to revise their proposal.995
    Mr. Mitchum, the Police Commissioner who was asked to 
review the different proposals for the Commission, testified 
that First Capital and the Lasater group were ``neck and 
neck,'' but that the delayed payments called for in the Lasater 
proposal made their bid more attractive.996 As a result, 
the opinion given by Mitchell Williams 33 favored the 
interpretation of the law that their client Lasater & Co. had 
relied on.

    \33\ The Mitchell Williams attorney who signed the May 16 opinion 
letter, was Anne Ritchey, one of the lawyers who had performed work for 
the Lasater group.

          Section Five does not state to whom the monthly 
        transfers out of the Lease Fund are to be made. 
        Therefore there is no requirement that the transfers be 
        made to the ultimate payee or lessor under the Lease 
---------------------------------------------------------------------------
        Agreement.997

Mr. Mitchum agreed with First Capital's analysis that the Act 
called for the state to make these payments on a monthly 
basis.998
    On May 1, 1985 nine days before the ASP Commission awarded 
the bond underwriting contract to the Lasater syndicate, 
Michael Gaines of the Governor's staff,34 sent a 
memorandum directly to the Governor that contained a head count 
as to which ASP Commissioner's favored or disfavored giving the 
police radio underwriting contract to Mr. Lasater.999 
Lasater & Co. is the only firm that is referenced in Mr. 
Gaines' report to the Governor. In addition, the memorandum 
contains handwritten notes from Betsey Wright that are directed 
to the Governor, which read in part, ``[w]e have a real problem 
here since `street talk' is that Lasater (sic) put in 
unreasonably low bid knowing that he can raise it once he gets 
it.'' 1000 Ms. Wright's note implies that the governor's 
office had an interest in Mr. Lasater's participation in the 
project, and that if Mr. Lasater was involved in submitting a 
low bid it could cause the Governor's office a ``real 
problem.'' The Governor replied: ``Lasater should be told bid 
must price.'' 1001
---------------------------------------------------------------------------
    \34\ Mr. Gaines was the governor's office liaison with state public 
safety agencies.
---------------------------------------------------------------------------
    Ms. Wright sent Governor Clinton sent another memorandum on 
the subject of Mr. Lasater's activities related to the state 
police radio financing on May 13, 1985.1002 The memorandum 
informed Governor Clinton that the Lasater group faced 
potential threat from a member the Legislature that was 
threatening to go to the Telecommunications Study Committee to 
insist on an alternative form of financing that would eliminate 
the deal Lasater had made with the ASP Commission.1003 Ms. 
Wright also informed the Governor that she alerted ``Drake,'' 
suggesting that the Governor was familiar with Mr. Lasater's 
executive vice president.1004
    On May 15, 1985, Mr. Gaines drafted yet another memorandum 
on the subject of Lasater's ability to participate as an 
underwriter on the police radio project.1005 The May 15 
memorandum was addressed to Ms. Wright and dealt specifically 
with the controversy surrounding the First Capital group's 
protest. Mr. Gaines' memorandum reads in part:

          The Capital Resources group [First Capital], which 
        did not get the ASP Commission's nod, intend to contest 
        the award to Hutton, Lasater, Raney on the following 
        points: 1) Capital offers a fixed rate rather than a 
        floating rate, and 2) Capital's proposal was based on 
        monthly payments by the state to repay the debt while 
        H,R,L based their proposal on payments every 6 months. 
        Capital points out that the legislation (written by 
        H,R,L) requires monthly payments.1006

    These communications between the Governor and his staff 
clearly indicate that the Governor's office had a keen interest 
in not only Mr. Lasater's participation in the police radio 
underwriting contest, but in helping ensure that Mr. Lasater's 
firm was able to secure the contract.
    During February 1985, two months before the ASP sent out 
requests for proposals for the state police radio financing, 
news accounts likely put Governor Clinton and members of the 
ASP Commission on notice that Mr. Lasater used cocaine, and 
that he was the possible target of a drug investigation.
    On February 27, 1985, The Arkansas Gazette reported that a 
witness in the drug trial of Hot Springs lawyer, Sam Anderson, 
Gina Canada, said in her sworn testimony that Dan Lasater had 
given Roger Clinton $8,000 to pay off drug debts, and that Mr. 
Lasater ``also used cocaine.'' 1007 The next day, another 
article appeared in The Arkansas Gazette that reported on the 
sworn testimony given by Mr. Anderson:

        In the summer of 1984, Anderson said Roger Clinton had 
        told him that he had to see him. They arranged to meet 
        in a boat on Lake Hamilton because [Roger] Clinton said 
        he didn't want to be seen in a public place with 
        Anderson * * * Anderson said [Roger] Clinton told him 
        that he had been approached by State Police 
        investigators and that he was very, very frightened, 
        totally frightened to death. He said [Roger] Clinton 
        informed him that the investigators wanted to set up 
        three people: [Roger] Clinton's drug supplier, Anderson 
        and Lasater. 1008

    Although this trial occurred in Little Rock, Colonel 
Goodwin claimed that he was not aware of this testimony about 
Mr. Lasater even though it was printed in one of the state's 
two largest papers.1009 Colonel Goodwin also asserted that 
he did not believe that an investigation of Mr. Lasater's drug 
activity had been initiated by the ``summer of 1984.'' 
1010

    In any event, Colonel Goodwin testified that he had at 
least one conversation with Governor Clinton, during which Mr. 
Lasater's drug use was discussed. Mr. Goodwin stated:

          I remember at least one of those meetings was after 
        the legislation had passed. Governor Clinton, myself 
        and a lot of other people knew that Dan Lasater was a 
        user of cocaine. The conversation with the Governor, 
        Clinton * * * was we sure don't want any firm involved 
        in financing this that is about to be arrested for 
        selling cocaine. I think he directed that statement to 
        me in particular.1011

    Colonel Goodwin believed that he implied to Governor 
Clinton that Mr. Lasater should not be have been involved in 
the financing for the police radio system, and that he was 
concerned about Mr. Lasater's participation in the 
deal.1012 Mr. Goodwin said that he recognized that it 
would have been problematic to have a financial adviser with a 
drug problem doing work for the state.1013
    The fact that it was well known or understood that Mr. 
Lasater was a cocaine user, gave Colonel Goodwin reason enough 
to disqualify Mr. Lasater from getting this police radio 
financing contract, and he believes that he made the Governor 
aware of his sentiments.1014 At this point, the Governor 
asked Colonel Goodwin to ascertain if Lasater was in danger of 
being caught for using cocaine.1015 Colonel Goodwin agreed 
that Governor Clinton's focus was not on Mr. Lasater's use of 
cocaine, rather it was directed toward determining whether he 
was going to be arrested for such use while his company was 
handling the police radio transaction.1016
    Colonel Goodwin then asked a captain in the ASP's Criminal 
Investigation Department to ``quietly find out if there was a 
major investigation or any investigation going on Dan Lasater 
at the time.'' 1017 Betsey Wright testified that she also 
asked Colonel Goodwin to inquire as to whether there were any 
ongoing criminal investigations of Mr. Lasater. She testified 
that he reported back to her that there were no investigations 
outstanding.1018
    On December 14, 1983, Mr. Lasater sent Governor Clinton a 
letter discussing a forthcoming bond liquidation.1019 At 
the top of the letter is a note written by Mr. Clinton. The 
part of the note that is discernable addresses Linda Garner, 
1020 who, at the time, was Insurance Commissioner for the 
State of Arkansas.1021 The note, presumably written in 
reaction to the information in the letter, reads, ``MS [* * *] 
after Garner [* * *] you talk to her--we must give him [* * *] 
B.'' 1022 Although the note is not precise as to what 
Governor Clinton wanted to give to Mr. Lasater, he apparently 
wanted to give him something involving Ms. Garner. That the 
letter discusses a liquidation of bonds by insurance companies, 
and suggests that Mr. Clinton wanted to provide liquidation 
business to Mr. Lasater.
    In the summer of 1983, during her tenure as Insurance 
Commissioner, Ms. Garner placed Mount Hood Pension Fund, 
National Investors Life Insurance, and National Investors 
Pension Fund into receivership and became the 
receiver.1023 Near the end of 1983, Mr. Lasater's company 
contacted Ms. Garner and expressed a desire to help with the 
administration of the firm's insurance portfolios.1024 
Sometime later, according to Ms. Garner, Governor Clinton 
``[e]xpressed concern that an Arkansas firm that had been 
handling might be losing the business. * * *'' 1025 The 
Governor also suggested ``[a]pointing a broker from E.F. Hutton 
to select who the portfolio manager would be.'' 1026 Ms. 
Garner deemed Governor Clinton's suggestion to be inappropriate 
and told him so.1027 Mr. Lasater's firm had close ties 
with E.F. Hutton.

       PART IV. David Hale and Capital Management Services, INC.

I. The Special Committee's Attempts To Obtain Hale Testimony

    The Special Committee unsuccessfully sought to obtain the 
testimony of David Hale, former president of Capital Management 
Services, Inc., who was a critical witness in the recently 
concluded Tucker-McDougal trial.
    In October and December 1995, the Committee was informed by 
the Office of the Independent Counsel that the OIC's 
``investigations and prosecutions would be seriously hindered 
or impeded if the Committee examined in any forum,'' David 
Hale, 1028 and that hearings ``prior to the trial of 
United States v. James B. McDougal, et al., regarding * * * 
Capital Management Services'' would hinder or impede their 
investigations and prosecutions.1029 As a result, the 
Special Committee postponed examination of Mr. Hale and 
hearings into Capital Management Services until after the 
Tucker-McDougal trial.
    On May 17, 1996, after the conclusion of the trial, the 
Special Committee requested that Mr. Hale make himself 
available to provide deposition and hearing testimony.1030 
Mr. Hale's attorney, Theodore B. Olson, responded that ``based 
on the rights guaranteed to him [Mr. Hale] by the Fifth 
Amendment to the Constitution of the United States, Mr. Hale 
respectfully'' declines to appear before the Special 
Committee.1031 Mr. Olson stated that ``Mr. Hale has been 
explicitly threatened, in writing, with prosecution in Arkansas 
by Arkansas state authorities.'' 1032 Mr. Olson further 
stated that Mr. Hale ``has been advised that any testimony that 
he may give before the Special Committee may be used against 
him by Arkansas prosecutors in any such future proceeding in 
Arkansas.'' 1033
    On June 5, 1996, the Committee subpoenaed Mr. Hale to make 
himself available for deposition and public hearing. Mr. Hale 
again asserted his Fifth Amendment privilege.1034 John A. 
Mintz, an attorney for Mr. Hale, wrote: ``In absence of a court 
order to testify and a grant of immunity as provided by Federal 
law,'' any testimony Mr. Hale may give before the Special 
Committee ``may be used against'' Mr. Hale.1035
    On June 11, 1996, the Special Committee was not able to 
secure the 12 votes required to grant Mr. Hale limited use 
immunity for his testimony to the Special Committee. Therefore, 
the Committee will not have Mr. Hale's testimony to evaluate 
matters related to Capital Management Services as set forth in 
Senate Resolution 120.

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?

    Mr. Hale testified as a prosecution witness for nine days 
at the Tucker-McDougal. Specifically, Mr. Hale testified that 
he has known James McDougal, Jim Guy Tucker, and President 
Clinton for over 20 years. He met Mr. McDougal in 1959, when he 
and Mr. McDougal were members of the same fraternity at 
University of Arkansas.1036 Mr. Hale met Jim Guy Tucker in 
the mid-1960s and hired Mr. Tucker as his lawyer in 
1980.1037 Mr. Hale met President Clinton in the early 
1970s.1038 Mr. Hale continued his relationship with these 
three men throughout the 1980s. In 1979, Mr. Hale obtained a 
license for a Small Business Investment Corporation (``SBIC''), 
Capital Management Services, Inc.1039 This SBIC was 
required to loan money to those who were economically or 
socially disadvantaged.1040
    Mr. Hale testified that in the fall 1985, Mr. Tucker asked 
him to attend a meeting with Mr. McDougal and Mr. 
Tucker.1041 The three drove to Mr. McDougal's newly 
purchased Castle Grande development to view the site.1042 
Mr. McDougal said to Mr. Hale, ``I'm going to need some funds, 
and we're going to have to clean up some members of the 
political family.'' 1043 Mr. Hale testified that when Mr. 
McDougal said ``political family,'' he understood that Mr. 
McDougal meant ``Bill Clinton, and some of his aides, Jim Guy 
Tucker and some of McDougal's associates.'' 1044
    Mr. Hale testified that later that evening, he and Messrs. 
McDougal and Tucker went to Mr. Tucker's house and reached an 
agreement related to a scheme to defraud the Small Business 
Administration by fraudulently obtaining money from 
CMS.1045 The agreement consisted of a plan to have Mr. 
Tucker ``get my purchase of the property completed as fast as 
possible.'' 1046 After the sale, Mr. Hale would look for a 
buyer of the property, ``someone we could put the property's 
name in.'' 1047 Madison Guaranty would finance the 
purchase, and according to Mr. Hale, ``Jim would see to it that 
Madison Guaranty would make the loan on the purchase enough so 
that we would have $500,000 put in the SBIC.'' 1048 Mr. 
Hale explained, ``[I]n order for Jim Guy and Jim and others to 
have the funds they needed, we had to take the money from 
Madison, put it into the SBIC, and then loan it back out.'' 
1049
    Messrs. Tucker, McDougal and Hale decided on $500,000 to 
enable CMS to increase its SBIC loan limit from $150,000 to 
$300,000.1050 Mr. McDougal told Mr. Hale that the urgency 
of the loan stemmed from the fact that federal regulators were 
coming in to examine Madison Guaranty.1051
    In either January or February 1986, Mr. McDougal asked Mr. 
Hale to meet with Mr. McDougal and then-Governor Clinton ``to 
talk about getting the loan ready and consummated.'' 1052 
Mr. Hale went to Mr. McDougal's office at Castle Grande (where 
McDougal had moved when the examiners came into the S&L), and 
the three allegedly discussed the loan Mr. Hale was going to 
make.1053
    Mr. McDougal proposed that the loan be made to Susan 
McDougal.1054 Governor Clinton allegedly offered to 
provide as security for the loan property in Marion County 
(where Whitewater is located).1055 Mr. McDougal also 
offered to put up as security his stock in Madison 
Guaranty.1056 Governor Clinton then allegedly told Mr. 
Hale ``be sure--my name cannot show up on this.'' 1057
    The transactions were consummated in February-April of 
1986. On February 28, 1986, Madison Guaranty lent Dean Paul, 
Ltd. $1.2 million. According to the plan, Mr. Hale used 
$502,000 to put capital in CMS and applied for an additional 
$500,000 of matching funds from the SBA.1058 This capital 
infusion raised CMS's lending limit to $300,000.1059
    On April 3, 1986, Mr. Hale, through CMS, made a $300,000 
loan to Susan McDougal d/b/a Master Marketing.1060 Mrs. 
McDougal's application for the loan stated that Master 
Marketing was an advertising company.35 Mr. Hale knew that 
the statement was untruthful.1061
---------------------------------------------------------------------------
    \35\ In May, 1986, Mr. McDougal asked Mr. Hale to substitute 
another application for the file. According to Mr. Hale, Mr. McDougal 
was ``real frightened and he was--he said he had to see my file, he had 
to get the file. I asked him what the problem was. He said he was going 
to have to change the purpose out. He had prepared another loan 
application showing the loan for a different purpose and he had to 
exchange that out, and he had things that were going bad at Madison. 
(McDougal trial, p. 3308). The other application states that ``real 
estate brokerage and land development was Master Marketing's business. 
(McDougal trial, p. 3347).
---------------------------------------------------------------------------
    Mr. Hale testified that he looked to then-Governor Clinton 
and Mr. McDougal to repay the loan because he believed that 
they were receiving the proceeds.1062 In May 1986, Mr. 
McDougal contacted Mr. Hale in an attempt to alter the original 
loan documents because things were going bad at 
Madison.1063
    In 1991, auditors questioned Mr. Hale about repayment of 
the loan.1064 Mr. Hale arranged with Mr. McDougal's 
attorney to obtain a judgement, which would satisfy the 
auditors.1065 Suit was filed, and Mrs. McDougal agreed to 
the judgement, although it was not collectable and only 
affected how much money Mr. Hale could have in CMS and how much 
money Mr. Hale could draw.1066 Mr. Hale persuaded a friend 
to buy the loan and give CMS a note for it. The purpose of the 
note was to give the appearance to the auditors that the loan 
had been paid. Mr. Hale sent a letter to the SBA indicating 
that the Master Marketing loan had been paid in full, thereby 
hiding the loss.1067
    The district court judge in the Tucker-McDougal trial 
refused to allow Mr. Hale to testify to the other two meetings 
that Mr. Hale has asserted he had with President Clinton. Mr. 
Hale has stated that shortly after the initial meeting with Mr. 
McDougal and Mr. Clinton, he ran into Mr. Clinton on the steps 
of the Arkansas Capitol. Governor Clinton allegedly approached 
Mr. Hale and said that Mr. McDougal would call Mr. Hale. 
Governor Clinton allegedly hoped that Mr. Hale would help Mr. 
McDougal.
    Mr. Hale has further alleged that a third meeting took 
place at a Little Rock shopping mall. Governor Clinton, 
agitated, allegedly asked Mr. Hale: ``Do you know what that --
-- Susan did with the money?'' 1068
    William Watt, Mr. Hale's business associate also recalled 
the involvement of Governor Clinton in the Dean Paul 
loan.1069 Mr. Watt recalled going to Mr. Hale's office, 
and Mr. Hale was anxious about getting the appraisals done 
quickly.1070 Mr. Hale told Mr. Watt: ``I've got to have 
this done.'' 1071 Mr. Hale said he had been ``to a meeting 
out at the Capitol * * * or the Governor's mansion.'' 1072 
Mr. Hale also said, ``And Governor Clinton is interested. He 
wants me to try to get it to him to help his friends.'' 
1073 During a subsequent telephone conversation with Mr. 
Watt, Mr. Hale raised the Governor's name again.1074 
According to Mr. Watt, Governor Clinton asked Mr. Hale, ``Did 
you get my friends''-- ``Did you get my deal done? Did you help 
my friends?'' 1075
    Robert Palmer, a real estate appraiser who worked on the 
appraisal of the property, provided testimony at the Tucker-
McDougal trial concerning the involvement of politicians. Mr. 
Palmer testified that Mr. Watt, called told Mr. Palmer that the 
appraisals of the property had to be increased.1076 Mr. 
Watt told Mr. Palmer that ``they really needed a higher figure 
on the property'' and that ``David Hale was doing a favor for 
Jim McDougal.'' 1077 Mr. Palmer testified that Mr. Watt 
instructed him to ``do whatever [he has] to do'' even if that 
meant they ``use an inflated value.'' 1078 Mr. Watt told 
Mr. Palmer not to ``worry about any repercussions.1079 
Everybody knows about the deal * * * this goes all the way, you 
know, to the top.'' 1080 Mr. Palmer asked if it was 
``McDougal'' and Watt said ``higher.'' 1081 Mr. Palmer 
said ``politically'' and Watt said ``yes.'' 1082
    Special Agent Michael Patkus of the FBI testified at the 
trial that of the $300,000 loan from CMS to Master Marketing, 
$111,500 went to Flowerwood Farms to be used for loan 
payments.1083 One of the checks drawn on the Flowerwood 
Farms account was written to Whitewater Development Corporation 
in the amount of $24,455.06.1084 The memo section of the 
check reflected that the funds were for a loan.1085 Agent 
Patkus testified that the funds were deposited in Whitewater's 
account at Madison Guaranty were used to cover a check, dated 
March 22, 1985.1086 According to Agent Patkus, this March 
22 check was made payable to Ozark Realty for $25,000.1087
    President Clinton admitted that he went to Mr. McDougal's 
office at Castle Grande one time, but denied that Mr. Hale was 
present during the meeting.1088 Mr. McDougal admitted, 
however, that he told an FBI agent on July 17, 1995, that Mr. 
Clinton had visited him at his Castle Grande offices on several 
occasions. The President claimed he was never present at any 
meeting between Mr. McDougal and Mr. Hale.1089 Moreover, 
he denied telling Mr. Hale that his name could not appear on 
any loan or financial documents or that Mr. Hale could use 
President Clinton's property in Marion County as security for a 
loan.1090 The President denied that he ever asked or 
pressured Mr. Hale to make a loan to him, Mr. McDougal, Mrs. 
McDougal or Mr. Tucker. The President alleged that Mr. Hale 
``has told two or three different stories'' but they are 
``simply not true.'' 1091 The President denied having 
knowledge of or receiving the proceeds from the $300,000 loan 
from Capital Management Services to Master Marketing.1092
    The Independent Counsel presented other evidence 
corroborating Mr. Hale's testimony about the meetings with 
President Clinton. A message slip from President Clinton 
indicates that he wants to meet with McDougal on a Saturday in 
January. Mr. McDougal claimed he does not know if he told Hale 
about that meeting, but he believes he did not.1093 
Another message slip indicates that Mr. McDougal called 
President Clinton on the Friday following the Saturday meeting. 
Mr. McDougal claimed that he does not know why he called the 
Governor on that day.1094 Mr. McDougal also did not recall 
why the Governor called him on February 3, 1986.1095

PART V. THE LENDING ACTIVITIES OF PERRY COUNTY BANK IN THE 1990 CLINTON 
                         GUBERNATORIAL CAMPAIGN

    Senate Resolution 120 Sec. 1(b)(3)(G) authorized the 
Special Committee to Investigate Whitewater Development 
Corporation and Related Matters to investigate the ``lending 
activities of Perry County Bank, Perryville, Arkansas, in 
connection with the 1990 Arkansas gubernatorial election.''
    The Committee began its investigation into these lending 
activities by subpoenaing documents from a number of agencies 
and individuals. Although the Committee did receive relevant 
records, it did not complete a comprehensive examination of 
this matter. The Committee deferred to the Office of the 
Independent Counsel's concerns and has decided to not hold 
public hearings, or compile a public record on this matter.
    The Office of the Independent counsel stated in letters 
dated April 30, 1996 and May 13, 1996, in response to the 
Special Committee inquiries of March 28, 1996 and April 18, 
1996, that its investigation would be hindered if the Committee 
examined a number of witnesses regarding Perry County Bank. 
Also, as requested in a June 12, 1996 letter from the 
Independent Counsel, the Committee has not included matters 
relating to the Perry County Bank in its report.
    In the interest of ensuring the ability of the Independent 
Counsel to pursue its investigation the Committee deferred to 
the request of the Independent Counsel and did not pursue 
matters relating to the Perry County Bank. It is unfortunate 
that the Committee could not fully complete its mandate under 
S. Res. 120. Nevertheless the Committee does not wish to impede 
or hinder the efforts of the Independent Counsel, or create a 
situation that may impinge on the rights of any individual to 
receive a fair trial.

                                Endnotes

    1 Williams & Connolly Document DKSN013309.
    2 Williams & Connolly Document DKSN013309.
    3 Norton, 5/6/96 pp. 8-9.
    4 June 11, 1996 Interview of Don Denton by FDIC.
    5 Stout, 4/30/96 Dep. p. 13.
    6 House Document Fundraiser 17.
    7 12/19/95 Pillsbury Report p. 6.
    8 12/19/95 Pillsbury Report p. 29.
    9 Clark, 1/30/96 Hrg. p. 24.
    10 RTC Document, 99000942.
    11 12/28/95 Pillsbury Report p. 31.
    12 Williams & Connolly Document DKSN029024.
    13 Williams & Connolly Document DKSN029026.
    14 Clark, 6/10/96 FDIC OIG Interview p. 1.
    15 Denton Document 000000021.
    16 RTC Documents SEN33125, SEN33195.
    17 Clark, 6/10/96 FDIC OIG Interview p. 8.
    18 Clark, 6/10/96 FDIC OIG Interview p. 8.
    19 Clark, 6/10/96 FDIC OIG Interview p. 9.
    20 Clark, 6/10/96 FDIC OIG Interview p. 9.
    21 Clark, 6/10/96 FDIC OIG Interview p. 9.
    22 Denton, 6/11/96 FDIC OIG Interview p. 2.
    23 Denton, 6/11/96 FDIC OIG Interview p. 2.
    24 Denton, 6/11/96 FDIC OIG Interview p. 2.
    25 Denton, 6/11/96 FDIC OIG Interview p. 2.
    26 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    27 Denton, 6/11/96 FDIC OIG Interview p. 3.
    28 Denton, 6/11/96 FDIC OIG Interview p. 3.
    29 6/13/96 letter from Senators Alfonse D'Amato, Richard 
Shelby, Christopher Bond, Connie Mack, Lauch Faircloth, Robert Bennett, 
Rod Grams, Pete Domenici, Orrin Hatch, and Frank Murkowski to David 
Kendall.
    30 Affidavit of Hillary Rodham Clinton, June 17, 1996, p. 2.
    31 6/17/95 Letter from David Kendall to Alfonse D'Amato, p. 2.
    32 H. Clinton, Interrogatory Answers to RTC, 5/24/95 p. 73.
    33 Black, 2/5/95 Dep. Majority Exhibits 1 & 2.
    34 Black, 2/5/95 Dep. Exhibit 1; Williams & Connolly Document 
DKSN028984.
    35 RTC Document S-INTR00096--S-INTR00097.
    36 RTC Document, 0000091.
    37 Hubbell, 12/27/95 RTC OIG Interview pp. 21-22.
    38 Hubbell, 4/20/95 RTC OIG Interview p. 7.
    39 Hubbell, 2/7/96 Hrg. pp. 191-192, 212.
    40 Hubbell, 2/7/96 Hrg. p. 212.
    41 Hubbell, 2/7/96 Hrg. p. 212.
    42 Hubbell, 12/27/95 RTC OIG Interview p. 22.
    43 Hubbell, 2/7/96 Hrg. p. 108.
    44 Hubbell, 6/4/96 Dep. p. 46.
    45 Hubbell, 6/4/96 Dep. pp. 51-52.
    46 Patten, 12/8/94 RTC OIG Interview p. 2.
    47 Patten, 12/8/94 RTC OIG Interview p. 2.
    48 RTC Document 005222.
    49 Denton, 6/3/96 FDIC OIG Interview pp. 4, 6, 8; Denton, 6/
11/96 FDIC OIG Interview pp. 4, 6, 8.
    50 Denton, 6/3/96 FDIC OIG Interview p. 4.
    51 Denton, 6/3/96 FDIC OIG Interview p. 6.
    52 Denton, 6/11/96 FDIC OIG Interview p. 3.
    53 Denton, 6/11/96 FDIC OIG Interview p. 3.
    54 Denton, 6/11/96 FDIC OIG Interview p. 3.
    55 Hubbell, 2/7/96 Hrg. pp. 14-15.
    56 Hubbell, 2/7/96 Hrg. pp. 17-26.
    57 Latham, 5/16/96 Hrg. p. 15.
    58 W. Clinton, 4/28/96 McDougal Trial Testimony p. 120.
    59 Associated Press, 5/24/95, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    60 Associated Press, 5/24/95, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    61 Knight, 05/16/96 Hrg. p. 10.
    62 Knight, 4/26/96 Dep. p. 13.
    63 H. Clinton, 11/10/94 FDIC OIG Interview p. 3.
    64 Massey, 1/11/96 Hrg, p. 233.
    65 Massey, 1/11/96 Hrg. pp. 18-19.
    66 Massey, 1/11/96 Hrg. pp. 25-26.
    67 Massey, 1/11/96 Hrg. pp. 29, 222-23.
    68 Bunch Document 5/14/96 (Not Numbered).
    69 Bunch, 5/16/96 Hrg. pp. 18-21.
    70 H. Clinton, Interrogatory Answers to RTC, 5/24/95 p. 34.
    71 H. Clinton, Interrogatory Answers to RTC, 5/24/95 p. 41.
    72 Williams & Connolly Document DKSN028934.
    73 Schaffer, 1/25/96 Hrg. pp. 24-28.
    74 Massey, 1/11/96 Hrg. pp. 184-185.
    75 Massey, 01/11/96 Hrg. p. 113.
    76 RTC Document MG0000759; Williams & Connolly Document DKSN 
025966; Lyon, 12/14/95 Dep. p. 55.
    77 Herr, 4/24/96 Hrg. pp. 18-19.
    78 RTC Document DKRT800606A.
    79 Herr, 4/24/96 Hrg. pp. 18-19.
    80 Bratton, 1/5/96 Dep. pp. 44-45.
    81 Williams & Connolly Document DKSN018008.
    82 Williams & Connolly Document DKSN018011.
    83 Denton, 5/8/96 Hrg. pp. 21-23.
    84 Denton, 5/8/96 Hrg. p. 66.
    85 Norton, 5/15/96 Hrg. pp. 4-5.
    86 Norton, 5/15/96 Hrg. pp. 8-9.
    87 Ritter, 4/24/96 Dep. pp. 52-55.
    88 Ritter, 4/24/96 Dep. pp. 52-55; Pockrus, 4/26/96 Dep. pp. 
41-42.
    89 Burge, 2/15/96 Dep. pp. 85-86.
    90 Strange, 5/2/96 Dep. pp. 55-57.
    91 Pockrus, 4/26/96 Dep. pp. 24-26.
    92 Jackson, 2/12/96 Dep. pp. 46-48.
    93 Jackson, 2/12/96 Dep. p. 48.
    94 Lyon, 1/23/96 Hrg. p. 30.
    95 Lasater, 2/22/96 Dep. pp. 144-145; FDIC OIG Report of 
Investigation, Vol. 3, Exhibit 51.
    96 Lasater, 5/1/96 Hrg. p. 28.
    97 Thomasson, 2/23/96 Dep. pp. 85-87.
    98 Stout, 4/30/96 Dep. pp. 30-31.
    99 Chandler, 5/1/96 Hrg. pp. 191-93.
    100 Stout, 4/30/96, Dep. p. 80.
    101 Stout, 4/30/96 Dep. pp. 14, 20.
    102 Garner, 6/13/96 Dep. pp. 29-31, 44.
    103 Garner, 6/13/96 Dep. pp. 32-33.
    104 Williams & Connolly Documents DKSN027162 & DKSN018184.
    105 Pillsbury Madison & Sutro, ``Madison Guaranty Savings & 
Loan and Whitewater Development Company, Inc., A Preliminary Report to 
the Resolution Trust Corporation,'' April 24, 1995, pp. 130-131 
(hereinafter the ``4/24/95 Pillsbury Report'').
    106 W. Clinton, 4/28/96 McDougal Trial Testimony pp. 13-14.
    107 W. Clinton, 4/28/96 McDougal Trial Testimony p. 13.
    108 W. Clinton, 4/28/96 McDougal Trial Testimony p. 13.
    109 4/24/95 Pillsbury Report p. 17.
    110 W. Clinton, 4/28/96 McDougal Trial Testimony p. 13.
    111 4/24/96 Pillsbury Report p. 15.
    112 4/24/96 Pillsbury Report p. 17.
    113 4/24/96 Pillsbury Report p. 18.
    114 4/24/96 Pillsbury Report p. 17.
    115 4/24/96 Pillsbury Report p. 19.
    116 4/24/95 Pillsbury Report pp. 19-22.
    117 W. Clinton, Interrogatory Answers to RTC 5/24/95 p. 4, 
Williams & Connolly Document DKSN001095.
    118 H. Clinton, Interrogatory Answers to RTC, 5/24/95, pp. 27-
28, Williams & Connolly Document DKSN000793-794.
    119 H. Clinton, Interrogatory Answers to RTC, 5/24/95, pp. 27-
28, Williams & Connolly Document DKSN000793-794).
    120 The RTC interrogatories state, in part:
    Interrogatory No. 1: DESCRIBE each and every occasion before August 
1978 on which YOU:
    (d) Invested in real estate (including any investments in 
corporations and partnerships that dealt primarily in real estate. In 
answering this interrogatory, be sure to DESCRIBE the real estate 
transactions referred to in documents DKRT900707, DKRT900715 and 
DKRT900716.
    The referenced documents which were attached to the interrogatories 
sent to President Clinton include: (1) Schedule D (Form 1040) from the 
Clintons' 1978 Federal Income Tax Return showing capital gains and 
losses (DKRT900707); (2) Schedule 2B attached to the same return 
showing long term capital gains (DKRT900715); and, (3) an un-numbered 
schedule showing an installment gain on sale for 15 acres of unimproved 
land (DKRT900716).
    121 W. Clinton, Interrogatory Answers to RTC, 5/24/95 pp. 1-3.
    122 RTC Document DKRT900707.
    123 RTC Document DKRT900707, DKRT900716.
    124 4/24/95 Pillsbury Report p. 13.
    125 Williams & Connolly Document DKSN022069 626
    126 Haddon Morgan & Foreman Documents LP0656-LP0672.
    127 Williams & Connolly Document DKSN022069.
    128 Williams & Connolly Document DKSN022066.
    129 Williams & Connolly Document DKSN022961.
    130 Norton, 5/15/96 Hrg. pp. 21-22.
    131 Norton, 5/15/96 Hrg. pp. 21-22.
    132 Norton, 5/15/96 Hrg. pp. 8-9.
    133 Norton, 5/15/96 Hrg. pp. 5-6.
    134 Norton, 5/15/96 Hrg. pp. 4-5.
    135 Norton, 5/15/96 Hrg. p. 7.
    136 Norton, 5/15/96 Hrg. pp. 7-8.
    137 Norton, 5/15/96 Hrg. pp. 8-9.
    138 Norton, 5/15/96 Hrg. pp. 8-9.
    139 Norton, 5/15/96 Hrg. pp. 8-9.
    140 The initial loan was made by several bank insiders with an 
interest in this land deal steered the loan to the bank. (See 
generally, Burge, 2/15/96 Dep., pp. 22-26). The original Whitewater 
loan for $182,611 was brought to the Flippin Bank by Chris Wade, a 
director of Flippin Bank and the local realtor who sold the property, 
and ushered through with the assistance of James Patterson, President 
and director of Flippin Bank and a shareholder in 101 River 
Development, Inc., the owners of a larger parcel of land that included 
the Whitewater property. (Burge, 2/15/96 Dep. p. 21).
    141 Mercantile Bank Document D28.
    142 Burge, 2/15/96 Dep. pp. 21-22.
    143 Burge, 5/8/96 Hrg. pp. 17-20.
    144 Burge, 5/8/96 Hrg. p. 71.
    145 Burge, 2/15/96 Dep. pp. 49, 54.
    146 Denton, 5/8/96 Hrg. pp. 75-76.
    147 Denton, 5/8/96 Hrg. p. 87.
    148 Denton, 5/9/96 Hrg. pp. 21-23.
    149 Berry, 5/10/96 Dep. pp. 29-30.
    150 Denton, 5/8/96 Hrg. p. 66.
    151 Burge, 2/15/96 Dep., pp. 85-86.
    152 Denton, 5/8/96 Hrg. p. 51.
    153 Ritter, 4/24/96 Dep. p. 24.
    154 Ritter, 4/24/96 Dep. pp. 43-46.
    155 Ritter, 5/8/96 Hrg. pp. 32-35.
    156 Ritter, 4/24/96 Dep. p. 51.
    157 Ritter, 4/24/96 Dep. p. 51.
    158 Ritter, 4/24/96 Dep. p. 54.
    159 Ritter, 4/24/96 Dep. pp. 52-55.
    160 Ritter, 4/24/96 Dep. pp. 52-57.
    161 H. Clinton Interrogatory Answers to RTC, 5/24/95 p. 7; W. 
Clinton, Interrogatory Answers to RTC, 5/24/95 pp. 11-12.
    162 4/24/95 Pillsbury Report pp. 30-31.
    163 Bunch, 5/2/96 Dep. pp. 37-38.
    164 Pockrus, 4/26/96 Dep. pp. 22-23.
    165 Bunch, 5/2/96 Dep. p. 42.
    166 RTC Document DKRT070031
    167 RTC Document DKRT070031
    168 Pockrus, 4/26/96 Dep. pp. 10, 14.
    169 RTC Document DKRT400134
    170 Pockrus, 4/26/96 Dep. p. 16.
    171 Pockrus, 4/26/96 Dep. pp. 41-42.
    172 Pockrus, 4/26/96 Dep. pp. 32, 38.
    173 Jackson, 2/12/96 Dep. pp. 24-26.
    174 Jackson, 2/12/96 Dep. p. 28.
    175 Jackson, 2/12/96 Dep. pp. 45-46.
    176 Madison Cease & Desist Order
    177 Jackson, 2/12/96 Dep. pp. 24-26.
    178 Pockrus, 4/26/96 Dep. pp. 24-26.
    179 Jackson, 2/12/96 Dep. pp. 38-40.
    180 Jackson, 2/12/96 Dep. p. 44.
    181 Jackson, 2/12/96 Dep. pp. 46-47.
    182 4/24/95 Pillsbury Report p. 65.
    183 Campbell, 4/29/96 Dep. pp. 51-52.
    184 Campbell, 4/29/96 Dep. pp. 41-44.
    185 Lyon, 1/23/96 Hrg. p. 30.
    186 Security Bank 11/20/86 Letter to HRC re: Loan over due 
$15,435.31.
    187 Jackson, 2/12/96 Dep. pp. 86-88.
    188 Security Bank 1/4/96 (Not Numbered) (10/5/87 HRC Loan) 
Application.
    189 Jackson, 2/12/96 Dep. pp. 89-91.
    190 H. Clinton, Interrogatory Answers to RTC, 5/24/95 pp. 15-
16.
    191 RTC Document, DKRT100318, 200743-46, 400481.
    192 Webb, 12/18/95 Dep. pp. 12-13.
    193 Union National Bank, 4/26/96 (Not Numbered).
    194 RTC Document DKRT100649-653.
    195 RTC Document DKRT200475.
    196 4/24/95 Pillsbury Report pp. 50,127.
    197 Strange, 5/2/96 Dep. p. 74.
    198 Strange, 5/2/96 Dep. pp. 55-56.
    199 Strange, 5/2/96 Dep. pp. 55, 67-68, 77-82
    200 See, e.g., Ritter, 4/24/96 Dep. pp. 19, 69-70; Dewey, 5/3/
96 Dep. pp. 15, 31, 55-56; Proctor, 5/2/96 Dep. p. 26.
    201 Ritter, 4/24/96 Dep. pp. 19-20.
    202 Proctor, 5/8/96 Hrg. p. 109.
    203 Proctor, 5/2/96 Dep. p. 52.
    204 RTC Document DKRT000376.
    205 4/24/95 Pillsbury Report p. 22.
    206 3/5/84 Letter from Ed Penick, TC Bancshares to the Federal 
Reserve Bank of St. Louis; Penick, 5/9/96 Hrg. p. 85.
    207 Strange, 5/9/96 Hrg. p. 186.
    208 Proctor, 5/2/96 Dep. pp. 63-64.
    209 Penick, 5/9/96 Hrg. p. 85.
    210 Penick, 5/3/96 Dep. pp. 10-12.
    211 Sisk/Grobmyer, 5/7/96 Dep. p. 25; Dewey, 5/3/96 Dep. p. 
50.
    212 Penick, 5/3/96 Dep. pp. 47-50.
    213 Mercantile Bank Document 4/25/96 (Not Numbered) (5/27/86 
File Notes of Edward M. Penick, Jr.).
    214 1987 Ark. Acts 539.
    215 Ark. Const. Ann. amend. 14 (Michie 1987 & Supp. 19950 (Ex. 
A).
    216 Penick, 5/3/96 Dep. p. 52.
    217 Penick, 5/3/96 Dep. p. 48.
    218 Penick, 5/3/96 Dep. pp. 47-51; Berry, 5/10/96 Dep. pp. 36-
39; 49-50.
    219 4/24/95 Pillsbury Report pp. 131-132.
    220 RTC Document DKRT200475.
    221 RTC Document DKRT700113.
    222 Proctor, 5/2/96 Dep. p. 52.
    223 Strange, 5/2/96 Dep. p. 35.
    224 Proctor, 5/2/96 Dep. p. 52.
    225 Mercantile Bank Document D212.
    226 Proctor, 5/2/96 Dep. p. 52; Dewey, 5/3/96 Dep. p. 21.
    227 Dewey, 5/3/96 Dep. p. 22-23.
    228 Proctor, 5/8/96 Hrg. pp. 108-110.
    229 Dewey, 5/3/96 Dep. p. 66.
    230 Strange, 5/9/96 Hrg. pp. 91-93.
    231 Penick, 5/3/96 Dep. pp. 22-24.
    232 Penick, 5/3/96 Dep. pp. 22-31.
    233 Proctor, 5/2/96 Dep. p. 55.; Dewey 5/3/96 Dep. p. 28.
    234 Penick, 5/3/96 Dep. pp. 22-23, 32.
    235 RTC Document DKRT700294.
    236 Eldridge, 5/9/96 Hrg. p. 162.
    237 The McDougals never provided a financial statement for 
this renewal, and in December 1987, 1st Ozark waived the requirement 
for them. (Mercantile Bank Document D173).
    238 Mercantile Bank Document, 5/2/96 (Not Numbered).
    239 809 F.2d. 266 (5th Cir., 1987).
    240 Hartsfield, 5/7/96 Dep. pp. 32-34, 49-50.
    241 Hartsfield, 5/7/96 Dep. pp. 69-70; Wright, Lindsey & 
Jennings Document JRTS00010, 00012 and 00494.
    242 Penick 5/3/96 Dep. pp. 73-79; Wright, Lindsey & Jennings 
Document JRTS00002, 00012, 00142-00143, 00491, 00496-00497 and 00593.
    243 Wright, Lindsey & Jennings Document 00204-00205.
    244 Wright, Lindsey & Jennings Document 000118.
    245 Wright, Lindsey & Jennings Document JRTS00012, 00593.
    246 Hartsfield, 5/7/96 Dep. pp. 53-54, 68-70.
    247 Hartsfield, 5/7/96 Dep. pp. 54-57; Wright, Lindsey & 
Jennings Document JRTS00142, 00593.
    248 Wright, Lindsey & Jennings Document JRTS00491.
    249 Mercantile Bank Document D163.
    250 Proctor, 5/8/96 Hrg. pp. 131-134.
    251 Mercantile Bank Document D186-187.
    252 Wright, Lindsey & Jennings Document JRTS00382.
    253 Wright, Lindsey & Jennings Document JRTS00197.
    254 Wright, Lindsey & Jennings Document JRTS00195.
    255 Wright, Lindsey & Jennings Document JRTS00109.
    256 Wright, Lindsey & Jennings Document JRTS00206.
    257 Penick, 5/9/96 Hrg. pp. 116-117.
    258 Wright, Lindsey & Jennings Document JRTS00141.
    259 Wright, Lindsey & Jennings Document, JRTS00204.
    260 Penick, 5/9/96 Hrg. pp. 191-192; 1988 Ark, Acts 12 
(extraordinary session).
    261 Mercantile Bank Document D184.
    262 Proctor, 5/8/96 Hrg. pp. 133-135.
    263 Jeff Gerth, ``The 1992 Campaign: Personal Finances; 
Clintons Joined S. & L. Operator in an Ozark Real Estate Venture,'' N. 
Y. Times, Mar. 8, 1992, p. A1.
    264 Lynch, 5/14/96 Dep. pp. 94, 107-108.
    265 Lynch, 5/14/96 Dep. pp. 104-112.
    266 Blair, 2/19/96 Dep. p. 25.
    267 Blair, 2/19/96 Dep. p. 25; Keker & Van Ness Document 
LML103.
    268 Lynch, 5/14/96 Dep. p. 54.
    269 Keker & Van Ness Document LML0103.
    270 Keker & Van Ness Document LML0103.
    271 Keker & Van Ness Document LML0103.
    272 Keker & Van Ness Document LML0104.
    273 RTC Document S-MG00085.
    274 RTC Document S-MG00085.
    275 Blair, 2/19/96 Dep. pp. 103-104.
    276 Blair, 2/19/96 Dep. pp. 101-103.
    277 Patterson, 5/8/96 Hrg. pp. 137-138.
    278 River Valley Bank Document 4/26/96 (Not Numbered) 
(Mortgage Notes for Lots 2, 9, 23, 30, 37, 43 and 44 of Whitewater 
Estates).
    279 Hatfield & Lassiter, 2/21/96 (Not Numbered) ($9,628.67 
check from Ozark Air Services to First Ozark National Bank signed by 
Chris Wade designated to ``payoff Whitewater Loan'').
    280 Proctor, 5/8/96 Hrg. pp. 173-175.
    281 1/4/96, Letter from Jack T. Lassiter to Special Committee.
    282 Patterson, 5/8/96 Hrg. pp. 136-138.
    283 Patterson, 5/8/96 Hrg. p. 157.
    284 Patterson, 5/8/96 Hrg. p. 153.
    285 Patterson, 5/8/95 Hrg. p. 157.
    286 Patterson, 5/8/96 Hrg. p. 158.
    287 Patterson, 5/8/96 Hrg. pp. 141; 152-153.
    288 Patterson, 5/8/96 Hrg. p. 157.
    289 Patterson, 5/8/96 Hrg. pp. 150-153; 156.
    290 Lyons, 6/5/96 Dep. p. 11
    291 Lyons, 11/2/95 Dep. p. 10.
    292 Lyons, 11//2/95 Dep. pp. 11, 13.
    293 Lyons, 11/2/95 Dep. p. 19.
    294 Lyons, 6/5/96 Dep. p. 11.
    295 Lyons, 6/5/96 Dep. p. 10.
    296 Patten, 5/31/96 Dep. p. 9.
    297 Lyons, 11/2/95 Dep. p. 47.
    298 Lyons, 11/2/95 Dep. p. 47.
    299 Haddon Morgan & Foreman Document LP01155.
    300 Patten, 5/31/96 Dep. pp. 69-71.
    301 Patten, 5/31/96 Dep. pp. 12-13.
    302 Patten, 5/31/96 Dep. pp. 12-13.
    303 Patten, 5/31/96 Dep. pp. 69-71.
    304 Haddon Morgan & Foreman Documents LP01108-114, LP01115-169 
and LP01170-176.
    305 Haddon Morgan & Foreman Documents LP01177-90.
    306 Haddon Morgan & Foreman Documents LP01101-107.
    307 Patten, 5/31/96 Dep. p. 75.
    308 Patten, 5/31/96 Dep. pp. 19-20.
    309 Patten, 5/31/96 Dep. pp. 75-77.
    310 Lyons, 11/2/95 Dep. p. 103.
    311 Lyons, 11/2/95 Dep. p. 112.
    312 Haddon Morgan & Foreman Documents LP01086-92.
    313 Haddon Morgan & Foreman Documents LP01086-92.
    314 Haddon Morgan & Foreman Documents LP01058-69.
    315 Haddon Morgan & Foreman Documents LP01115-119.
    316 Lyons Documents JML 077-78.
    317 Lyons, 11/2/95 Dep. p. 112.
    318 Patten, 5/31/96 Dep. p. 68.
    319 Haddon Morgan & Foreman Documents LP01105-14.
    320 Lyons Documents JML 140.
    321 Lyons Documents JML 140.
    322 Lyons Documents JML 140.
    323 Lyons Documents JML 140.
    324 Lindsey, 6/12/95 Dep. pp. 79-80.
    325 Lindsey, 6/12/95 Dep. pp. 79-80.
    326 Lyons Documents JML 2584-85.
    327 Lyons Documents JML 2584-85.
    328 Haddon Morgan & Foreman Documents LP00014.
    329 Williams & Connolly Document DKSN000481.
    330 Hearings before the Special Committee to Investigate 
Whitewater Development Corporation and Related Matters, administered by 
the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, on 
the Inquiry into whether Improper Conduct Occurred Regarding the Way in 
which White House Officials Handled Documents in the Office of White 
House Deputy Counsel Vincent W. Foster, Jr., 104th Cong., 1st Sess., 
July 18, 1995--August 10, 1995 [hereinafter ``S. Hrg.''], 8/8/95 p. 28; 
Williams & Connolly Document DKSN000482.
    331 Blair, 2/19/96 Dep. p. 62.
    332 Blair, 2/19/96 Dep. p. 67.
    333 Blair, 2/19/96 Dep. p. 67.
    334 Blair, 2/19/96 Dep. p. 69.
    335 Blair, 2/19/96 Dep. p. 70.
    336 Blair, 2/19/96 Dep. p. 72.
    337 Blair, 2/19/96 Dep. p. 72.
    338 Blair, 2/19/96 Dep. p. 84.
    339 Blair, 2/19/96 Dep. p. 63.
    340 Blair, 2/19/96 Dep. p. 73.
    341 Blair, 2/19/96 Dep. p. 79.
    342 Redden, 5/30/96 Dep. p. 237.
    343 Williams & Connolly Document DKSN000518.
    344 Williams & Connolly Document DKSN000514.
    345 Jeff Gerth and Stephen Engleberg, ``Documents Show 
Clintons Enjoyed Far Vaster Protection from Whitewater Losses,'' New 
York Times, July 15 1995, at A18.
    346 Williams & Connolly Document DKSN000515.
    347 Williams & Connolly Document DKSN000515.
    348 Williams & Connolly Document DKSN000518.
    349 Williams & Connolly Document DKSN000519.
    350 Sidley & Austin Document 0000185.
    351 Sidley & Austin Document 0000185.
    352 Redden, 5/30/96 Dep. p. 228.
    353 Redden, 5/30/96 Dep. pp. 230-231.
    354 Jeff Gerth and Stephen Engleberg, ``Documents Show 
Clintons Enjoyed Far Vaster Protection from Whitewater Losses,'' New 
York Times, July 15, 1995, at A18.
    355 Redden, 5/30/96 Dep. p. 234.
    356 Redden, 5/30/96 Dep. p. 234.
    357 4/24/95 Pillsbury Report, pp. 130-31.
    358 Norton, 5/15/96 Hrg. pp. 3-4; Norton, 5/6/96 Dep. pp. 83-
84.
    359 Norton, 5/6/96 Dep. pp. 92-93, 100-101.
    360 Norton, 5/15/96 Hrg. pp. 8-9.
    361 Norton, 5/15/96 Hrg. pp. 3-4.
    362 Norton, 5/15/96 Hrg. pp. 3-4.
    363 Norton, 5/6/96 Dep. pp. 20 and 83-84.
    364 Norton, 5/15/96 Hrg. pp. 8-9.
    365 Haddon Morgan & Foreman Document LP01547.
    366 Haddon Morgan & Foreman Document LP0663.
    367 Haddon Morgan & Foreman Document LP00672.
    368 Haddon Morgan & Foreman Documents LP00663, LP00672.
    369 RTC Document DKRT800001-20.
    370 Haddon Morgan & Foreman Document LP00682.
    371 Haddon Morgan & Foreman Document 133-00000518-531.
    372 RTC Document DKRT900994.
    373 RTC Document DKRT800044-68.
    374 RTC Document DKRT800053.
    375 RTC Document DKRT800009.
    376 RTC Document DKRT800001-20.
    377 Internal Revenue Code Sec. 163(a).
    378 RTC Document DKRT8000533.
    379 RTC Document DKRT11000804-808.
    380 RTC Document DKRT800533.
    381 Haddon Morgan & Foreman Document LP00673-89.
    382 RTC Production DKRT800533.
    383 RTC Document DKRT800533.
    384 RTC Document DKRT800533.
    385 Letter from David Kendall to the Honorable James A. Leach, 
May 24, 1996, forwarding a report entitled ``Review of Clinton Tax 
Adjustments Proposed by the House Committee on Banking and Financial 
Services,'' p.8 (hereinafter the ``Kendall Report'').
    386 Lyons Document JLM 088.
    387 4/24/95 Pillsbury Report, p. 31.
    388 Kendall Report, pp. 10-11.
    389 Bayou Verret Land Co. v. Commissioner, 52 T.C. 971, 985-
986 (1969), affd. on this issue 450 F.2d 850 (5th Cir. 1971). However, 
a taxpayer cannot deduct prepaid interest, regardless of her intent.
    390 Bayou Verret Land Co. v. Commissioner, 52 T.C. 971, 985-
986 (1969), affd. on this issue 450 F.2d 850 (5th Cir. 1971).
    391 4/24/95 Pillsbury Report, p. 31.
    392 4/24/95 Pillsbury Report, p. 31.
    393 RTC Document DKRT900145.
    394 4/24/95 Pillsbury Report pp. 15-16.
    395 RTC Document DKRT900155.
    396 RTC Document DKRT900155.
    397 RTC Document BCV0004.
    398 RTC Document DKRT900968.
    399 RTC Document DKRT901077.
    400 Internal Revenue Code Sec. 61(a)(12).
    401 Lash v. Commissioner, T.C. Memo 1956-87 (``amounts 
expended by Bristol for petitioner's benefit would constitute income to 
him. . . .'').
    402 Internal Revenue Code Sec. 108(e)(4)(A).
    403 Haddon Morgan & Foreman Document LP00106.
    404 Haddon Morgan & Foreman LP00106.
    405 Haddon Morgan & Foreman Documents LP01957-69.
    406 W.Clinton, Interrogatory Answers to RTC, 5/24/95 pp. 12-
13.
    407 Smith, 4/23/96 Dep. p. 25.
    408 Williams & Connolly Document DKSN 021879 (Bank of Cherry 
Valley note, dated 4/13/81); RTC Document (Not Numbered) Bank of Cherry 
Valley note, dated 12/9/82, with James McDougal as maker, signed only 
by James McDougal; Bank of Cherry Valley note, dated 6/9/84, with James 
McDougal as maker, signed only by James McDougal; Bank of Cherry Valley 
note, dated 12/3/84, with James McDougal as maker, signed only by James 
McDougal.
    409 Williams & Connolly Document DKSN 021879 (Bank of Cherry 
Valley note, dated 4/13/81); RTC Production (Not Numbered) Bank of 
Cherry Valley note, dated 12/9/82, with James McDougal as maker, signed 
only by James McDougal; Bank of Cherry Valley note, dated 6/9/84, with 
James McDougal as maker, signed only by James McDougal; Bank of Cherry 
Valley note, dated 12/3/84, with James McDougal as maker, signed only 
by James McDougal.
    410 RTC Document DKRT100500.
    411 RTC Document DKRT100500.
    412 RTC Document CBF0280.
    413 Hogan & Hartson Document BL011114.
    414 RTC Document DKRT500067.
    415 RTC Document DKRT500067.
    416 Haddon Morgan & Foreman Document LP02928.
    417 Internal Revenue Code Sec. 61(a)(12)
    418 Lash v. Commissioner, T.C. Memo 1956-87 (``amounts 
expended by Bristol for petitioner's benefit would constitute income to 
him. . . .'').
    419 W. Clinton, Interrogatory Answers to RTC, 5/24/95 pp. 23-
24.
    420 RTC Document DKRT400989.
    421 RTC Document DKRT800044-68; Haddon Morgan & Foreman 
Document LP01957-88.
    422 Haddon Morgan & Foreman Document LP01981-2.
    423 Haddon Morgan & Foreman Document LP02018.
    424 Kendall Report, p. 11.
    425 Gerth and Labaton, ``Whitewater Papers Cast Doubt on 
Clinton Account of a Tax Underpayment,'' The New York Times, August 6, 
1995, p. 20.
    426 Haddon Morgan & Foreman Document LP00109.
    427 Haddon Morgan & Foreman Document LP00109.
    428 Gerth and Labaton, ``Whitewater Papers Cast Doubt on 
Clinton Account of a Tax Underpayment,'' The New York Times, August 6, 
1995, p. 20.
    429 Gerth and Labaton, ``Whitewater Papers Cast Doubt on 
Clinton Account of a Tax Underpayment,'' The New York Times, August 6, 
1995, p. 20.
    430 Haddon Morgan & Foreman Document LP00528.
    431 Haddon Morgan & Foreman Document LP00790.
    432 Hogan & Hartson Document BL011121.
    433 Haddon Morgan & Foreman Document LP00858.
    434 Kendall Report, p. 11.
    435 Haddon Morgan & Foreman Document 133-00001008.
    436 Redden, 5/30/96 Dep. pp. 184-187.
    437 RTC Document DKRT101031-35 and DKRT101043-44.
    438 Haddon Morgan & Foreman Document LP00866.
    439 See DeVere v. Commissioner, 35 T.C.M. 28 (1976); Anderson 
v. Commissioner, 33 T.C.M. 234 (1974), aff'd. per curiam, 527 F.2d 198 
(9th Cir., 1975).
    440 Cornelia C.F. Horsford v. Commissioner, 2 T.C. 826 (1943); 
Estate of Movius, 22 T.C. 391 (1954); Steinert v. Commissioner, 33 T.C. 
447 (1959).
    441 Kendall Report, pp. 12-13.
    442 Haddon Morgan & Foreman Document LP00861-94.
    443 Haddon Morgan & Foreman Document LP00861--LP00894; Kendall 
Report, pp. 12-13.
    444 Kendall Report, pp. 11.
    445 RTC Document MG0000759; Williams & Connolly Document 
DKSN025966; Lyon, 12/14/95 Dep. p. 55.
    446 Herr, 4/24/96 Hrg. pp. 18-19.
    447 RTC Document DKRT800606A.
    448 4/24/95, Pillsbury Report p. 43.
    449 4/24/95, Pillsbury Report p. 43.
    450 4/24/95, Pillsbury Report p. 43.
    451 4/24/95, Pillsbury Report p. 43.
    452 4/24/95, Pillsbury Report p. 45.
    453 4/24/95, Pillsbury Report p. 43.
    454 4/24/95, Pillsbury Report pp. 44-45.
    455 Clark, 1/30/96 Hrg. p. 9.
    456 Clark, 1/30/96 Hrg. p. 9.
    457 Clark, 1/30/96 Hrg. p. 15.
    458 Hogan & Hartson Document BL010705.
    459 Hogan & Hartson Document BL010705.
    460 Hogan & Hartson Document BL010705.
    461 Hogan & Hartson Document BL010705.
    462 Clark, 1/30/96 Hrg. p. 17.
    463 Clark, 1/30/96 Hrg. p. 18.
    464 Clark, 1/30/96 Hrg. p. 19.
    465 Clark, 1/30/96 Hrg. p. 21.
    466 Denton, 3/18/96 McDougal Trial Testimony p. 1025.
    467 Clark, 1/30/96 Hrg. p. 146.
    468 Clark, 1/30/96 Hrg. p. 155.
    469 Clark, 1/30/96 Hrg. pp. 155-56.
    470 Clark, 1/30/96 Hrg. p. 92.
    471 Clark, 1/30/96 Hrg. p. 10.
    472 Clark, 1/30/96 Hrg. p. 32.
    473 Denton, 3/18/96 McDougal Trial Testimony p. 1125.
    474 Palmer, 3/26/96 McDougal Trial Testimony pp. 2152, 2178, 
2193.
    475 Clark, 1/30/96 Hrg. p. 142.
    476 Clark, 1/30/96 Hrg. p. 14.
    477 Clark, 1/30/96 Hrg. p. 15.
    478 O'Melveny & Meyers Document CCBW885-887.
    479 O'Melveny & Meyers, Document CCBW884
    480 O'Melveny & Meyers Document CCBW884.
    481 Bratton, 2/13/96 Hrg. pp. 6, 9.
    482 Bratton, 2/13/96 Hrg. p. 7.
    483 O'Melveny & Meyers Document CCBW885.
    484 Bratton, 2/13/96 Hrg. p. 7.
    485 Wright, 1/26/96 Dep. p. 229.
    486 Wright, 1/26/96 Dep. p. 230.
    487 Clark, 1/30/96 Hrg. p. 115.
    488 Clark, 1/30/96 Hrg. pp. 116-17.
    489 Clark, 1/30/96 Hrg. p. 120.
    490 RTC Document 001395.
    491 RTC Document 001395.
    492 Clark, 1/30/96 Hrg. p. 36.
    493 RTC Document 1403, 7432.
    494 Pulcer, 1/30/96 Hrg. pp. 122-123.
    495 Williams & Connolly Document DKSN013309.
    496 Williams & Connolly Document DKSN013309.
    497 Wright, 1/26/96 Dep. p. 232.
    498 Williams & Connolly Documents DKSN001168-9.
    499 Williams & Connolly Documents DKSN001168-9.
    500 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''; H. Clinton, Interrogatory Answers to RTC 2/4/94 pp. 36-37; H. 
Clinton, 2/14/96 FDIC Interview pp. 91-96.
    501 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.'' p. 15.
    502 H. Clinton Interrogatory Answers to RTC, 5/24/95 pp.36-37.
    503 H. Clinton, 2/14/96 FDIC Interview p. 92.
    504 Lyon, 12/14/95 Dep. pp. 28-29.
    505 Herr, 4/24/96 Hrg. pp. 18-19.
    506 Herr, 2/13/96 Dep. pp. 15-16.
    507 Herr, 2/13/96 Dep. pp. 16-17.
    508 Herr, 4/24/96 Hrg. p. 10.
    509 Herr, 4/24/96 Hrg. p. 12.
    510 Herr, 4/24/96 Hrg. p. 13.
    511 Herr, 4/24/96 Hrg. p. 16.
    512 Herr, 4/24/96 Hrg. p. 15.
    513 Herr, 2/13/96 Dep. p. 34-35.
    514 Herr, 2/13/96 Dep. p. 34-35.
    515 Herr, 4/24/96 Hrg. p. 19.
    516 Herr, 4/24/96 Hrg. p. 24.
    517 Herr, 4/24/96 Hrg. p. 24.
    518 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    519 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    520 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    521 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    522 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    523 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    524 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    525 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    526 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    527 Denton, 5/7/96 Dep. p. 81.
    528 Williams & Connolly Document DKSN001259; 4/24/95 Pillsbury 
Report p. 102.
    529 Smith, 4/23/96 Dep. p. 33, 35.
    530 RTC Document B-1, C-1, D-3, D-5.
    531 RTC Document B-1, C-1, D-3, D-5.
    532 Peacock, 4/24/96 Hrg. p. 169.
    533 Peacock, 4/24/96 Hrg. p. 169-170.
    534 RTC Document D-5.
    535 RTC Document B-1, C-1, D-3, D-5.
    536 O'Melveny & Myers Document CCBW-0017.
    537 RTC Document B-1, D-3, D-5.
    538 Wright, 1/26/96 Dep. p. 280; W. Clinton, Interrogatory 
Answers to RTC, 5/24/95 p. 40.
    539 House Document House W/W RPT. 2953-2954.
    540 House Document House W/W RPT. 2953-2954.
    541 House Document House W/W RPT. 2953-2954.
    542 House Document House W/W RPT. 2953-2954.
    543 4/24/95 Pillsbury Report pp.108-110.
    544 4/24/95 Pillsbury Report pp.108-110.
    545 4/24/95 Pillsbury Report p.109.
    546 4/24/95 Pillsbury Report p.109.
    547 4/24/95 Pillsbury Report p. 109.
    548 Peacock, 4/24/96 Hrg. p. 169-170.
    549 4/24/95 Pillsbury Report p. 109.
    550 Peacock, 1/16/96 Dep. pp. 22-23.
    551 Peacock, 1/16/96 Dep. pp. 22-23.
    552 Peacock, 1/16/96 Dep. p. 23.
    553 RTC Document D-2.
    554 RTC Document D-5.
    555 4/24/95 Pillsbury Report p. 106.
    556 Peacock, 1/16/96 Dep. pp. 27-28.
    557 Peacock, 12/10/86 Borod & Huggins Interview p. 5.
    558 RTC Document A-3, A-8; Peacock, 12/20/86 Borod & Huggins 
Interview p. 107; RTC Production A-6.
    559 RTC Document E-1.
    560 RTC Document E-1, D-1.
    561 Peacock, 4/24/96 Hrg. p. 173.
    562 RTC Document E-8.
    563 RTC Document E-9.
    564 Peacock, 1/16/96 Dep. p. 43.
    565 Peacock, 1/16/96 Dep. p. 26.
    566 4/24/95 Pillsbury Report p. 107.
    567 4/24/95 Pillsbury Report p. 107.
    568 4/24/95 Pillsbury Report pp. 107-108.
    569 4/24/95 Pillsbury Report p. 108.
    570 RTC Document (Not Numbered) 9/25/97 letter from Selig to 
FHLBB, pp. 1-10.
    571 RTC Document 10/25/95 (Not Numbered) Letter from Mitchell, 
Williams, Selig & Tucker to Examiners-in-Charge, 9/25/87 p. 7.
    572 RTC Document 10/25/96 (Not Numbered) Letter from Mitchell, 
Williams, Selig & Tucker to Examiners-in-Charge, 9/25/87 pp. 2-4.
    573 RTC Document 10/25/95 (Not Numbered) Letter from Mitchell, 
Williams, Selig & Tucker to Examiners-in-Charge, 9/25/87 pp. 2-4.
    574 RTC Document 10/25/95 (Not Numbered) Letter from Mitchell 
Williams Selig & Tucker to Examiners-in-Charge, 9/25/87 p. 1.
    575 Miller, 1/22/96 Dep. p. 40.
    576 Hays, 2/23/96 Dep. pp. 21-22.
    577 Hays, 2/23/96 Dep. pp. 21-22.
    578 Hays, 2/23/96 Dep. pp. 22-23.
    579 House Document Fundraiser 17.
    580 22Huse Document Fundraiser 18.
    581 Hays, 2/23/96 Dep. p. 29.
    582 House Document Fundraiser 18.
    583 House Document Fundraiser 18.
    584 Hays, 2/23/96 Dep. p. 77.
    585 Hays, 2/23/96 Dep. p. 77.
    586 Hays, 2/23/96 Dep. p. 57.
    587 Hays, 2/23/96 Dep. p. 132.
    588 Hopkins, 2/14/96 Dep. pp. 45, 47.
    589 Hopkins, 4/24/96 Hrg. p. 165.
    590 Hopkins, 4/24/96 Hrg. p. 166.
    591 Hopkins, 2/14/96 Dep. pp. 81-82.
    592 Hopkins, 4/24/96 Hrg. pp. 150-151.
    593 Hopkins, 2/14/96 Dep. p. 75.
    594 Rule 4.1(a) of the Arkansas Rule of Professional Conduct.
    595 House Document Fundraiser 18.
    596 Arkansas State Building Services Document, 2/13/96 (Not 
numbered.)
    597 Herr, 4/24/96 Hrg. pp. 18-19.
    598 RTC Document PLS03127.
    599 RTC Document PLS03127-03128.
    600 Vinson & Elkins Document RLFO2932-02934.
    601 Vinson & Elkins Document RLF02932-02943.
    602 Vinson & Elkins Document RLF02932-02943.
    603 H. Clinton, Interrogatory Answers to RTC, 1/18/96 p. 13.
    604 FDIC Document FDICHRC 0162-0163
    605 Williams & Connolly Document DKSN018011.
    606 Shults, 2/8/96, Dep. pp. 113-114.
    607 RTC Document PLS031290-03132.
    608 Williams & Connolly Document DKSN029016, RTC Document 
RS000941-0009444.
    609 RTC Document RS000941.
    610 Donovan, 1/31/96 Hrg. p. 304.
    611 Williams & Connolly Document DKSN28997, DKSN29011, 
DKSN29013, DKSN29016 and Vinson & Elkins Documents Rose Law Firm 
vouchers #4372 & 4391.
    612 2/25/96 Pillsbury Report p. 107.
    613 Shults, 2/8/96, Dep. pp. 113-114.
    614 Shults, 2/8/96 Dep. pp. 57-58.
    615 Shults, Ray & Kurrus, 11/30/95 (Not Numbered).
    616 Shults, Ray & Kurrus 11/30/95 (Not Numbered), 4/24/87 
Letter by Jim Guy Tucker.
    617 Bratton, 1/5/96 Dep. pp.44-45.
    618 Bratton, 1/5/96 Dep. p. 46.
    619 Bratton, 2/13/96 Hrg. pp. 18-20.
    620 Bratton, 2/13/96 Hrg. pp. 18-20.
    621 Hernreich, 2/9/96 Dep. p. 12.
    622 Williams & Connolly Document DKSN018008.
    623 Williams & Connolly Document DKSN018008.
    624 Williams & Connolly Document DKSN018008.
    625 O'Melveny & Myers Document CCBW-0017, CCBW-0019, CCBW-
0022; House Document Fundraiser 14.
    626 Wright, 2/27/96 Dep. pp. 54-55.
    627 Shults, Ray & Kurrus, 11/30/95 (Not Numbered), April 24, 
1987 letter.
    628 Bratton, 1/5/96 Dep. pp. 74-75.
    629 Williams & Connolly Document DKSN013371.
    630 Wright, 2/27/96 Dep. p. 64.
    631 Williams & Connolly Document DKSN018001.
    632 Williams & Connolly Document DKSN018011.
    633 Williams & Connolly Document DKSN018011.
    634 Williams & Connolly Document DKSN018011.
    635 Williams & Connolly Document DKSN018011.
    636 Williams & Connolly Document DKSN018011.
    637 Williams & Connolly Document DKSN018012.
    638 Williams & Connolly Document DKSN024856-024859.
    639 Williams & Connolly Document DKSN024856-024859.
    640 Shults, Ray & Kurrus, 11/30/95 (Not Numbered) (6/18/87 
Letter from Robert Shults to Jeffrey B. Stern, Esq).
    641 Lyon, 12/14/95 Dep. p. 28.
    642 RTC Document MG-000555-MG-000556.
    643 Lyon, 12/14/95 Dep. pp. 12; 25-26.
    644 Lyon, 12/14/95 Dep. pp. 25-26.
    645 Lyon, 1/23/96 Hrg. p. 59; Lyon, 12/14/95 Dep. p. 29.
    646 Lyon, 12/14/95 Dep. pp. 28-29.
    647 Lyon, 12/14/95 Dep. pp. 47-49; Lyon, 1/23/96 Hrg. p. 16.
    648 Lyon, 12/14/95 Dep. p. 40.
    649 FDIC Document S-KCR01315.
    650 FDIC Document S-KCR03152-S-KCR01353.
    651 House Memo on Quid Pro Quos p. 11.
    652 Lyon, 12/14/95 Dep. p. 41.
    653 House memo on Quid-Pro-Quos p. 11; House Document QPQ24.
    654 Lyon, 12/14/95 Dep. p. 38.
    655 Lyon, 12/14/95 Dep. pp. 39-40.
    656 RTC Document MG-000555-MG000556.
    657 House Document QPQ26.
    658 House Document QPQ28.
    659 Williams & Connolly Document DKSN029011.
    660 House Document QPQ27.
    661 Dobbins Document 12/5/95 (Not Numbered).
    662 Dobbins Document 12/5/95 (Not Numbered).
    663 Dobbins Document 12/5/95 (Not Numbered).
    664 Dobbins Document 12/5/95 (Not Numbered)
    665 Dobbins Document 12/5/95 (Not Numbered).
    666 Dobbins Document 12/5/95 (Not Numbered).
    667 Dobbins Document 12/5/95 (Not Numbered).
    668 Dobbins Document 12/5/95 (Not Numbered).
    669 House Document QPQ4.
    670 House Document QPQ5.
    671 House Document QPQ6.
    672 RTC Document DKRT800620A.
    673 Pete Yost, ``McDougal Complaint Prompted Then Gov. Clinton 
to Convene Meeting,'' Associated Press, 10/3/94.
    674 Butler, 12/5/95 Dep. p. 16.
    675 Butler, 12/5/95 Dep. pp. 19-21; House Document QPQ11.
    676 RTC Document DKRT800606A.
    677 Dobbins, 12/4/95 Dep. p. 73; Butler, 12/5/95 Dep. pp. 26-
27; Choate, 12/5/95 Dep. p. 29.
    678 Williams & Connolly Document DKSN013314-DKSN013315.
    679 RTC Document MG0000759.
    680 RTC Document MG0000759.
    681 Williams & Connolly Document DKSN025966.
    682 Lyon, 1/23/96 Hrg. p. 12.
    683 Lyon, 12/14/95 Dep. p. 55.
    684 Lyon, 12/14/95 Dep. pp. 56-58.
    685 Lyon, 1/23/96 Hrg. pp. 16-17.
    686 Lyon, 12/14/95 Dep. pp. 56-58.
    687 Lyon, 12/14/95 Dep. pp. 56-58.
    688 Lyon, 12/14/95 Dep. pp. 56-58.
    689 Lyon, 12/14/95 Dep. pp. 56-58.
    690 Lyon, 1/23/96 Hrg. pp. 19-20.
    691 Lyon, 1/23/96 Hrg. pp. 69-62.
    692 Williams & Connolly Document DKSN026297.
    693 Williams & Connolly Document DKSN026305.
    694 Sidley & Austin Document 000637.
    695 Sidley & Austin Document 000638.
    696 Sidley & Austin Document 000637.
    697 W. Clinton, 4/28/96 McDougal Trial Testimony p. 120.
    698 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    699 Associated Press, 4/22/94, ``Text of First Lady Hillary 
Rodham Clinton's News Conference in the State Dining Room of the White 
House.''
    700 H. Clinton Interrogatory Answers to RTC 5/24/95 pp. 34-35, 
RTC Document DKSN000800-801.
    701 Massey, 1/11/96 Hrg. p. 233.
    702 Massey, 1/11/96 Hrg. pp. 18-19.
    703 Massey, 1/11/96 Hrg. pp. 25-26.
    704 Massey, 1/11/96 Hrg. pp. 29, 222-23.
    705 Knight, 5/16/96 Hrg. p. 10.
    706 Knight, 5/16/96 Hrg. p. 12.
    707 Knight, 5/16/96 Hrg. p. 10.
    708 Latham, 5/16/96 Hrg. p. 15.
    709 Bunch Document, 5/14/96 (Not Numbered) (Minutes of the 11/
27/86 Madison Bank & Trust Board Meeting).
    710 Bunch Document, 5/14/96 (Not Numbered) (Minutes of the 11/
27/86 Madison Bank and Trust Board Meeting).
    711 Bunch, 05/16/96 Hrg. pp. 18-21.
    712 H. Clinton, 2/14/96 FDIC Interview pp. 27-31.
    713 H. Clinton, 2/14/96 FDIC Interview pp. 27-31.
    714 Williams & Connolly Document DKSN028934.
    715 RTC OIG Report Document RLF103184.
    716 H. Clinton, Interrogatory Answers to RTC, 5/24/95 p. 41.
    717 Schaffer, 1/25/96 Hrg. pp. 24-28.
    718 Massey, 1/11/96 Hrg. pp. 184-185.
    719 Massey, 01/11/96 Hrg. p. 113.
    720 Massey, 01/11/96 Hrg. p. 113.
    721 2/25/96 Pillsbury Report p. 27.
    722 2/25/96, Pillsbury Report p. 27.
    723 Vinson & Elkins Document, RLF03182-03183.
    724 Vinson & Elkins Document, RLF03182-03183.
    725 Brady, 1/25/96 Hrg. p. 243.
    726 Vinson & Elkins Document, RLF1 03186.
    727 Brady, 1/25/96 Hrg. p. 243.
    728 Brady, 1/25/96 Hrg. p. 244.
    729 Brady, 5/18/94 RTC OIG Interview p. 84, ex. 81.
    730 Brady, 1/25/96 Hrg. p. 244.
    731 Brady, 5/18/96 RTC OIG Interview p. 84, ex. 81.
    732 Brady, 1/25/96 Hrg. p. 244.
    733 Brady, 1/25/96 Hrg. p. 246.
    734 Brady, 5/18/94 RTC OIG Interview ex. 84.
    735 Brady, 5/18/94 RTC OIG Interview ex. 84.
    736 Vinson & Elkins Document RLF1 03184.
    737 12/29/95 Pillsbury Report p. 15.
    738 12/19/95 Pillsbury Report pp. 6-7.
    739 12/19/95 Pillsbury Report p. 29.
    740 Williams & Connolly Document DKSN 028928-029043.
    741 Clark, 6/10/96 FDIC OIG Interview p. 9.
    742 Denton, 6/11/96 FDIC OIG Interview p. 3.
    743 Denton, 6/11/96 FDIC OIG Interview p. 3.
    744 H. Clinton Interrogatory Answers to RTC 5/24/95, p. 73; 
RTC Document 74.
    745 12/19/95 Pillsbury Report p. 6.
    746 Ward, 2/12/96 Dep. pp. 10-11.
    747 RTC Document SEN33127.
    748 12/19/95 Pillsbury Report p. 9.
    749 Thrash, 1/31/96 Hrg. pp. 194-196, 289-290; Williams & 
Connolly Document DKSN028980.
    750 Williams & Connolly Document DKSN028984.
    751 Ward, 2/12/96 Dep. p. 13.
    752 12/19/95 Pillsbury Report p. 6.
    753 12/19/95 Pillsbury Report p. 9.
    754 12/19/95 Pillsbury Report pp. 8-9.
    755 12/19/95 Pillsbury Report p. 8; Ward, 2/12/96 Dep. p. 13.
    756 12/28/95, Pillsbury Report p. 56.
    757 Reproduced in 12/28/95, Pillsbury Report p. 56.
    758 Clark, 1/30/96 Hrg. pp. 9, 13.
    759 Clark, 1/30/96 Hrg. p. 26.
    760 RTC Document 99000942.
    761 Clark, 6/10/96 FDIC OIG Interview p. 3.
    762 Clark, 1/30/96 Hrg. p. 24.
    763 Clark, 1/30/96 Hrg. pp. 17-18.
    764 Clark, 6/10/96 FDIC OIG Interview p. 3.
    765 Denton, 3/18/96 McDougal Trial Testimony p. 1023.
    766 Denton, 6/11/96 FDIC OIG Interview p. 4.
    767 RTC Document SEN34712.
    768 Ward, 2/12/96 Dep. pp. 14-15, 42-43, 60.
    769 RTC Document SEN22896.
    770 Hubbell, 2/7/96 Hrg. p. 6.
    771 Hubbell, 12/27/95 Dep. pp. 21-22.
    772 Hubbell, 4/20/95 RTC OIG Interview p. 7.
    773 12/19/95, Pillsbury Report (appendix 9).
    774 12/19/95, Pillsbury Report pp. 7-29.
    775 12/19/95, Pillsbury Report p. 29.
    776 12/28/95, Pillsbury Report p. 31.
    777 12/19/95, Pillsbury Report pp. 9, 19.
    778 Denton, 6/3/96 FDIC OIG Interview p. 5.
    779 Denton, 6/11/96 FDIC OIG Interview p. 2.
    780 Clark, 6/10/96 FDIC OIG Interview p. 1.
    781 RTC Document SEN32911-32912.
    782 Denton Document, 000000021.
    783 12/28/95, Pillsbury Report p. 31.
    784 RTC Documents SEN33125, SEN33195.
    785 Denton, 6/3/96 FDIC OIG Interview p. 9.
    786 RTC Document SEN32838-32840, SEN32860-32865, SEN32912-
32913.
    787 Seth Ward v. Madison Guaranty Savings & Loan Association, 
No. 87-7580 (Pulaski County Cir. Ct.).
    788 Jennings, 2/6/96 Dep. pp. 10-11.
    789 RTC Document SEN32740--SEN32741.
    790 RTC Document SEN32867-32869.
    791 RTC Document SEN33043.
    792 White House Document S001766--S001770.
    793 RTC Document SEN30383-30384, SEN 33094-33096.
    794 Ward, 2/12/96 Dep. pp. 18-23.
    795 Strayhorn, 2/1/96 Hrg. pp. 22-23.
    796 RTC Document SEN33094.
    797 Ward, 2/12/96 Dep. pp. 21-22.
    798 RTC Document SWI-063--SWI-068.
    799 RTC Production SEN33006-33007.
    800 Denton, 6/3/96 FDIC OIG Interview p. 7.
    801 Clark, 6/10/96 FDIC OIG Interview p. 8.
    802 Clark, 6/10/96 FDIC OIG Interview p. 8.
    803 Clark, 6/10/96 FDIC OIG Interview pp. 8-9.
    804 Clark, 6/10/96 FDIC OIG Interview p. 8.
    805 Clark, 6/10/96 FDIC OIG Interview p. 8.
    806 Clark, 6/10/96 FDIC OIG Interview p. 8.
    807 Clark, 6/10/96 FDIC OIG Interview p. 9.
    808 Clark, 6/10/96 FDIC OIG Interview p. 9.
    809 Clark, 6/10/96 FDIC OIG Interview p. 9.
    810 Clark, 6/10/96 FDIC OIG Interview p. 9.
    811 RTC Document SW1-063--SW1-068.
    812 RTC Document SWI063--SWI068.
    813 Williams & Connolly Document DKSN029026.
    814 12/28/95, Pillsbury Report p. 74.
    815 RTC Document S-INTR0090.
    816 Clark, 6/10/96 FDIC OIG Interview p. 9.
    817 Denton Document, DD000000241.
    818 Denton, 6/11/96 FDIC OIG Interview p. 2.
    819 Denton, 6/11/96 FDIC OIG Interview p. 2.
    820 Denton, 6/11/96 FDIC OIG Interview p. 2.
    821 Denton, 6/11/96 FDIC OIG Interview pp. 2-3.
    822 Denton, 6/11/96 FDIC OIG Interview p. 3.
    823 Denton, 6/11/96 FDIC OIG Interview p. 3.
    824 6/13/96 letter from Senators Alfonse D'Amato, Richard 
Shelby, Christopher Bond, Connie Mack, Lauch Faircloth, Robert Bennett, 
Rod Grams, Pete Domenici, Orrin Hatch, and Frank Murkowski to David 
Kendall.
    825 Affidavit of Hillary Rodham Clinton, June 17, 1996, p. 2.
    826 6/17/95 Letter from David Kendall to Alfonse D'Amato, p. 
2.
    827 Black, 8/10/95 House Hrg. p. 52.
    828 Black, 2/5/95 Dep., Majority Exhibits 1 & 2.
    829 Black, 2/5/95 Dep. Exhibit 1; Williams & Connolly Document 
DKSN029011.
    830 Williams & Connolly Document DKSN029024.
    831 Williams & Connolly Document DKSN029026.
    832 RTC Document RIC-039285.
    833 Vinson & Elkins Document RLF2 03583-84.
    834 RTC Document RIC-039286.
    835 RTC Document RIC-039286.
    836 Williams & Connolly Document DKSN028962.
    837 Williams & Connolly Document DKSN028960.
    838 H. Clinton, Interrogatory Answers to RTC, 5/24/95 p. 73.
    839 RTC Document S-INTR00096--S-INTR00097.
    840 RTC Document S-INTR0000091.
    841 Denton, 3/18/96 McDougal Trial Testimony p. 1029.
    842 McDougal, 5/7/96 McDougal Trial Transcript p. 7016.
    843 American Broadcasting Company, Nightline, Transcript # 
3832, January 30, 1996.
    844 Clark, 1/30/96 Hrg. p. 160; Pulcer, 1/30/96 Hrg. p. 160.
    845 Fitzhugh, 1/15/96 Dep. p. 109.
    846 Fitzhugh, 1/31/96 Hrg. pp. 18-19, 170.
    847 RTC Document FDICHRC0162.
    848 Hubbell, 2/7/96 Hrg. p. 97.
    849 Strayhorn, 2/1/96 Hrg. p. 56.
    850 Strayhorn, 2/1/96 Hrg. p. 56.
    851 Hubbell, 2/7/96 Hrg. p. 6.
    852 Hubbell, 2/7/96 Hrg. p. 184.
    853 Hubbell, 12/27/95 RTC OIG Interview pp. 21-22.
    854 Hubbell, 4/20/95 RTC OIG Interview p. 7.
    855 Hubbell, 2/7/96 Hrg. pp. 191-192, 212.
    856 Hubbell, 2/7/96 Hrg. p. 212.
    857 Hubbell, 2/7/96 Hrg. p. 212.
    858 Hubbell, 12/27/95 RTC OIG Interview p. 22.
    859 Hubbell, 2/7/96 Hrg. p. 108.
    860 Hubbell, 6/4/96 Dep. p. 46.
    861 Hubbell, 6/4/96 Dep. pp. 46, 49.
    862 Hubbell, 6/4/96 Dep. pp. 46, 49.
    863 Hubbell, 6/4/96 Dep. pp. 51-52.
    864 Patten, 12/8/94 RTC OIG Interview p. 2.
    865 Patten, 12/8/94 RTC OIG Interview p. 2.
    866 Hubbell, 2/7/96 Hrg. p. 11.
    867 Jennings, 2/6/96 Dep. pp. 123, 135.
    868 RTC Document, 005222.
    869 Clark, 6/10/96 FDIC OIG Interview p. 9.
    870 Denton, 6/11/96 FDIC OIG Interview pp. 3, 5; Denton, 6/3/
96 FDIC OIG Interview pp. 4, 6, 8.
    871 Denton, 6/3/96 FDIC OIG Interview p. 4.
    872 Denton, 6/3/96 FDIC OIG Interview p. 6.
    873 Denton, 6/11/96 FDIC OIG Interview p. 3.
    874 Denton, 6/11/96 FDIC OIG Interview p. 3.
    875 Denton, 6/11/96 FDIC OIG Interview p. 3.
    876 Hubbell, 2/7/96 Hrg. pp. 14-15.
    877 Hubbell, 2/7/96 Hrg. pp. 15-16.
    878 Breslaw, 11/30/96 Hrg. p. 129.
    879 Hubbell, 2/7/96 Hrg. p. 16.
    880 Hubbell, 2/7/96 Hrg. pp. 17-26.
    881 Hubbell, 2/7/96 Hrg. p. 21-22.
    882 Hubbell, 2/7/96 Hrg. p. 21-22.
    883 Locke, 4/25/96 Dep. pp. 27-28.
    884 Locke, 4/25/96 Dep. p. 9.
    885 Locke, 4/25/96 Dep. p. 27.
    886 Locke, 4/25/96 Dep. p. 29.
    887 Locke, 4/25/96 Dep. p. 27.
    888 Lasater, 2/22/96 Dep. 68.
    889 Lasater, 5/1/96 Hrg. p. 10.
    890 Lasater, 5/1/96 Hrg. p. 10.
    891 Lasater, 2/22/96 Dep. p. 72.
    892 Lasater, 5/1/96 Hrg. pp. 10, 30.
    893 DOJ Document FBI-00003588.
    894 Thomasson, 2/23/96 Dep. pp. 16-17.
    895 Thomasson, 2/23/96 Dep. pp. 85-87.
    896 Williams & Connolly Document DKSN017642-DKSN017643.
    897 Thomasson, 2/23/96 Dep. p. 88.
    898 Lasater, 2/22/96 Dep. p. 132.
    899 Lasater, 2/22/96 Dep. p. 132.
    900 Drake, 5/1/96 Hrg. p. 16.
    901 Lasater, 5/1/96, Hrg. p. 19.
    902 Judgement and Probation/Commitment Order LR-CR-86158(1), 
12/18/86.
    903 Id.
    904 Lasater, 5/1/96 Hrg. p. 5.
    905 Arkansas Gazette, ``Judge sees `clear pattern of fraud' by 
Locke.'' January 1985.
    906 Arkansas Gazette, ``Judge sees `clear pattern of fraud' by 
Locke.'' January 1985.
    907 Arkansas Gazette, ``Judge sees `clear pattern of fraud' by 
Locke.'' January 1985.
    908 Lasater, 5/1/96 Hrg. pp. 21-23.
    909 Lasater, 5/1/96 Hrg. pp. 24-25.
    910 Lasater, 2/22/96 Dep. 83; Thomasson, 2/23/96 Dep. pp. 55-
58
    911 Lasater, 2/22/96 Dep. pp. 86-87.
    912 Lasater, 2/22/96 Dep. pp. 144-145.
    913 Lasater, 2/22/96 Dep. p. 144.
    914 FDIC OIG Report of Investigation, Vol. 3, Exhibit 51.
    915 FDIC OIG Report of Investigation, Vol. 3, Exhibit 51.
    916 Lasater, 2/22/96 Dep. p. 114; Wright, 2/27/96 Dep. p. 112.
    917 Lasater, 2/22/96 Dep. pp. 112-113.
    918 Lasater, 2/22/96 Dep. p. 106.
    919 Spivey, 8/9/95 Civil Dep. p. 6.
    920 Spivey, 8/9/95 Civil Dep. p. 24.
    921 Spivey, 8/9/95 Civil Dep. p. 23.
    922 Spivey, 8/9/95 Civil Dep. pp. 25-26.
    923 Spivey, 8/9/95 Civil Dep. p. 24.
    924 Spivey, 8/9/95 Civil Dep. p. 24.
    925 Lasater, 2/22/96 Dep. pp. 103-104.
    926 Lasater, 5/1/96 Hrg. p. 8.
    927 Williams & Connolly Document DKSN026466.
    928 Williams & Connolly Document DKSN026466.
    929 Williams & Connolly Document DKSN027456-7, DKSN026479, 
DKSN027455, DKSN027455-57, DKSN027573-74.
    930 Williams & Connolly Document DKSN27574.
    931 Lasater, 5/1/96 Hrg. p. 26-7.
    932 Williams & Connolly Document DKSN027573.
    933 Williams & Connolly Document DKSN027573-DKSN027574.
    934 Williams & Connolly Document DKSN027472.
    935 Williams & Connolly Document DKSN027472, DKSN027490.
    936 Williams & Connolly Document DKSN027473.
    937 Stout, 5/1/96 Hrg. p. 186; Chandler, 5/1/96 Hrg. p. 190; 
Williams & Connolly Document DKSN026171-26172.
    938 ADFA Document 2/17/83 (Not Numbered) (Minutes from 
February 17, 1983 Arkansas Housing Development Agency Board of 
Directors Meeting).
    939 Stout, 4/30/96 Dep. p. 13.
    940 Stout, 4/30/96 Dep. pp. 13-14.
    941 Stout, 4/30/96 Dep. p. 17.
    942 Stout, 5/1/96 Hrg. p. 186.
    943 Chandler, 5/1/96 Hrg. p. 191.
    944 Stout, 4/30/96 Dep. p. 22.
    945 Stout, 4/30/96 Dep. p. 23.
    946 Stout, 5/1/96 Hrg. p. 184.
    947 Stout, 4/30/96 Dep. pp. 43-44.
    948 Stout, 4/30/96 Dep. p. 80.
    949 Stout, 4/30/96 Dep. 15-16.
    950 Hardwicke, 2/15/96 Dep. p. 44.
    951 Hardwicke, 5/1/96 Hrg. p. 209.
    952 Stout, 4/30/96 Dep. pp. 24-25.
    953 Stout, 4/30/96 Dep. p. 20.
    954 ADFA Document 2/17/83 (Not numbered) (Minutes of February 
17, 1983 Arkansas Housing Development Agency Board of Directors 
Meeting.)
    955 Stout, 4/30/96 Dep. pp. 13-14.
    956 Stout, 4/30/96 p. 14.
    957 Williams & Connolly Document DKSN027286.
    958 ADFA Document 4/12/83 (Not Numbered) (Minutes of Arkansas 
Housing Development Agency Executive Board's April 12, 1983 Meeting).
    959 ADFA Document 4/19/83 (Not numbered) (Minutes from April 
19, 1983 Arkansas Housing Development Agency Special Executive Board 
meeting).
    960 Chandler, 5/1/96 Hrg. pp. 200-201.
    961 Chandler, 5/1/96 Hrg. pp. 201-202.
    962 Chandler, 5/1/96 Hrg. p. 202.
    963 Chandler, 5/1/96 Hrg. pp. 203-204.
    964 Chandler, 5/1/96 Hrg. p. 204.
    965 Nash, 4/30/96 Hrg. p. 121.
    966 Goodwin, 2/26/96 Dep. pp. 9-10.
    967 Goodwin, 2/26/96 Dep. p. 13.
    968 Goodwin, 2/26/96 Dep. pp. 9-10.
    969 Goodwin, 2/26/96 Dep. 10.
    970 Williams & Connolly Document DKSN018193-DKSN018199.
    971 FDIC Report of Investigation Vol. Exhibit XXX.
    972 Williams & Connolly Document DKSN027189-027191.
    973 TJ Raney Document 1.
    974 Snider, 2/7/96 Dep. pp. 70-71, 75, 80.
    975 Williams & Connolly Document DKSN027162.
    976 Arkansas State Police Document 4/25/96 (Not Numbered).
    977 Arkansas State Police Document 4/25/96 (Not Numbered).
    978 Drake, 1/24/96 Dep. p. 85.
    979 Snider, 2/7/96 Dep. pp. 70-71.
    980 Snider, 2/7/96 Dep. p. 76.
    981 Drake, 1/24/96 Dep. p. 86.
    982 Snider, 2/7/96 Dep. p. 159.
    983 Drake, 1/24/96 Dep. pp. 87-88.
    984 Drake, 1/24/96 p. 88.
    985 Wright, 4/25/96 Hrg. pp. 203-204.
    986 Wright, 4/25/96 Hrg. pp. 202-203.
    987 TJ Raney Document 74, 81, 83, & 84.
    988 Williams & Connolly Document DKSN027566.
    989 Young, 4/30/96 Hrg. p. 25.
    990 In connection with the underwriting contract for the 
police radio financing, the ASP originally received proposals from 
eight financial firms, and this field was reduced to four finalists 
during an ASP Financial Screening Committee meeting that occurred on 
May 3, 1985. The four finalists were Dabbs Sullivan, Stephens, Inc., 
First Capital Resources (``First Capital'') and the Lasater syndicate. 
Williams & Connolly Production DKSN027166.
    991 Williams & Connolly Document DKSN027190.
    992 Williams & Connolly Document DKSN027214.
    993 Mitchum, 2/9/96 Dep. p. 72.
    994 Arkansas State Police Document 4/25/96 (Not Numbered).
    995 Mitchum, 2/9/96 Dep. p. 87.
    996 Mitchum, 2/9/96 Dep. p. 72.
    997 Arkansas State Police Document 4/25/96 (Not Numbered).
    998 Mitchum, 2/9/96 Dep. p. 87.
    999 Williams & Connolly Document DKSN027162.
    1000 Williams & Connolly Document DKSN027162.
    1001 Williams & Connolly Document DKSN027162 (emphasis in 
original).
    1002 Williams & Connolly Document DKSN018182.
    1003 Williams & Connolly DKSN018182.
    1004 Wright, 2/27/96 Dep. p. 132.
    1005 Williams & Connolly Document DKSN018184.
    1006 Williams & Connolly Document DKSN018184.
    1007 Williams & Connolly Document DKSN017636.
    1008 Williams & Connolly Document DKSN017635.
    1009 Goodwin, 4/30/96 Hrg. p. 21-22.
    1010 Goodwin, 4/30/96 Hrg. p. 21.
    1011 Goodwin, 2/26/96 Dep. p. 31.
    1012 Goodwin, 4/30/96 Hrg. p. 14.
    1013 Goodwin, 4/30/96 Hrg. p. 13.
    1014 Goodwin, 4/30/96 Hrg. p. 14.
    1015 Goodwin, 4/30/96 Hrg. p. 14.
    1016 Goodwin, 4/30/96 Hrg. pp. 14-15.
    1017 Goodwin, 2/26/96 Dep. p. 32.
    1018 Wright, 2/27/96 Dep. p. 151.
    1019 Williams & Connolly Document DKSN027455-DKSN027457
    1020 Williams & Connolly Document DKSN027455.
    1021 Garner, 6/13/96, Dep. p. 8.
    1022 Williams & Connolly Document DKSN027455.
    1023 Garner, 6/13/96, Dep. p. 18.
    1024 Garner, 6/13/96, Dep. pp. 22-23.
    1025 Garner, 6/13/96, Dep. p. 25.
    1026 Garner, 6/13/96, Dep. p. 26.
    1027 Garner, 6/13/96, Dep. pp. 26-27.
    1028 12/4/95, Letter from the Office of Independent Counsel to 
Robert J. Giuffra, Jr. and Neal E. Kravitz.
    1029 12/4/95, Letter from the Office of Independent Counsel to 
Robert J. Giuffra, Jr. and Neal E. Kravitz.
    1030 5/17/96, Letter from Robert J. Giuffra, Jr. to Theodore 
B. Olson.
    1031 5/23/96, Letter from Theodore B. Olson to Michael 
Chertoff and Richard Ben-Veniste.
    1032 5/23/96, Letter from Theodore B. Olson to Michael 
Chertoff and Richard Ben-Veniste.
    1033 5/23/96, Letter from Theodore B. Olson to Michael 
Chertoff and Richard Ben-Veniste.
    1034 6/6/96, Letter from John A. Mintz to Senator D'Amato and 
Paul Sarbanes.
    1035 6/6/96, Letter from John A. Mintz to Senator D'Amato and 
Paul Sarbanes.
    1036 Hale, 4/1/96 McDougal Trial Transcript p. 3052.
    1037 Hale, 4/1/96 McDougal Trial Transcript, p. 3054, 3058.
    1038 Hale, 4/1/96 McDougal Trial Transcript p. 3061.
    1039 Hale, 4/1/96 McDougal Trial Transcript p. 3069.
    1040 Hale, 4/1/96 McDougal Trial Transcript p. 3069.
    1041 Hale, 4/1/96 McDougal Trial Transcript p. 3083.
    1042 Hale, 4/1/96 McDougal Trial Transcript p. 3084.
    1043 Hale, 4/1/96 McDougal Trial Transcript p. 3098.
    1044 Hale, 4/1/96 McDougal Trial Transcript p. 3106.
    1045 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1046 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1047 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1048 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1049 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1050 Hale, 4/1/96 McDougal Trial Transcript p. 3102.
    1051 Hale, 4/1/96 McDougal Trial Transcript p. 3123.
    1052 Hale, 4/2/96 McDougal Trial Transcript p. 3221.
    1053 Hale, 4/2/96 McDougal Trial Transcript p. 3222.
    1054 Hale, 4/2/96 McDougal Trial Transcript p. 3223.
    1055 Hale, 4/2/96 McDougal Trial Transcript p. 3223.
    1056 Hale, 4/2/96 McDougal Trial Transcript p. 3223.
    1057 Hale, 4/2/96 McDougal Trial Transcript p. 3224.
    1058 Hale, 4/2/96 McDougal Trial Transcript pp. 3293-99.
    1059 Hale, 4/2/96 McDougal Trial Transcript p. 3294.
    1060 Hale, 4/2/96 McDougal Trial Transcript p. 3305.
    1061 Hale, 4/2/96 McDougal Trial Transcript p. 3314.
    1062 Hale, 4/2/96 McDougal Trial Transcript p. 3314.
    1063 Hale, 4/2/96 McDougal Trial Transcript p. 3308.
    1064 Hale, 4/3/96 McDougal Trial Transcript p. 3375.
    1065 Hale, 4/3/96 McDougal Trial Transcript p. 3375.
    1066 Hale, 4/3/96 McDougal Trial Transcript p. 3378.
    1067 Hale, 4/3/96 McDougal Trial Transcript pp. 3378-3380.
    1068 White House Document S12532.
    1069 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1070 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1071 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1072 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1073 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1074 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1075 Watt, 3/27/96 McDougal Trial Transcript p. 2475.
    1076 Palmer, 3/26/96 McDougal Trial Transcript p. 2178.
    1077 Palmer, 3/26/96 McDougal Trial Transcript p. 2178.
    1078 Palmer, 3/26/96 McDougal Trial Transcript p. 2178.
    1079 Palmer, 3/26/96 McDougal Trial Transcript p. 2179.
    1080 Palmer, 3/26/96 McDougal Trial Transcript p. 2178.
    1081 Palmer, 3/26/96 McDougal Trial Transcript p. 2179.
    1082 Palmer, 3/26/96 McDougal Trial Transcript p. 2179.
    1083 Palmer, 3/26/96 McDougal Trial Transcript p. 6775.
    1084 Patkus, 5/3/96 McDougal Trial Transcript p. 6781.
    1085 Patkus, 5/3/96 McDougal Trial Transcript p. 6781.
    1086 Patkus, 5/3/96 McDougal Trial Transcript p. 6781.
    1087 Patkus, 5/3/96 McDougal Trial Transcript p. 6781.
    1088 W. Clinton, 4/28/96 McDougal Trial Testimony p. 22.
    1089 W. Clinton, 4/28/96 McDougal Trial Testimony p. 23.
    1090 W. Clinton, 4/28/96 McDougal Trial Testimony p. 23.
    1091 W. Clinton, 4/28/96 McDougal Trial Testimony p. 24.
    1092 W. Clinton, 4/28/96 McDougal Trial Testimony p. 37.
    1093 James McDougal, 5/8/96 McDougal-Tucker Trial Testimony p. 
7327.
    1094 McDougal, 5/8/96 McDougal Trial Testimony p. 7327.
    1095 James McDougal, 5/8/96 McDougal-Tucker Trial Testimony p. 
7328.
             ADDITIONAL VIEWS OF SENATOR FAIRCLOTH (R-N.C.)

    The Senate began its Whitewater hearings nearly eleven 
months ago, but many Americans are still wondering what 
Whitewater is all about.
    To answer that question, first, it is important to remember 
that the Whitewater scandal is an outgrowth of the savings and 
loan scandal that cost the American taxpayers $150 billion. 
That monumental cost created ballooning deficits and a sluggish 
economy that allowed candidate Bill Clinton to run a campaign 
based on ``It's the economy, stupid.''
    It is somewhat ironic then, that the First Couple, had a 
role, albeit relatively small, in that scandal; and may explain 
to some extent the extraordinary lengths to which they have 
gone to cover-up this story. After all, during Bill Clinton's 
tenure as Governor of Arkansas, 80% of the state-chartered 
savings and loans failed.
    The guilty verdicts in Arkansas are a reminder that the 
American people have not forgotten that fraudulently run 
savings and loans like Madison Guaranty left them holding the 
tab. It was a system of heads I win; tails, the taxpayers lose. 
In the case of Madison, the taxpayers lost $68 million. With 
the Whitewater venture in particular, the taxpayers lost 
$88,000--more than the Clintons.
    If Whitewater was about anything, it was exposing this 
microcosm of the savings and loan scandal--and letting the 
American people know that they too were on the losing end of 
the Clintons' no money down land deal.
    The Clintons' association with the savings and loan crisis 
did not end with Whitewater. There is the question of Mrs. 
Clinton's work for Madison Guaranty and her role in the Castle 
Grande land deal. This aspect may yet prove to be the most 
serious charge.
    Castle Grande was typical of many of the fraudulent schemes 
from that era. The law prevented the S&L from directly 
investing a large sum of money in a raw land deal. In order to 
evade the law, Jim McDougal merely found a ``straw man'' to act 
as a borrower. That borrower was Webster Hubbel's father-in-
law, Seth Ward. Mrs. Clinton drafted the option that allowed 
the S&L to buy back the land. Thus, she finds herself at the 
center of the sham deal. This sham deal cost the American 
taxpayers over $3 million. It is not surprising that the 
Committee learned as late as Friday, June 14, 1996, the 
additional evidence that the First Lady was well aware, from a 
Madison insider, of the role she was playing in the scheme.
    This may be the most plausible explanation yet of why the 
billing records, which detail work on the Castle Grande 
project, remained hidden for two years in the White House.
    It has also been overlooked that Vince Foster was reminded 
that this remained a problem well into 1993, when Seth ward's 
letter regarding his lawsuit against the RTC was forwarded to 
Foster at the White House.
    Again, under the umbrella of what Whitewater is about, it 
should not be forgotten that the Clintons sought out these 
business associations with the likes of Jim McDougal, David 
Hale and Dan Lasater. Madison, for example, was a client 
because the Clintons wanted Madison to be a client. They were 
not a client, because of the efforts of an eager first year 
associate at the Rose Law Firm, the Committee's testimony on 
that point is very clear.
    One aspect of the Rose Law Firm's work in the savings and 
loan field is worth mentioning, because it was not probed 
extensively by the Committee. This is the strange episode of 
Vince Foster and Mrs. Clinton, representing the federal 
government against Dan Lasater, in the failure of two savings 
and loans in Illinois. Mrs. Clinton played a role in reviewing 
the settlement agreement that allowed Dan Lasater to avoid 
repaying over $2 million to the taxpayers. Mr. Lasater was a 
convicted cocaine dealer, friend and contributor to Bill 
Clinton, benefactor of state bond contracts, and Roger 
Clinton's employer.
    Again, in a word--this is Whitewater.
    Whitewater became a national story because of the nearly 
obsessive manner in which the Clintons and their political 
appointees, spread throughout the federal government, from the 
RTC to the Small Business Administration, handled the story. 
Recall that the SBA tipped off the White House about the 
pending investigation of David Hale in May 1993. Further, 
recall the White House was aware in March 1993 of the first RTC 
criminal referral involving Madison, thanks to Roger Altman's 
immediate faxes to Bernie Nussbaum. The White House became 
aware of the second batch of criminal referrals before they 
were even sent to the Justice Department.
    The White House also closely monitored the RTC civil 
investigation against the Clintons. White House aides got an 
inside briefing on the status, courtesy of Roger Altman. They 
then berated him for recusing himself from decision making. Of 
course, Maggie Williams, the First Lady's Chief of Staff, told 
the Committee that she never reported any information from the 
briefing to the First Lady. This was the first of a number of 
items that Ms. Williams remarkably never discussed with her 
superior. This either makes her a poor staff aide, or perhaps, 
a poor liar.
    Further, when the Office of Government Ethics (OGE) 
reviewed the handling of White House, RTC, and Treasury 
contacts, the Whitewater Committee demonstrated that the OGE 
report was procedurally flawed. Even that report could not be 
conducted without White House interference. A significant, but 
overlooked point, was that the OGE never judged White House 
ethical behavior, even though the Committee was lead to believe 
that they did.
    The Whitewater scandal was further defined by the way in 
which the White House handled the death of Mr. Foster. On this 
issue, in discerning the truth, perhaps it is best to look at 
the testimony of those that did not have a vested interest in 
maintaining the cover-up. Henry O'Neil, a veteran, uniformed 
Secret Service agent, testified that on the night of Mr. 
Foster's death, he saw Ms. Williams exiting Vincent Foster's 
office with a stack of documents. For what reason would Mr. 
O'Neil fabricate such a story and remember incorrectly events 
on the night of the death of a high ranking White House 
official? Can we really believe that Maggie Williams would have 
a phone conversation with the First Lady after returning from 
the White House that evening--and not tell Mrs. Clinton she had 
been to Mr. Foster's office?
    Are we not to believe the testimony of Stephen Neuwirth, 
associate attorney in the White House when he learned that 
certain people were concerned about ``unfettered access'' to 
Vince Foster's office? This coupled with the eight phone calls 
to the White House--before noon--made by Susan Thomasses on the 
day Mr. Foster's office was being searched by the FBI, Park 
Police and Justice Department. The phone calls had a clear 
pattern: Mrs. Clinton to Susan Thomasses to Bernie Nussbaum.
    Ms. Thomasses' posture before the Committee epitomized many 
of the witnesses closely associated with the Clintons. Ms. 
Thomasses had been described in news accounts as Mrs. Clinton's 
``blunt instrument of enforcement,'' yet, when she appeared 
before our Committee, she seemed to be the ``little lost 
lamb,'' simply making condolence calls to everyone.
    Regrettably, the Committee never heard any testimony from 
key figures in this episode, such as Jim McDougal, Susan 
McDougal, David Hale, Chris Wade, and of course, the Clintons 
themselves. While at one time I believed that Mrs. Clinton 
should have testified before our Committee, I now think the 
veracity of both the President and the First Lady is best left 
to the judgement of the Independent Counsel and the voters.
    This report brings to a close the Congressional 
investigation of Whitewater. Many looked for the silver bullet 
in this scandal. Whitewater is larger than just one defining 
incident. Whitewater was part wrongdoing, part scandal, and 
part cover-up. Individually, each may not have been 
devastating, but as it came together, as a story it offers 
great volumes about the savings and loan scandal, the Clintons' 
political appointees, their business associates, and the 
character of the Clintons themselves.
    Perhaps this is why that Mrs. Clinton did not want anyone 
probing into ``twenty years of public life in Arkansas.''
                                                   Lauch Faircloth.
    MINORITY VIEWS TO THE FINAL REPORT OF THE SPECIAL COMMITTEE TO 
 INVESTIGATE WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS OF 
 SENATORS SARBANES, DODD, KERRY, BRYAN, BOXER, MOSELEY-BRAUN, MURRAY, 
                               AND SIMON

                         Summary of Conclusions

                               i. preface

    The central question that faced the Special Committee is: 
Did Bill Clinton misuse the powers of the Presidency? The 
answer is a clear and unequivocal ``no.''
    A secondary question is whether, prior to his election as 
President, Mr. Clinton used his official position in the State 
of Arkansas improperly to provide favored treatment to business 
associates or others. In its exhaustive review of various 
allegations extending back to the 1970s in some instances, the 
Committee examined in excruciating detail a number of matters 
in Arkansas ranging from the handling of water and sewer 
legislation to state regulation of the sale of alcoholic 
beverages. Again, the clear conclusion is that then-Governor 
Clinton did not abuse his office.
    Having failed to tarnish the President, the Majority turned 
its attention to Mrs. Clinton's private law practice in 
Arkansas more than ten years ago. The Majority launched a 
massive hunt for some way in which to contradict statements 
made by Mrs. Clinton during the last four years. Again, no 
credible evidence has been put forward to show that Mrs. 
Clinton engaged in any improper, much less illegal, conduct.
    The public deserves an objective report that separates the 
facts developed in the Senate Whitewater inquiry from the 
superheated and untenable conclusions that pervade the 
Majority's report. Unfortunately, the extension of these 
hearings directly into the presidential campaign season has 
provoked a high degree of partisanship, which has undermined 
the objectivity of this investigation. Partisanship has colored 
the Majority's decisions in conducting the inquiry and in 
reaching conclusions that clearly are intended for political 
impact. It is now evident that this Committee's business easily 
could have been concluded within the original February 29, 1996 
deadline. When a parallel situation presented itself as the 
Iran-Contra hearings threatened to spill over into the 
political season, Democrats concurred in bringing the hearings 
to a prompt close. That was the right decision and one that 
future Senate committees should follow as a more worthy 
precedent than the Whitewater example.
    The Majority's pattern throughout these hearings has been 
to construct conclusions first and then to discard the facts as 
they become inconvenient. One after another, the partisan 
conspiracy theories about Whitewater--from the alleged 
shredding of documents at the Rose Law Firm, to the so-called 
``mystery phone call,'' to the ``all-important'' White House e-
mails--have turned into dry holes.
    Lacking any credible case against the President, the 
Majority is now engaging in a blatantly political game of 
``tag'' by tarring several witnesses with unsupportable 
suggestions of perjury in a bid to grab media attention. The 
political grandstanding of these ``perjury referrals'' is a 
tactic also used after the 1994 hearings. Margaret Williams, 
for instance--a favorite target of the Majority--has passed two 
lie detector tests, which corroborate her testimony that she 
did not remove documents from Foster's office on the night of 
his death. Yet, the Majority seeks to discount Williams's lie 
detector tests--performed first by a retired FBI polygraph 
instructor and confirmed by a present FBI expert under the 
supervision of the Independent Counsel. In the bargain, the 
Majority report takes on the reliability of polygraph testing, 
which the FBI has depended on for decades in investigations 
involving the highest levels of national security.
    Taken as a whole, the Majority's approach to its report has 
been to hammer evidence--no matter how ill-fitting--into the 
precast mold of its conclusions. A perfect example of this 
refusal to modify its preordained conclusion by reference to 
the facts is revealed by the Majority's treatment of the April 
5, 1985 fundraiser hosted by James McDougal for Governor 
Clinton at Madison Guaranty Savings and Loan. The Majority 
began the inquiry with the conclusion that there was a quid pro 
quo involving the fundraiser and the decision of an Arkansas 
state agency--ADFA--to lease office space from Madison 
Guaranty. To a fair-minded investigator, two obstacles to 
reading such a conclusion would be presented: (1) the fact that 
the lease for office space was entered into more than a full 
year before McDougal's fundraiser, and (2) the evidence showed 
that Governor Clinton played no role in selecting the office 
site or negotiating the terms of the lease. When the evidence 
at the public hearing demonstrated the circumstances under 
which the Madison space was chosen, a Member of the Majority 
registered his consternation at this departure from the 
Republican game plan:

          Mr. Chairman, isn't the point here simply to draw a 
        conclusion that [then-Governor Clinton] played a major 
        role in the selection of this building?

    Inconveniently, the evidence once again rebutted the 
preconceived conclusion, yet that conclusion is the one relied 
upon by the Majority in its final report.
    More than finding no abuse of office by Bill Clinton, the 
evidence gathered by the Committee shows that then-Governor 
Clinton demonstrated independence from political supporters 
doing business with State government. Three examples from the 
Committee's exhaustive review of Governor Clinton's twelve-year 
tenure as governor of Arkansas are representative of our 
findings in this area. In 1983, Marlin Jackson, the Arkansas 
State Banking Commissioner, informed Governor Clinton of bank 
regulatory problems at the Bank of Kingston, a small bank in 
northern Arkansas that James McDougal purchased after leaving a 
senior post in Governor Clinton's first administration. Jackson 
testified that he mentioned the Bank of Kingston problem as a 
``litmus test'' to see if the young governor would seek to 
influence Jackson and obtain favorable treatment for a 
political supporter. Clinton passed Jackson's test: Jackson 
testified that Governor Clinton told him:

          You do whatever you need to do to be a good, no, to 
        be a great Bank Commissioner and don't worry about the 
        political consequences. It doesn't matter who is 
        involved. I'll take the political heat. You just do 
        whatever you need to do to be a great Bank 
        Commissioner.

    Four years later, in another situation involving James 
McDougal, Governor Clinton showed the same good judgment and 
respect for the independence of state regulatory officials. 
McDougal requested a meeting with Governor Clinton and State 
Health Department officials to present a grievance about unfair 
treatment by state sanitarians inspecting sewage disposal 
systems at one of the Madison Guaranty real estate 
developments. McDougal behaved badly at the meeting, attacking 
the Health Department officials and accusing them of 
misconduct. Governor Clinton supported the state officials at 
the meeting. He reprimanded McDougal for his conduct in front 
of Health Department officials. Most important, after the 
meeting, Governor Clinton pulled aside Tom Butler, the Deputy 
Director of the State Health Department, and told him to ``do 
what you have to do, and you will not hear another word from 
me.'' Once again, Governor Clinton made it perfectly clear to a 
state regulator that James McDougal should not receive any 
special treatment.
    One final example of Governor Clinton's actions in Arkansas 
is worth noting. About 1984, Dan Lasater, a strong political 
supporter of Governor Clinton who had helped Clinton regain the 
Governor's office in 1982 after an upset loss in 1980, 
requested a meeting to complain to the Governor that his 
investment firm was not getting its fair share of the state 
bond business. Governor Clinton met with Lasater, listened to 
his complaint, then told him that he should make his case to 
the appropriate State officials. Although it would have been 
easy for him to do so, Governor Clinton did not tell Lasater 
that he would intervene in the matter. Lasater left the meeting 
``disappointed'' that he had not obtained the result he had 
hoped to obtain. Again, Governor Clinton did not intervene on 
behalf of a political supporter.
    These examples lead a fair-minded reader to the same 
conclusion that will follow from a review of the entire, 
lengthy report: Governor Clinton did not misuse his office, as 
Governor of Arkansas, or as President.
    These examples also underscore another important point. 
Governor Clinton, of course, was an elected public official 
when these events took place. As an elected official he was 
answerable to his constituents, and it was his responsibility 
to listen to their complaints. All elected public officials, at 
the state, local, and even the national level, must do this--it 
is part of the job. To do this job properly, however, a public 
official must exercise good judgment, so as to be responsive to 
constituents without going too far and interfering with the 
actions of career government officials who also are discharging 
their responsibilities. Governor Clinton's actions some ten 
years ago in Arkansas, as illustrated, met the test then of 
proper conduct by an elected official, and they meet that test 
now.
    The venom with which the Majority focuses its attack on 
Hillary Rodham Clinton is surprising, even in the context of 
the investigation. No attempt is made to place into perspective 
the relative importance to the American people of whether Mrs. 
Clinton has a specific recollection today of every memorandum, 
phone call, and detail of every case she handled in her private 
law practice in Little Rock over a decade ago.
    Every act is portrayed in its most sinister light, every 
failure of recollection is treated as though the standard for 
human experience is total recall and photographic memory.
    Perhaps the most sensationalized conclusions of the 
Majority involved the handling of Vincent Foster's papers. The 
crux of the disagreement between White House Counsel Bernard 
Nussbaum and Deputy Attorney General Philip Heymann was whether 
Nussbaum's insistence on being the one to review Foster's files 
in the presence of Justice Department lawyers and law 
enforcement officials would create an unfortunate appearance 
problem for the White House. Heymann agreed that, legally, the 
Park Police investigators had no right to enter the office and 
search the files, nor could Justice Department lawyers obtain a 
search warrant or subpoena. While Heymann was clearly prescient 
about the public and political fallout from Nussbaum's 
decision, who is to say that Nussbaum wasn't right also in 
believing that even if the Justice Department lawyers had taken 
part in the search, critics of the Administration would simply 
charge a broader conspiracy?
    Irresponsible claims of possible obstruction of justice 
simply ignore the testimony of law enforcement officials who 
came before the Committee: that the investigation into Vincent 
Foster's death--the only investigation involving the review of 
the office files--was not obstructed; that the investigators 
were provided every document or file they requested; that the 
investigators had absolutely no interest in reviewing financial 
records or files involving personal investments of the Clintons 
such as Whitewater; and that the investigators' interest was 
limited to reviewing a suicide note or other information 
bearing on the cause for Foster's suicide.
    The Majority's pursuit of White House officials involved in 
searching for a suicide note in the aftermath of Foster's death 
is equally irresponsible. Senator Dodd captured the spirit of 
the Majority's onslaught during a hearing in November, 1995:

          Senator Dodd. Mr. Chairman, just on this point, and I 
        think it is very important, this gets to the reality. 
        But what I was getting at earlier and what we're doing 
        here in a sense is there are sort of three fact 
        situations. You get a witness that says well, I don't 
        recall. The immediate accusation is you're being 
        disingenuous.
          If you have witnesses with conflicting testimony, the 
        allegation is someone's lying. And if you have 
        witnesses that have consistent statements, it's a 
        conspiracy.
          This is getting ridiculous. So you're trapped no 
        matter what you say * * * You're either disingenuous, 
        lying or conspiring, and that's just foolishness.

    The game of leaking information has marred the Committee's 
credibility throughout these proceedings. Often, distorted or 
even baseless charges have been disseminated through faceless 
leaks. The recent, well-orchestrated leak of the Majority 
report is but part of a pattern.
    The supposed short-term benefits of leaking will be offset 
by the longer-term diminution of credibility that the Majority 
must suffer for these blatantly political and unfair tactics.
    The Minority report was not leaked. It was released 
according to the rules. In it, the subjects set forth in Senate 
Resolution 120 are analyzed according to the testimony and 
documents presented. We look forward to the opportunity to 
present the facts to the American public in contrast to the 
overheated assertions by the Majority, which have characterized 
its approach to this investigation.
    Not including the Senate Banking Committee's hearings in 
1994, the Senate Whitewater Committee in 1995 and 1996 met for 
more than 300 hours in open sessions, taking 10,729 pages of 
hearing testimony in 51 hearings and 8 public meetings. The 
Committee received hearing testimony from 159 witnesses and 
took more than 35,000 pages of deposition testimony from 245 
persons. Hundreds of thousands of pages of documents have been 
provided to the Committee by various government departments, 
agencies, and individuals.
    The White House has produced more than 15,000 pages of 
documents, and the Clintons' attorney has produced nearly 
30,000 pages more.
    Direct costs of the various Whitewater inquiries now exceed 
$31,849,795 (as of May, 1996), including: $400,000 from the 
Senate Banking Committee's 1994 hearings (Senate Resolution 
229), $950,000 through the initial charter of the D'Amato 
hearings (Senate Resolution 120), approved May 17, 1995), and 
another $450,000 for an extension this year approved by the 
Senate (Senate Resolution 246, approved April 17, 1996); 
$3,800,000 for the Resolution Trust Corporation's contract with 
the Pillsbury, Madison & Sutro law firm, for the production of 
its report; and $26,249,795 by the Office of the Independent 
Counsel (through May, 1996). Costs of the various Whitewater 
inquiries in the House of Representatives and agency work to 
comply with inquiries while not separately accounted for amount 
to significant additional sums.
    This has been the longest-running congressional 
investigation of any sitting president, far longer than 
Watergate or Iran-Contra--both of which involved actual abuse 
of government power. The facts gathered by the Committee are 
more than enough to close this chapter. The American people 
deserve to know, and now can take comfort in knowing, that this 
year-long investigation shows no misconduct or abuse of power 
by their President or First Lady.

               summary of conclusions: washington matters

A. Jean Lewis's 1992 RTC criminal referral

    On September 2, 1992, two months before the presidential 
election, an investigator in the Kansas City field office of 
the Resolution Trust Corporation submitted a criminal referral 
to the Department of Justice relating to the failure of Madison 
Guaranty Savings and Loan Association. The handling of the 
referral, which named the Clintons as possible witnesses to an 
alleged check kiting scheme at Madison Guaranty, was the 
subject of extensive investigation and public hearings by the 
Special Committee.
    The evidence showed that the 1992 referral was prepared by 
a politically motivated investigator who pressed the 
investigation with the hope of damaging Bill Clinton's chances 
in the 1992 presidential election. The referral failed to 
allege any evidence of a crime and gratuitously named the 
Clintons as witnesses despite the absence of any reasonable 
basis to believe that the Clintons knew about the matters 
alleged in the referral.
    The allegations contained in the 1992 referral have been 
repeatedly rejected by federal prosecutors and other 
investigators. Career officials of the Federal Bureau of 
Investigation, the Department of Justice, and the United States 
Attorney's Office for the Eastern District of Arkansas all 
reviewed the allegations and properly rejected the 1992 
referral as a basis for prosecution. The Office of the 
Independent Counsel, which subsequently assumed responsibility 
for the investigation of the 1992 referral, has brought no 
criminal charges arising from the referral's allegations. The 
law firm of Pillsbury, Madison & Sutro, which the RTC retained 
to investigate civil claims arising from the failure of 
Madison, found no evidence to support the allegations contained 
in the 1992 referral and concluded that those allegations were 
insufficient to support even a civil cause of action based on 
fraud.
    The evidence showed that the Clinton Administration made no 
effort to interfere with the proper handling of the 1992 
referral following its submission. If anything, the evidence 
indicated that it was senior officials of the Bush 
Administration--at both the White House and the Department of 
Justice--who exhibited an unusually high level of interest in 
the referral prior to the 1992 presidential election. The 
United States Attorney in Little Rock, however, steadfastly 
refused to respond to political pressures and properly declined 
to take any action on the referral until after the election.

B. The investigations of David Hale

    The Special Committee conducted an extensive review of the 
federal government's handling of its various investigations of 
David Hale's fraudulent operation of Capital Management 
Services, Inc., Hale's small business investment company. The 
Committee viewed those federal investigations as particularly 
sensitive because once Hale came under criminal investigation 
he alleged publicly that as Governor of Arkansas, Bill Clinton 
participated in discussions relating to an illegal loan Hale 
made to Susan McDougal back in 1986. The Committee considered 
allegations that the Clinton Administration sought to silence 
Hale by interfering in the federal investigations of Hale's 
criminal activities.
    The Special Committee's investigation and public hearings 
established that the Clinton Administration made no effort to 
delay or obstruct the investigations and prosecution of Hale by 
the Small Business Administration and the Department of 
Justice. To the contrary, the evidence showed that the Small 
Business Administration promptly submitted a criminal referral 
describing Hale's fraudulent conduct and that the United States 
Attorney's Office in Little Rock quickly obtained a federal 
grand jury indictment against Hale. The evidence showed further 
that despite his extraordinary efforts to manipulate the 
criminal justice system in his favor, Hale received no 
preferential treatment from any federal government official.
    In late 1993, White House officials obtained from the Small 
Business Administration a report that the agency had provided 
to an oversight committee of the House of Representatives. The 
evidence established that no sensitive information was 
contained in this report or any of its attachments and that the 
motives of the White House officials who obtained the report 
were totally innocent. More important, the evidence established 
that White House officials made no efforts to affect the way 
the federal investigations of Hale were handled.

C. The RTC's handling of the 1993 criminal referrals

    Jean Lewis submitted nine additional criminal referrals 
relating to Madison Guaranty in October 1993. The Special 
Committee held several days of public hearings on allegations 
by Lewis that senior officials at the RTC interfered with her 
investigation. Lewis's principal allegation concerned a ``legal 
review'' of the referrals conducted by lawyers in the Kansas 
City field office of the RTC prior to the referrals' submission 
to the Department of Justice. Lewis claimed that the review was 
``unprecedented'' and that it was a blatant attempt to derail 
her referrals.
    The evidence established that the legal review was mandated 
by a nationwide RTC policy that had been instituted four months 
earlier without regard to Madison Guaranty. Contrary to Lewis's 
claim of interference, the legal review was conducted by career 
government lawyers and was intended simply to improve the 
quality of the referrals by making sure that allegations of 
possible criminal wrongdoing contained therein were supported 
by documents and other evidence.
    Lewis also claimed that in early 1994, as the RTC was 
conducting a follow-up civil investigation of Madison Guaranty, 
senior RTC officials in Washington sent RTC attorney April 
Breslaw to Kansas City in an attempt to influence the outcome 
of the investigation so as to avoid the filing of any civil 
lawsuits against the Clintons. This claim, like all of Lewis' 
claims of interference, was shown by the Committee's 
investigation to be without any evidentiary basis. The Special 
Committee's hearings showed that Lewis provided misleading 
testimony about her surreptitiously tape-recorded conversation 
with Breslaw. The Committee heard no credible evidence that any 
senior RTC official interfered with any RTC investigation of 
Madison Guaranty.

D. The Justice Department's handling of the criminal referrals

    The Special Committee also considered the Department of 
Justice's handling of the RTC criminal referrals. Prior to the 
Special Committee's creation, there had been rampant 
speculation that Associate Attorney General Webster Hubbell had 
interfered with the Justice Department's investigation of the 
referrals and had acted to block their use as bases for 
criminal prosecutions. This speculation found no evidentiary 
support.
    The Special Committee conducted an exhaustive inquiry into 
the Justice Department's handling of the RTC criminal referrals 
and came up with nothing to suggest that Hubbell or anyone else 
at the Justice Department interfered with the proper handling 
of the referrals. To the contrary, the evidence established 
that Hubbell, who had no supervisory authority over the Justice 
Department's criminal division, never made any effort to affect 
the handling of the referrals and did not even know about their 
existence until many months after their submission.
    The evidence also showed that Paula Casey, the United 
States Attorney in Little Rock, properly handled her office's 
plea negotiations with Hale and later properly recused herself 
from further consideration of criminal referrals concerning 
Madison Guaranty and Capital Management Services, Inc. Hale 
sought immunity from prosecution from Casey in exchange for 
what he claimed was incriminating information about high-
ranking Arkansas politicians, but he refused to provide any 
factual details. As required by Justice Department practice, 
Casey invited Hale to proffer his information to the government 
but declined to reach a plea bargain with him unless he first 
provided his information. The Office of the Independent Counsel 
later followed the same approach.

E. White House discussions of Beverly Bassett Schaffer in 1993-94

    It was alleged during the 1992 presidential campaign that 
Hillary Rodham Clinton obtained favored treatment for Madison 
Guaranty from the Arkansas Securities Department back in 1985 
in a legal matter concerning a contemplated offering of 
preferred stock. When the allegation arose in 1992, Beverly 
Bassett Schaffer, the Securities Commissioner in 1985, publicly 
refuted it. Schaffer stated that Mrs. Clinton had neither 
sought nor received favored treatment for her client and that, 
contrary to the accusation, there was nothing either 
inappropriate or unique about Mrs. Clinton's inquiry into 
whether it was permissible for a state-chartered savings and 
loan institution to issue preferred stock for the purpose of 
increasing its capitalization.
    When allegations concerning the preferred stock issue 
surfaced again in late December 1993 and early January 1994, 
several White House officials recalled Schaffer's credible 
statements during the campaign. White House officials thought 
it was important to determine whether Schaffer had made a 
correct legal judgment back in 1985 and, if so, whether she 
would be willing to speak out publicly again. Although they 
correctly determined that it would not be at all improper for 
the White House to contact Schaffer for this purpose, White 
House officials chose not to contact her because of concerns 
that any such contacts would be mischaracterized as attempts to 
influence Schaffer's views on the propriety of Mrs. Clinton's 
1985 conduct.
    The Special Committee held several days of public hearings 
on the activities of the so-called Whitewater Response Team at 
the White House in late 1993 and early 1994. The Committee's 
hearings were full of testy exchanges and colorful language. 
But at their conclusion, the hearings established that no White 
House official made any effort to influence the substance of 
Schaffer's statements about the preferred stock issue. The 
evidence showed that the White House properly determined that 
Schaffer had made a correct legal judgment back in 1985 and 
then encouraged Schaffer to speak out publicly, as she had in 
1992, to refute the false allegations of favoritism.

F. Use by the White House of materials related to the Office of 
        Government Ethics' July 1994 report on White House-Treasury 
        contacts

    The Special Committee held several days of public hearings 
to determine whether the White House Counsel's Office 
improperly received investigative materials underlying the 
Office of Government Ethics' July 1994 report on White House-
Treasury contacts and, if so, whether the White House made any 
improper use of the materials in preparation for Congressional 
hearings. The evidence showed that no improprieties occurred.
    The White House made no effort to interfere in any way with 
the investigation conducted by the Office of Government Ethics 
and the Inspectors General of the RTC and the FDIC. That 
investigation was thorough and complete and resulted in a fully 
independent determination on the merits.
    The evidence showed that the White House Counsel had two 
entirely proper purposes in obtaining investigative materials--
to conduct a thorough internal White House review of the White 
House-Treasury contacts, and to prepare complete and accurate 
testimony to be provided to Congress. The evidence established 
that the White House obtained no sensitive RTC information and 
that none of the deposition transcripts received were used 
improperly to affect the Congressional testimony of any White 
House witness. The transmission of investigative materials to 
the White House had no effect whatsoever on any of the 
investigations conducted by the Office of Government Ethics, 
the Congress or the Independent Counsel.

                SUMMARY OF CONCLUSIONS: ARKANSAS MATTERS

    The Special Committee devoted enormous resources to 
investigating a variety of allegations concerning matters 
taking place in Arkansas since 1978. The allegations fell into 
three broad categories: (1) allegations concerning the 
Clintons' personal finances; (2) allegations concerning 
Governor Clinton's conduct as Governor of Arkansas; and (3) 
allegations concerning Mrs. Clinton's work as a Rose Law Firm 
attorney. After months of exhaustive investigation into 
Arkansas-related matters--including more than 100 sworn 
depositions and 20 days of public hearings--the allegations of 
improprieties remain unsupported by the evidence. On the 
contrary, the evidence shows that neither the President nor 
Mrs. Clinton engaged in any improper, much less illegal, 
conduct in connection with any of the events in Arkansas that 
were examined in minute detail by the Special Committee over 
the past thirteen months.

A. Whitewater

            1. The initial investment
    On August 2, 1978, the McDougals and the Clintons purchased 
approximately 230 acres of undeveloped land in Flippin, 
Arkansas from a group of local investors known as the 101 River 
Development Corporation. The property was bounded on one side 
by Arkansas Route 101 and on the other side by the White River. 
Because the White River area was popular with sportsmen, James 
McDougal envisioned the property as a retirement and vacation 
development. He named it Whitewater Estates.
    The McDougals and the Clintons paid $202,611 for the 
Whitewater property, slightly less than $900 per acre. They 
financed this purchase with two bank loans. The Special 
Committee investigated whether the McDougals and the Clintons 
received special treatment from the banks in obtaining these 
loans because Mr. Clinton was Arkansas Attorney General and a 
candidate for Governor when the loans were made. The evidence, 
however, demonstrated that the McDougals and the Clintons did 
not receive any special treatment in connection with the making 
of the loans. The loans were made on the same terms and at the 
same interest rates as similiar loans to other borrowers. The 
bank that provided the first mortgage loan financed other real 
estate developments in the same area. In addition, the 
testimony of the bank officials who made the Whitewater loans 
demonstrated that the Clintons were passive investors in the 
Whitewater project. The banking officials who made the loans 
were pleased to have the opportunity to make a loan to the 
McDougals and the Clintons, and one bank official actively 
solicited the loan business from Mr. Clinton. Overall, the 
testimony of the bank officials who authorized and managed the 
loans established that the Clintons had little, if any, 
involvement in the financing of the investment.
            2. Management of the Whitewater investment
    From 1978 until 1986 the business affairs of the Whitewater 
development were managed by James and Susan McDougal, assisted 
by Charles James, the accountant who kept the books for 
Whitewater and other real estate developments managed by the 
McDougals. The Special Committee's investigation of the 
Whitewater investment has confirmed what other investigations 
of Whitewater have found: Records for the Whitewater investment 
were not properly maintained by the McDougals during the years 
that they managed the investment, and the Clintons did not 
receive regular and complete information about the investment 
from the McDougals.
    In 1986, after the McDougals left Arkansas and stopped 
attending to the affairs of Whitewater, Mrs. Clinton attempted 
to obtain information about the investment. She contacted James 
to obtain corporate records, and she asked Yoly Redden, who 
then was the Clintons' personal tax preparer, to review the 
records and try to determine how much money the Clintons had 
put into Whitewater and what was the financial condition of the 
enterprise at that time. The testimony that Redden and James 
provided to the Special Committee confirms that the Clintons 
were never well-informed about Whitewater.
            3. The renewals of the Whitewater loans
    After the Clintons and McDougals incorporated Whitewater 
Development Company, Inc. in 1979, they transferred the land to 
the corporation, subject to the bank loan that was secured by 
the property, which was not assumed by corporation. That loan 
was subsequently renewed or extended nine times before it was 
paid off on May 12, 1992. The Committee devoted considerable 
attention to those loan renewals. In particular, the Committee 
explored: (1) whether the loan received special treatment; and 
(2) whether the loan renewals were connected in any way to 
banking legislation enacted by the State of Arkansas in 1987 
and 1988 that may have benefitted the bank that made the 
Whitewater loan.
    The evidence collected by the Special Committee 
demonstrated conclusively that the Whitewater loan renewal 
requests did not receive any special treatment. The loan was 
fully collateralized and was personally guaranteed by the 
Clintons and the McDougals. In addition, beginning in 1985, the 
bank received all income from lot sales. Also, although two 
loan renewals (out of the total of nine renewals) 
coincidentally occurred at about the same time as the approval 
of state bank legislation, the evidence demonstrated that there 
was no connection between the loan renewal and the banking 
legislation. The only connection between the Whitewater loan 
renewals and the branch banking legislation was a coincidence 
of timing.
            4. The Whitewater lot 13 transaction
    The Committee also reviewed a loan to Mrs. Clinton from 
Madison Bank & Trust Company (previously known as the Bank of 
Kingston and not to be confused with Madison Guaranty Savings & 
Loan Association). Mrs. Clinton borrowed $30,000 from that bank 
to finance a model home on Whitewater Estates lot 13. The 
Committee looked into allegations that this loan violated 
banking regulations restricting loans outside a bank's 
designated loan territory. The Committee found no evidence of 
any improprieties involving the Clintons with respect to this 
loan.
            5. Whitewater tax issues
    The Special Committee conducted a limited review of matters 
pertaining to the Clintons' treatment of the Whitewater 
investment on their personal income tax returns and to the 
corporate tax filings of Whitewater Development Company, Inc. 
The Committee's review of these matters, while not exhaustive, 
was sufficient to establish that (1) the Clintons' tax 
treatment of the Whitewater investment on their personal tax 
returns was appropriate based upon the limited information 
about the investment that they received and (2) the information 
about the investment they received was, in many instances, 
incomplete or incorrect, which resulted in some unintentional 
errors in the Clintons' personal tax returns. These conclusions 
are consistent with the findings of other investigations of the 
Whitewater investment, particularly the Pillsbury Madison & 
Sutro 1994-96 investigation and the review of Whitewater 
accounting and tax matters conducted for the Clintons by Denver 
attorney James M. Lyons in March 1992.
    The evidence collected by the Special Committee shows that 
unlike many real estate investors during the time period of the 
Whitewater investment, the Clintons did not claim personal tax 
deductions for corporate losses incurred by Whitewater. The 
Clintons' tax treatment of the Whitewater investment was 
conservative and reflected the economic substance of the 
transaction--they only claimed tax deductions when they made 
legally deductible payments with their own funds. The Special 
Committee found no evidence that the Clintons ever sought to 
obtain any improper tax benefits from their investment in 
Whitewater.
    As noted above, the Special Committee also found that 
records for the Whitewater investment were not properly 
maintained by the McDougals during the years they managed the 
investment, and the Clintons did not receive regular and 
complete information about the investment from the McDougals. 
This poor recordkeeping and reporting resulted in some 
unintentional errors on the Clintons' personal tax filings. 
Where the existence of an error has been established, the 
Clintons have, at their own initiative, paid additional taxes 
and interest to correct the errors.
    The Special Committee also reviewed whether or not the 
Clintons received actual or imputed income from the Whitewater 
investment that they had a legal obligation to report on their 
personal income tax returns. As has been the case with all 
other investigations of Whitewater, the Special Committee found 
that the Clintons received no return on their Whitewater 
investment. Although some esoteric tax theories have been 
advanced for the proposition that the Clintons should have 
recognized income on their personal tax returns in connection 
with payments on the land acquisition loans that were made with 
Whitewater corporate funds or funds contributed by the 
McDougals, those theories are not supported by the evidence 
obtained by the Special Committee. All of the witnesses 
examined by the Special Committee rejected these theories. The 
Special Committee confirmed that the Clintons put money into 
Whitewater, but never took any money out of the investment. 
Moreover, the proceeds of the Whitewater land acquisition loans 
were invested in the business, through the land purchase, and 
the Clintons did not use any portion of the proceeds of those 
loans for their personal benefit. Both logic and legal analysis 
support the conclusion that the Whitewater investment did not 
result in any taxable income to the Clintons.
    In short, the Special Committee found no evidence that the 
Clintons entered into the Whitewater investment as a tax 
shelter or ever sought to use the investment as a means to 
avoid paying their personal income taxes, even when they 
legally might have done so.

B. Arkansas regulators' oversight of the McDougals

    The McDougals operated several business enterprises in 
Arkansas during the 1980s, including Madison Guaranty, Madison 
Bank & Trust Company, and various real estate developments. The 
activities of these businesses were subject to regulation by 
various Arkansas government agencies.
    The Majority has asserted that the McDougals and their 
business enterprises obtained favored treatment from state 
regulators due to the McDougals' relationship with Governor 
Clinton. In particular, it has been alleged that Governor 
Clinton influenced government actions to benefit the McDougals. 
It also has been suggested that the McDougals provided 
financial benefits to the Clintons in return for the allegedly 
favorable treatment. The record developed by the Special 
Committee, however, is at odds with these allegations.
    The evidence collected by the Special Committee 
demonstrated that the McDougals did not receive favored 
treatment from state agencies and that Arkansas state officials 
treated the McDougals and their business enterprises properly 
and appropriately. The evidence further demonstrated that 
Governor Clinton did not intervene with state officials or take 
any improper action in the McDougals' behalf. Finally, the 
record simply does not support the allegation that the 
McDougals provided improper financial benefits to the Clintons.

 a. The Arkansas State Agency leases of offices from Madison Guaranty 
     were proper, appropriate and in the normal course of business

    The Special Committee investigated whether certain leases 
were awarded to Madison Guaranty because of Governor Clinton's 
relationship with James McDougal. In particular, the Committee 
reviewed whether the leases were related to a fundraiser that 
McDougal held for Governor Clinton at Madison Guaranty on April 
5, 1985. The evidence collected by the Committee establishes 
that the leases were entirely proper and appropriate, and were 
entered into in the normal course of business. There is no 
evidence that Governor Clinton or anyone acting on his behalf 
caused or directed the leases to be signed, or that Madison 
Guaranty received any special consideration. Moreover, the 
State first leased space at Madison Guaranty at least a year 
before the fundraiser took place. Thus, there is no basis to 
connect the fundraiser with the leases, and no reason to 
believe that the leases entailed a quid pro quo of any kind.

 b. McDougal received no special treatment from the Arkansas Alcoholic 
                          Beverage Commission

    The Committee reviewed whether Governor Clinton took any 
action to influence the Arkansas Alcoholic Beverage Control 
Division (``ABC'') to provide favored treatment to James 
McDougal. The Special Committee investigated whether Governor 
Clinton interceded with the ABC in support of McDougal's 
efforts to develop a microbrewery and brew pub on the IDC 
property. The Committee also investigated whether Governor 
Clinton caused the ABC to promulgate a regulation permitting 
breweries to operate ``tasting rooms.'' The evidence, however, 
demonstrated that Governor Clinton never contacted the ABC with 
respect to the IDC brewery proposal. The evidence further 
demonstrated that Governor Clinton played no part in the 
approval of the tasting room regulation.

                        c. The sewer legislation

    In 1987 Governor Clinton signed legislation to deregulate 
small sewer and water utilities. The Majority has alleged that 
the legislation was designed to provide special treatment to 
the Castle Sewer and Water Company and to protect the Rose Law 
Firm from exposure to civil liability. The Committee found that 
the Arkansas Public Service Commission and the entire Arkansas 
legislature supported the legislation. Furthermore, passage of 
the legislation was fully justified on the merits.

d. McDougal's Maple Creek Farms development and the reassignment of the 
                 Arkansas Health Department Sanitarians

    The Special Committee reviewed whether Governor Clinton 
interfered with the regulation of the Maple Creek Farms project 
by Arkansas Health Department officials. In March 1986 Governor 
Clinton arranged a meeting at which McDougal could communicate 
to Health Department officials the concerns he had about unfair 
treatment at the Maple Creek project. Beyond arranging the 
meeting, which was appropriate, Governor Clinton did not take 
any action on McDougal's behalf, either at the meeting or 
thereafter. To the contrary, Governor Clinton reprimanded 
McDougal (who behaved badly at the meeting) for his behavior, 
defended the Health Department's professional staff, and told 
McDougal to work with the Health Department to resolve the 
problems. Most important, immediately after the meeting 
Governor Clinton made a special effort to let the Health 
Department know that McDougal was not to receive any special 
treatment and that Clinton would support whatever action the 
Health Department decided to take.

 e. Regulation of Madison Bank and Trust by the Arkansas State Banking 
                               Department

    The Special Committee reviewed the regulation of a small 
Madison Bank & Trust Company, that James McDougal operated 
after he left a position on Governor Clinton's staff in 1980. 
In October 1980 McDougal and a group of investors purchased a 
controlling interest in the Bank of Kingston, a small bank in 
Kingston, Arkansas. McDougal then changed the bank's name to 
Madison Bank & Trust Company. As a state chartered institution, 
Madison Bank was regulated by both the Arkansas State Banking 
Department and the Federal Deposit Insurance Corporation. In 
1983 Marlin Jackson was the State Bank Commissioner.
    In 1983 Jackson informed Governor Clinton of regulatory 
problems at Madison Bank. Jackson testified that he told the 
Governor about Madison Bank's problems as ``a litmus test'' to 
see if Governor Clinton would seek to influence Jackson and 
obtain favorable treatment for a political supporter. (Jackson 
was aware that McDougal had been a member of Governor Clinton's 
staff during Clinton's first term in office, 1979-80.) Governor 
Clinton passed Jackson's litmus test. Jackson testified that 
Governor Clinton responded:

          You do whatever you need to do to be a good * * * no, 
        to be a great Bank Commissioner and don't worry about 
        the political consequences. It doesn't matter who is 
        involved. I'll take the political heat. You just do 
        whatever you need to be a great Bank Commissioner.

    The evidence collected by the Special Committee confirms 
that Governor Clinton never interfered with Jackson or the 
State Banking Commission in their regulation of Madison Bank. 
After his discussion with Governor Clinton, Jackson and the 
State Banking Commission joined with the Federal Deposit 
Insurance Corporation in a cease-and-desist order against 
Madison Bank that curtailed the bank's ability to make out-of-
territory loans and, among other things, required the bank to 
increase its operating capital. Governor Clinton never 
attempted to intercede on James McDougal's behalf. In fact, 
other than the one conversation described above--which was 
initiated by Jackson--Governor Clinton never discussed Madison 
Bank or James McDougal with Jackson.

C. Lasater & Company

    The Special Committee reviewed State bond underwriting 
contracts awarded to Lasater & Company. The Committee's inquiry 
focused on allegations that Lasater & Company's selection as 
bond underwriter for State agencies resulted from improper 
political pressure. The extensive evidentiary record developed 
by the Committee does not support the charge that Governor 
Clinton improperly steered state bond business to Lasater & 
Company. The record shows that in 1983 Governor Clinton put in 
place a new policy of spreading state bond business among 
qualified firms (his Republican predecessor had given all the 
business to two local firms) and that Lasater & Company was 
only one of the firms that benefitted from this new policy.
    Witnesses from the State agencies that awarded underwriting 
business to Lasater & Company, from Governor Clinton's office, 
and from the Lasater firm uniformly testified that no political 
pressure was applied to include Lasater & Company in State bond 
underwritings. Instead, under the new policy, all Arkansas 
underwriting firms participated in State business regardless of 
their political identification. All local underwriting firms 
participated equally, sharing the portion of the bond issues 
that was not allocated to one of several large national 
underwriters. The Lasater firm received only a small share of 
State bond underwriting business, and received a share similar 
to that of other local firms. The participation of the Lasater 
firm was supported by both Democratic and Republican State 
officials. Thus, the allegation that Lasater & Co.'s 
participation in State bond issues was due to political 
favoritism is not supported.
            1. Clinton Administration expands number of underwriters 
                    participating in State bond business
    Under Governor Clinton, the number of firms doing 
underwriting business with the State of Arkansas expanded. From 
1980-82, under Republican Governor Frank White, Arkansas State 
bond underwriting business had been the preserve of a small 
number of firms. During that time, State agencies used 
underwriters E.F. Hutton, Stephens, Inc. and T.J. Raney almost 
exclusively. After 1983, the Clinton Administration promoted 
participation in State bond underwriting by all qualified 
Arkansas firms, regardless of which political candidates they 
supported. Betsey Wright, former Chief of Staff to Governor 
Clinton, added that Governor Clinton's goal was to make the 
State bond underwriting business ``as open and available to all 
companies in the State as possible.''
            2. Lasater & Company's participation in bond underwriting 
                    for AHDA/ADFA
    These policies were adopted by the Arkansas Housing 
Development Agency, a State agency that issued bonds to provide 
home mortgages to Arkansas residents. In keeping with the views 
of Governor Clinton and the AHDA Board Members, the agency used 
a greater number of underwriters after 1983. Pursuant to these 
policies, Lasater & Company began underwriting AHDA single 
family bonds in 1983. That year the Lasater firm received a 
13.33 percent share of the bond issue--smaller than one local 
firm and equal to the share of two other local firms. Two of 
the three AHDA Subcommittee Members who voted to include 
Lasater & Company were appointed by Governor Frank White; the 
third was appointed by Governor Bill Clinton. Lasater & Company 
received an even smaller share of AHDA's next bond offering. 
All local firms, including the Lasater firm, received the same 
share of the bond issue--10 percent.
    The Lasater firm was treated the same as other local firms. 
The Lasater firm always was part of a team of underwriters, 
including other local firms, that underwrote bond issues for 
AHDA and its successor agency, ADFA. The Lasater firm never 
served as the sole underwriter of an AHDA/ADFA bond issue. 
Other local firms underwrote as many state bonds as did the 
Lasater firm.
    It has been alleged that Governor Clinton directed AHDA and 
ADFA to award bond underwriting business to Lasater & Company. 
The evidence, however, did not demonstrate that Governor 
Clinton pressured anyone to include the Lasater firm in bond 
underwritings. Members of the Governor's staff have said it did 
not happen, members of the AHDA Board have said it did not 
happen, members of the AHDA staff have said it did not happen, 
and employees of both Lasater & Company and a competitor have 
said it did not happen.
    One witness recalled that a member of the staff of the 
Governor's Office suggested that the Lasater firm be included 
as an AHDA underwriter. Charles Stout, an appointee of 
Republican Governor Frank White who was serving out his term as 
Chairman of the AHDA Board in 1983, recalled receiving a 
telephone call from Bob Nash, an assistant to Governor Clinton 
for economic development matters. According to Stout, Nash 
'called [him] and recommended that we [AHDA] start using the 
Lasater firm.'
    No other witness recalled this incident. Nash testified 
that while he may have spoken with Stout regarding bond 
underwriting contracts, he never instructed Stout to include 
the Lasater firm in AHDA bond issues. Even if this telephone 
conversation occurred--which is hardly clear--it is likely that 
other witnesses do not recall it because it was innocuous in 
nature. Stout himself characterized the conversation as a 
suggestion from Nash, rather than a directive.
            3. Lasater & Company's Bond Underwriting for the Arkansas 
                    State Police
    The Committee also examined a 1985 bond issue for the 
Arkansas State Police shared by T.J. Raney & Sons, E.F. Hutton 
& Company and Lasater & Company. It has been alleged that 
Governor Clinton influenced the underwriter selection process 
to benefit Lasater. The evidence, however, does not establish 
that Governor Clinton or his staff pressured the Arkansas State 
Police to include the Lasater firm in the bond underwriting or 
to award the contract to the group including the Lasater firm.
    On April 4, 1985, Governor Clinton signed legislation 
authorizing the State Police Commission to acquire a new 
communications system, financed by bonds. That same day, the 
State Police Commission began a competitive process to select 
the bond underwriters. The State Police solicited proposals 
from all interested financial firms.
    Police Commissioner Johnny Mitchum, an appointee of 
Republican Governor Frank White, was a certified public 
accountant and the only member of the Police Commission with a 
background in finance. Mitchum reviewed the underwriting 
proposals and concluded that a proposal submitted jointly by 
investment firms T.J. Raney, E.F. Hutton & Company, and Lasater 
& Company was the most attractive for the State. An actuary 
hired by Mitchum concurred at the time that the Raney/Hutton/
Lasater bid was the best for the State of Arkansas. After the 
Police Commission heard oral presentations from the four 
finalists, the Raney/Hutton/Lasater team was awarded the 
contract by a vote of 4 to 2.
    The record does not establish that the Raney/Hutton/Lasater 
group won the bond underwriting for the Arkansas State Police 
as a result of special treatment, rather than submitting the 
best proposal. Members of the Governor's staff testified that 
no influence was exerted. Lasater and his employees testified 
that no influence was exerted on his behalf. Finally, the State 
Police witnesses themselves testified that they acted 
unilaterally and without influence from the Governor's office.
    The breakdown of the vote by the State Police Commission to 
award the contract to the Raney/Hutton/Lasater team 
demonstrates that it was not a politically motivated decision. 
Both Republican appointees to the Police Commission voted in 
favor of awarding the contract to the Lasater team; the two 
members who voted against the Raney/Hutton/Lasater team were 
both Clinton appointees.
    The Majority argues that it was improper for the State 
Police Commission to award this contract to a group including 
Lasater & Company because of rumors at the time that Lasater 
used cocaine. In fact, it is clear that the Clinton 
Administration was concerned about awarding State bond business 
to anyone under investigation for drug offenses. The Governor 
and members of his staff raised the issue with law enforcement 
authorities, who reported that no investigations of Lasater 
were underway at that time.

D. The Rose Law Firm's Representation of Madison Guaranty

            1. Background
    In April 1985 Madison Guaranty retained the Rose Law Firm 
to provide legal advice on a securities law matter, a proposed 
sale of preferred stock. The following year, on July 14, 1986, 
the firm ceased its representation of Madison Guaranty so the 
firm could qualify to represent federal regulatory agencies in 
litigation involving failed savings and loan associations. The 
Rose Law Firm was paid approximately $21,000 for its work in 
1985 and 1986 on behalf of Madison Guaranty.
    The Committee devoted considerable attention to the 
circumstances of the Rose Law Firm's retention by Madison 
Guaranty. In particular, the Committee examined allegations 
that James McDougal directed a portion of Madison Guaranty's 
legal business to Mrs. Clinton for improper reasons. The 
evidence, however, demonstrated that nothing improper occurred 
in connection with Madison Guaranty's retention of the Rose Law 
Firm.
    The Committee also examined the substance of the work the 
Rose Law Firm and Mrs. Clinton performed for Madison Guaranty. 
The evidence demonstrated that the Rose Law Firm's work for 
Madison Guaranty was legitimate, well-documented, and 
appropriately billed. There is no credible evidence that any of 
the legal services provided by Mrs. Clinton and the Rose Law 
Firm were improper or contributed to the failure of the 
institution.
    Finally, the Committee reviewed Mrs. Clinton's prior 
statements concerning the Rose Law Firm's retention by and work 
for Madison Guaranty. In this regard, the Committee carefully 
examined the documentary evidence, including the Rose Law 
Firm's billing records for the Madison Guaranty engagement, and 
took testimony from Rose Law Firm lawyers who participated in 
the representation. The Committee also examined the documents 
prepared by the Rose Law Firm for Madison Guaranty. This 
evidence demonstrated that Mrs. Clinton has accurately 
characterized her representation of Madison Guaranty as limited 
and insubstantial.
            2. The retention of the Rose Law Firm by Madison Guaranty
    On February 25, 1996, Pillsbury, Madison & Sutro, the law 
firm retained by the Resolution Trust Corporation to 
investigate possible civil claims relating to Madison Guaranty, 
concluded that a ``finder of fact is highly unlikely to find 
that there was anything untoward, let alone fraudulent or 
intentionally wrongful, in the circumstances of the Rose Law 
Firm's retention by Madison Guaranty.'' The Special Committee's 
investigation has confirmed that conclusion.
    The Special Committee devoted a great deal of attention to 
investigating how the Rose Law Firm came to be retained by 
Madison Guaranty and the role Mrs. Clinton played in the 
retention. Although it is impossible now, over eleven years 
later, to reconstruct exactly how the Rose Law Firm was 
retained, it appears that Rick Massey or Vincent Foster may 
have spoken with Mrs. Clinton about the possible retention of 
the firm and a prior billing problem with James McDougal. Mrs. 
Clinton then spoke with McDougal. She recalls that she told 
McDougal the Rose Law Firm would do the work if Madison 
Guaranty would enter into a retainer agreement which would 
ensure that the Rose Law Firm was paid for its work. Mrs. 
Clinton remembers that McDougal agreed to a $2,000 monthly 
retainer payment.
    Mrs. Clinton did nothing improper in connection with the 
retainer agreement, and there is no evidence that there was any 
illicit motive underlying the retention. Madison Guaranty 
needed legal counsel after legal issues arose out of McDougal's 
plan to sell preferred stock. The Rose Law Firm, because of the 
firm's expertise in securities law, was a logical choice to 
provide that counsel. The Special Committee found no evidence 
that Madison Guaranty's retention of the Rose Law Firm was a 
scheme for McDougal to confer a financial benefit on the 
Clintons.
            3. Regulation of Madison Guaranty by the Arkansas 
                    Securities Department
    As discussed above, the Special Committee's investigation 
confirmed that Mrs. Clinton's role in the representation of 
Madison Guaranty in the preferred stock matter was very 
limited. A related issue is whether, notwithstanding the 
limited nature of her work on the securities matters, Mrs. 
Clinton sought to use her position as the Governor's wife to 
seek special treatment for Madison Guaranty. The Special 
Committee's investigation has established that there was no 
effort to obtain preferential treatment, and that, in fact, no 
preferential treatment was given. To the contrary, the Arkansas 
Securities Department under the direction of Beverly Bassett 
Schaffer performed its duties in an entirely appropriate manner 
and took no action that either improperly benefitted Madison 
Guaranty or that was in any way inconsistent with the public 
interest.
    Mrs. Clinton had one brief telephone discussion with 
Schaffer at the outset of the representation. Schaffer 
testified that she did not attach any particular significance 
to her one telephone conversation with Mrs. Clinton. Nor did 
anyone in the Governor's office put any political pressure on 
Schaffer or her staff to give Madison Guaranty special 
treatment. The record demonstrates that Schaffer behaved 
exactly as an appointed regulatory official should in relying 
upon the expertise of her professional staff to identify 
applicable regulatory requirements and then insisting that all 
such requirements be met before her department approved Madison 
Guaranty's proposals. Because those requirements were never 
satisfied, the proposals were never approved.
    The Special Committee found that ultimately it was Schaffer 
who recommended in 1987 that Madison Guaranty be closed by the 
federal regulators. The federal regulators did not close 
Madison Guaranty until 1989. This delay was the result of the 
failure of the federal authorities to act on Schaffer's 
December 1987 recommendation and was in no way caused by 
Schaffer or other Arkansas officials. Although the Special 
Committee did not investigate the effect this delay had on the 
losses associated with Madison Guaranty, it is likely that 
those losses would have been reduced if the federal authorities 
had heeded Schaffer's recommendation and closed the institution 
in 1987.
            4. The IDC real estate transactions
    In the late summer and fall of 1985, the Rose Law Firm 
provided some legal services to Madison Guaranty in connection 
with the purchase of a large tract of land south of Little Rock 
from the Industrial Development Corporation or ``IDC.'' The 
work done by the Rose Law Firm, and especially Mrs. Clinton, on 
IDC matters was the subject of considerable attention by the 
Special Committee. The focus of that attention has been on 
whether Mrs. Clinton or other Rose Law Firm lawyers had any 
involvement in aspects of the IDC transaction that may have 
been unlawful. In particular, the Committee reviewed the 
initial purchase of a portion of the IDC property by Seth Ward, 
a transaction that has been characterized as a sham, ``straw 
man'' purchase (although Ward vehemently denies that charge), 
and the subsequent resales of parcels of that property to 
Madison Guaranty insiders. The Special Committee's 
investigation confirmed the conclusion of Pillsbury Madison & 
Sutro that the evidence does not support the assertion that the 
Rose Law Firm or Mrs. Clinton was aware of any unlawful conduct 
involving the IDC property.
    Although the Rose Law Firm did not do any legal work on the 
aspects of the IDC transaction that raised bank regulatory 
issues, the firm did provide legal services to Madison Guaranty 
on other matters relating to the development of the IDC 
property, and the Rose Law Firm provided that service. The bulk 
of that work, which was supervised by Mrs. Clinton, involved 
analysis of issues relating to utility regulations and laws 
regulating the sale of alcoholic beverages. The evidence 
collected by the Special Committee indicates that Madison 
Guaranty needed legal counsel on these two relatively routine 
legal issues that related to the development of the IDC 
property. Mrs. Clinton, recalls that she ``conducted research 
and explored possible issues pertaining to [the brewery and 
utility matters], both on my own and in partnership with Mr. 
Donovan [the Rose Law Firm associate who assisted her].'' The 
Rose Law Firm billing records confirm Mrs. Clinton's 
recollection of her involvement in these matters.
    Another matter relating to the IDC transaction that was 
reviewed by the Special Committee involved Mrs. Clinton's prior 
public statements that she did not work on the ``Castle 
Grande'' matter for Madison Guaranty. The Committee's review 
demonstrated that confusion has arisen as to whether the entire 
property purchased from IDC was known as ``Castle Grande'' at 
the time Mrs. Clinton performed the legal work described above. 
The documents and testimony provided to the Special Committee 
clearly indicate that within the Rose Law Firm, the work was 
known as the IDC matter. Although with the passage of time the 
entire property has sometimes been referred to as Castle 
Grande, the evidence collected by the Special Committee 
established that during the relevant time period--in 1985 and 
1986 when the Rose Law Firm was providing legal services to 
Madison Guaranty--only the portion of the IDC property south of 
145th Street was called Castle Grande. That was the name James 
McDougal gave to the residential development he started on that 
portion of the IDC property. John Latham testified that the 
residential area which was named Castle Grande was ``really a 
small part of'' the IDC property. The projects Mrs. Clinton 
worked on were related to the other, commercial, portions of 
the IDC tract, and did not involve the Castle Grande 
residential development. Thus Mrs. Clinton's prior statement 
that she did not work on Castle Grande is consistent with the 
evidence obtained by the Special Committee.

E. David Hale

    David Hale is the only witness who has claimed that 
Governor Clinton participated in discussions of financial 
transactions concerning Madison Guaranty and Capital Management 
Services, Inc. Hale, a twice convicted felon and an admitted 
liar and perjurer, has claimed that on three occasions in late 
1985 and early 1986 Governor Clinton spoke with him about an 
illegal $300,000 loan Hale was considering making to Susan 
McDougal. President Clinton has denied ever speaking with Hale 
about a loan to Susan McDougal. No document or witness brought 
before the Special Committee has corroborated Hale's assertion 
in any way.
    The jurors in the Tucker/McDougal trial, at which Hale and 
President Clinton both testified, made clear after the trial 
that they rejected Hale's unsubstantiated claim about Governor 
Clinton. One juror, Colin Capp, stated that the jurors 
considered Hale ``an unmitigated liar * * * [who] perjured 
himself. * * * David Hale invoked the President's name for one 
reason: to save his butt. We all thought that way.'' Another 
juror, Earnest Williams, agreed, adding, ``I didn't believe a 
thing Hale said.''
    In stark contrast, the jurors stated after the trial that 
they believed President Clinton when he denied having spoken 
with Hale about the loan to Susan McDougal. Sandra Wood, the 
jury foreperson, told the press, ``The President's credibility 
was never an issue. I just felt like he was telling us to the 
best of his knowledge what he knew.'' Juror Tracy Pleasants 
added, ``I just felt as though he [President Clinton] was 
telling the truth, and I wasn't so sure about David Hale.''
    Even Ray Jahn, the lead prosecutor who presented Hale's 
plea-bargained testimony at the trial on behalf of the Office 
of the Independent Counsel, backed away from Hale's unsupported 
assertion about Governor Clinton. In his closing argument, Jahn 
told the jury that no one, including Hale, had alleged 
wrongdoing by Governor Clinton. The lead prosecutor told the 
jury what anyone who had taken the trouble to review the actual 
testimony (rather than the hype) already knew--that there was 
no evidence presented at the trial, including Hale's testimony, 
that anyone pressured Hale to make the loan to Susan McDougal 
or her company, Master Marketing.
    The Special Committee has in its record an abundance of 
evidence, including 1,600 pages of official transcripts 
reporting nine days of Hale's testimony at the Tucker/McDougal 
trial, that sheds considerable light on Hale's veracity. 
Consistent with the view expressed by the jurors in the Tucker/
McDougal trial, the evidence in the Committee's record compels 
the conclusion that Hale's unsupported allegation regarding 
Governor Clinton is false.

              SUMMARY OF CONCLUSIONS: FOSTER PAPER MATTERS

    The Special Committee conducted an exhaustive investigation 
into the handling of documents in the office of Vincent Foster 
following his death. The investigation focused on the brief 
entry of Foster's office by three senior White House officials 
on the night of Foster's death for the purpose of looking for a 
suicide note, on the review of the contents of Foster's office 
conducted two days later by White House Counsel Bernard 
Nussbaum in the presence of law enforcement officials, and on 
the subsequent disposition of those contents, including 
personal and financial papers belonging to President and Mrs. 
Clinton.
    Although some voiced the opinion that the White House 
exercised questionable political judgment, particularly with 
regard to method used during the July 22, 1993 search of 
Foster's office in the presence of law enforcement officials, 
the evidence did not establish any unethical or unlawful 
conduct by any White House official.

A. The night of July 20, 1993

    The evidence showed that Nussbaum, Margaret Williams and 
Patsy Thomasson entered Foster's office on the night of 
Foster's death to look for a suicide note and to grieve for 
their friend and colleague. All three testified that they were 
in Foster's office only briefly, that they reviewed no 
documents, and that they removed nothing.
    Officer Henry O'Neill testified that he observed Williams 
remove materials from Foster's office on the night of July 20, 
1993. O'Neill's testimony, however, was confused and 
inconsistent as to what it was he remembered Williams carrying. 
Williams, by contrast, was quite clear in her testimony that 
she did not remove anything from Foster's office that night. 
Williams' testimony was corroborated by the results of two 
polygraph examinations, including one conducted by the Office 
of the Independent Counsel.

B. The review of the contents of Foster's office

    The unanimous opinion of the law enforcement witnesses who 
appeared before the Committee was that neither the Park Police 
nor the Justice Department had the authority to enter or review 
documents in Foster's office. Deputy Attorney General Philip 
Heymann testified that the Justice Department could not have 
obtained a search warrant or a subpoena for items in Foster's 
office because no crime had been committed. Consistent with 
their limited authority, the Park Police never expressed a 
desire to review all of the documents in Foster's office. To 
the contrary, their focus was much narrower--the Park Police 
sought to examine Foster's office only for a suicide note or 
other personal documents capable of shedding light on Foster's 
state of mind.
    The Committee heard divergent testimony about whether 
Nussbaum and Heymann reached an agreement on July 21, 1993 
concerning the procedures for the review of the documents in 
Foster's office. Department of Justice officials testified that 
Nussbaum agreed on July 21 that they, too, would be permitted 
to review Foster's documents. Nussbaum and other White House 
lawyers testified that there was no such agreement.
    The Majority has concluded that Nussbaum reneged on an 
agreement with Heymann under instructions from Mrs. Clinton 
passed through Williams and Susan Thomases. The Majority bases 
its conclusion on telephone records indicating that certain 
telephone calls were made on the morning of July 22.
    The Majority's conclusion is inconsistent with the 
testimony the Committee received. Nussbaum, Williams and 
Thomases all testified that they did not speak with Mrs. 
Clinton about the review of Foster's office, and Nussbaum and 
Thomases testified that Thomases did not act as an intermediary 
between Mrs. Clinton and Nussbaum.
    Most important, the Department of Justice attorneys told 
the Committee that although they thought Nussbaum's decision 
not to allow them to review the materials in Foster's office 
was a mistake politically--because Nussbaum's decision could 
create an appearance of a lack of impartiality--they made clear 
that Nussbaum's actions constituted no violation of any law or 
ethics rule. Indeed, Heymann testified that Nussbaum went 
``beyond what could be legally required of the White House 
Counsel'' by permitting law enforcement officials to be present 
during the search.
    Nussbaum went through the documents in Foster's office in 
the presence of investigators from the Park Police and career 
attorneys from the Justice Department. Nussbaum described the 
documents as he went through them, and he put to one side all 
of the documents the law enforcement officials expressed an 
interest in seeing. The White House promptly made all of these 
documents available to law enforcement for copying and review. 
No Park Police or Justice Department official ever asked 
permission to review any of the Clintons' personal financial 
files in Foster's office. As one of the senior Justice 
Department officials present during the search testified, 
``things like tax returns and personal financial information of 
the Clintons * * * didn't have much to do with a suicide 
investigation.''

C. The disposition of the Clintons' personal files in Foster's office

    Following the review of documents in Foster's office on 
July 22, 1993, Nussbaum decided to give the Clintons' personal 
files to their personal attorneys, Williams & Connolly. Neither 
the Justice Department attorneys nor the Park Police 
investigators present during the document review objected to 
Nussbaum's stated intention to send the Clintons' personal 
files to their private attorneys.
    Nussbaum asked Williams to deliver certain personal 
documents of the Clintons' from Foster's office to the 
Clintons' personal attorneys. Williams testified that later 
that afternoon, having attended to other matters in the 
meantime, she decided not to deliver the files to the Clintons' 
lawyer that day. Rather than leave the files in Foster's office 
or in her own office, Williams decided to put them in the White 
House residence.
    Bob Barnett, the Clintons' personal lawyer at Williams & 
Connolly, retrieved the personal files on July 27, 1993. 
Barnett does not recall seeing or speaking with Mrs. Clinton 
that day. He was certain that Mrs. Clinton was not present 
while he reviewed the contents of the box.
    There is no evidence that any of the personal files were 
removed or tampered with before they were transferred to 
Williams & Connolly. Nor is there any credible evidence that 
any document that was in Foster's office at the time of 
Foster's death has been withheld from the Committee.

D. The discovery of Foster's torn-up note

    White House officials discovered a torn-up note in Foster's 
briefcase on July 26, 1993. The White House provided the note 
to law enforcement officials as soon as they were able to 
notify Mrs. Foster and the President. Law enforcement officials 
testified that their investigations were not affected by the 
timing of the discovery and production of the note.

                     ROSE LAW FIRM BILLING RECORDS

    In January 1996, Carolyn Huber had some furniture removed 
from her White House East Wing office. She used the occasion to 
review the contents of a box of photographs and other materials 
to be catalogued that had been under a table, and discovered 
the Rose Law Firm billing records. Ms. Huber believed that 
these records had been requested by investigating authorities, 
and she immediately called David Kendall, the personal attorney 
for President and Mrs. Clinton. Later that afternoon, Kendall, 
Huber, Special Counsel to the President Jane Sherburne and 
Huber's personal attorney reviewed the documents together. At 
the end of this review, the lawyers concluded that the billing 
records were called for by various requests for documents from 
government agencies. They copied the documents that night and 
produced to them the next day to the Independent Counsel, the 
Special Committee, the House Banking Committee, and the FDIC.
    The documents found by Huber are copies of Rose Law Firm 
billing records for the firm's representation of Madison 
Guaranty in the mid-1980's. While these records provide more 
detail than was previously available, they do not contradict 
what Mrs. Clinton and Rose Law Firm lawyers have said about the 
representation of Madison Guaranty. The Rose Law Firm was not 
Madison Guaranty's regular outside counsel, and it handled only 
certain discrete assignments for the institution. Within the 
firm, Mrs. Clinton's work for Madison Guaranty was limited in 
time and scope. Work performed for Madison Guaranty comprised 
only a small fraction of the firm's total billings and of Mrs. 
Clinton's total billings.
    The Special Committee sought to establish the chain of 
custody of the Rose Law Firm billing records prior to their 
discovery by Huber in January 1996. It is not possible on the 
existing record to ascertain when and by what means the billing 
records were brought into the White House, or in whose custody 
they remained once they were there. Huber testified that she 
first encountered the billing records during the first or 
second week of August 1995. She first saw them in the ``Book 
Room,'' a room on the third floor of the White House residence 
used at that time to store gifts, photographs, newspaper and 
magazine articles, and other items to be catalogued. Huber 
testified that the documents had not been on the table in the 
Book Room when she last had occasion to be in that room, a week 
or two before. Huber retrieved four or five boxes of materials 
to be catalogued from the Book Room that day. She testified 
that the documents remained undisturbed in a box on the floor 
of her office from August 1995 to January 4, 1996, when the 
table was removed from her office and she examined the contents 
of the box.
    It appears that the billing records were in Foster's 
possession Foster in February 1992. Webster Hubbell testified 
that during the Presidential campaign early in 1992, an issue 
arose regarding contacts Mrs. Clinton may have had with the 
Arkansas Securities Department on behalf of Madison Guaranty. 
Either Hubbell or Foster requested that the billing records be 
printed by the Rose Law Firm accounting department.
    The testimony and the FBI fingerprint analysis of the 
records leave open the possibility that Foster brought the 
billing records to the White House. If so, they may have passed 
out of his possession before his death.
    Contrary to the Majority's insinuations, Kendall issued a 
statement on January 5, 1996 making clear that Mrs. Clinton did 
not put the billing records in the Book Room: ``the First Lady 
was not aware until today that these records were located in 
the White House.'' On January 26, 1996, Mrs. Clinton herself 
told the press, ``I do not know how the billing records came to 
be found where they were found, but I am pleased that they were 
found, because they confirm what I have been saying.''

                          II. Washington Phase

               A. JEAN LEWIS'S 1992 RTC CRIMINAL REFERRAL

1. Introduction

    The evidence showed that the Resolution Trust Corporation's 
1992 criminal referral regarding the Madison Guaranty Savings 
and Loan Association was prepared by a politically motivated 
investigator who pressed the investigation hoping to affect the 
outcome of the 1992 Presidential election. The referral, which 
the RTC investigator submitted to the Department of Justice 
just two months before Election Day, failed to allege any 
evidence of a crime and named the Clintons as witnesses despite 
the absence of any reasonable basis to believe that they knew 
about the matters alleged in the referral.
    The allegations contained in the 1992 referral have been 
repeatedly rejected by federal prosecutors and other 
investigators. Career officials of the Federal Bureau of 
Investigation, the Department of Justice, and the United States 
Attorneys Office for the Eastern District of Arkansas all 
properly rejected the 1992 referral as a basis for prosecution. 
The Office of the Independent Counsel, which subsequently took 
over responsibility for the investigation of the 1992 referral, 
has brought no criminal charges arising from the referral's 
allegations. And the law firm of Pillsbury, Madison & Sutro, 
which the RTC hired to investigate civil claims arising from 
the failure of Madison Guaranty, found no evidence to support 
the allegations contained in the 1992 referral and concluded 
that those allegations were insufficient to support even a 
civil cause of action based on fraud.

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

    On December 11, 1991, RTC criminal investigator L. Jean 
Lewis sent a memorandum to her supervisor setting forth the 
RTC's 1992 schedule for conducting criminal investigations of 
failed savings and loan institutions in Arkansas.1 Lewis, 
who had been delegated responsibility for the RTC's criminal 
investigations of all failed S&Ls in Arkansas,2 set the 
1992 schedule in consultation with senior officials in the 
Little Rock field office of the FBI.3 Lewis and senior FBI 
officials agreed that investigations of institutions most 
likely to lead to meritorious criminal prosecutions should be 
conducted first and should be made the top priorities for the 
RTC's limited investigative resources.4
    Consistent with this approach, Lewis listed Savers Savings 
Association (``Savers Savings'') of Little Rock and First 
Federal of Little Rock (``First Federal'') first and third, 
respectively, on her December 11, 1991 priority list of failed 
Arkansas institutions to be investigated in 1992.5 Lewis 
and senior FBI officials viewed these two institutions as 
highly likely to yield meritorious prosecutions; both 
institutions had failed in the recent past at enormous cost to 
taxpayers--Savers Savings at a cost of $650 million, First 
Federal at a cost of $900 million--and both had failed amid 
strong indications of criminal fraud.6 Neither institution 
had been the subject of a previous criminal investigation or 
prosecution.7 In light of these factors, Lewis scheduled 
the RTC's criminal investigations of Savers Savings and First 
Federal for the first quarter of 1992.8
    In the same December 11, 1991 memorandum, Lewis placed 
Madison Guaranty Savings and Loan Association near the bottom 
of her priority list--tenth out of the twelve failed Arkansas 
institutions to be investigated in 1992.9 Madison Guaranty 
had failed several years earlier at a far lower cost to the 
taxpayers--approximately $60 million--than Savers Savings, 
First Federal and the other top priority institutions. 
Moreover, Madison Guaranty had been the subject of an extensive 
federal criminal investigation in 1989-90 that had resulted in 
the 1990 trial and acquittal of James McDougal, the 
investigation's principal target.10 As of December 1991, 
the RTC and the FBI had no information indicating that any 
criminal activity had occurred at Madison Guaranty other than 
that already alleged and rejected by the jury in the 1990 
McDougal trial.11 In light of these factors, Lewis and the 
FBI agreed that further investigation of Madison Guaranty 
should be made a low priority,12 and Lewis scheduled the 
RTC's investigation of Madison for the final quarter of 
1992.13
    Lewis followed the agreed-upon schedule for several months. 
She shifted her priorities, however, following the March 8, 
1992 publication of Jeff Gerth's article on the Clintons' 
Whitewater investment in the New York Times.
    The Tulsa field office of the RTC, where Lewis was assigned 
at the time, received inquiries about the Gerth article from 
two senior RTC officials shortly after the article's 
publication.14 Lewis' supervisor, Richard Iorio, testified 
that the scope of both inquiries was strictly limited to the 
simple question whether there was ``any truth'' to Gerth's 
allegations;15 neither inquiry sought a significant 
investigation of Madison Guaranty or suggested that Lewis 
should advance the investigation of Madison Guaranty from its 
place near the bottom of her agreed upon 1992 list.16
    Nevertheless, Lewis--who was neither a trained criminal 
investigator nor a career civil servant--set aside the higher 
priority investigations she was conducting and traveled to 
Little Rock to look through Madison-related documents in a 
warehouse.17 In April 1992, Iorio granted Lewis' request 
that the RTC's criminal investigation of Madison Guaranty be 
advanced and placed ahead of the other failed Arkansas thrifts 
on Lewis' priority list.18

 3. Lewis rushed to complete a criminal referral prior to a self-
        imposed pre-election deadline

    Lewis worked intensively to prepare a criminal referral in 
the Madison Guaranty case by what she described as a ``self-
imposed deadline'' of August 31, 1992.19 Lewis set this 
deadline--a date approximately 60 days before the Presidential 
election--even though there was no compelling law enforcement 
interest, such as an imminent statute of limitations deadline, 
in completing the referral so quickly.20
    Lewis acknowledged that she understood in 1992 that her 
work on the Madison Guaranty referral could affect the outcome 
of the upcoming Presidential election if it became known that 
the Clintons were involved, even as mere witnesses, in a 
criminal investigation.21 But Lewis testified that her 
``own conservative [political] views'' caused her to hold 
herself to an even higher standard of professionalism in her 
work on the Madison Guaranty case than the standard to which 
she held herself in other cases.22 Lewis denied any 
intention of creating an ``October Surprise'' through the 
submission of a pre-election criminal referral naming the 
Clintons.23
    The Committee's record belied Lewis' testimony. Documentary 
and testimonial evidence established that Lewis did in fact 
intend her 1992 referral in the Madison Guaranty case to harm 
Bill Clinton's election chances.
    Lewis informed FBI Special Agent Steve Irons in August 1992 
that she would soon be submitting a criminal referral in the 
Madison Guaranty case.24 Irons' contemporaneous notes of 
the conversation indicate that Lewis told him she had ``g[iven] 
up a job opportunity in D.C.'' so that she could ``alter 
history'' by completing the Madison referral prior to the 
election.25
    Initially, Lewis told the Committee that she had no memory 
of having made this comment to Irons.26 Then, after being 
confronted with Irons' contemporaneous notes, Lewis testified 
that if she did tell Irons that she planned to alter history 
through the pre-election submission of her referral, she 
probably did so sarcastically.27
    Irons flatly contradicted Lewis' testimony on this point. 
Fully supported by his contemporaneous notes of the 
conversation, Irons testified that Lewis' comments about her 
desire to ``alter history'' were ``very dramatic'' and that, in 
his mind, the comments clearly related to Lewis' identification 
of the Clintons as witnesses in the referral.28 As 
discussed below, Lewis' conduct in the period immediately 
following her September 1, 1992 submission of the criminal 
referral compels the conclusion that Lewis sought to use the 
referral as a vehicle to alter the course of history by 
affecting the outcome of the 1992 Presidential election.
    The Committee's hearings established that Lewis was 
motivated by more than just her political interest in affecting 
the outcome of the 1992 Presidential election. Specifically, 
the evidence showed that Lewis held a strong personal animus 
toward Bill Clinton--an animus that was reflected in a letter 
Lewis wrote to a friend in February 1992, one month before 
Lewis dropped her work on higher priority institutions to focus 
on Madison Guaranty, in which Lewis referred to Clinton as a 
``lying bastard.'' 29

4. Lewis' 1992 referral failed to allege evidence of a federal crime 
        and gratuitously named the Clintons as witnesses

    With the approval of her supervisor in the field, Lewis 
transmitted a criminal referral to the United States Attorneys 
Office and the FBI in Little Rock on September 1, 1992.30 
The referral alleged a check kiting scheme at Madison Guaranty 
and named the Clintons as possible witnesses.31
    Career prosecutors at the Department of Justice who 
reviewed Lewis' 1992 referral uniformly criticized both its 
completeness and its quality. Mark MacDougal, a trial attorney 
in the Fraud Section who conducted a thorough written analysis 
of the merits of the referral, wrote that the referral ``does 
not provide * * * factual allegations sufficient to establish 
the elements of any of the criminal statutes used in the 
prosecution of [federal] bank fraud cases.'' 32 Gerald 
McDowell, the chief of the Fraud Section and a former chief of 
the Public Integrity Section, testified that the referral was 
``junky,'' that it had ``come in half-baked,'' and that ``it 
could have used more investigation before it came in.'' 33 
Michael Johnson, an Assistant United States Attorney in Little 
Rock, called the referral's allegations ``reckless,'' 
``irresponsible'' and ``odd.'' 34 Special Counsel Fiske 
and Independent Counsel Starr have had responsibility for 
investigating the 1992 referral since January 1994. Consistent 
with the opinions of the referral expressed by the career 
investigators and prosecutors, neither Fiske nor Starr has 
brought any criminal charges based on allegations contained in 
the referral. Indeed, Charles Patterson, one of the senior 
lawyers at the law firm of Pillsbury, Madison & Sutro, which 
investigated possible civil claims arising from the failure of 
Madison Guaranty for the RTC, testified that the firm found no 
evidence of the type of ``over-arching check kiting scheme'' 
alleged in the 1992 referral; Patterson testified that 
Pillsbury, Madison & Sutro found no evidence to support a civil 
fraud claim based on the information contained in the 1992 
referral, even though such a civil action would require a lower 
evidentiary showing than would any of the criminal charges 
contemplated in the referral.35
    Career prosecutors and investigators also have taken the 
view consistently that Lewis lacked an evidentiary basis on 
which to name the Clintons as witnesses to the alleged criminal 
conduct described in the referral. Mark MacDougal wrote that 
``[n]o factual claims can be found in the referral to support 
the designation of Mr. and Mrs. Clinton as witnesses.'' 36 
FBI Special Agent Steve Irons testified that he ``didn't think 
there was anything in [the referral] to support'' the 
allegation that the Clintons were witnesses to the check-kiting 
scheme alleged.37 Donald Pettus, the Special Agent in 
Charge of the FBI's Little Rock field office, wrote in an 
October 7, 1992 teletype to FBI Headquarters that ``there is 
indeed insufficient evidence to suggest the Clintons had 
knowledge of the check-kiting activity conducted by McDougal or 
Aunspaugh. The earlier mention of a campaign contribution to 
the gubernatorial campaign also drew no nexus suggesting 
knowledge or involvement by the Clintons.'' 38
    On behalf of the RTC, the law firm of Pillsbury, Madison & 
Sutro later reached the same conclusion as the career 
prosecutors and investigators--that Lewis lacked an evidentiary 
basis on which to describe the Clintons as witnesses. The 
firm's report stated that ``there is no basis to assert that 
the Clintons knew anything of substance about the McDougals' 
advances to Whitewater, the source of the funds used to make 
those advances or the source of funds used to make payments on 
bank debt.'' 39
    Even Lewis conceded at the Committee's public hearings that 
``there was no evidence that Mr. Clinton or Mrs. Clinton knew 
that Mr. McDougal was involved in this check kiting among his 
different companies.'' 40
    In sum, the Committee's record indicated that Lewis' 1992 
referral failed to allege evidence of a federal crime and that 
its identification of the Clintons as witnesses was without 
basis.

5. Lewis pressured the United States Attorneys Office and the FBI to 
        open a formal investigation before the Presidential election

    Lewis' supervisor, Richard Iorio, told the Committee that 
the RTC typically ``hears something'' back from the FBI or the 
United States Attorneys Office within approximately 90 days of 
the submission of a criminal referral.41 As a general 
rule, therefore, an RTC investigator has no reason to contact 
the FBI or the United States Attorneys Office to follow up on a 
criminal referral, or to inquire about its status, until 
approximately 90 days have passed since the referral's 
submission.42 Even then, Iorio testified, the only reason 
an RTC investigator would contact the FBI or the United States 
Attorneys Office would be to find out if either law enforcement 
agency was going to need the RTC investigator to assist in any 
continuing investigation; the RTC sometimes needs this 
information for its own scheduling purposes.43
    In the case of Lewis' 1992 referral in the Madison Guaranty 
case, Iorio and others at the RTC expected that it would take 
at least 90 days for the FBI or the United States Attorneys 
Office to contact the RTC about the referral. Iorio and others 
at the RTC understood that the upcoming change in 
Administrations--and the resulting automatic replacement of the 
United States Attorney in Little Rock--likely would cause a 
delay in the work of these federal law enforcement 
agencies.44 Thus, there was no reason for Lewis or anyone 
else at the RTC to contact the FBI or the United States 
Attorneys Office for a status report on the Madison Guaranty 
referral until at least 90 days, and probably a longer period 
of time, had passed since the referral's submission.
     Lewis testified that she did not contact the FBI or the 
United States Attorneys Office about the 1992 Madison referral 
until December 1992, one month after the Presidential 
election.45 Lewis told the Committee under oath that she 
``would have had no reason'' to contact the FBI or the United 
States Attorneys Office in September, October and November 1992 
to ask whether the referral would be pursued, whether subpoenas 
would be issued, or whether a grand jury investigation would be 
opened.46
    As before, Lewis' sworn statements before the Committee 
were directly contradicted by the testimony and contemporaneous 
notes of FBI Special Agent Steve Irons. Irons' testimony, along 
with that of several other career federal law enforcement 
officials, established that Lewis repeatedly contacted the FBI 
and the United States Attorneys Office between the referral's 
submission on September 1, 1992 and the Presidential election 
two months later. The evidence showed that Lewis tried during 
this critical time period to determine the status of the 
referral and to encourage the opening of a formal FBI or grand 
jury investigation.
    Lewis' efforts to press the FBI began almost immediately 
following her submission of the referral on September 1, 1992. 
In the course of the next ``few days,'' Lewis tried on several 
occasions to contact Irons ``to ask what the FBI was doing with 
[the] referral.'' 47 Apparently frustrated by her 
inability to reach Irons, Lewis called again on September 9, 
1992 and spoke with Irons' secretary, who left the following 
written message for Irons:

          Jean [Lewis] requested I take a verbatim message & 
        make sure you got it. It is as follows * * * (and don't 
        ask me what a pariah [sic] is!)
          Have I turned into a local pariah [sic], just because 
        I wrote one referral with high profile names or do you 
        plan on calling me back before Christmas, Steven????? 
        (816) 968-7237.48

    Irons returned Lewis' call on September 10, 1992. In 
response to an inquiry from Lewis, Irons stated that the FBI 
and the United States Attorneys Office had not made a decision 
about the Madison Guaranty referral and that they were not 
going to be in a position to provide status reports in the 
future.49
    Nevertheless, Lewis travelled to Little Rock on September 
18, 1992 and, without calling ahead, dropped in on Irons at the 
FBI's Little Rock field office.50 Irons, who was away from 
his office, returned to find Lewis there waiting for 
him.51 Lewis apologized for her repeated contacts but 
explained that ``her boss, Richard Iorio, kept asking her to 
try to find out what it was [the FBI was] doing.'' 52
    Richard Iorio's testimony directly contradicted Lewis on 
this point. Iorio testified that he never asked Lewis to 
contact the FBI or anyone else in September or October 1992 to 
try to determine the status of the Madison referral. 53
    Lewis soon began contacting the United States Attorneys 
Office in Little Rock about the Madison referral. United States 
Attorney Charles Banks testified that he was aware of four or 
five calls that Lewis made to the office between early 
September and October 16, 1992.54 Assistant United States 
Attorney Mac Dodson testified that Lewis called him ``fairly 
often'' between September and November 1992 and that Lewis gave 
him the impression that she thought prosecutors were not acting 
on the referral fast enough:

          All the calls would have been between the 1st of 
        September and probably November, around election time. 
        It was my recollection she called me every week or 
        every other week. She called me fairly often. * * * I 
        got the impression she thought I was not moving fast 
        enough.55

    Lewis explained to Dodson that it was ``standard'' RTC 
practice to make a follow-up contact six weeks after the 
submission of a referral to make sure the referral had been 
received and to find out if any clarification or assistance was 
needed.56 Like the explanation Lewis had given to Special 
Agent Irons for her repeated attempts to contact the FBI, 
Lewis' statement to Dodson was contradicted by the sworn 
testimony of Lewis' supervisor, Richard Iorio; as set forth in 
greater detail above, Iorio testified that the RTC's general 
practice was to wait 90 days before contacting the FBI or the 
United States Attorneys Office to follow up on a 
referral.57
    Lewis' contacts with the FBI and the United States 
Attorneys Office prior to the Presidential election caused 
several high-level officials in those agencies to be suspicious 
of Lewis' motives. United States Attorney Charles Banks, for 
example, testified that the sense of urgency he noted in Lewis' 
contacts with his office made him ``circumspect'' about the 
referral:

          The series of calls that [Lewis] made over a period 
        of two to three weeks struck me as being unusual. There 
        was--I saw no need for the sense of urgency, saving 
        except for who the witnesses were in the referral [the 
        Clintons]. If it hadn't been for the witnesses, 
        Senator, I don't think that there would have been 
        anything like that in the sense of urgency by Ms. 
        Lewis, so it caused me to be very circumspect about 
        it.58

    Donald Pettus, the Special Agent in Charge of the FBI's 
Little Rock field office, testified that the timing of Lewis' 
referral and Lewis' comment about altering the course of 
history caused him and others at the FBI to be concerned about 
Lewis' objectivity and overall professionalism.59

 6. United States Attorney Charles Banks resisted Lewis' pressure and 
        declined to commence a grand jury investigation before the 1992 
        Presidential election

    The argument has been made in Lewis' defense that Lewis 
would have leaked the existence of the Madison Guaranty 
referral had she truly wanted to affect the outcome of the 1992 
Presidential election. 60 Lewis herself argued in her 
testimony before the Committee that ``the existence of the 
criminal referral and the information it contained had no 
effect on the election because it was not revealed.'' 61 *
---------------------------------------------------------------------------
    \*\ The Committee's record indicates that in the fall of 1992 a 
female employee in the RTC's Kansas City field office--the office to 
which Lewis was assigned at the time--did improperly disclose to a 
person outside the RTC the fact that the RTC had submitted a criminal 
referral in a case that ``might touch on the Clintons'' (Wright, 4/25/
96 Hrg. p.117). Betsey Wright, the Deputy Chairperson of the 1992 
Clinton Campaign, testified that in September or October 1992 she 
received a call from a Clinton supporter in California. This person, 
whose name Wright could not recall at the time of her testimony before 
the Committee, told Wright that he had just returned from a business 
trip to Kansas City. He informed Wright that he had gone to a cocktail 
party in Kansas City and that a female RTC official told him at the 
party that the RTC had ``just sent a criminal referral up to the 
prosecutor in Little Rock'' (Wright, 4/25/96 Hrg. pp.117-121; Wright, 
1/26/96 Dep. pp.157-158). The criminal referral, according to the 
female RTC official, was ``about an S&L officer which would implicate 
the Clintons in Arkansas'' (Wright, 4/25/96 Hrg. pp.117-118).
---------------------------------------------------------------------------
    In fact, the opening of a formal inquiry by the FBI or the 
commencement of a grand jury investigation by the United States 
Attorneys Office--even in the absence of an actual leak from 
the RTC--would have made information about the referral, 
including the identities of the Clintons and other witnesses 
named therein, available to numerous law enforcement sources. 
That process very likely could have resulted in actual leaks 
about the referral and its famous witnesses occurring before 
the 1992 Presidential election. As Charles Banks, the 
Republican-appointed United States Attorney in Little Rock, 
wrote in an October 16, 1992 letter to Pettus:

          You and I know in investigations of this type, the 
        first steps, such as [the] issuance of grand jury 
        subpoena[s] for records, will lead to media and public 
        inquiries of matters that are subject to absolute 
        privacy. Even media questions about such an 
        investigation in today's modern political climate all 
        too often publicly purports to ``legitimize what can't 
        be proven.'' 62

    The evidence established that it was Banks' steadfast 
refusal to capitulate to Lewis' pressure that kept the referral 
out of the public domain prior to the election. Banks' October 
16, 1992 letter to Pettus concluded:
          While I do not intend to denigrate the work of [the] 
        RTC, I must opine that after such a lapse of time the 
        insistence for urgency in this case appears to suggest 
        an intentional or unintentional attempt to intervene 
        into the political process of the upcoming presidential 
        election. * * *
          For me personally to participate in an investigation 
        that I know will or could easily lead to the above 
        scenario and to the possible denial of rights due to 
        the targets, subjects, witnesses or defendants is 
        inappropriate. I believe it amounts to prosecutorial 
        misconduct and violates the most basic fundamental rule 
        of Department of Justice policy. I cannot be a party to 
        such actions and believe that such would be detrimental 
        to the Department of Justice, FBI, this office and to 
        the President of the United States [George 
        Bush].63

    Chairman D'Amato praised Banks for resisting Lewis' 
pressure:

          [I]n terms of the action that you took in September, 
        or wherever, or in October, you did absolutely the 
        right thing. * * * You don't start a grand jury 
        investigation as it relates to the then-Governor, 
        presidential candidate, three weeks before [an 
        election]. I mean, that's ridiculous. And I think what 
        you did was absolutely correct.64

    Senator Sarbanes was equally strong in his commendation of 
Banks:

          I simply want to say that I think [your October 16, 
        1992 letter to Pettus], and the positions you took, 
        reflected a determined effort to sustain the integrity 
        of the criminal justice system. I think that ought to 
        be recognized, and I think it's this kind of courage 
        that makes the system work, and I commend you for 
        it.65

7. The Bush White House and Justice Department showed an interest in 
        Lewis' referral before the 1992 Presidential election

    The evidence showed that while Banks was declining to 
commence a grand jury investigation prior to the 1992 
Presidential election, several high level Bush Administration 
officials at both the White House and the Department of Justice 
learned of the existence of the confidential criminal referral 
and made inquiries about it. The Committee's record did not 
conclusively establish how information about the existence of a 
confidential criminal referral spread to these senior Bush 
Administration officials, who made their inquiries after Lewis 
submitted the referral but before any report of it appeared in 
the press.
            a. The White House
    Albert Casey, the Chief Executive Officer of the RTC in 
1992, testified that in late September or early October 1992 he 
received a telephone call from President Bush's White House 
Counsel, C. Boyden Gray. Casey testified that Gray asked him if 
he knew anything about an RTC matter involving the Clintons. 
Casey told Gray that he did not know of such a matter but that 
he would look into it and call Gray back.66
    Casey immediately called RTC Vice President William Roelle, 
who told Casey that there was an RTC criminal referral 
involving the Clintons.67 Casey's best recollection was 
that Roelle told him that the Clintons were not subjects of the 
referral but that they might be called as witnesses.68
    Roelle corroborated Casey's testimony. He stated that Casey 
told him in September 1992 that Gray had contacted him about an 
RTC criminal referral involving the Clintons. Roelle testified 
that he confirmed the existence of the referral and showed 
Casey a copy.69 Roelle testified further that he told 
Casey that he should not provide the White House with any 
information about the referral.70
    Gray called Casey a second time before Casey was able to 
call Gray back with the information he had learned from Roelle. 
Casey testified that Gray told him, ``Al, forget my request. I 
don't want you to tell me a thing.'' 71 Casey testified 
that all three conversations occurred on the same day, within a 
one-hour period.72
    Gray denied any memory of ever having spoken with Casey 
about an RTC criminal referral.73
            b. The Department of Justice
    William Barr, President Bush's Attorney General in 1992, 
testified that White House Cabinet Secretary Edith Holiday 
asked him on September 17, 1992, during a flight on Air Force 
One, whether he was aware of an ``S&L matter[]'' involving Bill 
Clinton pending before the Justice Department.74 At the 
time, Holiday was serving as the ``chief liaison'' between the 
Bush White House and the 1992 Bush-Quayle Reelection 
Campaign.75 Holiday had served previously as Chief Counsel 
and National Financial and Operations Director of the 1988 
Bush-Quayle Presidential Campaign and as Counselor to the 
Secretary and General Counsel of the Department of the Treasury 
under Secretary Nicholas Brady.76
    Barr testified that when he returned to the Justice 
Department he asked Ira Raphaelson, his Special Counsel for 
Financial Crimes, to check whether there was an S&L case 
involving the Clintons pending before the Justice 
Department.77 Raphaelson told Barr that he would contact 
the FBI.78 Raphaelson got back to Barr shortly thereafter 
and told him that the FBI had no record of such a case.79
    Barr testified that he reported to Holiday that there was 
no record of an S&L matter involving the Clintons pending 
before the Justice Department.80 Barr thought that Holiday 
seemed surprised to hear this, and Holiday's reaction made Barr 
wonder ``if she had better information'' than he.81
    Barr went back to Raphaelson and asked him to check again 
for a record of a pending S&L matter involving the 
Clintons.82 Raphaelson contacted the FBI again and the 
Executive Office of United States Attorneys and soon learned 
that an RTC criminal referral mentioning the Clintons did 
exist.83 When Raphaelson reported this information to 
Barr, Barr was angry because he felt that the United States 
Attorney in Little Rock had ``deliberately withheld'' 
information about the referral from him.84
    Raphaelson testified that he learned of the Madison 
referral near the time that the United States Attorney in 
Little Rock forwarded it to the Department of Justice in 
Washington in an ``Urgent Report'' dated October 7, 
1992.85 On October 8, 1992, one day after the Department 
of Justice in Washington received the referral, Raphaelson 
discussed the referral at a meeting attended by Robert Mueller, 
the head of the Justice Department's Criminal Division, and by 
FBI Assistant Director Larry Potts and other senior FBI 
officials.86
    The next day, October 9, 1992, FBI Headquarters sent a 
teletype to the FBI's Little Rock field office directing them 
to review the Madison referral and to report back by October 
16, 1992.87 The Little Rock field office reported back on 
October 16, 1992, concurring in the view of United States 
Attorney Banks that no action should be taken on the referral 
at that time.88
    Holiday denied any recollection of having asked Barr in 
September 1992 whether he was aware of an S&L matter involving 
the Clintons pending before the Department of Justice.89 
Holiday also denied any recollection of having had a subsequent 
conversation with Barr about the S&L matter prior to the 1992 
election.90
            c. The passport controversy
    On October 5, 1992, during the same time period in which 
Boyden Gray, Edith Holiday and William Barr were making 
inquiries about the existence of an RTC criminal referral 
involving the Clintons, The Washington Post reported that the 
FBI was investigating whether Bush Administration officials at 
the State Department had improperly tried to gain access to 
Bill Clinton's confidential passport file.91 Efforts of 
Bush Administration officials to learn more about the 1992 
Madison referral and to accelerate its investigation appear to 
have ceased shortly thereafter.

8. The Clinton Justice Department properly handled Lewis' 1992 referral

    Despite the consensus view among career prosecutors in the 
Department of Justice that the 1992 referral failed to cite 
evidence of any federal criminal offense, the United States 
Attorneys Office in Little Rock did not send the RTC a letter 
formally declining to prosecute the matters described in the 
referral until Paula Casey, the Clinton Administration's newly 
appointed United States Attorney, did so on October 27, 1993. 
It has been suggested that this delay was the result of 
interference by officials of the Clinton Administration. The 
evidence proved otherwise.
    As described above, Charles Banks, the Republican-appointed 
United States Attorney in Little Rock, courageously decided not 
to act on the referral prior to the 1992 Presidential election. 
After the election, Banks wrote a letter to the Department of 
Justice in Washington seeking advice on whether his office 
should be recused from the investigation.92 A several-
month delay ensued at Main Justice as Banks' recusal inquiry 
became an unintended casualty of the transition period at the 
end of the Bush Administration and the beginning of the Clinton 
Administration. Douglas Frazier, a career prosecutor who worked 
in the Office of the Deputy Attorney General during this 
period, explained the problem as follows: ``[T]he entire 
hierarchy of the Department ceased to exist on one day [January 
20, 1993], and it took until May to get it semi 
reestablished.93
    The referral then was analyzed by the Fraud Section, was 
found wanting, and was returned by career officials to the 
United States Attorneys Office in Little Rock with a strong 
indication that it should not be pursued.94 Specifically, 
John Keeney, the acting head of the Criminal Division and the 
senior career prosecutor in the entire Department of Justice, 
wrote that due to the referral's shortcomings ``we would not 
question a decision by the United States Attorney to decline 
further substantive action on the referral.'' 95
    Paula Casey subsequently based her formal declination of 
the referral on the uniform recommendations and analyses of the 
referral provided by career officials at the Department of 
Justice, the United States Attorneys Office and the FBI.96

9. Webster Hubbell had no involvement in the handling of Lewis' 1992 
        referral

    The evidence showed that Webster Hubbell had no involvement 
in the appointment of Casey as United States Attorney in Little 
Rock or in any aspect of the Justice Department's handling of 
the RTC criminal referrals relating to Madison Guaranty. The 
Committee's exhaustive examination showed that Hubbell did not 
influence or seek to influence the Justice Department's 
disposition of the referrals. Hubbell himself testified that he 
did not even hear about the 1992 referral until late summer or 
early fall 1993.97 No evidence contradicted Hubbell's 
testimony.

10. Other failed S&Ls in Arkansas went uninvestigated due to Lewis' 
        focus on Madison Guaranty

    As discussed above, Jean Lewis and Special Agent Steve 
Irons agreed in late 1991, a few months before Jeff Gerth's 
article appeared in The New York Times--that Savers Savings 
Association and First Federal were their top priorities for 
prompt criminal investigations and that Lewis would fully 
investigate these two failed Arkansas institutions during the 
first quarter of 1992.98 Over the course of the next 
several years, as Lewis instead focused her efforts nearly 
exclusively on Madison Guaranty, Irons and others at the FBI--
including officials at FBI Headquarters--repeatedly reminded 
Lewis and the RTC of their strong interest in receiving timely 
referrals on Savers Savings and First Federal, which had failed 
at a cost to taxpayers of $650 million and $900 million, 
respectively.99
    The efforts of Irons and others at the FBI to get Lewis to 
work on Savers Savings and First Federal were unavailing. 
Despite the FBI's view that Savers Savings and First Federal 
were ``believed to have much greater prosecutive potential than 
Madison Guaranty Savings and Loan,'' 100 Lewis did not 
submit a referral on either institution after putting them at 
the top of her December 11, 1991 priority list.101
    In the spring of 1995, based on the work of an investigator 
other than Lewis, the RTC finally submitted a criminal referral 
arising from the failure of First Federal of Little 
Rock.102 So much time had passed, however, that the FBI 
and the United States Attorneys Office were unable to act on 
the referral. The statute of limitations had expired on most of 
the allegations contained in the referral, and the documents 
necessary to the investigation of the few remaining claims had 
been dispersed throughout the country when the RTC sold off the 
institution's assets.103

                  B. The Investigations of David Hale

    The Special Committee's investigation established that the 
White House did not delay or obstruct the investigation and 
liquidation of Capital Management Services (``CMS'') or the 
prosecution of David Hale. Specifically, the evidence showed 
that Hale was indicted quickly after the Small Business 
Administration (``SBA'') uncovered evidence of Hale's numerous 
fraudulent activities, and that he received no preferential 
treatment either by the SBA or the Justice Department. White 
House officials knew of developments regarding Hale and CMS, 
but made no effort to affect the way in which the SBA or the 
Justice Department handled their investigations.

1. The SBA uncovers Hale's fraudulent activity

    The SBA began to investigate Hale and CMS in September 
1992, when Hale falsely represented to the SBA that CMS had 
received $13.8 million in donated non-cash assets, and sought 
SBA matching funds.104 Several aspects of the transaction 
raised concerns at the SBA about the legitimacy of this 
financial activity, including the transfer of assets from bank 
accounts in the Cayman Islands. Consequently, Wayne Foren, 
then-Associate Administrator for the program which regulated 
CMS, ordered an independent examination of the deal.
    The examination report, dated March 11, 1993, raised 
``questions relative to the donated assets and * * * other 
transactions.'' 105 Specifically, the examination 
concluded * that CMS: ``transferred assets to an associate 
without SBA approval;'' ``did not properly safeguard its assets 
during the exchange [of portfolio assets];'' and 
``misclassified and misrepresented the sale of assets as 
financings to small concerns.'' 106 The examination report 
led Foren to tell Hale that ``these assets are not worth the 
represented value, in which case you are perpetrating a fraud 
against the SBA, or you are being bribed.'' 107 By this 
point, Foren was ``concerned that [the SBA] was not dealing 
with an entity that was dealing in good faith and trust with 
us.'' 108 Later, Foren realized that CMS ``was attempting 
to defraud SBA with its 1992 $13.8 million noncash capital 
increase and related requests for $6 million of [SBA matching 
funds], and that its 1988 capital increase and related leverage 
was in fact fraudulent.'' 109 Foren testified that Hale's 
activities at CMS constituted ``one of the most blatant cases 
of fraud'' he had ever witnessed.110
---------------------------------------------------------------------------
    \*\ The General Accounting Office reached a harsher conclusion in 
its 1994 report on CMS: ``Mr. Hale operated Capital Management in an 
improper manner by entering into prohibited transactions. Such 
prohibited transactions included loans to business associates and loans 
for real estate purchases, both of which violated SBA regulations. He 
also took advantage of the opening provided by the flexibility in SBA 
guidelines--for determining socially or economically disadvantaged 
individuals--to provide loans to individuals with questionable claims 
to program eligibility.'' U.S. General Accounting Office, ``Small 
Business Administration: Inadequate Oversight of Capital Management 
Services, Inc.--an SSBIC,'' GAO/OSI-94-23, p. 3 (March 21, 1994) 
(citations omitted).
---------------------------------------------------------------------------
    On May 5, 1993, Foren referred CMS to the SBA's Inspector 
General for further investigation and sent Hale a letter 
notifying him of the referral.111 Foren discussed the 
timing of the referral with Erskine Bowles, who had been 
nominated to head the SBA. According to Foren, Bowles told 
Foren to issue the referral that day.112 On May 20, 1993, 
the SBA Inspector General referred the case to the Federal 
Bureau of Investigation (FBI), which had superior resources to 
investigate Hale's complicated fraudulent transactions. In 
addition, the U.S. Attorney's Office and the FBI field office 
in Little Rock had already been investigating Hale's 
involvement in other fraudulent transactions in 1986 and 1988, 
which confirmed Foren's concerns about Hale and CMS.113
    On July 21, 1993, the FBI executed a search warrant at CMS' 
offices and seized documents and records relevant to its 
investigation. Shortly after the U.S. Attorney's office 
received access to relevant records stored in the RTC's Kansas 
City office, Hale was indicted on September 23, 1993, for 
defrauding the SBA and making false statements to the 
SBA.114 What Foren described as the ``rather swift'' 
action to indict Hale demonstrated the absence of any improper 
considerations to Hale.115
    Hale pleaded guilty to two counts of fraud on March 22, 
1994. At the time of his plea, Hale admitted that in 1988 and 
1989, $1 million had been temporarily transferred to CMS 
permitting Hale to mislead the SBA to believe that some non-
performing loans had been repaid, thus enabling Hale to receive 
an additional $900,000 in SBA funds. Hale also admitted at the 
time of his guilty plea, that he submitted numerous false 
statements to the SBA.116 The General Accounting Office 
has estimated that Hale's fraudulent activity alone cost the 
SBA $3.4 million.117

2. The White House does not interfere with the investigation

    It has been alleged that the White House interfered with 
the SBA's investigation of Hale. The evidence, however, refutes 
these allegations. Foren testified that he briefed SBA 
Administrator Erskine Bowles on May 5, 1993 about his decision 
to refer CMS to the SBA Inspector General. Foren testified that 
Bowles told Foren to send the referral immediately, that Bowles 
briefed former White House Chief of Staff Thomas ``Mack'' 
McLarty on the CMS referral at dinner that night, and that on 
May 6 Bowles told Foren about briefing McLarty the night 
before.
    Bowles and McLarty testified that they did not have dinner 
on May 5 and that they never discussed CMS. But even if Bowles 
did tell McLarty about the referral, Foren testified that there 
would have been nothing illegal or unethical about Bowles 
briefing McLarty on CMS, that there were no attempts by 
McLarty, Bowles or the White House to delay or impede SBA's 
investigation of CMS, and that Hale was indicted in record 
time.118 Bowles instructed Foren and the career SBA staff 
to proceed with the CMS investigation with the same vigor as 
they would any other investigation and to take all appropriate 
steps to prosecute any individuals who had committed any fraud 
or abuse.119 Moreover, Foren's understanding was that he 
was to ``proceed with this case as you do any other case;'' 
120 there was never any suggestion that anyone should ``go 
easy'' on Hale.121
    Similarly, there were no instructions from or pressure by 
the White House to provide Hale with any favored 
treatment.122 Associate General Counsel Mark Stephens, who 
handled the liquidation of CMS and served as the SBA's liaison 
with the FBI, testified that neither White House officials nor 
SBA political appointees ever tried to influence his 
investigation of CMS or Hale.123
    It should also be noted that on May 5--the date when the 
SBA referred CMS to the Inspector General--the SBA informed 
Hale by letter that his company had been referred to the 
Inspector General. It was standard procedure at that time to 
inform a target of an investigation of a referral to the 
Inspector General.124 Thus, there is no valid claim that 
the White House gave Hale a ``heads up'' and thus undermined or 
compromised the subsequent investigation of CMS.

3. The SBA provides the White House with copies of documents already 
        sent to Congress

    The SBA did not undermine the Justice Department's 
investigation of Hale and CMS merely by providing the White 
House with copies of documents that had already been sent to 
Congress. On November 4, 1993, House Small Business Committee 
Chairman John LaFalce asked the SBA to produce a report on CMS 
by November 15. Associate White House Counsel Neil Eggleston 
read news stories about LaFalce's request.125 Eggleston 
called the SBA, and later received a return call from SBA 
General Counsel John Spotila. Spotila confirmed that the SBA 
had sent a report to Congress regarding CMS.126 Eggleston 
asked if it would be appropriate for the SBA to provide the 
White House with a copy of the report that had been submitted 
to Congress.127 Spotila later agreed to produce the 
report, and faxed a copy of the four-page report to Eggleston 
on November 16.128 When Eggleston realized that 
attachments to the report had not been provided, he requested 
those as well. Spotila determined that the SBA could 
appropriately provide to the White House copies of the 
attachments that the SBA had submitted to Congress.129 
Thus, the SBA did not provide the White House with any 
documents that the SBA had not already provided to Congress at 
the request of the House Small Business Committee Chairman John 
LaFalce.130
    According to Spotila, SBA ethics officer Martin Teckler 
said it would be appropriate to give the documents to the White 
House. SBA Associate General Counsel Mark Stephens testified 
that most of the documents that were attached to the report 
were either public documents (such as the court pleadings filed 
in a federal court in Arkansas), or contained information that 
was not confidential.131 Spotila testified that he did not 
believe sending the documents to the White House constituted a 
public release of documents. Importantly, Teckler and Spotila 
testified that the documents had been screened prior to being 
sent to Congress.
    A few days later, Stephens called Eggleston and told him 
that the SBA had decided to discuss the issue with officials at 
the Department of Justice.132 Allen Carver and other 
Justice Department officials informed Stephens that the SBA 
should have the White House return the documents for the sake 
of appearances. Eggleston returned the documents to Stephens on 
November 21, just four days after he had received them.133
    The document transfer did not undermine the CMS 
investigation. Hale was indicted on September 23, 1993--nearly 
two months before the White House received the November 15 
report. Moreover, the evidence showed that the documents were 
not used inappropriately. The Deputy Chief of the Justice 
Department's Fraud Section, Allen Carver, testified that he 
thought the request for the documents was ``totally innocent,'' 
and that the White House wanted to track Congressional 
inquiries.134 Irv Nathan, an aide to Deputy Attorney 
General Phil Heymann, believed Eggleston's explanation for why 
he sought the SBA documents was ``reasonable and sensible.'' 
135 Mark Stephens believed the whole matter was ``much ado 
about nothing'' and did not believe that the document transfer 
undermined or compromised the CMS investigation.136 
Teckler, Eggleston, and Spotila did not believe that SBA 
provided any ``sensitive documents'' to the White 
House.137 As Teckler testified, ``I think we satisfied 
ourselves, and I think Mr. Spotila satisfied himself, prior to 
having sent the documents forward that there were no sensitive 
documents. We certainly are satisfied to that effect 
afterwards.'' 138 Actually, the SBA's report to 
Congressman LaFalce was converted into an information sheet 
that was made available to the public at the time the documents 
were sent to Congress.139 The attachments were merely 
``background'' materials about CMS.140

               c. the rtc's handling of the 1993 referrals

    Jean Lewis has claimed that RTC attorney Julie Yanda 
``obstructed'' the RTC investigation of Madison Guaranty ``with 
her unprecedented demand that her staff first conduct a `legal 
review' of the referrals.'' 141 The Committee's 
investigation demonstrates that the legal review of the 1993 
referrals was not an attempt to obstruct the Madison 
investigation. The evidence showed that the legal review was 
appropriate because RTC policy required such a review, because 
Lewis's 1992 referral was poorly drafted, and because the poor 
quality of other referrals prepared by the Kansas City RTC 
criminal investigators had prompted complaints from the FBI and 
federal prosecutors.
    After Lewis and Yanda had testified before the Committee, 
Chairman D'Amato informed Yanda that ``I certainly want 
publicly to put on the record there is no one on this Committee 
who impugns you or your integrity, or your undertaking your 
job.'' Chairman D'Amato added that:

          I can certainly understand that if actions that you 
        have undertaken in good faith are characterized in that 
        manner, and certainly the fact that on June 17 there 
        was a procedure that then implemented this and the fact 
        that I think you took something like nine days * * * in 
        the review, that certainly does not appear to this 
        Senator to be any actions that should be characterized 
        as obstruction.142 For the reasons stated below, 
        we share this view of the matter.

1. The legal review was consistent with RTC policy

    RTC policy required a legal review of the referrals before 
they were sent to the U.S. Attorney's Office in Little Rock. As 
Yanda testified, the ``unambiguous language'' of the June 17, 
1993 RTC Policy Directive required her to conduct a legal 
review of the referrals. The Policy Directive stated:

          Except in rare circumstances, criminal referrals 
        shall be reviewed by RTC Investigations and Legal 
        Division Criminal Coordinators before they are 
        delivered to the U.S. Attorney and the FBI or other 
        investigative agencies. RTC criminal coordinators shall 
        make certain that all required and support documents 
        are provided.143

    James Thompson, a senior RTC official who served as deputy 
regional director in Kansas City in 1993, testified that this 
language certainly supported Yanda's view that the legal 
division should review referrals before they were sent to 
prosecutors or the FBI.144 Similarly, RTC criminal 
coordinator Karen Carmichael interpreted this language as 
requiring her ``to review the referral before it went out, make 
sure all the attached documents state the same thing as the 
referral and * * * do a legal review of the referral.'' 
145
    The legal review was also consistent with the internal 
policy of the RTC's Kansas City office, which had organized a 
1993 blue ribbon task force to facilitate cooperation between 
the office's attorneys and investigators.146 Thompson, 
Yanda, and investigations chief Richard Iorio all supported the 
task force, which Thompson believed helped avoid conflicts 
``between the investigators and the attorneys on how we were 
going to get to a decision and who was going to do what.'' 
147 Thompson testified that if ``you're working on 
referrals or working on legal cases or working on anything 
involving the law, somewhere in the process appropriate legal 
counsel should be sought.'' 148 The goal of the review was 
simply to improve the quality of the referrals, not to obstruct 
them.149 Thompson concluded, ``if you're afraid of your 
own attorney's opinion, you have a fundamental problem.'' 
150
    The evidence indicates that the legal review was objective 
and useful. Yanda assigned Carmichael--a former aide to 
Republican Senator Don Nickels 151--and former Justice 
Department prosecutor Philip Adams to conduct the legal review. 
Yanda, Carmichael, and Adams had no apparent motive to obstruct 
the RTC's investigation. Rather, they reviewed the referrals 
and submitted 13 pages of concerns and recommendations within 
ten days of receiving the referrals and exhibits.152 Even 
in that limited amount of time, they were able to flag 
important issues, such as whether Lorene McDougal, one of the 
targets of the RTC investigation, had died before Lewis drafted 
the referral. As Yanda testified, ``I honestly do not believe . 
. . that it is in the interest of the RTC for its investigators 
to recommend to the U.S. Attorney and the FBI that they conduct 
a criminal investigation of a dead person.'' 153 The 
attorneys also sought to review the referrals regarding double 
jeopardy, the statute of limitations and other legal 
issues.154 Randy Knight, one of Lewis's colleagues in the 
criminal investigations office, believed that it was reasonable 
and useful for the attorneys to review the referrals and 
provide their recommendations to the FBI and to the U.S. 
Attorney.155

2. The poor quality of previous referrals made legal review essential

    As discussed earlier, career prosecutors at the Justice 
Department harshly criticized Lewis's 1992 referral.* The 
poor quality of the 1992 RTC referral was not unique. 
Carmichael testified that in June 1993, an Assistant U.S. 
Attorney in Oklahoma who handled bank fraud investigations, 
complained about the ``problems he had with the RTC's referrals 
and how they had all been unfounded, none of them were 
supported by any facts, that they had spent exceptional amounts 
of money and time and special authority to travel from their 
district up to Kansas City to review documentation which was 
not provided to them, that they had to find documents 
themselves.'' 156 This federal prosecutor did not 
``trust'' referrals written by Lewis and her colleague Ed 
Noyes, and ``he would not accept the referral'' from them that 
RTC attorneys ``had not absolutely put their blessing on and 
agreed that this was in fact a legitimate referral.'' 157 
Other U.S. Attorney's Offices had expressed concerns about the 
quality of criminal referrals being submitted by Lewis and 
other investigators in Kansas City.
---------------------------------------------------------------------------
    \*\ While the Majority's report gives Lewis credit for identifying 
suspected criminal activities that formed the basis of the indictment 
against Tucker and the McDougals, the facts are as follows. James 
McDougal's criminal activities were ``old news'' by the time Lewis 
drafted the 1992 referrals. The government had already prosecuted 
McDougal just a few years earlier. McDougal had been stricken by 
serious physical and mental illnesses. He was also destitute and living 
in a borrowed trailer; clearly there was no prospect of McDougal being 
held financially accountable for losses suffered by the RTC.
    Two of Lewis' 1993 referrals became the basis of charges against 
Tucker. The facts contained in RTC Criminal Referral No. 730CR0190, 
which accused Tucker of diverting approximately $135,000 in proceeds 
from a Madison Guaranty loan, were described as overt acts in Count I 
of the indictment. A jury convicted Tucker on this count. The facts 
contained in RTC Criminal Referral No. 730CR0198, which accused Tucker 
of participating in fraudulent land transactions regarding a Main 
Street property in Little Rock, were contained in Count 20 of the 
indictment. A jury acquitted Tucker of this charge.
    As previously discussed, however, Lewis's contribution to the 1992 
referral was substantially marred. The document was poorly drafted and 
improperly designated the Clintons as ``witnesses'' to alleged criminal 
offenses.
---------------------------------------------------------------------------
    Another federal prosecutor had complained that Lewis had 
made a mistake that led to a significantly diminished civil 
recovery from a financial institution in Paragould, Arkansas. 
158 In 1992, Lewis had refused to cooperate with the 
senior RTC attorney who had been assigned to handle a fidelity 
bond claim. Lewis failed to inform RTC attorneys about a 
criminal referral she had sent to the U.S. Attorney's Office. 
159 Lewis and an Assistant U.S. Attorney arranged a plea 
agreement with a ``target defendant'' that did not incorporate 
any requirement of restitution or cooperation by the defendant. 
Consequently, ``the interests of the RTC were wholly 
unprotected'' 160 and resulted in a loss to the RTC of 
approximately $200,000. 161
    Similarly, the U.S. Attorney and the FBI in Little Rock had 
complained about the failure of the RTC to provide them with 
subpoenaed documents relevant to the Madison investigation in 
the fall of 1993. In late August or early September 1993, the 
RTC's Kansas City office received a grand jury subpoena for 
documents related to Madison Guaranty. 162 After several 
months of trying to locate these documents, Yanda and 
Carmichael eventually discovered Lewis and Ausen ``had 100 
boxes worth of documents responsive to subpoenas that the FBI 
and AUSA knew about but which nobody had bothered to tell [RTC 
lawyers] about, despite our repeated requests.'' 163 
Consequently, Yanda concluded that ``we had a team member, Ms. 
Lewis, who had a demonstrated failure to perform as part of 
that team'' and asked that Lewis be removed from the Madison 
investigation. 164
    Given these facts, it is obvious that a legal review of 
Lewis's criminal referrals was reasonable and appropriate. The 
review allowed RTC lawyers to be aware of all facts related to 
their cases and allowed the RTC to maximize the recovery of 
taxpayer dollars lost due to fraudulent activity. Moreover, the 
legal review may have been useful to federal prosecutors and to 
the FBI in assessing and pursuing matters that were referred to 
them.

3. The legal review was not an attempt to impede the Madison 
        investigation

    There exists no evidence that the legal review was an 
attempt to impede the RTC investigation of Madison Guaranty. 
Randy Knight, an RTC criminal investigator who prepared two of 
the 1993 criminal referrals, did not believe that the legal 
review of the referrals was intended to undermine or impede the 
investigation of Madison Guaranty or was politically motivated. 
165 Richard Iorio, Lewis's supervisor, noted that the 
legal review of the referrals took no more than nine days, and 
that all referrals drafted since the issuance of the June 17 
policy directive have been subjected to the same legal review 
for a comparable length of time as the 1993 Madison referrals. 
166
    Similarly, Lewis's claim that the legal review of the 1993 
referrals was ``unprecedented'' is extremely misleading. As 
Yanda testified,

          The review of the Madison referrals was unprecedented 
        only in the unremarkable sense that they were the first 
        ones made available to my lawyers and me in order for 
        such a review to occur. I assure you that if previous 
        referrals had been provided for review, they would have 
        received the same professional analysis that Ms. 
        Carmichael and Mr. Adams applied to the Madison 
        referrals, and that attorneys in my section have 
        applied to every referral that we have received since 
        September 1993. 167

    Carmichael's testimony corroborated Yanda's recollection 
that these were simply the first referrals that the 
investigators had presented for legal review after the 
nationwide issuance of the June 17, 1993 Policy Directive. 
168 Carmichael testified that there was nothing ``novel'' 
about the review of the Madison referrals, noting that she has 
reviewed four other referrals in addition to the Madison 
referrals. 169
    4. Lewis was not a credible witness and her allegations are 
therefore suspect
    Lewis's testimony contained numerous inconsistencies and 
implausible statements. Lewis testified, for example, that the 
recorder that taped her entire conversation with April Breslaw 
on February 2, 1994, turned on by itself. 170 In 
explaining this unlikely phenomenon, Lewis admitted that the 
tape recorder was not a voice-activated machine 171 but 
testified that the tape recorder was ``eight years old at that 
point, it didn't always function as it was expected to.'' 
172 The Committee issued a subpoena for that tape 
recorder, but Lewis testified that after the recorder ``died'' 
in mid-February 1994, she purchased a new tape recorder and 
discarded the old one, which had supposedly taped conversation 
with Breslaw. 173 In response to the Committee's request 
for documentation of the purchase of the ``new'' recorder, 
Lewis's attorney sent a November 7, 1995 letter to the 
Committee indicating that ``Ms. Lewis has reviewed her bank 
statements * * * and determined that the following entry * * * 
reflects the purchase of the tape recorder:

------------------------------------------------------------------------
            ``Date                     Description         Checks/Debits
------------------------------------------------------------------------
``02-17.......................  #Purchase...............           64.94
                                  ``Merchant Purchase                   
                                 Terminal 440140.                       
                                  ``Office Depot #176                   
                                 Shawnee KS''.                          
------------------------------------------------------------------------

    The evidence, however, contradicts Lewis's assertion. 
Office Depot, the store that sold the new tape recorder to 
Lewis, subsequently provided records that proved that Lewis 
purchased other office supplies, not the new recorder, on 
February 17, 1994. The Office Depot records incontrovertibly 
established that Lewis had actually purchased the new tape 
recorder on January 17, 1994, over two weeks prior to the 
taping of the conversation with Breslaw. 174 Thus, Lewis's 
explanation of the tape recorder turning on by itself--which 
strained credulity in the first place--is refuted by the fact 
that she had already purchased the new tape recorder and, by 
her own admission, had discarded the old recorder when she 
purchased the new one.
    In addition, it was improper for Lewis to have taped this 
conversation without first obtaining Breslaw's consent. Lewis 
denied deliberately setting out to surreptitiously record her 
conversation with Breslaw. Nevertheless, Lewis admitted that 
she was aware from the beginning that the conversation was 
being recorded and that she consciously decided to continue 
taping the conversation. 175 To insure that Breslaw 
remained unaware that the conversation was being taped, Lewis 
sat on the same side of her desk as Breslaw so that Breslaw 
``would not see the tape recorder.'' 176 Former RTC 
General Counsel Ellen Kulka testified that this clandestine 
taping of Breslaw was one of the justifications for placing 
Lewis on administrative leave. 177 *
---------------------------------------------------------------------------
    \*\ According to Lewis, even Congressman Jim Leach described 
Lewis's taping of this conversation without Breslaw's consent as 
``inappropriate. (Lewis, 10/30/95 Dep. p.238).
---------------------------------------------------------------------------
    Another example of Lewis's implausible testimony before the 
Special Committee occurred when Lewis stated that she never 
attempted to profit from the Madison investigation. 178 
Lewis later conceded she attempted to market versions of 
copyrighted shirts and products containing the acronym 
``B.I.T.C.H.,'' which stood for ``Boys I'm Taking Charge, 
Hillary'' or ``Bubba, I've taken charge. Hillary.'' 179 
Lewis provided her RTC office telephone number to potential 
investors so that she could pursue her business interests while 
at work. 180 Lewis testified that the use of the word 
``bitch'' was ``in no way intended to denigrate the First 
Lady.'' 181 Lewis refused to acknowledge the impropriety 
in conducting personal business affairs in her governmental 
office, or in marketing a product that disparaged people she 
had identified as witnesses in the course of her investigation.
    Finally, Lewis leaked confidential RTC information during 
her February 18, 1994 meeting with Republican Congressman Jim 
Leach. The release of this confidential information directly 
violated RTC policy. The RTC's Director of the Office of 
Investigations and several members of the RTC's Office of the 
General Counsel issued a June 17, 1993 Memorandum that stated, 
``All referrals are sensitive and must be handled with 
appropriate confidentiality and care.'' 182 James 
Thompson, an RTC vice president in the Kansas City region in 
1993, testified that criminal referrals and their exhibits are 
confidential material, and that such materials ``would not be 
disclosed to Congress'' from ``the regional level.'' 183 
Nevertheless, Lewis provided Congressman Leach with material 
she knew to be confidential, such as internal RTC memoranda and 
correspondence regarding the Madison referrals, as well as 
documents from Madison Guaranty, Madison Bank and Madison 
Financial Corporation gathered by the RTC during the course of 
its investigation. Lewis also provided Congressman Leach with a 
summary of her conversation with Breslaw after playing the tape 
recording for Congressman Leach, even though she recognized 
that the conversation contained confidential information. 
184 Predictably, Congressman Leach then released all of 
these documents to the public on March 24, 1994. Thus, Lewis's 
unilateral decision to leak RTC documents to Congressman Leach 
directly resulted in the public dissemination of confidential 
information in the middle of the Special Prosecutor's 
investigation of Madison-related matters.
    Lewis fully understood the impropriety in releasing these 
materials. She recognized that ``there are fairly stringent 
regulations with regard to documents that are released from 
government agencies for public access'' 185 including the 
June 17 RTC Memorandum discussed above. As Lewis recognized, 
these restrictions exist because disclosing confidential 
information to third parties ``[m]ight create a problem'' for 
an ongoing investigation. 186 However, Lewis chose not to 
notify her supervisors in advance of her meeting with 
Congressman Leach because she feared they would not have 
concurred with her decision to provide Congressman Leach with 
confidential RTC documents. 187
    The facts refute Lewis's claim that she was acting as a 
``whistle blower'' by disclosing this confidential information 
to Congressman Leach. As Knight observed, none of the people 
listed in the referral ``are our supervisors or government 
employees * * * so that would not be whistle-blowing; that 
would be criminal.'' 188 Knight correctly believed that 
leaking confidential information to Congressman Leach was no 
different than providing the information to the press because 
``the outcome is the same.'' 189 Most significantly, 
Special Prosecutor Robert Fiske, a Republican and a former 
federal prosecutor, was conducting an ongoing investigation 
regarding transactions that directly related to the 
confidential information that Lewis leaked to Congressman 
Leach. Instead of providing relevant information to the 
prosecutor, Lewis chose to politicize the investigation by 
disclosing the information to a Republican congressman who 
promptly released the confidential information to the public.
    The leaking of this information constituted a serious 
breach of RTC policies. Knight noted that some of Lewis's 
colleagues felt that ```if I would have done that, I'd have 
been fired''' and that RTC employees had been fired for more 
minor infractions--like misusing postage stamps--than leaking 
confidential documents. 190 Thompson agreed, testifying 
that the leak of confidential information connected to a 
criminal referral ``would be cause for disciplinary action'' 
and ``very likely could include termination of the employee.'' 
191

       d. the justice department's handling of the 1993 referrals

    It has been alleged that U.S. Attorney Paula Casey treated 
David Hale unfairly by requiring him to explain what 
information he could provide to the prosecution before entering 
a plea agreement with Hale. The evidence showed, however, that 
Casey followed standard Justice Department procedures in the 
negotiations with Hale and his attorney, Randy Coleman. 
Actually, Casey offered Hale a more lenient plea than Hale 
ultimately accepted from the Independent Counsel.

1. The U.S. Attorney's office handled the 1993 referrals properly

    The FBI in Little Rock received the SBA referral regarding 
Hale and CMS in June 1993.192 Assistant U.S. Attorney 
Fletcher Jackson reviewed the referral and then reviewed the 
documents that the FBI had seized while executing a search 
warrant at CMS's offices on July 21, 1993. Interestingly, the 
RTC office in Kansas City had not been cooperating with the 
FBI's attempts to obtain information relevant to their 
investigation. The FBI contacted Michael Johnson, First 
Assistant U.S. Attorney in Little Rock, for assistance in 
resolving the matter. As Johnson testified, ``The agents 
indicated to me that they were seeking records in the 
possession of the RTC essential for the initial phase of the 
FBI's criminal investigation. They indicated to me that the RTC 
had continually represented to them that the records needed to 
be retained in Kansas City so that the RTC personnel could 
prepare criminal referrals. They indicated to me that the 
criminal referrals had been promised in July 1993, but the RTC 
kept delaying the date. The agents further indicated to me that 
they believed the referrals would concern the same matters that 
the FBI had outlined to me and already wanted to investigate.'' 
193 Johnson interceded on the agents' behalf, * but 
ultimately the agents ``simply had to wait until the RTC sent 
the referrals in mid-October before we could actually begin 
what we had been already attempting to do.'' 194
---------------------------------------------------------------------------
    \*\ When the Justice Department assumed control of the 
investigation stemming from the nine referrals, the deputy chief of the 
Fraud Section, Allen Carver, recognized that FBI agents in Little Rock 
had ``wanted to get speedier action on getting documents that they were 
trying to get from the RTC.'' To ease tensions between the FBI and the 
RTC in Kansas City, Carver sent Mackay to Kansas City in early November 
1993 ``to try to work with the Kansas City RTC and to develop a 
relationship with them . . . .'' Carver, 10/17/95 Dep. pp.120-122.
---------------------------------------------------------------------------
    Paula Casey, the U.S. Attorney in Little Rock, recalled 
receiving the criminal referrals from the RTC's Kansas City 
office in October 1993. After reviewing these referrals, Casey 
believed she had to recuse herself from the 
investigation.195 Her top assistant, career prosecutor 
Michael Johnson, however, asked her to delay making a recusal 
request until he and the FBI had had a chance to assess the 
referrals more carefully.196 Johnson, who had no 
connection with individuals named in the referrals, wanted to 
make a ``preliminary assessment'' of the referrals because his 
``past experience with the RTC'' caused him to ``not have the 
confidence in the RTC that [he] had in the FBI.'' 197 By 
then Johnson had read Jean Lewis's 1992 referral, and ``[t]he 
nature of the referral and the manner in which it was set forth 
made me cautious about relying on allegations by the RTC as the 
sole basis to make the important decision of recusal.'' 
198 Johnson therefore discussed the referrals with the 
FBI, drafted subpoenas for relevant documents, and arranged to 
travel to Kansas City to review RTC documents.
    On November 3, 1995, Casey met with senior Justice 
Department officials in Washington, where the 1993 referrals 
were discussed. The general consensus of the group was that 
Casey should recuse. On November 5, 1993, Casey sent a written 
recusal letter to Deputy Attorney General Phil Heymann, in 
which she formally recused herself and the U.S. Attorney's 
office in Little Rock from the investigation of Hale and the 
1993 referrals.199 Heymann accepted her recusal request, 
and a team of prosecutors from the Justice Department, led by 
former Nixon appointee Donald MacKay, assumed control of the 
investigation.
    Before Johnson's departure for Kansas City, which had been 
planned for November 8, Casey informed him that she had recused 
the office from the matter, therefore eliminating the need for 
Johnson to travel to Kansas City. Mackay went to Kansas City 
instead.200 Johnson then facilitated the transition of the 
Hale matter and the 1993 criminal referrals to the Justice 
Department and ultimately to the Independent Counsel's 
office.201
    Casey testified that no one in her office attempted ``to 
obstruct the investigation of any of the RTC referrals during 
the few weeks that they were in my office.'' 202 Johnson 
testified that ``no one associated with the Department of 
Justice, the White House, the Federal Bureau of Investigation, 
or any other federal agency, ever attempted to delay, control 
or obstruct the investigation being conducted by our office.'' 
203 Similarly, the Little Rock prosecutor who handled the 
Hale investigation and the criminal referrals testified that 
prior to Casey's decision to recuse herself, Casey ``didn't 
interfere in any way with what I was doing.'' 204

2. Plea negotiations with Hale were handled appropriately

    Hale demanded that U.S. Attorney Paula Casey grant him an 
unusually lenient plea agreement--without first requiring him 
to proffer any facts relevant to the criminal 
investigation.205 Coleman wanted a misdemeanor plea for 
Hale that would have allowed Hale to retain his license to 
practice law and to remain a judge.206 Casey and numerous 
career Justice Department officials uniformly testified that, 
in the absence of such a proffer, the U.S. Attorney would have 
risked ``buying a pig in a poke''--that is, giving the benefit 
of a lenient plea without knowing whether they would receive 
the benefit of information that would be useful to the 
prosecution.207 Michael Johnson, a career prosecutor with 
22 years of experience, testified that it is ``a common 
occurrence, when dealing with potential defendants who seek 
leniency in exchange for information, to demand and obtain from 
them a proffer, that is, a preview of the evidence they have to 
offer before agreeing to the arrangement.'' 208 According 
to Johnson, the proffer would have allowed the FBI and the U.S. 
Attorney's office ``to assess and corroborate the information, 
and to make the determination whether to enter into a plea 
arrangement whereby Mr. Hale would receive leniency in exchange 
for the information and testimony. It was standard Department 
of Justice operating procedure.'' 209 The high-ranking 
career Justice Department prosecutors who reviewed the actions 
of the U.S. Attorney's office in Little Rock agreed that the 
office acted appropriately in rejecting Hale's attempt to push 
them into a blind agreement.
    Rather than make a proffer to the prosecutors, Hale chose 
to contact Clinton's most vociferous opponents,210 and to 
provide lengthy interviews to reporters while Coleman contacted 
the White House Counsel's Office in a futile attempt to get the 
White House to do something ``foolish'' with respect to the 
investigation.211 Johnson believed that Coleman ``was 
manipulating public perception, in part through the news media, 
in an effort to scare [the U.S. Attorney's office] into 
capitulating regarding the potential indictment of his 
client.'' 212 Nevertheless, no one in the White House 
tried to influence Casey's or the Justice Department's handling 
the Hale case.213
    On November 8, 1993, Donald Mackay, a prosecutor in the 
Department of Justice's Fraud Section assumed the investigation 
of the Hale matter and the nine criminal referrals.214 The 
Department of Justice's position regarding Hale's plea demands 
was the same as Casey's position. Like Casey, Mackay informed 
Coleman that the prosecution would not plea bargain with Hale 
until Hale informed them directly of the information he could 
provide in exchange for the agreement.215 According to 
Acting Assistant Attorney General John Keeney, the Justice 
Department position was ``that no deal would be made with Hale 
until we had a lawyer's proffer and were able to evaluate 
it''.216 Yet, Hale still refused to make a proffer in 
absence of a promise of immunity or the dismissal of the 
charges.217
    Johnson noted that Hale eventually began to negotiate ``in 
earnest'' with the U.S. Attorney's office on October 21, 1993: 
``As a result of that negotiation, Mr. Hale agreed to accept a 
felony plea and make himself available for interview. However, 
by [the] time he did so, on November 8th, 1993, our office had 
recused from the case.'' 218 The Justice Department and 
then the Office of the Independent Counsel assumed the 
negotiations. Ultimately, the Independent Counsel required Hale 
to plead guilty to two felony counts, while Casey had insisted 
on a plea to a single count--a dramatic contrast to the grant 
of immunity or misdemeanor plea Hale originally had 
sought.219 Michael Johnson, who supervised the plea 
negotiations with Hale, summarized the matter:

          The United State's Attorney's office offered Mr. Hale 
        a plea agreement which would have required him to plead 
        guilty to a single felony. He rejected that and 
        insisted on receiving immunity, or at most, pleading to 
        a misdemeanor offense. This issue was ultimately 
        resolved between Mr. Hale and the Independent Counsel's 
        office when Mr. Hale pled guilty to two felony 
        offenses, not one.220

    The prosecutors handled negotiations with Hale and Coleman 
properly. Given the plea offer Hale ultimately accepted from 
the Independent Counsel, it is clear that the U.S. Attorney 
would have acted unwisely if she had accepted Hale's requests 
for lenient treatment.

3. Casey's recusal was handled properly

    As discussed above, Hale and Coleman refused to make a 
proffer during the plea negotiations with the U.S. Attorney's 
office. As a result, prosecutors were left with nothing beyond 
unsubstantiated rumors circulating in media accounts regarding 
Hale's allegations about President Clinton. Michael Johnson, a 
career prosecutor and the top Assistant U.S. Attorney in the 
Little Rock office, advised Casey not to recuse herself on the 
basis of unsupported rumors that Hale had circulated in the 
media:

          I advised Ms. Casey of the same things that I had 
        told Mr. Keeney, and urged her for the same reasons not 
        to consider recusal unless and until we had obtained 
        information on which a recusal might be warranted, and 
        until we had an opportunity to assess the reliability 
        of that information. It was my professional view then, 
        and it is my professional view now, that to do 
        otherwise was irresponsible and would abdicate our duty 
        as prosecutors.221

    Johnson was concerned that a recusal under these 
circumstances would set a precedent that could result in 
defendants routinely forcing the U.S. Attorney's office out of 
cases simply by making unsupported allegations against Governor 
Tucker or the Clintons.222
    Nevertheless, Casey recused herself on November 5, 1993, to 
avoid the appearance of any conflict of interest. After MacKay 
assumed control of the investigation, he handled plea 
negotiations in essentially the same manner as Casey had 
previously.223 Most significantly, officials in the 
Justice Department and the U.S. Attorney's office in Little 
Rock agreed that the timing of Casey's recusal did not affect 
the investigation in any way. As Fletcher Jackson testified,

          [Casey] didn't interfere in any way with what I was 
        doing. So I don't really think it made any difference 
        whether she recused one week or the next week or 
        whenever, and when she eventually did. I don't see any 
        harm that occurred from, you know, from when * * * it 
        occurred. 224

4. The White House did not influence the investigation

    Casey testified that her office was not subjected to any 
attempt by the White House or Justice Department to improperly 
influence the investigation of Hale. She testified that she did 
not speak with Webster Hubbell in 1993.225 Neither Casey 
nor anyone in her office was in contact with the White House on 
this matter.226 Johnson also was not aware of anyone in 
his office speaking to Hubbell about Hale, Madison Guaranty or 
the criminal referrals.227 Lastly, Hubbell testified that 
although a September 1993 internal Justice Department 
memorandum routinely routed to him informed him of the 
referral, he took no action regarding the memorandum.228
    In sum, the best evidence proving the lack of White House 
interference was the prompt indictment of Hale and the refusal 
of the White House to be drawn into Hale's scheme to involve 
the White House in the matter. Casey's handling of the matter 
in conjunction with career prosecutors in the Little Rock U.S. 
Attorney's office was entirely consistent with Justice 
Department procedures and was in all respects proper.

 E. The Clinton administration's contacts with Beverly Bassett Schaffer 
        in 1993 and 1994 were proper and appropriate

    On April 29, 1985, Mrs. Clinton had a brief telephone 
conversation with Arkansas Securities Commissioner Beverly 
Bassett [Schaffer]. Mrs. Clinton informed Schaffer that Madison 
Guaranty planned to submit a proposal to issue preferred stock, 
and asked Schaffer to whom the application should be 
directed.229 Schaffer advised Mrs. Clinton that she was 
familiar with the issue of preferred stock offerings by savings 
and loan associations, and considered it ``very simple, very 
basic, very straightforward.''230 Although the 
conversation lasted only five minutes, and was not 
substantive,231 it has been alleged that as a consequence 
of the conversation Madison Guaranty received preferential 
treatment from the Arkansas Securities Department.232 As 
discussed in Section III.E, below, the allegation of favored 
treatment lacks merit.
    It also has been suggested that the Clinton Administration 
interfered with possible investigations into Mrs. Clinton's 
conversation with Schaffer. In particular, it has been alleged 
that in late 1993 and early 1994 representatives of the Clinton 
Administration improperly importuned Schaffer to defend Mrs. 
Clinton against allegations of impropriety arising out of their 
conversation. The evidence does not support the allegation that 
the Clinton Administration sought to influence the content of 
Schaffer's statements on the issue. All the Administration 
sought to do was to have Schaffer speak publicly, as she had 
done in 1992, to rebut false allegations raised in the press. 
It was proper and appropriate for Administration 
representatives to ask Schaffer to speak out publicly regarding 
the regulation of Madison Guaranty during the 1980s. Indeed, 
there was no reason for the Administration to want to influence 
what Schaffer would say; her past public statements fully 
supported the conclusion that Mrs. Clinton obtained no special 
treatment for Madison Guaranty with the Arkansas Securities 
Department.
             1. Background
    During the 1992 presidential campaign, regulatory treatment 
of Madison Guaranty--including Mrs. Clinton's conversation with 
Schaffer--became a political issue. In this regard, allegations 
were raised that the conversation resulted in special treatment 
for Madison Guaranty. Schaffer, however, publicly denied that 
Madison Guaranty received favored treatment from the Arkansas 
Securities Department while she was Commissioner.233 
Schaffer also made herself available to the press to refute the 
allegations of special treatment.
    By late 1993, press interest in the regulatory treatment of 
Madison Guaranty had revived. For example, during the first 
week of November 1993, The Washington Post, The New York Times 
and The Wall Street Journal published articles on the 
subject.234 Also, on December 20, 1993, The New York Times 
published an editorial urging the Administration to provide the 
press with additional information regarding the regulation of 
Madison Guaranty.235 President Clinton read the article 
and forwarded it to Mack McLarty and Bruce Lindsey. The 
President noted in the margin: ``This is important to be on top 
of. Bassett did a good job in [campaign] on this--can she 
now.'' 236
    Approximately a week later, President Clinton and Bruce 
Lindsey attended a University of Arkansas basketball 
game.237 Ms. Schaffer's husband, Archie Schaffer, also 
attended the game, but with others.* During halftime, the 
President and Lindsey visited the corporate box owned by 
Tyson's Chicken. By coincidence, Schaffer also visited the 
Tyson's box.238 Lindsey took the opportunity to ask Archie 
Schaffer whether Ms. Schaffer would restate publicly the views 
she expressed in 1992 on the Securities Department's handling 
of Madison Guaranty.239 Mr. Schaffer was noncommittal--not 
because Ms. Schaffer's views had changed, but because by this 
time, Ms. Schaffer was the subject of so much media attention 
that her life had been disrupted.240 Thus, Ms. Schaffer 
was reluctant to get involved again with the press. At no time 
during this conversation--or any other conversation--did 
Lindsey seek to influence the substance of Ms. Schaffer's 
story.241
---------------------------------------------------------------------------
    \*\ The implication has been raised that Lindsey knew Archie 
Schaffer would attend the basketball game and contrived to speak with 
him. There is no evidence to support this allegation. On the contrary, 
Lindsey testified that attending the basketball game was not a disguise 
for meeting with either Mr. Schaffer or Ms. Schaffer (Lindsey, 01/16/96 
Hrg. pp. 229-230.)
---------------------------------------------------------------------------
    During the first two weeks of January 1994, senior White 
House officials met regularly to coordinate the 
Administration's response to press inquiries concerning 
Whitewater.242 At one such meeting, on January 7, 1994, 
the discussion included possible responses to the renewed 
allegations that Madison Guaranty received special treatment 
from the Arkansas Securities Department.243
    According to Mark Gearan's notes of the meeting, Deputy 
White House Chief of Staff Harold Ickes considered Ms. 
Schaffer's statements an important part of the Administration's 
response. Before relying on her statements, however, Ickes 
wanted to ``make sure her story is OK.'' 244 This note has 
been mischaracterized as indicating an interest in manipulating 
Ms. Schaffer's statements. The evidence showed, however, that 
Ickes had no interest in manipulating the content of Ms. 
Schaffer's statements. To the contrary, Ickes testified that he 
had two goals concerning Ms. Schaffer: first, to ensure that 
Ms. Schaffer made the correct legal judgment regarding the 
preferred stock issue back in 1985, i.e., that Madison Guaranty 
received no favored treatment; and second, assuming that Ms. 
Schaffer acted properly in 1985, to persuade her to speak out 
publicly again.245 Gearan confirmed Ickes's 
explanation.246
    Documentary evidence also confirmed Ickes' testimony. The 
White House did, in fact, conduct research into whether Ms. 
Schaffer reached the correct judgment on the preferred stock 
issue. A January 11, 1994 memo by Jake Siewert collected 
numerous authorities in support of Schaffer's opinion that a 
state chartered S&L in Arkansas could issue preferred 
stock.247 The Majority has characterized Madison 
Guaranty's inquiry as ``novel'' and ``controversial.'' However, 
the research conducted by the White House demonstrated that it 
was neither. Federally insured savings and loan associations 
had authority to issue preferred stock as early as 
1975.248 By 1984, Federal Home Loan Bank Board (``FHLBB'') 
regulations expressly recognized that the issuance of preferred 
stock by savings and loan associations was common.249 In 
fact, the FHLBB actively encouraged thrifts to raise capital by 
issuing preferred shares under appropriate 
circumstances.250
    During the January 7 meeting, consideration was also given 
to contacting Schaffer to determine whether she would be 
willing to speak to the press.251 Several possible 
emissaries were considered to visit Ms. Schaffer in Arkansas, 
including Paul Begala, Bruce Lindsey, and Michael 
Waldman.252 There was also a discussion about the 
possibility that James L. (Skip) Rutherford or John Tisdale 
could contact Ms. Schaffer.253
     There was no legal or ethical reason not to contact 
Schaffer. It would have been appropriate and proper to confirm 
Schaffer's recollection of events that had taken place nearly a 
decade earlier, and to ask her to state her recollection 
publicly, as she had in 1992. In the end, however, the group 
concluded that it would not be politically prudent to contact 
Schaffer. According to Gearan's notes, Ickes expressed concern 
that an attempt to contact Schaffer would be misinterpreted as 
an attempt to alter her recollection.254 This, in turn, 
would simply create another news story.255 As such, the 
decision was made not to contact Schaffer, even though doing so 
would have been proper.256
    Finally, the implication has been raised that the White 
House sought to influence the substance of Schaffer's 
statements regarding the regulatory treatment of Madison 
Guaranty. This allegation is groundless. There was no 
discussion of influencing Schaffer's statements regarding 
Madison Guaranty at the January 7 meeting--or any other 
meeting.257 Moreover, during the 1992 presidential 
campaign, Schaffer made numerous public statements regarding 
the regulation of Madison Guaranty. In every instance, Schaffer 
described the regulatory treatment of Madison Guaranty as 
proper and appropriate. As such, there was no reason for the 
White House to influence her testimony.
            2. There were no improper contacts between the Clinton 
                    administration and Beverly Bassett Schaffer
    Despite Ickes's determination that it would be politically 
imprudent to send an emissary to speak with Schaffer, the press 
continued to make inquiries regarding the regulatory treatment 
of Madison Guaranty. As such, the Administration still had to 
communicate with Schaffer to determine whether she would 
respond to press inquiries. Several people did, in fact, reach 
out to Schaffer. The implication has been raised that these 
individuals sought to influence Schaffer's recollection of 
events. The evidence, however, showed that there were no 
improper contacts between the Clinton Administration and 
Schaffer.
    Rutherford--an Arkansan who worked on the Clinton 
presidential campaign--testified that he had a telephone 
conversation with Mr. Schaffer, which was possibly joined by 
Ms. Schaffer, in December 1993 or January 1994. During that 
conversation they discussed the Schaffers' concern that Ms. 
Schaffer was being stalked by the news media.258 Mr. 
Schaffer and Rutherford also had a subsequent telephone 
conversation, in December or January, in which they discussed 
the concern about a stalker, the large number of press calls 
Ms. Schaffer was receiving, and the possibility that Ms. 
Schaffer might hold a press conference to respond to the press 
inquiries.259 There was nothing improper about these 
conversations. In any event, the conversations did not result 
from White House efforts to contact Ms. Schaffer. Rutherford 
testified that: ``no one at the White House ever asked me to 
contact Beverly Bassett Schaffer.'' 260 Schaffer also 
spoke with John Tisdale, a lawyer at her firm, who asked her to 
assist him in compiling a chronology and a list of documents 
concerning Whitewater. 261 There is no evidence that 
Tisdale sought to influence Schaffer.*
---------------------------------------------------------------------------
    \*\ The Committee did not seek testimony from Tisdale.
---------------------------------------------------------------------------
    Finally, when Schaffer testified before the Special 
Committee, she was asked whether she spoke with anyone from the 
Clinton Administration regarding the regulatory treatment of 
Madison Guaranty after the 1992 presidential campaign. 
Initially, Schaffer did not recall any such 
conversations.262 She later agreed that she ``may'' have 
spoken with Lindsey, but was not sure. Moreover, even if she 
did speak with Lindsey, ``[the conversation] wasn't of any 
consequence * * * .'' 263 In the end, Schaffer could not 
recall any conversation in which the White House attempted to 
influence her actions relating to Madison Guaranty and no one 
tried to influence the substance of Schaffer's statements that 
Madison Guaranty received no special treatment.
            3. Conclusion
    The evidence demonstrated that the Clinton Administration's 
dealings with Beverly Bassett Schaffer during 1993 and 1994 
were proper and appropriate. No efforts were made to influence 
or alter her recollections regarding the regulatory treatment 
of Madison Guaranty (or any other subject). On the contrary, 
the Clinton Administration sought only to confirm that 
Schaffer's actions as Arkansas Securities Commissioner were 
proper--which they were--and to encourage her to speak publicly 
about them.

F. The OGE report and the transmission of investigative materials to 
        transmission of investigative materials to the White House and 
        Secretary Bentsen

    On March 4, 1994, Treasury Secretary Lloyd Bentsen asked 
the Office of Government Ethics (``OGE'') to review a series of 
contacts among officials of the Treasury Department 
(``Treasury''), the Resolution Trust Corporation (``RTC'') and 
the White House between September 1993 and February 1994 (``the 
White House/Treasury contacts''). Specifically, Secretary 
Bentsen asked OGE to determine whether the Treasury officials 
who participated in the White House/Treasury contacts had 
violated federal ethics standards.
    At OGE's request, the Inspectors General of the Treasury 
(``Treasury-IG'') and the RTC (``RTC-IG'') conducted a 
comprehensive factual investigation of the White House/Treasury 
contacts. Based on the IGs' fact-finding, OGE concluded on July 
31, 1994 that no current Treasury officials violated the ethics 
rules and regulations set forth in the Standards of Ethical 
Conduct for Employees of the Executive Branch.264
    Section (b)(2)(E) of Senate Resolution 120 authorized the 
Special Committee to investigate whether improprieties occurred 
in connection with the OGE investigation. In particular, the 
Committee was authorized to investigate whether the OGE report 
or related transcripts of depositions taken Treasury-IG and 
RTC-IG investigators:

          (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 Savings and Loan 
        Association or Whitewater Development Corporation.

    The evidence demonstrates that no improprieties occurred in 
connection with the IGs' investigation or OGE's analysis.
            1. OGE'S investigation was thorough and complete, and 
                    received the full cooperation of the administration
    It has been suggested that OGE's conclusions should be 
discounted because the Inspectors Generals' investigation was 
incomplete and did not have the Administration's full 
cooperation. In fact, the record is clear that the 
investigation was thorough and complete, and received full 
cooperation from the Administration. Every witness the 
investigators sought to depose voluntarily agreed to testify, 
and every document the investigators requested was made 
available to them. Moreover, the IGs' investigators and OGE 
officials uniformly testified that no one--from within the 
Administration or outside it--tried to influence their inquiry 
in any way.

  a. The Inspectors Generals' investigation was thorough and complete

    The IG investigators uniformly testified that their inquiry 
was thorough and complete. At least 8 professional 
investigators worked virtually full-time for a month and 
conducted 27 depositions and reviewed thousands of pages of 
documents. The record is clear that the investigators received 
testimony from every witness they sought.265 James Cottos, 
the lead Treasury-IG investigator, stated clearly that:

          We had access to all the witnesses that we deemed 
        necessary. No one restricted us on witnesses, whether 
        it be the White House, Treasury, RTC. Everyone we felt 
        we had to interview was made available to us.266

    Moreover, the witnesses all appeared voluntarily. This is 
particularly significant because the investigators had no 
authority to compel testimony.267
    Similarly, the record is clear that the investigators had 
access to every document they sought.268 The documents 
were provided to them without material conditions or 
limitations.269 Here, too, the Administration's 
cooperation was largely voluntary. The IGs had no legal 
authority to compel production of documents from outside their 
own agencies. Yet the investigators were denied nothing. In 
this regard, Patricia Black, Counsel to the Inspector General 
of the RTC, stated succinctly: ``I know of no relevant 
materials that we were denied.'' 270
    Finally, the investigators uniformly testified that they 
were free to follow whatever leads they developed. No one in 
the Administration tried to limit the scope of their inquiry or 
to restrict the investigation.271 In this regard, OGE 
Director Stephen Potts stated plainly that ``[t]here were no 
limits placed on our role'' and no subjects that OGE could not 
address.272 OGE's Deputy General Counsel Jane Ley agreed: 
``To my knowledge * * * no limits were placed on the 
investigation.'' 273

      b. The IGs had sufficient time to conduct the investigation

    The majority also has questioned the investigation on the 
grounds that the IGs worked under time constraints. There is no 
question that the investigators completed the investigation 
expeditiously, but this does not diminish the value of the 
investigation. The investigators uniformly testified that they 
had sufficient time to conduct a thorough investigation.
    As a preliminary matter, it should be emphasized that the 
Administration did not impose any time limits on the 
investigators. Any time concerns were caused by the Special 
Counsel and congressional investigators.
    In March 1994, while planning the investigation, OGE became 
concerned that its investigation might affect Special Counsel 
Fiske's inquiry into the White House/Treasury contacts.274 
Accordingly, OGE consulted with Fiske, and at his request, 
agreed to postpone its investigation until Fiske advised 
otherwise. OGE and the IGs continued to plan their inquiry and 
to perform background research, but did not contact 
witnesses.275 On June 30, 1994, Fiske advised OGE that it 
could begin its investigation.
    By the time Fiske approved the OGE investigation, the 
Senate Banking Committee and House Banking Committee also had 
begun investigations into the White House/Treasury contacts. In 
addition, the White House had initiated an internal review 
under the direction of Special Counsel Lloyd Cutler. Thus, when 
OGE began its investigation on June 30, 1994, its investigation 
was one of five overlapping inquiries.
    In general, the other investigations had little bearing on 
OGE's efforts. However, the congressional investigations did 
have one concrete effect. By June 30, 1994, it was clear that 
Congress would call Secretary Bentsen to testify regarding the 
White House/Treasury contacts. In order to avoid interference 
with OGE's investigation, Secretary Bentsen had forbidden any 
other internal Treasury Department inquiries into the White 
House/Treasury contacts.276 Therefore, as a practical 
matter, OGE was the only source for the information Secretary 
Bentsen needed to provide Congress with complete and accurate 
testimony.
    Although the investigators knew that Secretary Bentsen was 
dependent upon their efforts--and they wanted to accommodate 
his needs--this concern did not materially affect the 
investigation. The investigators uniformly testified that no 
one instructed them to complete their work by a specific 
date.277 They further testified that irrespective of 
Secretary Bentsen's congressional testimony, they would not 
have concluded the investigation if it remained 
incomplete.278 Finally, the investigators testified that 
there were no other witnesses they would have deposed and no 
other documents they would have reviewed if they had had more 
time.279 RTC-IG Counsel Black stated:

          I am aware of no evidence we didn't collect or any 
        witnesses we did not speak to that I would say we 
        needed to.280

    Therefore, the evidence established that the time concerns 
arising out of the Administration's efforts to cooperate with 
congressional investigations had no substantive impact on the 
IGs' inquiry. The investigators had sufficient time to conduct 
a thorough and complete investigation.

     c. The administration cooperated fully with the investigation

    In reviewing the IGs' investigation, it cannot be forgotten 
that Secretary Bentsen initiated the inquiry. As such, the 
investigation only took place because the Administration 
requested it. Moreover, the Administration went to great 
lengths to ensure that the investigation would be vigorous and 
credible. OGE Director Potts explained that:

          [Secretary Bentsen] wanted to have as independent and 
        authoritative analysis of the situation as he could 
        get, so that's why he was calling on us.281

    Further, as discussed above, the record shows that the 
Administration cooperated fully with the investigation. The 
investigators testified that they had access to all the 
witnesses and documents they sought. These facts alone belie 
the Majority's criticism.
    Finally, the investigators themselves rejected any 
suggestion that their investigation was impeded, or that the 
Administration somehow failed to cooperate. For instance, 
Assistant Treasury IG James Cottos stated that the 
Administration cooperated completely with the investigation. He 
explained:

    I think that everyone interviewed cooperated, Treasury 
people, RTC people and the White House people. There was not 
anything that came back about people not cooperating.282

    RTC-IG Counsel Patricia Black concurred; she described the 
Administrative as ``cooperative in full.'' 283
    In the end, the investigators concluded that the 
cooperation of witnesses must have reflected the attitude of 
high level Administration officials.284 Witnesses rightly 
believed that their superiors expected them to cooperate fully, 
and they did so. -

      d. No one in the administration tried to influence the IGs' 
                   investigation or OGE's conclusions

    The evidence demonstrates that the Administration did not 
seek to influence the IGs' investigation or OGE's analysis in 
any way. On the contrary, the testimony clearly establishes 
that the IGs and OGE were permitted to do their jobs as they 
deemed appropriate. OGE Director Stephen Potts and Deputy 
General Counsel Jane Ley both testified that no one in the 
Administration tried to influence OGE's analysis. 285 
Similarly, the RTC-IG investigators and the Treasury-IG 
investigators uniformly testified that no one from the 
Administration tried to pressure them. 286

                             e. Conclusion

    In light of the foregoing, it is clear that the IGs' 
investigation was thorough and complete. Moreover, the 
Administration made no effort to influence the investigation 
and, in fact, sought to facilitate the inquiry. The lead 
Treasury-IG investigator, James Cottos, stated that he was 
``proud'' of the investigation. 287 According to OGE 
Deputy General Counsel Jane Ley, subsequent events confirm that 
the investigation was deserving of Cottos' confidence. She 
stated:

          With the benefit of what's gone on since * * * there 
        has been no other document, no other information that 
        has shown up through anybody else's investigation, 
        through any news people, through anything else that's 
        indicated we missed--there was something missed that 
        would have changed that analysis. 288

            2. It was proper for the White House counsel's office to 
                    receive transcripts of the depositions taken by the 
                    Inspectors General
    On July 23, 1994, Acting Treasury Inspector General Bob 
Cesca authorized the release of the IGs' deposition transcripts 
to the White House Counsel's Office. It has been asserted that 
the transcripts were improperly disseminated to the White 
House. In fact, the release of the transcripts to the White 
House was entirely proper and appropriate, and it caused no 
harm to the IGs' investigation or any other inquiry.

     a. The White House had a legitimate and pressing need for the 
                         deposition transcripts

    As noted previously, OGE's investigation was one of five 
concurrent inquiries regarding the White House/Treasury 
contacts. In particular, while the IGs were investigating the 
conduct of Treasury and RTC officials, White House Special 
Counsel Lloyd Cutler was conducting an internal inquiry into 
the conduct of White House officials at the request of Chief of 
Staff Mack McLarty. Like Secretary Bentsen, Cutler needed the 
information contained in the IGs' deposition transcripts to 
complete his investigation. Also, Cutler was scheduled to 
testify before the House Banking Committee on July 26, 1994 and 
the Senate Banking Committee shortly thereafter. Cutler had an 
obligation to ensure that his testimony was based on complete 
and accurate information.
    Cutler's need for complete and accurate information created 
a conundrum. Plainly, he could not complete his investigation 
without taking steps to determine what the Treasury officials 
who engaged in the White House/Treasury contacts had to say 
about them. But Cutler was concerned that a White House effort 
to interview non-White House officials could be construed as an 
attempt to influence their testimony. 289 Steven Switzer, 
the RTC's Deputy Inspector General, characterized Cutler's 
concern as ``reasonable'' and noted that Cutler was in a 
``tough situation.'' 290 Assistant RTC Inspector General 
Clark Blight agreed that Cutler was in ``a difficult 
situation'' due to the time pressures imposed by Congress. 
291
    To resolve this dilemma, Cutler agreed with Secretary 
Bentsen that his investigators would not interview Treasury or 
RTC employees, but would receive their deposition transcripts 
for review. 292 Although Cutler considered this an 
imperfect solution--he would have preferred to conduct his own 
interviews--he agreed to it to protect the integrity of OGE's 
investigation. The arrangement between Secretary Bentsen and 
Special Counsel Cutler was no secret. On June 30, 1994, before 
OGE's investigation even began, Cutler stated in a White House 
briefing that ``we will be coordinating with the Treasury 
inspector general with respect to interviews and exchanges of 
factual information on the Treasury side and the White House 
side.'' 293 On July 26, 1994, when Cutler testified before 
the House Banking Committee, he stated plainly that he had seen 
the IG deposition transcripts. Cutler made no effort to conceal 
that fact; on the contrary, he volunteered the information. 
294 Cutler's openness refutes any implication that the 
transcripts were procured or used wrongfully.
    Nearly two years ago, during Cutler's testimony to the 
Senate Banking Committee, Chairman D'Amato concluded that it 
was appropriate for the White House to receive the deposition 
transcripts for use in Cutler's investigation. Senator D'Amato 
stated:

          Mr. Chairman, if I might make a point. I have to tell 
        you, I understand sending the depositions over to Mr. 
        Cutler. I think that is a closed question. But I think 
        reasonable people could say, well you know he is 
        conducting an investigation of his own, et cetera, so 
        should he not have that information? 295

    Nothing the Committee has learned in the intervening period 
conflicts with Senator D'Amato's conclusion. On the contrary, 
the evidence confirms the propriety of the White House's 
receiving the transcripts.
    The Committee learned, for example, that OGE encouraged 
Cutler to review the transcripts. Jane Ley, OGE's Deputy 
General Counsel, advised White House Associate Special Counsel 
Jane Sherburne that the White House had a ``responsibility'' to 
investigate the White House/Treasury contacts, and should read 
the transcripts in order to do a proper job in the White 
House's internal investigation. 296 Ley recounted that:

          I simply said to them that if they were conducting 
        their own investigation of their own employees' 
        conduct, they ought to at least read their own 
        employees' transcripts.

    Moreover, Ley stated that Cutler ``certainly'' should have 
obtained unredacted deposition transcripts, at least for White 
House employees. 297 She explained that the transcripts 
are ``a source of information of statements made by their own 
employees about their own actions, and they ought to know 
that.'' 298
    Nor was OGE alone in its view that the White House acted 
properly in seeking the deposition transcripts. Acting Treasury 
IG Robert Cesca--who approved the release of the transcripts--
testified that he continued to believe that the release was 
appropriate. 299 So did Francine Kerner, Counsel to the 
Treasury IG. 300
    Even Inspector General personnel who objected to the 
release of the depositions acknowledged that the White House 
acted properly in seeking the transcripts. For example, RTC IG 
Jack Adair testified that ``I didn't think it was inappropriate 
[that] they were asking [for the deposition transcripts] * * 
*.'' 301 Treasury Assistant Inspector General Cottos 
stated: ``I understood why the White House would ask [for the 
deposition transcripts], that's never been a question.'' 
302 Cottos added that it was reasonable for the White 
House to assume that the decision to release the transcripts 
had been approved by the Inspectors General. 303
    Finally, the Treasury Department's most senior career 
lawyers testified that the Department had an obligation to 
cooperate with the White House investigation by providing the 
deposition transcripts. In fact, according to Assistant General 
Counsel Robert McNamara, Treasury Department lawyers believed 
they had an affirmative obligation to provide Cutler with the 
transcripts, and were concerned that refusing to release the 
depositions could be construed as obstructing the White House 
investigation.304 Ed Knight, the Executive Secretary to 
Secretary Bentsen, similarly testified that the Department had 
``no choice'' but to provide the transcripts to Cutler in 
connection with his investigation.305
    In sum, the evidence has shown that Secretary Bentsen acted 
properly in providing the deposition transcripts to Special 
Counsel Cutler for use in the internal White House review of 
the White House/Treasury contacts.

 b. There is no evidence that OGE's investigation was affected by the 
        release of the deposition transcripts to the White House

    It has been suggested that the release of the transcripts 
to the White House permitted witnesses to conform their 
testimony, thus undermining the integrity of the investigation. 
However, the assertion that witnesses conformed their testimony 
is unsupported by evidence. On the contrary, the evidence 
demonstrated that witnesses were not permitted to review the 
testimony of other witnesses, and that no improper use was made 
of the transcripts. Moreover, by the time the White House 
received the transcripts from Treasury on July 23, 1994, all 
White House witnesses already had been deposed by the 
IGs.*
---------------------------------------------------------------------------
    \*\ One non-White House deposition was conducted after July 23; 
Comptroller of the Currency Gene Ludwig was deposed on July 27. 
However, there is no evidence that Ludwig's testimony was influenced by 
the release of the transcripts to the White House.
---------------------------------------------------------------------------
    The OGE and IG personnel who conducted the investigation 
confirmed that the release of the transcripts to the White 
House had no effect on the inquiry. First, OGE Director Stephen 
Potts testified that the release of the transcripts to the 
White House had no effect on OGE's analysis.

          As far as our analysis that we provided to the 
        Secretary, I am positive that it didn't impact on that 
        * * *. [I]t wasn't a factor at all in the 
        analysis.306

    Second, the IGs' confirmed that the release of the 
transcripts had no effect on their investigation. For example, 
Clark Blight, the supervisory RTC-IG investigator, testified 
that the IGs' report was not affected by the release of the 
transcripts to the White House.307 Similarly, Steven 
Switzer, the RTC's Deputy Inspector General, testified that the 
release of the transcripts to the White House on July 23 had no 
bearing on the IGs' investigation or report. 308 Treasury-
IG's Cottos testified that he had no reason to believe the 
transcripts were used to prepare witnesses. He stated:
    [O]ur interviews were already done at that point, so no, 
that did not affect our interviews.309
    Finally, Pat Black, Counsel to the RTC Inspector General, 
testified that the results of the IGs' investigation were not 
affected by the provision of the transcripts to the White 
House.310

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

    When the Treasury Department provided the White House with 
the deposition transcripts, the White House agreed they would 
be used to help White House Special Counsel Lloyd Cutler 
complete his investigation and prepare for his upcoming 
congressional testimony. 311 Questions have been raised 
whether the White House complied with the terms of this 
agreement. In particular, concerns have been raised that the 
White House Counsel's Office used the deposition transcripts or 
the information contained in them to influence the 
congressional testimony of White House officials.
    The evidence has demonstrated that the White House did not 
make improper use of the transcripts. The White House used the 
transcripts solely for the purposes agreed upon--to help Cutler 
complete his investigation and prepare accurate and complete 
testimony for the Congress. No transcripts were provided to 
anyone outside Cutler's office.
    As a preliminary matter, OGE began its investigation after 
Special Counsel Fiske completed his investigation into the 
White House/Treasury contacts. Therefore, the witnesses deposed 
by the IGs already had been questioned on the same subject by 
the Federal Bureau of Investigation and the Independent 
Counsel. Many of the witnesses also had been deposed by 
congressional investigators. As such, witnesses had given two 
or three sworn statements on the White House/Treasury contacts 
before they spoke with the IGs' investigators. This makes it 
highly unlikely they could have altered their testimony based 
on a review of the IG depositions, even if they had received 
them--which they did not.
    When first asked what use he made of the transcripts, 
Cutler was clear and concise. In an August 3, 1994 letter to 
then-Chairman Riegle, Cutler stated that the transcripts were 
not shown to any witnesses and were not used to prepare any 
witnesses for their congressional testimony. He wrote: ``These 
transcripts were used by me and my staff to complete my review 
of these matters and prepare for my congressional testimony. We 
did not provide copies to anyone.'' 312 Thus, Cutler's 
contemporaneous testimony was unequivocal; the agreement was 
complied with meticulously.
    Cutler later created some confusion regarding the use of 
the transcripts. The Associated Press reported on May 8, 1995 
that ``White House attorneys used the depositions to identify 
contradictory accounts and confront aides just before witnesses 
were to testify before Congress.'' 313 The report quoted 
Cutler as saying the following:

          If we found inconsistencies, we would go back to 
        White House officials, and go back over testimony they 
        gave us * * *. And then we would say we have heard 
        other reports. I think it was perfectly appropriate to 
        say that this is your testimony to us. There is 
        conflicting testimony. Are you sure that's what you 
        said? 314

    Understandably, the apparent conflict between Cutler's 
contemporaneous letter and his subsequent interview raised 
questions regarding the use to which the transcripts were put. 
In his testimony to this Committee, Cutler resolved the 
confusion. He acknowledged making the statement attributed to 
him by the Associated Press, but denied using the transcripts 
as he had stated. Cutler testified that at the time of the 
interview--nine months after the fact--he had a mistaken 
recollection as to when the White House received the 
transcripts and the use made of them. 315
    Other White House witnesses supported Cutler's testimony. 
Associate Special Counsel Jane Sherburne, Cutler's assistant at 
the time, confirmed that the transcripts were not shown to any 
potential witnesses or their counsel. 316 So did Sharon 
Conaway of the White House Counsel's Office, who had physical 
custody of the transcripts. 317
    Moreover, the investigators themselves debunked the notion 
that Cutler made improper use of the deposition transcripts. 
Assistant Treasury Inspector General Cottos--who objected to 
releasing the transcripts before the IGs rendered their final 
report--put this whole issue in perspective. He testified that:

          Nothing has ever been disclosed to me that 
        individuals took advantage of the fact that we released 
        those transcripts. 318

Clark Blight, the lead RTC-IG investigator, offered similar 
testimony. 319 And RTC Inspector General Jack Adair stated 
simply that he had ``no reason to believe'' that anyone in the 
White House made improper use of the information contained in 
the deposition transcripts. 320

 d. The deposition transcripts did not contain material, confidential 
                            RTC information

    Although the transcripts provided to the White House were 
later redacted to remove certain information regarding the 
RTC's underlying investigation, virtually all the information 
in the transcripts had become public long before the 
depositions were conveyed to the White House. The limited 
information that had not been made public was inconsequential.
    As a preliminary matter, only a tiny fraction of the 
information contained in the transcripts could possibly be 
characterized as confidential. Just 12 of the 27 deposition 
transcripts were redacted at all. Those redactions often 
involved a single word or phrase. Even the investigators agreed 
that the redactions involved only a modicum of the total 
contents of the depositions. For example, Patricia Black, 
Counsel to the RTC-IG, testified that the purportedly 
confidential information represented a ``very small amount'' of 
the total information contained in the transcripts, and that 
``the unredacted material * * * was the vast majority. 321 
Assistant RTC Inspector General Clark Blight similarly 
testified that ``[n]ot very much'' information was redacted. 
322
    Moreover, even the small amount of information that was 
redacted cannot seriously be characterized as confidential. All 
the redacted information concerned the RTC's investigation into 
Madison Guaranty, in particular the 1992 and 1993 referrals. 
For example, the RTC redacted the exact number of referrals, 
which can hardly be characterized as a matter of consequence.
    Moreover, the contents of the referrals were public long 
before OGE began its investigation. In fact, press coverage of 
the referrals and the RTC's investigation preceded the OGE 
depositions by at least eight months. On October 31, 1993, for 
example, the Washington Post published a front-page article on 
the RTC's investigation and the contents of the 1992 and 1993 
criminal referrals. 323 In the ensuing weeks, The 
Washington Post reported at length on those same subjects. 
324 The New York Times and The Wall Street Journal also 
devoted substantial coverage to the RTC's investigation and the 
referrals. 325 Accordingly, by the time the IG depositions 
were taken, it was common knowledge that the RTC had made 
criminal referrals against James McDougal and others with 
respect to Madison Guaranty, and that President and Mrs. 
Clinton had been named as possible witnesses.
    Thus, despite the fact that certain limited information 
about the referrals had not been formally released by the RTC, 
Treasury-IG officials testified that the transcripts did not 
contain information that was truly confidential. For example, 
Francine Kerner, Counsel to the Treasury Inspector General, 
characterized the redactions as ``ludicrous,'' because all the 
information in the transcripts already had been reported in the 
press. 326 Acting Treasury Inspector General Bob Cesca 
similarly stated that the transcripts did not contain any non-
public information because everything in the transcripts 
already had been reported in the press. 327
    Even RTC-IG officials--who opposed the release of 
unredacted transcripts--confirmed that the information later 
redacted was widely known. For example, Patricia Black 
testified that the subsequent redactions involved information 
which had been widely reported in the press--such as the total 
number of referrals--but had not been officially confirmed by 
the RTC. 328 The redactions also included information that 
had been the subject of substantial ``public speculation.'' 
329 Finally, Black acknowledged that the widespread 
dissemination of information prevents an agency from asserting 
confidentiality:

        there comes a point at which, even if a release has not 
        been authorized or confirmed by the agency, that 
        something comes to be so far in the public domain that 
        you will not--one will not be able to withhold it any 
        longer under FOIA, even as a discretionary matter. 
        330

    In light of the foregoing, it is plain that the deposition 
transcripts did not contain material confidential information.

                             e. Conclusion

    The record is clear that OGE's investigation and the 
inquiries conducted by the House and Senate Banking Committees 
were unaffected by the release of the IG deposition transcripts 
to the White House on July 23, 1994. Nor was the RTC's 
underlying investigation into Madison Guaranty affected. Former 
RTC General Counsel Ellen Kulka--who subsequently caused the 
transcripts to be redacted--testified that the transmittal of 
unredacted transcripts to the White House Counsel's Office did 
no harm. In particular, Kulka stated that the release of the 
unredacted transcripts to the White House had no ``significant 
practical effect'' on the RTC's investigation. 331
     In the end, then, there is no evidence that any harm 
resulted from the release of the deposition transcripts. On the 
contrary, the record showed that the White House had a 
legitimate and pressing need for the transcripts and that it 
was entirely proper and appropriate for the White House to 
receive them.
            3. The Treasury Department did not exert undue influence on 
                    OGE's investigation

   a. It was proper for Secretary Bentsen and his representatives to 
     receive a draft version of the IGs' report and the deposition 
                              transcripts

    Questions have been raised regarding the provision of the 
deposition transcripts and the draft IG report to Treasury 
Department officials. The record demonstrates that Secretary 
Bentsen had a legitimate and pressing need for the information 
contained in the depositions and report, and that the officials 
who received the report were acting on behalf of Secretary 
Bentsen. Thus, it was appropriate for Secretary Bentsen's 
representatives to receive the transcripts and the draft IG 
report.
    As a preliminary matter, the premise that the deposition 
transcripts and draft report were provided to Treasury's Office 
of General Counsel (``OGC'') is misleading. Although Assistant 
General Counsel Ken Schmalzbach and Deputy Assistant General 
Counsel Stephen McHale formally were employed by OGC, they did 
not function as OGC lawyers in connection with the OGE 
investigation. Rather, they acted as the personal 
representatives of Secretary Bentsen.332 Secretary Bentsen 
plainly had the right and responsibility to seek legal 
assistance in such a complicated and serious matter. However, 
he could not turn to Treasury's General Counsel Jean Hanson or 
Deputy General Counsel Dennis Foreman because they were 
involved in the White House/Treasury contacts. Schmalzbach and 
McHale were the Treasury's most senior career ethics officers, 
and were completely removed from the events under 
investigation.333 Thus, it was entirely logical and 
appropriate for them to assist Secretary Bentsen.*
---------------------------------------------------------------------------
    \*\ Along with Assistant General Counsel Robert McNamara, 
Schmalzbach and McHale played a similar role in connection with all 
five investigations into the White House/Treasury contacts.
---------------------------------------------------------------------------
    The substance of the concern is equally spurious. It is 
undisputed that the OGE investigation was undertaken at 
Secretary Bentsen's request.334 The investigators clearly 
understood that Secretary Bentsen was ``the end user'' of their 
investigative product; there was never any question that 
Secretary Bentsen would receive the deposition transcripts and 
the IGs' report.335 Moreover, Secretary Bentsen made it 
clear from the outset that he needed the IGs' report before he 
testified at congressional hearings on the White House/Treasury 
contacts.336 Those hearings commenced on July 26, 1994.
    Secretary Bentsen had an obligation to provide complete and 
accurate testimony to Congress. He also needed the information 
contained in the transcripts and draft report to make personnel 
decisions and to determine whether Treasury's policies or 
practices should be modified.337 As discussed previously, 
OGE and the Inspectors General were the only possible source of 
information concerning the White House/Treasury 
contacts.338 Moreover, for reasons entirely outside his 
control, OGE had postponed its efforts for four months after 
Secretary Bentsen's request for their assistance. Thus, 
Secretary Bentsen could not countenance any further delay; he 
had no choice but to seek the information in the transcripts 
and draft report.
    Finally, both Inspectors General considered it was 
appropriate for Secretary Bentsen to receive the deposition 
transcripts and the draft IGs' report. In this regard, Acting 
Treasury Inspector General Robert Cesca testified that it was 
``important'' and ``proper'' to provide Secretary Bentsen with 
the draft report.339 Jack Adair, the RTC Inspector General 
agreed that it was appropriate for Secretary Bentsen to receive 
the transcripts and draft report. In particular, Adair noted 
that the CEO of the RTC receives all draft and final reports 
prepared by the IG's Office, and may be briefed regarding 
ongoing investigations. Adair agreed that the transmittal of 
the draft report to Bentsen was analogous to the procedures 
that were routinely followed by his office.340

b. No harm resulted from the release of the deposition transcripts and 
                draft report to the Treasury Department

    As a preliminary matter, there is no evidence that any 
improper use was made of the draft IGs' report or the 
deposition transcripts. On the contrary, Ken Schmalzbach, 
Robert McNamara, Stephen McHale and Ed Knight--the Treasury 
officials who reviewed the deposition transcripts and draft 
IGs' report for Secretary Bentsen--uniformly testified that 
they did not share the deposition transcripts with other 
witnesses.341
    Nor is there any evidence that the release of the 
transcripts and the draft report to Secretary Bentsen affected 
the IGs' report or OGE's analysis. First, with respect to the 
IGs' report, James Cottos noted that the IGs completed their 
investigation before Secretary Bentsen received the draft 
report. Cottos added that the report ``substantively'' was 
finished when Secretary Bentsen received the draft and that the 
only changes thereafter were ``wordsmithing'' and ``minor.'' 
342 Similarly, RTC-IG Counsel Patricia Black concluded 
that: ``I do not believe that the way things worked out, that 
the provision of the draft to Mr. Bentsen had any impact.'' 
343 Second, with respect to OGE's analysis, OGE Director 
Potts was even more definitive that conveyance of the draft 
report to Secretary Bentsen had no importance. He stated: ``As 
far as our analysis that we provided to the Secretary, I'm 
positive that it didn't impact on that.'' 344
    Therefore, the record is clear that no harm resulted from 
the release of the deposition transcripts and draft report to 
the Treasury Department.

c. Francine Kerner's participation in the investigation was proper and 
                              appropriate

    The majority has suggested that the IGs' investigation was 
tainted by the participation of Francine Kerner, Counsel to the 
Treasury Inspector General.345 As a general proposition, 
the majority complains that Kerner had a conflict of interest 
because she was formally employed by Treasury's Office of 
General Counsel, and General Counsel Jean Hanson was involved 
in the White House/Treasury contacts.346 The charge also 
has been made that Kerner sought to protect her superiors from 
a probing inquiry. Neither charge is supported by the evidence. 
On the contrary, the evidence shows that Kerner's participation 
in the investigation was entirely proper and appropriate.
    The criticism of Treasury's arrangement--wherein the IG 
Counsel is formally employed by OGC--is specious. As a 
preliminary matter, the arrangement is a common one. The 
Departments of Defense and Health and Human Services and the 
Environmental Protection Agency employ similar 
structures.347 Pat Black, who criticized the arrangement, 
served under an analogous arrangement at the Department of 
Housing and Urban Development before joining the RTC. Moreover, 
Kerner took extraordinary steps to prevent any problems that 
might arise out of her dual reporting relationship. From the 
time she arrived at the Treasury, Kerner sought a memorandum of 
understanding guaranteeing her independence.348 In 
addition, on June 27, 1994--before the OGE investigation 
began--Kerner procured a memorandum from General Counsel Hanson 
removing her from OGC's chain of command for the purposes of 
the OGE investigation.349
    Moreover, the majority's criticisms are old hat, and were 
resolved long ago. From the outset of the investigation, Acting 
Treasury IG Cesca--Kerner's supervisor and client--was aware of 
her employment situation. Yet he had no concerns about her 
loyalty, professionalism or performance.350 OGE reached 
the same conclusion shortly after the investigation when 
Congressman Charles Canady raised the issue in a July 1994 
letter to OGE Director Stephen Potts. Potts responded in an 
August 4, 1994 letter that OGE had no problem with Kerner's 
participation in the investigation.351 More recently, 
Potts added that OGE's views had not changed; OGE ``had no 
reason to have a problem'' with Kerner's role.352
            4. Roger Altman did not receive a transcript of Harold 
                    Ickes' deposition prior to his Senate Banking 
                    Committee testimony on August 2, 1994
    In a Senate Banking Committee deposition taken on July 24, 
1994, Harold Ickes discussed a White House-Treasury meeting on 
February 2, 1994 attended by Roger Altman and Jean Hanson from 
Treasury and Ickes, Bernard Nussbaum, Neil Eggleston and 
Margaret Williams from the White House. The meeting concerned 
the RTC's inquiry ``as to whether there was a basis for a civil 
claim against persons or parties involved in Whitewater/
Madison.'' 353 According to Ickes, Altman indicated that 
the statute of limitations on such claims was about to expire, 
and said ``at least in so many words, that it was his 
understanding that the investigation probably would not be 
concluded and that a determination could not be made by the 
RTC's general counsel as to whether there was a basis for a 
civil claim until after the expiration of the statute of 
limitations had applied to that particular investigation.'' 
354
    At the time Ickes made the foregoing statements, he was not 
permitted to consult his contemporaneous notes from the 
meeting. Instead, he was urged to ``guess'' what Altman may 
have said.355 Significantly, no one else who attended the 
February 2, 1994 meeting recalled Altman indicating that the 
RTC would not be able to act before the statute of limitations 
expired on February 28, 1994. Moreover, Altman's talking points 
from the meeting are inconsistent with Ickes' 
testimony.356
    On August 2, 1994, Altman told the Committee that he 
believed Ickes had provided an inaccurate recollection of the 
February 2, 1994 meeting. ``I believe, and you can ask Mr. 
Ickes yourself when he appears before you, that he did not 
intend to say I had told the White House the investigation 
could not be concluded by February 28.'' 357 Altman 
further testified that he had not seen a copy of Ickes' 
deposition.358
    The following day, on August 3, 1994, during Treasury 
Secretary Lloyd Bentsen's testimony before the Senate Banking 
Committee, Senator D'Amato stated that Deputy Secretary Roger 
Altman had testified that he read White House Deputy Chief of 
Staff Harold Ickes' Senate Banking Committee deposition prior 
to his own congressional testimony. In particular, Senator 
D'Amato stated: ``We are asking Mr.--and we only found out 
about this because we are asking Mr. Altman questions, and the 
next thing you know he says, oh, that is not what Mr. Ickes 
said. How do you know that? Oh, I read his deposition. He's got 
his deposition there.'' 359
    Senator D'Amato was mistaken. As noted above, Altman 
clearly testified that he did not review Ickes' deposition. 
Moreover, the testimony of the other witnesses who appeared 
before the Committee is uniform; witnesses--including Altman--
were not shown the transcripts of other witnesses.
    Ironically, Senator D'Amato may have been the source of the 
information that he inaccurately asserted Altman learned from 
Ickes' deposition transcript. On July 30 1994,--before Altman 
testified before the Senate Banking Committee--the Los Angeles 
Times reported that:

          ``Citing a deposition by White House Deputy Chief of 
        Staff Harold M. Ickes as his source [Senator] D'Amato 
        said that Altman had told a White House meeting that 
        the RTC would not be able to complete its Madison 
        Guaranty inquiry before the expiration of a deadline 
        for filing civil claims at the end of February.'' 
        360

It is not clear whether Altman read the Los Angeles Times 
article; however, it is clear that the substance of Ickes's 
deposition testimony was public several days before Altman 
testified. Thus, there is no reason to believe that Altman saw 
Ickes' deposition transcript before his congressional 
appearance.

                                ENDNOTES

    \1\ Doc. Nos. RIO 492--RIO 493 December 11, 1991 memorandum from 
Jean Brennan [Lewis] to Clark Walton re: ``Referral Schedule.''
    \2\ Lewis, 11/29/95 Hrg. p. 88; Iorio, 10/20/95 Dep. pp.167-168, 
156-157.
    \3\ Pettus, 10/17/95 Dep. pp.99-100; Lewis, 11/29/95 Hrg. p.90; 
Irons, 12/5/95 Hrg. pp.143-144.
    \4\ Irons, 12/5/95 Hrg. pp.143-144; Pettus, 10/17/95 Dep. pp.99-
100.
    \5\ Doc. No. RIO 492, December 11, 1991 memorandum from Jean 
Brennan [Lewis] to Clark Walton, regarding ``Referral Schedule.''
    \6\ Irons, 12/5/95 Hrg. pp.143-144; Pettus, 12/5/95 Hrg p.162; 
Pettus, 10/17/95 Dep. p.95.
    \7\ Pettus, 10/17/95 Dep. pp.98-99.
    \8\ Doc. No. RIO 492, December 11, 1991 memorandum from Jean 
Brennan [Lewis] to Clark Walton, regarding ``Referral Schedule.''
    \9\ Doc. No. RIO 492, December 11, 1991 memorandum from Jean 
Brennan [Lewis] to Clark Walton, regarding ``Referral Schedule.''
    \10\ Pettus, 10/17/95 Dep. pp.97-98.
    \11\ Iorio, 10/20/95 Dep. pp.159-160.
    \12\ Lewis 10/31/95 Dep. pp.332-335; Pettus, 10/17/95 Dep. pp.109-
110.
    \13\ Doc. No. RIO 492, December 11, 1991 memorandum from Jean 
Brennan [Lewis] to Clark Walton, regarding ``Referral Schedule.''
    \14\ Iorio, 10/20/95 Dep. pp.179, 180, 182.
    \15\ Iorio, 10/20/95 Dep. pp.179, 180, 182.
    \16\ Iorio, 10/20/95 Dep. pp.180, 182.
    \17\ Iorio, 10/20/95 Dep. pp.182-184.
    \18\ Iorio, 10/20/95 Dep. pp.188-189.
    \19\ Lewis, 11/29/95 Hrg. p.94.
    \20\ Lewis, 11/29/95 Hrg. pp.94-96; Lewis, 10/31/95 Dep. p.453.
    \21\ Lewis, 11/29/95 Hrg. pp.97-98; Lewis, 10/31/95 Dep. p.442.
    \22\ Lewis, 11/29/95 Hrg pp.107, 117-118.
    \23\ Lewis, 11/29/95 Hrg. pp.34-35, 97-98.
    \24\ Doc. Nos. FBI 1529--FBI 1533, August 1992 telephone call from 
Jean Brennan [Lewis] to Steven Irons.
    \25\ Doc. No. OIC 1124, Doc. No. FBI 1526, Steven Irons handwritten 
notes from August 1992 telephone conversation with Jean Brennan 
[Lewis]; Irons, 12/5/95 Hrg. pp.145-146.
    \26\ Lewis, 11/29/95 Hrg. pp.92-94.
    \27\ Lewis, 11/29/95 Hrg. p.94.
    \28\ Irons, 12/5/95 Hrg. pp.145-146.
    \29\ Lewis, 11/29/95 Hrg. pp.118-119.
    \30\ Doc. No. DOJ 6694, transmission of September 1, 1992 criminal 
referral by Jean Brennan [Lewis] to the United States Attorneys Office 
and the FBI in Little Rock.
    \31\ Doc. Nos. DOJ 6695--DOJ 6714, transmission of September 1, 
1992 criminal referral by Jean Brennan [Lewis] to United States 
Attorneys Office and the FBI in Little Rock alleging a check kiting 
scheme at Madison Guaranty.
    \32\ Doc. Nos. DOJ 7041--DOJ 7045, February 23, 1993 memorandum 
from Mark MacDougal to Gerald E. McDowell, Chief, Fraud Section.
    \33\ McDowell, 12/6/95 Hrg. pp.54-55; McDowell, 10/19/95 Dep. 
pp.114, 119.
    \34\ Johnson, 10/24/95 Dep. pp.67, 144, 197-198.
    \35\ Patterson, 5/14/96 Dep. pp.106-110.
    \36\ Doc. Nos. DOJ 7041--DOJ 7045, February 23, 1993 memorandum 
from Mark MacDougal to Gerald E. McDowell, Chief, Fraud Section.
    \37\ Irons, 12/5/95 Hrg. p.159.
    \38\ Doc. Nos. FBI 986--FBI 996, at FBI 992, October 7, 1992 
teletype from the FBI-Little Rock to FBI-Headquarters.
    \39\ ``Madison Guaranty Savings & Loan and Whitewater Development 
Company, Inc.,'' by Pillsbury, Madison & Sutro, 12/13/95, p.77.
    \40\ Lewis, 11/29/95 Hrg. pp.152-153.
    \41\ Iorio, 11/29/95 Hrg. p.98; Iorio, 10/20/95 Dep. p.142.
    \42\ Iorio, 10/20/95 Dep. p.145.
    \43\ Iorio, 10/20/95 Dep. p.148.
    \44\ Iorio, 10/20/95 Dep. p.40.
    \45\ Lewis, 10/30/95 Dep. pp.49-51, 188-189; See also Lewis, 11/29/
95 Hrg. pp.11, 68-69.
    \46\ Lewis, 10/31/95 Dep. p.456.
    \47\ Doc. No. FBI 1527, Steven Irons telephone record chronology; 
Irons, 12/5/95 Hrg. p.149.
    \48\ Doc. No. OIC 1123, September 9, 1992 message routing slip.
    \49\ Doc. No. FBI 1527, Doc. No. OIC 1123 Steven Irons telephone 
record chronology.
    \50\ Doc. No. OIC 1134, Steven Irons notes from September 18, 1992; 
Doc. No. FBI 1534, Steven Irons telephone record chronology.
    \51\ Irons, 12/5/95 Hrg. p.151.
    \52\ Irons, 12/5/95 Hrg. p.152.
    \53\ Iorio, 10/20/95 Dep. pp.154-155.
    \54\ Banks, 12/5/95 Hrg. p.156; Banks, 10/24/95 Dep. pp.26-28.
    \55\ Dodson, 10/18/95 Dep. p.48.
    \56\ Doc. Nos. FBI 1527--FBI 1528, Doc. No. OIC 1133, Steven Irons 
telephone record chronology.
    \57\ Iorio, 10/20/95 Dep. p.145.
    \58\ Banks, 12/5/95 Hrg. pp.215-216.
    \59\ Pettus, 10/17/95 Dep. p.128.
    \60\ Senator Faircloth, 11/29/95 Hrg. pp.139-140.
    \61\ Lewis, 11/29/95 Hrg. p.35.
    \62\ Doc. Nos. FBI 1000--FBI 1001, October 16, 1992 letter from 
Charles Banks to Don Pettus.
    \63\ Doc. Nos. FBI 1000--FBI 1001, October 16, 1992 letter from 
Charles Banks to Don Pettus.
    \64\ Chairman D'Amato, 12/5/95 Hrg. pp.221, 223.
    \65\ Senator Sarbanes, 12/5/95 Hrg. p.226.
    \66\ Casey, 11/3/95 Dep. p.9-10.
    \67\ Casey, 11/3/95 Dep. p.10.
    \68\ Casey, 11/3/95 Dep. p.10.
    \69\ Roelle, 7/20/94 Dep. p.29.
    \70\ Roelle, 7/20/94 Dep. pp.79-80.
    \71\ Casey, 11/3/95 Dep. p.11.
    \72\ Casey, 11/3/95 Dep. p.11.
    \73\ Gray, 10/20/95 Dep. pp.12, 23.
    \74\ Barr, 11/13/95 Dep. pp.10-11.
    \75\ Robert Pear, ``The 1992 Campaign: White House; White House 
'Funnel' Directs Aid to States With Primaries Nearing,'' The New York 
Times, March 10, 1992, p.A1.
    \76\ Edith Holiday, ``Appointment of Edith E. Holiday as Assistant 
to the President and Secretary of the Cabinet,'' Public Papers of the 
President, June 4, 1990.
    \77\ Barr, 11/13/95 Dep. pp.12-13.
    \78\ Barr, 11/13/95 Dep. p.13.
    \79\ Barr, 11/13/95 Dep. p.13.
    \80\ Barr, 11/13/95 Dep. pp.25-26, 39-41.
    \81\ Barr, 11/13/95 Dep. p.40.
    \82\ Barr, 11/13/95 Dep. pp.13-14.
    \83\ Raphaelson, 10/26/95 Dep. pp.15-17.
    \84\ Barr, 11/13/95 Dep. pp.14-15.
    \85\ Raphaelson, 10/26/95 Dep. pp.15-17.
    \86\ Raphaelson, 10/26/95 Dep. p.20.
    \87\ Doc. Nos. FBI 523--FBI 525, October 9, 1992 teletype from FBI 
Headquarters to FBI Little Rock.
    \88\ Doc. Nos. FBI 526--FBI 528, October 16, 1992 teletype from FBI 
Little Rock to FBI Headquarters.
    \89\ Holiday, 11/27/95 Dep. pp.10-12.
    \90\ Holiday, 11/27/95 Dep. pp.12-13.
    \91\ Gary Lee, ``Clinton's Passport Files Missing Several Pages; 
FBI Reportedly Probes Possible Tampering,'' The Washington Post, 
October 5, 1992, p.A7.
    \92\ Doc. Nos. DOJ 6686--DOJ 6687, January 27, 1993 letter from 
Charles Banks to Donna Henneman, DOJ Executive Office of United States 
Attorneys.
    \93\ Frazier, 10/12/95 Dep. p.88.
    \94\ Doc. No. DOJ 006675, June 8, 1993 handwritten entry on cover 
memorandum.
    \95\ Doc. No. DOJ 006676, March 19, 1993 memorandum from John 
Keeney to Douglas Frazier.
    \96\ Casey, 11/1/95 Dep. pp.181-182.
    \97\ Hubbell, 10/26/95 Dep. pp.10, 174-175.
    \98\ Lewis, 11/29/95 Hrg. p.90; Irons, 12/5/95 Hrg. pp.143-144, 
175-176; Doc. No. RIO 492--RIO 493 December 11, 1991 memorandum from 
Jean Brennan [Lewis] to Clark Walton re: ``Referral Schedule.''
    \99\ Irons, 12/5/95 Hrg. p.162; Doc. Nos. FBI 529--FBI 530, October 
26, 1992 teletype from FBI-Little Rock to FBI-Headquarters.
    \100\ Doc. No. FBI 528, October 16, 1992 teletype from FBI-Little 
Rock to FBI-Headquarters.
    \101\ Lewis, 11/29/95 Hrg. p.90; Johnson, 12/1/95 Hrg. pp.288-289.
    \102\ Johnson, 12/1/95 Hrg. pp.291-292; Irons, 12/5/95 Hrg. pp.177, 
183-184.
    \103\ Johnson, 12/1/95 Hrg. pp.291-292.
    \104\ Foren, 11/28/95 Hrg. pp.14-15; Foren, 10/26/95 Dep. p.13.
    \105\ Foren, 10/29/95 Dep. p.25.
    \106\ ``SBA Report of Examination Regarding Capital Management 
Services, Inc.,'' March 11, 1993.
    \107\ Foren, 10/26/95 Dep. p.31.
    \108\ Foren, 10/26/95 Dep. p.34.
    \109\ Foren, 11/28/95 Hrg. p.5.
    \110\ Foren, 8/7/95 House Banking Committee Hrg. p.200.
    \111\ Foren, 11/28/95 Hrg. pp.42, 57.
    \112\ Foren, 11/28/95 Hrg. pp.48-49.
    \113\ Foren, 11/28/95 Hrg. pp.50-51.
    \114\ Foren, 11/28/95 Hrg. p.44.
    \115\ Foren, 11/28/95 Hrg. p.51.
    \116\ United States v. Hale, No. LR-CR-93-147, pp.13, 22-23 (E.D. 
Ark., March 22, 1994) (transcript of plea proceedings).
    \117\ ``Small Business Administration: Inadequate Oversight of 
Capital Management Services, Inc.--an SSBIC,'' U.S. General Accounting 
Office, GAO/OSI-94-23, March 21, 1994, p.3.
    \118\ Foren, 10/26/95 Dep. pp.119, 122-125.
    \119\ Bowles, 11/28/95 Hrg. pp.10-11.
    \120\ Foren, 11/28/95 Hrg. p.22; Shepperson, 11/28/95 Hrg. pp.23-
24.
    \121\ Foren, 11/28/95 Hrg. p.49.
    \122\ Bowles, 11/28/95 Hrg. p.50.
    \123\ Stephens, 10/30/95 Dep. pp.164-165.
    \124\ Spotila, 11/6/95 Dep. p.95; Teckler, 11/17/95 Dep. p.112.
    \125\ Eggleston, 11/28/95 Hrg. p.137.
    \126\ Eggleston, 11/28/95 Hrg. p.139.
    \127\ Eggleston, 11/28/95 Hrg. p.139.
    \128\ Eggleston, 11/28/95 Hrg. pp.139-140.
    \129\ Eggleston, 11/28/95 Hrg. pp.97-98, 140.
    \130\ Eggleston, 11/28/95 Hrg. p.98.
    \131\ Stephens, 10/30/95 Dep. pp.230-235.
    \132\ Eggleston, 11/28/95 Hrg. p.99.
    \133\ Eggleston, 11/28/95 Hrg. pp.141-142.
    \134\ Carver, 10/17/95 Dep. p.80.
    \135\ Nathan, 10/27/95 Dep. pp.97-98.
    \136\ Stephens, 10/30/95 Dep. pp.238-239.
    \137\ Eggleston, 11/28/95 Hrg. p.143; Teckler, 11/28/95 Hrg. p.145; 
Spotila, 11/28/95 Hrg. pp.145-146.
    \138\ Teckler, 11/28/95 Hrg. p.145.
    \139\ Stephens, 10/30/95 Dep. p.201.
    \140\ Eggleston, 11/28/95 Hrg. p.158; Spotila, 11/28/95 Hrg. p.159.
    \141\ Lewis, 11/29/95 Hrg. pp.15-16.
    \142\ Chairman D'Amato, 11/30/95 Hrg. p.192.
    \143\ Yanda, 11/30/95 Hrg. p.13; Thompson, 10/24/95 Dep. p.47; Doc. 
No. TH0704, June 17, 1993 RTC memorandum from RTC Director James Dudine 
and three assistant General Counsels to all RTC department heads, PLS, 
and other officials, regarding new RTC policy concerning making 
criminal referrals to the Department of Justice and other agencies 
(emphasis added).
    \144\ Thompson, 10/24/95 Dep. p.48.
    \145\ Carmichael, 10/25/95 Dep. p.61.
    \146\ Thompson, 10/24/95 Dep. pp.38-42.
    \147\ Thompson, 10/24/95 Dep. p.39.
    \148\ Thompson, 10/24/95 Dep. pp.87-88.
    \149\ Yanda, 11/30/95 Hrg. p.15.
    \150\ Thompson, 10/24/95 Dep. p.80.
    \151\ Carmichael, 10/25/95 Dep. pp.167-168.
    \152\ Carmichael, 10/25/95 Dep. pp.62, 110-111.
    \153\ Yanda, 11/30/95 Hrg. p.15.
    \154\ Carmichael, 10/25/95 Dep. p.51.
    \155\ Knight, 10/19/95 Dep. pp.88-89.
    \156\ Carmichael, 10/25/95 Dep. p.55.
    \157\ Carmichael, 10/25/95 Dep. p.56.
    \158\ Carmichael, 10/25/95 Dep. pp.169-170.
     159 Yanda, 11/2/95 Dep. pp.83-85.
     160 Yanda, 11/2/95 Dep. pp.151-152.
     161 Yanda, 11/2/95 Dep. p.154.
     162 Carmichael, 10/25/95 Dep. pp.29-30.
     163 Yanda, 11/30/95 Hrg. p.144.
     164 Yanda, 11/30/95 Hrg. pp.144-145.
     165 Knight, 10/19/95 Dep. pp.96-97.
     166 Iorio, 11/29/95 Hrg. pp.182-183.
     167 Yanda, 11/30/95 Hrg. pp.15-16.
     168 Carmichael, 10/25/95 Dep. pp.64-65.
     169 Carmichael, 10/25/95 Dep. p.65.
     170 Lewis, 11/29/95 Hrg. pp.125-126; Lewis, 10/30/95 Dep. 
pp.196-197.
     171 Lewis, 10/30/95 Dep. pp.195-196.
     172 Lewis, 10/30/95 Dep. p.159.
     173 Lewis, 10/30/95 Dep. pp.200-201.
     174 See Dec. 6, 1995 letter from Alyson Kaufman of Office 
Depot to Joseph Kolinski, Chief Clerk, United States Senate, and 
attached copies of sales receipt dated Jan. 17, 1994, [Document Not 
Numbered].
     175 Lewis, 10/31/95 Dep. p.288.
     176 Lewis, 10/31/95 Dep. p.288.
     177 Kulka, 10/27/95 Dep. pp.53-54.
     178 Lewis, 11/29/95 Hrg. p.167.
     179 Lewis, 11/29/95 Hrg. pp.170-173.
     180 Lewis, 11/29/95 Hrg. pp.171-172.
     181 Lewis, 11/29/95 Hrg. p.174.
     182 Doc. No. TH0704, June 17, 1993 RTC memorandum from RTC 
Director James Rubin and three assistant General Counsels to all RTC 
department heads, PLS, and other officials, regarding new RTC policy 
for making criminal referrals to Department of Justice and other 
agencies.
     183 Thompson, 10/24/95 Dep. pp.48-49.
     184 Lewis, 10/30/95 Dep. p.239.
     185 Lewis, 10/30/95 Dep. p.313.
     186 Lewis, 10/30/95 Dep. p.228.
     187 Lewis, 10/30/95 Dep. pp.163, 240-241.
     188 Knight, 10/19/95 Dep. p.138.
     189 Knight, 10/19/95 Dep. pp.135-136.
     190 Knight, 10/19/95 Dep. pp.70-71, 72, 75-76.
     191 Thompson, 10/24/95 Dep. p.54.
     192 Jackson, 12/1/95 Hrg. pp.218-219.
     193 Johnson, 12/1/95 Hrg. p.211.
     194 Johnson, 12/1/95 Hrg. p.212.
     195 Casey, 12/1/95 Hrg. p.201.
     196 Casey, 12/1/95 Hrg. p.201.
     197 Johnson, 12/1/95 Hrg. pp.214-215.
     198 Johnson, 12/1/95 Hrg. p.215.
     199 Casey, 12/1/95 Hrg. pp.201-202.
     200 Johnson, 10/24/95 Dep. p.184.
     201 Johnson, 12/1/95 Hrg. p.216.
    \202\ Casey, 12/1/95 Hrg. p.202.
    \203\ Johnson, 12/1/95 Hrg. p.204.
    \204\ Jackson, 12/1/95 Hrg. p.300.
    \205\ MacKay, 10/18/95 Dep. p.76.
    \206\ Coleman, 11/9/95 Dep. pp.117-118.
    \207\ Carver, 10/17/95 Dep. p.130; Nathan, 10/27/95 Dep. p.105; 
MacKay, 10/18/95 Dep. pp.92-93.
    \208\ Johnson, 12/1/95 Hrg. p.209.
    \209\ Johnson, 12/1/95 Hrg. pp.209-210.
    \210\ United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 4, 
1996), pp.3732-3734.
    \211\ Coleman, 12/1/95 Hrg. p.81.
    \212\ Johnson, 12/1/95 Hrg. p.208.
    \213\ Casey, 12/1/95 Hrg. p.203.
    \214\ MacKay, 10/18/95 Dep. p.13.
    \215\ MacKay, 10/18/95 Dep. pp.92-93.
    \216\ Keeney, 10/20/95 Dep. p.40.
    \217\ MacKay, 10/18/95 Dep. pp.90-91, 98.
    \218\ Johnson, 12/1/95 Hrg. p.210.
    \219\ Coleman, 12/1/95 Hrg. p.64.
    \220\ Johnson, 12/1/95 Hrg. p.208.
    \221\ Johnson, 12/1/95 Hrg. p.214.
    \222\ Johnson, 12/1/95 Hrg. p.261.
    \223\ MacKay, 10/18/95 Dep. pp.92-94.
    \224\ Jackson, 12/1/95 Hrg. pp.299-300; See also, Gangloff, 10/13/
95 Dep. pp.143-144; McDowell, 10/19/95 Dep. pp.69-70.
    \225\ Casey, 11/1/95 Dep. pp.243-244.
    \226\ Casey, 11/1/95 Dep. pp.172-173; Casey, 11/1/95 Dep. p.244; 
Johnson, 10/24/95 Dep. pp.158-160.
    \227\ Johnson, 10/24/95 Dep. p.157-158.
    \228\ Hubbell, 12/1/95 Hrg. pp.122-123.
    \229\ Schaffer, 1/25/96 Hrg. pp.24-28.
    \230\ Schaffer, 1/25/96 Hrg. p.27.
    \231\ Schaffer, 1/25/96 Hrg. pp.27,44.
    \232\ Schaffer, 1/25/96 Hrg. pp. 3-4.
    \233\ Gearan, 2/15/96 Hrg. pp.47, 49-50.
    \234\ M. Isikoff, S. Schneider, ``Clintons' Former Real Estate Firm 
Probed; Federal Inquiries Focus on Financial Activities of Other 
Arkansans,'' The Washington Post, November 2, 1993, p.A1; J. Gerth, S. 
Engelberg, ``U.S. Investigating Clinton's Links to Arkansas S&L,'' The 
New York Times, November 2, 1993, p.A20; U.S. Probes S&L Loans and '85 
Check to Clinton, The Wall Street Journal, November 2, 1993, p.A16.
    \235\ ``Open up on Madison Guaranty,'' The New York Times, December 
20, 1993.
    \236\ ``Open up on Madison Guaranty,'' The New York Times, December 
20, 1993.
    \237\ Lindsey, 1/16/96 Hrg. pp.196-198.
    \238\ Lindsey, 1/16/96 Hrg. pp.196-198.
    \239\ Lindsey, 1/16/96 Hrg. pp.196-198.
    \240\ Rutherford, 2/26/96 Dep. pp.19-21.
    \241\ Lindsey, 1/16/96 Hrg. pp.196-204, 208-210.
    \242\ Ickes, 2/22/96 Hrg. p. 37.
    \243\ Gearan, 2/15/96 Hrg. p.46.
    244 Doc. No. S 020575, January 7, 1994 Gearan meeting notes; 
Gearan 2/6/96 Hrg. p.156.
    245 Ickes, 2/22/96 Hrg. p.96.
    246 Gearan, 2/15/96 Hrg. p.48.
    247 Doc. No. S 20589, Jan. 11, 1994 memorandum for Circulation 
from Jake Siewart, regarding ``preferred Stock''; Gearan, 2/15/96 Hrg. 
pp.49, 51.
    248 Doc. No. S 20589, Siewert memorandum, p.1; Gearan, 2/15/96 
Hrg. pp.49, 51.
    249 Doc. No. S 20589, Siewert memorandum, p.1; Gearan, 2/15/96 
Hrg. pp.49, 51.
    250 Doc. No. S 20589, Siewert memorandum, p.1; Gearan, 2/15/96 
Hrg. pp.49, 51.
    251 Gearan, 2/15/96 Hrg. P.48.
    252 Gearan, 2/15/96 Hrg. p.182.
    253 Ickes, 2/22/96 Hrg. pp.89-90.
    254 Doc. No. S 020575, Gearan notes of 1/7/94 meeting; Ickes, 
2/22/96 Hrg. p.89.
    255 Doc. No. S 020575, Gearan notes of 1/7/94 meeting; Ickes, 
2/22/96 Hrg. p.89.
    256 Ickes, 2/22/96 Hrg. p.88.
    257 Gearan, 2/15/96 Hrg. p.48.
    258 Rutherford, 2/29/96 Hrg. pp.19-21.
    259 Rutherford, 2/29/96 Dep. pp.21-26.
    260 Rutherford, 2/29/96 Dep. p.28.
    261 Larry Margasak, ``Arkansas Regulator Says She Was 
Approached About Backing Clintons,'' Associated Press, February 11, 
1996.
    262 Schaffer, 1/25/96 Hrg. pp.236-239.
    263 Schaffer, 1/25/96 Hrg. pp.236-239.
    264 ``Report to the Secretary of the Treasury from the Office 
of Government Ethics,'' July 31, 1994, p.3.
    265 Black, 10/12/95 Dep. p.206.
    266 Cottos, 10/18/95 Dep. p.206.
    267 Black, 10/12/95 Dep. p.268.
    268 Cottos, 10/18/95 Dep. p.208.
    269 Cottos, 10/18/95 Dep. pp.204-206.
    270 Black 10/12/95 Dep. pp.208-209, 269.
    271 Adair, 10/26/95 Dep. p.97; Black, 10/12/95 Dep. p.208; 
Cesca, 10/13/95 Dep. p.226; Cottos, 10/18/95 Dep. p.206.
    272 Potts, 10/11/95 Dep. pp.88-89.
    273 Ley, 10/11/95 Dep. p.77.
    274 Black, 10/12/95 Dep. p.211; Ley, 10/11/95 Dep. pp.79-80.
    275 Black, 10/12/95 Dep. p.213; Ley, 10/11/95 Dep. p.81.
    276 Kerner, 11/1/95 Dep. pp.338-39; Knight, 10/25/95 Dep. 
p.104.
    277 Black, 10/12/95 Dep. pp.216-218.
    278 Black, 10/12/95 Dep. p.217.
    279 Black, 10/12/95 Dep. pp.218-220; Cottos, 10/18/95 Dep. 
pp.204-206.
    280 Black, 10/12/95 Dep. p.220.
    281 Potts, 10/11/95 Dep. pp.87-88.
    282 Cottos, 10/18/95 Dep. p.122.
    283 Black, 10/12/95 Dep. p.270.
    284 Black, 10/12/95 Dep. p.270.
    285 Potts, 10/11/95 Dep. pp.89-90; Ley, 10/11/95 Dep. pp.77-
78.
    286 Black, 10/12/95 Dep. pp.204-207; Cesca, 10/13/95 Dep. 
pp.220-221
    \287\ Cottos, 10/18/95 Dep. p.204.
    \288\ Ley, 10/11/95 Dep. p.85.
    \289\ Switzer, 10/10/95 Dep. pp.130-132.
    \290\ Doc. No. 06083, 7/6/94 Switzer notes.
    \291\ Blight, 10/10/95 Dep. p.162.
    \292\ Cutler, 11/6/95 Dep. pp.16-19.
    \293\ Federal News Service, Transcript of Cutler's White House 
Briefing, June 30, 1994, p.4.
    \294\ Cutler, 7/26/94 House Banking Hearing.
    \295\ Chairman D'Amato, 8/3/94 Hrg. p.21.
    \296\ Ley, 10/11/95 Dep. pp.63-64, 89, 94.
    \297\ Ley, 10/11/95 Dep. pp.87-88.
    \298\ Ley, 10/11/95 Dep. p.89.
    \299\ Cesca, 11/8/95 Hrg. p.111.
    \300\ Kerner, 11/1/95 Dep. p.349.
    \301\ Adair, 10/26/95 Dep. pp.138-139.
    \302\ Cottos, 10/13/95 Dep. p.214.
    \303\ Cottos, 10/13/95 Dep. pp.214-215.
    \304\ McNamara, 10/24/95 Dep. p.71.
    \305\ Knight, 10/25/95 Dep. p.123.
    \306\ Potts, 10/11/95 Dep. p.100.
    \307\ Blight, 10/10/95 Dep. p.140.
    \308\ Switzer, 10/10/95 Dep. p.124-125.
    \309\ Cottos, 10/18/95 Dep. p.218.
    \310\ Black, 10/12/95 Dep. pp.227-228.
    \311\ July 23, 1994 letter from Stephen McHale to Jane Sherburne.
    \312\ August 3, 1994 letter from Lloyd Cutler to Chairman Riegle, 
[Document Not Numbered].
    \313\ Associated Press, ``Starr Investigates Behind-Scenes 
Maneuvering During Ethics Probe,'' May 8, 1995.
    \314\ Richard Keil and John Solomon, ``Starr Investigates Behind-
Scenes Maneuvering During Ethics Probe,'' The Associated Press, May 8, 
1995.
    \315\ Cutler, 11/6/95 Dep. p.122.
    \316\ Sherburne, 10/31/95 Dep. pp.134-139.
    \317\ Conaway, 11/7/95 Dep. p.30.
    \318\ Cottos, 10/18/95 Dep. p.287.
    \319\ Blight, 10/10/95 Dep. p.148.
    \320\ Adair, 10/26/95 Dep. p.141.
    \321\ Black, 10/12/95 Dep. pp.259-261.
    \322\ Blight, 10/10/95 Dep. p.128.
    \323\ Susan Schmidt, ``U.S. Is Asked to Probe Failed Arkansas S&L 
RTC Questions Thrift's Mid-'80s Check Flow,'' The Washington Post, 
October 31, 1993, p.A1.
    \324\ See, e.g., Michael Isikoff and S. Schneider, ``Clintons' 
Former Real Estate Firm Probed; Federal Inquiries Focus on Financial 
Activities of Other Arkansans,'' The Washington Post, November 2, 1993, 
p.A1; Michael Isikoff and Susan Schmidt, ``U.S. Steps Up Investigations 
in Arkansas; Justice Dept. Names 3 as Prosecution Team,'' The 
Washington Post, November 10, 1993, p.A1; Susan Schmidt and Michael 
Isikoff, ``Dealings of Clinton Partners Were Referred to Justice Dept. 
in 1992,'' The Washington Post, November 11, 1993, p.A3.
    \325\ Jeff Gerth and S. Engelberg, ``U.S. Investigating Clinton's 
Links to Arkansas S&L,'' The New York Times, November 2, 1993, p.A20.
    326 Kerner, 11/1/95 Dep. pp.245-246.
    \327\ Cesca, 10/13/95 Dep. p.165.
    \328\ Black, 10/12/95 Dep. p.243.
    \329\ Black, 10/12/95 Dep. pp.251-252.
    \330\ Black, 10/12/95 Dep. p.245.
    \331\ Kulka, 10/27/95 Dep. pp.67-68.
    \332\ Cesca, 10/12/95 Dep. p.197; Kerner, 11/1/95 Dep. pp.319-320.
    \333\ Kerner, 11/1/95 Dep. pp.318-319; Knight, 10/25/95 Dep. 
pp.100-101.
    \334\ Cottos, 10/18/95 Dep. pp.207-209; Potts 10/18/95 Dep. p.86.
    \335\ Black, 10/12/95 Dep. p.202.
    \336\ Black, 10/12/95 Dep. pp.215-216.
    \337\ Knight, 10/25/95 Dep. p.100-102.
    \338\ Kerner, 11/1/95 Dep. pp.338-339.
    \339\ Cesca, 11/12/95 Dep. pp.196, 237.
    \340\ Adair, 10/26/95 Dep. pp.138-139.
    \341\ Schmalzbach, 10/20/95 Dep. pp.342-344; McNamara, 10/24/95 
Dep. pp.114-117; McHale, 10/19/95 Dep. p.85
    \342\ Cottos, 10/18/95 Dep. pp.216-217.
    \343\ Black, 10/12/95 Dep. p.227.
    \344\ Potts, 10/11/95 Dep. pp.100, 113.
    \345\ Chairman D'Amato, 11/7/95 Hrg. pp.169-170.
    \346\ Chairman D'Amato, 11/7/95 Hrg. pp.169-170.
    \347\ Kerner, 11/1/95 Dep. p.93.
    \348\ Kerner, 11/1/95 Dep. pp.90-96.
    \349\ Doc. No. 6890, June 27, 1994 memorandum from Jean Hanson to 
Robert Cesca.
    \350\ Cesca, 10/13/95 Dep. pp.241-243.
    \351\ August 4, 1994 letter from Stephen Potts to the Honorable 
Charles T. Canady, [Document Not Numbered].
    \352\ Potts, 10/11/95 Dep. pp.97-98.
    \353\ Ickes, 7/24/94, Dep. p.116.
    \354\ Ickes, 7/24/94 Dep. pp.121-122.
    \355\ Ickes, 7/24/95 Dep. pp.121-122.
    \356\ Doc. No. 000141, Talking Points for Roger Altman: 
informational interview with Mack McLarty, February 2, 1994.
    \357\ Altman, 8/2/94 Hrg. p.412.
    \358\ Altman, 8/2/94 Hrg. p.444.
    \359\ Chairman D'Amato, 8/3/94 Hrg. p.21.
    \360\ Michael Ross and Sara Fritz, ``Altman Lied About Probe 
Contacts, GOP Senators Say,'' The Los Angeles Times, July 30, 1994.

                        III. The Arkansas Phase

    The Special Committee devoted considerable attention and 
resources to investigating allegations of improprieties in 
Arkansas since 1978. The allegations fell into three broad 
categories: (1) allegations concerning the Clintons' personal 
finances; (2) allegations concerning Governor Clinton's conduct 
as Governor of Arkansas; and (3) allegations concerning Mrs. 
Clinton's work as a Rose Law Firm attorney. After months of 
exhaustive investigation into Arkansas-related matters--
including more than 100 sworn depositions and 20 days of public 
hearings--the allegations of improprieties remain unsupported 
by the evidence. On the contrary, the evidence demonstrated 
that no improprieties occurred in connection with any of these 
areas of inquiry.

A. The loans used to purchase the Whitewater property

            1. Background
    On August 2, 1978, the McDougals and the Clintons purchased 
approximately 230 acres of undeveloped land in Flippin, 
Arkansas from a group of local investors known as the 101 River 
Development Corporation. The property was bounded on one side 
by Arkansas Route 101 and on the other side by the White River. 
Because the White River area was popular with sportsmen, James 
McDougal envisioned the property as a retirement and vacation 
development. He named it Whitewater Estates.
    The McDougals and the Clintons paid $202,611 for the 
Whitewater property, slightly less than $900 per acre. They 
financed this purchase with two loans: a loan for $182,611 from 
the Citizens Bank and Trust of Flippin (``Citizens Bank'') and 
a $20,000 loan from Union National Bank of Little Rock (``Union 
National''). It has been alleged that the Clintons and the 
McDougals received special treatment from Citizens Bank and 
Union National due to the fact that Clinton was the Arkansas 
Attorney General and a candidate for Governor when the loan was 
made. The evidence, however, demonstrated that the loans did 
not receive special treatment.
            2. The Citizens Bank loan
    As noted above, the Clintons and McDougals borrowed 
$182,611.20 from Citizens Bank on August 2, 1978 to purchase 
the Whitewater property. The loan was a six month demand note 
bearing interest at 10%. This loan was renewed and extended 
nine times before being repaid in full on May 12, 1992.
    Frank Burge, Robert Ritter and James Patterson--the most 
senior officials at Citizens Bank at or about the time the loan 
made--all testified that the loan received no special 
treatment.* Citizens Bank routinely made real estate loans 
for the development of unimproved land--such as Whitewater 
Estates. Patterson testified that Citizens Bank ``was a heavy 
real estate lender'' 1 and that the bank had made loans to 
other developers who bought tracts of land in the 200-acre 
range and then subdivided the land for resale.2 In fact, 
the bank sometimes provided 100 percent financing for real 
estate investments similar to Whitewater Estates.**
---------------------------------------------------------------------------
    \*\ Patterson was the president of Citizens Bank from 1972-1979. 
Burge was a senior vice president and later president of the bank from 
1978-1979. Ritter was the president, chief executive officer and 
director of the bank from 1979-1983.
    \**\ Patterson testified that ``if you-all go back and check 
everything that I and the bank had done, you'll probably find loans we 
lent 120 percent on, and you will probably find loans we didn't lend 50 
percent on. And that's just community country banking.'' (Patterson, 2/
22/96 Dep. p.39.) Patterson also testified that ``I feel real sure that 
realtors like Wade and lots of other biggies in that region could not 
only get 100 percent financing, but they would get as much financing as 
was required to put water, streets or whatever was involved in it.'' 
(Patterson, 2/22/96 Dep. p.43.)
---------------------------------------------------------------------------
    There was no special treatment in the decision to approve 
the loan. Burge testified that:

        to be quite candid with you, I don't think Bill Clinton 
        added one real big impact point in the approval of that 
        loan. The approval of that loan was basically that * * 
        * if the loan had problems, McDougal had ample 
        resources, cash flow-wise, to service that debt for any 
        purpose, that Clinton added to the loan the basic 
        character, that I just didn't believe * * * that a 
        sitting governor would let a loan go in default and be 
        foreclosed on.3

    Burge testified that the Clinton/McDougal loan was approved 
because, at that time McDougal was a ``prominent'' real estate 
developer who ``had proven his ability to borrow money and 
repay the debt in a timely fashion,'' and who had had ``success 
in remarketing property.'' Moreover, Burge testified that the 
Citizens Bank board believed that Attorney General Clinton had 
the financial ability to discharge the loan or service the 
debt.4 Similarly, Patterson testified that, ``We gave no 
preference to that loan'' and ``they were treated exactly like 
any other customer.'' 5 Patterson later added, ``This was 
just the most ultimate, normal deal in the world.'' 6 
Ritter was not told by his board of directors to handle the 
loan differently than he might have handled other loans.7
    The evidence also established that the loan carried 
standard terms and conditions for Citizens Bank loans. First, 
the interest rate for the loan (and the subsequent renewals) 
was consistent with the market rate in Arkansas at the time. 
According to Ritter, ``All of [the loans] were at the limit of 
usury at that time,'' 8 which was 10 percent. Second, a 
six-month demand note was consistent with the Citizens Bank 
loan portfolio.9 Ritter testified that the notes were 
short-term and demandable

        probably because of the opportunity to renew all of 
        them at the time of usury changes in Arkansas. So when 
        that would have occurred, and it did, then it was a 
        matter of renewing all those notes at a higher rate. 
        Basically, the whole portfolio looked of that nature, 
        with six-month renewal notes or six month notes or one-
        year notes.10

    In other words, Citizens Bank insisted upon short term 
loans to maximize its potential interest income. Borrowers--
including the McDougals and the Clintons--would have preferred 
longer terms, but the bank did not offer them.
    Finally, there was nothing unusual about the performance of 
the loan. When asked if other loans performed better than the 
Whitewater loan, Burge said, ``I wouldn't say it was better. I 
think it was difficult as well for those other people. During 
that period of time of those first few years, interest rates 
went to 21 percent and it was a struggle for all of them.'' 
11
    Citizens Bank anticipated repayment of the loan from 
proceeds of Whitewater Estates land sales. According to Burge, 
``we anticipated that they would had ample cash sales and ample 
contract and deed sales to discharge the debt in a timely 
fashion.'' 12 Burge explained that, ``I looked for the 
land sales to be the primary source of payment. And I would be 
safe to say that the secondary source of repayment would have 
been McDougal.'' He also noted that James McDougal was the 
borrower ``with the deep pockets.'' 13 Moreover, Burge 
said that ``I would assume that we would have made the loan to 
McDougal on a stand-alone basis.'' 14 Patterson also 
testified that the bank expected to be repaid out of the 
proceeds of subsequent resale of the property.15 Burge 
testified that he believed ``McDougal has ample resources, cash 
flow-wise, to service that debt for any purpose.'' 16
    In sum, according to Burge, the Citizens Bank loan to the 
McDougals and Clintons was ``a normal deal'' 17 made on 
the ``exact same terms we made to every borrower.'' 18
            3. The Union National Bank loan
    On June 19, 1978, Attorney General Clinton and James 
McDougal borrowed $20,000 from Union National. The loan was a 
one-year unsecured demand note with an interest rate of 10 
percent. Union National extended the loan three times between 
June and December 1979. With each extension, the interest rate 
rose: first from 10% to 10.5% in June 1979; then from 10.5% to 
11.5% in September 1979; and finally from 11.5% to 13% in 
December 1979. The loan was repaid in full on June 23, 
1980.*
---------------------------------------------------------------------------
    \*\ Whitewater Development ``dispersed $21,346.29 to Union Bank in 
repayment of the $20,000 earnest money loan taken out by Jim McDougal 
and Attorney General Clinton on June 19, 1978. Jim McDougal personally 
borrowed $20,000 on June 19, 1980 from the Bank of Cherry Valley and 
deposited these funds into a Whitewater account on June 20, 1980.'' (A 
Preliminary Report on Madison Guaranty Savings & Loan and Whitewater 
Development Company, Inc., Prepared for the Resolution Trust 
Corporation by Pillsbury, Madison & Sutro, April 24, 1995, p.30 
(citations omitted).)
---------------------------------------------------------------------------
    The allegation has been made that Attorney General Clinton 
solicited the loan and that he received special treatment. The 
evidence, however, does not support this allegation. Union 
National Vice President Paul Berry testified that he approached 
Attorney General Clinton about borrowing the money after 
Clinton stated that he was considering purchasing land near the 
White River. Berry testified that ``I discussed whether or not 
[Clinton and James McDougal] were going to [buy the property] 
and I said if you make the decision to do so, we would like 
to--it would be my guess that we would like to make that 
loan.'' 19 Berry described this statement as a ``routine 
remark'' that he made to potential customers to generate 
business for the Union National.20 In contrast to claims 
that Attorney General Clinton sought the Union National loan, 
Berry's testimony demonstrates that the bank solicited 
Clinton's loan business.
    Berry further testified that Attorney General Clinton and 
James McDougal received no special treatment regarding the 
loan. Berry described the loan as ``relatively small,'' 21 
and noted that Union National routinely provided similar 
unsecured loans under the ``prestige banking'' program, which 
served as a marketing device to encourage young professionals 
to conduct business with the bank.22 Moreover, Clinton and 
McDougal already had accounts with the bank at the time of the 
loan, and Berry recalled that McDougal already was a loan 
customer.
    Following his conversation with Attorney General Clinton, 
Berry went to the chief lending officer Don Denton to discuss a 
possible loan:

          I was in the main lobby at this point and Mr. 
        Denton's office was in--just off the main lobby on the 
        same floor and I routinely spoke to members of the loan 
        department about customers that I had solicited their 
        business (sic), and in the course of the conversation, 
        if they mentioned a credit need, as part of my duties, 
        I reported such credit needs for existing or potential 
        customers to the loan department. And I mentioned this 
        to Mr. Denton or--and I am sure I apprised him of this 
        potential credit need.23

    Denton has claimed that he was pressured by senior bank 
officials to make the loan to Clinton. Berry, however, 
testified that he did not order Denton--a high ranking official 
at the bank--to make the loan, nor did he convey any message 
from the bank's president about the loan.24 Berry simply 
believed that making the loan was ``good business'' for the 
bank,25 which then earned most of its profits from the 
loans. Finally, Denton's actions at the time of the loan are 
not consistent with his recent allegations. Denton never 
expressed any objections about the loan. Berry was unaware that 
Denton had any reservations about the loan, and Denton 
testified that he never voiced any concerns or objections about 
the loan to bank officials or during loan committee 
meetings.26 Denton testified that if he had attended the 
officers' loan review committee meeting at which the McDougal-
Clinton loan was discussed, he would have ``raised some 
questions,'' but admitted that ``I probably would have taken no 
action beyond asking questions.'' 27
    There is no question that Union National anticipated 
repayment of loan. Denton testified Union National wanted to 
make a profit and expected loans--including those made to top 
political officials in the state--to be repaid.28 He 
assumed that the bank expected Clinton and McDougal to repay 
their Union National loan and he noted that the loan was in 
fact repaid in full.29
    Union Bank was a national bank, and therefore not subject 
to state banking regulation.30 Denton also testified that 
neither the Attorney General 31 nor the Governor 32 
had any direct regulatory role over the bank. Thus, Union 
National had no reason to fear retaliation from Clinton, as 
either Attorney General or Governor, for refusing to approve or 
renew the loan or requiring repayment.
            4. The Clintons were passive investors in Whitewater
    The testimony of Citizens Bank and Union National officials 
demonstrated that the Clintons were passive investors in the 
Whitewater project. The senior banking officials who authorized 
or managed the loan had little, if any, contact with the 
Clintons.
    Burge testified that he dealt primarily with James McDougal 
and viewed him as the ``primary partner * * * the one that 
seemed to be knowledgeable of all facets of each of the 
partners.'' 33 He added that ``it was always my contention 
and understanding that McDougal was handling that transaction. 
He was the, if you will, point person or the conduit that all 
information and correspondence was channelled through.'' 
34 Burge received all financial information from James 
McDougal.35 Burge had no contact with Mrs. Clinton and 
dealt with Attorney General Clinton only on one occasion: when 
Clinton authorized Burge to answer media inquiries regarding 
the loan.36
    Ritter dealt primarily with James McDougal because he was 
``a fellow banker'' and was the easiest to reach of the 
group.37 Ritter could not recall the Clintons ever calling 
him directly about the status of the loan.38 Patterson 
could not recall ever meeting the Clintons, although he 
recalled that James McDougal had come to the bank on several 
occasions and was in the area while the land was being 
developed.39 Denton dealt solely with McDougal and never 
communicated with Governor Clinton about the Union Bank 
loan.40
    The bankers' testimony is consistent with the Clintons' 
interrogatory responses to the Resolution Trust Corporation in 
1995. President Clinton, for example, recalled signing for the 
Citizens Bank and Union National loans.41 He has 
testified, however, that the Clintons did not visit Whitewater 
Estates before they bought the property with the 
McDougals,42 that ``the books and records of the project 
were kept by the McDougals,'' that the Clintons ``relied upon 
the McDougals to tell us when we needed to make a financial 
contribution to the venture,'' 43 and that the Clintons 
``relied upon the McDougals to conduct or supervise sales and 
marketing'' of the lots.44 Similarly, Mrs. Clinton stated 
that:

        the McDougals exercised control over the management and 
        operation of [Whitewater Development Corporation] for 
        the period of its active existence. My husband and I 
        did not receive annual reports or regular financial 
        summaries and were not informed of all actions taken in 
        the name of [Whitewater Development Corporation]. As 
        was contemplated from the inception of the venture, we 
        were passive investors and relied upon the McDougals to 
        manage and operate it.45

    The Pillsbury, Madison & Sutro report concluded that the 
Clintons did not play an active role in the activities 
connected with the real estate development. The report states 
in part that:

          For the relevant period (ending in 1986), the 
        evidence suggests that the McDougals and not the 
        Clintons managed Whitewater. The evidence does not 
        suggest that the Clintons had managerial control over 
        the enterprise, or received annual reports or regular 
        financial summaries. Instead, and as the Clintons 
        suggest, their main contact with Whitewater seems to 
        have consisted of signing loan extensions or 
        renewals.46

    Moreover, after listing every document the Clintons had 
been provided in connection with the Whitewater investment, the 
Pillsbury report concluded that, ``on this record, there is no 
basis to assert that the Clintons knew anything of substance 
about the McDougals' advances to Whitewater, the source of the 
funds used to make those advances or the sources of the funds 
used to make payments on the bank debt.'' 47 Bruce 
Ericson, a primary author of the Pillsbury report, accepted 
Mrs. Clinton's statement that the Clintons `` `had little 
knowledge [of] and no control over the Whitewater project.' '' 
48

B. The extensions of the loans

    After the Clintons and McDougals incorporated Whitewater 
Development Company, Inc. (``WWDC'') in June 1979, they 
transferred the land to the corporation, subject to the 
Citizens Bank mortgage. By the end of 1984 Citizens Bank had 
renewed or extended the loan six times. In 1985, however, Twin 
City Bankshares (``TCB''), a bank holding company that had 
purchased Citizens Bank, transformed it into First Ozark 
National Bank. Thereafter, Whitewater loan renewals were 
handled by First Ozark. First Ozark also renewed the loan 
several times. In all Citizens Bank and First Ozark renewed or 
extended the loan nine times before it was paid off on May 12, 
1992.
    The Committee devoted considerable attention to the First 
Ozark loan renewals in 1987 and 1988. In particular, the 
Committee explored: (1) whether the loan received special 
treatment; and (2) whether the loan renewals were connected in 
any way to banking legislation enacted by the State of Arkansas 
in 1987 and 1988 that may have benefitted First Ozark's parent 
company, Twin City Bankshares.
    The evidence demonstrated that the Whitewater loan did not 
receive any special treatment. The loan was fully 
collateralized and was personally guaranteed by the Clintons 
and the McDougals. In addition, beginning in 1985, the bank 
received all income from lot sales. Also, although these two 
loan renewals (out of the total of nine renewals) occurred 
about the same time as the banking legislation, the evidence 
demonstrated that there was no connection between the loan 
renewals and the banking legislation.
            1. Extension of loan by Citizens Bank
    Citizens Bank Assistant Vice President Ron Proctor assumed 
responsibility for the Whitewater loan when he joined the bank 
in 1983.* By then, the loan already had been renewed or 
extended several times, and the loan balance had been reduced 
from more than $182,000 to approximately $125,000. The loan was 
structured as a single pay loan. No payments were due during 
the term of the loan; however, a balloon payment including 
accrued interest was due when the loan matured. This loan 
structure was common for commercial loans in Arkansas at that 
time.49 Arkansas usury statutes capped interest rates 
below the market rate for long term commercial loans.50 As 
such, banks commonly made short term loans that were renewed at 
new interest rates reflecting changes in market conditions.
---------------------------------------------------------------------------
    \*\ Blood Sport, by James Stewart, erroneously states that Proctor 
had turned over ``much of the Whitewater [loan] file'' to Vernon Dewey 
by 1986. Blood Sport, p.149. Actually, Proctor retained complete 
responsibility for the loan file until the loan was retired in May 
1992. (Proctor, 5/2/96 Dep. pp.13-14; Strange, 5/2/96 Dep. pp.32, 107.) 
In his deposition, Dewey conceded that he never had responsibility for 
the Whitewater file. (Dewey, 5/3/96 Dep. p.55.)
---------------------------------------------------------------------------
    From the time Proctor became involved, the Whitewater loan 
was secured by the land. In addition, the Clintons and 
McDougals were personally responsible for the loan. Proctor 
therefore considered First Ozark to be well protected.51 
As such, the loan was routinely extended in October 1983 and 
renewed in December 1984 (at which point the balance had been 
reduced to approximately $100,000).52 The 1984 renewal was 
for two years, until December 3, 1986.

           a. Ozark Air's purchase of the Whitewater property

    On May 4, 1985, Chris Wade's Ozark Air Service purchased 
all the unsold Whitewater land. When Wade informed Proctor of 
the purchase, he asked Proctor to assign the loan to him and to 
release the Clintons and McDougals.* Proctor testified he 
was pleased that Wade had purchased the land. Wade was a local 
real estate businessman, and Proctor though he might be able to 
sell the lots faster than McDougal.53 Wade also had served 
on the board of Citizens Bank. Proctor had the impression that 
the Clintons and McDougals wanted to withdraw from the 
Whitewater investment, and that Wade was helping them do 
so.54 Proctor's first concern was the bank, however; 
accordingly, he refused to release the Clintons or the 
McDougals from their personal liability until the loan was paid 
in full.55 This conflicts with any claim that the bank 
gave the Clintons special treatment. On the contrary, the bank 
declined to release the Clintons from personal liability for 
the loan even though Wade was prepared to assume that liability 
after he purchased the property.
---------------------------------------------------------------------------
    \*\ Although Proctor could not recall when this discussion 
occurred, the records show that Wade purchased the remaining Whitewater 
lots in May 1985.
---------------------------------------------------------------------------

                        b. The 1987 loan renewal

    When the Whitewater loan matured in December 1986, the 
McDougals again sought to renew the loan. At this point, the 
loan balance had been reduced to approximately $53,000.56 
The Clintons were not involved in renewing the Whitewater loan 
at this time;* Proctor's primary contact on the loan was 
Susan McDougal.57
---------------------------------------------------------------------------
    \*\ The Clintons did not become involved in loan renewals until at 
least 1988. Proctor did not communicate with Mrs. Clinton regarding the 
loan until 1990. ``She wasn't really involved in the loan'' until 
approximately 1990. (Proctor, 5/2/96 Dep. p.40.) Even then, Proctor 
never spoke with Governor Clinton about the loan. (Proctor, 5/8/96 Hrg. 
pp.94-95.)
---------------------------------------------------------------------------
    As the loan officer responsible for the Whitewater loan, 
Proctor was required to review the loan renewal application and 
make a recommendation. As part of this review process, Proctor 
decided to reevaluate the collateral for the loan, the 
Whitewater property, which had not been appraised since the 
original loan was made in 1978.58 To do so, Proctor 
visited the Whitewater property in January 1987. According to 
Proctor's file notes dated January 6, 1987, he valued the land 
at $750 per acre.59 This was less than the original 
appraisal of $1,100 per acre, due in part to the ill-kept 
condition of the property.** The reduced valuation was 
Proctor's best informed estimate. He had no technical training 
in appraisal.60 A formal appraisal was not 
prepared.***
---------------------------------------------------------------------------
    \**\ Also, many of the most valuable lots already had been sold, 
which naturally reduced the average value of the remaining lots.
    \***\ Proctor never conveyed his opinion regarding the value of the 
property to the Clintons or the McDougals. He did not believe that the 
Clintons or McDougals were aware of his analysis. Proctor, 5/2/96 Dep. 
pp.88-89.
---------------------------------------------------------------------------
    Proctor testified that although he would have preferred 
that the value of the land had not declined over the life of 
the loan, he was not concerned about repayment because the loan 
did not really depend on the collateral.61 The escrow 
payments that the bank was receiving were adequate and the loan 
also was guaranteed by the Clintons and the McDougals. Proctor 
therefore assigned the loan a risk rating of 3 (out of 
6).62
    It has been alleged that a risk rating of 3 was unusual, 
and meant ``the bank should start preparing for a default, but 
still hoped the loan would perform.'' 63 Proctor and First 
Ozark President Wes Strange both testified that this was 
incorrect.64 First, a 3 rating did not signify potential 
default. On the contrary, Proctor stated that a 3 rating 
signified a ``standard loan with normal risk.'' 65 Strange 
agreed that a risk rating of 3 signified a ``normal loan.'' 
66 He explained that: ``A 3-rated loan was a standard 
acceptable credit in the bank with no particular problem.'' 
67 Even Vernon Dewey--the junior bank officer who made 
that allegation--ultimately conceded that a 3 rating was in the 
``middle of the rating scale,'' and did not signify a loan that 
was about to go into default.68 Second, a risk rating of 3 
was common, not unusual. Proctor estimated that 80% or 85% of 
the bank's loans were risk rated 3.69 Strange described 
Proctor's estimate as ``very close.'' 70 In fact, every 
commercial loan approved on January 8, 1987 (the day the 
Whitewater loan renewal was approved) was assigned a risk 
rating of 3.71
    First Ozark's officers loan committee held its regular 
weekly meeting on January 8, 1987. The attendees included 
Proctor, Strange, and Dewey. Susan Sisk, TCB's representative 
on the loan committee, did not attend.72
    Fourteen loans were considered at the meeting. The 
Whitewater loan renewal was one of eight commercial loans on 
the agenda. Based on Proctor's recommendation, the committee 
approved the loan renewal.73 Once again, this demonstrates 
that the Whitewater loan did not receive special treatment. 
Although the minutes do not state who supported the renewal, a 
single negative vote would have caused the loan to be 
declined.74 Therefore, the loan presumably received 
approval.*
---------------------------------------------------------------------------
    \*\ Although Dewey voted to approve the loan, he testified that he 
actually believed it should be declined. Dewey stated: ``I thought it 
should be renewed because it was the Governor of the State of Arkansas, 
not that it was a good loan.'' However, Dewey conceded that no one 
pressured him to approve the loan; his vote reflected his own judgment.
---------------------------------------------------------------------------
    Although the loan committee approved the loan on January 8, 
1987, the actual renewal was subject to three conditions:
    1. All sales proceeds (less commissions) applied to note.
    2. All contracts to be maintained here at [First Ozark 
National Bank].
    3. Need new financials.75
    Although the loan's fundamentals were adequate for renewal, 
the bank would not finalize the loan until it was further 
protected.
    The committee's conditions were met before the loan was 
formally renewed on March 26, 1987. First, the renewed loan 
included an assignment of escrow in the bank's favor. As such, 
payments from sales were made into an escrow account, and the 
proceeds of the escrow account were pledged and paid to the 
bank. Second, the sales contracts were provided to First Ozark. 
Finally, the Clintons submitted an updated financial statement 
on March 24, 1987, which First Ozark received on March 26, 
1987. *
---------------------------------------------------------------------------
    \*\ It was not significant that the loan was approved on January 8, 
1987, pending receipt of the Clintons' financial statement. Proctor 
testified that the financial statement was helpful, but that even 
without the financial statement, the loan was justified because it was 
collateralized and the bank was being paid from an escrow fund. 
(Proctor, 5/2/96 Dep. pp.82-83.) In any event, the loan was not 
actually renewed until the financial statement was provided to the 
bank.
---------------------------------------------------------------------------
    The loan had a twelve month term and carried an interest 
rate of 10.5%--the same rate carried by every other loan 
approved at the meeting on January 8, 1987. 76 As noted 
above, all eight of the commercial loans approved that day had 
risk ratings of 3. 77

          c. The Clintons' March 24, 1987 financial statement

    The circumstances under which the bank obtained the 
Clintons' financial statement have been the subject of 
considerable attention. Proctor and Twin City Bank president Ed 
Penick both testified that they attended a First Ozark board 
meeting at which the bank's desire to obtain the Clintons' 
financial statement was discussed. 78 Proctor does not 
recall how the subject arose. 79 Penick recalls that the 
Whitewater loan was on a list of loans with file documentation 
deficiencies. 80 The board routinely reviewed such lists. 
81
    During the foregoing discussion, Penick offered to help 
procure a financial statement. * Specifically, Penick said 
he would speak with Margaret Davenport (now Margaret 
Eldridge)--a Twin City Bank officer who was friendly with Mrs. 
Clinton--and ask her to speak with Mrs. Clinton. 82 Penick 
then wrote to Mrs. Clinton and enclosed a form financial 
statement. 83 Penick, however, does not recall speaking 
with Davenport. 84 Davenport similarly testified that she 
did not speak with Penick or with Mrs. Clinton. 85 
However, a handwritten note on Mrs. Clinton's stationery 
references ``Notes of Tk w/ M. Davenport.'' The note--which is 
dated ``1987'' in the upper right hand corner--recounts the 
status of the Whitewater loan as of October 1986. 86 Thus, 
Davenport may have spoken with Mrs. Clinton regarding the 
Whitewater loan, but has since forgotten having done so.
---------------------------------------------------------------------------
    \*\ Penick did not recall offering to ask Davenport to speak with 
Mrs. Clinton. (Penick, 5/9/96 Hrg. pp.147-148.) Strange also did not 
recall the conversation. (Strange, 5/9/96 Hrg. p.148.)
---------------------------------------------------------------------------
    In any event, on March 26, 1987, the bank received a 
financial statement for the Clintons. The statement--which is 
dated March 24, 1987--appears to be a form supplied by the 
bank. 87
    The Committee devoted considerable attention to the 
Clintons' financial statements. Much of the Committee's inquiry 
tracked allegations in Blood Sport. First, the book made much 
of the fact that the bank approved the 1984 Whitewater loan 
renewal without an updated financial statement for the 
Clintons, and that the bank gave preliminary approval to the 
1987 renewal before it received a financial statement. In 
particular, the book cites Dewey for the proposition that the 
Whitewater loan was ``the only one in the bank's portfolio'' 
that lacked fully updated financial statements, and suggests 
that this represents special treatment for the Clintons. 
88
    The evidence, however, simply does not support the 
suggestion of favoritism. As an initial matter, Proctor 
estimated that 40% of the loans in First Ozark's portfolio 
lacked fully updated financial statements from the borrowers. 
89 Penick and Strange agreed that it was not unusual for a 
loan to lack fully updated financial statements. 90 
Moreover, when confronted with Proctor's testimony, Dewey 
conceded that ``it was not the only loan in the bank lacking 
financial information but this loan sticks out in my mind 
because of who the borrowers were.'' 91
    Similarly, Blood Sport reported that Dewey was so troubled 
by the lack of updated financial statements that he ``insisted 
that the matter be brought to the bank's board of directors, 
and argued that the loan should be called.'' 92 Once 
again, this raises the implication that the bank afforded 
special treatment to the Clintons. This statement also was at 
odds with the evidence. Dewey testified that he never argued to 
the board of directors that the loan should be called; in fact, 
he never told a single director--during a meeting or 
elsewhere--that the loan should be called. 93 Proctor was 
the only person whom Dewey recalled telling that the loan 
should be called, and Proctor denied that Dewey did so. 94
    Moreover, Proctor testified that financial statements were 
less significant with respect to the Whitewater loan than many 
other loans. 95 Unlike many other loans at the time, the 
Whitewater loan was performing; the balance already had been 
reduced from $182,000 to $52,000. Also, the bank had ample 
security for the loan because it was receiving payments from an 
escrow fund and the loan was secured by the land itself (as 
well as the personal liability of the McDougals and the 
Clintons). 96 Thus, the bank did not need the Clinton's 
updated financial statement to analyze the loan.
    Second, it was suggested in Blood Sport that the bank made 
repeated efforts to procure a financial statement, which were 
ignored by the Clintons. In particular, the book asserts that 
Dewey stated that he had ``written the Clintons repeatedly 
asking, then demanding, that they provide a financial 
disclosure.'' 97 Under oath, however, Dewey conceded that 
he never wrote to the Clintons or communicated with them in any 
way on any subject. 98 Nor did Proctor contact the 
Clintons directly at this time. 99 In fact, the only 
person who recalls having contacted the Clintons directly was 
Penick, who sent Mrs. Clinton a blank Twin City Bank financial 
form shortly before the Clintons submitted such a form on March 
24, 1987. 100
    In any event, there was no reason for the Clintons to avoid 
submitting a financial statement to First Ozark. The Clintons 
previously had submitted financial statements to First Ozark 
and other banks that identified and valued their Whitewater 
investment. Governor Clinton also had submitted state-mandated 
financial disclosure forms that identified the Whitewater 
investment.
    Finally, the Clintons' valuation of the Whitewater 
investment on their financial statement has been the subject of 
substantial discussion, particularly in Blood Sport. According 
to the book, Whitewater ``[c]uriously'' is not referred to by 
name in the assets portion of the document, but the Clintons 
listed two assets that may refer to Whitewater: $50,000 in 
accounts receivable and a partial interest in real estate 
valued at $50,000. 101 It therefore concluded that they 
valued their Whitewater investment at $100,000. *
---------------------------------------------------------------------------
    \*\ According to Blood Sport, Whitewater was the only ``investment 
or holding'' listed on Governor Clinton's state financial disclosure 
form.
---------------------------------------------------------------------------
    The book then challenged the accuracy of this valuation. As 
noted earlier, in 1985, the unsold Whitewater lots had been 
conveyed to Chris Wade's Ozark Air. Wade still owed WWDC 
approximately $25,500 in that transaction, of which the 
Clintons were due half, or $12,750. In addition, the Clintons 
owned half of Whitewater's $60,000 in accounts receivable from 
before the sale to Wade; approximately $30,000. Thus, Blood 
Sport concludes that the Clintons' share of Whitewater was 
worth a total of approximately $42,750--less than half of the 
$100,000 value the Clintons supposedly assigned to the 
property. 102
    Apparently, Stewart reviewed only the first page of the two 
page financial statement. ** The second page of the 
financial statement lists Whitewater as an asset valued at 
$100,000, 103 but it also lists the Clintons' portion of 
the Whitewater loan as a $70,000 liability. Thus, the net 
valuation of the Whitewater investment on the financial 
statement is actually $30,000--less than the $42,750 value that 
Blood Sport calculated. Consequently, it appears that the 
Clintons may actually have undervalued their Whitewater 
investment. 104 In any event, the whole issue is spurious 
because the bank already had complete information about both 
the value of the assets and the amount of the liabilities 
associated with Whitewater. They only needed a completed form 
for their loan files, and they were not looking to that form 
for information about a loan they had made which was 
collateralized by property they had inspected.
---------------------------------------------------------------------------
    \**\ Blood Sport never mentions the second page of the financial 
statement. Moreover, the financial statement is reproduced in an 
appendix to the book as a one page document. Taken together, these 
facts strongly suggest that a mistake was made in treating the 
financial statement as a one page document.
---------------------------------------------------------------------------
    Moreover, there is no evidence to suggest that the Clintons 
intentionally misrepresented the value. David Kendall has 
described the valuations as the Clintons' ``best estimate.'' In 
this regard, it should be noted that $100,000 is approximately 
half of the original purchase price for the Whitewater 
property. In any event, the Clintons were consistent in their 
valuation of Whitewater. As noted previously, in the First 
Ozark financial statement, the Clintons value their Whitewater 
investment at approximately $100,000. 105 A financial 
statement that the Clintons provided to Security Bank of 
Paragould about the same time assigns a similar value to the 
Whitewater investment. 106 So does a financial statement 
submitted to the Bank of Cherry Valley in April 1983. 107 
Thus, it appears that the Clintons simply assigned the same 
value to their Whitewater investment that they had always 
assigned to it. *
---------------------------------------------------------------------------
    \*\ The Clintons' apparent confusion regarding the status of the 
property and the balance on the loan tends to confirm that the Clintons 
were passive investors in Whitewater and that the McDougals managed the 
investment.
---------------------------------------------------------------------------

                          d. The 1988 renewal

    On November 20, 1987, about midway through the term of the 
1987 renewal, Proctor wrote to Susan McDougal to request an 
updated financial statement for the McDougals. 108 As the 
loan approached maturity, he repeated the request by letter 
dated February 24, 1988, this time requesting an updated 
statement for the Clintons also. 109 The McDougals 
apparently did not respond to either letter. **
---------------------------------------------------------------------------
    \**\ Nevertheless, on December 12, 1987, the loan committee 
approved Proctor's request to waive the McDougal's financial statement 
requirement. (Doc. No. CBF0403, December 12, 1987 Minutes of First 
Ozark Officers Loan Committee Meeting.)
---------------------------------------------------------------------------
    On April 12, 1988, Wes Strange wrote to Mrs. Clinton about 
renewing the Whitewater loan. 110 This was a change in 
procedure; previously, the bank had worked through the 
McDougals. By this time, however, the McDougals had left 
Arkansas and moved to California.111 First Ozark's efforts 
to locate them had proved unsuccessful. Strange thus sought 
Mrs. Clinton's help in contacting the McDougals. 112
    Mrs. Clinton made several attempts to contact the 
McDougals. On June 9, 1988, she sent them a certified letter 
recounting her efforts to reach Mrs. McDougal, and asking them 
to contact her to discuss the loan extension. In a ``Blind 
P.S.'' to Strange, Mrs. Clinton added: ``Wes, I do not know 
what else to do. If you have any suggestions, please give me a 
call. Thanks.'' 113 By July 13, 1988, Mrs. Clinton 
apparently had given up trying to reach the McDougals. She 
wrote to Strange: ``I am enclosing the renewal note you sent 
for Bill's and my signature. Despite repeated efforts, I have 
been unable to reach the McDougals.'' 114
    On July 15, 1988, Proctor prepared a request for waiver of 
financial statements for WWDC and the guarantors--that is, the 
Clintons and McDougals. In his request, Proctor explained that 
statements were not necessary because:
    1) Payments on loan are derived from escrow contracts 
controlled by [First Ozark National Bank]; and
    2) Collateral is sufficient to cover the loan.
    The request for a loan documentation waiver was approved by 
Strange. 115
    According to Proctor, his request for a loan documentation 
waiver was not unusual. 116 By this time, the loan balance 
had been paid down to approximately $36,000. 117 Moreover, 
the loan was supported by an income stream from the escrow 
account and was collateralized by the land. In addition, the 
waiver request reflected the bank's recognition that the 
McDougals could not be found. * In any event, First Ozark 
did not relieve the Clintons or McDougals of liability for the 
loan; the bank merely waived a paperwork requirement. 118
---------------------------------------------------------------------------
    \*\ The waiver occurred on the same day that Governor Clinton 
signed the 1988 Omnibus Banking Bill. However, there is no evidence 
that would connect these two events.
---------------------------------------------------------------------------
    Also on July 15, 1988, Proctor approved the renewal of the 
Whitewater loan for 39 months. Strange also approved the 
renewal. 119 Because the loan amount was only $36,000, the 
loan did not require further approval.
    On July 19, 1988, Strange forwarded the renewal note to 
Mrs. Clinton for signing. 120 On July 27, 1988, Mrs. 
Clinton returned the renewal note signed by her and the 
Governor to Strange. 121
            2. Branch Banking Legislation
    Until 1987, a state-chartered bank in Arkansas could 
operate branches only in the community in which it was 
chartered. Savings and loans had no such restriction. 
Legislation enacted in 1987 and 1988 broadened opportunities 
for state-chartered banks to operate branches outside their 
immediate communities. Twin City Bankshares (``TCB''), the 
parent company of First Ozark National Bank, supported the 1987 
and 1988 legislation. It has been suggested that a relationship 
existed between First Ozark's renewal of the Whitewater loan in 
1987 and 1988 and the Clinton Administration's support for 
branch banking legislation. There is no evidence to support 
this allegation. The only connection between the Whitewater 
loan renewals and the branch banking legislation was a 
coincidence of timing.

                           a. Act 539 of 1987

    By 1986, opposition to the geographic restriction on state-
chartered banks in Arkansas was growing. For example, on May 
27, 1986, TCB's president Ed Penick met with State Bank 
Commissioner Marlin Jackson to discuss TCB's application to 
open new branches in North Little Rock, the community in which 
it was chartered.122 According to Penick's file notes:

          The Commissioner also mentioned that, in his opinion, 
        it was time for somebody to foster legislation to 
        permit county-wide branching. The legislation could be 
        restricted to counties with over 100,000 population so 
        that only Pulaski County would be affected. He felt 
        there was a good chance the legislation would be 
        approved. * * *
          It would be interesting to casually feel out our 
        state delegation to determine if there would be support 
        for county-wide branching, but I'm not too optimistic 
        here either knowing the influence of [State Senator] 
        Max Howell and the close association he has with Pat 
        Wilson.123

    This memorandum demonstrates that the Clinton 
Administration supported branch banking legislation long before 
the 1987 Whitewater loan renewal. The memorandum also shows 
that the Clinton Administration proposed branch banking 
legislation to TCB; TCB did not propose the legislation to the 
administration. TCB may have favored the idea, but the Clinton 
Administration's interest preceded the maturity of the 
Whitewater loan by six months. Thus, it is implausible that the 
Governor's support for the legislation was connected to the 
loan renewal in any way.
    In any event, on April 1, 1987, the Arkansas Legislature 
passed Act 539, which permitted state-chartered banks in 
counties with populations greater than 200,000 to operate 
branches virtually anywhere in their county. The only 
limitation was that a bank could not open a branch within 300 
feet of the main branch of another bank.124 Act 539 passed 
overwhelmingly: 80 to 10 in the House and 23 to 10 in the 
Senate.
    At the time, only one Arkansas county had a population 
greater than 200,000; Pulaski County, which contains Little 
Rock and North Little Rock. Although the Act permitted any bank 
in Pulaski County to expand outside its immediate community, as 
a practical matter, there was less incentive for Little Rock 
banks to expand outside the city than for banks outside Little 
Rock to expand into the city.
    Twin City Banks--which was owned by Twin City Bankshares--
was the largest state-chartered bank in Arkansas. It also was 
the only major bank chartered in North Little Rock. It has been 
suggested that a connection existed between First Ozark's 
renewal of the Whitewater loan in March 1987 and the passage of 
Act 539 in April 1987.125 There is no evidence to support 
this allegation. On the contrary, every single witness has 
denied any connection between the loan renewal and Act 
539.* Ron Proctor saw ``no connection at all between the 
two''126, and Penick when it was suggested to him at a 
hearing that there was a ``quid pro quo for support of the 
banking legislation'' said ``absolutely not.''127 
Therefore, the evidence demonstrated no connection between the 
renewal of the Whitewater loan in 1987 and the enactment of Act 
539.
---------------------------------------------------------------------------
    \*\ In Blood Sport, Dewey is quoted as connecting the legislation 
to ``a few calls'' made by TCB officials, but in his deposition, he 
testified at his deposition that he had no reason to believe that there 
was any connection between the Whitewater loan and branch banking 
legislation. (Dewey, 5/3/96, Dep. pp.71-72.)
---------------------------------------------------------------------------

                  b. The Omnibus Banking Bill of 1988

    Notwithstanding the passage of Act 539, TCB's efforts to 
open new branches encountered opposition. Most significantly, 
TCB's main competitor, First Commercial Bank, sued to overturn 
five permits that Bank Commissioner Bill Ford granted TCB to 
open branches in Little Rock. First Commercial claimed that the 
Act constituted unconstitutional ``local'' legislation because 
it affected only Pulaski County.128
    While the litigation was pending, a federal court in 
Mississippi overturned a regulatory system similar to that in 
Arkansas (in which S&Ls could branch statewide, but federally-
chartered and state-chartered banks could not).129 In 
essence, the court compelled Mississippi to permit federally-
chartered banks to branch statewide, which gave them a 
significant competitive advantage over state-chartered banks--
and threatened Mississippi's dual charter system.130
    At the time, Arkansas also had a dual charter system. The 
Mississippi decision thus raised alarm among bankers and 
regulators that Arkansas would face a similar suit. To prevent 
judicial intervention, the banking community put together a 
comprehensive overhaul of the State's banking laws called the 
Omnibus Banking Bill of 1988.131 This bill was introduced 
and enacted during a special legislative session that Governor 
Clinton called in July 1988. Among other reforms, the Omnibus 
Bill authorized statewide branching by state-chartered banks. 
This provision replaced Act 539 and rendered First Commercial's 
litigation moot.
    Again, the only connection between the Omnibus Banking Bill 
of 1988 and First Ozark's renewal of the Whitewater loan is a 
coincidence of timing. The 1988 legislation was enacted on July 
15, 1988, the same day that First Ozark waived the 
documentation requirement for the Whitewater loan and four days 
before the loan was renewed. However, no witness has testified 
to any knowledge of a connection between these events. In fact, 
every single witness has denied that a connection exists.
    Wayne Hartsfield, President of the Arkansas Bankers 
Association and the person who coordinated the drafting of the 
1988 legislation, testified that he had no reason to believe 
the 1988 legislation was unduly influenced by TCB or any other 
bank. 132 Hartsfield stated that the bill's provisions 
were the product of a consensus among bank chief executives, 
and that he had no reason to believe that TCB had any special 
influence with the Governor or his staff. 133 There is no 
evidence to the contrary.

C. Subsequent events related to the Whitewater property

            1. The Lot 13 Loan
    The Majority raised questions about a loan to Mrs. Clinton 
from Madison Bank and Trust (``MBT''), previously known as the 
Bank of Kingston, when she borrowed $30,000 to build a model 
home on Whitewater Estates lot 13. The Majority has alleged 
that this loan violated a Federal Deposit Insurance Corporation 
(``FDIC'') restriction on MBT loans outside the bank's 
designated loan territory.* The evidence did not support 
this allegations.
---------------------------------------------------------------------------
    \*\ On April 27, 1983, MBT consented to the FDIC's entry of an 
order that required the bank to cease and desist from, among other 
things, extending credit outside Madison County or the western half of 
Newton County, Arkansas unless the loan was approved by the bank's 
board of directors. (Doc. No. DKSN 001157, In the Matter of Madison 
Bank and Trust, Order to Cease and Desist, April 27, 1983.) Mrs. 
Clinton took out her loan on December 16, 1980--over two years before 
the Cease and Desist Order was in effect. The loan was repaid in 
October 1993. The record is silent as to whether MBT's board of 
directors ever discussed Mrs. Clinton's loan. (Bunch, 5/2/96 Dep. p.92; 
Pockrus, 4/26/96 Dep. p.33.)
---------------------------------------------------------------------------
    MBT President Gary Bunch testified that there was nothing 
unusual about the terms of Mrs. Clinton's loan. The amount of 
the loan, $30,000, was not unusually large for the bank at that 
time.134 Mrs. Clinton's loan was a demand note, like ``90 
percent or more'' of MBT's loans at that time.135 
Moreover, MBT obviously was not providing Mrs. Clinton with 
special treatment by setting an interest rate of 20 percent for 
the loan.136
    Bunch also testified that there was nothing unusual about 
the fact that Mrs. Clinton lived outside MBT's loan territory. 
MBT made numerous out-of-territory loans in addition to Mrs. 
Clinton's loan.137 In addition, the FDIC, MBT's federal 
regulator, expressly permitted MBT to make out-of-territory 
loans under certain conditions.138 There is no evidence 
that Mrs. Clinton's loan was not in compliance with those 
conditions.139 Moreover, even if Mrs. Clinton's loan were 
in violation of the FDIC order--which has not been 
demonstrated--there is no reason to believe that Mrs. Clinton 
knew or should have known of any regulatory violation.140 
The cease and desist order was a confidential agreement between 
the bank and the FDIC, and MBT officials did not disclose the 
terms of the order to the bank's borrowers.141
    Furthermore, there is no evidence of irregularities in 
connection with the extension of credit to Mrs. Clinton. Bunch 
refuted allegations that the Clintons ever refused to provide 
any information to MBT.142 According to Bunch, any absence 
of proper loan documentation in the loan file was the fault of 
the bank, not the Clintons.143 In short, there is nothing 
to suggest that Mrs. Clinton ever received any special 
treatment with respect to this loan.
            2. The Clintons' sale of their interest in Whitewater 
                    Development Corporation
    On December 22, 1992, James McDougal bought the Clintons' 
remaining interest in WWDC for $1,000.144 By this time, 
WWDC had sold all of its remaining lots and had no prospect of 
ever becoming a profitable enterprise.* Because McDougal 
had become destitute, Jim Blair, General Counsel for Tysons 
Foods, loaned McDougal $1,000 to his longtime friend to 
complete the transaction.145 Blair did not inform the 
Clintons that he loaned this money to McDougal, and there is no 
evidence that the Clintons were aware of the loan at that 
time.146
---------------------------------------------------------------------------
    \*\ On May 4, 1985, WWDC sold the remaining 24 Whitewater Estates 
lots to Ozark Air in exchange for an airplane and Ozark Air's 
assumption of $35,000 of the balance on the McDougals' and the 
Clintons' original Citizens Bank loan. According to the Pillsbury 
Report, ``May 1985 * * * marked the end of Whitewater as a project. By 
the end of May, the land was gone; all that remained behind was debt 
and notes receivable that did not generate enough cash to service the 
debt. The Company would continue to exist but there was never again any 
prospect that it might turn a profit.'' (PM&S Report on Madison 
Guaranty, 4/24/95, p.123).
---------------------------------------------------------------------------

D. Whitewater tax issues

    The Special Committee conducted a limited review of matters 
pertaining to the Clintons' treatment of the Whitewater 
investment on their personal income tax returns and to the 
corporate tax filings of Whitewater Development Company, Inc. 
The Committee's review of these matters, while not exhaustive, 
was sufficient to establish that (1) the Clintons' tax 
treatment of the Whitewater investment on their personal tax 
returns was appropriate based upon the limited information 
about the investment that they received and (2) the information 
about the investment they received was, in many instances, 
incomplete or incorrect, which resulted in some unintentional 
errors in the Clintons' personal tax returns. As discussed 
below, these conclusions are consistent with findings of other 
investigations of the Whitewater investment, particularly the 
Pillsbury Madison & Sutro investigation (discussed in this 
report below) and the review of Whitewater accounting and tax 
matters conducted for the Clintons by Denver attorney James M. 
Lyons in March 1992.
            1. Background
    As discussed above, the McDougals and the Clintons funded 
the August 1978 purchase of the Whitewater property with two 
bank loans. The $182,611.20 Citizens Bank & Trust loan was 
secured by a first mortgage on the Whitewater property and was 
executed by Mr. and Mrs. McDougal and Mr. and Mrs. Clinton, all 
four of whom were personally obligated to repay the 
loan.147 The $20,000 Union National Bank loan was an 
unsecured personal loan to Mr. McDougal and Mr. 
Clinton.148 The proceeds from these two loans were used to 
purchase the Whitewater property.149 The property was 
deeded to the McDougals and the Clintons, as individuals, and a 
deed was recorded in the Marion County, Arkansas, land title 
records reflecting that the McDougals and the Clintons were the 
owners of the property.150
    In June 1979 Charles James, the accountant who kept the 
books for Whitewater and other real estate developments 
controlled by James McDougal,151 incorporated Whitewater 
Development Company, Inc. (hereinafter ``WWDC'' or ``the 
corporation'').152 On September 30, 1979, the McDougals 
and the Clintons deeded all 230 acres of the Whitewater 
property to the corporation.153 The bank loans that had 
been used to acquire the property were not assumed by the 
corporation. Those loans remained in the names of the McDougals 
and the Clintons, and they remained personally and individually 
obligated to repay those loans.154
            2. The Clintons interest deductions for interest payments 
                    they made on the Whitewater loans
    From 1978 until 1986 the business affairs of the Whitewater 
development were managed by James and Susan McDougal, assisted 
by Charles James.155 The Clintons made some interest 
payments on the Whitewater bank loans out of their personal 
funds and claimed deductions on their personal tax returns for 
those payments.* The Clintons claimed the following 
deductions for interest payments on the Whitewater loans that 
they made out of their personal funds:
---------------------------------------------------------------------------
    \*\ Until 1987 the tax laws permitted taxpayers to deduct the full 
amount of interest paid on personal loans. (Tax Reform Act of 1986, 
Pub. L. No. 99-514, 1986 U.S. Code Cong. & Admin. News) After 1986 the 
deductibility of interest on personal loans (other than home mortgage 
loans meeting certain requirements) was gradually ``phased out'' 
through 1991.

1978......................................................* $10,131
1979 **......................................................11,753
1980..............................................................13,350

    In addition to the interest payments on the land 
acquisition loans, the Clintons made interest payments on a 
personal loan relating to the model home on Whitewater Lot 13 
that is discussed in section II.C, above. In December 1980, 
Mrs. Clinton borrowed $30,000 from the Bank of Kingston to pay 
for the model home.156 In December 1981 Lot 13 and the 
model home were sold in an installment sale. The monthly 
payments by the buyer, while not sufficient to cover principal 
and interest payments on the Bank of Kingston loan, were used 
to service that loan, with additional payments by WWDC used to 
cover the debt service shortfall. The Clintons claimed no tax 
deductions for the interest payments on the Bank of Kingston 
loan.
---------------------------------------------------------------------------
    \*\ According to a May 1996 review of Whitewater tax issues 
conducted by three tax experts for the Clintons' personal attorney, 
David Kendall (hereinafter ``the May 1996 Review''), $1,000 of the 
$10,131 deduction in 1978 was for interest on a Union National Bank 
loan and the remaining $9,131 was for interest on the Citizens Bank 
loan.
    ** The Clintons' 1979 tax return was the subject of an 
Internal Revenue Service audit. (Doc. No. DKSN 000977 and Norton Hrg. 
p. 38) No adjustments were required as a result of that audit (Doc. Nos 
DKSN 000980-000981), and the tax return included the $11,753 deduction 
for Whitewater interest listed here (Doc. Nos DKRT 800007-800021).
---------------------------------------------------------------------------
    In September 1983 Governor Clinton obtained a $20,800 
personal loan from the Security Bank of Paragould.157 The 
proceeds of that loan were applied towards paying off the Bank 
of Kingston loan.158 The Security Bank of Paragould loan 
also was serviced with the monthly payments from the Lot 13 
installment sale and additional payments by WWDC. From 1984-
1988, the Clintons claimed *** the following interest 
deductions for the Security Bank of Paragould loan:
---------------------------------------------------------------------------
    \***\ Unbeknownst to the Clintons, some of these deductions were 
also claimed by WWDC. The Clintons corrected these inadvertent errors 
in 1993 and 1996, as discussed below.

1984..............................................................$2,811
1985.............................................................. 2,322
1986.............................................................. 1,636
1987.............................................................. 2,561
1988.............................................................. 1,474

    The deductions described above are the only tax deductions 
claimed by the Clintons for interest payments on Whitewater-
related loans. During the time period in which these payments 
were made and the deductions were claimed, taxpayers were 
permitted to claim tax deductions for interest payments on 
personal bank loans. Thus the Clintons were legally entitled to 
claim tax deductions for interest payments they made, and they 
did not knowingly claim any tax deductions beyond their 
personal expenses related to the Whitewater investment (some 
unintentional errors, attributable to poor recordkeeping for 
the Whitewater investments, are discussed below).
    The latter point is significant. Unlike many real estate 
investors during this time period, the Clintons did not claim 
personal tax deductions for corporate losses incurred by 
WWDC.* The Clintons' tax treatment of the Whitewater 
investment was conservative ** and reflected the economic 
substance of the transaction--they only claimed tax deductions 
when they made legally deductible payments with their own 
funds. Moreover, the Clintons' tax returns for the years in 
which they were investors in Whitewater were prepared by 
certified public accountants who had worked for the Internal 
Revenue Service before entering private practice.159 
Norton, who was the Clintons' tax preparer for the first six 
years of the Whitewater investment, testified 160 that the 
Clintons did not enter into the Whitewater investment as a tax 
shelter.*** The Special Committee found no evidence that 
the Clintons ever sought to obtain any improper tax benefits 
from their investment in Whitewater.****
---------------------------------------------------------------------------
    \*\ At the outset of the investment, the Clintons' tax preparer at 
the time, Gaines Norton, advised James McDougal that even if Whitewater 
was formed as a ``Subchapter S'' corporation (in which losses and gains 
are passed directly to the shareholders without taxation at the 
corporate level), such expenses likely could not be deducted on the 
individuals' personal returns. Norton recalls that McDougal disputed 
this point, and Mr. Clinton asked Mr. Norton not to pursue the matter 
further because Mr. McDougal was in charge of the investment. (Norton 
Hrg. pp. 6-9; Norton Dep. pp. 108-112) In any event, WWDC never filed 
its tax return as a Subchapter S corporation and, consistent with 
Norton's view, the Clintons never claimed deductions for WWDC losses on 
their personal tax returns.
    \**\ In fact, the tax treatment of the Whitewater investment may 
have been unduly conservative. The May 1996 Review concluded, inter 
alia, that: ``With better tax advice, Mr. and Mrs. Clinton and the 
McDougals could legitimately have structured their Whitewater 
investment to fully utilize corporate losses, with substantially 
greater federal income tax benefits than they took or received.'' (May 
1996 Review, p. 4)
    \***\ Consistent with the testimony provided to the Special 
Committee, the May 1996 Review states that ``the Whitewater investment 
does not appear to have been structured as a device to save federal 
income taxes.'' (May 1996 Review, p. 4)
    \****\ The Majority raises questions about possible unreported 
income from the Clintons January 1977 purchase of 20 acres of land from 
Rolling Manor Inc., another real estate development managed by James 
McDougal. The limited evidence available with respect to this almost 
twenty-year-old transaction is not adequate to establish that any 
income beyond what the Clintons reported on their tax returns was in 
fact received. The available evidence does not demonstrate any 
improprieties, and the Majority's accusation, based on partial 
information and a series of unsupported assumptions, is inappropriate 
and irresponsible.
---------------------------------------------------------------------------
            3. The Clintons have corrected past errors in their 
                    personal tax returns that resulted from inadequate 
                    information
    As discussed above, the Special Committee's investigation 
of the Whitewater investment has confirmed what other 
investigations of Whitewater have found: Records for the 
Whitewater investment were not properly maintained by the 
McDougals during the years they managed the investment, and the 
Clintons did not receive regular and complete information about 
the investment from the McDougals. This poor recordkeeping and 
reporting resulted in some unintentional errors on the 
Clintons' personal tax filings. The Clintons have acknowledged 
and corrected those errors, even where they had no legal 
obligation to do so. The problems that led to those errors and 
the corrections the Clintons have made are discussed below
    There is no question that from 1978 through 1986 the 
McDougals managed the Whitewater investment and the Clintons 
had no involvement in the day-to-day affairs of the 
enterprise.* It also is clear that the McDougals did not 
keep careful records for the Whitewater development. Charles 
James, the accountant who kept the books for Whitewater and the 
McDougals' other real estate projects through 1986, testified 
that at the end of a tax year James McDougal would sometimes 
bring him a box of loose records, including checks, receipts, 
and other documents, and ask him to prepare the WWDC tax 
returns.161 There is no evidence that the Clintons ever 
received any regular reports or briefings on Whitewater, and 
the available evidence suggests that the Clintons knew very 
little about the investment before 1986.** James also 
testified that he does not believe he provided copies of the 
WWDC corporate tax returns to the Clintons during the period in 
which he prepared the returns.162 Consistent with James's 
recollection, there is no evidence that the Clintons signed the 
WWDC corporate tax returns in this time period.
---------------------------------------------------------------------------
    \*\ Every study of Whitewater has reached this conclusion, 
including the ``Lyons Report'' prepared during the 1992 presidential 
campaign (Doc. Nos. JML 077-JML 083, March 23, 1992; see also Lyons, 6/
5/96 Dep. p. 203) and the Pillsbury Madison & Sutro 1994-96 
investigation (Madison Guaranty Savings and Loan and Whitewater 
Development Company, Inc., A Preliminary Report to the Resolution Trust 
Corporation, Prepared by Pillsbury, Madison & Sutro, April 24, 1995 
(hereinafter ``PM&S Preliminary Report''); Madison Guaranty Savings and 
Loan and Whitewater Development Company, Inc., A Supplemental Report to 
the Resolution Trust Corporation, Prepared by Pillsbury, Madison & 
Sutro, December 13, 1995, (hereinafter ``PM&S, Supplemental Report'')). 
Pillsbury, Madison & Sutro stated that personal tax issues were not 
within the scope its inquiry, however. (PM&S Preliminary Report, 4/24/
95, p. 28 n.122.) Blood Sport, the book on Whitewater written by James 
Stewart, also portrays the McDougals as the sole managers of the 
investment until 1986. (See Part One of Blood Sport.)
    \**\ In 1987, after the McDougals left Arkansas and stopped 
attending to the affairs of Whitewater, Mrs. Clinton attempted to 
obtain information about the investment. She contacted James to obtain 
corporate records (James, 5/5/96 Dep. pp. 42-45; Redden, 5/30/96 Dep. 
pp. 50-51), and she asked Yoly Redden, who was then the Clintons' 
personal tax preparer, to review the records and try to determine how 
much money the Clintons had put into Whitewater and what the financial 
condition of the enterprise was at that time (Redden, 5/30/96 Dep. pp. 
50-51). The testimony of Redden and James confirms that the Clintons 
were never well-informed about Whitewater.
---------------------------------------------------------------------------
    It is not surprising, in light of the poor quality of the 
Whitewater records and the lack of information provided to the 
Clintons, that some unintentional errors were made in the 
preparation of the Clintons' personal income tax returns. Where 
the existence of errors has been established, the Clintons have 
corrected the errors and made payments for all past due amounts 
and interest.
    In December 1993 the Clintons corrected errors in their 
1984 and 1985 personal tax returns relating to deductions of 
interest payments on Whitewater loans. Based upon information 
first obtained in connection with the preparation of the Lyons 
Report, it appeared that an interest deduction of $2,811 
claimed by the Clintons on their 1984 personal tax 
return,163 that resulted in tax savings of $1,181, had 
also been claimed on the 1984 WWDC corporate tax 
return.164 Even though they were under no legal obligation 
to do so, in December 1993 the Clintons paid over $2,700 in 
back taxes and interest to correct this error.
    A similar error on the Clintons' 1985 personal tax return 
also was corrected in December 1993. An interest deduction of 
$2,322 claimed by the Clintons on their 1985 personal tax 
return,165 that resulted in tax savings of $975, had also 
been claimed on the 1985 WWDC corporate tax return.166 
Again, even though they were under no legal obligation to do 
so, the Clintons paid over $2,000 in additional taxes and 
interest to correct this error.
    Both of these errors resulted from inadequate communication 
of Whitewater financial information. The Clintons and their tax 
preparer were unaware in 1984 and 1985 that the same deductions 
had been claimed on the WWDC corporate returns.167 James, 
who prepared the WWDC tax returns for those years, testified 
that he recalls providing WWDC tax information to McDougal, but 
he does not recall ever discussing Whitewater financial matters 
with the Clintons while he was the Whitewater 
accountant.168 Better communication and coordination 
between the tax preparers for the Clintons and the corporation 
would have prevented these errors. The important point is that 
there is no reason to believe that the Clintons knew at the 
time that incorrect deductions had been included in their 
returns.
    In May 1996, in response to questions about Whitewater tax 
issues in an August 1995 report prepared for the Republican 
staff of the House Committee on Banking and Financial Services, 
the Clintons made additional corrections of unintentional 
errors * relating to Whitewater in their personal tax 
returns. The three tax experts who conducted the May 1996 
Review concluded that the evidence indicates that the vast bulk 
of the Clintons' Whitewater-related deductions were 
appropriate. The experts found that: (1) there is insufficient 
evidence to conclude that a $9,000 interest deduction on the 
Clintons' 1980 federal income tax return was improper; (2) the 
Clintons appear to have properly deducted $2,400 of interest on 
their 1979 tax return; (3) a $5,691 WWDC payment for a loan did 
not result, based on available evidence, in additional income 
to the Clintons in 1982; and (4) a $1,474 interest deduction on 
the Clintons' 1988 federal income tax return was proper. The 
experts also found minor erroneous deductions taken in 1984 and 
1987 ($144 for real estate taxes in 1984 and $1,665 for 1987 
interest), which resulted in additional federal income tax 
liability of $701. They also found an additional 1988 capital 
gain of $1,673 on the Lot 13 transaction that should have been 
reported. This capital gain resulted in additional federal 
income tax liability of $563. Finally, timing differences for 
interest deductions related to 1978 and 1979 result in an 
additional net federal tax liability of $19. The Clintons paid 
$2,910 in additional taxes and interest to correct these 
errors.
---------------------------------------------------------------------------
    \*\ The May 24, 1996 letter to Chairman James A. Leach of the House 
Committee on Banking and Financial Services from David A. Kendall, the 
Clintons' personal attorney, transmitting the May 1996 Review states 
that the tax deficiencies alleged in the House report ``are 
overwhelmingly erroneous or unsupported,'' and that ``certain minor 
errors'' had been corrected. That letter also points out that the 
Clintons had ``made no adjustment for Whitewater-related tax benefits 
they could have but did not take.'' (May 24, 1996 letter from D. 
Kendall to Hon. J. Leach)
---------------------------------------------------------------------------
    All of the corrections described above were to address 
unintentional errors in the Clintons' personal tax returns that 
resulted from inadequate information about the investment. The 
Special Committee found no evidence that either the Clintons or 
their personal tax preparers, both of whom were former Internal 
Revenue Service agents, knew or should have known of these 
errors at the time the returns were filed. In all cases where 
the existence of an error has been established, the Clintons 
have, at their own initiative, paid additional taxes and 
interest, even though they had no legal duty to do so.
            4. The Clintons had no reason to report any personal income 
                    from the Whitewater investment
    The Special Committee also reviewed whether or not the 
Clintons received actual or imputed income from the Whitewater 
investment that they had a legal obligation to report on their 
personal income tax returns. As has been the case with all 
other investigations of Whitewater, the Special Committee found 
that the Clintons received no return on their Whitewater 
investment. Simply put, Whitewater never made money.
    At the Committee's public hearing on May 15, 1996, James 
and Norton confirmed that the Clintons never received any 
dividends or other income distributions from WWDC.169 The 
WWDC tax returns report accumulated tax losses of $115,000 for 
the years 1980-1992. As is further discussed below, the 
Clintons never sought to claim any personal tax deductions for 
these losses. (The Clintons paid a total of about $510,000 in 
personal federal income taxes in this period.) In November 1986 
James McDougal sent the Clintons a letter stating that up to 
that time Whitewater had lost approximately $90,000.170 
This letter is significant for a number of reasons,* but 
for present purposes the most important point concerning the 
letter is that it evidences the fact that the Clintons were 
told by the individual who was managing the development that 
the venture had lost a large amount of money. Accordingly, the 
Clintons had no reason to believe that they should have 
recognized any income from the Whitewater investment.
---------------------------------------------------------------------------
    \*\ This letter shows that the Clintons relied upon the McDougals 
for information about Whitewater. It also shows that the McDougals did 
not provide the Clintons with important information about Whitewater. 
The previous month the McDougals had purchased a large property south 
of Little Rock from International Paper Co. in the name of Whitewater 
Development Corporation, without the knowledge of the Clintons. When 
they purchased the property the McDougals represented to International 
Paper that they were the sole owners of WWDC. (PM&S Preliminary Report 
on Whitewater Development, 4/24/95, pp.116-122; PM&S Report on 
Whitewater Development, 12/13/95, pp.62-64.) The Clintons have stated 
that they were unaware of the International Paper transaction. 
(Interrogatory Responses of Hillary Rodham Clinton, May 24, 1995, 
answer to Interrogatory No. 24(c), at 59-60; Interrogatory Responses of 
William Jefferson Clinton, May 24, 1995, answer to Interrogatory No. 
24, at 46-47.)
---------------------------------------------------------------------------
    Some esoteric tax theories have been advanced for the 
proposition that the Clintons should have recognized income on 
their personal tax returns in connection with the transfer of 
the Whitewater property to WWDC and the subsequent payments on 
the land acquisition loans that were made with WWDC corporate 
funds or funds contributed by the McDougals.171 These 
theories are not supported by the evidence obtained by the 
Special Committee. The two tax professionals who were 
responsible for the tax returns of WWDC and the Clintons during 
the early years of the investment rejected these theories. 
James testified that the formation of the corporation did not 
have any tax consequences, except that the corporation would be 
required to pay taxes if it was profitable (as noted above, it 
never was profitable).172 Norton testified that he had no 
reason to report any personal income associated with the WWDC 
for the Clintons during the period in which he prepared their 
tax returns.173
    James and Norton are not alone in rejecting the suggestion 
that, while Whitewater never was profitable, the Clintons 
nonetheless should have recognized income of some kind from 
their Whitewater investment. Leslie A. Patten, the certified 
public accountant who reviewed the entire accounting history of 
the Whitewater investment for the Clintons, in March 1992, 
testified that he considered that issue when he conducted his 
review and concluded that the Clintons need not have recognized 
income from Whitewater. 174 At his deposition, Mr. Patten 
was asked if the McDougals or the Clintons had any income that 
should have been recognized for tax purposes after the land was 
conveyed to WWDC. He answered, ``No, and there should not have 
been.'' 175
    Consistent with the position of all the witnesses examined 
by the Special Committee, the three tax experts who conducted 
the May 1996 review of Whitewater tax issues for David Kendall, 
the Clintons' personal counsel, also concluded that the 
Clintons did not incur any income from the Whitewater 
investment. The experts considered whether the Clintons had 
``possible additional unreported income'' from Whitewater 
because the Clintons contributed less than the McDougals (and 
McDougal-related entities) toward Whitewater expenses. 176 
The tax experts rejected this theory: ``Although [WWDC] may 
have had a negative net worth [arising out of the payments by 
the McDougals and entities they controlled]. . . this had no 
significance for Mr. and Mrs. Clinton as shareholders, because 
they were not entitled to deduct any portion of this loss and 
they did not realize any taxable gain on the disposition of 
their stock for federal income tax purposes (beyond the $1,000 
[they received for the stock], which they reported in its 
entirety).'' 177 In less technical terms, the 
contributions by the McDougals (or companies controlled by the 
McDougals) to make payments of Whitewater expenses did not 
result in any taxable income to the Clintons as shareholders in 
WWDC. *
---------------------------------------------------------------------------
    \*\ Technical accounting questions, such as whether these payments 
should have been accounted for as additional contributions of capital 
to WWDC by the McDougals or loans to the corporation by the McDougals, 
need not be resolved here. The important point is that whatever the 
correct accounting treatment of these payments, they did not result in 
any taxable income to the Clintons.
---------------------------------------------------------------------------
    It is not surprising that the tax experts and the witnesses 
examined by the Special Committee come to the same conclusion 
on this issue. The theory that the Clintons should have 
recognized income from a money-losing investment flies in the 
face of logic and common sense. The Clintons put money into 
Whitewater, but never took any money out of the investment. 
** The proceeds of the Whitewater land acquisition loans 
were invested in the business, through the land purchase, and 
the Clintons did not use any portion of the proceeds of those 
loans for their personal benefit. Both logic and legal analysis 
support the conclusion that payments of principal and interest 
on those loans, whether using corporate funds or funds 
contributed by other shareholders (the McDougals), did not 
result in any taxable income to the Clintons.
---------------------------------------------------------------------------
    \**\ The Clintons did recognize a small gain of $3,313 on the Lot 
13 transaction, but that gain is not relevant to this issue.
---------------------------------------------------------------------------
            5. The Clintons have not sought to take advantage of 
                    Whitewater losses that they might have claimed on 
                    their personal tax returns
    As discussed in section II.D. above, in December 1992 the 
Clintons sold their stock in Whitewater to James McDougal for 
$1,000. The Clintons had invested about $40,500 * in 
Whitewater and had never received any return on their 
investment. As a technical matter, the Clintons were entitled 
to recognize a capital loss on the sale of their stock, but 
because of the poor quality of the Whitewater records and the 
resulting difficulty of establishing their tax basis in the 
investment, ** they reported the entire $1,000 as a 
capital gain. 178 The Clintons were entitled to recognize 
the capital loss they incurred when they sold their interest in 
the investment, but they chose not to do so, instead taking the 
most conservative possible approach and treating the entire 
$1,000 as a capital gain. Moreover, as discussed above, the 
Clintons never sought to use any of WWDC's losses to offset 
their personal income (at a time when the tax laws would have 
permitted them to do so and many real estate investments were 
structured for that purpose). These actions demonstrate the 
conservative approach taken by the Clintons throughout the 
entire period of the Whitewater investment.
---------------------------------------------------------------------------
    \*\ This amount represents the Pillsbury, Madison & Sutro finding 
that the Clintons invested $42,191 in Whitewater, adjusted for a $1,673 
correction described on page 13 of the May 1996 Review. (See PM&S 
Preliminary Report, 4/24/95, p.130.)
    \**\ This difficulty was considered by Deputy White House Counsel 
Vincent Foster, consulting with James Lyons and Yoly Redden, in 1993. 
(Lyons, 6/5/96 Dep. pp. 108-109; Redden, 5/30/96 Dep. pp. 128-133, 236-
238) Foster's handwritten notes relating to this issue were produced to 
the Special Committee by the White House. The notes include an entry 
referring to the Clintons' tax basis in Whitewater as a ``can of 
worms'' that should not be opened. (Doc. Nos. DKSN 000517-DKSN 000519, 
Handwritten notes of Vincent Foster.) This reference has been 
mischaracterized in the press and during the Special Committee's 
hearings. First, the term ``can of worms'' in the notes does not refer 
to the Whitewater investment generally, as has been stated in newspaper 
articles and elsewhere: ``In the note, Mr. Foster describes the 
Clintons' role in the Arkansas Whitewater Development Corp. as a ``can 
of worms you shouldn't open.'' (``Foster's Death Center of Probe; 
Whitewater Review Starting in Senate'', The Washington Times, July 18, 
1995; see also statement of Special Committee Chairman Alfonse D'Amato, 
press conference of Jan. 18, 1996). Instead, the reference is to the 
technical issue of the documentation required to establish the 
Clintons' tax basis. (Redden, 5/30/96 Dep. pp. 237-238.) In addition, 
Redden testified that it was she who told Foster that the basis issue 
was a can of worms that should not be opened, contrary to the newspaper 
articles and statements that have attributed that statement to Foster.
---------------------------------------------------------------------------
    Finally, and perhaps most significant, as noted above, by 
the time the Clintons sold their interest in the corporation, 
WWDC had accumulated tax losses of $115,000. During the period 
that the Clintons were investors in Whitewater they paid about 
$510,000 in personal federal income taxes. The Clintons did not 
seek to claim personal tax deductions for any of the WWDC tax 
losses during this period, even though, as the tax experts who 
prepared the May 1996 Report noted, with better tax advice they 
could have claimed some of these losses. This fact alone 
demonstrates that the Clintons were conservative in their tax 
treatment of the Whitewater investment and were not trying to 
minimize or avoid taxes with the investment.
    In short, the Special Committee found no evidence that the 
Clintons entered into the Whitewater investment as a tax 
shelter or ever sought to use the investment as a means to 
avoid paying their personal income taxes.

E. Madison Guaranty Savings & Loan

            1. Reports on Madison Guaranty Savings & Loan make no 
                    finding of improper or illegal activity by 
                    President or Mrs. Clinton
    Madison Guaranty Savings and Loan has been the subject of 
extensive investigations over the past decade. These 
investigations include examinations by the Federal Home Loan 
Bank Board (FHLBB) in 1986; reviews by an independent third 
party real estate consultant in 1987 and 1988 pursuant to a 
Cease and Desist order by the FHLBB; indictments issued by the 
U.S. Attorney for the Eastern District of Arkansas in 1989; a 
Resolution Trust Corporation (RTC) civil investigation in 1990; 
an RTC criminal investigation in 1991; and a report by the law 
firm Pillsbury Madison & Sutro retained by the RTC to 
investigate potential civil claims against Madison by the RTC. 
None of these reports made any finding of illegal or improper 
activity by the President or Mrs. Clinton relating to Madison 
Guaranty Savings and Loan.
    The Federal Home Loan Bank Board conducted an extensive 
examination of Madison Guaranty Savings and Loan Association in 
March 1986. 179 The examination found conflicts of 
interest among members of the board of directors of Madison, 
failure of management to operate Madison in a safe and sound 
manner, investments in questionable land development projects, 
excessive growth in liabilities, questionable accounting 
practices, incomplete and inaccurate records, inadequate 
internal controls, and excessive compensation to executives. 
180 While the examination cites by name members of the 
board and management of Madison for engaging in improper 
practices, then Governor and Mrs. Clinton are not mentioned in 
the report. Pursuant to the findings of the FHLBB examination, 
the board of directors of Madison consented to a Cease and 
Desist order which became effective on August 15, 1986 and 
addressed most of the problems cited in the examination. 
181 The Cease and Desist order specifically required the 
board of directors to engage an independent third party real 
estate consultant, subject to the prior approval of the FHLBB's 
Supervisory Agent, to review and evaluate the association's 
real estate and loan and investment portfolio. 182 The 
scope and content of the review and evaluation was also subject 
to the approval of the Supervisory Agent. 183
    The law firm of Borod and Huggins was engaged to conduct 
the review and evaluation. Jeffrey Gerrish, an attorney with 
the firm, served as lead counsel in conducting the review. The 
preliminary investigative report issued on March 3, 1987 found 
that for the period 1982 through 1986 covered by the report, 
numerous regulatory violations and breaches of fiduciary duty 
on the part of directors and officers of Madison Guaranty 
occurred, and that criminal violations may have occurred as 
well. 184 However, the report makes no mention of then 
Governor or Mrs. Clinton.
    The board of Madison Guaranty commissioned a continuation 
of the initial investigation into the factual basis for certain 
of the losses incurred by Madison Guaranty. The board requested 
that its scope be expanded in anticipation of litigation 
against several of the insiders, friends, and associates of 
insiders at Madison. 185 The lead counsel on this 
investigation was again Jeffrey Gerrish, now with the law firm 
of Gerrish and McCreary.
    The report, submitted on August 31, 1988, set forth six 
potential causes of action involving, in one or all of the 
claims, fourteen specified individuals. The claims include 
potential claims for directors liability, RICO, and fraudulent 
or negligent misrepresentation. 186 Then Governor and Mrs. 
Clinton are not mentioned in the report.
    In November 1989, Charles Banks, U.S. Attorney for the 
Eastern District of Arkansas, brought indictments against James 
McDougal, the major stockholder in Madison Guaranty, David 
Henley, an employee of Madison Financial Corporation, and Jim 
Henley, a salesman on commission for various Madison Financial 
developments, for alleged violations of law in regard to 
Madison Guaranty. 187 An indictment was also brought 
against John Latham, Chairman of the Board of Directors and 
Chief Executive Officer of Madison Guaranty, in February 1990. 
188 None of the indictments mention then Governor and Mrs. 
Clinton.
    When the RTC placed Madison Guaranty into conservatorship 
in 1989, it inherited an accounting malpractice case which 
Madison had brought against the accounting firm of Frost and 
Company. 189 Frost had audited Madison's financial 
statement in 1984 and 1985. When the Federal Home Loan Bank 
Board's 1986 examination of Madison found significant 
accounting deficiencies, Madison sued Frost for malpractice. 
190 In February 1991, April Breslaw, a Senior Attorney for 
the RTC, wrote a memo proposing to settle the pending 
accounting malpractice case. The memo reviewed the facts of the 
case and argued that the settlement offered was as much as the 
RTC was likely to recover by going to court. 191 The memo 
made no mention of the Clintons.
    In addition, the RTC undertook a civil investigation of 
Madison Guaranty to determine if there was ground to bring a 
civil action against the directors and officers of Madison 
Guaranty. April Breslaw drafted a memo recommending that the 
RTC terminate the directors' and officers' liability 
investigation for Madison Guaranty. The memo listed nine 
individuals who might be held culpable for the failure of the 
association, but concluded that the potential recovery was 
insufficient to make a liability claim economically justifiable 
and recommended a close-out of the investigation. 192 The 
memo also contained no references to the Clintons.
    In September, 1992, L. Richard Iorio, a Field 
Investigations Officer for the RTC, sent to Charles Banks, U.S. 
Attorney for the Eastern District of Arkansas, criminal 
referrals relating to Madison Guaranty . The referral was 
prepared by Jean Lewis, Criminal Investigator for the RTC. It 
listed three individuals as suspected of criminal violations--
James McDougal, Susan McDougal, and Lisa Anspaugh. Among the 
suspected violations were check kiting, bank fraud, and 
forgery. 193
    The referral also listed 12 companies each of which 
maintained a checking account at Madison Guaranty. One of those 
companies was Whitewater Development Corporation. It also 
listed seven individuals, including Bill and Hillary Clinton, 
who were principals in one or more of those companies. The 
report also listed the Clintons as witnesses who might have 
information about the suspected violation. 194 No 
allegation of wrongdoing was made toward the Clintons.
    Finally, the RTC retained the law firm of Pillsbury Madison 
& Sutro in January 1994 to investigate potential civil claims 
on behalf of the RTC relating to Madison Guaranty and 
Whitewater Development Corporation. In April 1995, Pillsbury 
Madison & Sutro released a preliminary report on Whitewater 
that described the history of the venture and its relationship 
to Madison Guaranty. In regard to the involvement of the 
Clintons as investors in Whitewater, the report stated:

          The available evidence shows only that the Clintons 
        knew of the existence of at least some of the bank debt 
        incurred by Whitewater and its shareholders, signed 
        some promissory notes and loan extension, and on 
        occasions made payments on bank debt or taxes out of 
        their personal checking account. The evidence also 
        suggests that the Clintons had little direct 
        involvement in Whitewater's's financial management 
        until 1988, by which all of the lots had been sold and 
        McDougal had suffered a nervous breakdown. 195

    The report also found that `So far as can be determined 
from the available documentary evidence, little Whitewater 
financial information was transmitted to the Clintons.' 
196 The report recommended that no further resources be 
expended on the Whitewater part of this investigation. 197
    In December 1995, Pillsbury Madison & Sutro released a 
supplemental report on Whitewater. In regard to the role of the 
Clintons as investors in Whitewater, the report stated:

          Putting aside for the moment the legal significance 
        of the phrase `passive investor,' the evidence is 
        essentially consistent with this assertion. For the 
        relevant period (ending in 1986), the evidence suggests 
        that the McDougals and not the Clintons had managerial 
        control over the enterprise, or received annual reports 
        or regular financial summaries. Instead, as the 
        Clintons suggest, their main contact with Whitewater 
        seems to have consisted of signing loan extensions and 
        renewals. 198

The report further stated that:

          There is no basis to assert that the Clintons knew 
        anything of substance about McDougal's advances to 
        Whitewater, the source of the funds used to make those 
        advances or the source of the funds used to make 
        payments on bank debt.199

The report concluded that:

          There is no basis to charge the Clintons with any 
        kind of primary liability for fraud or intentional 
        misconduct. This investigation had revealed no evidence 
        to support any such claims. Nor would the record 
        support any claim of secondary or derivative liability 
        for the possible misdeeds of others.200

    In addition to the report by Pillsbury, the House Banking 
Committee held four days of hearings on August 7, 8, 9, and 10, 
1995. The Committee undertook a review of the matters relating 
to Madison Guaranty and Whitewater and released numerous 
documents to the public.
    The Office of Independent Counsel has also been 
investigating Whitewater and its relationship to Madison 
Guaranty. It has entered into a number of plea agreements with 
individuals who were targets of its investigation. A well-
publicized trial was recently completed in Arkansas which dealt 
with matters relating to Madison Guaranty. One of the 
prosecutors in the trial for the Office of Independent Counsel, 
W. Ray Jahn, in his closing statement at the trial, said that: 
``The man occupying the position of the Office of the 
Presidency is not on trial here. There's been no allegations of 
wrongdoing on the part of David Hale directed toward even the 
President.'' 201
             2. Madison Guaranty in the context of the nationwide S&L 
                    crisis
    Given all of the attention that has been directed toward 
the failure of Madison Guaranty Savings and Loan Association, 
it is worthwhile to consider the failure of Madison in the 
larger context of the national crisis that confronted the 
savings and loan industry in the 1980's.
    According to the Federal Deposit Insurance Corporation 
(``FDIC''), over 1300 federally insured savings and loans 
failed in the United States between 1980 and 1995 with total 
assets of over $600 billion.202 In the state of Arkansas 
during that same period, according to the Office of Thrift 
Supervision (``OTS''), the federal agency responsible for 
supervising federally insured savings and loans, 22 savings and 
loans failed with total assets of over $6.8 billion.203 
Madison Guaranty, with assets of $114 million, was the eleventh 
largest failed Arkansas savings and loans.204
    The most intensive analysis of the failure of Madison 
Guaranty, entitled ``The Condition and Regulation of Madison 
Guaranty Savings and Loan Association in the 1980's and Its 
Seizure in 1989'', was prepared for the House Banking Committee 
by James Barth and Dan Brumbaugh, Jr.205 That report 
points out that Madison Guaranty Savings and Loan Association 
was a stockholder owned, state-chartered Arkansas savings and 
loan whose deposits were insured by the Federal Savings and 
Loan insurance Corporation (``FSLIC''), whose successor agency 
is the FDIC.206
    The report points out that Madison was only one of 12 
federally insured savings and loans in Arkansas that was seized 
in 1989.207 Further, although Madison had been reporting 
insolvency since the end of 1987, ten of the eleven other 
institutions seized in 1989 had been reporting insolvency 
longer.208 The report also points out that:

          According to the most recent estimates of the RTC, 
        Madison cost an estimated $73 million to resolve. Four 
        other Arkansas Savings and loans that were insolvent in 
        1989 were resolved at greater--and in some instances 
        substantially greater--cost, and they are all federally 
        chartered institutions. First Federal of Arkansas cost 
        $833 million, Savers Savings Association $645 million, 
        Independence $314 million, and Landmark Savings $91 
        million. Overall * * * Madison cost only 3.3 percent of 
        the total estimated resolution cost of institutions, 
        which like itself, were open but insolvent in Arkansas 
        in part of 1989 before being seized.209

    In order to place the failure of Madison Guaranty further 
into perspective, it is worth noting that Madison was located 
in the Ninth District of the Federal Home Loan Bank System, 
which encompasses the five states of Arkansas, Louisiana, 
Mississippi, New Mexico, and Texas.210 According to the 
report, by 1986 50 percent of the savings and loans (a total of 
246 institutions) in that district were reporting losses, and 
65 percent (a total of 311 institutions) did so in 
1987.211 As the report states:

          At year-end 1987, there were 186 institutions in the 
        Ninth district reporting insolvency based on Generally 
        Accepted Accounting Principles (GAAP). The institutions 
        had $60 billion in assets and were reporting negative 
        tangible of $16 billion and negative income of $7.3 
        billion. At this time, Madison's $111 million in assets 
        represented two one hundredths of one percent of the 
        total assets of insolvent institutions in the ninth 
        district, and its $12 million negative capital 
        represented eight one thousandths of one percent of the 
        total negative capital reported in the 
        district.212

    The report pointed out that 36 percent of the nation's 
insolvent institutions with 33 percent of the assets were in 
the ninth district.213 The report also stated:

          A conclusion that Madison was somehow unique in its 
        collapse and the costs that it imposed on federal 
        taxpayers because it received special treatment or 
        leniency from state regulators does not appear to be 
        supported by the information we have reviewed.214

F. The treatment of the McDougals and their business enterprises by 
        Arkansas State agencies

    The McDougals operated several business enterprises in 
Arkansas during the 1980s, including Madison Guaranty Savings & 
Loan, Madison Bank & Trust, and various real estate 
developments.* The activities of these business 
enterprises brought the McDougals into frequent contact with 
state regulatory agencies.
---------------------------------------------------------------------------
    \*\ Madison Bank & Trust should not be confused with Madison 
Guaranty Savings & Loan Association. They were two different financial 
institutions that James McDougal controlled and operated at different 
times. The potential for confusion stems from the fact that in each 
instance McDougal changed the name of the institution to ``Madison'' 
after he acquired control. While the ``Madison'' in Madison Bank & 
Trust may have been selected because the bank was located in Madison 
County, Arkansas, Madison Guaranty Savings & Loan (formerly Woodruff 
County Savings and Loan Association) was not in Madison County--it was 
in a different part of the state altogether. The use of a profile of 
President James Madison on Madison Guaranty's stationary suggests that 
McDougal may have selected the name of the bank because he admired 
President Madison. Madison Bank employee Gary Bunch confirmed that 
point when he testified before the Special Committee (Bunch, 5/16/96 
Hrg. p.42.)
---------------------------------------------------------------------------
    The allegation has been raised that the McDougals and their 
business enterprises obtained favored treatment from state 
regulators due to the McDougals' relationship with Governor 
Clinton. In particular, it has been alleged that Governor 
Clinton influenced state actions to benefit the McDougals. It 
also has been suggested that the McDougals provided financial 
benefits to the Clintons in return for the allegedly favorable 
treatment.
    The record, however, is at odds with the allegations. The 
evidence demonstrated that the McDougals did not receive 
favored treatment from state agencies; state officials treated 
the McDougals and their business enterprises properly and 
appropriately, in the normal course of business. The evidence 
further demonstrated that Governor Clinton did not intervene 
with state officials in the McDougals' behalf, or assist the 
McDougals in their dealings with state agencies. Finally, the 
record does not support the allegation that the McDougals 
provided improper financial benefits to the Clintons.
             1. Treatment of the Whitewater investment
    James McDougal was not involved in any state-related 
business until he purchased a majority interest in the Bank of 
Kingston in 1980.215 Prior to that time, McDougal had 
worked as a Senate aide and a real estate developer.216
             2. There is no evidence that Arkansas State agency leases 
                    of offices from Madison Guaranty were improper
    Between April 1984 and November 1985, the State of Arkansas 
entered into three leases for office space in Little Rock 
buildings owned by Madison Financial Corporation (``MFC''), a 
subsidiary of Madison Guaranty. On April 10, 1984 the Arkansas 
Housing Development Agency (``AHDA'') leased office space in 
the Madison Guaranty Building at 1501 Main Street. On August 
13, 1985, AHDA's successor agency--the Arkansas Development 
Finance Authority (``ADFA'')--leased additional space in the 
same building. Finally, on November 7, 1985, the Arkansas 
Department of Finance and Administration leased a small 
building at 1520 Main Street from MFC.
    The Special Committee has investigated whether any of the 
leases were signed because of Governor Clinton's relationship 
with James McDougal, Madison Guaranty's owner. In particular, 
the Committee has sought to determine whether the leases were 
related to a fundraiser that McDougal held for Governor Clinton 
at Madison Guaranty on April 5, 1985. The evidence collected by 
the Committee establishes that the leases were entirely proper 
and appropriate, and were entered into in the normal course of 
business. There is no evidence that Governor Clinton or anyone 
acting on his behalf caused or directed the leases to be 
signed, or that Madison Guaranty received any special 
consideration. Moreover, the State first leased space at 
Madison Guaranty at least a year before the fundraiser took 
place. Thus, there is no basis to connect the fundraiser with 
the leases, and no reason to believe that the leases entailed a 
quid pro quo of any kind.

                 a. The AHDA lease at Madison Guaranty

    The Arkansas Housing Development Agency was created in 1977 
to issue bonds and use the proceeds to make housing loans to 
lower and middle income families. At the time, AHDA was 
authorized to issue $15 million in bonds. In 1979, as part of a 
broad economic development effort, AHDA's bond issuance 
authority was increased to $600 million--which caused the 
agency to grow dramatically.
    In 1979, AHDA moved into the Donaghey Building at 7th and 
Main Streets in Little Rock. By 1983, however, the Donaghey 
Building space had become inadequate. AHDA was forced to occupy 
noncontiguous offices that were separated by 75 yards.217 
Also, the space was too small to house the agency, which had 
grown as its bond issuance authority increased.218 
Although AHDA tried to obtain additional space within the 
Donaghey Building, this proved impossible.219 Accordingly, 
in June 1983, AHDA's Board authorized Executive Director Linda 
Trent to take steps to relocate the agency.
    AHDA's efforts to move continued when Wooten Epes became 
Executive Director in September 1983. Epes placed Deputy 
Director C.E. Anderson in charge of the search process. 
Anderson contacted Arkansas State Building Services 
(``SBS'').220 This was standard procedure; SBS oversees 
leasing for all Arkansas state agencies, schools and 
universities.221
    Upon receiving AHDA's request, SBS publicly announced 
AHDA's space requirements, advertised for bid proposals, and 
began accepting solicitations.222 SBS received a number of 
proposals. Even so, Epes recalled that ``there just weren't 
that many options'' that satisfied AHDA's most basic 
requirements.223 He noted:

          I couldn't find what I wanted, and that was within 
        our price range anyway. We needed a pretty good chunk 
        of space in one block and that was generally the 
        problem, finding that and finding it in a low cost 
        building.224

In addition, AHDA preferred a downtown Little Rock location, 
near other State agencies and support services.225
    SBS considered nearly 20 possible locations for AHDA, but 
it proved difficult to find suitable space. Old World Plaza, 
for example, was in North Little Rock and was not handicapped 
accessible. The Executive Building, Evergreen Place, and Plaza 
West were located five miles outside downtown Little Rock. The 
Continental Building was unrenovated. The Spring Building, the 
Pyramid Building, Commercial National Bank Building, and the 
Heritage Center could not provide sufficient space on a single 
floor. The Tower Building was too expensive. In addition, many 
of the buildings could not provide sufficient parking for AHDA 
employees.226
    Although none of the available choices was ideal, AHDA 
needed to move as soon as possible because its current location 
was inadequate. Accordingly, on October 31, 1983, AHDA asked 
SBS for authority to negotiate a lease at 1300 Brookwood Drive 
(which was located three or four miles from downtown). At the 
time, AHDA anticipated leasing 5800 square feet of office space 
at a rate of $6.50 per square foot--a total cost of $37,700 per 
year. However, efforts to negotiate a satisfactory lease with 
the Brookwood building's owner proved unsuccessful. The ``final 
proposal'' from the Brookwood building's owner was $8.60 per 
square foot--a total cost of $49,880 per year. In light of the 
higher than expected cost, AHDA and SBS ``concurred in the 
rejection'' of the Brookwood proposal.* The Governor's 
office played no part in the rejection of the Brookwood 
proposal.
---------------------------------------------------------------------------
    \*\ Although AHDA's rejection of the Brookwood space is documented 
in a letter dated March 5, 1984, the actual rejection likely occurred 
earlier. The letter seems to reference an earlier agreement with SBS to 
reject the Brookwood space.
---------------------------------------------------------------------------
    Meanwhile, in January or February 1984, Madison Guaranty 
submitted a proposal to SBS. Shortly thereafter, Susan McDougal 
visited SBS to propose the Madison Guaranty Building as a 
potential site for AHDA. McDougal met with Mallard and Leasing 
Supervisor Helen Herr in his office.** This was not 
unusual; as Mallard observed: ``You have meetings with 
everybody that you lease buildings from or lease buildings 
to.''227 Herr confirmed that building owners regularly 
visited SBS to promote their properties, and agreed that the 
meeting with Susan McDougal was ``just a regular part of 
[SBS's] business.''228
---------------------------------------------------------------------------
    \**\ It is unclear how this meeting came about. Mallard has no 
specific recollection; he speculated that McDougal might have been in 
the building and Herr brought her to his office. (Mallard, 2/14/96 Dep. 
pp. 21-22.) Herr recalled that McDougal was in Mallard's office and he 
called her in. (Herr, 2/13/96 Dep. p. 16.) In any event, Mallard 
testified that it was common for building owners to visit him to pitch 
their buildings. (Mallard, 2/14/96 Dep. p. 74.)
---------------------------------------------------------------------------
    Following the meeting, Mallard asked Herr to look into the 
Madison Guaranty Building as a site for AHDA. Once again, this 
was common practice. Herr stated:

          People contacted [Mallard] a lot about different 
        buildings that they had available, and he would bring 
        it to [the leasing officials'] attention.229

Herr testified that Mallard did not ask her to treat the 
Madison Guaranty proposal any differently from any other 
proposal and that she did not do so.230
    As Mallard requested, Herr visited the Madison Guaranty 
Building with AHDA Deputy Director Anderson.231 Anderson 
raised two principal concerns about the Madison Guaranty 
Building as a site for the agency.232 First, the building 
was located in the Quapaw Quarter, an older section of downtown 
Little Rock adjacent to the Governor's mansion. Although the 
Quapaw Quarter was undergoing redevelopment, some AHDA 
employees worried that the neighborhood was unsafe.233 
Second, AHDA had grown and expected to grow further. AHDA thus 
wanted to ensure that the Madison Guaranty space was large 
enough to accommodate the expected growth.234
    Anderson's first concern--the location of the Madison 
Guaranty Building--actually provided an inducement to lease 
there because State policy called for using State agencies to 
revitalize downtown Little Rock. This was especially 
significant for AHDA, the agency with primary responsibility 
for economic development.235 As such, the decision to move 
AHDA to the Madison Guaranty Building was consistent with both 
State policy and the mission of the agency.
    Bob Nash, Governor Clinton's senior economic development 
adviser, testified that the State actively promoted development 
in ``deteriorating'' parts of the State such as the Quapaw 
Quarter. 236 Betsey Wright, Governor Clinton's chief of 
staff, confirmed that the State had a policy ``that all things 
being equal and where economically feasible, that we would help 
keep downtown Little Rock alive.'' 237
    Similarly, SBS Director Mallard testified that SBS had a 
longstanding policy to promote development downtown, which 
predated his service at SBS.238 In fact, SBS' governing 
board had made this policy explicit. He stated:

          It was an official policy of and it was a set policy 
        when I [came] on board as director, that we try to 
        lease any of the space in the downtown buildings that 
        we could. And that had been concurred with by a state 
        building service council, which council * * * I served 
        under.239

    As a practical matter, this policy predisposed Mallard and 
SBS to lease space in the Quapaw Quarter whenever possible. In 
this regard, Mallard testified that:

          It had been a bad area at one time, just like all of 
        Downtown Little Rock was fast becoming, and we [were] 
        encouraged by our council and all of the downtown real 
        estate community to lease all those buildings we could 
        lease. And we tried, every time we made a lease, we 
        tried to--we tried to lease from downtown 
        areas.240

    SBS Leasing Supervisor Herr also testified that the State's 
revitalization policy played a role in the site selection for 
AHDA. Herr testified:

      Quapaw Quarter was a historic area and there was a 
separate agency charged with maintaining the integrity of the 
area, so I was well aware of the push and the need to develop 
that area.241

Moreover, Herr agreed that the policy was ``a good thing.'' 
242

    Even AHDA Director Epes acknowledged that Governor Clinton 
rightfully was concerned about improving the Quapaw Quarter, 
which encompassed a 10 block radius around the governor's 
mansion. He stated:

          [Governor Clinton] felt like the state needed to try 
        to have a presence in this part of town because there 
        was an ongoing effort to revitalize and redevelop that 
        part of Main Street in Little Rock. It was only a few 
        blocks from the Governor's mansion, and it was kind of 
        a part of town that needed redeveloping, and he felt 
        that this might help that process.243

    In addition, witnesses uniformly testified that safety 
concerns regarding the Quapaw Quarter were exaggerated. For 
example, Mallard testified that the neighborhood was 
improving.244 Helen Herr, the SBS leasing manager, stated 
that the employees were ``overreacting.'' 245 AHDA 
Director Epes testified that he felt obligated to present his 
employees' security concerns to SBS and the Governor's office, 
but did not share those concerns. He stated: ``[M]y own 
concerns were not that strong because I didn't live very far 
from there.'' 246 Bob Nash--the member of the Governor's 
staff to whom Epes raised the concerns--worked in the Quapaw 
Quarter for seven years before joining the Governor's 
staff.247 He considered the concerns ``sincere but 
unfounded.'' 248 Nash explained:

    I figured that it was just a lack of understanding or a 
perception that because an area was low-income that it 
automatically was not as safe as other areas, and I just don't 
believe that. * * * I did not think that it was a security 
problem in that area, because again, the governor's mansion is 
in that area and a lot of other people have moved into that 
general area and restored old homes. It was coming 
back.249

Betsey Wright shared Nash's assessment, adding that such 
concerns commonly were ``racist in [their bearing,'' and that 
the State had an obligation not to accommodate them.250
    In any event, any reasonable security concerns were 
alleviated when Madison Guaranty agreed to fence in the parking 
lot and to hire a security guard.251 Notably, during 
AHDA's three and one half year tenancy in the Madison Guaranty 
Building, not a single serious crime was reported.252
    Anderson's second concern--the physical layout of the 
Madison Guaranty space--also proved to be a positive factor. 
Glen Cox, an SBS architect, toured the space and drafted floor 
plans that demonstrated that the Madison Guaranty building had 
sufficient space for AHDA's needs.253 This assessment was 
confirmed sixteen months later when Madison Guaranty made 
additional space in the building available to AHDA. As such, 
the Madison Guaranty space was not only large enough to 
accommodate AHDA's current needs, but offered space for 
expansion.
    Moreover, much of the office space offered to AHDA was old 
and in poor condition. The Madison Guaranty Building, by 
contrast, was undergoing a complete renovation at the time. The 
renovation assured ADHA of high quality space that it could 
design to its own specifications. In the end, therefore, AHDA 
received newly renovated, custom-designed office space.
    After satisfying himself that AHDA's concerns had been 
addressed, SBS Director Mallard decided to move AHDA to the 
Madison Guaranty Building. Mallard testified that he made the 
decision solely on the merits, without any pressure from the 
Governor's office.254 The record supports Mallard's 
testimony that he made the leasing decision unilaterally. For 
example, Epes recalled that SBS made the decision to move the 
agency to Madison, and testified that he was not aware of any 
pressure from the Governor's office.255 AHDA Board 
Chairman Mort Hardwicke stated similarly that no one from the 
Governor's office tried to influence him or any other AHDA 
official.256 Finally, Bob Nash, Governor Clinton's liaison 
with AHDA, testified that, to his knowledge, no one in the 
Governor's office was involved in the decision.257
    In a March 5, 1984 letter, Epes advised Herr that AHDA 
``rejected'' Mallard's decision to move the agency to the 
Madison Guaranty Building.* The letter raised three 
concerns: (1) the Madison proposal was $7,000 more expensive 
than the Brookwood proposal, in part because Madison included a 
flat charge for utilities, which AHDA could not control; (2) 
AHDA preferred to stay ``in a downtown location, preferably 
within walking distance of our attorneys;'' and (3) the Madison 
space did not provide for anticipated personnel growth. The 
letter made no mention of employee security or the 
neighborhood.258
---------------------------------------------------------------------------
    \*\ Epes testified that he did not sign the letter. He speculated 
that it must have been authored by Deputy Director Anderson, and sent 
over his signature. Epes did not take issue with the contents of the 
letter.
---------------------------------------------------------------------------
    Although it is not clear exactly how SBS evaluated AHDA's 
expressed concerns, it is clear that the concerns were 
meritless. First, with respect to price, the Madison Guaranty 
space actually cost less than the Brookwood space on a per 
square foot basis--the higher total price arose because Madison 
Guaranty offered AHDA 6852 square feet of space, whereas 
Brookwood offered only 5,780 square feet. In addition, SBS 
negotiated a provision in the Madison Guaranty lease which 
permitted an annual adjustment in the cost of utilities based 
on actual usage, thus giving AHDA control of a significant cost 
component. Second, Madison Guaranty was downtown (albeit not in 
the central business district where the cost of a lease would 
have been prohibitive in any event). AHDA's concerns regarding 
Madison Guaranty's location are puzzling in light of the 
agency's efforts to move to Brookwood Drive. According to Epes, 
the Brookwood Drive building was in West Little Rock, three or 
four miles from downtown, which would not have been a 
convenient location for AHDA. Third, the Madison Guaranty space 
plainly permitted further growth, because AHDA leased 1,500 
additional square feet from Madison in August 1985. In any 
event, it is clear that SBS was not convinced by AHDA's 
arguments. Shortly thereafter, SBS advised AHDA that it would 
have to move into the Madison Guaranty Building despite the 
objections stated in the March 5, 1984 letter.
    Following SBS' decision, AHDA made a final effort to avoid 
moving to Madison Guaranty. At Epes' request, Mallard met with 
Bob Nash, Governor Clinton's liaison with AHDA.259 
Although Epes initiated the meeting, he did not attend; Deputy 
Director Anderson and two Board members represented AHDA.* 
Mallard did not recall precisely when the meeting occurred, but 
believed it to have been ``fairly close'' to the time the lease 
was signed in early April 1984.260
---------------------------------------------------------------------------
    \*\ Mallard could not identify the AHDA Board members. However, he 
was certain that Governor Clinton, Betsey Wright and Sam Bratton did 
not attend.
---------------------------------------------------------------------------
    According to Mallard--the only witness who testified about 
the meeting--the meeting was brief. AHDA restated its concerns 
about the neighborhood around the Madison Guaranty Building. 
Mallard responded that:
    [W]e felt that this building was more suitable to their 
needs and we were trying to keep all the agencies in the 
downtown area. And we were just trying to help downtown Little 
Rock stay viable and stay alive. At that time there was so many 
vacant buildings.261
    Mallard then ``declined again'' to reverse his decision 
``and that was the end of the meeting.'' 262 Nash did not 
express any opinion about the Madison Guaranty lease, either on 
behalf of himself or the Governor's office.263
    Sometime later, AHDA Board Chairman Hardwicke approached 
Epes and offered to set up a meeting with Governor Clinton to 
press their case. Epes agreed, and a meeting ensued.264 
Epes recalls that he was accompanied by Hardwicke and that a 
gubernatorial staffer also may have attended the meeting. 
(Hardwicke did not remember the meeting; he could not even 
confirm that it took place.) 265
    Only Epes remembered anything that was said at the meeting, 
and his recollection was limited and general. In sum, Epes 
testified that he apprised Governor Clinton of his staff's 
safety concerns, * but that Governor Clinton believed the 
concerns could be addressed.266 Epes added that Governor 
Clinton said the State needed to have a presence in the 
downtown area, and that he was interested in revitalizing the 
area.267 (As noted above, Betsey Wright and Bob Nash both 
testified that revitalization of downtown Little Rock was a 
priority for Governor Clinton and that state agencies were an 
integral part of the Governor's revitalization efforts.) 
268 Ultimately, Clinton declined to overrule the decision 
of the Director of Building Services.269 Significantly, 
the McDougals were not discussed.270
---------------------------------------------------------------------------
    \*\ As noted previously, Epes lived near the Madison Guaranty 
Building and did not share his staff's safety concerns. (Epes, 4/24/96 
Hrg. pp.64, 68; Epes, 2/5/96, Dep. pp.172-173, 180.)
---------------------------------------------------------------------------
    On April 10, 1984, AHDA and Madison Guaranty executed a 
lease for 6,852 square feet of space at a price of $8.50 per 
square foot--a total of $58,242. The leased commenced in July 
1984, when, as scheduled, AHDA moved into custom-renovated 
offices in the Madison Guaranty Building.*
---------------------------------------------------------------------------
    \*\ As promised in the lease, Madison initially employed a security 
guard to address AHDA's security concerns. Over time, Madison 
apparently halted this arrangement, perhaps because the security 
concerns raised by AHDA proved unfounded. However, there is no dispute 
that Madison complied initially.
---------------------------------------------------------------------------
    SBS Leasing Administrator Helen Herr described the price as 
``competitive'' and testified that ``the quality of space as 
presented was good, and did justify the cost per square foot.'' 
271 She added that the floor plan was entirely 
``workable.'' 272 Mallard stated that AHDA was satisfied 
with the Madison space after AHDA moved in. ``I know after 
[Epes] got there, he was happy, and, you know, I would see him 
from time to time and he expressed himself that he was happy 
there.'' 273 Epes agreed.

          [O]nce we determined that that's where we were 
        moving, there was a construction period where they 
        built out our space for us. It was an old warehouse 
        that had been converted so it was raw space and we were 
        able to put up the walls and the offices in an 
        arrangement that was best for us.274

    Moreover, the AHDA lease apparently had the intended 
catalytic effect on the Quapaw Quarter. Herr observed that the 
neighborhood improved after AHDA moved into the Madison 
Guaranty building and that ``[t]here was a lot more activity in 
that area, business activity in that area.'' 275

                 b. ADFA'S Expansion of the AHDA Lease

    During April 1985, legislation was enacted transforming the 
Arkansas Housing Development Agency into the Arkansas 
Development Finance Authority. ADFA's responsibilities were 
significantly broader than AHDA's. ADFA also had authority to 
hire several additional employees. This, in turn, created a 
need for additional office space.
    On April 9, 1985, AHDA Director Epes wrote to SBS Director 
Mallard. Epes advised Mallard of the ADFA legislation, and 
noted that AHDA expected to hire ``three to four additional 
employees for Development Finance efforts.'' Epes added that 
AHDA had hired two additional employees since it moved into the 
Madison building. He therefore requested SBS to seek additional 
space to accommodate the new employees.276
    Fortunately, the Madison Guaranty Building had additional 
space available at a competitive price.277 Thus, ADFA 
could increase its office space without the expense and 
dislocation of moving.278 In this regard, SBS Leasing 
Manager Herr testified that ``it would not have made any fiscal 
sense to relocate [AHDA] at that time, if space was available 
at a reasonable rate right next door.'' 279 Mallard agreed 
that it was ``reasonable'' to expand into the adjoining space. 
He added that: ``We always tried to keep [agencies] in the same 
space if we could.'' 280
    Accordingly, on August 13, 1985, ADFA leased 1,456 square 
feet of additional office space at Madison Guaranty. The new 
space was adjacent to ADFA's existing space. The price was 
slightly higher--$9.32 per square foot as opposed to $8.50 for 
the existing space--but this amount included significant 
renovations. The base rent remained the same. According to 
Herr, the price was reasonable considering the construction 
entailed in customizing the new space for the agency.281
    There is no evidence of impropriety in connection with the 
lease expansion.

            c. The revenue office lease at 1520 Main Street

    The Arkansas Department of Finance and Administration 
(``DFA'') operates approximately 140 ``revenue offices'' 
throughout the State. Among other things, Arkansans can renew 
their drivers licenses and automobile registrations at revenue 
offices. DFA makes a concerted effort to spread revenue offices 
out in such a way as to make them accessible to all 
Arkansans.\282\
    As of 1985, DFA occupied a revenue office on Wealth Street 
in downtown Little Rock. However, the Wealth Street office was 
infested by rodents and insects.\283\ In addition, the office 
had been broken into and robbed several times.\284\ 
Accordingly, Revenue Department Administrator John Cox decided 
to move the office to a safer location in the same 
neighborhood.\285\ In particular, Cox decided to move to a 
former service station located at 1520 Main Street--across the 
street from the Madison Guaranty Building--that was owned by 
Madison Financial. The service station was about five blocks 
from the Wealth Street location.
    Only one witness recalled anything substantive about this 
lease. SBS Leasing Manager Morris Patterson--who handled all 
revenue office leases--offered the only pertinent testimony. 
Patterson stated that Cox found the property on his own, then 
called Patterson directly and asked him to negotiate and draft 
a lease for the property.\286\ A letter from John Cox * to 
Patterson confirms that DFA found the space.\287\ Patterson had 
no contact with the Governor's office regarding the move or the 
lease, and Cox did not mention any such contact to Patterson 
during the leasing process.\288\ Mallard had a general 
recollection that Cox found the space and contacted Patterson 
directly, but could not recall any details.
---------------------------------------------------------------------------
    * Cox is deceased.
---------------------------------------------------------------------------
    According to Patterson, the building was reasonably 
priced--2,315 square feet at $7.50 per square foot--and was 
well renovated to DFA's specifications. Patterson added that 
the building remains in use as a revenue office today.\289\
    The record concerning the revenue office lease is clear. 
This was a run-of-the-mill, unremarkable transaction. The 
Governor's office had no involvement at all. In fact, there is 
no evidence that anyone outside DFA and SBS played any part in 
the lease negotiations.

                d. ADFA's move to the Technology Center

    On September 1, 1987, ADFA moved from the Madison Guaranty 
Building to the Technology Center at 100 Main Street in Little 
Rock. The new lease encompassed 10,800 square feet of space at 
a price of $11.00 per square foot, for a total of $118,800 per 
year. As of March 1, 1992, ADFA occupied 15,040 square feet.
    There are two noteworthy aspects to this move. First, 
although the move took place before ADFA's lease at Madison 
expired, this did not result in any cost to the State. The 
owners of the Technology Center assumed financial 
responsibility to Madison Financial for ADFA's breaking the 
lease. Second, the Technology Center was owned by an investment 
group headed by Tom Ferstl, a prominent Republican opponent of 
Governor Clinton's. This is totally inconsistent with the 
suggestion that the Governor's office was manipulating the 
leasing process to benefit Governor Clinton's friends or 
political supporters.

  e. Neither Governor Clinton nor his staff pressured anyone to lease 
                   office space from Madison Guaranty

    Not one witness was contacted by the Governor or anyone 
acting on his behalf. In fact, the Governor's only involvement 
in the leasing process came after SBS Director Mallard already 
had decided to move AHDA to the Madison Guaranty Building. Even 
then, Governor Clinton did not initiate the meeting. AHDA 
Director Epes and Board Chairman Hardwicke sought a meeting to 
discuss the agency's move to Madison Guaranty. The Governor 
merely acceded to their request.\290\
    In any event, the evidence indicates that the meeting was 
perfunctory and insubstantial. Epes described the meeting as 
``fairly brief.'' \291\ Hardwicke could not even recall whether 
a meeting took place.\292\ Most important, Governor Clinton 
refused to get involved in the dispute between AHDA and SBS. He 
simply restated his policy of promoting development in low 
income areas, noted Madison Guaranty's proximity to the 
Governor's mansion, and declined to overrule the director of 
SBS.\293\ Neither Governor Clinton nor anyone acting on his 
behalf took any action as a consequence of the meeting.
    The Committee has taken extensive sworn testimony regarding 
the State leases at Madison Guaranty. That testimony is 
consistent and clear. Every single witness has testified that 
SBS acted unilaterally in selecting the Madison Guaranty 
Building for AHDA's offices. There is no evidence that Governor 
Clinton or his staff sought to influence the selection process.
    Despite the overwhelming weight of the evidence, the 
majority has seized on the deposition testimony of Helen Herr 
to suggest that SBS did not act unilaterally.\294\ According to 
Herr, Mallard advised her that:

          [T]he Governor's office wanted us to lease that 
        space, that they were interested in--as I recall, he 
        said they were interested in helping the development in 
        the quarter area, South Main, and that the McDougals 
        were friends [of the Clintons].\295\

    Mallard denied making the statement that Herr attributed to 
him.\296\ However, even assuming he made the statement and 
forgot, it does not suggest any impropriety and, in fact, is 
consistent with the other evidence. As discussed previously, 
Epes and Hardwicke met with Governor Clinton in March or April 
1985, but could not persuade him to overrule Mallard's decision 
or to intervene in the leasing process.\297\ Herr testified 
that her conversation with Mallard took place after that 
meeting and that Mallard was merely apprising Herr that the 
Governor would not interfere with the decision Mallard made 
before the meeting.\298\
    Additional testimony further undermines any claim that 
Herr's testimony suggests improper conduct in connection with 
the Madison Guaranty lease. First and foremost, SBS Director 
Mallard testified that he made the decision to lease space from 
Madison Guaranty for state agencies.\299\ Neither Governor 
Clinton nor anyone acting on his behalf exerted any influence 
on Mallard to lease space from Madison Guaranty or any other 
lessor.\300\ Mallard stated:

          The Governor never said anything to me at all about 
        this lease or any other lease that we made while I was 
        at state building service, 4\1/2\ years or whatever 
        length of time I was there.\301\

Mallard summarized that: ``I had no pressure at all.'' \302\ 
Nor did Mallard select the Madison Guaranty space based on 
McDougal's relationship with Governor Clinton. Mallard flatly 
denied that he was influenced by the fact that McDougal was a 
friend and supporter of the Governor.\303\
    Morris Patterson--the SBS leasing manager who drafted the 
AHDA lease--confirmed Mallard's testimony. Patterson stated 
plainly that ``[n]obody'' tried to pressure him, and that he 
was ``not aware of any pressure whatsoever'' from the 
Governor's office to lease space from Madison Guaranty.\304\
    AHDA Board Chairman Mort Hardwicke gave similar testimony. 
Hardwicke stated that no one from the Governor's office tried 
to influence him regarding the move to the Madison Guaranty 
Building, and that he had no reason to believe that any other 
AHDA official was pressured.\305\
    Finally, Bob Nash, Governor Clinton's liaison with AHDA, 
testified that neither Governor Clinton nor anyone acting on 
his behalf sought to influence SBS to lease space from Madison 
Guaranty.\306\ On the contrary, Nash testified that SBS decided 
unilaterally to lease from Madison Guaranty.\307\ In fact, Nash 
first learned that SBS was considering the Madison Guaranty 
space after the decision to lease the space had been made.\308\ 
Nash summarized that he had ``no reason to believe that [the 
selection of the Madison Guaranty Building] was not proper and 
appropriate.'' \309\

 f. It was common for state agencies to object to the space chosen for 
                              them by SBS

    Much has been made of the fact that AHDA initially objected 
to the Madison Guaranty space. In fact, ADHA's objections have 
little significance. State agencies routinely raised concerns 
about the office space assigned to them by SBS.\310\ It would 
have been more surprising if the move were met with silence. 
Moreover, AHDA's legitimate concerns were addressed and 
resolved before the agency moved into Madison Guaranty. In the 
end, the Madison Guaranty space proved well-suited to AHDA's 
needs, and the agency was entirely satisfied.
    SBS officials uniformly testified that it was common for 
state agencies to raise objections to the space selected for 
them by SBS. For example, SBS Director Mallard stated:

          [E]very time we moved an agency, usually someone 
        within that agency objected. I mean, this was nothing 
        unusual. You would have someone within the agency would 
        have to drive a few miles further. You would have 
        someone in the agency that would lose a parking place. 
        You would every time you moved someone, if you didn't 
        let them go exactly where they wanted to go, and then 
        there were some dissatisfied if you let them go where 
        they wanted to go.\311\

Similarly, Helen Herr agreed it was common for state employees 
to raise complaints when their agencies were slated to 
move.\312\
    Nor was it unusual that AHDA Director Epes made a direct 
plea to SBS regarding the Madison Guaranty space.* Mallard 
stated: ``[Y]ou would always have agency directors that would--
a lot of times I had them calling me saying they wasn't going 
to move. They couldn't, wouldn't move.'' \313\
---------------------------------------------------------------------------
    * Although Epes did not share the concern of his staff, he ``didn't 
want [his] staff members to think that I didn't care about their 
concerns.'' (Epes, 2/5/96 Dep. p.173.)
---------------------------------------------------------------------------
    Betsey Wright confirmed that agencies commonly objected to 
SBS decisions, and that the Governor's office frequently was 
called upon to mediate those objections. She added that efforts 
to move agencies to downtown locations were particularly likely 
to engender opposition, and not always for legitimate 
reasons.\314\ Wright stated:

          Sometimes agencies didn't particularly want to be in 
        downtown Little Rock, and I would have conversations 
        with the agency directors or department directors about 
        what the problems were, and state building services 
        would be working with the owners to see if they could 
        be accommodated.
          Quite frankly, in many cases, the concern was racist 
        in its bearing, and it was in part my responsibility to 
        try to determine and ascertain where that was the 
        barrier, because that was one we weren't going to allow 
        to be a barrier.\315\

     In any event, in the end, AHDA's objections proved 
unfounded. When asked his opinion of the agency's new offices, 
Epes testified: ``I liked it. It was--it was laid out well, and 
we got to design our space in a manner that was suitable for 
us.'' 316 Morris Patterson, the career SBS official who 
drafted the lease confirmed Epes' testimony. He recounted that 
``[Epes] readily worked with me on this to do the floor plan, 
like he was happy to go there.'' 317

                g. The April 5, 1985 Madison fundraiser

    On April 5, 1985, James McDougal hosted a fundraiser for 
Bill Clinton at the Madison Guaranty Building. The event raised 
approximately $33,000. It has been alleged that one or more of 
the state agency leases at Madison Guaranty was a quid pro quo 
for the fundraiser. As discussed above, this claim conflicts 
with the unanimous testimony of the State officials who 
conducted the leasing process. Moreover, the initial AHDA lease 
at Madison Guaranty--which was the only lease that even came to 
the Governor's attention--was signed a full year before the 
fundraiser.
    Questions also have been raised about certain contributions 
that the campaign received during the fundraiser. Although 
Charles Peacock III apparently made $6,000 in unlawful 
contributions at the fundraiser, the record demonstrates that 
the campaign did not know the contributions were unlawful and 
had no reason to suspect that the contributions were anything 
but proper.

                             (1) Background

    Charles Peacock III was the largest minority shareholder in 
Madison Guaranty, and served on the board of directors when 
James McDougal ran the institution. He and his companies also 
were substantial borrowers from Madison; Peacock's total debt 
to Madison ultimately exceeded $1 million. 318 Included in 
that amount were two loans that Peacock received at the time of 
the fundraiser. On April 4, 1985, Peacock received a $50,000 
personal loan; on April 5, 1985 Dixie Continental Leasing, a 
company owned by Peacock, received a $297,000 loan. Most of the 
funds Peacock and Dixie Continental borrowed in April 1985 were 
used to purchase a 30 acre parcel of land from Madison 
Financial. 319 Approximately $11,000 of the loan proceeds, 
however, cannot be traced.
     At the April 5, 1985 fundraiser, Peacock made two $3,000 
contributions to Governor Clinton in the names of others--his 
son, Ken Peacock, and his business partner, Dene Landrum. 
320 Both contributions were for legally permissible 
amounts, and on their face, were entirely proper. 321 
However, Arkansas campaign finance law prohibits making a 
contribution in the name of another person. 322 Thus, the 
contributions violated the Arkansas election code. Peacock 
admits that he made the contributions, but denies knowing that 
making contributions in the name of another was illegal. 
323 Peacock also denies that he used the proceeds from the 
April 1985 loans to fund the contributions. 324
    In any event, after McDougal was removed from control of 
Madison, Peacock defaulted on his loans. As a consequence, by 
1987, Madison Guaranty was engaged in collection and bankruptcy 
litigation against Peacock and several of his companies.
    Patricia Heritage [Hays] was the collection officer who 
coordinated the Peacock litigation for Madison Guaranty. On 
April 21, 1987, Peacock's lawyer, Greg Hopkins, appeared 
unexpectedly at Hays' office. Hopkins made a series of ``very 
angry'' allegations about Madison's lawyers, the Mitchell, 
Williams firm, and its conduct of the Peacock litigation. 
325
    Hays viewed the allegations as the kind of ``huffing and 
puffing that a litigator will do to gain an advantage for his 
client.'' * Hopkins was faring poorly in the Peacock 
litigation, and apparently hoped to pressure Madison to reach a 
settlement. 326 Also, Hays knew that Hopkins was angry at 
Lance Miller, one of the Mitchell firm attorneys who 
represented Madison in the Peacock litigation. 327 During 
a recent appearance in bankruptcy court, Miller had questioned 
the source of Hopkins' legal fees. In particular, Miller 
suggested that Hopkins was paid with the proceeds from one of 
Madison's loans to Peacock. 328 Hays also thought that 
Hopkins was embarrassed because Miller had forced Peacock to 
dismiss with prejudice the bankruptcy petition that Hopkins had 
filed on Peacock's behalf--a major defeat for Peacock and 
Hopkins. 329
---------------------------------------------------------------------------
    \*\ (Hays, 2/23/96 Dep. p.106.) Apparently Hays was correct. Years 
later, in approximately July 1995, Hopkins told Hays that he was ``just 
posturing'' and ``blowing smoke'' during their April 1987 conversation. 
(Hays, 2/23/96 Dep. pp.127-28.)
---------------------------------------------------------------------------
    As soon as Hopkins left her office, Hays telephoned Miller 
and recounted Hopkins' allegations. Miller took contemporaneous 
notes of his conversation with Hays (``phone notes''). 330 
Miller also discussed the allegations with two lawyers at the 
Mitchell firm, Tim Grooms, a more senior associate, and Jim Guy 
Tucker, a partner in the firm. 331 In addition, at 
Tucker's suggestion, Miller drafted a memorandum to John Selig, 
the senior partner at the Mitchell firm (``memorandum''). 
332 The three page memorandum, dated April 23, 1987, was 
intended to apprise Selig of Hopkins' allegations. 333 
Both documents were based entirely on Miller's April 21 
conversation with Hays; Miller did not conduct any independent 
research or investigation. 334
    The bulk of Hopkins' allegations concerned Tucker's 
relationship with Madison Guaranty and the Mitchell firm's 
conduct of the Peacock litigation. For example, Hopkins 
threatened to seek to disqualify the Mitchell firm from the 
Peacock litigation based on a conflict of interest arising out 
of Tucker's business dealings with Madison Guaranty and 
McDougal. 335 Hopkins also attacked the Mitchell firm's 
conduct of the litigation as ``churn[ing] the files'' to 
generate legal fees. 336 Finally, Hopkins criticized the 
Mitchell firm's conduct of the litigation as ``too dirty'' and 
stated that he was considering resigning his representation of 
Peacock as a consequence. 337 These allegations are not 
directly relevant to the Committee's investigation.
    One of Hopkins' allegations is pertinent to the Committee's 
inquiry. According to Miller's phone notes and memorandum, 
Hopkins claimed that funds from a Madison Guaranty loan to 
Dixie Continental were used to make contributions to the 
Clinton campaign and that the state lease with Madison was 
related to the contributions. 338
    Hopkins' allegation is recounted in Miller's phone notes 
and his subsequent memorandum. First, Miller's phone notes 
state:

          Dixie loan went to Clinton Campaign
          Signed lease to state,
          alot of people going to prison. 339

In his memorandum, Miller expanded upon his phone notes. The 
memorandum states:

          Mr. Hopkins stated that a portion of the loan 
        proceeds made to Dixie Continental Leasing went to Bill 
        Clinton's campaign and that in return for the 
        substantial campaign contribution, Bill Clinton assured 
        Jim McDougal that a state agency would lease space from 
        Madison at its headquarters on Main Street in Little 
        Rock. 340

These statements--which were reported in the press in July 
1995--appear to have provided the impetus for the Committee's 
investigation into the supposed relationship between the April 
5, 1985 fundraiser and the State leases at Madison Guaranty.

    (2) There was no connection between the State leases at Madison 
               Guaranty and the April 5, 1985 fundraiser

    On its face, Hopkins' allegation is certainly troubling. 
However, upon examination, the record simply does not support 
the allegation.
    First and foremost, the timing of events is inconsistent 
with the allegation of a connection between the leases and the 
fundraiser. As discussed above, the AHDA lease at Madison 
Guaranty was signed in April 1984. The fundraiser was not held 
until April 1985, a full year later. It strains credulity that 
Governor Clinton directed state agencies to lease space at 
Madison in the hope that sometime later--much later as it 
turned out--McDougal would hold a fundraiser for him. Nor is 
there any basis to argue that the fundraiser was planned 
earlier but delayed. Pillsbury, Madison reported that the 
fundraiser was not scheduled until a week before it took place. 
341
    Second, every single person involved in the leasing process 
rejected the notion that Governor Clinton influenced the 
selection of Madison. Three SBS officials--Paul Mallard, Helen 
Herr and Morris Patterson--all testified that Mallard made the 
decision unilaterally. Wooten Epes, the Director of AHDA and 
ADFA, testified that Governor Clinton stayed out of the leasing 
process, even when Epes tried to draw him into it. Nor did 
Betsey Wright or Bob Nash of the Governor's staff get involved. 
John Latham, the president of Madison Guaranty, testified that 
``I know of no link'' between the leases and the fundraiser. 
342 Moreover, Hays made inquiries at Madison but did not 
discover anything. 343 In this regard, on April 27, 1987, 
Hays advised Marcy Taylor, a Mitchell, Williams lawyer that: 
``No one here knows anything about it.'' 344
    The majority apparently recognizes the implausibility of a 
connection between the fundraiser and the AHDA lease. Instead, 
the majority has noted that ADFA Director Epes wrote to SBS 
Director Mallard on April 9, 1985 to request additional space, 
and has suggested that the resulting August 13, 1985 lease 
expansion at Madison must have been in recompense for the 
fundraiser. 345 However, the facts simply do not support 
this claim. The record clearly establishes that the agency 
needed the additional space, that it was cost-effective and 
efficient to seek additional space at Madison, and that there 
was no connection with the fundraiser.
    There can be no dispute that ADFA required additional 
office space. From the outset of the leasing process, the 
agency stressed that it expected to expand, and needed office 
space that would accommodate expansion. 346 Moreover, the 
timing of the expansion was entirely due to factors outside 
AHDA's control. As noted previously, in April 1985, the 
Arkansas legislature enacted a wide ranging economic 
development package. Part of this legislation transformed AHDA 
into ADFA. Because ADFA's responsibilities were significantly 
broader than AHDA's, the new agency was authorized to hire 
several additional employees. This, in turn, created a need for 
additional space. 347
    In light of the new legislation, Epes wrote to Mallard on 
April 9, 1985 to request additional office space. 348 This 
request had no connection with the fundraiser; in fact, Epes 
had no idea that the fundraiser had been held. 349 Rather, 
Epes apprised Mallard of the new legislation, and noted that 
AHDA expected to hire ``three to four additional employees for 
Development Finance efforts.'' 350 Epes further noted that 
AHDA had hired two additional employees since it moved into the 
Madison Guaranty building. He therefore requested additional 
space to accommodate all the new employees. 351
    As SBS had anticipated when it obtained the initial lease, 
Madison Guaranty had additional space available at a 
competitive price. 352 Thus, ADFA could expand without the 
expense and dislocation of moving. 353 Helen Herr 
testified that this was the only sensible decision. She stated 
succinctly:

        it would not have made any fiscal sense to relocate 
        [AHDA] at that time, if space was available at a 
        reasonable rate right next door. 354

Accordingly, on August 13, 1985, ADFA leased 1,456 square feet 
of additional office space at Madison Guaranty. The new space 
was contiguous with ADFA's existing space. Although the price 
was slightly higher--$9.32 per square foot compared to $8.50 
for the existing space--this amount included significant 
renovations. The base rent remained the same. According to 
Herr, the price was reasonable considering the work entailed in 
customizing the new space for ADFA. 355

    (3) Hopkins' allegations of wrongdoing were directed at Madison 
 Guaranty insiders, not at Governor Clinton or anyone associated with 
                                  him.

    As noted above, Hopkins told Hays that ``a lot of people 
[would be] going to prison'' as a consequence of wrongdoing at 
Madison. 356 The Committee's investigation established 
that this statement referred to the operation of Madison 
Guaranty by the McDougals and other Madison Guaranty insiders, 
not to the Governor or people associated with his 
administration or his campaign. Hays and Miller both testified 
that Hopkins' reference pertained only to Madison insiders, and 
did not pertain to Governor Clinton or anyone associated with 
him. *
---------------------------------------------------------------------------
    \*\ Hopkins did not recall the conversation with Hays, and could 
not explain Miller's phone notes and memorandum. (Hopkins, 2/14/96 Dep. 
pp.86-87.)
---------------------------------------------------------------------------
    Miller's phone notes are silent as to whom Hopkins accused 
of wrongdoing. 357 However, Miller's memorandum clarified 
that Hopkins' allegation was directed at McDougal and other 
Madison insiders. Miller wrote:

          Mr. Hopkins went on to explain that there was 
        substantial wrongdoing regarding the prior 
        administration of Madison, that several people were 
        `going to prison,' and that our firm will be severely 
        embarrassed when a full disclosure is made and our firm 
        is disqualified with potential sanctions 
        imposed.358

Thus, the people who Hopkins' warned might be ``going to 
prison'' were ``the prior administration of Madison''--not 
Governor Clinton or anyone associated with him. 359
    Hays confirmed Miller's interpretation. As a preliminary 
matter, Hopkins' statement regarding McDougal and the Madison 
insiders came as no surprise to Hays. It was common knowledge 
that James McDougal had been forced out of Madison Guaranty, 
amidst allegations of rampant fraud. As a Madison employee, 
Hays was acutely aware of these events. She noted:

        It's just that a lot of what he was saying, it wasn't 
        news to me. And maybe the particulars that statements 
        like that people are going to prison, I mean that was 
        widely known. That was widely talked about and 
        speculated about. 360

Thus, Hays had no doubt that Hopkins' references to 
``wrongdoing'' and ``prison'' applied to Madison insiders, not 
to Governor Clinton or anyone associated with his 
administration or campaign. 361 Hays explained:

          He was strictly talking about Madison related 
        insiders * * * who had been running Madison. That's who 
        I understood him to be talking about, definitely. * * * 
        Jim McDougal, one or more of the Henley brothers, John 
        Latham. That's essentially it. 362

    (4) There was no impropriety by Governor Clinton or the Clinton 
         campaign in connection with the Peacock contributions

     As noted previously, the contributions that Charles 
Peacock made at the April 5, 1985 fundraiser were legal on 
their face. However, Arkansas campaign finance law prohibited 
contributions in the name of another person. 363 Thus, the 
contributions violated the Arkansas election code.
    Peacock admits that he made the contributions, but denies 
knowing that the contributions were illegal.364 He also 
denies that his contributions had any relation to state 
leases.365 Rather, Peacock claims he made the 
contributions for ``a selfish reason''--to help Ken obtain a 
state job after graduating from law school and to help the son 
of Landrum's friend procure a state scholarship.366 
Neither event actually occurred.*
---------------------------------------------------------------------------
    \*\ No charges have been brought against Peacock by the Independent 
Counsel in connection with the contributions. Nor has Peacock been 
granted immunity. (Peacock, 4/24/96 Hrg. pp.157-58.)
---------------------------------------------------------------------------
    Although Peacock now admits that he made the contributions, 
at the time, there was no reason for Governor Clinton or anyone 
associated with his campaign to doubt that the contributions 
were made by Ken Peacock and Dene Landrum. On the contrary, the 
campaign had every reason to believe that Ken Peacock and Dene 
Landrum did make the contributions. The contribution checks 
identified Ken Peacock and Dene Landrum as the makers; no other 
names appeared on the checks.367 Moreover, Peacock wanted 
the campaign to believe the contributions came from his son and 
Landrum.368 Thus, the only person who could identify the 
actual contributor sought to conceal that fact.
    The evidence shows that the campaign believed that the 
contributions came from Ken Peacock and Dene Landrum. In a 
letter dated April 24, 1985, McDougal's secretary Sue Strayhorn 
provided Linda Dickson of the Governor's Office, with 
``addresses for checks you received through Madison for the 
Governor.'' 369 The Ken Peacock and Dene Landrum 
contribution checks are among those listed in the letter. This 
indicates that the Clinton campaign believed the checks were 
drawn by Ken Peacock and Dene Landrum, the individuals 
identified on the face of the checks.370 Shortly 
thereafter, the Clinton campaign sent Ken Peacock and Dene 
Landrum thank you letters at the addresses provided by 
Strayhorn.371 These letters were identical to the thank 
you letters that all the other contributors received.372 
Charles Peacock did not receive a thank you letter.
    In interrogatory responses dated May 24, 1995, President 
Clinton stated that he had no knowledge regarding the source of 
funds for the contributions made in connection with the 
fundraiser.373 After a two-year review, on December 13, 
1995, Pillsbury, Madison reported that it could not find any 
evidence to the contrary.374 The evidence provided to the 
Committee also is entirely consistent with the President's 
statement. There is no reason whatsoever to believe that the 
President or anyone associated with him knew the source of 
funds for the Ken Peacock and Dene Landrum contributions.

                             h. Conclusion

    After extensive examination, the record is clear; Governor 
Clinton and everyone associated with his administration and his 
campaign acted entirely properly with respect to the State 
leases at Madison Guaranty. The leases were signed in the 
normal course of business by the State officials responsible 
for leasing office space. Governor Clinton did not influence 
the leasing process in any way. The record indicates that only 
one lease--the April 1984 ADHA lease--even came to the 
Governor's attention. Even then, he refused to intervene in the 
leasing process, and deferred to the decision of SBS Director 
Mallard.
    The record further shows that there was no connection 
between the State leases and the April 5, 1985 fundraiser at 
Madison Guaranty. The AHDA lease was signed in April 1984, a 
full year before the fundraiser. Thus, as a matter of timing, 
it is incredible to connect these events. Nor could there have 
been any connection to the August 1985 ADFA lease expansion. 
ADFA Director Epes--who proposed the lease extension--did not 
know that the fundraiser had taken place. He simply requested 
space to house additional employees authorized during the 
legislative session. The record also demonstrates that the 
revenue office lease signed in November 1985 was handled solely 
by the Department of Finance and Administration and SBS, 
without any involvement from the Governor's office. Thus, there 
is no basis to connect the fundraiser with the leases.
    Finally, there is no evidence that Governor Clinton or 
anyone associated with his administration or his campaign was 
aware of the source of funds for the contributions Charles 
Peacock made in the names of Ken Peacock and Dene Landrum. On 
the contrary, the record shows that the campaign treated the 
contributions like all other contributions.
    In sum, therefore, there is no evidence of impropriety by 
Governor Clinton or anyone associated with him in connection 
with the State leases at Madison Guaranty or the April 5, 1985 
fundraiser.
            3. There is no evidence that McDougal received special 
                    treatment from the Alcoholic Beverage Commission
    It has been alleged that Governor Clinton pressured the 
Arkansas Alcoholic Beverage Control Division (``ABC'') to 
provide favored treatment to James McDougal. First, it has been 
alleged that Governor Clinton interceded with the ABC in 
support of McDougal's efforts to develop a microbrewery and 
brew pub on the IDC property. Second, it has been alleged that 
Governor Clinton caused the ABC to promulgate a regulation 
permitting breweries to operate ``tasting rooms.'' The 
evidence, however, demonstrated that Governor Clinton never 
contacted the ABC with respect to the IDC brewery proposal. The 
evidence further demonstrated that Governor Clinton played no 
part in the approval of the tasting room regulation.

 a. No evidence that McDougal received special treatment in connection 
       with his efforts to develop a brewery on the IDC property

    From 1982-86, William Lyon operated a small microbrewery in 
Little Rock, producing Riley's Red Lyon Beer.375 As 
discussed in section II.E, below, during the fall of 1985, 
McDougal tried to persuade Lyon to move his microbrewery to the 
IDC property.376 Specifically, McDougal asked Lyon to 
purchase a warehouse on the IDC property and convert it into a 
brewery.377 Lyon testified that he had little interest in 
McDougal's proposal, but agreed to consider it because Madison 
Guaranty had loaned him approximately $368,000 to finance the 
construction and expansion of the brewery.378
    In considering McDougal's proposal, Lyon first visited the 
IDC property with Seth Ward.* Lyon then contacted the ABC 
to inquire about the proposed move.379 The ABC advised 
Lyon that the IDC property was situated in a ``dry'' section of 
Pulaski County--which meant that alcohol could not be produced 
or sold on the IDC property.380 Plainly, this precluded 
placing a brewery on the IDC property.
---------------------------------------------------------------------------
    \*\ Ward owned part of the IDC property. However, it is unclear 
whether Ward was acting as a principal, a real estate agent, or both 
when he showed Lyon the property.
---------------------------------------------------------------------------
     According to Lyon, when he informed McDougal that the IDC 
property was dry, McDougal responded that ``he could take care 
of that * * * [t]hrough his many years in government, state 
government, his friendship with Bill Clinton . * * *.''381 
To the best of Lyon's knowledge, McDougal never followed up on 
his assurances. Lyon testified that McDougal ``did not take any 
steps, as far as I know, to take care of [the wet/dry 
problem].''382
    However, in a memorandum to Seth Ward dated November 20, 
1985, McDougal wrote:

          Subject to approval by the ABC, Bill [Lyon] will 
        place his brewery in the shell building, along with a 
        tasting room. I have spoken with the Governor on this 
        matter and expect that it will be approved.383

Based on this memorandum, it has been suggested that Governor 
Clinton agreed to intercede with the ABC to help McDougal 
obtain approval to move Lyon's brewery to the IDC property. The 
evidence, however, demonstrated that Governor Clinton did not 
contact the ABC.
    McDougal's memorandum was replete with inaccuracies. As an 
initial matter, Lyon testified that he never agreed to move his 
brewery to the IDC property.384 He merely considered the 
possibility out of deference to McDougal, his creditor. Thus, 
the basic factual premise of the memorandum was erroneous.
    In addition, the ABC had no authority to approve the move; 
the prohibition on the sale or manufacture of alcoholic 
beverages on the IDC property was statutory, not 
regulatory.385 Thus, the suggestion that Governor Clinton 
interceded with the ABC to help McDougal makes no sense; there 
was nothing that Governor Clinton could have influenced the ABC 
to do.
     Moreover, Lyon stated that McDougal was a ``salesman-
type'' who tended to ``exaggerate'' and to ``brag'' about his 
relationship with Governor Clinton.386 With respect to 
influencing Governor Clinton, Lyon added that: ``[McDougal] 
thought he could do anything. Whether he could or not--well, I 
guess history has proven that he couldn't.''387
    Even if McDougal did speak with Governor Clinton, moreover, 
there is no evidence that the Governor took any action to 
assist McDougal. On the contrary, the evidence demonstrated 
that Governor Clinton did not assist McDougal. Charles 
Singleton, the Director of the ABC,* confirmed that 
Governor Clinton ``never contacted'' him on any matter, and 
that no one at all contacted him regarding a possible brewery 
on the IDC property.388 ABC attorney Treeca Dyer also 
testified that she ``didn't talk to the Governor's 
office.''389 Nobody pressured Dyer or, to the best of her 
knowledge, her colleagues.390 Even Lyon did not believe 
that anyone in the Clinton administration interceded with the 
ABC in his behalf.391
---------------------------------------------------------------------------
    \*\ Singleton was appointed by Republican Governor Frank White.
---------------------------------------------------------------------------
    In the end, the IDC property remained dry, and Lyon did not 
move his brewery to the IDC property. As such, there is no 
evidence that anything improper occurred in connection with 
McDougal's efforts to develop a brewery on the IDC property.

   b. Governor Clinton had no involvement in the ABC's approval of a 
        regulation permitting breweries to operate tasting rooms

    In late 1984, Lyon's microbrewery in Little Rock 
experienced financial problems. To generate additional income, 
Lyon sought to operate a brew pub * at the 
microbrewery.392 Arkansas law, however, prohibited the 
retail sale of alcoholic beverages on the premises of 
manufacturing plants.
---------------------------------------------------------------------------
    \*\ Lyon hoped to sell sandwiches and beer on the premises of his 
brewery.
---------------------------------------------------------------------------
    Lyon lobbied his friend and state senator Jim Scott to 
introduce legislation to carve out an exception that would 
permit brew pubs.393 Senator Scott introduced the 
legislation during the 1985 legislative session.394 
However, he withdrew the bill on February 18, 1985, after 
determining that the legislation would not pass.395
    At the same time he sought legislative relief, Lyon 
contacted the ABC to seek regulatory relief.396 On 
February 20, 1985, the ABC approved a regulation permitting 
``tasting rooms,'' in which beer manufacturers could give away 
free samples. However, breweries still could not engage in 
retail beer sales.
    It is unclear why McDougal would have been concerned with 
brewery regulations during this time; he did not purchase the 
IDC property until a year later.** Nonetheless, on 
December 12, 1984, McDougal had sent Scott's proposal to Betsey 
Wright.397 In the accompanying letter, McDougal wrote that 
``Governor Clinton has made a commitment concerning this bill. 
* * *''398 Based on this letter, it has been alleged that 
Governor Clinton influenced the ABC to enact the tasting room 
regulation to help McDougal. This allegation is quite a 
stretch. At most, the letter showed that Governor Clinton may 
have favored legislation--like that enacted in Arkansas and 
several neighboring states over the next few years399--to 
permit brew pubs. The letter made no mention of the ABC or a 
tasting room regulation.400 In any event, the evidence 
showed that Governor Clinton played no part in the approval of 
the regulation.
---------------------------------------------------------------------------
    \**\ McDougal did not even consider purchasing the IDC property 
until the summer of 1985, well after the tasting room regulation was 
promulgated. (Ward, 2/12/96 Dep. pp.6,10.)
---------------------------------------------------------------------------
    ABC Director Singleton--who drafted and promulgated the 
tasting room regulation--testified that the regulation was part 
of a routine process of updating and modernizing outdated 
regulations.401 He stated:

          It's just one of a group of regulations that we 
        considered and adopted. At the same time there had 
        probably been 15 or 20 others, that other people would 
        have been interested in and would have communicated 
        about. This one does not stand out in my mind over any 
        of the others.402

    Singleton further testified that the impetus for the 
regulation came from the alcoholic beverage industry.403 
No one from the Clinton Administration pressured him, or even 
contacted him, about this regulation.404 Moreover, 
Singleton would have recalled if the Governor or his staff had 
intervened. He noted that:

          I rarely had any contact with the governor's office 
        when I was over there. We pretty much did our own thing 
        as far as adopting regulations, and I don't recall ever 
        being contacted by the governor's office about a 
        regulation.405

Therefore, the evidence showed that Governor Clinton and his 
office played no part in the approval of the tasting room 
regulation.
    In addition, it should be noted that the tasting room 
regulation did not provide Lyon with the relief he sought. The 
regulation permitted him to give away samples of his beer, but 
did not permit him to sell beer and food on the premises of his 
brewery, as he wished.406 Thus, the regulation did nothing 
to help Lyon generate additional income. Lyon explained: ``It 
was less than I had [before the regulation was approved]. It 
just allowed me to give the beer away.''407
    Finally, it has been suggested that the approval of the 
tasting room regulation was related to Senator Scott's decision 
to withdraw his bill two days earlier--although it has not been 
demonstrated why this would cause concern. In any event, 
Singleton expressly denied any connection between the bill and 
the regulation.408 He added that the ABC began crafting 
the regulation six months before it was promulgated--in the 
fall of 1984.409 Thus, the alleged connection between the 
bill and the regulation rests on a coincidence of timing, and 
cannot withstand scrutiny.
            4. No evidence that Governor Clinton handled the sewer 
                    legislation impropery
    In 1987, Governor Clinton signed legislation to deregulate 
small sewer and water utilities. The Majority has alleged that 
the legislation was designed to provide special treatment to 
the Castle Sewer and Water company (``CSW'') and to protect the 
Rose Law Firm from exposure to civil liability. The Arkansas 
Public Service Commission (``the Commission'') and the entire 
Arkansas legislature supported the legislation. Furthermore, 
passage of the legislation was fully justified on the merits.
    Sam Bratton, the current chairman of the Commission, served 
as Governor Clinton's liaison to the Commission from 1979-1980 
and from 1983-1989. Bratton first heard of CSW during 
Arkansas's 1987 legislative session, when Clinton vetoed House 
Bill 1780. Bratton had recommended the veto because he and 
Commission General Counsel Doug Strock considered the bill to 
be ``special and local legislation'' that violated the state 
constitution by specifically exempting CSW from Commission 
regulation. To overcome this objection, the sponsors of House 
Bill 1780 introduced during the 1987 special session House Bill 
1047, which exempted all small utilities throughout the state 
from regulation by the Commission. Virtually identical to a 
bill that Strock had proposed in 1985 and 1986, the legislature 
passed the new bill unanimously. Governor Clinton then followed 
the recommendations of Bratton and the Commission by signing 
the bill into law.

                    a. The impact on small utilities

    During the 1987 legislative session, Arkansas 
Representatives William Walker and Mike Wilson introduced House 
Bill 1780, which stated in relevant part that:

          Notwithstanding any other provisions of the laws of 
        this State regulating public utilities, the provision 
        of this Act shall govern the registration, accounting, 
        and rates only of a privately owned public utility 
        providing sewer and/or water services to one or more 
        customers at a location within the (10) miles of the 
        corporate limits of a City of the First Class which as 
        a population in excess of 140,000 persons.410

    In 1987, the only city in Arkansas with a population of 
140,000 was Little Rock and CSW was apparently the only 
privately owned sewer and water utility within 10 miles of 
Little Rock. Thus, the effect of House Bill 1780 would have 
been to exempt CSW from regulation by the Commission.
    Representative Walker apparently believed that the 
deregulation of CSW would have resulted in lower utility rates 
for his constituents. According to Bratton:

          Bill Walker's interest in this matter apparently 
        arises from the fact that this utility company could 
        sell water to the City of Wrightsville at wholesale at 
        a price substantially less than Wrightsville in 
        currently purchasing water from the City of Little 
        Rock.411

     Wrightsville residents were paying ``fairly high'' rates 
to buy their water from Little Rock and to have it transported 
to their municipality. These higher rates were especially 
burdensome because Wrightsville had a ``low socioeconomic 
base.'' 412 Walker therefore wanted ``to find an 
alternative water supply source for the city of Wrightsville 
and apparently Castle Water and Sewer was one of the 
alternatives that was potentially available.'' 413 House 
Bill 1780 was thus an attempt to provide Wrightsville residents 
with access to less expensive sources of water. The Clinton 
Administration had no role in initiating or drafting this 
legislation.414
    House Bill 1780 passed both houses of the Arkansas 
Legislature without a dissenting vote.415 According to 
Bratton, Governor Clinton's top aide on matters involving the 
Commission, Clinton received no pressure to support or oppose 
the bill.416 Because Arkansas had no pocket veto 
provision, House Bill 1780 would have become law automatically 
even if Governor Clinton had taken no action.417 
Nevertheless, Bratton advised Clinton to veto the bill. Bratton 
considered the law to be ``special legislation'' because it 
applied only to CSW despite the existence of similarly situated 
utilities.418 The Walker-Wilson bill therefore 
``contravened a provision in the state constitution that 
prohibited special local legislation and therefore it was 
constitutionally defective.'' 419
    Commission General Counsel Strock shared Bratton's concerns 
about the constitutionality of the Walker-Wilson bill. In an 
internal memorandum stating his opinion on the merits of House 
Bill 1780, Strock concluded:

          The bill is obviously designed to apply only to some 
        utility/ies within ten miles of Little Rock. It is 
        really a kind of special legislation, phrased with an 
        eye to meeting constitutional prohibitions against 
        special legislation. It may possibly be vulnerable to a 
        constitutional challenge as special legislation, 
        however.420

    Governor Clinton adopted Bratton's and Strock's reasoning 
with respect to the Walker-Wilson bill. On April 8, 1987, 
Clinton vetoed House Bill 1780, and released the following 
statement:

          Amendment 14 to the Arkansas Constitution prohibits 
        the enactment of special or local legislation. By its 
        terms, House Bill 1780 would partially deregulate only 
        certain sewer and water services located within ten 
        (10) miles of the City of Little Rock. There appears to 
        be no rational basis for a classification which singles 
        out for deregulation such utilities and does not apply 
        to other privately owned sewer and water services 
        located within the State of Arkansas.

    After the veto, several individuals contacted Bratton. R.D. 
Randolph, a prominent Arkansas contractor, voiced his 
displeasure to Bratton and Nancy Hernreich,* the 
Governor's scheduler, noting that the bill had faced little or 
no opposition in the legislature.421 Tucker and McDougal 
also contacted Bratton. In addition, Tucker sent a letter to 
Governor Clinton dated April 24, 1987, which stated that ``R.D. 
Randolph, Madison Guaranty Savings & Loan, and I were all very 
disappointed that this non-controversial bill was vetoed. If a 
special session does become necessary, we ask that your call 
include this legislation.'' 422
---------------------------------------------------------------------------
    \*\ There have been allegations that Randolph's reference to 
$33,000 during a conversation with Nancy Hernreich was an allusion to 
the 1985 fundraiser James McDougal hosted for Governor Clinton at 
Madison Guaranty's main office--which raised roughly $32,000. 
Randolph's intent in making the statement was not clear to Hernreich 
and Bratton. In her memorandum to Governor Clinton, Hernreich noted 
Randolph's reference to the money and then declared, ``This was pretty 
cryptic.'' (Doc. No. DKSN 018008, April 14, 1987 memorandum from Nancy 
Hernreich to Governor Clinton.) Clinton's only substantive response to 
Hernreich's memorandum was to ``see if Sam [Bratton] will call him.'' 
(Doc. No. DKSN 018008.) Bratton, who was not present during the 
conversation between Randolph and Hernreich, had ``no idea what Mr. 
Randolph was trying to communicate'' with his comment. (Bratton, 2/13/
96 Hrg. p.17). Bratton did not discuss the matter with Governor 
Clinton. (Bratton, 1/5/95 Dep. pp.51-52.) Whatever Randolph may have 
meant, there is no evidence that campaign contributions in April 1985 
had any influence on the legislation enacted in June 1987.
---------------------------------------------------------------------------
    In the summer of 1987, Clinton called a special session of 
the legislature to revise legislation that provided an income 
tax credit for contributions to institutions of higher 
education.423 During the special session, Representative 
Wilson introduced House Bill 1047, which corrected the 
constitutional defect contained in House Bill 1780 by exempting 
all small water and sewer utilities from Commission 
regulation.424 The bill passed in the state House of 
Representatives by a vote of 97-0 and passed in the state 
Senate by a vote of 33-0. According to Bratton, no party 
expressed opposition to the legislation.425 On June 12, 
1987, Governor Clinton signed the bill into law, which then 
became known as Act 37.
    Act 37 was virtually identical to a bill Strock had 
proposed in January 1985 and had drafted in June 1986 for the 
1987 legislative session.* Strock summarized his 1986 
proposal as a bill that
---------------------------------------------------------------------------
    \*\ In 1985, Strock noted that small utilities in the state were 
having some difficulty raising money to finance ``health and safety 
related improvements.'' He proposed several methods for addressing the 
problem, including a partial deregulation of small utilities. In a 
January 17, 1985 memorandum, Strock proposed addressing regulatory 
difficulties faced by ``small water companies'' by eliminating the 
Commission's jurisdiction over them. ``This,'' he wrote, ``would leave 
them unregulated, at least for rate purposes, but would allow the 
company to increase rates whenever it needed money. The Department of 
Health would continue to have jurisdiction over the health and safety 
aspects of the company.''
---------------------------------------------------------------------------
        redefines `public utility' to exclude small water and 
        sewer companies not meeting the criteria for Class A 
        companies. The bill allows the customers of such 
        utilities to condemn the facilities, if necessary, by 
        forming a suburban improvement district, to compensate 
        for whatever protection is afforded currently by 
        [Commission] jurisdiction, assuming the [Commission] 
        has jurisdiction.426
    Strock's recommendation to deregulate small sewer and water 
utilities preceded Madison Financial's purchase of the Castle 
Grande property by eight months and preceded the formation of 
CSW by eleven months.427 Strock's recommendation preceded 
Clinton's support for House Bill 1047 by more than two years. 
Given these circumstances, the legislation ultimately enacted 
was not intended to provide any special benefit to CSW or to 
its owners.
            b. Potential litigation involving the Rose Law Firm
    It has been alleged that Governor Clinton ``reversed'' his 
veto and signed House Bill 1047 to shield Mrs. Clinton and the 
Rose Law Firm from liability for providing Madison Guaranty 
with questionable legal advice. The evidence does not support 
this allegation.
    The Rose Law Firm represented Madison Guaranty on public 
utility matters arising out of the IDC/Castle Grande 
transaction. In this regard, Richard Donovan, a Rose Law Firm 
attorney, drafted a February 17, 1986 memorandum to Mrs. 
Clinton which concluded that ``Madison Guaranty/IDC, in all 
likelihood, meets the statutory and common law definition of a 
`public utility,'''  but that many small utilities are 
regulated by the Commission only if they formally seek 
regulation or if a patron lodges a formal complaint against the 
utility. ``The risk of non-compliance with [Commission] 
regulations,'' Donovan wrote, ``is civil sanctions.'' 
Therefore, ``costs saved by non-regulation may make the risks 
palatable.'' 428 After this memorandum was provided to 
Madison Guaranty, Madison Financial decided not to register the 
Castle Grande sewer and water system as a public utility. 
Tucker later threatened to sue Madison Guaranty to rescind 
CSW's mortgage due to the failure to register CSW with the 
Commission before conveying the underlying property to CSW.
    There is no evidence, however, that Bratton knew that 
Tucker's threatened litigation might have implicated the Rose 
Law Firm. Tucker did not mention the Rose Law Firm or Mrs. 
Clinton in his conversation with Bratton about the potential 
litigation.429 Bratton's May 19, 1987 memorandum to the 
Governor corroborated his recollection. Written almost 
contemporaneously to the conversation with Tucker, the 
memorandum stated,

          According to Tucker, if the legislation exempting 
        certain water and sewer companies from [Commission] 
        regulation is not enacted in the special session, 
        litigation will probably be initiated between Madison 
        Guaranty and the company owning the utility * * 
        *.430

    Tucker did not mention that the legislation was essential 
to the consummation of CSW's purchase of the sewer and water 
system at Castle Grande in February 1986.* Nor did Tucker 
give Bratton any ``reason to think there was any tie between 
[the sewer and water utilities] legislation and the Rose Law 
Firm.'' 431
---------------------------------------------------------------------------
    \*\ Tucker and Randolph had formed CSW in December 1985 for the 
purpose of buying the sewer and water system at Castle Grande from 
Madison Financial for $1.2 million. The purchase was financed by a 
$1,050,000 non-recourse loan from Madison Guaranty and a $150,000 loan 
from David Hale's Capital Management Services. After the Federal Home 
Loan Bank Board ousted Jim McDougal from Madison Guaranty in July 1986, 
Madison Guaranty's board of directors questioned Tucker about his 
dealings with McDougal. Tucker claimed that he and McDougal had an oral 
agreement in connection with the acquisition of the sewer and water 
system whereby McDougal promised Tucker 110 utility hookups annually at 
$500 per hookup. When the Madison Guaranty board told Tucker it would 
not honor this agreement, Tucker hired Robert Shults and threatened to 
rescind the original purchase of the utility system unless Madison 
Guaranty agreed to renegotiate its loan to CSW.
---------------------------------------------------------------------------
    Robert Shults, the attorney Tucker hired to represent CSW, 
similarly testified that the ``Rose Law Firm never figured into 
anything I was involved in this matter.'' 432 It does not 
appear that the law firm billed Madison Guaranty for Mrs. 
Clinton's time in reviewing the memorandum. Most importantly, 
the evidence indicates that Governor Clinton signed House Bill 
1047 not to shield the Rose Law Firm from potential liability--
assuming he was aware of any such risk--but to enact 
legislation that was supported unanimously by disinterested 
parties like the Commission and both houses of the state 
legislature. Approximately one year before the Rose Law Firm 
rendered its legal opinion and before the Castle Grande 
property transaction occurred, Doug Strock proposed, in 
essence, the legislation that Governor Clinton ultimately 
signed. As such, the evidence demonstrated that potential 
litigation involving the Rose Law Firm had no influence on the 
decision to sign House Bill 1047.

5. No evidence that Arkansas health department sanitarians were 
        reassigned improperly

            a. Background
    In 1983 Madison Financial Corporation was selling tracts of 
land in a residential development called Maple Creek Farms in 
Saline County, Arkansas.433 The State Health Department 
had conducted a preliminary review of the project and 
determined ``that the soil was unsuitable for supporting 
subsurface individual sewage disposal systems'' such as septic 
tanks.434 The Health Department initially recommended 
installation of a public sewer system for the entire 
development, but because of cost considerations the Department 
agreed not to require a public sewer system if all tracts in 
the development were larger than three acres.435 Arkansas 
law did not require large tract developments, defined as 
developments with lots of three acres and larger, to perform 
preliminary soil studies or obtain approvals from the State 
Health Department before selling the lots.436
    On June 23, 1983 the Health Department entered into a 
Memorandum of Agreement with Madison Financial Corporation to 
memorialize ``the understanding of the Saline County Health 
Department that all lots contained in Maple Creek Estates are 
to be a minimum of three acres'' and that each lot would be 
individually evaluated for an acceptable septic tank disposal 
system.437 An accompanying transmittal letter to McDougal 
from Saline County Sanitarian Lex A. Dobbins suggested that an 
approved individual sewage disposal permit be obtained prior to 
any construction to allow for proper planning of the plumbing 
and sewage disposal system for each home.438
    The Memorandum of Agreement permitted the lots in Maple 
Creek Farms to be sold, but it did not resolve the soil quality 
and sewage disposal problems at the development. As noted 
above, under the Memorandum of Agreement the Health Department 
was required to review each individual tract when a purchaser 
began construction and to work with the purchaser to develop a 
satisfactory sewage disposal system.439 The poor soil 
quality continued to cause problems as lot purchasers built 
homes and installed individual sewage disposal systems. It also 
appears that some homes were constructed and plumbing was 
installed before individual sewage disposal permits were 
obtained, creating problems for ``proper installation of the 
sewage disposal systems.'' 440 In a letter dated February 
21, 1984, Dobbins brought this problem to McDougal's attention, 
suggested that permits be obtained prior to construction, and 
asked ``that you consider an over-all plan of development that 
would provide public sewerage for any area in Maple Creek in 
which the malfunction of individual sewage disposal systems may 
occur and thus constitute a public health hazard.'' 441
    In 1984 McDougal created a new subdivision within Maple 
Creek that was to be served by a community sewer system--``a 
subdivision within the development'' that would include lots 
smaller than three acres.442 According to Health 
Department records, ``[t]he Department felt that a workable 
agreement could be reached by both parties as to an acceptable 
plan of development for the future utilization of public 
sewers'' at Maple Creek.443 The Health Department entered 
into a Memorandum of Understanding with Maple Creek Farms, Inc. 
on April 26, 1984,444 in which the Health Department 
agreed to issue temporary individual sewage disposal permits 
* and Madison Financial agreed to initiate steps for the 
formation of a sewer improvement district to provide a 
community sewerage system.445 McDougal executed the 
Memorandum of Understanding on behalf of Maple Creek Farms, but 
it appears that he was not happy about being required to 
provide a community sewer system for a portion of the 
development. William A. Teer, Director of the Health 
Department's Division of Sanitarian Services, recalls attending 
the meeting at which the Memorandum of Understanding was 
executed and observing that McDougal ``was extremely brash, 
disrespectful, [and] arrogant, and that after signing the 
document ``he [threw] it back across at me * * * and said, as 
far as he's concerned, it wasn't worth the paper it was written 
on.'' 446
---------------------------------------------------------------------------
    \*\ Dobbins testified that the temporary permits were obtained by 
Madison Financial on behalf of the purchasers of Maple Creek lots. 
(Dobbins, 12/4/95 Dep. pp. 28,32). Dobbins suspected that the buyers 
often did not see the permits, which contained stipulations indicating 
that the soil was marginal and that septic systems might not function 
properly. (Dobbins, 12/4/95 Dep. pp. 28-30,32). Dobbins believed that 
if the buyers had seen the temporary permits they might not have 
purchased the property, but under Arkansas law the Health Department 
had no authority to require that the buyers be provided the permits in 
advance of sale. (Dobbins, 12/4/95 Dep. pp. 33-34). As discussed below, 
Dobbins was the primary target of McDougal's charges of unfair 
treatment by the Health Department when McDougal met with Governor 
Clinton and senior Health Department officials in March 1986.
---------------------------------------------------------------------------
    On July 3, 1984, Teer wrote to McDougal about the ``past 
problems that we have encountered at Maple Creek in regard to 
malfunctions of individual on-site sewage disposal systems.'' 
447 Teer's letter recommended site protection and site 
drainage procedures to alleviate future problems ``until 
community sewers are made available.'' 448 On July 17, 
1984, McDougal wrote back to Teer and, after apologizing for 
not responding to Teer more promptly because he had been away 
for a vacation, advised Teer: ``We are in agreement on your 
recommendations as to site protection and site drainage and are 
in the process of the continued implementation of these 
recommendations.'' 449 Another letter from McDougal to the 
Health Department, dated July 6, 1984, advises the Department 
that Bob Holloway (a consulting engineer for Madison Financial) 
450 would ``prepare the preliminary engineering data on 
the proposed pumped affluent sewer system for Maple Creek 
Farms.'' 451
            b. McDougal's worsening relations with the health 
                    department
    Documents and testimony obtained by the Special Committee 
indicate that Madison Financial's posture may not have been as 
cooperative as the July 1984 letters from McDougal to the 
Health Department described above suggest, however. An August 
31, 1984 letter to McDougal from an attorney for Madison 
Financial named Larry Crane reports that Crane had visited the 
Health Department, reviewed files relating to Maple Creek, and 
``told them that while your company did not intend to file suit 
immediately on anything, you had become concerned enough about 
the continuing changes in requirements that it was necessary to 
retain me to educate myself about the situation in case 
litigation were necessary.'' 452 Teer recalls a meeting 
with Crane at that time at which Crane told Teer that Dobbins 
had been harassing McDougal.453
    Dobbins recalled Crane visiting the Saline County Health 
Department offices to review documentation on Maple Creek, 
which were public records. Dobbins could not recall a 
discussion with Crane about statements by Dobbins to potential 
lot buyers about the sewage disposal problems, but he 
acknowledged that he had told some potential buyers about the 
problems. Dobbins testified that he did so ``in the course of 
business'' and that if a buyer asked him about Maple Creek 
Farms he ``would give them my opinion, my professional 
opinion.'' 454 Dobbins also acknowledged that he ``may 
have had a similar discussion with another lending 
institution.'' 455 These actions by Dobbins may have 
influenced McDougal to retain an attorney and, ultimately, to 
request a meeting with the Governor to complain about Dobbins, 
as discussed below.*
---------------------------------------------------------------------------
    \*\ While an in-depth review of the regulatory actions of the 
Health Department and the complaints voiced by McDougal was beyond the 
scope of the Committee's investigation, it does appear that the Health 
Department sought to work with McDougal and that McDougal may not have 
fulfilled all of his undertakings in the two written agreements he 
entered into with the Health Department. The Committee did not examine, 
however, whether McDougal's complaints against Dobbins had merit. The 
focus of the Special Committee's inquiry was the role of the governor's 
office in the matter, not the underlying dispute between McDougal and 
the Health Department.
---------------------------------------------------------------------------
    In December 1984 McDougal copied Health Department 
Sanitarian Services Division Director Teer on a letter to 
Holloway which stated that ``the earliest practical time to 
undertake construction [of a pressure sewer system at Maple 
Creek Farms] is after cessation of the spring rains in 1985.'' 
456 That letter also states that Madison Financial 
intended to begin construction of the sewer system at that 
time.457 The Health Department did not set a deadline for 
construction of a community sewer system, and discussions 
regarding technical specifications continued into 1985.458 
In 1985 development activity at Maple Creek ``was slowing down 
quite a bit'' and both the Health Department and McDougal 
apparently took a ``wait-and-see'' attitude about the sewage 
disposal problems, with the Health Department continuing to 
issue temporary permits.459
    It appears that relations between Dobbins and McDougal 
worsened during 1985, however. A July 1985 memorandum to 
McDougal from Bruce Watson of Maple Creek Farms reports on a 
meeting at the development with Dobbins's supervisor, J. P. 
Jones, at which Jones apparently overruled Dobbins and approved 
two septic tank systems that Dobbins had previously refused to 
approve.460 The memorandum also states that Watson 
believed ``the outcome of this meeting helped readjust Lex's 
attitude towards Maple Creek.'' 461 Dobbins testified that 
he does not recall that particular meeting, but does recall 
that Jones made more than one trip to Maple Creek ``to mediate 
discussions'' between Dobbins and representatives of Madison 
Financial.462 Dobbins testified that throughout the 
balance of 1985 disagreements continued to arise concerning him 
issuing further temporary permits, and he ``wasn't really 
pleased with the way the development was going anyway, with the 
lack of information being given to the buyers [and their] 
method of installing sewage disposal systems.'' 463
    These disagreements apparently came to a head in January 
1986, causing McDougal to request a meeting with Governor 
Clinton.
            c. McDougal requests a meeting with Governor Clinton
    McDougal requested a meeting with Governor Clinton on 
January 14, 1986. A January 14 memorandum 464 to Governor 
Clinton from his scheduling secretary, Nancy Hernreich, reports 
a request from McDougal for a meeting * with the governor. 
Handwritten notations on the memorandum indicate that the 
meeting was scheduled for Saturday, January 18, 1986. Copies of 
the governor's schedule for Saturday, January 18, 1986, show a 
meeting with McDougal scheduled for 11:00 a.m. at the 
Governor's Mansion.465 A January 15 telephone message for 
McDougal from Nancy Hernreich says ``can see Governor Sat. a.m. 
at 11:00--go by Mansion.'' 466
---------------------------------------------------------------------------
    \*\ The memorandum states that McDougal ``needs to see you 
[Governor Clinton] before Tues. to get you to sign some personal 
business papers,'' and the notes on the memorandum show that a meeting 
was scheduled for Saturday, January 18. (Doc. No. DKSN 013266, January 
14, 1986 memorandum for Nancy Hernreich to Governor Clinton). It 
appears that McDougal used that meeting as an opportunity to complain 
to Governor Clinton about the Health Department and provide a copy of 
his January 17 memorandum, which is discussed below.
---------------------------------------------------------------------------
    McDougal prepared a memorandum on the Health Department 
matter in advance of the January 18 meeting with Governor 
Clinton. A memorandum dated January 17, 1986, from Jim 
McDougal, with no addressee, lists the names of Teer, Dobbins, 
and two other state sanitarians and requests approval of two 
subdivisions in Pulaski and White counties.467 The 
memorandum also requests: ``Strict written instructions from 
Teer to county sanitarians to not discuss our subdivision with 
our customers.'' 468 The latter request appears to relate 
to Dobbins's contacts with prospective purchasers of Maple 
Creek Farms lots, discussed above.
    It seems that McDougal gave the January 17 memorandum to 
Governor Clinton at the meeting on Saturday, January 18, and 
the memorandum then was misplaced for a time. A January 30, 
1986 memorandum to Governor Clinton from Janice Choate (then 
the governor's office liaison with the Health Department) 
469 titled ``Jim McDougal'' reports on a telephone 
conversation Choate had with McDougal in which: ``He told me to 
look for the memo he gave you that had all the complaints 
outlined and that I could find that memo in the coat pocket of 
the jacket you had on when he saw you Sat. morn.'' 470 (A 
later reference in the memorandum to ``Tuesday of this week'' 
indicates that the Saturday morning meeting referenced in the 
memorandum is the January 18 meeting.)
    It appears that a second version of the memorandum was 
prepared after the first memorandum was misplaced. A version 
dated January 18, 1986, which does not include the ``From: Jim 
McDougal'' heading, also was produced to the Special 
Committee.471 In addition to the omission of the heading, 
the wording of the January 18 memorandum differs slightly from 
the version dated January 17, and a handwritten note on the 
January 18 version states ``Rasco--this is McDougal's memo.'' 
(Carol Rasco was another aide to Governor Clinton at that 
time.) 472 Finally, a January 28 [1986] telephone message 
to McDougal from Choate reads ``copy of memo'' 473 and 
suggests that Choate may have been trying to obtain another 
copy of the memorandum from McDougal. In any event, the two 
versions of the memorandum described above were produced to the 
Special Committee, and there are no material differences 
between the two versions.
    Choate and Rasco looked into McDougal's complaint and the 
matters set out in the January 17/January 18 memorandum. A 
February 25 memorandum to Rasco from Choate reports that Choate 
had spoken with Tom Butler (the Deputy Director of the Health 
Department) and Butler had met with the four sanitarians listed 
in the McDougal memorandum. 474 According to Choate's 
February 25 memorandum, Dobbins told Butler that ``he had no 
recollection of any kind of difficulty between him and 
McDougal,'' and Butler advised Choate that ``the Health Dept. 
has not badgered McDougal about this.'' 475 Another 
February 25, 1986 memorandum to Choate from Rasco indicates 
that a meeting was scheduled for Tuesday, March 4, at 2 p.m. 
with Butler, * Teer, Jerry Hill (Teer's supervisor), and 
Dr. Ben Saltzman (who was then the director of the State Health 
Department). 476
---------------------------------------------------------------------------
    \*\ Butler remembers that Governor Clinton called him and said 
there was a problem with a constituent, that the Health Department was 
``possibly messing over him [the constituent],'' and asked Butler if he 
would be willing to meet with McDougal. (Butler, 12/5/95 Dep. pp.15-
16). Butler told Governor Clinton he would be glad to meet. Clinton 
then told Butler that ``the reason I think some of your staff is 
messing with this development is because this gentleman has been a 
supporter of mine since I ran for Congress and he has never asked me 
for anything.'' (Butler, 12/5/95 Dep. pp.15-16).
---------------------------------------------------------------------------
    Choate prepared a memorandum to Governor Clinton on the 
``Jim McDougal/Health Department'' matter, dated March 4, 1986, 
the day the governor met with McDougal and the Health 
Department officials. That memorandum reports that Choate had 
spoken with Health Department officials ``in regard to the memo 
you received from McDougal'' and was assured that ``they have 
made a concerted effort to be courteous to Mr. McDougal and his 
employees.'' 477 Choate's memorandum closes by noting that 
the Health Department officials were ``puzzled by Jim 
McDougal's memo,'' and that Choate had no reason to doubt what 
they were saying. 478 McDougal's position on the treatment 
he had received from the Health Department was very different, 
however, as he made clear at the March 4 meeting.
            d. McDougal meets with Governor Clinton and health 
                    department officials
    Governor Clinton met with McDougal and the Health 
Department officials on March [4], 1986. Choate attended the 
meeting as the governor's staff liaison with the Health 
Department. Butler recalls that at the outset of the meeting 
Governor Clinton suggested that the group ``lay the problem 
out'' and try to come to an agreement on how to solve the 
problem, ``at which time McDougal went ballistic.'' 479 
Butler testified that McDougal's ``tirade'' lasted about five 
minutes and included personal accusations against Dobbins, 
Butler, and Dr. Saltzman. 480 Choate's contemporaneous 
notes of the meeting confirm Butler's recollection of 
McDougal's conduct. Choate's notes read ``Mar. 4--McDougal 
agitated--nothing but duplicity & trickery from the Hlth. 
Dpt.--you're here to gang [up] on me--Lex Dobbins has made a 
concerted effort of intimidation.'' 481 The notes go on to 
recount more personal attacks on Dobbins and McDougal's 
assertion that he had been ``stabbed in the back.'' Choate 
testified that she recalls McDougal ``was real upset and 
agitated.'' 482
    Butler and Choate both testified that Governor Clinton 
became angry with McDougal's conduct and reprimanded him. 
Choate testified that ``[a]fter McDougal got through ranting 
and raving,'' the Governor told McDougal that the way he was 
talking to professional staff was ``inexcusable,'' and that 
Governor Clinton ``defended us and them [the Health Department 
staff].'' 483 Choate recalled that Governor Clinton told 
McDougal ``we are not cutting you any slack--those may not be 
the exact words, but something to that effect--that these 
people are professional and they will revisit this with you and 
get it straightened out, do what you are supposed to do.'' 
484 Butler remembers that the Governor ``got real red,'' 
which indicated he was angry, and: ``From that time, McDougal 
calmed down. I think it was pretty obvious he had said the 
wrong thing. The meeting then calmed down to a normal 
meeting.'' 485
    At the conclusion of the meeting the Health Department 
officials agreed to take another look at the McDougal real 
estate developments. Butler recalled:

          The end result was I told him we would be willing to 
        go back out and take another look at the property, 
        because we are not beyond making a mistake. That was 
        the agreement at the time, and the Governor said, I 
        think we can live with this, and you go back out and 
        look at the property. 486

    Butler also testified that in a private discussion with 
Butler immediately after the meeting Governor Clinton made 
clear that McDougal was to receive no special treatment:
          He said, I apologize for the way the man acted, I had 
        no idea he would act this way. He said, you go do what 
        you have to do and you will never hear another word 
        from me. That was my last conversation with the 
        Governor on the matter. 487

    No decision was made at the meeting * to reassign 
Dobbins or the other sanitarians. 488
---------------------------------------------------------------------------
    \*\ When Butler was asked if any decision was made about Dobbins in 
the private conversation with Governor Clinton, Butler testified: ``No, 
Dobbins's name never came up with me and the Governor ever.'' (Butler, 
12/5/95 Dep. pp.24-25).
---------------------------------------------------------------------------
            e. The Reassignment of the sanitarians
    After the March 4 meeting Butler decided to reassign the 
four sanitarians whose names were listed in McDougal's 
memorandum. Butler testified that he consulted with Saltzman 
and Hill, then met with Teer and the sanitarians, * and 
informed them that the sanitarians were being reassigned. 
489 Butler testified that the decision to reassign the 
sanitarians was consistent with the Health Department's usual 
practice when particular employees were the subject of 
complaints:
---------------------------------------------------------------------------
    \*\ A March 5, 1986 memorandum from Choate to Governor Clinton 
reports that Butler had met with the sanitarians and reassigned them. 
The memorandum also reports that Butler instructed the sanitarians not 
to talk about McDougal's subdivisions ``because they don't want to give 
credence to any of McDougal's allegations.'' The memorandum goes on to 
describe the frustration of Butler, Hill and Saltzman at McDougal's 
conduct at the meeting, and to report that ``they kept silent yesterday 
out of respect for you, but their silence was not tacit approval of 
Jim's accusations.'' (Doc. Nos. DKSN 013404-DKSN 013405). Finally, 
consistent with Butler's recollection of the telephone call he received 
from Governor Clinton (described above), the memorandum states that 
Governor Clinton referred to McDougal at the meeting as ``a friend of 
20 years who had never asked for a favor.'' (Doc. Nos. DKSN 013404-DKSN 
013405).

          We have done it in the past and we have done it since 
        then. If we get to a point in time where we are not 
        dealing with the problem, we rotate sanitarians, we 
        move one on one program and move one back in. Then if 
        they come back and tell us our sanitarian has it out 
        for us, that won't hold water at that point in time, 
---------------------------------------------------------------------------
        because we have moved another one in. 490

    The other witnesses examined by the Special Committee also 
testified that the reassignment of the sanitarians was 
consistent with normal Health Department practice and was not 
the result of any direction or influence from the governor's 
office.
    Teer confirmed that Butler made the decision to reassign 
the sanitarians. 491 He also confirmed that Butler was the 
Health Department official who normally makes decisions on 
reassignments. 492 Teer testified that the sanitarians who 
had been responsible for the various McDougal developments, 
including Maple Creek Farms, were reassigned ``in order to show 
that we were trying to be fair with Mr. McDougal and . . . 
trying to show that we're not being impartial [sic] or anything 
like that.'' 493 The Health Department's normal practice 
is that ``[i]f an accusation comes up against a sanitarian or 
us being against a person, trying to harass them, trying to be 
arbitrary, he [Butler] will reassign somebody in the hope that 
the reassignment will show that we are trying to be fair.'' 
494
    Teer also testified that the same policy had been followed 
by the Health Department since the 1970's and has been followed 
since, with one such reassignment occurring in 1995. 495 
It does not appear that Teer, who concurred in the decision to 
reassign the sanitarians, was influenced in any way by the 
meeting with Governor Clinton, which he did not attend. 
496 In fact, Teer recalled that he did not learn what had 
been said at the meeting with Governor Clinton until after the 
sanitarians had been reassigned. 497 Moreover, Teer 
testified that ``if it [the decision to reassign the 
sanitarians] had come from the governor's office, as much as we 
talk shop * * * I think we would have heard it after this much 
time.'' 498
    Even Lex Dobbins, the sanitarian who was the subject of 
McDougal's ire at the March 4 meeting, testified that ``[i]t 
was standard operating procedure any time a developer 
complained to the state Health Department about unfair 
treatment, the sanitarian would be reassigned.'' 499 
Dobbins described this policy as an effort by the agency to 
establish ``a level playing field to show no bias in the way we 
regulated the developers.'' 500 Dobbins testified that the 
policy of reassigning sanitarians was followed whether or not 
senior Health Department officials agreed with the positions 
taken by the sanitarian who was the subject of a complaint by a 
developer. 501 Dobbins also testified that while McDougal 
or his representatives told him ``they were friends of the 
governor,'' they ``never threatened me with the governor or 
their relationship with the governor in any way.'' 502 
Finally, Dobbins confirmed that the outcome would have been the 
same--reassignment of the sanitarians--if McDougal had 
complained only to the Health Department and had not requested 
a meeting with or otherwise involved the Governor: ``The 
decision to remove us would have been the same if Socks had 
been sitting in the chair.'' 503
            f. Conclusions
    The documents and testimony collected by the Special 
Committee show that the Maple Creek Farms project had recurring 
sewage disposal problems and there was extensive contact 
between Health Department officials and James McDougal and his 
associates. The evidence also shows that, with or without 
justification, McDougal developed a strong personal animus 
against Dobbins and eventually complained to Governor Clinton. 
The evidence also shows that Governor Clinton followed up on 
McDougal's complaint and arranged a meeting at which McDougal 
could communicate to Health Department officials the concerns 
he had about unfair treatment.
    Governor Clinton did not take any action on McDougal's 
behalf, however, either at the meeting with the Health 
Department officials or thereafter. To the contrary, Governor 
Clinton reprimanded McDougal for his behavior at the meeting, 
defended the Health Department's professional staff, and told 
McDougal to work with the Health Department to resolve the 
problems. Most important, immediately after the meeting 
Governor Clinton made a special effort to let Butler know that 
McDougal was not to receive any special treatment and that 
Clinton would support whatever action the Health Department 
decided to take.
    There is no evidence that Governor Clinton played any role 
in the decision to reassign the sanitarians. All of the 
evidence supports the conclusion that Butler made the decision 
to reassign the sanitarians and that his action was consistent 
with standard Health Department practice in such situations. 
There is no evidence that Governor Clinton or anyone else in 
the Governor's office played a role in the reassignment of the 
sanitarians. The matter appears to have been handled routinely, 
and the meeting with Governor Clinton does not appear to have 
affected the Health Department's subsequent handling of the 
matter.
    The record on this matter is clear on the key issues: 
Nothing suggests that Governor Clinton or anyone else in the 
Governor's office took any action on McDougal's behalf, and 
nothing suggests that McDougal ever received any special 
treatment from the Health Department. Governor Clinton 
supported his staff and took special care to make sure that 
they understood that McDougal should not receive any favorable 
treatment.

6. No impropriety in connection with Williams Lyon's appointment to the 
        banking board or his subsequent resignation

    From approximately 1978-86, William C. Lyon owned Pine 
State Bank, which he described as the smallest bank in 
Arkansas. 504 On January 2, 1980, Governor Clinton 
appointed Lyon to the Arkansas Banking Board (``Banking 
Board''). Four years later, Lyon resigned at Governor Clinton's 
request. Lyon's resignation became effective following a 
Banking Board meeting on January 17, 1984.
    Lyon has suggested that the circumstances surrounding his 
resignation were improper. In particular, Lyon testified that 
James McDougal offered to secure his appointment to the 
Arkansas Savings & Loan Board (``S&L Board'') in exchange for 
his resignation from the Banking Board. According to Lyon, 
McDougal wanted him to join the S&L Board in order to approve a 
preferred stock offering that Madison Guaranty was pursuing at 
the time. However, the other evidence collected by the Special 
Committee contradicts Lyon's testimony because Madison Guaranty 
did not pursue a preferred stock offering until more than a 
year after Lyon resigned from the Banking Board. Even if Lyon's 
testimony were accurate, moreover, there is no evidence that 
anything improper occurred in connection with Lyon's 
resignation from the Banking Board. Governor Clinton did not 
appoint Lyon to the S&L Board--or anything else--following his 
resignation from the Banking Board.
            a. Background
    According to Lyon, in late 1979, during Governor Clinton's 
first term in office, James McDougal approached him and 
inquired whether he would be interested in an appointment to 
the Arkansas Banking Board. 505 At the time, McDougal 
served on Governor Clinton's staff, and would have been acting 
in his official capacity when he approached Lyon. 506 Lyon 
viewed the Banking Board as a ``plum appointment,'' and readily 
agreed to serve. 507 Shortly thereafter, Governor Clinton 
appointed him to the Banking Board. 508
    In late 1983, during Clinton's second term, McDougal again 
approached Lyon. This time, however, McDougal asked Lyon to 
resign from the Banking Board. Lyon testified that McDougal 
told him that Governor Clinton wanted to give Lyon's seat on 
the Banking Board to ``somebody [who] had contributed a large 
sum of money'' to the Governor's 1982 campaign. 509 In 
return for his resignation, Lyon testified, McDougal promised 
to arrange his appointment to the S&L Board. In addition, 
McDougal told Lyon that, upon his appointment to the S&L Board, 
McDougal wanted him to vote to approve a preferred stock 
offering by Madison Guaranty. Lyon recalled that McDougal ``was 
trying extremely hard to get a stock issue, a preferred stock 
issue through the State of Arkansas'' at the time. 510
    Lyon testified that he refused to resign at McDougal's 
request. He told McDougal he would resign if Governor Clinton 
asked him directly, but not otherwise. 511 Lyon added that 
he responded ``hell no'' to McDougal's suggestion that he vote 
to approve the preferred stock offering. 512
    Lyon recalled that sometime in the next ``month or two,'' 
Governor Clinton called him at his office at Pine State Bank 
and asked him to resign. 513 The Governor thanked Lyon for 
his service, but told him that he ``needed the appointment.'' 
514 He was ``very nice'' and ``a gentleman'' during this 
conversation. 515 Nonetheless, Lyon resented being asked 
to resign. 516
    Governor Clinton did not tell Lyons why he wanted to 
replace him or discuss whom he planned to appoint in Lyon's 
place. 517 He made no mention of campaign contributions or 
contributors. 518 Nor did Governor Clinton mention the 
possibility of appointing Lyon to the S&L Board or a proposed 
stock offering by Madison Guaranty. 519 Lyon was not 
appointed to the S&L Board.
            b. Lyon's testimony conflicts with the evidence
    In his testimony, Lyon was emphatic that McDougal wanted 
him to join the S&L Board to approve a preferred stock offering 
from Madison Guaranty, and that the preferred stock offering 
was a high priority for McDougal. Lyon stated that:

          [McDougal] was trying extremely hard to get a stock 
        issue, a preferred stock issue through the State of 
        Arkansas. It was quite an unusual issue. He came over 
        and asked me to resign and to serve on the savings and 
        loan board, that he was bound and determined to get the 
        stock issue through so that he could get his capital 
        increased. It was a preferred stock deal. 520

    However, this testimony conflicts with all the other 
evidence collected by the Committee regarding the timing of the 
preferred stock offering.
    Banking Board records show that Lyon left the Banking Board 
following the January 17, 1984 meeting.521 Lyon testified 
that he spoke with McDougal two months before Governor Clinton 
called to request his resignation.522 As such, Lyon's 
conversation with McDougal would have occurred in late 1983 or 
early 1984. There is no evidence that Madison Guaranty was 
considering a preferred stock offering in late 1983. On the 
contrary, the evidence establishes that Madison Guaranty did 
not explore a preferred stock offering until early 1985.
    The earliest evidence that Madison Guaranty took steps to 
issue preferred stock is a memorandum dated April 3, 1985 from 
Charles Handley of the Arkansas Securities Department to 
Securities Commissioner Beverly Bassett.523 The 
memorandum--which recounts a phone call from Davis Fitzhugh of 
Madison Guaranty to another Securities Department staff 
member--indicates that Madison Guaranty had just begun its 
consideration of a preferred stock offering.524 A second 
memorandum dated April 3, 1985, prepared by a Federal Home Loan 
Bank Board (``FHLBB'') official, confirms the timing. That 
memorandum describes a meeting between Madison Guaranty 
personnel and FHLBB officials in Dallas, and states that the 
Madison Guaranty personnel advised the FHLBB that Madison 
Guaranty planned to issue preferred stock to satisfy more 
stringent net worth requirements imposed by an FHLBB regulation 
that took effect on March 31, 1985.525 The timing is 
further confirmed by a memorandum dated April 16, 1985 from 
Fitzhugh to Madison Guaranty's President, John Latham, which 
describes Fitzhugh's preliminary research on preferred stock 
offerings by S&Ls.526 Thereafter, in late April 1985, 
Madison Guaranty retained the Rose Law Firm to work on the 
preferred stock offering.527
    As noted above, Lyon testified that McDougal was 
aggressively pursuing a preferred stock offering by the end of 
1983. There is no evidence whatsoever to support that claim. On 
the contrary, the evidence shows that Madison Guaranty did not 
consider issuing preferred stock until April 1985, nearly a 
year and a half later. In this regard, Pillsbury, Madison & 
Sutro concluded that ``[i]n the spring of 1985, Madison 
Guaranty became interested in issuing preferred stock.'' 
528 Consequently, Lyon's testimony directly conflicts with 
the evidence.
            c. No evidence that Governor Clinton had knowledge of 
                    Lyon's conversation with McDougal or did anything 
                    improper
    Even if Lyon's testimony were accurate, it would only 
establish that McDougal schemed to benefit Madison Guaranty. 
There is no evidence that Governor Clinton was aware of 
McDougal's supposed machinations.529 Even Lyon conceded, 
``I don't know if Bill Clinton knew anything about it or not.'' 
530 In fact, the evidence shows that Governor Clinton had 
no such knowledge, and that he acted completely properly.
    As an initial matter, Governor Clinton had every right to 
seek Lyon's resignation. Governor Clinton had appointed Lyon to 
the Banking Board in the first instance, and there was no legal 
or ethical impediment to Governor Clinton's replacing Lyon if 
he saw fit. Moreover, the Governor handled the matter in an 
appropriate way. Although Lyon testified that Governor Clinton 
angered him by seeking his resignation, he conceded that the 
Governor acted entirely properly during their 
conversation.531 Governor Clinton simply thanked Lyon for 
his service and for his willingness to step aside.532 He 
gave no indication that he knew about Lyon's alleged 
conversation with McDougal.533 He never mentioned the S&L 
Board or the preferred stock offering.534 Nor did he 
appoint Lyon to the S&L Board, or anything else.
    Therefore, the record establishes that Governor Clinton 
took no action to further McDougal's alleged scheme to obtain 
approval for a preferred stock offering. On the contrary, the 
evidence strongly suggests that Governor Clinton was not even 
aware of McDougal's scheme, if in fact it existed--and the 
evidence suggests it did not.

7. No Evidence of impropriety in regulation of Madison Bank and Trust 
        by the Arkansas State Banking Department

    In October 1980 James McDougal and a group of investors 
purchased a controlling interest in the Bank of Kingston, a 
small bank in Kingston, Arkansas. McDougal then changed the 
bank's name to Madison Bank & Trust Company (``Madison 
Bank'').* As a state chartered institution, Madison Bank 
was regulated by both the Arkansas State Banking Department 
(the ``ASB'') and the Federal Deposit Insurance Corporation 
(the ``FDIC'').535 In 1983 Marlin Jackson was the State 
Bank Commissioner.536
---------------------------------------------------------------------------
    \*\ Madison Bank & Trust should not be confused with Madison 
Guaranty Savings & Loan Association. They were two different financial 
institutions that James McDougal controlled and operated at different 
times. The potential for confusion stems from the fact that in each 
instance McDougal changed the name of the institution to ``Madison'' 
after he acquired control. While the ``Madison'' in Madison Bank & 
Trust may have been selected because the bank was located in Madison 
County, Arkansas, Madison Guaranty Savings & Loan (formerly Woodruff 
County Savings and Loan Association) was not in Madison County--it was 
in a different part of the state altogether. The use of a profile of 
President James Madison on Madison Guaranty's stationary suggests that 
McDougal may have selected the name of the bank because he admired 
President Madison. Madison Bank employee Gary Bunch confirmed that 
point when he testified before the Special Committee (Bunch, 5/16/96 
Hrg. p.42).
---------------------------------------------------------------------------
    In 1983 Jackson informed Governor Clinton of regulatory 
problems at Madison Bank. Jackson testified that he told the 
Governor about Madison Bank's problems as ``a litmus test'' to 
see if Governor Clinton would seek to influence Jackson and 
obtain favorable treatment for a political supporter. (Jackson 
was aware that McDougal had been a member of Governor Clinton's 
staff during Clinton's first term in office, 1979-80.) Governor 
Clinton passed Jackson's litmus test. Jackson testified that 
Governor Clinton responded:

          You do whatever you need to do to be a good * * * no, 
        to be a great Bank Commissioner and don't worry about 
        the political consequences. It doesn't matter who is 
        involved. I'll take the political heat. You just do 
        whatever you need to be a great Bank 
        Commissioner.537

    The evidence collected by the Special Committee confirms 
that Governor Clinton never interfered with Jackson or the ASB 
in their regulation of Madison Bank. After his discussion with 
Governor Clinton, Jackson and the ASB joined with the FDIC in a 
cease-and-desist order against Madison Bank that curtailed the 
bank's ability to make out-of-territory loans and, among other 
things, required the bank to increase its operating 
capital.538 Governor Clinton never attempted to intercede 
on James McDougal's behalf. In fact, other than the one 
conversation described above--which was initiated by Jackson--
Governor Clinton never discussed Madison Bank or James McDougal 
with Jackson.539

G. Dan Lasater and Bond Underwriting Contracts involving Lasater & 
        Company

    Senate Resolution 120 authorized the Special Committee to 
investigate ``the bond underwriting contracts between Arkansas 
Development Finance Authority and Lasater & Company.'' In 
addition, the Special Committee examined a bond underwriting 
contract between the Arkansas State Police Commission and 
Lasater & Company. The Committee's inquiry focused on 
allegations that Lasater & Company's selection as bond 
underwriter for State agencies resulted from improper political 
pressure.
    The evidence obtained by the Committee showed that the 
Lasater firm began participating in bond underwritings in 1983 
pursuant to a State policy to expand the number of underwriters 
receiving State business and to include more local underwriting 
firms. The firm won additional bond business through a 
competitive proposal process. The Lasater firm received the 
same share of State bond issues as other local firms and 
received no special treatment. Witnesses from the State 
agencies that awarded underwriting business to Lasater & 
Company, from Governor Clinton's office, and from the Lasater 
firm uniformly testified that no political pressure was applied 
to include Lasater & Company in State bond underwritings.
    The Majority relies on circumstances separate and apart 
from the bond underwritings themselves to suggest impropriety 
in the participation of the Lasater firm. The Majority seeks to 
link the Lasater firm's bond underwriting to Dan Lasater's 
political support of Governor Clinton, friendship with Roger 
Clinton, even to the use of Lasater-owned aircraft. The 
Majority seeks to call bond contracts to the Lasater firm in 
1983 and 1985 into question due to unrelated criminal charges 
that Mr. Lasater later faced personally, in 1986. The Majority 
relies on the recollection of a single witness to argue that a 
member of Governor Clinton's staff intervened with a State 
agency in 1983 to ensure that the Lasater firm was included as 
a bond underwriter, when no other witnesses recall any 
intervention by the Governor's office in the selection of 
underwriters.
    The Majority's contentions, however, cannot alter the facts 
developed by the Committee regarding the bond underwritings 
themselves. All Arkansas underwriting firms participated in 
State business regardless of their political identification; 
notably, the Stephens firm continued to receive State bond 
underwriting business under Governor Clinton despite opposing 
him politically. All local underwriting firms participated 
equally, sharing the portion of the bond issues that was not 
allocated to one of several large national underwriters. The 
Lasater firm received only a small share of State bond 
underwriting business, and received a similar share as other 
local firms. The participation of the Lasater firm was 
supported by both Democratic and Republican State officials. 
The allegation that Lasater & Company's participation in State 
bond issues was due to political favoritism is not supported by 
the evidence.
            1. Background

                             a. Dan Lasater

    Although he received no formal education past high school, 
Lasater was a well-known figure in Arkansas and a successful 
entrepreneur.1 In the 1960s, while still in his twenties, 
Lasater founded the Ponderosa Steak House chain.2 In 1972, 
before turning 30, Lasater sold his interest in Ponderosa for 
approximately $20 million.3 He continued to invest in 
restaurant chains until 1985 when he liquidated his 
interests.4
    Following the sale of his interest in Ponderosa, Lasater 
turned his attention to horse breeding and racing.5 He 
operated thoroughbred racehorse farms in Kentucky and Florida, 
which were very successful.6 Lasater also invested in a 
ski resort in New Mexico known as Angel Fire.7
    In the fall of 1986, Lasater was indicted on Federal 
charges of cocaine distribution; he pleaded guilty and served 
time in prison.8 Lasater is currently involved in real 
estate development, management of commercial real estate, 
timber and saw mills.9

                          b. Lasater & Company

    During the 1970s, Lasater became acquainted with George 
Locke, a former Arkansas state senator, through their mutual 
interest in thoroughbred racing.10 Through Locke, Lasater 
met securities salesman David Collins.11 In 1980 or 1981, 
the three men each put up approximately $70,000 and founded a 
securities firm called Collins, Locke & Lasater.12
    Initially, Collins, Locke & Lasater primarily traded 
Government securities (issued by the U.S. Treasury and Federal 
agencies) and municipal securities (issued by State and local 
governments).13 However, in late 1982 or early 1983, 
Collins hired Michael Drake, an investment banker with 
expertise in municipal securities, to build the firm's 
capability to underwrite securities as well as buy and sell 
securities.14 In June or July, 1983, Collins withdrew from 
the firm and the firm's name was changed to Lasater & Company.

c. The Arkansas Housing Development Agency and the Arkansas Development 
                           Finance Authority

    The Arkansas Housing Development Agency (``AHDA'') was 
created during the administration of Governor David Pryor to 
promote economic activity in Arkansas and to help citizens of 
moderate means purchase their own homes. AHDA raised money by 
issuing bonds backed by residential mortgages, then loaned that 
money to Arkansas institutions, which in turn used the funds to 
provide home mortgages to Arkansas residents. AHDA was run by 
an Executive Director, who reported to a Board appointed by the 
Governor. AHDA was similar in structure and purpose to housing 
development agencies in other States.
    In April 1985, as part of Governor Clinton's economic 
development package, AHDA was transformed into the Arkansas 
Development Finance Authority (``ADFA''), in an effort to make 
low-cost funding available to promote a wider range of economic 
development purposes. ADFA issued bonds in connection with a 
wider range of activities than AHDA, including industrial 
development, public infrastructure, and education. ADFA was run 
by a President, again reporting to a Board appointed by the 
Governor. (Some AHDA Board members continued to serve on the 
ADFA Board after 1985.) ADFA was similar in structure and 
purpose to economic development agencies in other States.

                d. The Arkansas State Police Commission

    The Arkansas State Police Commission is comprised of seven 
members appointed by the Governor. The Police Commission 
generally supervises the State Police. It approves significant 
administrative decisions, including budget and personnel 
matters, but does not participate in or receive information 
concerning police activities such as investigations. In 1985, 
the Arkansas State Legislature passed legislation authorizing 
the State Police to acquire a new police radio system and to 
issue bonds to pay for the system. The Police Commission 
coordinated the selection of the new communications system. The 
Commission also coordinated the selection of a financing 
proposal and a team of underwriters to implement that proposal.
            2. Clinton administration policy favored participation by 
                    Arkansas firms in State bond underwriting
    Under Governor Clinton, the number of firms doing 
underwriting business with the State of Arkansas 
expanded.15 From 1980-82, under Republican Governor Frank 
White, Arkansas State bond underwriting business had been the 
preserve of a small number of firms. During that time, AHDA 
used underwriters E.F. Hutton, Stephens, Inc. and T.J. Raney 
almost exclusively.16 Those three firms underwrote four of 
AHDA's five issues of single family bonds prior to 1983, and 
shared the fifth issue with Merrill Lynch.17 The owners of 
Stephens, Inc. were known as political supporters of Governor 
White.18
    After 1983, the Clinton Administration promoted 
participation in State bond underwriting by all qualified 
Arkansas firms, regardless of which political candidates they 
supported.19 Betsey Wright, former Chief of Staff to 
Governor Clinton, testified that the Clinton Administration 
policy was to open the State bond underwriting business to more 
firms.20 Sam Bratton of Governor Clinton's staff added 
that in the fall of 1983, Governor Clinton's goal was to make 
the State bond underwriting business ``as open and available to 
all companies in the State as possible.'' 21
    Linda Chandler--who served as AHDA's director in 1983--
testified that AHDA Board members also favored opening AHDA 
bond underwriting to a greater number of firms.22 Chandler 
testified that expanding the number of AHDA bond underwriters 
benefitted the State by causing the firms to submit more 
competitive proposals:

          We'd had the same local underwriters for three years 
        and the same elite underwriter for four years. If 
        underwriters know that they are going to get the next 
        bond issue that we decide to sell, then how competitive 
        are they going to be? So if you include other 
        underwriting firms, you get lower bids.23

This, in turn, allowed AHDA to devote more of the money raised 
to its mission of providing affordable housing.
    AHDA Board Member Mort Hardwicke testified that he proposed 
that AHDA use a larger number of local underwriting firms, and 
that no one from the Governor's office asked him to do so:

          I just thought that the more money you could keep at 
        home the better off you were. And somebody explained to 
        me that you just about had to have a national 
        underwriter to get other bond people to participate. 
        So--but that's the reason I made it, is to--not to help 
        Raney or Stephens or anybody else, just more or less to 
        cut the pie into equal parts.24

Hardwicke believed that it would benefit AHDA and the State of 
Arkansas for more local underwriters to participate in AHDA 
bond issues.25 AHDA Board Member George Wright agreed that 
it made sense for AHDA to include more local 
underwriters.26 He recalled that ``several [AHDA] board 
members'' expressed the view that the agency should use more 
local underwriters, so long as doing so did not increase the 
cost of issuing securities.27
    In keeping with the views of Governor Clinton and the AHDA 
Board Members', the agency used a greater number of 
underwriters after 1983. In 1981-82, AHDA used just 4 
underwriters: E.F. Hutton, Stephens, Inc., T.J. Raney & Sons, 
and George K. Baum & Company In 1983-84, AHDA used twelve 
underwriters, including local firms Stephens, Inc., George K. 
Baum & Company, T.J. Raney & Sons, Simmons First National Bank, 
and Lasater & Co.28 Pursuant to these policies, Collins, 
Locke & Lasater began underwriting AHDA single family bonds in 
1983. On February 17, 1983, AHDA selected the following 
underwriters for the agency's single family bonds: Paine Webber 
and George K. Baum (sharing 60%) and T.J. Raney, Stephens, Inc. 
and Collins, Locke & Lasater (sharing 40%--13\1/3\% each). The 
Lasater firm thus received a share smaller than one local firm 
(George K. Baum) and equal to the share of two other local 
firms (T.J. Raney and Stephens, Inc.). No participating firm 
received a smaller share than Lasater. Two of the three AHDA 
Subcommittee Members who voted to include Collins, Locke & 
Lasater were appointed by Governor Frank White (Charles Stout 
and Fred Dacus). The third, Mort Hardwicke, was appointed by 
Governor Bill Clinton. Stout did not recall these 
events.29
    Collins, Locke & Lasater received an even smaller share of 
AHDA's next bond offering. Minutes of an August 31, 1983 AHDA 
Special Board Meeting state that the Subcommittee selected the 
following underwriters for a $125 million offering of single 
family bonds: Paine Webber (25%), First Boston (20%), 
Prudential-Bache (15%), and George K. Baum, T.J. Raney, 
Stephens Inc. and Collins, Locke & Lasater (10% each). All the 
local firms, including the Lasater firm, received the same 
share of the bond issue--10%.
    The Lasater firm also participated in offerings of AHDA 
multifamily bonds. At the April 12, 1983 AHDA Board meeting, 
Hardwicke proposed that Merrill Lynch, Stephens Inc. and T.J. 
Raney form the underwriting team for multifamily bond issues. 
At the April 19, 1983 meeting, George Wright moved to add 
Collins, Locke & Lasater to the multifamily bond underwriting 
team. Neither Hardwicke nor Wright recalled these 
events.30
    Linda Chandler, AHDA's Executive Director at the time, 
recalled that Charles Crow from Stephens, Inc. visited her 
after Collins, Locke & Lasater was added as an underwriter. He 
asked her to convince the AHDA Board to remove Collins, Locke & 
Lasater from the issue or Stephens, Inc. would resign. He 
indicated Stephens, Inc. did not want Collins, Locke & Lasater 
included because they were ``a little unscrupulous.'' 31 
Stephens may have had self-interested motivations. According to 
Chandler, the inclusion of Collins, Locke & Lasater decreased 
Stephens, Inc.'s allocation of bonds in the issue, and thereby 
decreased the amount of money Stephens, Inc. might make.32
    Chandler relayed Crow's concerns to Charles Stout, then 
Chairman of the AHDA Board. Stout told Chandler that he would 
handle the matter. Chandler does not know what actions Stout 
took, if any.33 She considered it inappropriate for 
Stephens, Inc. to try to convince a State agency to fire 
another underwriter.34 She is not aware of other firms 
taking similar action.35
    Stephens, Inc. subsequently resigned from this bond issue 
and was replaced by another local firm, the Dabbs Sullivan 
Division of George K. Baum & Company. In an April 28, 1983 
letter, Stephens, Inc. complained that, ``subsequent to our 
selection, the Board decided, without discussion, to add to the 
underwriting group a firm which did not submit a proposal under 
the Agency proposal procedures which invited individual firm 
proposals.'' According to Chandler, the letter is inaccurate; 
no underwriters were hired without submitting proposals.36 
Nor did Chandler see any ``erosion of the independence of the 
Board,'' as alleged in Stephens, Inc.'s letter.37 
Furthermore, Stephens, Inc. continued to participate with the 
Lasater firm in other bond issues after that time.
            3. Lasater & Company received no special treatment in 
                    connection with AHDA/ADFA bond underwriting 
                    contracts
    The evidence demonstrates that the Lasater firm was treated 
the same as other local firms. Other local firms underwrote as 
many state bonds as did the Lasater firm. The Lasater firm 
never served as the sole underwriter of an AHDA/ADFA bond 
issue; it always was part of a team of underwriters, including 
other local firms. Moreover, although Lasater & Company sought 
to become a lead underwriter of an AHDA/ADFA bond issue--which 
would have allowed the firm to make more money from the 
offering--the firm never was selected to serve as a lead 
underwriter for the agency.38
    The evidence further demonstrates that the firm did not 
exercise unusual influence over the agency. For example, when 
Michael Drake of Lasater & Company asked ADFA to replace 
PaineWebber with E.F. Hutton as lead underwriter of a 
particular bond issue--presumably because Lasater & Company had 
a better working relationship with E.F. Hutton--the agency 
ignored the requests and proceeded with PaineWebber.39
    Lasater believed that his firm was entitled to a larger 
share of the AHDA bond underwritings based on its size:

          It is my position that we had the second largest 
        capitalized firm in the State of Arkansas and we didn't 
        receive the pro rata share of the bond business that I 
        thought we were entitled to because of the size.40

However, when Lasater lobbied Governor Clinton for a larger 
share of AHDA bond underwritings, Governor Clinton refused to 
get involved. Lasater explained:

        [O]n the one occasion when I complained to Governor 
        Clinton that Lasater & Company was not receiving its 
        fair share of state bond underwriting business, he 
        simply told me that we should present our case to the 
        appropriate staff if we felt we were not being treated 
        fairly. He did not take any action on our behalf. And, 
        our position among the firms that were underwriting 
        state bond business never improved.41

This directly contradicts the allegation that Governor Clinton 
sought special treatment for Lasater and Company.
    In sum, Lasater & Company qualified for inclusion in ADFA 
underwriting teams pursuant to ADFA policies. As described by 
Epes:

          We would usually select co-managers based on two 
        criteria. One would be whether they had a presence in 
        the state because we wanted to get a good effort to 
        sell bonds within the state as well as out of the 
        state, and get an understanding of what types of bonds 
        needed to be--how they needed to be structured so we 
        could sell some in the state.
          And then we would usually bring in additional 
        national firms to help us with either bond 
        distribution, or maybe we thought that they had--ran a 
        close second in their proposal and had some expertise 
        to offer. * * *42
          [T]here were a lot more firms there than there are 
        now. And many were what we refer to as bucket shops 
        that didn't have very good reputations and they were 
        strictly sales-oriented, didn't have underwriters that 
        would structure bond issues. And so we limited our 
        involvement to firms that actually had underwriters 
        assigned or that were employed at the firm. And that's 
        the main limiting factors--those two things, coverage 
        for sales and also having an underwriter.43

Epes testified that the Lasater firm met these criteria; it was 
a local firm with an underwriting capability. He added that 
Lasater & Company deserved to be treated the same as other 
local underwriting firms, based on the firm's performance as an 
underwriter.

          My recollection is that they performed as well or 
        better than the other local firms. They--I was told by 
        the senior manager on more than one occasion that they 
        sold more bonds than most of the other local firms. In 
        some cases, they sold more than any of the other locals 
        and others they were among the top two.44

    Moreover, there was no guarantee that Lasater & Company 
would profit from its participation in the AHDA/ADFA bond 
underwritings. On the contrary, the Lasater firm was at risk on 
the AHDA/ADFA bonds it underwrote: it bought the bonds from the 
agency and in turn had to find investors to purchase the bonds. 
The Lasater firm received fees from the State in connection 
with these underwritings, but most of the firm's profits 
depended on its ability to find investors to purchase the 
bonds. Drake testified that ``the majority of the income to the 
firm was derived from sales commissions.'' 45
    Among Collins, Locke & Lasater's brokerage clients were a 
group of insurance companies that were placed in receivership 
by the Arkansas Insurance Commissioner in 1983. The companies 
were Mount Hood Pension Company, National Investors Life 
Insurance Company, and National Investors Pension Insurance 
Company. The Lasater firm approached the Insurance 
Commissioner, Linda Garner, about serving as a manager of 
companies' portfolio in receivership. Garner believed that the 
assignment required a firm of greater size and experience and 
appointed First Boston and Stephens, Inc. as portfolio 
managers. At some point, Governor Clinton called Garner to 
express his concern that, should the Lasater firm not be 
included as a manager, an Arkansas firm would be losing 
business. He asked her to consider appointing E.F. Hutton to 
select the portfolio manager. Garner told Governor Clinton that 
the assignment required an experienced national firm; she did 
not give E.F. Hutton or Collins, Locke & Lasater a role in 
managing the portfolio. Ms. Garner testified that Governor 
Clinton did not pressure her to hire the Lasater firm and she 
did not hear from his or his staff again regarding this matter. 
She did not consider it inappropriate for Governor Clinton to 
raise the matter with her.46
            4. Neither Governor Clinton nor his staff pressured AHDA/
                    ADFA to include Lasater's firm in bond 
                    underwritings
    It has been alleged that Governor Clinton directed AHDA and 
ADFA to award bond underwriting business to Lasater & Company. 
The evidence, however, demonstrated that neither Governor 
Clinton nor his staff pressured anyone to include the Lasater 
firm in bond underwritings. Members of the Governor's staff 
have said it did not happen, members of the AHDA Board have 
said it did not happen, members of the AHDA staff have said it 
did not happen, and employees of both Lasater & Company and a 
competitor have said it did not happen. One witness recalled 
that a member of the staff of the Governor's Office suggested 
that the Lasater firm be included as an AHDA underwriter; no 
other witness could recall the incident.
    Linda Chandler, who became AHDA Executive Director early in 
1983, testified that Governor Clinton did not ask her to 
include or exclude any underwriting firms with respect to AHDA 
bond issues. Chandler testified that when she was seeking to 
become AHDA Executive Director, she initiated a meeting with 
Governor Clinton, whom she had not previously met. Chandler 
explained that she sought this meeting not to convince Governor 
Clinton to hire her, as that was a decision that would be made 
by the AHDA Board, but because she felt that under Governor 
Frank White the Executive Director had been a ``political'' 
position.47
    Chandler told Governor Clinton that she was ``not 
political''--she had served on the AHDA staff during both his 
first term and that of Governor White. She stressed her 
technical expertise and told Governor Clinton she would run the 
agency in a ``business like fashion.'' 48 Governor Clinton 
made no mention of underwriting firms.49 He neither 
favored nor disfavored particular firms.50
    Chandler was selected as AHDA Executive Director. She was 
not aware of any influence exerted by the Governor's office to 
choose an underwriter.51
    AHDA Board member Mort Hardwicke never discussed bond 
underwriting with Governor Clinton or Governor Clinton's staff. 
He has never heard that the Governor's office identified a 
specific firm that they wanted to receive underwriting 
business.52 Hardwicke testified that he ``never heard'' of 
the Governor's office trying to influence AHDA's selection of 
underwriters.53
    AHDA Board Member George Wright went even further. Wright 
testified that he never spoke with Governor Clinton about AHDA 
business.54 Moreover, no one from the Governor's office 
called him regarding selection of underwriters.55 Nor did 
anyone from the Governor's office ever contact AHDA staff 
members regarding underwriter selection.56
    Wooten Epes succeeded Linda Chandler as Executive Director 
of AHDA in the fall of 1983. He testified that he did not 
recall ever being asked by the Governor's staff to include 
particular firms in bond offerings.57 Epes did not recall 
the Governor's office being involved with choosing 
underwriters.58
    Bob Snider and Paul Young, investment bankers at T.J. Raney 
& Sons, a competitor of Lasater & Company, do not recall AHDA 
bond contracts awarded on terms other than merit or complaints 
to that effect.59
    Just one witness recalled discussing the inclusion of a 
specific underwriting firm with Governor Clinton's office. 
Charles Stout, an appointee of Republican Governor Frank White 
who was serving out his term as Chairman of the AHDA Board in 
1983, recalled receiving a telephone call from Bob Nash, an 
assistant to Governor Clinton for economic development matters. 
According to Stout, Nash ``called [him] and recommended that we 
[AHDA] start using the Lasater firm.'' 60 Stout testified 
that Nash ``was suggesting a certain underwriter that we start 
using.'' 61 According to Stout, Nash indicated that the 
Lasater firm should be allocated 15 percent of the agency's 
bond underwritings.62
    Stout recalled that, while he was on the telephone with 
Nash, he ``asked one Board member, I think it was Hardwicke, to 
get on and listen to the conversation.'' 63 Stout recalled 
discussing the conversation with Hardwicke after Nash hung up; 
he recalled that he did not speak with the other Board members 
but that Hardwicke informed the other Board members of the 
conversation:

          I thought that Mort [Hardwicke] talked to the other 
        Board members. I don't know. It's been a long time ago, 
        and I've had a stroke and my memory's not good.64
          Senator Sarbanes * * * Did you tell other members of 
        the Board about it?
          Mr. Stout. No, sir.
          Senator Sarbanes. You didn't tell any of the other 
        members?
          Mr. Stout. Not to my memory, I didn't.
          Senator Sarbanes. Is it your testimony that Mr. 
        Hardwicke went around and told all the other members?
          Mr. Stout. It's my recollection that he did.65

     Hardwicke, however, would not confirm Stout's testimony. 
On the contrary, Hardwicke stated that he did not recall the 
incident described by Stout, despite Stout's testimony that 
Hardwicke joined him on the telephone with Nash.66

          I don't recall. I don't doubt Mr. Stout's word but I 
        do not recall listening to Mr. Nash telling the Board 
        that Lasater should get 15 percent.67

Hardwicke also did not recall telling the other Board members 
of this call.68 Significantly, no other Board members 
recalled hearing about this alleged conversation. Wright, for 
example, did not recall learning of this telephone call from 
Hardwicke: ``I don't recall hearing that Bob Nash called over 
here and said do this.'' 69 He added, ``Specifically, no, 
sir. I don't recall him coming and talking to me about it.'' 
70 Nor did any other witness recall this conversation.
    Nash testified that while he may have spoken with Stout 
regarding bond underwriting contracts, he never instructed 
Stout to include Collins, Locke & Lasater in AHDA bond 
issues.71 Nash did not recall ever discussing with Stout 
the specific percentages of bonds that different underwriting 
firms would receive.72 Wright testified further that 
neither Nash nor anyone else in the Governor's office called 
him to ask that the Lasater firm be added.73
    Even if this telephone conversation occurred--which is 
hardly clear--it is likely that other witnesses do not recall 
it because it was innocuous in nature. Stout himself 
characterized the conversation as a suggestion from Nash, 
rather than a directive.74 He testified, ``I took it as a 
suggestion.'' 75 Nash did not threaten Stout; nor did he 
mention Governor Clinton's name.76 Asked what would have 
happened if the AHDA Board had not included the Lasater firm, 
Stout replied, ``Who knows. I don't think anything would have 
happened.'' 77 The allegation that Governor Clinton 
influenced the selection of AHDA/ADFA bond underwriters based 
on political or personal considerations was further undermined 
by the Governor's treatment of his political opponents. 
Stephens Inc. continued to participate in AHDA bond 
underwritings after Bill Clinton defeated Frank White in 1982, 
despite the fact that the firm had supported Frank White, and 
that White went to work at Stephens Inc. after losing the 1982 
election.78 Hardwicke recalled that he spoke with Governor 
Clinton shortly after he was reelected in 1982 and asked him 
how to deal with Stephens, Inc. According to Hardwicke, the 
Governor replied: ``Give them a fair shake. That was the end of 
the conversation.'' 79
    Finally, Lasater himself testified that he did not believe 
the awarding of State bond business was related to political 
considerations:

          I believe that Lasater & Company would have received 
        the same amount of bond business if they did or did not 
        contribute to the Clinton campaign. And I base that on 
        the fact that Stephens, Inc. who did the majority of 
        the business when Frank White was Governor contributed 
        heavily to Frank White, supported Frank White and 
        fought the election of Bill Clinton and Bill Clinton 
        still gave them a large share of the State 
        business.80

            5. Lasater had no influence over AHDA/ADFA appointments
    The documents produced to the Special Committee include 
several letters to Governor Clinton from Lasater and his 
associates, recommending various individuals be appointed to 
the AHDA and ADFA boards. It has been alleged that these 
letters show that Lasater exerted undue influence over the 
agency. The evidence does not support this allegation. As an 
initial matter, there is nothing inherently improper about a 
citizen recommending possible appointees to State boards; the 
evidence developed by the Committee indicates it happened 
regularly.
    Moreover, there was nothing unique about Lasater's 
recommendations; on the contrary many of the individuals 
recommended by Lasater were not appointed by Governor Clinton. 
For example, on January 4, 1985, Lasater wrote to Governor 
Clinton recommending Don Spears for the AHDA Board.81 
Spears, however, was not appointed.82 Similarly, on April 
3, 1985, Patsy Thomasson wrote to Governor Clinton recommending 
Don Spears, Ed Willis and Jim Tom Bell for ADFA Board.83 
Thomasson received a form letter back from Governor 
Clinton.84 Neither Willis nor Bell was appointed to the 
ADFA Board.85
    Nor can Lasater & Company's recommendations reasonably be 
characterized as attempts to influence the bond underwriter 
selection process. For example, on March 31, 1983, David 
Collins wrote to Governor Clinton recommending Linda Trent 
[Chandler] for AHDA Executive Director.86 Chandler has 
never met David Collins and was not aware he had written a 
letter of recommendation on her behalf.87 She has never 
met Dan Lasater either.88
    Similarly, on May 1, 1985 Lasater wrote three identical 
letters to Governor Clinton, recommending that Bill Mathis be 
appointed to the ADFA Board and that Mort Hardwicke and George 
Wright be reappointed to the ADFA Board.89 Lasater 
received three identical form letters back from Governor 
Clinton.90 Mathis was not appointed to the ADFA Board 
while Hardwicke and Wright were reappointed.91 Hardwicke 
testified that he has never met Lasater and was not aware of 
the letter.92 Wright testified he also has never met 
Lasater and ``was unaware that Lasater ever recommended me for 
anything.'' 93
    Finally, the evidence showed that Dan Lasater and his 
colleagues at Lasater & Company were hardly the only source of 
unsolicited recommendations to the Governor's office regarding 
appointments to the ADFA Board. Governor Clinton regularly 
received recommendations other private individuals, as well as 
public officials, such as members of the State 
legislature.94 In this regard, Drake testified that when 
he worked at Stephens, Inc., that firm ``routinely'' made 
recommendations to the Governor's office regarding appointments 
to state boards.95
            6. The Raney/Hutton/Lasater Team Was Awarded the State 
                    Police Commission Bond Underwriting Contract on the 
                    Merits
    The Committee also examined a 1985 bond issue for the 
Arkansas State Police shared by T.J. Raney & Sons, E.F. Hutton 
and Lasater & Co. It has been alleged that Governor Clinton 
influenced the underwriter selection process to benefit 
Lasater. The record, however, is at odds with this allegation. 
It shows that Governor Clinton and his staff did not pressure 
the Arkansas State Police to include the Lasater firm in the 
bond underwriting or to award the contract to the group 
including the Lasater firm. To the contrary, the evidence 
demonstrated that Governor Clinton and his staff played no part 
in the underwriter selection process.

                             a. Background

    The 1984 murder of an Arkansas State Trooper while outside 
the range of the Arkansas State Police radio system attracted 
widespread press attention in Arkansas.96 The murder 
highlighted the inefficiency of the existing radio system and 
gave new urgency to the State Police's longstanding efforts to 
replace the system. Traveling together to that Trooper's 
funeral, the director of the Arkansas State Police, Col. Tommy 
Goodwin lobbied Governor Clinton for a new police radio 
system.97 Governor Clinton agreed that a new radio system 
was necessary. As such, the State Police were evaluating 
financing alternatives for a new communications system by 
October 1, 1984.98

          b. The Formation of the Raney, Hutton, Lasater Group

    It was well-known to underwriting firms in Arkansas that a 
financing opportunity would exist with respect to a new police 
radio system. Bob Snider, head of the public finance department 
at T.J. Raney, testified that his firm learned of this 
opportunity in late 1984, before the State Police officially 
solicited proposals from financial firms.99 Paul Young of 
T.J. Raney discussed the transaction with Bobby Roberts, 
Governor Clinton's liaison for criminal justice 
matters.100 Young and Snider also met with Sam Bratton, 
Governor Clinton's Counsel.101 Neither Roberts nor Bratton 
expressed a preference for any underwriting firm or indicated 
that Lasater & Company should receive this business.102 No 
one in the Governor's office suggested any other financial 
firms with which T.J. Raney should work on this 
project.103
    As part of its efforts to prepare for the underwriter 
selection, T.J. Raney contacted Stephens, Inc. about joining 
forces to pursue the financing. Snider testified:

          Our first call was to Stephens. They turned us down. 
        They wanted to go by themselves on this [the police 
        radio transaction]. Our next call was to E.F. 
        Hutton.104

Snider recalled that E.F. Hutton suggested that Lasater & 
Company be included in the transaction: ``when I talked to 
Hutton about us going joint account, Hutton mentioned to me 
that they felt like Lasater should be involved.'' 105
    The evidence indicates that the Raney firm approached the 
Lasater firm to work together on the police radio bonds. Drake 
testified that Young and Snider of T.J. Raney contacted him 
regarding joining forces to underwrite bonds for the State 
Police Commission:

          It's my recollection that in mid-1984--and it may 
        have in the spring or in the summer--I was approached 
        by two gentlemen from T.J. Raney and Sons, Bob Snider, 
        who is managing director of the public finance 
        department, and a colleague of his, Paul Young * * * 
        seeking our assistance in pursuing the creation of 
        legislation that would enable a state police radio 
        system to be acquired by the Arkansas State Police, one 
        to structuring a transaction that would enable us to 
        underwrite the securities; and, [sic] three, to 
        participate in a transaction that involved E.F. Hutton 
        as the national distributor of securities.106

Young believed that Snider initiated contact with the Lasater 
firm.107 Snider did not recall whether he, Young or 
someone from E.F. Hutton contacted the Lasater firm.108
    The witnesses disagreed as to why the Raney firm approached 
the Lasater firm. Young testified that T.J. Raney contacted 
Lasater & Company because of Lasater & Company's experience 
underwriting AHDA bonds.109 Drake, however, recalled that 
the Raney firm wanted to work with Lasater & Company because of 
Lasater's relationship with Governor Clinton, and that he told 
this to Lasater. 110 Neither Lasater, Young nor Snider 
recalled discussing with Drake that T.J. Raney approached 
Lasater & Company regarding the Police Commission bond 
underwriting because of Lasater's relationship with Governor 
Clinton.111 Young, in fact, testified that he did not tell 
Drake that T.J. Raney approached Lasater & Company because of 
Lasater's relationship with Governor Clinton.112 Snider 
also testified that was not the case:

          Q. Did anyone from T.J. Raney & Sons approach Mr. 
        Drake, to your knowledge, and indicate that the reason 
        they were approaching Lasater & Company was because of 
        their relationship with the Governor?
          A. No. That's not why we did it.113

    In any case, the fact that T.J. Raney first approached 
Stephens, Inc., and only approached Lasater & Company after 
Stephens, Inc. declined to enter into a partnership, undermines 
the allegation that T.J. Raney was seeking political 
connections to the Clinton Administration; as discussed 
earlier, the Stephens firm had been a political opponent of 
Governor Clinton.

              c. The awarding of the underwriting contract

    On April 4, 1985, Governor Clinton signed Act 817, ``An Act 
Authorizing the Leasing of Communications Equipment for the 
Department of the Arkansas State Police; Providing for the 
Payment and Security of the Costs of the Equipment; and for 
Other Purposes.'' 114 The Act authorized the State Police 
Commission to acquire a new communications system, financed by 
bonds that in turn would be financed by revenues from drivers' 
license fees.
    Much has been made of the fact that the Raney/Hutton/
Lasater group hired the Mitchell, Williams law firm to help 
draft the legislation. The Majority alleges that the group 
benefitted improperly from the role their attorneys played in 
drafting the statute. In fact, the Raney/Hutton/Lasater group 
enjoyed no special advantages or information as a result of 
having retained the Mitchell, Williams firm.115 The 
legislation did not specify what financial firms would 
underwrite bonds, did not establish criteria for such firms, 
and did not even specify by what procedures the State Police 
would select underwriters.116 Young, Colonel Goodwin and 
Police Commissioner Johnny Mitchum testified that the 
legislation did not bias the selection process in favor of the 
Raney/Hutton/Lasater team.117 The legislation of course 
had to be approved and passed by the Arkansas legislature to 
become a public law, after which it was available to all. The 
Lasater group made no secret of its relationship with the 
Mitchell, Williams firm. Sam Bratton, former Counsel to 
Governor Clinton, testified that it was common for law firms 
with expertise in bond work to draft bond-related 
legislation.118
    On the same day Governor Clinton signed the legislation, 
the State Police Commission began a competitive process to 
select the bond underwriters. The State Police solicited 
proposals from all interested financial firms. In this regard, 
the minutes of an April 4, 1985 Meeting of the State Police 
Commission state:

          After a lengthy discussion between members of the 
        Commission, Mr. Ed Erxleben and Mr. Dudley Meadows of 
        State Purchasing, and representatives of several 
        financial firms concerning procedures to follow 
        relating to the acquisition and financing of the 
        communication equipment, the Commission agreed to begin 
        immediately the process of selecting a financial 
        institution to handle the financing.
          The Commission agreed to solicit proposals from only 
        those companies doing business in Arkansas.
          A letter will be mailed on Monday, April 8, 1985 to 
        financial institutions in the state seeking proposals, 
        with a cut-off date of two weeks from date of letter 
        for proposals to be received.119

    The State Police received eight proposals in response to 
its letter request. The eight proposals were then winnowed to 
four finalists by a Committee consisting entirely of career 
government officials: three State Police staff members (State 
Police Director Col. Tommy Goodwin, State Police Deputy 
Director Maj. Jim Tyler, and State Police Purchasing Officer 
David Mosely) and two staff from the State Purchasing 
Department (Ed Erxleben and Dudley Meadows).120
    Police Commissioner Johnny Mitchum, an appointee of 
Governor Frank White, was a certified public accountant and the 
only member of the Police Commission with a background in 
finance.121 Mitchum reviewed the underwriting proposals 
and concluded that the Raney/Hutton/Lasater proposal was the 
most attractive for the State.122 In order to obtain some 
independent corroboration, Mitchum hired an actuary, John 
Myers, to evaluate the four proposals selected as 
finalists.123 Mitchum did not know Myers, and had no 
reason to believe Myers would favor one firm over 
another.124 While Myers recalled that Mitchum told him 
that he considered the Raney/Hutton/Lasater proposal to be the 
most favorable, Mitchum did not recall indicating that.125 
In any event, Myers and Mitchum agree that Mitchum did not 
direct Myers to reach any particular conclusion.126
    The evaluation prepared by Myers assigned a net present 
value of $18,101,700 to the Raney/Hutton/Lasater proposal. In 
other words, Myers calculated that the Raney/Hutton/Lasater 
proposal would cost the State slightly more than $18 million 
(in 1985 dollars) over the life of the bonds. This was less 
than the net present value that Myers calculated for the 
Stephens, Inc. and Dabbs Sullivan proposals, but $28,000 more 
than the $18,073,030 assigned to the First Capital 
proposal.127 Myers testified that, given the size of the 
transaction, the $28,000 difference was de minimus and the 
Raney/Hutton/Lasater and First Capital bids were statistically 
equivalent.128 Myers concurred at the time that the Raney/
Hutton/Lasater bid was the best for the State of 
Arkansas.129
    There is no evidence that any of the losing bidders 
challenged Myers' analysis. However, the Raney/Hutton/Lasater 
group did raise some concern. In particular, Young testified 
that Myers did not adequately reflect the benefit to the State 
of the debt service reserve in the Raney/Hutton/Lasater 
proposal and therefore overstated the net present value of the 
proposal.130

          Actually, I did not feel like it gave us the 
        advantage that I thought that we had. I had reviewed 
        all the proposals myself and had looked at this 
        particular proposal, and I don't think I really felt 
        like it was as close as he presented. We had in our 
        structure some funds that were invested that would 
        generate a benefit that frankly I thought [was] not 
        adequately weighed in his analysis.131

In essence, the larger debt service reserve contained in the 
Raney/Hutton/Lasater proposal allowed the State to lower its 
overall cost of borrowing through arbitrage.132 Young 
testified that:

        the Stephens proposal had a reserve amount equal to one 
        half-year's debt service as opposed to ours which had a 
        full year's debt service, which actually was 
        detrimental to their presentation because at the time * 
        * * an issuer could keep the benefit of earnings that 
        were generated over and above what the financing rate 
        was. So the larger the reserve the greater the net 
        benefit to an issuer. I don't recall how the other 
        presentation structured their reserves. I think some 
        had full year reserves. I think the one prepared by 
        First Capital, I think, didn't have any 
        reserve.133

    On May 10, 1995, the Police Commission heard oral 
presentations from the four finalists.134 After all the 
presentations, Commissioner Johnny Mitchum moved that the 
Raney/Hutton/Lasater team be awarded the contract. This motion 
carried by a vote of 4 to 2.135

           d. Legislative review of the underwriting contract

    Act 817, the enabling legislation for the police radio 
system, stated

          The [Police] Commission shall submit any contract, 
        agreement, or proposal, as authorized by this Act, to 
        the Arkansas Communications Study Committee and to the 
        Arkansas Legislative Council prior to any obligation 
        being incurred by the Commission for their advice and 
        counsel.136

Both the Communications Study Committee and the Legislative 
Council ultimately gave favorable advice to the proposal. The 
Minutes of the July 10, 1985 Meeting of the Communications 
Study Committee, at which the contract was approved, state, 
``Mr. Erxleben said it was a well coordinated and reviewed 
contract.'' 137 Erxleben had been appointed State 
Purchasing Director by Governor Frank White and retained by 
Governor Clinton.138

e. The Clinton administration properly investigated rumors that Lasater 
     was under investigation for drug use and was advised that no 
                       investigation was underway

    The Majority argues that it was improper for the State 
Police Commission to award this contract to a group including 
Lasater & Company because of rumors at the time that Lasater 
used cocaine. In fact, it is clear that the Clinton 
Administration was concerned about awarding State bond business 
to anyone under investigation for drug offenses. The Governor 
and members of his staff raised the issue with law enforcement 
authorities, who reported that no investigations of Lasater 
were underway.
    In early 1985, Hot Springs lawyer Sam Anderson, Jr. was 
tried on cocaine distribution and conspiracy charges. A witness 
at that trial testified that Lasater used cocaine.139 Col. 
Tommy Goodwin, who had been appointed by Governor Frank White 
as Director of the Arkansas State Police, testified that before 
Lasater & Company was awarded the State Police bond 
underwriting, Governor Clinton told him that the firm should 
not get the contract if Lasater was under investigation for 
cocaine distribution.140 Col. Goodwin asked subordinates 
in the State Police to make inquiries. They determined that no 
State or local criminal investigations of Lasater were underway 
at that time.141 Although the Arkansas State Police began 
an investigation of Lasater the following year, the Police had 
no investigation underway in 1985.142
    Betsey Wright, then Governor Clinton's Chief of Staff, also 
asked Colonel Goodwin to check if any investigations were 
underway. She, too, was advised that no investigations were 
underway.143
    Lasater testified that he first became aware that he was 
the target of a cocaine investigation no more than sixty days 
before he was indicted on Federal charges in October 
1986.144
            7. Neither Governor Clinton nor his staff pressured the 
                    Arkansas State Police to award bond underwriting 
                    contracts to Lasater's firm
    The Majority asserts that the Governor's Office closely 
monitored the bond underwriting process, and suggests that this 
tainted the process. However, even assuming that the Governor's 
office did keep track of the contracting process, there is no 
evidence that Governor Clinton or anyone acting on his behalf 
sought to influence the selection of an underwriter. On the 
contrary, the evidence demonstrated that the Police Commission 
selected the Raney/Hutton/Lasater group on its own, without any 
influence from the Governor's office.
    As an initial matter, the Governor's staff testified that 
no influence was exerted. Betsey Wright, Governor Clinton's 
Chief of Staff, testified that the Governor's office did not 
express any preference to the State Police that Lasater & 
Company be awarded the underwriting contract and played no role 
in the selection process.145 Sam Bratton, Governor 
Clinton's Counsel, testified that Lasater did not receive any 
kind of special treatment with respect to the police bond 
contract.146 Michael Gaines, the Governor's liaison with 
the Police Commission, gave similar testimony.147
    Second, Lasater and his employees testified that no 
influence was exerted on his behalf. Lasater testified he does 
not recall discussing the State Police Commission bond 
underwriting with Governor Clinton or his staff.148 He is 
not aware of political pressure brought to bear on the award of 
this contract. Drake testified that he is not aware of anyone 
at Lasater & Company discussing the State Police underwriting 
contract with Governor Clinton, or of anyone from the 
Governor's office taking steps to award the contract to the 
Raney/Hutton/Lasater team.149 Young testified that in his 
discussions with Governor Clinton's staff, he was never told 
that Lasater & Company would receive this award.150 On the 
contrary, Young was concerned that the Raney/Hutton/Lasater 
group might not receive the contract despite submitting the 
best proposal.151
    Finally, the State Police witnesses themselves testified 
that they acted unilaterally and without influence from the 
Governor's office. Commissioner Mitchum testified that: ``I 
never recall anyone from the Governor's office taking an active 
role in that process.'' 152 Nor did Governor Clinton's 
office suggest that he undertake any kind of comparison that 
would favor the Raney/Hutton/Lasater proposal.153 Colonel 
Goodwin, the director of the Arkansas State Police, testified 
that Governor Clinton never indicated to him that Dan Lasater 
was interested in securing this piece of bond underwriting 
business.154
    The breakdown of the vote by the State Police Commission to 
award the contract to the Raney/Hutton/Lasater team 
demonstrates that it was not a politically motivated decision. 
The vote on the contract was 4-2. Commissioners Mitchum and 
Rockefeller two of the four commissioners who voted to award 
the contract to Raney/Hutton/Lasater, were Republican 
appointees to the Police Commission. One Clinton appointee 
voted in favor of the Raney/Hutton/Lasater group, as did the 
sole appointee of Governor David Pryor. Notably, both members 
who voted against the Raney/Hutton/Lasater team, Commissioners 
Raff and Mashburn, were Clinton appointees.155 The 
Director of the State Police at the time, Colonel Goodwin, also 
had been appointed by Republican Governor Frank White.156
    The Raney/Hutton/Lasater team did not enjoy any special 
advantages in formulating a proposal. One losing bidder 
complained that the Raney/Hutton/Lasater proposal violated the 
enabling legislation, by providing for semiannual payments to 
bondholders rather than monthly payments. (This allowed the 
State to earn more in interest from holding the funds.) 
However, the legislation did not require that bondholders 
receive monthly payments; it required only that the radio 
equipment be paid for monthly: ``Payments to cover the costs 
under the Lease Agreement shall be paid from the Lease Fund on 
a monthly basis.'' 157 As Young explained, this simply 
required the State to segregate the funds monthly, so they 
would be available for their designated purpose; it did not 
control the payments to bondholders.158 Arkansas State 
bonds typically paid bondholders semiannually.159 Young 
testified that all the other financial firms interpreted the 
statute in the same way as did the Raney/Hutton/Lasater team, 
namely providing for semiannual payments.160 Only one 
losing bidder interpreted it differently.161 Therefore, 
the Raney/Hutton/Lasater group gained little from the 
interpretation of the legislation by the Mitchell, Williams 
firm cited in the Majority Report: most bidders had already 
interpreted the legislation to pay for semiannual payments.
    It has been alleged that a May 1, 1985 memorandum that 
Michael Gaines, Governor Clinton's liaison to the Arkansas 
State Police, sent to the Governor and Betsey Wright reflected 
an improper attempt by the Clinton Administration to monitor 
the underwriter selection process.162 The memorandum 
indicates ``Tommy Goodwin's observations'' of which firms the 
Commissioners favored for the underwriting contract. Gaines 
does not recall preparing the memorandum; he does not believe 
he asked Colonel Goodwin for this information but rather that 
Colonel Goodwin provided him this information to him.163 
No one in the Governor's office told Gaines to monitor the 
votes on the award of the bond underwriting contract.164 
Betsey Wright testified that she was not monitoring the 
votes.165
    Betsey Wright wrote a note on the memorandum that ``street 
talk'' suggested that Lasater had submitted ``an unreasonably 
low bid knowing he can raise it once he gets it.'' In response 
to Wright's note, Governor Clinton wrote, ``Lasater should be 
told bid must be price.'' The majority has alleged that this 
colloquy showed the Clinton Administration's favoritism to 
Lasater. This allegation lacks merit. Far from demonstrating 
favoritism to Lasater, Governor Clinton's comment demonstrated 
his insistence that contracts be awarded on the merits, and the 
State's fiscal interest be protected.
    In any event, Wright's concerns were unfounded. This 
underwriting contract did not entail ``bid'' to provide goods 
or services for the State at a price that could be altered 
later, but rather a ``proposal'' to sell securities to 
investors. Drake explained:

        * * * in all deference to Betsey, whom I admire as a 
        wonderful public servant, she doesn't know beans about 
        investment banking. She may have heard that we had 
        ``low balled.'' But, there was no bid. There was no bid 
        to low ball. It was a proposal * * * her concern, in my 
        mind, was a concern of perception rather than reality. 
        We submitted a proposal. We were not asked to submit a 
        bid nor were our competitors asked to submit a bid. Our 
        proposal contained a provision for interest rates if 
        the securities were sold at the moment of our 
        submission. And, if you will look at my memo of April 
        30th to Dan [Lasater], George [Locke] and Dan Moudy, 
        which appears to be in reaction to an assertion that we 
        had low balled our proposal, I make it real clear that 
        the proposals * * * were submitted well in advance of 
        the financing date.166

Drake added that while the Raney/Hutton/Lasater team may have 
priced the securities aggressively, ``aggressive pricing only 
occurs by definition when securities are offered, not when a 
proposal is made.'' 167 Thus, the aggressive pricing did 
not involve the State on the State's money.
            8. Dan Lasater's relationship with Bill Clinton and Roger 
                    Clinton
    Dan Lasater first met Virginia Kelley, the mother of Bill 
and Roger Clinton, at the Oaklawn Park racetrack in Hot Springs 
in the late 1970's.168 He met Roger Clinton shortly 
thereafter, while Roger was singing at a nightclub in Hot 
Springs.169 At some later point, Mrs. Kelley introduced 
Lasater to her other son, Governor Clinton, at Oaklawn.170
    While Roger Clinton was not one of his closest friends, 
Lasater did socialize with him during 1982-86.171 Lasater 
recalled that either Governor Clinton or Virginia Kelley asked 
Lasater if he could find a job for Roger Clinton.172 
Lasater hired Roger Clinton to work as a stablehand at his 
Florida horse farm; he worked there for four to six months 
during 1983.173 Roger Clinton received the same 
compensation as other stablehands.174 Lasater testified 
that hiring Roger Clinton was not intended to help his firm get 
State business:

          Senator Faircloth. No connection? You didn't think 
        that hiring the Governor's brother and having him would 
        help you to curry favor and friendship with the 
        governor and get bond business?
          Mr. Lasater. I don't think hiring the Governor's 
        brother for $3 an hour to muck stalls at a farm in 
        Florida would get me any business, no.175

    Around 1984, Roger Clinton told Lasater than he owed a drug 
dealer $8,000 and that the drug dealer had threatened to harm 
him, Governor Clinton and Virginia Kelley if the debt were not 
paid.176 Lasater testified that he does not know if 
Governor Clinton and Mrs. Kelley were aware of this 
threat.177 Lasater loaned the money to Roger 
Clinton.178 Lasater never discussed the loan with Governor 
Clinton and doesn't know when Governor Clinton became aware of 
it.179
    Lasater became a political supporter of Governor Clinton in 
the 1980's. George Locke recalled that he was contacted by 
Governor Clinton or his staff within days of Governor Clinton's 
loss to Frank White in 1980, and introduced Lasater to the 
Governor at a meeting shortly thereafter.180 Lasater 
testified that Locke has told him that sometime during 1980-
1982, while Bill Clinton was seeking to regain the office he 
had lost to Frank White in 1980, Clinton asked to meet with 
Messrs. Locke, Collins and Lasater to seek their support and 
that such a meeting took place.181 Lasater has no 
independent recollection of the meeting.182 Lasater 
contributed to Governor Clinton's campaigns in 1982, 1984 and 
1986. Lasater organized a fundraiser * for Governor 
Clinton in 1984, which raised approximately $50,000.183
---------------------------------------------------------------------------
    \*\ Patsy Thomasson, who was working for Mr. Lasater at that time 
as an employee of his holding company, helped organize the fundraiser. 
(Thomasson, 2/23/96 Dep. pp. 55-56.) Ms. Thomasson did not work for 
Lasater & Co. after 1983, did not work on attempting to secure 
underwriting business for the firm, and did not discuss the firm with 
Governor Clinton's office. (Thomasson, 2/23/96 Dep. p. 22; Drake, 1/24/
96 Dep. pp. 242-243.)
---------------------------------------------------------------------------
    Lasater described himself as ``a friend and supporter [of 
Governor Clinton], like many people in Arkansas. Not a close 
friend.'' 184 While the Majority cited a letter Lasater 
sent to Governor Clinton asking for access to the Governor's 
office, the Majority omitted the testimony of Lasater and 
Betsey Wright that no such access was given.185 Lasater 
recalled being at the Governor's Mansion on no more than two 
occasions.186

        * * * I can recall being at the Governor's Mansion 
        possibly twice, and those were social events. I think 
        one time was when Bob Hope was in town and they had 
        some kind of a party over there for him, and some other 
        social function. I have never been to the mansion on a 
        personal basis.187

Lasater specifically denied the tales of Barry Spivey cited by 
the Majority; 188 Spivey was never questioned by the 
Committee and his account was obtained by the Majority outside 
the Committee's regular procedures for production of documents 
and is consequently unauthenticated. Lasater was not a close 
friend of Governor Clinton and received no special treatment as 
a result of his relationship with Governor Clinton or Roger 
Clinton.
    In October 1986, Lasater was indicted on a single Federal 
count of conspiracy to distribute cocaine and to possess with 
intent to distribute. He pleaded guilty the next week and 
served six months in prison and a further six months in a 
halfway house.189 Lasater never discussed the cocaine 
investigation with Governor Clinton and doesn't know when 
Governor Clinton learned of it.190 Following his guilty 
plea, Arkansas Securities Commissioner Beverly Bassett Schaffer 
revoked his securities license.191

H. The Rose Law Firm's Representation of Madison Guaranty

    From 1977 until 1992, Mrs. Clinton practiced law at the 
Rose Law Firm, one of the most prominent law firms in Arkansas. 
Starting as an associate, within two years Mrs. Clinton became 
a partner in the firm.
    In April 1985 Madison Guaranty retained the Rose Law Firm 
to provide legal advice on a securities law matter, a proposed 
sale of preferred stock. The following year, on July 14, 1986, 
the firm ceased its representation of Madison Guaranty so the 
firm could qualify to represent federal regulatory agencies in 
litigation involving failed savings and loan associations. The 
Rose Law Firm was paid approximately $21,000 for its work in 
1985 and 1986 on behalf of Madison Guaranty.
    The Committee devoted considerable attention to the 
circumstances of the Rose Law Firm's retention by Madison 
Guaranty. In particular, the Committee examined allegations 
that James McDougal directed a portion of Madison Guaranty's 
legal business to Mrs. Clinton for improper reasons. The 
evidence, however, demonstrated that nothing improper occurred 
in connection with Madison Guaranty's retention of the Rose Law 
Firm.
    The Committee also examined the substance of the work the 
Rose Law Firm and Mrs. Clinton performed for Madison Guaranty. 
The evidence demonstrated that the Rose Law Firm's work for 
Madison Guaranty was legitimate, well-documented, and 
appropriately billed. There is no credible evidence that any of 
the legal services provided by Mrs. Clinton and the Rose Law 
Firm were improper or contributed to the failure of the 
institution.
    Finally, the Committee reviewed Mrs. Clinton's prior 
statements concerning the Rose Law Firm's retention by and work 
for Madison Guaranty. In this regard, the Committee carefully 
examined the documentary evidence, including the Rose Law 
Firm's billing records for the Madison Guaranty engagement, and 
took testimony from Rose Law Firm lawyers who participated in 
the representation. The Committee also examined the documents 
prepared by the Rose Law Firm for Madison Guaranty. This 
evidence demonstrated that Mrs. Clinton has accurately 
characterized her representation of Madison Guaranty as limited 
and insubstantial.
            1. Retention of the Rose Law Firm by Madison Guaranty 
                    Savings & Loan
    On February 25, 1996, Pillsbury, Madison & Sutro, the law 
firm retained by the Resolution Trust Corporation to 
investigate possible civil claims relating to Madison Guaranty, 
concluded that a ``finder of fact is highly unlikely to find 
that there was anything untoward, let alone fraudulent or 
intentionally wrongful, in the circumstances of the Rose Law 
Firm's retention by Madison Guaranty.'' 192 The Special 
Committee's investigation has confirmed that conclusion.

        a. Madison Guaranty's proposal to issue preferred stock

    The Rose Law Firm was initially retained by Madison 
Guaranty in April 1985 to provide legal advice on securities 
law matters, including a proposed offering of preferred stock. 
James McDougal apparently had already developed a plan to sell 
preferred stock and had even lined up some potential buyers for 
the stock. On April 3, 1985, Madison Guaranty personnel met 
with officials of the Federal Home Loan Bank Board (the 
``FHLBB'') in Dallas. A contemporaneous memorandum 193 of 
that meeting prepared by an FHLBB official states, ``The 
Association plans to issue $600,000 of preferred stock for 
which a buyer is awaiting issuance, and a second issue of 
unknown amount will follow shortly thereafter.'' * An 
April 18, 1985 memorandum from McDougal to Madison Guaranty 
president John Latham states, ``I want this preferred stock 
matter cleared up immediately as I need to go to Washington to 
sell stock.'' 194
---------------------------------------------------------------------------
    \*\ It is worth noting, in light of the questions that have been 
raised about the oversight of Madison Guaranty by Arkansas regulatory 
officials, that in April 1985 the federal regulators were not overly 
concerned about Madison Guaranty's financial condition. According to 
the April 3 memorandum, ``The SA [Supervisory Agent] indicated general 
satisfaction with Madison's business plan as well as corrections and 
improvements following the last examination report except that the 
rapid growth has not been accompanied by proportionate increases in Net 
Worth.'' (Doc. No. 032901, John Mitchell memorandum to File.) The 
memorandum also reports that: ``A discussion was had regarding 
Madison's service corporation development projects, with which we have 
a reasonable comfort level.''
---------------------------------------------------------------------------
    In early April Madison Guaranty employees had taken some 
preliminary steps to prepare to sell the preferred 
stock,195 but legal issues had arisen when they contacted 
the Arkansas Securities Department (the ``ASD'') to obtain 
forms for the stock offering.196 On April 3, 1985, ASD 
Chief Examiner Charles Handley advised Madison Guaranty vice 
president Davis Fitzhugh (a lawyer with an MBA degree who was 
working with Latham on the preferred stock matter) 197 
that he questioned whether Madison Guaranty could issue non-
voting preferred stock, but he would ``be glad to review his or 
the association's attorney[s'] reasons and opinions as to their 
ability to issue preferred stock.'' 198 McDougal's April 
18 memorandum to Latham directing that the preferred stock 
matter be ``cleared up immediately,'' coupled with Handley's 
suggestion that an opinion from Madison Guaranty's counsel 
might resolve the legal issue, may have precipitated the 
engagement of the Rose Law Firm--the first time entries by Rose 
Law Firm attorneys on the preferred stock matter are dated 
April 23, 1985, five days after McDougal's memorandum to 
Latham, and include conferences with Latham and McDougal about 
the proposed preferred stock offering.
    There are good reasons for Latham and McDougal to have 
retained the Rose Law Firm to assist Madison Guaranty with the 
preferred stock matter. At the time that Madison Guaranty 
encountered questions from the ASD on the preferred stock 
proposal, some of the institution's employees had been 
consulting with a Rose Law Firm attorney on securities law 
issues, although the firm had not been retained and Madison 
Guaranty was not being billed for those informal 
consultations.199 Rick Massey, then a first-year associate 
at the Rose Law Firm, had met John Latham when Massey lectured 
on securities law at the University of Arkansas at Little Rock 
School of Law.200 Latham was one of the students in a 
securities law class Massey taught, and after class Latham 
sometimes would ask Massey questions about securities law 
issues.201 After a few of these discussions Latham 
referred another Madison employee to Massey for advice on 
securities law matters.202
    Massey recalls that eventually he had lunch with Latham and 
``actually pitched the business to him [saying] * * * Why don't 
you hire us and put us to work on some of these things.'' 
203 Rose Law Firm partner David Knight accompanied Massey 
to the lunch with Latham.204 Latham recalls ``that Rick 
pitched the business in the sense that he wanted us to hire 
them to do legal work for us.'' 205 Latham's response was 
that he did not have the authority to do so.206 Massey 
testified that he may have then had a conversation with Mrs. 
Clinton about Madison Guaranty, because he was aware that she 
was acquainted with James McDougal.207 Latham also has a 
``vague recollection'' of a discussion with McDougal in which 
they either discussed or Latham inferred that McDougal ``had 
friends at the Rose Law Firm'' and ``was wanting to spread his 
business with more of his friends.'' 208

b. Mrs. Clinton's role in the retention of the Rose Law Firm by Madison 
                                Guaranty

    Mrs. Clinton recalls that Massey or Vincent Foster asked 
her if she would talk to McDougal about the firm doing legal 
work for Madison Guaranty.209 Mrs. Clinton also recalls 
that some of the Rose Law Firm's partners were hesitant to 
accept McDougal as a client because several years earlier, when 
McDougal was operating another small Arkansas financial 
institution--Madison Bank & Trust Company of Kingston, Arkansas 
*--he had retained the firm and then failed to pay in full 
for the services they provided.210 The Special Committee's 
investigation has confirmed Mrs. Clinton's recollection of a 
problem obtaining payment from Madison Bank for prior legal 
work by the Rose Law Firm. Documentation obtained by the 
Special Committee shows that the Rose Law Firm was not paid by 
Madison Bank for legal work in late 1981 and early 1982 until 
October 1984--almost three years after the work was 
done.211 Moreover, when the Rose Law Firm finally was paid 
in October 1984, Madison Bank paid only $5,000 of the total 
$5,893.63 that was owed to the firm.212
---------------------------------------------------------------------------
    \*\ Madison Bank & Trust Company should not be confused with 
Madison Guaranty Savings & Loan Association. They were two different 
financial institutions that James McDougal controlled and operated at 
different times. The potential for confusion stems from the fact that 
in each instance McDougal changed the name of the institution to 
``Madison'' after he acquired control. While the ``Madison'' in Madison 
Bank & Trust may have been selected because the bank was located in 
Madison County, Arkansas, Madison Guaranty Savings & Loan (formerly 
Woodruff County Savings and Loan Association) was not in Madison 
County--it was in a different part of the state altogether. The use of 
a profile of President James Madison on Madison Guaranty's stationary 
suggests that McDougal may have selected the name of the bank because 
he admired President Madison. Madison Bank employee Gary Bunch 
confirmed that point when he testified before the Special Committee. 
(Bunch, 5/16/96 Hrg. p.42.)
---------------------------------------------------------------------------
    In addition, Rose Law Firm partner David Knight confirmed 
that at the time of the lunch with Latham, Rose Law Firm 
partners were concerned about the problem the firm had 
encountered collecting for the earlier Madison Bank work. 
Knight testified that immediately before the lunch with Latham 
he mentioned the possible Madison Guaranty engagement to C.J. 
Giroir, a senior partner at the firm, who raised the problem 
the firm had encountered in collecting for the Madison Bank 
legal work.213 Knight recalls that Giroir said, ``He 
thought it was fine to go ahead and have the lunch. But if 
anything came out of it, and we decided we wanted to undertake 
a representation on something, that we needed to--I needed to 
look into that and make sure there wasn't a problem there.'' 
214 As noted above, Mrs. Clinton recalls that Vincent 
Foster may have asked her to approach McDougal about the firm's 
retention by Madison Guaranty and the prior payment problems 
with McDougal at Madison Bank, and that she may have spoken 
with other Rose Law Firm partners about the matter.215 
(Her recollection that she may have spoken with other partners 
is consistent with Knight's recollection that Giroir raised the 
matter with him--clearly the partners were concerned about 
McDougal's prior failure to pay his bills in a timely fashion.)
    Although it is impossible now, over eleven years later, to 
reconstruct exactly how the billing issue was resolved and the 
Rose Law Firm was retained, it appears that Massey * or 
Foster may have spoken with Mrs. Clinton about the billing 
problem and she then spoke with McDougal.216 Mrs. Clinton 
recalls that she told McDougal the Rose Law Firm would do the 
work if Madison Guaranty would enter into a retainer agreement 
which would ensure that the Rose Law Firm was paid for its 
work.217 Mrs. Clinton remembers that McDougal agreed to a 
$2,000 a month retainer and indicated that Massey could do the 
securities work for Madison, if ``Latham wants him to do the 
work.'' 218
---------------------------------------------------------------------------
    \*\ Whatever the exact sequence of events, it is clear that Massey 
was seeking to recruit Madison Guaranty as a client. Knight recalls 
that Massey ``came up with the idea of having John Latham to lunch'' 
(Knight, 4/26/96 Dep. p.13) and it was Massey who ``pitched the 
business'' to Latham. Knight, 4/26/96 Hrg. pp.34-35. Latham recalls 
Massey asking for work, but does not even recall Knight being present 
at the lunch. (Latham, 5/16/96 Hrg. p.29.)
---------------------------------------------------------------------------
    Mrs. Clinton was the ``billing partner'' on the Madison 
Guaranty engagement, and Massey was the junior associate 
responsible for the ``hands-on'' legal work. This arrangement 
was dictated both by the kind of legal work that was involved 
and by the Rose Law Firm's internal management policies. The 
work to be done for Madison Guaranty involved advice on 
corporate securities law, a very technical and specialized 
area. Mrs. Clinton was a commercial litigator and did not have 
any special expertise in corporate securities law.219 
Massey, who did practice in that area, was a junior associate. 
Rose Law Firm policies did not permit a junior associate to be 
solely responsible for a client account.220 Accordingly, 
Mrs. Clinton served as the billing partner while Massey did 
most of the work on the securities law matters.*
---------------------------------------------------------------------------
    \*\ At the May 16, 1996 hearing at which Latham and Knight 
testified, Majority Counsel questioned why Mrs. Clinton, rather than 
Knight, served as the billing partner on the engagement. (Knight, 5/16/
96 Hrg. pp.48-51.) In fact, it makes perfect sense for Mrs. Clinton to 
have served as the billing partner--it was she who had arranged the 
retainer agreement with McDougal that addressed the payment concerns 
arising out of the prior Madison Bank work. Having met with McDougal 
and negotiated the retainer agreement, it is to be expected that Mrs. 
Clinton would serve as the billing partner and ensure that the billing 
procedure she had agreed upon with McDougal was followed. Knight 
testified that it was not unusual at the Rose Law Firm for a partner to 
handle billing on a matter that was outside that partner's area of 
expertise. (Knight, 4/24/96 Dep. p.27, as corrected by a May 16, 1996 
errata submission.)
---------------------------------------------------------------------------
    The evidence collected by the Special Committee confirms 
that Massey performed most of the substantive legal work and 
billed considerably more time than Mrs. Clinton on the 
securities law matters.221 This finding is consistent with 
Mrs. Clinton's public statements regarding the matter, 
including her statements before additional billing records were 
discovered in the White House on January 4, 1996.222 The 
Rose Law Firm billing records that were discovered in January 
1996 contain detailed time entries for the Rose Law Firm's work 
for Madison Guaranty. Those records show that Mrs. Clinton's 
billings on the securities law matters totalled approximately 
19.4 hours over 9 months, while Massey billed 75.4 hours over 
the same time period.
    During the Special Committee's hearings an issue arose 
concerning Mrs. Clinton's description of her work for Madison 
Guaranty as a ``minimal amount.'' 223 Comparing Mrs. 
Clinton's Madison Guaranty billings with the billings by Jay 
Stephens of Pillsbury Madison & Sutro on the investigation of 
Madison Guaranty conducted by that firm for the Resolution 
Trust Corporation sheds some light on this issue. As discussed 
elsewhere in this report, Stephens testified that he did 
``minimal'' work on the PM&S investigation of Madison Guaranty, 
but his billing records 224 show that he billed 339.75 
hours over 12 months, or an average of 28.3 hours per month. 
Mrs. Clinton in contrast, billed 63.5 hours over 15 months, or 
an average of 4.23 hours per month. The fact that Mr. Stephens 
testified under oath that his work was ``minimal'' in 
amount,225 when the records of the time he billed to the 
government show he did far more work in 1994 and 1995 than Mrs. 
Clinton did in 1985 and 1986, demonstrates that Mrs. Clinton's 
description of her work for Madison Guaranty as ``minimal'' is 
fair and accurate. (The comparison also suggests that Mrs. 
Clinton's critics may be applying a double-standard in an 
effort to score political points.)
    Other contemporaneous documentation that the Special 
Committee has collected confirms the limited nature of Mrs. 
Clinton's work on the preferred stock and securities brokerage 
matters. Massey corresponded and consulted extensively with the 
ASD on a number of issues relating to the preferred stock 
proposal and Madison Guaranty's efforts to license a securities 
brokerage affiliate. The documentation indicates that the 
correspondence and other communications on these matters were 
between Handley, representing the ASD, and Massey, representing 
Madison Guaranty.226 Handley testified that he had 
numerous communications with Massey about the preferred stock 
and broker-dealer matters.227 He did not have any contact 
with Mrs. Clinton. Mrs. Clinton's time records show that she 
reviewed only a few of the letters that Massey wrote to the 
ASD, had no discussions with Handley, and played little or no 
role in the drafting and the underlying research and legal 
analysis.228 Mrs. Clinton had only one brief telephone 
discussion with the ASD, which is discussed below.
    There is no significant discrepancy between the 
recollections of Massey and Mrs. Clinton regarding the 
circumstances surrounding the retention of the Rose Law Firm by 
Madison Guaranty. Latham and Knight confirm the key events--the 
effort by Massey to obtain business from Madison Guaranty 
229 and the prior billing problem for Madison Bank 
work.230 Massey has consistently stated that he made an 
effort to recruit Madison Guaranty as a client and had made a 
proposal to Latham, ``As I testified earlier, I actually 
pitched the business to him. I think the pitch was basically, 
gee, I'm--you're asking me all these questions. Why don't you 
hire us and put us to work on these some of these things.'' 
231 Latham confirmed that Massey ``pitched the business'' 
at the lunch and tried to persuade Latham that Madison Guaranty 
should retain the Rose Law Firm.232 Massey was unable to 
``close the deal,'' however, because Latham did not have the 
authority to retain the Rose Law Firm. (Latham does recall that 
he suggested to McDougal that Madison Guaranty should retain 
the Rose Law Firm, and McDougal came back to Latham and 
instructed him to put the Rose Law Firm on retainer.233) 
Mrs. Clinton eventually played a role in resolving the matter 
because of her prior relationship with James McDougal.234
    Different versions of how Madison Guaranty retained the 
Rose Law Firm have been recounted by James McDougal * and 
over time have been discredited. McDougal at one point told a 
reporter that Governor Clinton visited McDougal at Madison 
Guaranty and expressed a concern about his family's financial 
situation, then asked if McDougal could send Mrs. Clinton some 
of Madison Guaranty's legal work.235 The Special 
Committee's investigation supports the prior conclusion of 
Pillsbury, Madison & Sutro that McDougal's story is contrary to 
the evidence and simply makes no sense.**
---------------------------------------------------------------------------
    \*\ The Special Committee did not subpoena James McDougal pursuant 
to an agreement with the Office of the Independent Office (the 
``OIC''). On September 21, 1995, Special Committee staff provided the 
OIC with a list of potential witnesses to be interviewed, deposed or 
examined at public hearings. On September 27, 1995, the OIC responded 
to the Special Committee letter of September 21, stating, ``We are 
particularly concerned that investigations and hearings on subject 
matters relating to Madison Guaranty, Whitewater and CMS would hinder 
or impede our investigations and prosecutions and might jeopardize the 
proper administration of justice in light of the pending indictment in 
United States v. James B. McDougal.'' On October 2, 1995, Chairman 
Alfonse D'Amato and Ranking Member Paul Sarbanes wrote to the OIC and 
stated, ``The Special Committee does not intend to seek the testimony 
of any defendant in a pending action brought by your office, nor will 
it seek to expand upon any of the grants of immunity provided to 
persons by your office or its predecessors.'' James McDougal, of 
course, was a defendant in a pending criminal action brought by the 
OIC.
    \**\ Pillsbury Madison & Sutro reached the following conclusion:
    ``First, McDougal may not be a reliable witness. In January 1996, 
McDougal's psychiatrist testified that McDougal's recollections are not 
trustworthy, although this one might be.
    ``Second, the statement that McDougal had no specific legal work in 
mind when he retained the Rose Law Firm obviously is wrong. The 
preferred stock issue had arisen at least a week before Mrs. Clinton 
met with McDougal on April 23, 1985, and work on this project began the 
same day as that meeting.
    ``Third, and perhaps most significantly, the alleged economic 
motivation makes no sense. McDougal suggests that the Clintons needed 
$2,000 a month and the implication is that this accounts for the 
monthly retainer in that amount, but there is no evidence that the 
Clintons ever received anything like $2,000 a month from the 
engagement, and every reason to believe that they never received more 
than a trivial sum of money.'' (PM&S Supplemental Rose Report, 2/25/96, 
p.24 (footnotes omitted).)
---------------------------------------------------------------------------
    A brief analysis of the economics of the Rose Law Firm 
engagement reveals the flaws in this version of the retention. 
McDougal agreed to put the Rose Law Firm on a $2,000 a month 
retainer. As a partner in the Rose Law Firm, Mrs. Clinton 
earned a percentage of the firm's profits. ``[I]f all the 
[$2,000 a month] retainer had been earned in fees, Mrs. 
Clinton's share would have been less that $20 a month.'' 
236 This nominal sum of money does not support the theory 
that McDougal was using Madison Guaranty to bestow a financial 
benefit on the Clintons. Moreover, Mrs. Clinton's share of the 
profits was calculated based on a ``five year rolling average'' 
of her billings for her own time.237 Unlike some law 
firms, the Rose Law Firm generally did not compensate partners 
for legal work they brought into the firm that was done by 
others.238 Thus, if the purpose of the Madison Guaranty 
engagement was to enrich the Clintons, Mrs. Clinton would have 
tried to bill as much time to the matter personally as 
possible. As discussed above, she did not do that.
    There is another significant flaw in this version of 
events. McDougal claims that Governor Clinton visited him at 
Madison Guaranty in the summer or perhaps early fall of 1984 
(according to McDougal, it was a hot day and Clinton, sweating 
from his jog, supposedly sat in and stained McDougal's new 
leather chair).239 Yet the retainer agreement and the Rose 
Law Firm's work for Madison Guaranty did not commence until 
April 1985. It seems unlikely that if Governor Clinton had 
asked McDougal to retain Mrs. Clinton, and if McDougal was 
willing to do so, that the retainer would not have been put 
into place and the Rose Law Firm would not have been given any 
legal work until some nine months later. David Knight recalls 
that his lunch with Latham and Massey was in the spring of 
1985, 240 perhaps in February or March.241 Massey 
testified that it was a matter of weeks between the ``pitch'' 
to Latham and the retention of the Rose Law Firm.242 The 
Rose Law Firm billing records establish that the firm began 
working for Madison Guaranty on April 23, 1985.243 The 
first $2,000 monthly ``retainer'' payment was in April or May 
1985.* Knight recalls that it was Massey who told him that 
the firm had been retained by Madison Guaranty.244 All of 
these events are consistent with Mrs. Clinton's recollection of 
the circumstances of the retention and are inconsistent with 
McDougal's story.**
---------------------------------------------------------------------------
    \*\ A May 2, 1985 Madison Guaranty check for $2,000 (Doc. No. S-
KCR02954) to the Rose Law Firm may be the first monthly payment under 
the retainer agreement. No Madison Guaranty checks to the Rose Law Firm 
prior to May 2, 1985 check have been located.
    \**\ It is worth noting that on at least one occasion McDougal has 
recanted his earlier statements about the retention of the Rose Law 
Firm and characterized them as a ``total fabrication.'' (``First Lady's 
Former Law Aide Supports and Contradicts Her'', Star Tribune, Jan. 12, 
1996.)
---------------------------------------------------------------------------

                             c. Conclusion

    Taken as a whole, it is clear that there was nothing 
improper or inappropriate about the retention of the Rose Law 
Firm by Madison Guaranty. Madison Guaranty needed legal counsel 
after legal issues arose out of McDougal's plan to sell 
preferred stock. The Rose Law Firm, because of Massey's 
relationship with Latham and the firm's expertise in securities 
law, was a logical choice to provide that counsel. The Special 
Committee has not found any evidence that Madison Guaranty's 
retention of the Rose Law Firm was a scheme for McDougal to 
confer a financial benefit on the Clintons. This conclusion is 
consistent with the findings of Pillsbury Madison & Sutro after 
a two-year investigation of Madison Guaranty.245

2. The Arkansas Securities Department's regulation of Madison Guaranty 
        Savings and Loan

    As discussed above, the Special Committee's investigation 
has confirmed that Mrs. Clinton's role in the representation of 
Madison Guaranty before the ASD was very limited. A related 
issue is whether, notwithstanding the limited nature of her 
work on the securities matters, Mrs. Clinton sought to use her 
position as the Governor's wife to seek to influence the ASD. 
The Special Committee has reviewed both matters--the preferred 
stock proposal and the broker-deal proposal--in which the Rose 
Law Firm represented Madison Guaranty before the ASD. In each 
case the evidence demonstrates that there was no effort to 
obtain preferential treatment, and that, in fact, no 
preferential treatment was given. To the contrary, the ASD 
under the direction of Beverly Bassett Schaffer performed its 
duties in an entirely appropriate manner and took no action 
that either improperly benefitted Madison Guaranty or that was 
in any way inconsistent with the public interest.

                a. The proposal to issue preferred stock

    As noted above, on April 3, 1995, Madison Guaranty vice-
president Davis Fitzhugh contacted the ASD to obtain the 
necessary forms for a preferred stock offering.246 ASD 
Chief Examiner Handley testified that Fitzhugh said he had been 
told other savings and loan institutions had issued preferred 
stock and there was a ``standard form'' for such stock 
offerings.247 Later that day, Handley sent a memorandum to 
Schaffer regarding his conversation with Fitzhugh on the 
preferred stock matter.248 In that memorandum Handley, who 
was not an attorney, advised Schaffer that he did not believe 
the Arkansas savings and loan statutes provided for the 
issuance of non-voting preferred stock by a state-chartered 
savings and loan association.249 Handley also provided 
Fitzhugh a copy of his April 3 memorandum, which attached 
copies of the Arkansas savings and loan statutes. It appears 
that Fitzhugh reviewed the memorandum and the statutes Handley 
sent him. An April 16 memorandum from Fitzhugh to John Latham 
summarizes the statutes and argues that under the statutes 
Madison Guaranty should be permitted to issue preferred 
stock.250 Since the Special Committee was not able to 
obtain testimony from McDougal, it was not possible to 
determine whether Fitzhugh's April 16 memorandum caused 
McDougal to write his April 18 memorandum to Latham stating he 
wanted the preferred stock ``cleared up immediately'' and to 
decide to retain the Rose Law Firm.

  (1) Mrs. Clinton's one telephone conversation with Beverly Bassett 
                                Schaffer

    Mrs. Clinton had one preliminary telephone conversation 
with Beverly Bassett Schaffer about the preferred stock 
matter.251 On April 29, 1985, Mrs. Clinton called Schaffer 
and told her that the Rose Law Firm was preparing to submit a 
proposal for Madison Guaranty to issue preferred stock.252 
Schaffer testified that she told Mrs. Clinton she was already 
``familiar with that issue.'' 253 Schaffer told Mrs. 
Clinton that the letter should be directed to Charles Handley, 
who was handling the Madison Guaranty matter.254 Mrs. 
Clinton does not recall anything specific about her 
conversation with Schaffer except that she asked to whom in the 
office requests concerning savings and loan associations should 
be directed.255 Her recollection is consistent with 
Schaffer's testimony and with the documentary evidence, and the 
Special Committee has no evidence that anything further was 
discussed in that telephone conversation. That telephone call 
was Mrs. Clinton's only personal contact with the ASD.

             (2) Richard Massey's work with Charles Handley

    On April 30, 1985, the Rose Law Firm sent a letter to 
Handley seeking to confirm the Rose Law Firm's legal opinion 
that under the Arkansas Business Corporations Act a state-
chartered savings and loan association could issue a class of 
non-voting preferred stock.256 Schaffer was copied on the 
letter. On May 6, 1985, Handley forwarded the letter to 
Schaffer and Assistant Securities Commissioner Nancy Jones with 
a handwritten note indicating that he did not agree with all 
aspects of the Rose Law Firm's legal analysis.257 Although 
Handley agreed that a state-chartered savings and loan could 
issue preferred stock, he believed that a different provision 
of Arkansas law provided the authority for the stock issuance. 
The distinction here is important--Handley did not question 
Madison Guaranty's ability under Arkansas law to issue 
preferred stock. His concern was a narrow, technical question 
of what provision of Arkansas law authorized the issuance of 
preferred stock. It was left to Schaffer, a lawyer with 
experience in securities law, to resolve that issue.
    On May 14, 1985, Schaffer concluded that the Rose Law 
Firm's analysis was correct and that under the Arkansas 
Business Corporations Act a state-chartered savings and loan 
institution could issue non-voting preferred stock.258 
Schaffer's decision has been widely misunderstood and 
misreported. Contrary to the assertions in many news media 
reports on this matter, Schaffer's decision did not permit 
Madison Guaranty to sell preferred stock. Instead, it simply 
cleared the way for Madison Guaranty to file an application 
with the ASD requesting permission to sell the stock. In other 
words, even after Schaffer's May 14 letter, issuance of the 
stock remained subject to the approval of the ASD. As discussed 
below, that approval was never granted.

         b. The Proposal to Operate a Broker-Dealer Subsidiary

    The preferred stock proposal was not the only matter in 
which the Rose Law Firm represented Madison Guaranty before the 
ASD. It appears that as early as March 1985, McDougal was 
planning to establish a securities brokerage operation at 
Madison Guaranty. Davis Fitzhugh, a former vice president of 
Madison Guaranty, testified that he ``was hired primarily 
because [Madison Guaranty was] interested in having a broker/
dealer network, securities sales. I told them I was willing to 
take all the series licenses involved. I didn't know anything 
about it, but I was willing to try to learn. So, that's 
really--that's one of the main things they hired me for, that 
plus general real estate development.'' 259 On May 14, 
1985, Richard Massey submitted to the ASD on behalf of Madison 
Guaranty an application to engage in securities brokerage 
activities through a second-tier service corporation.260 A 
thorough review of the correspondence between Massey and 
Handley on this proposal demonstrates that Handley and the ASD 
clearly were not giving Madison Guaranty or the Rose Law Firm 
any special treatment. That correspondence is described below.
    On May 22, 1985, a week after Massey submitted the 
securities brokerage application, Handley forwarded a 
memorandum to Schaffer and Jones listing eleven issues that he 
had identified in his review of the application.261 
Handley also sent Massey a copy of his memorandum. In addition 
to issues relating to filing procedures and information about 
the proposed broker-dealer subsidiary, Handley identified two 
significant issues relating to the ASD's regulation of the 
parent company. First, Handley noted that the ASD would need to 
review current financial statements for Madison Guaranty to 
determine whether ``the total aggregate outstanding investment 
in capital stock, obligations or other securities of service 
corporations and subsidiaries and joint ventures'' exceeded 6% 
of Madison Guaranty's assets, a limitation imposed by ASD Rule 
V(C) (the ``six percent rule'').262 Second, Handley noted 
that Madison Guaranty's most recent financial statements, for 
year-end 1984, indicated that the institution did not meet the 
FHLBB minimum net worth requirements.263 Handley 
recommended to Schaffer and Jones that Madison Guaranty be 
required to submit their current net worth calculation and a 
plan to cure any deficiency before the ASD would approve the 
securities brokerage proposal.
    On June 17, 1985, Massey replied to Handley's letter of May 
22, indicating that his letter was an amended application on 
behalf of Madison Guaranty.264 Massey's June 17 letter 
outlined steps that Madison Guaranty would take to correct the 
institution's net worth deficiency, including issuance of ``a 
new class of preferred stock.'' 265 Despite the proposal 
outlined in Massey's June 17 letter, Handley took the position 
that Madison Guaranty would have to comply with federal net 
worth requirements before the ASD would approve the brokerage 
subsidiary proposal. On June 18, 1985, after reviewing the 
amended application submitted by Massey, Handley sent a 
memorandum to Jones and Schaffer stating that the application 
should not be approved ``until the Association has filed proof 
it has met the [FHLBB] minimum net worth requirement and even 
then our approval would need to be conditioned on receiving the 
FHLBB's principal supervisory agent's approval'' (under the so-
called ``direct investment rule'').266 Handley also 
continued to insist that Madison Guaranty provide additional 
financial information so the ASD could confirm that the 
institution's proposed investment in the broker-dealer would 
not exceed the six percent rule limitation on investments in 
service corporations.267
    The significance of Handley's position on these two 
regulatory requirements, as documented in his June 18 
memorandum, is that it dispels any suggestion that the ASD was 
``going easy'' on Madison Guaranty. Handley, supported by 
Schaffer, was requiring Madison Guaranty to meet all applicable 
regulatory requirements before the ASD would permit the 
institution to operate a broker-dealer subsidiary.*
---------------------------------------------------------------------------
    \*\ In a February 25, 1992 memorandum from Schaffer to Jeff Gerth, 
a reporter for The New York Times, Schaffer recalled that Assistant 
Securities Commissioner Nancy Jones believed that Madison Guaranty did 
not need to obtain approval of the ASD before operating a second-tier 
securities subsidiary: ``In the mid-1980's, federal savings and loans 
were allowed to engage in securities brokerage activities. Assistant 
Commissioner Nancy Jones believed that the savings and loan could 
engage in this activity without our prior approval. Charles Handley and 
I took the position, however, that it was not a pre-approved activity 
and that the savings and loan could not do it without our prior 
approval. Thus, we gained the necessary leverage to insist on an 
immediate infusion of additional capital.'' (Doc. Nos. 0000149, 
0000155.) Obviously, if Schaffer was seeking to give Madison Guaranty 
special or lenient treatment, she could simply have adopted Jones's 
position and permitted Madison Guaranty to go forward with the 
brokerage operation. As the correspondence summarized here 
demonstrates, however, she did the opposite. Schaffer and Handley 
required Madison Guaranty to comply with every applicable regulatory 
requirement.
---------------------------------------------------------------------------
    On July 10, 1995, Massey sent a letter to Handley in 
response to Handley's June 18 memorandum, arguing that the 
direct investment rule was inapplicable because the 
``investment in question was one of the service corporation and 
not of Madison.'' 268 Massey argued that the rule 
prohibited only direct investments by savings and loans in a 
service corporation, so in the Madison Guaranty situation, 
where the brokerage firm would be a second-tier investment by 
an existing service corporation, prior approval by the FHLBB 
was not required.269 On July, 17, 1985, Handley forwarded 
Massey's letter of July 10th to Schaffer and Jones, stating 
that he disagreed with Massey's position and also had concerns 
about the effect on net worth of certain adjustments to Madison 
Guaranty's December 31, 1984 audited financial 
statements.270 Handley told Schaffer and Jones that he 
``would recommend that the approval of this application be 
conditioned on the Association meeting the net worth 
requirements of the FHLBB or at a minimum the Association 
filing a detailed and reasonable plan which reflects that these 
net worth requirements will be met within a very short time.'' 
271 Again, Massey was copied on the memorandum.
     On July 25, 1985, Massey wrote another letter to Schaffer 
indicating that the adjustments to Madison Guaranty's year-end 
1984 financial statements were a result of the differences in 
calculating ``net worth'' under generally accepted accounting 
principles (GAAP) and regulatory accounting principles 
(RAP).272 Massey also proposed that Madison Guaranty be 
permitted to operate the brokerage subsidiary and use profits 
from that and other new business ventures, as well as savings 
from plans to reduce operating expenses, to cure the net worth 
deficiency. On July 27, 1985, Handley sent a memorandum to 
Schaffer and Jones stating that he had reviewed Massey's letter 
of July 25 and concluded that the year-end 1984 adjustments 
would not decrease Madison Guaranty's net worth.273 
Handley continued to recommend, however, that Madison 
Guaranty's application to operate a securities brokerage be 
conditioned on Madison Guaranty's submission of either proof 
that it was in compliance with FHLBB net worth requirements or 
a detailed plan outlining steps to come into compliance. He 
rejected the proposal Massey had submitted, on behalf of 
Madison Guaranty, that the net worth deficiency be cured with 
net profits generated from proposed new business ventures 
(including the proposed brokerage subsidiary) and the future 
reduction of operating expenses.274
    Efforts by Madison Guaranty and Massey to satisfy the 
requirements imposed by the ASD continued through 1985. On 
September 9, 1985, Massey forwarded to Schaffer a letter 
outlining two proposed actions Madison Guaranty would take to 
come into compliance with the FHLBB net worth requirements by 
December 31, 1985.275 Massey's letter acknowledged that as 
of June 30, 1985, Madison Guaranty was not in compliance with 
the applicable FHLBB minimum net worth requirement.276 
Massey proposed that Madison Guaranty would cure the net worth 
deficiency before year-end with a $3 million offering of 
preferred stock and an offering of limited partnership units of 
Madison Guaranty, with Madison Financial Corporation as the 
general partner.277
    On September 12, 1985, after reviewing the proposal set 
forth in Massey's letter of September 9, Handley prepared a 
handwritten memorandum to Schaffer advising her that Madison 
Guaranty's net worth deficiency had ``increased greatly since 
March 31, 1985.'' 278 Handley recommended that, at a 
minimum, the ASD should condition the approval of the 
securities brokerage application on three factors: 1) Madison 
Guaranty filing documents which reflected the ``exact terms and 
conditions'' of the preferred stock offering; 2) an opinion by 
counsel that the preferred stock would meet all the conditions 
necessary under FHLBB rules to be included in regulatory net 
worth; and, 3) that Madison Guaranty would file a statement 
reflecting that the institution could successfully complete its 
stock offering in the stated time period.279
    Schaffer accepted Handley's recommendation, and on October 
17, 1985, she sent a letter to Massey indicating that Madison 
Guaranty's request to engage in brokerage activities had been 
approved on September 20, 1985, ``conditioned upon Madison's 
[compliance with] the Federal Home Loan Bank Board's minimum 
net worth requirements by December 31, 1985.'' 280 
Schaffer also asked Madison Guaranty to keep the ASD informed 
on the status of ``Madison's efforts to achieve compliance.'' 
281 On December 9, 1985, Handley wrote to Massey that the 
ASD was ``concerned about the ability of Madison to complete 
the sale of such stock and meet the minimum net worth 
requirements of the Bank Board by December 31, 1985, as earlier 
agreed.'' 282 On December 18, 1985, Madison Guaranty 
acknowledged that it could not meet the conditions for engaging 
in securities brokerage activities that had been imposed by the 
ASD: ``Madison acknowledges that it has not met the FHL[B]B's 
minimum net worth requirements, and that the successful 
implementation of steps which would satisfy such requirements 
was a condition to your approval of the Application. Thus, 
Madison undertakes that it will not engage in brokerage 
activities until it has received approval from [the ASD] with 
respect to such activity.'' 283 The requirements imposed 
by the ASD were never met.
    Despite the months of work by Massey and the Rose Law 
Firm,* Madison Guaranty never issued any preferred stock 
and never operated a broker-dealer subsidiary. It is abundantly 
clear that the institution received no preferential treatment 
from Schaffer or the ASD in connection with its application to 
issue preferred stock and operate a brokerage subsidiary.
---------------------------------------------------------------------------
    \*\ As noted above, the great majority of this work was done by 
Massey. Mrs. Clinton did not play a significant role and had no 
personal contacts with the ASD after the initial telephone conversation 
with Schaffer.
---------------------------------------------------------------------------

    c. Beverly Bassett Schaffer's efforts to close Madison Guaranty

    Madison Guaranty's financial condition continued to worsen 
in the first half of 1986. On July 11, 1986, Schaffer attended 
a meeting in Dallas between the FHLBB regulators and the 
Madison Guaranty board of directors. In attendance were 
Schaffer and Handley from the ASD; Rolf Coburn, Bob Young, Dawn 
Pulcer, James Clark, Chip Kieswieter, Larry Stacy, and Walter 
Faulk from the FHLBB; Karen Bruton from the Enforcement 
Division of the Federal Savings and Loan Insurance Corporation 
(the ``FSLIC''), the predecessor to the Resolution Trust 
Corporation; Steve Cuffman, Dennis Edwards, John Latham, Jack 
Owen, Sarah Hawkins, and Charles Peacock from Madison Guaranty 
board of directors; and John Selig and Breck Speed of the 
Mitchell, Williams & Selig law firm, outside counsel to Madison 
Guaranty.284 McDougal was not present, and no one from the 
Rose Law Firm attended the meeting.
    At the meeting, the regulators confronted the board of 
directors with findings of regulatory violations at Madison 
Guaranty and advised the board of directors that the McDougals 
would have to be removed from any role at the 
institution.285 Faulk identified a number of serious 
problems at Madison Guaranty, including: 1) net worth $1.6 
million short of FHLBB regulations; 2) uncontrolled growth of 
deposits; 3) accounting mismanagement; 4) excessive 
compensation for McDougal and Latham; 5) ``misuse of position 
and usurpation of corporate opportunities''; and 6) inaccurate 
and unsupported appraisals and projections.286 Handley 
testified that the ASD was in complete agreement with the 
federal officials and concurred with the action against 
McDougal.287 FHLBB officials have stated that Schaffer and 
the ASD were fully supportive of the FHLBB's position and took 
no action to interfere with or impede the actions of the 
federal regulators.288
    At the meeting, Selig proposed a consulting agreement or a 
voting trust for the McDougals, but the federal regulators 
insisted that the McDougals had to be removed from any 
association with Madison Guaranty and its affiliates.289 
The McDougals resigned from their positions at Madison 
Financial later that month.290 Latham also was 
removed.291 Board member Steve Cuffman assumed the title 
of Madison Guaranty chief executive officer and oversaw Madison 
Guaranty's operation until a new chief executive was put in 
place by the federal regulators.
    After the July 11 meeting, Schaffer provided a copy of a 
June 19, 1986 FHLBB letter on Madison Guaranty to Sam Bratton, 
an aide in Governor Clinton's office who was responsible for 
state savings and loan matters.292 Schaffer testified that 
she sent the FHLBB letter and a July 2 cover note to Bratton 
because she was concerned that McDougal might seek to have the 
governor's office intercede on his behalf because of his 
longstanding relationship with Governor Clinton.293 At the 
time Schaffer knew that McDougal had been an aide during 
Clinton's first term as governor and was a political supporter, 
but she did not know that Clinton had any business ties to 
McDougal.294 Schaffer also feared that depositors would be 
concerned about their accounts at Madison Guaranty and might 
contact the governor's office, and she wanted Bratton to be 
prepared for any such calls.295 With respect to the latter 
concern, Schaffer testified that it was her regular practice 
* to inform the governor's office before a savings and 
loan association was closed.296
---------------------------------------------------------------------------
    \*\ Documents obtained by the Special Committee confirm that state 
regulators kept the governor's office apprised of potential regulatory 
problems affecting financial institutions. A February 19, 1986 letter 
to Governor Clinton from Bank Commissioner Marlin D. Jackson (Doc. No. 
DKSN 018001) reports on the lack of funds in the Federal Savings and 
Loan Insurance Corporation (FSLIC) fund. The letter states that Jackson 
``shared this information only with members of the Governor's staff. I 
think it is important to recognize the seriousness of the dilemma 
facing the Congress and the State in regard to the adequacy of the 
FSLIC fund.'' It was only some five months later that Schaffer informed 
the governor's office of the problems at Madison Guaranty. Her action 
in doing so appears both timely and entirely appropriate in view of the 
problems recognized in the Jackson letter. (Jackson's letter proved to 
be prescient. As discussed below, in 1987 when Schaffer recommended to 
federal authorities that Madison Guaranty be closed, the FSLIC 
insurance fund was inadequate, and as a result the closure of the 
institution was delayed for almost two years.)
---------------------------------------------------------------------------
    The June 19 FHLBB letter that Schaffer attached to her note 
to Bratton had already been sent to Madison Guaranty, so 
Schaffer was not releasing any non-public information to the 
governor's office. In addition, FHLBB regulators had contacted 
McDougal directly and advised him that the FHLBB would be 
taking over management of the institution and that he would be 
removed.297 Schaffer testified that she does not believe 
that anything untoward, irregular, or improper resulted from 
her communication with Bratton.298 Bratton 299 and 
Betsey Wright, 300 the former chief of staff to Governor 
Clinton, confirmed that Schaffer's action was appropriate and 
consistent with past practice in matters involving troubled 
financial institutions. Clearly, nothing was done by ASD 
officials to thwart the decision to remove the 
McDougals.301
    Ultimately, it was Schaffer who insisted that Madison 
Guaranty be closed by the federal regulators.302 Although 
a cease and desist order was entered against Madison Guaranty 
shortly after the July meeting in Dallas, 303 the ASD did 
not have proof that Madison Guaranty was insolvent until late 
1987, when the institution's independent auditors completed an 
annual audit of the thrift. On December 10, 1987, after 
reviewing the independent auditors' report on Madison 
Guaranty's financial condition at year-end 1986, Schaffer 
recommended to the FHLBB that the institution be closed, 
``since it is apparent now that [Madison Guaranty] cannot be 
restored to solvency without assistance of the FSLIC and since 
it appears unlikely that the FHLBB will succeed in finding a 
purchaser or merger partner, [the ASD] must request that 
[Madison Guaranty] be transferred immediately to the FSLIC.'' 
304 The FHLBB refused to take action to close the 
institution, however, and as a practical matter there was 
nothing further Schaffer and the ASD could do without the 
support of the federal officials.
    The Committee found no evidence that Schaffer and the ASD 
failed to take timely and appropriate action to close Madison 
Guaranty. While the ASD theoretically could have brought a 
lawsuit in state court to have Madison Guaranty closed and 
placed in a receivership, the ASD would have had the burden of 
proving that Madison Guaranty was insolvent. Prior to receiving 
the December 1987 audit report, the ASD had no such proof. More 
important, even after receiving the December 1987 audit report, 
the ASD did not have funds to pay off depositors if Madison 
Guaranty had been closed by the state.305 Schaffer 
testified that if the institution had been closed without 
paying off depositors, it might have precipitated ``panic'' and 
led to a statewide banking crisis.306 Former FHLBB 
supervisory agent Walter Faulk agreed that this would have been 
``a rather foolish move on [ASD's] part because you would raise 
concerns within the community.'' 307 Handley testified 
that if the ASD had moved forward and filed for receivership, 
it would have been ``disastrous to the insurance system in the 
State of Arkansas.'' 308 Under these circumstances it is 
not surprising that the ASD deferred to the federal regulators 
and did not act unilaterally to close the institution. The 
federal regulators did not close Madison Guaranty until 
February 28, 1989.309 This delay was the result of the 
failure of the federal authorities to act on Schaffer's 
December 1987 recommendation and was in no way caused by 
Schaffer or other Arkansas officials. Although the Special 
Committee did not investigate the effect this delay had on the 
losses associated with Madison Guaranty, it is likely that 
those losses would have been reduced if the federal authorities 
had heeded Schaffer's recommendation and closed the institution 
in 1987.

                             d. Conclusions

   (1) The securities law matters on which the Rose Law Firm advised 
           Madison Guaranty were not unusual or inappropriate

    The documents and testimony that the Special Committee has 
obtained provide a number of insights into the work the Rose 
Law Firm did for Madison Guaranty on the preferred stock and 
brokerage subsidiary proposals. The evidence establishes that 
the Rose Law Firm confronted regulatory obstacles at the ASD 
and performed significant legal services over the course of 
several months seeking to satisfy those regulatory impediments. 
This is the kind of legal work that large law firms routinely 
do for to their clients, and there was nothing unusual or 
inappropriate about the securities law work the Rose Law Firm 
did for Madison Guaranty.
    Furthermore, the activities that Madison Guaranty was 
seeking to have approved by the ASD were lawful so long as the 
applicable regulatory requirements were satisfied. The 
preferred stock offering in particular, if successful, would 
have benefitted both depositors and regulators because it would 
have increased the institution's net worth and improved its 
financial condition. In the mid-1980s it was a common industry 
practice for savings and loan associations to issue preferred 
stock, and financially troubled institutions even were 
encouraged to do so by federal regulators.310 Schaffer 
testified that federal regulators were recommending that 
troubled thrifts raise additional capital by issuing preferred 
stock, ``particularly for small savings and loans, [or] closely 
held entities without a market.'' 311 This policy was 
reflected in FHLBB regulations in effect at the time. On July 
12, 1984, the FHLBB had issued regulations authorizing a 
federally chartered savings and loan association to establish a 
subsidiary ``whose sole purpose is to issue debt or equity 
securities that the association is authorized to issue directly 
* * * and to remit the net proceeds of such issuance to the 
association. * * *'' 312 In May 1985, the FHLBB reported 
it was ``aware that during the past year many institutions [had 
issued] subordinated debt to ``limited purpose'' finance 
subsidiaries which obtained the funds to purchase the 
subordinated debt by issuing preferred stock to independent 
third parties.'' 313 Thus, the preferred stock proposal 
that Madison Guaranty and the Rose Law Firm presented to the 
ASD was consistent with both federal regulatory policy and the 
actions of similarly situated financial institutions.
    Finally, the correspondence between Massey and Handley, 
coupled with the Rose Law Firm billing records, establishes 
conclusively that Massey without question did most of the Rose 
Law Firm legal work on the securities matters involving the 
ASD. Mrs. Clinton's role was relatively minor, and Massey was 
the point of contact for both the regulators and the client. 
Mrs. Clinton had only one contact with the ASD, and nothing 
improper resulted from that contact. This finding is consistent 
with the position Mrs. Clinton has taken since questions first 
arose about the work the Rose Law Firm did for Madison 
Guaranty. Nothing the Special Committee has found calls into 
question the accuracy of Mrs. Clinton's prior statements 
regarding the nature and amount her work for Madison Guaranty 
on the securities law matters.

        (2) Madison Guaranty received no preferential treatment

    The correspondence between the ASD and the Rose Law Firm 
also shows that Beverly Bassett Schaffer delegated both Madison 
Guaranty securities matters to Charles Handley, a career 
official of the ASD, for review and analysis. Handley was a 16-
year veteran of the Department and a career regulator, not a 
political appointee.314 He conducted a thorough, rigorous 
and fair review of Madison Guaranty's proposals and did not 
hesitate to point out deficiencies and withhold regulatory 
approval where appropriate. The positions taken by the ASD were 
based on Handley's interpretation of the applicable laws and 
regulations, and Handley testified that no one ever pressured 
him to relax these requirements on behalf of Madison 
Guaranty.315 When the Rose Law Firm took issue with 
Handley's interpretations of the legal requirements, he did not 
simply acquiesce to the law firm's arguments. Instead, he held 
firm to his position and demanded compliance with regulatory 
requirements.
    Perhaps most important, Beverly Bassett Schaffer supported 
Handley's recommendations and never took any action to relax 
the applicable regulatory requirements or to give Madison 
Guaranty and the Rose Law Firm special treatment. Schaffer, 
Handley and ASD staff attorney William Brady all testified that 
at no point did either Governor Clinton or Mrs. Clinton ask 
Schaffer to do anything illegal or improper.316 In 
particular, Schaffer testified that she did not attach any 
particular significance to her one telephone conversation with 
Mrs. Clinton.317 Nor did anyone in the Governor's office 
put any political pressure on Schaffer or any other ASD staff 
to give Madison Guaranty special treatment.318 In short, 
Schaffer behaved exactly as an appointed regulatory official 
should in relying upon the expertise of her professional staff 
to identify applicable regulatory requirements and then 
insisting that all such requirements be met before her 
department approved Madison Guaranty's proposals. Because those 
requirements were never satisfied, the proposals were never 
approved by the ASD.
    The propriety of the actions taken by the ASD is evidenced 
by the fact that the federal regulators have since praised 
Schaffer's actions. Walter Faulk, the former FHLBB supervisory 
agent for Arkansas savings and loan institutions, has stated 
that Schaffer ``acted responsibly at all times and I don't see 
how anyone that knew the history of this case,. . . could say 
that she acted irresponsibly or delayed or drug her feet in any 
manner whatsoever.'' 319 The Special Committee has found 
no contrary evidence. Schaffer at all times acted responsibly 
and ethically in her dealings with the Rose Law Firm on the 
Madison Guaranty matter.
            3. The IDC Real Estate Transactions
    In the late summer and fall of 1985, the Rose Law Firm 
provided some legal services to Madison Guaranty in connection 
with the purchase of a large tract of land south of Little Rock 
from the Industrial Development Corporation (``IDC''). The work 
done by the Rose Law Firm, and especially Hillary Rodham 
Clinton, on IDC matters has been the subject of considerable 
attention. The focus of that attention has been on whether Mrs. 
Clinton or other Rose Law Firm lawyers had any involvement in 
aspects of the IDC transaction that may have been unlawful. The 
Special Committee investigation found no credible evidence that 
the Rose Law Firm and Mrs. Clinton were involved in or aware of 
any unlawful activity involving the IDC property. The evidence 
the Special Committee has collected that is relevant to this 
issue is discussed below.

  a. The Rose Law Firm and Mrs. Clinton played no role in the alleged 
    ``Straw Buyer'' arrangement between Seth Ward and James McDougal

    On or about August 2, 1985, the Rose Law Firm opened a 
client billing number (used to record lawyer time and expenses 
in the firm's internal accounting system for billing purposes) 
entitled ``Madison Guaranty--IDC.'' 320 Mrs. Clinton, who 
was the ``billing partner'' on other work the Rose Law Firm 
already was doing for Madison Guaranty (discussed above), has 
no recollection of how the IDC work came into the Rose Law 
Firm.321 Webster Hubbell, however, reportedly has said 
that his father-in-law Seth Ward, who was working for Madison 
Guaranty at the time, referred the matter to the Rose Law Firm 
at the direction of James McDougal.322
    Rose Law Firm billing records indicate that real estate 
partner Thomas Thrash began working on the IDC transaction on 
August 6, when he reviewed a draft contract for the sale of the 
property to Madison Financial Corporation, a subsidiary of 
Madison Guaranty.323 Thrash exchanged drafts of the sales 
contract with IDC's attorney, Darrell Dover, throughout 
August.324 The Rose Law Firm billed Madison Guaranty 
$654.30 for services provided by Thrash in August 1985 on the 
acquisition of the IDC property.325 Rose Law Firm 
associate Davis Thomas, Jr. also worked on the acquisition of 
the IDC property in August 1985, and the Rose Law Firm billed 
Madison Guaranty $90.00 for his work.326 Mrs. Clinton did 
not do any work on the IDC matter in August 1985.327
    The principal issue relating to the Rose Law Firm's work in 
connection with the acquisition of the IDC property is whether 
Rose Law Firm attorneys knew or should have known that Seth 
Ward, who purchased some 650 acres of the IDC property for 
$1.15 million, may have been a nominee or ``straw buyer'' for 
Madison Guaranty.328 (Madison Financial Corporation 
purchased the remaining 400 acres of the IDC property.) 
329 The straw buyer issue is pertinent because if Ward was 
acting as a straw buyer for Madison Guaranty, the transaction 
may have been a violation of an Arkansas law limiting the size 
of investments by state-regulated savings and loan 
associations.330 John Latham 331 and Davis Fitzhugh 
332 also have testified that they understood that Ward 
purchased a portion of the IDC property because of limits on 
the amount Madison Guaranty could invest in a service 
corporation (Madison Financial). Former Madison Guaranty loan 
officer Don Denton reportedly has stated that the purpose of 
the transaction was to avoid the investment limitation.333

(1) The purchase of the IDC property by Madison Financial and Seth Ward

    In 1985 Ward was employed by Madison Guaranty on a part-
time basis to look for real estate investment opportunities in 
the Little Rock area. Ward testified 334 that James 
McDougal wanted to acquire an easement through the IDC property 
to gain access to a ``landlocked'' piece of property that 
McDougal intended to buy from International Paper 
Corporation.* When Ward contacted IDC, they were unwilling 
to sell an easement, but offered to sell the entire 
property.335 Ward recalls that he reported back to 
McDougal, and McDougal said Madison Guaranty was not interested 
in purchasing such a large piece of property.336 John 
Latham confirms that McDougal was interested in acquiring only 
a portion of the IDC property--``just one area on 145th Street 
that he wanted to develop as a residential area.'' 337 
Ward went back to IDC and negotiated a lower price, and then 
told McDougal he intended to purchase the entire property 
himself. Ward recalls that McDougal responded, ``Well, at that 
price, we'd like to share it with you.'' 338 Again, 
Latham's recollection is consistent. Latham testified: ``It was 
a very good purchase, and I think that both Seth wanted to make 
as much money on it as possible and Jim McDougal wanted to make 
as much money as possible. And so they split it up.'' **
---------------------------------------------------------------------------
    \*\ This is the property that James and Susan McDougal purchased 
from International Paper Co. in October 1986 in the name of Whitewater 
Development Corporation without the knowledge of the Clintons. When 
they purchased the property the McDougals represented to International 
Paper that they were the sole owners of Whitewater Development 
Corporation. (PM&S Preliminary Report on Whitewater Development, 4/24/
95, pp.116-122; PM&S Report on Whitewater Development, 12/13/95, pp.62-
64.) The Clintons have stated that they were unaware of the 
International Paper transaction. (Interrogatory Responses of Hillary 
Rodham Clinton, May 24, 1995, answer to Interrogatory No. 24(c), at 59-
60; Interrogatory Responses of William Jefferson Clinton, May 24, 1995, 
answer to Interrogatory No. 24, at 46-47.) James McDougal did not 
inform the Clintons of the purchase of the International Paper property 
in November 1986 when he suggested that they transfer their stock in 
the corporation to him. (Doc. No. DKSN 010462, November 14, 1986 letter 
from James McDougal to Governor and Mrs. Clinton regarding status 
report on Whitewater Development Corporation.)
    \**\ As noted above, Latham also acknowledged that Arkansas savings 
and loan regulations would not have permitted Madison Guaranty to 
purchase the entire property. (Latham, 5/15/96 Dep. pp.35-36.)
---------------------------------------------------------------------------
    Despite the testimony of Ward and Latham, it is not clear 
when the decision was made that Ward would purchase a portion 
of the IDC property and Madison Financial would purchase the 
remainder of the property. The initial drafts of the contract 
for the sale of the IDC property indicated that the entire 
property would be purchased by Madison Financial or its 
``affiliate.'' 339 Subsequent drafts changed the wording 
of the contract from ``affiliate'' to ``any individual or 
entity'' designated by Madison Financial, language that would 
more clearly include Ward.340 Ward ultimately purchased 
approximately 650 acres of the IDC property, the portion of the 
property north of 145th Street, for $1.15 million.341 
Madison Guaranty loaned Ward the entire purchase price of the 
property on a ``non-recourse'' basis--Ward was not personally 
liable, and the loan was secured only by the property:

          Notwithstanding anything herein to the contrary, 
        makers and payee covenant and agree that makers, their 
        heirs and assigns shall not be personally liable to the 
        holders of this note for any default which may occur in 
        the performance of any of the terms hereof * * *. The 
        sole remedy of the maker(s) in the event of any such 
        default shall be to proceed against the collateral 
        encumbered mortgage securing [the property.] 342

    Madison Financial purchased the remaining 400 acres of the 
property, the property south of 145th Street, for 
$600,000.343 Madison Financial also paid Ward $35,000 for 
a 270-day option to purchase the property from Ward, one 
version of which excludes 22.5 acres of the property (the 
Holman Acres parcel).* In addition, Madison Financial 
agreed to pay Ward a ten percent commission * on all sales 
of IDC commercial property.344
---------------------------------------------------------------------------
    \*\ The terms of the option agreement are a matter of dispute. 
There are three versions of the agreement: (1) an unsigned draft dated 
September 23, 1985 that Ward provided to Special Committee staff during 
his deposition on Feb. 12, 1996; (2) a signed version (marked ``void'') 
dated September 24, 1985, that gives Madison Financial an option on all 
the property Ward purchased; and (3) another signed version dated 
September 24, 1995, that excludes the 22.5 acres Holman Acres parcel 
from the option. Ward testified that the voided version, which did not 
provide for the $35,000 payment and did not exclude the Holman Acres 
parcel from the option, did not accurately state the terms of his 
agreement with McDougal. (Ward, 2/12/96 Dep. pp.21-23.) Denton recently 
told FDIC investigators that he was provided a copy of the amended 
version, that excludes the Holman Acres property from the option, by 
Seth Ward on July 14, 1986. (FDIC Office of Inspector General, 
Interviews of Don Denton, June 3, 1996, pp.8-9 and June 11, 1996, p.6.) 
An unsigned copy of the amended version with a handwritten notation by 
Denton in the upper left corner, ``Received 7-14-86 Seth,'' was 
provided to the FDIC by Denton [Document Not Numbered]. In a March 7, 
1996 interview, Timothy Daters, the engineer who surveyed the IDC 
property, stated that the legal description of the Holman Acres 
property that is attached to the amended version of the September 24, 
1985 letter was prepared by his firm on March 31, 1986, suggesting that 
the amended version was prepared some time after that date. (FDIC 
Interview of Timothy Daters, 3/7/96, p.1.)
    \*\ Ward later sued Madison Guaranty for commissions he claimed he 
was owed on sales of IDC property. Ward v. Madison Guaranty Savings and 
Loan, No. 87-7580 (Pulaski Cty. Cir. Ct.). Relevant aspects of that 
litigation are discussed below.
---------------------------------------------------------------------------
    Don Denton recently told the Federal Deposit Insurance 
Corporation (FDIC) that it is ``his opinion'' that the non-
recourse wording of the note agreement, quoted above, was 
supplied by Webster Hubbell.345 He previously has made 
contradictory statements, however, and he reportedly refused to 
be sworn at his FDIC interview. Denton was interviewed by 
Pillsbury Madison & Sutro on April 28, 1994, and questioned 
about the IDC transaction. The memorandum of that interview 
indicates that on two occasions Denton stated that he was not 
aware that anyone from the Rose Law Firm provided advice or 
counsel to Ward on the transaction.346 In light of these 
prior statements, it is not clear why Denton now, two years 
later, has an ``opinion'' that Hubbell supplied the non-
recourse language.**
---------------------------------------------------------------------------
    \**\ Denton has been granted immunity from prosecution by the 
Office of the Independent Counsel and is a cooperating witness in that 
investigation. (Denton, 5/8/96 Hrg. p.48.) There are significant 
differences between Denton's statements to Pillsbury Madison & Sutro in 
April 1994 and his statements to the FDIC in June 1996. There are also 
significant differences between Denton's statements to the FDIC 
investigators in the June 3, 1996 and June 11, 1996 interviews. 
Finally, Denton's recollection, as reported in the FDIC interview 
memoranda, is faulty on a number of points. For example, in his June 3, 
1996 interview, Denton said that ``while at Union [National Bank] he 
also was the loan officer on a 1978 $20,000 equity loan to [James] 
McDougal and Susan McDougal and William and Hillary Rodham Clinton for 
the purchase of the property that has come to be referred to as the 
Whitewater property.'' (FDIC-IG Interview of Don Denton, 6/3/96, p.1.) 
In fact, the Union Bank loan was an unsecured personal loan to Mr. 
McDougal and Mr. Clinton, and neither Mrs. McDougal or Mrs. Clinton 
were borrowers. The differences and errors in these recent interview 
statements call into question Denton's credibility and reliability as a 
witness. Some of Denton's statements, such as the statement above 
regarding the Whitewater loan, suggest that his present recollection 
may have been affected by newspaper stories or other information he has 
obtained since he received immunity and became a cooperating witness in 
the Independent Counsel's investigation.
---------------------------------------------------------------------------
    The terms of Ward's purchase, particularly the non-recourse 
financing, the option, and the commission agreement, have been 
viewed as indicating that Ward may have been a ``straw buyer'' 
for Madison Guaranty.347 Both Ward 348 and Latham 
349 dispute the allegation that Ward was a ``straw buyer'' 
who ``warehoused'' the IDC commercial property for Madison 
Guaranty. James Clark, the bank examiner who was in charge of 
the examination of Madison Guaranty in 1986, recently told the 
FDIC that in his view Ward was acting as a ``straw buyer'' in 
the transaction, however.350
    For purposes of the Special Committee's investigation, the 
important issue is not whether Ward was in fact a ``straw 
buyer,'' but whether Rose Law Firm attorneys were aware of the 
questionable aspects of Ward's arrangement with McDougal. As 
discussed below, while the evidence is mixed on the question of 
whether Ward was in fact a straw buyer, there is no credible 
evidence that anyone at the Rose Law Firm (except perhaps 
Hubbell) * knew that Ward might have been acting as a 
straw buyer for Madison Guaranty.
---------------------------------------------------------------------------
    \*\ There is some evidence, discussed below, that Webster Hubbell 
may have been aware of the agreement between Ward and McDougal. Also, 
as discussed above, Don Denton recently told FDIC investigators that it 
is his ``opinion'' that Hubbell provided the non-recourse language for 
Ward's IDC note. (FDIC Office of Inspector General Interview of Den 
Denton, June 3, 1996.) It is not clear, however, what, if anything, 
Hubbell told others at the Rose Law Firm about the arrangement between 
Ward and Madison Guaranty.
---------------------------------------------------------------------------
    Rose Law Firm attorneys did not work on the IDC acquisition 
after August 1985, when drafts of the transaction documents 
were being prepared indicating that Madison Financial or an 
``individual or entity'' designated by Madison Financial 
** would purchase the entire IDC parcel, until October 
1985, when Thrash attended the closing.351 It was during 
this interim period that Ward and McDougal reached some 
agreement, set out in the differing versions of the September 
24 letter agreements, that Ward would purchase a portion of the 
IDC property, would give Madison Financial an option on some or 
all of the property he purchased, and would be paid a ten 
percent commission on all sales of IDC commercial 
property.352 No time records, billing statements, 
documents, or testimony has been obtained by the Special 
Committee which would suggest that Rose Law Firm attorneys 
(except perhaps Hubbell, as discussed below) were involved in 
the agreement between Ward and McDougal.
---------------------------------------------------------------------------
    \**\ Pillsbury Madison & Sutro stated that ``[e]ven the change in 
the language from `affiliate' to `entity or individual' is not the sort 
of thing that would have suggested incipient wrongdoing [to the Rose 
Law Firm attorneys involved in the transactions].'' (PM&S Supplemental 
Rose Report 2/25/96, p.62.)
---------------------------------------------------------------------------
    Ward testified that in September 1985 he asked Hubbell to 
assist him with documenting his arrangement with McDougal, but 
Hubbell declined to do so because the Rose Law Firm already 
represented Madison Guaranty.353 Rose Law Firm billing 
records do not contain any time entries for work relating to 
the September 24 letter agreement. Hubbell testified that Ward 
had ``multiple conversations'' with him regarding the IDC 
transaction.354 Hubbell also testified that it was his 
``understanding, and that's again based on conversations [with 
Ward], was that when it came close to closing that there was 
some concern about Madison taking all of the property in its 
name and that Mr. Ward offered to take a portion in his name 
until it was sold, if Madison would lend him the money to do 
so.'' 355 Hubbell said he believes he obtained this 
information at some time after the closing, however.356 
There is no evidence that Hubbell shared this information with 
other Rose Law Firm lawyers.* Mrs. Clinton has stated that 
she knows nothing about an agreement between Ward and 
McDougal,357 and that she had nothing to do with the 
preparation of the September 24 letter agreement.358
---------------------------------------------------------------------------
    \*\ As PM&S observed ``It is much harder to prove what other Rose 
Law Firm lawyers knew (if anything) about these matters. Other than 
Hubbell, all of them have denied knowing the salient terms that 
arguably make Ward a straw.'' (PM&S Supplemental Rose Report, 2/25/96, 
p.155.) ``No substantial evidence to the contrary has been found except 
possibly as to Hubbell.'' (Id., p.156.)
---------------------------------------------------------------------------
    Although Thomas Thrash attended the IDC closing on October 
4, 1985,359 and thus would have known that Ward was buying 
a portion of the property with financing provided by Madison 
Guaranty, he would not have known from the closing documents 
that the financing was non-recourse. The promissory note with 
the non-recourse terms was not executed until October 15, 
almost two weeks after the closing.360 Moreover, there is 
no reason that Thrash or any other Rose Law Firm attorney 
(including Mrs. Clinton) would have questioned Ward's 
involvement in the transaction or doubted that Ward was a bona 
fide purchaser. Ward was an established, successful business 
leader in Little Rock, and Thrash and other Rose Law Firm 
lawyers would have known that Ward had the financial 
wherewithal to purchase a portion of the IDC property if he 
wished to do so.361 Thus Ward's involvement in the 
transaction made economic sense and in itself would not have 
suggested any scheme to evade a regulatory requirement.362 
In short, there was nothing about the transaction that would 
have put the Rose Law Firm on notice that Ward was anything 
other than a bona fide purchaser of a portion of the IDC 
property.

                 (2) Other Ward/Madison guaranty loans

    On March 31, 1986, Ward borrowed $400,000 from Madison 
Guaranty.363 A signed copy of the March 31, 1986 note from 
Don Denton's files states that the loan is secured by a 
``mortgage covering real estate,'' and that ``[t]he purpose of 
this loan is business investment.'' 364 The loan committee 
minutes approving the loan states that the purposes of the loan 
were to ``pay a personal debt; pay income taxes; purchase 
airplanes.'' 365 The loan was secured with a mortgage on 
the Holman Acres property, and a March 31, 1986 mortgage to 
Madison Guaranty in the amount of $400,000 attaches a legal 
description * of the Holman Acres property.366
---------------------------------------------------------------------------
    \*\ This is the legal description on the Holman Acres property that 
Timothy Daters told the FDIC his firm prepared on March 31, 1986, and 
that is attached to the amended version of the September 24, 1985 
letter agreement. (FDIC interview of Timothy Daters, 3/7/96, p.1.)
---------------------------------------------------------------------------
    As noted above, in 1987 Ward sued Madison Guaranty for his 
commissions on the IDC transaction, and at that trial he 
testified that the purpose of the two loans was in order to 
meet his cash needs because ``they [Madison Financial] didn't 
have any cash to pay me the commission with, so they offered to 
loan me money from Madison [Guaranty] Savings & Loan.'' 
367 In his second FDIC interview, on June 11, 1996, Denton 
stated that he understood that the $400,000 loan to Ward was 
made because Madison Guaranty did not have the money to pay 
Ward the commissions he was due on the sales of IDC property, 
so either Latham or McDougal suggested that Ward be loaned 
$400,000.368 Denton also said that he understood that the 
$400,000 loan represented $300,000 in commissions, $70,000 to 
repay the outstanding balance Ward owed on a February 25, 1986 
loan which had been used to pay off his remaining debt on the 
IDC purchase, and $30,000 for interest.369
    Documents also indicate that Madison Financial borrowed 
$300,000 from (or at least acknowledged a debt of $300,000 to) 
Ward on or about April 7, 1986. An April 4, 1986 Madison 
Guaranty board resolution, notarized on April 7, states: ``Be 
it resolved that Madison Financial Corporation is authorized to 
borrow $300,000 from Seth Ward.'' 370 Denton told the FDIC 
that the purpose of the Ward ``loan'' to Madison Financial was 
to give Ward ``greater protection in the form of notes to set 
off his loans'' in connection with the commissions he was owed 
on the IDC sales.371 Ward testified in 1987, in his 
lawsuit against Madison Guaranty, that the purpose of the 
$300,000 loan to Madison Financial was that if Madison 
Financial was unable to pay him his commissions he ``wanted a 
note from them indicating that they owed me at least that much 
money so I could start drawing interest on it as long as I was 
going to have to pay interest on the money I had to borrow from 
the S&L.'' 372
    At his first FDIC interview,373 on June 3, 1996, 
Denton was shown an April 7, 1986 entry from the Rose Law Firm 
billing records by Mrs. Clinton recording a ``telephone 
conference with Don Denton.'' 374 At that time he told the 
FDIC investigator that he ``had no recollection of the call, 
and believed that the entry may have been in error.375 At 
his second interview, on June 11, Denton changed his story. On 
June 11, he told the FDIC investigators that he believes he 
discussed the Ward loans with Mrs. Clinton on April 7, 
1986.376 Denton apparently bases this new recollection at 
least in part on an April 7 [1986] telephone message 377 
to him from ``Sandra of Hillary Clinton's Office'' that is 
attached to a page of Denton's handwritten notes relating to 
the ``Babcock'' * matter.378 Denton said he recalls 
that he returned Mrs. Clinton's telephone call and spoke with 
her about ``the $400,000 loan to Ward, #4027, and the $400,000 
loan from Ward to [Madison Financial].'' 379 Denton said 
he vaguely recalls that Mrs. Clinton may have been preparing 
the loan documents, and that when he told her he had already 
prepared the documents, she asked him to send her 
copies.380 (The fact that Denton believes he spoke with 
Mrs. Clinton about the $400,000 Madison Guaranty loan to Ward 
and provided her with a copy of the loan documents may be 
particularly significant, for reasons that are discussed 
below.)
---------------------------------------------------------------------------
    \*\ The Babcock matter involved a workout on a defaulted commercial 
loan in which Madison Guaranty had obtained a participation from Savers 
Savings. (See PM&S Rose Report, 12/28/95, p.39.)
---------------------------------------------------------------------------
    Denton also now claims that during his telephone 
conversation with Mrs. Clinton he told her that ``there could 
be a problem with the notes as they constituted in effect a 
parent entity fulfilling the obligation of a subsidiary.'' 
381 Denton told the FDIC that Mrs. Clinton ``summarily 
dismissed'' his concern ``in a manner which he took to mean 
that he was to take care of savings and loan matters, and that 
she would take care of legal matters.'' 382 Denton told 
the FDIC that he expressed the same concern about the notes to 
Ward ``shortly after'' the telephone conversation with Mrs. 
Clinton.383 When asked if he knew why Mrs. Clinton had 
called him on the matter, Denton said he was ``reasonably 
confident'' that she was acting on Webster Hubbell's 
behalf.384 Denton did not give a reason why he believed 
Mrs. Clinton was acting on Hubbell's behalf, and he said his 
only contact with Mrs. Clinton relating to Madison Guaranty was 
on the Babcock matter.385
    Putting aside for the moment the possible significance of 
Denton's telephone conversation with Mrs. Clinton, if it 
occurred, the manner and timing of Denton's new ``refreshed'' 
recollection raises questions. In addition to the obvious 
improbability of forgetting a conversation with the First Lady 
of Arkansas for ten years (during which time the matters at 
issue were the subject of first litigation, then extensive 
national press attention), Denton's new story suffers from some 
significant flaws and internal inconsistencies. First, he had a 
copy of the April 7 telephone message and a copy of the Rose 
Law Firm billing records 386 when he first was interviewed 
by the FDIC, so there was no information provided to him at his 
first FDIC interview that he did not already have. (It also is 
reasonable to assume that between January 1996, when the Rose 
Law Firm billing records were discovered, and his June 3, 1996 
FDIC interview, Denton was questioned in detail by the staff of 
the Independent Counsel about the entries in the billing 
records that refer to him.) These circumstances hardly provide 
a satisfactory explanation for how Denton came to suddenly 
recall a ten-year old telephone discussion with Mrs. Clinton.
    Other flaws in Denton's new story are also troubling. The 
April 7 telephone message slip does not indicate the subject of 
the call, but it appears to have been attached to a page of 
Denton's handwritten notes 387 that seem to relate only to 
the Babcock matter. Mrs. Clinton has five time entries in the 
Rose Law Firm billing records, starting on April 9, 1986, and 
ending on May 6, 1986, that all were billed to the Babcock 
matter.388 Her April 9, May 1, and May 6 time entries all 
reflect telephone conversations with Denton relating to the 
Babcock matter.389 Moreover, all of Mrs. Clinton's time 
for discussions with Denton except the April 7 entry were 
billed to the Babcock matter. This suggests that the April 7 
discussion also related to the Babcock matter. In short, the 
fact that the April 7 telephone message was attached to notes 
about the Babcock matter, coupled with the fact that all of 
Mrs. Clinton's time entries for discussions with Denton relate 
to that matter, call into question Denton's new ``refreshed'' 
recollection that he spoke with Mrs. Clinton about the Ward 
loans, and not the Babcock matter.
    Denton's new story has another significant flaw. His 
documents contain two copies of the March 31, 1986 loan 
agreement for $400,000 loan from Madison Guaranty to Ward 
secured by a mortgage on the Holman Acres property.390 
With those notes is a mortgage dated March 31, 1986 391 
and attached legal description of the Holman Acres 
property.392 That legal description is the correct legal 
description of the Holman Acres property. (As discussed in a 
more detail below, the May 1, 1986 option agreement for the 
Holman Acres property that Mrs. Clinton prepared had an 
incorrect legal description of the property.) It is hard to 
understand how, if Denton provided Mrs. Clinton the Ward loan 
agreement with the correct legal description of the Holman 
Acres property on April 7, she would have prepared an option 
agreement on May 1 with an incorrect legal description of the 
same property.
    Finally, and consistent with Mrs. Clinton not having been 
provided a correct legal description of the Holman Acres 
property when she prepared the option agreement on May 1, the 
Madison Financial board resolution of May 1 (notarized May 5 
and signed by John Latham) that approves the option agreement 
contains an incorrect legal description of the Holman Acres 
property--the same incorrect legal description that is in the 
May 1 option that Mrs. Clinton prepared.393 This common 
mistake strongly suggests that neither Mrs. Clinton nor the 
preparer of the May 1 board resolution had been provided the 
note agreement for the Ward $400,000 loan secured by the 
mortgage Holman Acres property that attached the correct legal 
description of the property.
    Taken together, the unusual circumstances of Denton's 
sudden recollection of the telephone conversation with Mrs. 
Clinton after ten years and the contemporaneous documentation 
that appears to contradict Denton's story raise serious 
questions about his credibility. In any event, as discussed 
below, even if Denton did discuss the Ward loans with Mrs. 
Clinton, it does not suggest that her actions in preparing the 
May 1 option agreement were in any way improper.

                  (3) The May 1, 1986 Option Agreement

    On or about May 1, 1986, Madison Financial paid Ward $1,000 
for an option to purchase the Holman Acres property for 
$400,000.394 There are two signed versions of the option 
agreement, with different legal descriptions of the property 
that is the subject of the option. It appears that Mrs. Clinton 
prepared the first version of the option agreement, with an 
incorrect legal description, and the first two pages were later 
retyped to change the description to the Holman Acres 
property.* Denton told the FDIC investigators that he had 
the option agreement retyped after a bank examiner pointed out 
the incorrect legal description.395
---------------------------------------------------------------------------
    \*\ Document No. SW1-070-074 is one signed version, with a legal 
description of 6.667 acres in Pulaski County, Arkansas, beginning on 
page one and continuing to page two. Document No. SW1-063-068 is 
another signed version, with a brief legal description reading ``Part 
of Tracts 27 & 28, Holman Acres, Pulaski County, Arkansas,'' at the 
bottom of page one and page two apparently re-typed with the same terms 
as the other document, but omitting the portion of the legal 
description that did carry over to that page. That version of the 
document also includes notarized acknowledgements for the signatures of 
Seth and Yvonne Anna Ward and John Latham, dated May 5, 1986.
---------------------------------------------------------------------------
    There is no dispute that Mrs. Clinton had some involvement 
in the preparation of the first version of the option. 
According to the Rose Law Firm, the computer document code that 
appears on the first version of the document, and that is on 
all but the first two (retyped) pages of the second version, 
indicates the document was prepared by Mrs. Clinton.396 In 
addition, Mrs. Clinton's time records contain an entry on May 
1, 1986, billed to ``Madison Guaranty General'' recording two 
hours of time for ``Conference with Seth Ward; telephone 
conference with Seth Ward regarding option; telephone 
conference with Mike Schauffler [Ward's accountant]; prepare 
option.'' 397 There are no records indicating that any 
other Rose Law Firm attorneys worked on the May 1 option 
agreement.
    Mrs. Clinton has testified that she has no recollection of 
preparing the option 398 and has no recollection of the 
two hours referenced in her time records, other than what the 
records state.399 She did speculate that perhaps Ward 
``had something that had already been prepared by somebody else 
and wanted my secretary to make some changes in it. That was 
not uncommon for Mr. Ward, and I would have talked to him about 
it and maybe he needed some piece of information from Mr. 
Schaufele [sic].'' 400
    In his 1987 lawsuit against Madison Guaranty Ward testified 
under oath that the option had nothing to do with the 
commissions on the IDC transactions.401 Ward reaffirmed 
his 1987 testimony in 1996 when he was deposed, again under 
oath, by the staff of the Special Committee: 402

          Q: Did you view that option agreement as having 
        anything to do with the commissions that you felt were 
        owed by Madison?
          A: No. They paid me $1,000 for that option.
          Q: They wanted to buy the property, so they paid you 
        $1,000 for an option on it?
          A: That's right.

In that deposition Ward also disputed testimony by John Latham 
in the 1987 trial that the exercise of the option was to be the 
means by which Ward was paid his commissions: 403

          Q: That's not your understanding of what happened?
          A: No, it wasn't.
          Q: And again, why do you think Mr. Latham's testimony 
        is wrong?
          A: Because that's not the way it was.
          Q: And why was that not the way it was?
          A: I guess they were trying to win their trial.

The jury found for Ward in the 1987 trial 404 and, as the 
1987 and 1996 testimony set out above shows, Ward has 
consistently denied that the option agreement was related to 
his commissions. This point is significant, less so today as to 
whether or not the option in fact had anything to do with the 
commissions, than to what Mrs. Clinton may have been told at 
the time about the option. Since for ten years Ward has 
consistently sworn, under penalty of perjury, that the option 
had nothing to do with the IDC commissions, there is no reason 
to believe he told Mrs. Clinton anything different in 1986. 
(Ward testified in his February 1996 Special Committee 
deposition that he does not recall discussing the May 1 option 
agreement with Mrs. Clinton.) 405
     Thus while the available evidence indicates that Mrs. 
Clinton played some role in the preparation of the first 
version of the option, and Denton's recent recollections (if 
credited) suggest that she may have been aware of Ward's loans 
when she prepared the option, there is no evidence that she 
knew anything about Ward's agreement with Madison Guaranty 
regarding the purchase of the IDC property the prior 
year.* She only recorded two hours, in total, for work 
relating to the preparation of the option.406 Her April 7 
time entry for the discussion with Denton shows that she spoke 
with Denton for only two-tenths of an hour--twelve 
minutes.407 The option she prepared contained an incorrect 
legal description of the property and the first two pages were 
subsequently retyped at Denton's direction to reference the 
correct property. As Pillsbury Madison & Sutro noted: ``This 
[the incorrect legal description] suggests that Mrs. Clinton 
had not been told the entire reason, or perhaps any reason, for 
the option; after all, she evidently misunderstood what 
property it was to cover.'' 408 Moreover, there is nothing 
on the face of the option agreement itself that would lead one 
to question its purpose 409--it is a straightforward 
option agreement that makes good economic sense standing alone. 
The small amount of time reflected in her time records, 
combined with the innocuous nature of the document itself and 
the error in the legal description, all support the conclusion 
that Mrs. Clinton knew very little, if anything, at the time 
she prepared the option about the agreement between Ward and 
Madison Guaranty concerning the original IDC acquisition six 
months earlier--a conclusion that is wholly consistent with the 
fact that she does not remember anything about the matter now, 
over ten years later.
---------------------------------------------------------------------------
    \*\ As Pillsbury Madison & Sutro observed: If, instead, one credits 
Ward's view that the option had nothing to do with the commissions (as 
the jury in Ward v. Madison obviously did), then the author of the 
option need not have known anything about Ward's commissions, let alone 
his 100 percent financing or the other terms embodied in the September 
24, 1985 letter. For these reasons, the option seems, at most, 
tangentially related to the acquisition itself. (PM&S Supplemental Rose 
Report, 2/25/96, p.157.)
---------------------------------------------------------------------------
     The reason for the option agreement may never be 
established definitively. It is not necessary to establish the 
purpose of the agreement to come to a conclusion about Mrs. 
Clinton's role in the matter, however. The evidence collected 
by the Special Committee, including Denton's recent 
recollections of a brief discussion with Mrs. Clinton about 
Ward's loans, does not indicate that Mrs. Clinton knew anything 
about the arrangement between Ward and McDougal for the IDC 
purchase, which had closed six months earlier. The evidence 
indicates that Mrs. Clinton did very little work on the option, 
did not know its purpose, and was not privy to any ``straw 
man'' arrangement between Ward and McDougal (if indeed that was 
such an arrangement,* a charge Ward vigorously disputes).
---------------------------------------------------------------------------
    \*\ Pillsbury Madison & Sutro concluded ``having reached this 
point, however, it must be conceded that the argument that Ward was a 
straw[man] is weaker * * * one must grant that Ward's recent testimony 
about his desire to buy the IDC property himself, and his ability to do 
so, might well influence a trier of fact to find that Ward was not a 
straw man. Certainly a man who was ready, willing and able to buy a 
property, but did not do so because he recognized that he [owed] a duty 
of loyalty to his principal, seems much less like a straw than someone 
who never had the slightest interest in a property but simply was doing 
the bidding of another.'' (PM&S Supplemental Rose Report, 2/25/96, 
p.149; Ward, 2/12/96 Dep. pp.112-114, 121.)
---------------------------------------------------------------------------

b. The Rose Law Firm and Mrs. Clinton played no role in the resales of 
 IDC parcels that Federal regulators have called ``Sham Transactions''

    Between the closing of the IDC transaction on October 4, 
1985, and March 1986, most of the IDC commercial property that 
Ward had purchased was resold in a series of six transactions 
that apparently were orchestrated * by James McDougal. 
410 In 1996 the Committee reviewed these transactions at 
public hearings on January 30, January 31, and February 7. In 
summary, those transactions were as follows:

    \*\ Pillsbury Madison & Sutro stated that these transactions ``were 
engineered by McDougal and exemplify the nature of Madison Guaranty's 
lending and investment practices during McDougal's tenure at the 
institution.'' A Report on Certain Real Estate Loans and Investments 
made by Madison Guaranty Savings & Loan and Related Entities, (``PM&S 
Madison Guaranty Real Estate Report''), Prepared for the Federal 
Deposit Insurance Corporation by Pillsbury, Madison & Sutro, Dec. 19, 
1995, p.1.

          1. The October 25, 1985 sale of 6.6 acres and an 
        industrial warehouse leased to Levis Strauss & Co. to 
        Davis Fitzhugh for $500,000 (the loan amount was 
        $525,000, of which $25,000 purportedly was to be used 
        to establish a building maintenance account. 411
          2. The October 25, 1985 sale of 35 acres of 
        commercial property to Jim Guy Tucker for $125,000 (the 
        loan amount was $260,000, of which $135,000 purportedly 
        was to be used for a feasibility study on the 
        property). 412
          3. The November 20, 1985 sale of 9 acres of 
        commercial property to Larry Kuca for $120,000. 
        413
          4. The January 20, 1986 sale of 486 acres of the IDC 
        commercial property to former United States Senator J. 
        William Fulbright for $777,600. 414
          5. The February 14, 1986 sale of the IDC water and 
        sewer facilities to Castle Water & Sewer, Inc. (a 
        corporation formed by Jim Guy Tucker and R.D. Randolph) 
        for $1.2 million. 415
          6. The March 11, 1986 sale of 59 acres of industrial 
        property to Master Developers, Inc. (a corporation 
        formed by R.D. Randolph, James Henley, and David 
        Henley; the Henleys were Susan McDougal's brothers) for 
        $472,000. 416

    These transactions also were analyzed in detail by 
Pillsbury Madison & Sutro in their report entitled, ``A Report 
on Certain Real Estate Loans and Investments made by Madison 
Guaranty Savings & Loan and Related Entities,'' which was 
submitted to the Resolution Trust Corporation on December 19, 
1995. On four of the six transactions described above (all but 
the Fulbright and Kuca transactions) Madison Guaranty suffered 
losses when the borrowers failed to repay their loans. 417 
(The only losses attributable to the Fulbright and Kuca 
transactions were real estate commissions of $77,600 and 
$12,000, respectively, paid to Susan McDougal on the two 
transactions.) 418 Pillsbury Madison & Sutro concluded 
that ``[o]f these transactions, all but the Fulbright 
transaction appear to be suspect,'' 419 and reported that 
the total losses * to Madison Guaranty relating to the IDC 
transactions was $3,809,581.93 in unpaid principal and 
interest. 420
---------------------------------------------------------------------------
    \*\ This total includes losses attributable to the February 28, 
1986 Dean Paul Ltd. transaction, in which Dean Paul Ltd., a company 
formed by David Hale's friend and business associate Dean Paul, 
borrowed $825,000 from Madison Guaranty to purchase three properties 
from Hale at inflated prices. Hale then used the profits from the 
fraudulent sale of those properties to obtain federal matching funds 
for his Small Business Administration investment company, Capital 
Management Services, Inc. (``CMS''), some of which allegedly were used 
to loan Castle Sewer and Water, Inc. $150,000 for the downpayment on 
the purchase of the IDC water and sewer facilities. (A $300,000 loan by 
CMS to a Master Marketing, a company formed by Susan McDougal, also 
allegedly funded through the Dean Paul transaction.) Dean Paul Ltd. 
never repaid the $825,000 loan. Pillsbury Madison & Sutro reported that 
as of December 1995 the total loss to Madison Guaranty on the Dean Paul 
Limited loan was $1,208,640.58. (PM&S Madison Guaranty Real Estate 
Report, 12/19/95, pp. 25-26.) In another report, however, Pillsbury 
Madison & Sutro stated that ``the RTC recovered a judgment against Dean 
Paul and Dean Paul, Ltd. of approximately $600,000 (net). The judgment 
was sold to a joint venture in which the RTC is a venturer. If money is 
collected on the judgment, the RTC will stand to benefit. (A 
Supplemental Report on Madison Guaranty Savings & Loan and Whitewater 
Development Company, Inc., (``PM&S Whitewater Development Report''), 
Prepared for the Resolution Trust Corporation by Pillsbury, Madison & 
Sutro, Dec. 13, 1995, p.33, n.146.)
---------------------------------------------------------------------------
    As noted above, on January 4, 1996, additional Rose Law 
Firm billing records for legal services provided to Madison 
Guaranty were located in the White House. Those records were 
provided to the Special Committee 421 and Pillsbury 
Madison & Sutro 422 on January 5, 1996. In addition to 
records of work done in connection with the initial IDC 
purchase, the billing records contain attorney time entries 
describing work that the Rose Law Firm did for Madison Guaranty 
during the time that the IDC transactions described above were 
taking place. None of those time entries refer are for work on 
any of the IDC transactions listed above.
    On February 25, 1996, after analyzing the Rose Law Firm 
billing records, collecting additional relevant information, 
and interviewing Mrs. Clinton, Pillsbury Madison & Sutro 
concluded:

          For the reasons set forth in the [December 19, 1995] 
        Real Estate Report, a number of the sales of IDC 
        parcels to McDougal's friends appear to have been sham 
        transactions designed to create the illusion of 
        profits. There is no evidence, however, that the Rose 
        Law Firm had anything to do with these sales; in 
        essence, the evidence suggests that these transactions 
        were put together by McDougal and others at Madison 
        Guaranty, on occasion with the cooperation of others 
        such as David Hale, Dean Paul and Jim Guy Tucker. 
        423

The Special Committee's investigation confirmed the conclusion 
of Pillsbury Madison & Sutro that the Rose Law Firm had nothing 
to do with these allegedly fraudulent transactions. Davis 
Fitzhugh was a vice president at Madison Financial in 1985 when 
he purchased the Levi Strauss warehouse property. 424 
Fitzhugh testified that no attorneys were involved in the 
purchase of the property and that he drafted the non-recourse 
language in the loan agreement himself. 425 Rose Law Firm 
attorneys Thomas Thrash and Richard Donovan testified that they 
did not do any work on the IDC transactions described above. 
426 Although the Special Committee could not take 
testimony from all of the parties involved in these 
transactions, due in part to objections raised by the 
Independent Counsel with respect to obtaining testimony of 
certain witnesses, the testimony and documents obtained by the 
Special Committee support the conclusion that the Rose Law Firm 
and Mrs. Clinton had no involvement in any of the allegedly 
fraudulent real estate transactions.
            4. The Rose Law Firm's work for Madison Guaranty on IDC 
                    matters was legitimate, well-documented, and 
                    appropriately billed

                            a. Introduction

    Although the Rose Law Firm did not do any legal work on the 
sales of IDC parcels described above, the firm did provide 
legal services to Madison Guaranty on other matters relating to 
the development of the IDC commercial property. James McDougal 
reportedly planned to develop the commercial IDC property north 
of 145th Street through various projects, including a motel, a 
brewery, a convenience store, a gas station, a dance hall, a 
restaurant, and a sporting goods store. 427 These 
development efforts would complement McDougal's plans for the 
property south of 145th Street, where he intended to develop 
and sell residential lots. In connection with McDougal's plans 
for the development of the commercial portions of the IDC 
property, Mrs. Clinton and the Rose Law Firm were asked to 
research and analyze two legal issues. One project was to 
determine whether a brewery could be licensed in a ``dry'' 
township after that township had been incorporated into a 
larger ``wet'' township. The other project was to determine 
whether the existing sewer and water facilities on the IDC 
property could be extended to provide utility services to areas 
outside of the property.
    The Rose Law Firm became involved in the liquor license and 
utility issues when Ward asked the law firm to conduct some 
legal research on those issues. 428 Ward, who was 
overseeing the development of the IDC property for Madison 
Guaranty, dealt with Mrs. Clinton on these issues. Mrs. Clinton 
has testified that it was her ``understanding that [Ward] was 
in some manner employed by Madison to help them develop 
property around Little Rock.'' 429 Moreover, Mrs. Clinton 
has stated that she dealt exclusively with Ward as opposed to 
Latham or McDougal:

          Well, in most of my dealings in the last months 
        preceding this on behalf of Madison, I dealt with Mr. 
        Ward. He was the person I dealt with on the brewery 
        issue. He was the person that we dealt with on the 
        utility issue. He was Madison as far as I was 
        concerned.430

Ward does not recall the circumstances of the Rose Law Firm's 
retention, but has confirmed that he must have been working 
with Mrs. Clinton on the liquor license issue, ``I must have, 
because she gave me [Donovan's memorandum]. * * * And I had 
forgotten it, and I still don't remember getting it, but I must 
have, And I passed it on to--and if I did, I passed it on to 
Jim McDougal.'' 431

                      b. The liquor license issue

    The liquor license research resulted from a business 
proposal that McDougal presented to William Lyon, an Arkansas 
businessman whose business interests included banking, 
construction, and lumber sales. Lyon and McDougal had been 
acquaintances in college, and Lyon testified that McDougal was 
a ``wheeler-dealer'' who had often offered Lyon business 
opportunities.432 One of those opportunities was a 
proposal by McDougal that Lyon operate a brewery on the IDC 
property.
    At the time of McDougal's proposal, Lyon owned and operated 
a small microbrewery in Little Rock.433 Lyon built the 
brewery with a $100,000 loan from Madison Guaranty.434 As 
he expanded the operation, Lyon obtained additional financing 
from McDougal and Madison Guaranty. Throughout the course of 
the brewery's existence, Lyon borrowed approximately $360,000 
from Madison Guaranty.435 McDougal's familiarity with the 
microbrewery operation apparently led him to approach Lyon with 
a proposal to move the operation to the IDC property.436
    Lyon recalls that in the fall of 1985 McDougal approached 
him about operating a microbrewery and brew pub on the IDC 
property south of Little Rock.437 McDougal suggested that 
Lyon could buy a warehouse located at IDC and move his brewery 
there from Little Rock. Lyon testified that he was not 
particularly interested in McDougal's brewery proposal, but 
felt he had to indulge McDougal because he owed Madison 
Guaranty so much money on the brewery loans.438
    The warehouse was on the commercial portion of the IDC 
property north of 145th Street that Seth Ward had bought in 
October and optioned to Madison Financial Corporation 
(discussed above). On November 20, 1985, Jim McDougal wrote a 
memorandum to Seth Ward indicating the progress of sales on the 
IDC parcels that Ward had purchased and optioned to Madison 
Financial.439 McDougal stated in the memorandum that 
``[Bill Lyon], subject to approval by the ABC * * * will place 
his brewery in the shell building, along with a tasting room.'' 
440 Ward testified that he never took McDougal's idea for 
a brewery on the IDC property seriously, but he did visit 
Lyon's microbrewery in Little Rock and arrange for Lyon to see 
the IDC property.441
    Lyon toured the warehouse with Ward and contacted the 
Arkansas Alcoholic Beverage Commission (the ``ABC'') about 
moving his brewery to the IDC property.442 When he 
contacted the ABC, Lyon was told that the IDC property was in a 
``dry county'' where alcoholic beverages could not be 
sold.443 Lyon testified that when he advised McDougal that 
the county was dry, McDougal said he could ``take care of it.'' 
444 Lyon recalls that McDougal said he would speak with 
Governor Clinton and would pursue regulatory relief from the 
state authorities.445
    As noted above, McDougal's November 20, 1985 memorandum to 
Ward indicates that McDougal had recognized the necessity of 
obtaining ABC approval for the brewery project. The Rose Law 
Firm billing records indicate that on November 26, 1986, Mrs. 
Clinton had a conference with Ward, followed by conferences 
with her partners Thomas Thrash and Webster Hubbell.446 
Neither Mrs. Clinton nor Thrash nor Hubbell can remember now, 
almost ten years later, whether these conferences related to 
the brewery proposal. Other evidence collected by the Special 
Committee, however, suggests that may have been the case.
    Mrs. Clinton had a number of telephone conferences with 
Ward in December.447 On December 20 Mrs. Clinton's time 
records indicate that after a telephone conversation with Ward 
she searched for a map.448 The time entry for December 23 
appears incomplete, perhaps due to a typing error, but it seems 
to indicate that Mrs. Clinton visited Ward's office.449 
Mrs. Clinton recalls that she did some preliminary research 
before meeting with Ward on the liquor license issue.450 
After another telephone conference with Ward on December 24, 
Mrs. Clinton apparently enlisted the assistance of a Rose Law 
Firm associate to research the issue.
    The Rose Law Firm billing records indicate that on December 
30 Richard Donovan, then a young associate, began researching 
``local option election records.'' 451 On December 31 
Donovan billed time for a ``conference with ABC regarding wet/
dry precincts'' and further research on local option 
law.452 On January 2 Donovan billed three hours completing 
his research and drafting a memorandum. On January 3 he revised 
the memorandum.
    Donovan's memorandum is dated January 3, 1986, and is 
addressed to Mrs. Clinton. The memorandum analyzes whether or 
not the location for the proposed brewery at IDC * was 
within a ``dry'' or ``wet'' county.453 Specifically, the 
memorandum considers whether a smaller ``dry'' township (where 
the property at issue was located) retains its ``dry'' status 
or becomes ``wet'' when it is incorporated into a larger 
``wet'' township.454 Donovan found that there was ``no 
Arkansas law on that point,'' 455 but concluded based on 
law from other jurisdictions that ``the smaller township would 
retain its dry status'' when incorporated into a wet township 
until otherwise changed by an election.456 Donovan's 
memorandum also notes that in a minority of jurisdictions the 
``smaller township would lose its dry status'' when 
incorporated into a larger ``wet'' township.457 His 
memorandum concluded: ``It would seem the only chance for 
successfully building the brewery would be to convince the ABC 
the site is not within the old Union Township or convince the 
ABC and ultimately the courts that Arkansas should adopt the 
minority position that when `wet' and `dry' areas are joined, 
the resulting entity becomes all `wet'.'' 458 After 
receiving Donovan's memorandum Mrs. Clinton apparently then met 
with Ward and gave him a copy of the memorandum.459 Mrs. 
Clinton's time records show a conference with Ward on January 
7.460 Ward seems to have asked for further analysis of the 
issue.461 The billing records show that Donovan and Mrs. 
Clinton met on January 14 regarding further ``fact 
investigation.'' 462 On January 15 Donovan had another 
telephone conversation with the state election commission and 
county clerk ``regarding what happened to old Union Township.'' 
463 Then, on January 16, 1986, he asked Rose Law Firm 
paralegal Becky Arnold to research County Clerk's Office 
``records from 1953 until the present time and try to locate 
the record of the County Court's action in dissolving, merging, 
or rezoning the old Union Township.'' 464 On January 19 
and 22 Donovan researched the ``effect of township dissolution 
on `wet/dry' status'' and drafted another memorandum.465
---------------------------------------------------------------------------
    \*\ It is noteworthy that the memorandum does not make any 
reference to ``Castle Grande.'' This point is discussed further below.
---------------------------------------------------------------------------
    In his second memorandum, dated January 23, 1986, Donovan 
advised Mrs. Clinton that ``the overwhelming majority of cases 
hold that the consolidation, dissolution or merger of a given 
entity which had voted `wet or dry' pursuant to a local option 
election retains its `wet or dry' status even though it is 
incorporated into a ``wet'' political/geographic entity.'' 
466 Donovan then outlined two alternative strategies that 
might be employed to gain approval for a brewery on the IDC 
property: (1) file an application with the ABC Board and if 
denied attempt to ``convince the Board to adopt the minority 
rule''; or (2) ``obtain signatures to place the `wet dry' issue 
on the ballot'' and hope that the old Union Township's ``dry'' 
status could be changed to ``wet'' by popular vote.467
    Despite Donovan's diligent efforts to find a solution that 
would permit the brewery operation to be licensed, the client 
apparently decided not to try to overcome the legal obstacles. 
McDougal forwarded Donovan's January 23 memorandum to Jim Guy 
Tucker * on February 7, 1986 with a note stating ``It 
looks like our township is dry.'' 468 Although the Rose 
Law Firm billing records indicate that Becky Arnold did some 
additional research in February 469 and March 470 
regarding the ``old Union Township boundaries,'' there is no 
evidence that the Rose Law Firm or McDougal ever contacted the 
Governor's office or took any other steps to try to change the 
``dry'' status of the property.
---------------------------------------------------------------------------
    \*\ As discussed above, Tucker had purchased 35 acres of the IDC 
commercial property in October 1985.
---------------------------------------------------------------------------

                      c. The utility service issue

    With respect to the utility service research, Rose Law Firm 
billing records indicate that on February 11, 1986 Donovan 
began researching public utility law issues and ``supplying of 
water'' by the IDC water system.471 On February 12 and 13 
he continued his research, spoke with the state Public Service 
Commission legal staff, and began drafting a legal 
memorandum.472 The Rose Law Firm records show that on 
February 16, 1986, Donovan revised a memorandum ``regarding 
public utility issues.'' 473 On February 17, 1986, Donovan 
provided a memorandum to Mrs. Clinton addressing whether 
Madison Guaranty could ``become a public utility'' and whether 
Madison Guaranty could ``sell water to a business outside the 
IDC Development * and to another real estate development 
[Maple Creek].'' 474 Donovan found that in order to 
operate a public utility, Madison Guaranty would have to 
``submit itself to the jurisdiction of the [Arkansas Public 
Service Commission]'' and ``obtain licenses and permits'' from 
the Arkansas Board of Health and the Arkansas Pollution Control 
System.475 Donovan's memorandum concluded that under 
relevant Arkansas legal authorities, ``[a]ssuming an expansion 
of water and sewer services to customers outside the IDC 
Development does not impede or impair services to present 
patrons, Madison Guaranty/IDC is free to extend it services 
beyond the IDC Development.'' 476
---------------------------------------------------------------------------
    \*\ As with the Donovan January 23, 1986 memorandum referenced 
above, it is noteworthy that this memorandum to Mrs. Clinton refers to 
the property as the ``IDC Development,'' consistent with other evidence 
collected by the Special Committee indicating that the property that 
Seth Ward optioned to Madison Financial was not known as ``Castle 
Grande'' at the time the Rose Law Firm was doing legal work for Madison 
Guaranty.
---------------------------------------------------------------------------
    On March 4, 1986, Donovan prepared a follow-up memorandum 
to Mrs. Clinton on the water and sewer service expansion 
issue.477 That memorandum analyzed whether ``the fact that 
Madison Guaranty/IDC's potential water customers are within the 
Little Rock corporate city limits preclude the extension of 
services to those customers by Madison Guaranty IDC.'' 478 
The Rose Law Firm billing records indicate that in researching 
this issue Donovan made telephone calls to legal staff at the 
Public Service Commission and manager at the Little Rock Water 
Works.479 Donovan also did additional research to verify 
the legality of the proposed expansion of utility services. 
Donovan concluded, ``Not only is there no state statute or city 
ordinance which would preclude such an extension of Madison/
IDC's water services, but the common law general rule is that a 
municipality has no authority to enact an ordinance or to 
require persons within its territorial limits to use 
municipally supplied water to the exclusion of a privately 
owned system.'' 480

                             d. Conclusions

    Pillsbury Madison & Sutro observed that ``[n]o theory has 
been advanced that the [liquor license and utility research by 
the Rose Law Firm] aided any sort of wrongdoing.'' 481 The 
evidence obtained by the Special Committee is consistent with 
that conclusion. The evidence indicates that Madison Guaranty 
needed legal counsel on two relatively routine legal issues 
relating to the development of the IDC commercial properties. 
The Rose Law Firm was asked to research the regulatory 
limitations that might apply to constructing a brewery on the 
IDC property and expanding a sewer and water utility outside of 
the IDC complex. These were technical legal issues requiring 
analysis and interpretation of Arkansas laws and regulations, 
and it is not surprising that Madison Guaranty would have 
looked to an outside law firm for assistance.482 Mrs. 
Clinton, recalls that she ``conducted research and explored 
possible issues pertaining to [the brewery and utility 
matters], both on my own and in partnership with Mr. Donovan.'' 
483 The Rose Law Firm billing records confirm Mrs. 
Clinton's recollection of her involvement in these matters. All 
of the research memoranda on these matters were addressed to 
Mrs. Clinton. Finally, internal Madison Guaranty documents, 
such as the note from McDougal to Tucker discussed above, 
484 confirm Mrs. Clinton's work on these matters.
    With respect to the liquor license issue, Lyon testified 
that he had no reason to believe that anyone in the Governor's 
office ever interceded on his behalf in the brewery 
matter.485 Both Donovan and Thrash testified that the work 
the Rose Law Firm did for Madison Guaranty were straightforward 
legal matters, and they were never asked to do anything 
improper in connection with these matters.486 In the end, 
Lyon never pursued the construction of the brewery in the IDC 
property. The Rose Law Firm never filed a petition with the ABC 
to obtain approval for a brewery. Thus there is no suggestion 
that Mrs. Clinton or anyone else at the Rose Law Firm ever 
sought to influence any state officials on behalf of Madison 
Guaranty.
    The Rose Law Firm billing statements show that Mrs. Clinton 
first recorded time on IDC matters on November 14, 1985, for a 
telephone conference with Seth Ward.487 Mrs. Clinton has 
stated that because of the technical subject matter, she 
conducted some preliminary research on the issues.488 Mrs. 
Clinton has also testified that as a client, Ward could be 
quite demanding. As noted above, it appears that in both cases, 
after Mrs. Clinton reported to Ward, he asked that further 
legal work be done. After Mrs. Clinton spoke with Ward, Donovan 
did follow-up memoranda on both the liquor license and utility 
service issues. Accordingly, Mrs. Clinton has stated that in 
order to adequately address Ward's concerns, ``I believe I 
would have had to conduct additional research in order to 
satisfy Mr. Ward that [Donovan's] initial memo was legally 
correct and discussed with him possible avenues that could be 
pursued despite the legal research.'' 489
    The Rose Law Firm billing records indicate that in the 
January 1986 billing statement Mrs. Clinton's billings were 
adjusted, with the charge for Mrs. Clinton's time increased 
from $912.50 to $2,731.75.490 At Mrs. Clinton's hourly 
billing rate of $125.00, this adjustment represents an addition 
of approximately 14.5 hours. The Special Committee reviewed 
whether these additional 14.5 hours might represent billings 
for work during the September-October period in 1985 when the 
agreement was reached between Ward and McDougal for Ward to 
purchase a portion of the IDC property and option it to Madison 
Financial (the alleged ``straw buyer'' arrangement discussed 
above). The Special Committee's investigation has established 
that the adjustment to Mrs. Clinton's billings did not relate 
to work in the fall of 1985.
    Ron Clark, Rose Law Firm's chief operating officer, 
testified that if Mrs. Clinton would have ``[billed these 
hours] in September or October they would have been included on 
the September and October internal bills that were rendered, 
but that's not necessary to the case.* * * I would think that 
since the extra hours were on the January bill, it would have 
been time that she would have spent sometime after October 
29th, which was the next previous bill.'' 491 Moreover, 
Mrs. Clinton has stated that the reason for the adjustment was 
an effort by the Rose Law Firm to bill clients for all services 
provided prior to January 31, the end of the firm's fiscal 
year, and ``a tremendous effort was made to bill, not only all 
matters and hours that had already been recorded in the 
computer, but any work in progress as well to try to clear the 
decks before the end of the fiscal year.'' 492 Mrs. 
Clinton explained that the adjustment to her billings was for 
``work in progress'' that had not yet been entered into the 
computer when the January 1986 statement was prepared.493 
Clark confirmed Mrs. Clinton's explanation:

         ``If you will notice, I mean the date of the billing 
        memorandum is dated January 21; of course, the date of 
        the bill is only January 30th. And it looks like the 
        last time entry was January 15th and Mrs. Clinton's 
        last time entry was January 7. So I would anticipate at 
        the time of preparing the bill there had been 
        additional time rendered since the last date of the 
        last bill which was added to this. This is especially 
        true at this time of the year which is the end of our 
        fiscal year: especially in these years, our accounting 
        department was very backed up because they were 
        generating the bills that were putting the timekeeping 
        in. So typically we would have to manually add time 
        during the last months of the year to properly reflect 
        our bills.'' 494

    Finally, it should be noted that some confusion has arisen 
as to whether the entire property purchased from IDC was known 
as ``Castle Grande.'' This issue arose because prior to the 
discovery of the Rose Law Firm billing records, Mrs. Clinton 
had stated that she did not do any work on Castle 
Grande.495 The Rose Law Firm billing records show that she 
did some work on IDC matters, as discussed above. The documents 
and testimony provided to the Special Committee clearly 
indicate that within the Rose Law Firm, the work was known as 
the IDC matter.* Although with the passage of time the 
entire property has sometimes been referred to as Castle 
Grande,** the evidence collected by the Special Committee 
established that during the relevant time period--in 1985 and 
1986 when the Rose Law Firm was providing legal services to 
Madison Guaranty--only the portion of the IDC property south of 
145th Street was called Castle Grande.496 That was the 
name James McDougal gave to the residential development he 
started on that portion of the IDC property.497 John 
Latham testified that the residential area which was named 
Castle Grande was ``really a small part of'' the IDC 
property.498 The projects Mrs. Clinton worked on were 
related to the other, commercial, portions of the IDC tract, 
and did not involve the Castle Grande residential development. 
Thus Mrs. Clinton's prior statement that she did not work on 
Castle Grande is consistent with the evidence obtained by the 
Special Committee.
---------------------------------------------------------------------------
    \*\ On January 18, 1996, during the testimony of Ronald Clark, the 
Chief Operating Officer of the Rose Law Firm, Mr. Clark was questioned 
about what appeared to be a Rose Law Firm invoice that had a 
handwritten ``CG'' on it. (Clark, 1/18/96 Hrg. pp.108-116.) Majority 
Counsel questioned whether this invoice indicated that within the Rose 
Law Firm the term ``Castle Grande'' had been used, contrary to the 
prior statement of Mrs. Clinton that she did not work on Castle Grande. 
(Rose Law Firm Voucher # V 4372 for Madison Financial Corporation) At 
that time Mr. Clark was unsure what the invoice represented.
    The question was answered in January 31, 1996 letter to the Special 
Committee from Mr. Clark. He explained that he saw the ``CG'' invoice 
for the first time during the January 18 hearing, then went on to 
state: ``After reviewing the document further, it appears that the 
voucher actually was photocopied while laying on top of a Rose Law Firm 
invoice, thus creating a single paper with the voucher on top half and 
an incomplete copy of the Rose Law Firm invoice on the bottom of the 
page. I have consulted with our accounting department, and I am told 
that we did not use documents like this in 1985-1986 (as we do not 
today).'' In addition, Mr. Clark's letter stated, ``I believe this 
document is not from the Rose Law Firm but instead probably is an 
internal document from Madison Guaranty or Madison Financial.'' 
(January 31, 1996 Letter from Ron Clark to Chairman Alfonse D'Amato and 
Ranking Member Senator Paul Sarbanes, Special Committee; see also Rose 
Law Firm Billing Records, Matter #5 I.D.C.: DKSN 028930; DKSN 028979; 
DKSN 028980; DKSN 029011 through DKSN 029020; FDIC Interview of Hillary 
Rodham Clinton, 2/14/96, p.50.)
    \**\ See, e.g., Mary Hargrove, Don Johnson, Michael Whiteley, 
``They Called It Castle Grande,'' Arkansas Democrat-Gazette, Aug. 30, 
1994. Even the reports prepared by Pillsbury Madison & Sutro refer to 
the entire IDC parcel as Castle Grande. See, e.g., ``A Report on 
Certain Real Estate Loans and Investments Made by Madison Guaranty 
Savings & Loan and Related Entities,'' Dec. 19, 1995, p.7.
---------------------------------------------------------------------------

I. David Hale's false allegation against Governor Clinton

1. Introduction

     David Hale is the only witness who has claimed that as 
Governor of Arkansas, Bill Clinton participated in discussions 
of financial transactions concerning Madison Guaranty Savings 
and Loan Association and Capital Management Services, Inc. 
Hale, a twice convicted felon and an admitted liar and 
perjurer, has claimed that on three occasions in late 1985 and 
early 1986 Governor Clinton spoke with him about an illegal 
$300,000 loan Hale was considering making to Susan McDougal.
    Mr. Clinton has denied ever speaking with Hale about a loan 
to Susan McDougal. No document or witness before the Special 
Committee has corroborated Hale's assertion in any way.
    Hale's allegation concerning Governor Clinton, as 
unreliable as it is, pales in comparison with the exaggerated 
versions of Hale's statements published, uncritically, in the 
nearly three years since Hale first surfaced. Ever since 
operatives of Citizens United, the ultra-conservative anti-
Clinton group responsible for the 1988 Willie Horton television 
advertisement, first introduced Hale to the national media in 
1993, the press has consistently reported Hale's story as an 
allegation that Governor Clinton ``pressured'' Hale to make the 
loan to Susan McDougal. It was not until the recently concluded 
Tucker/McDougal trial--at which the prosecution was required to 
disclose Hale's prior interviews with law enforcement officials 
and the television networks were required to produce ``out-
takes'' of Hale's 1993 interviews with NBC, CNN and ABC--that 
the Committee learned what Hale actually told the government 
and the media about the Susan McDougal loan. These materials 
provided important evidence in direct conflict with the 
exaggerated ``pressure'' story.
    The jurors in the Tucker/McDougal trial, at which Hale and 
President Clinton both testified, made clear after the trial 
that they rejected Hale's unsubstantiated claim about Governor 
Clinton. One juror, Colin Capp, stated that the jurors 
considered Hale ``an unmitigated liar [who] perjured himself. 
David Hale invoked the President's name for one reason: to save 
his butt. We all thought that way.'' 499 Another juror, 
Earnest Williams, agreed, adding, ``I didn't believe a thing 
Hale said.'' 500
    In stark contrast, the jurors stated after the trial that 
they believed President Clinton when he denied having spoken 
with Hale about the loan Hale made to Susan McDougal. Sandra 
Wood, the jury foreperson, told the press, ``The President's 
credibility was never an issue. I just felt like he was telling 
us to the best of his knowledge what he knew.'' 501 Juror 
Tracy Pleasants added, ``I just felt as though he [President 
Clinton] was telling the truth, and I wasn't so sure about 
David Hale.'' 502
    Even Ray Jahn, the lead prosecutor in the case who 
presented Hale's plea-bargained testimony at the trial on 
behalf of the Office of the Independent Counsel, backed away 
from Hale's unsupported assertion about Governor Clinton. In 
his closing argument, Jahn told the jury that no one, including 
Hale, had alleged wrongdoing by Governor Clinton.503 The 
lead prosecutor told the jury what anyone who had taken the 
trouble to review the actual testimony (rather than the hype) 
already knew--that there was no evidence presented at the 
trial, including Hale's testimony, that anyone pressured Hale 
to make the loan to Susan McDougal or her company, Master 
Marketing.504
    Hale refused to testify before the Special Committee 
without a grant of blanket use immunity. Fortunately, the 
Special Committee has in its record an abundance of evidence, 
including 1600 pages of transcript covering nine days of Hale's 
testimony at the Tucker/McDougal trial, that sheds considerable 
light on Hale's veracity. Consistent with the view expressed by 
the jurors, the evidence in the Committee's record compels the 
conclusion that Hale's unsupported allegation regarding 
Governor Clinton is false.

 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 for numerous 
        felonies

    Hale first spoke with law enforcement officials about his 
company's $300,000 loan to Susan McDougal on October 10, 1989, 
when the FBI interviewed him as part of its criminal 
investigation into the failure of Madison Guaranty Savings and 
Loan Association. At the time of Hale's FBI interview in 
October 1989, Hale's own criminal conduct had not yet attracted 
the attention of law enforcement officials, and Hale was not a 
suspect of any criminal investigation.
    Hale described for the FBI how he came to make the $300,000 
loan to Susan McDougal back in 1986. FBI Special Agent Gary A. 
Aaron memorialized Hale's statements as follows, in a formal 
interview report (Form FD-302) prepared after the interview:

          Hale stated that he recalled making a $300,000 loan 
        to Susan McDougal, doing business as Master Marketing. 
        He had been dealing with Jim McDougal previously on 
        some items and recalled telling Jim McDougal that he 
        had some money he wanted to lend. Hale offered to lend 
        McDougal some as a tie-in with some of Madison Guaranty 
        Savings and Loan ventures. Hale recalled that later on 
        McDougal mentioned to him that his wife, Susan, needed 
        some money for a business. He recalled having an 
        additional discussion with Jim McDougal regarding this 
        in February, 1986. In March, 1986, Susan brought some 
        documents to his office which included the personal 
        financial statement of Jim and Susan McDougal, and the 
        financial statement of Madison Guaranty Savings and 
        Loan. Susan told Hale that she was going to use the 
        money to promote Madison Guaranty and some new land 
        development. She offered Hale a mortgage on some 
        property which was located near Castle Grande. The 
        McDougals personally guaranteed this loan. Hale stated 
        that he declined the mortgage which Susan offered on 
        the property because SBA viewed this type of thing more 
        favorably when it is made on an unsecured basis. Hale 
        stated that the loan he made Susan was for five years 
        and the loan currently is in default.505

    Thus, at a time when he was not in any criminal trouble 
himself, Hale described the $300,000 Master Marketing loan in 
extensive detail for the FBI without making any mention of any 
involvement by Bill Clinton. Contrary to his plea-bargained 
testimony several years later, Hale said nothing to the FBI in 
1989 about any discussions or meetings with Governor Clinton, 
and he said nothing about Governor Clinton or anyone else 
encouraging or pressuring him to make the loan. Instead, Hale 
told the FBI in 1989 that he and the McDougals worked out the 
deal and that he was the one who initiated the conversations 
about the loan because ``he had some money he wanted to lend.'' 
506
    However, Hale's personal circumstances changed dramatically 
in 1993. On May 5 of that year, the Small Business 
Administration notified Hale that it had referred him and his 
Small Business Investment Company, Capital Management Services, 
Inc., to the agency's Inspector General for an investigation of 
alleged fraud.507 Shortly thereafter, the Small Business 
Administration referred the matter to the FBI in Little Rock 
and the United States Attorney for the Eastern District of 
Arkansas.508 On July 21, 1993, the FBI executed a federal 
court search warrant at Hale's offices in Little Rock and 
seized a large number of incriminating documents.509 Hale 
retained Little Rock lawyer Richard Mays shortly after the FBI 
raid on his offices.510 Mays met once with officials of 
the United States Attorney's Office to determine whether he 
would be able to resolve the case quickly and easily for 
Hale.511 When Mays learned that the case was very serious 
and not likely to be easily resolved, he withdrew from the 
representation.512
    Hale then hired a criminal defense lawyer named Randy 
Coleman, whose law partner had served as campaign finance 
chairman for Sheffield Nelson, the Republican gubernatorial 
nominee Governor Clinton had defeated in 1990.513 Coleman 
quickly learned from prosecutors that Hale faced imminent 
indictment in federal court on several felonies involving 
millions of dollars of fraud against the Small Business 
Administration and others.514

3. Hale tried to extract an offer of blanket immunity from federal 
        prosecutors by offering to provide undefined information about 
        high-ranking Arkansas politicians

    Facing many years in prison, millions of dollars in fines, 
and the loss of his law license and municipal court judgeship, 
Hale authorized Coleman to seek a plea agreement with Paula 
Casey, the United States Attorney in Little Rock. Coleman met 
with Casey in early September 1993 and demanded that Casey 
either give Hale blanket immunity from prosecution or allow 
Hale to plead guilty to a single misdemeanor offense in 
exchange for Hale's provision of undefined information about 
unidentified members of the ``Arkansas political elite.'' 
515 Coleman testified that he sought this extraordinarily 
lenient deal from Casey, despite the seriousness of Hale's 
crimes, to enable Hale to retain his law license and continue 
serving as a municipal court judge in Little Rock.516
    Casey told Coleman that she was interested in receiving 
whatever information Hale had to offer.517 But Casey made 
clear that Hale would have to provide the FBI with a factual 
proffer of his information before any plea agreement could be 
struck, and that any such agreement would have to include a 
guilty plea to a felony offense.518 Assistant United 
States Attorney Michael Johnson, a career federal prosecutor in 
Casey's office with 22 years' experience, testified that it is 
common practice ``when dealing with potential defendants who 
seek leniency in exchange for information to demand and obtain 
from them a proffer, that is, a preview of the evidence they 
have to offer before agreeing to the arrangement.'' 519 As 
several career Department of Justice prosecutors testified, 
Casey would have risked ``buying a pig in a poke'' if she had 
agreed to a plea bargain without first insisting on a factual 
proffer from Hale, because without a proffer Casey would have 
had no way of determining whether Hale's information would be 
useful to the government.520
    Johnson added that a proffer would have allowed the FBI and 
the United States Attorney's Office ``to assess and corroborate 
the information, and to make the determination whether to enter 
into a plea arrangement whereby Mr. Hale would receive leniency 
in exchange for the information and testimony. It was standard 
Department of Justice operating procedure.'' 521 Special 
Agent Steve Irons, the lead financial fraud investigator in the 
FBI's Little Rock field office in 1993, and later a senior 
agent detailed to the Office of Independent Counsel Kenneth 
Starr, agreed with Johnson: ``Usually, it's just that you come 
in and tell us, and we'll decide after that.'' 522
    Rather than make a proffer, however, Hale chose to contact 
Jim Johnson, a pro-segregationist retired Justice of the 
Arkansas Supreme Court and one of President Clinton's most 
ardent and vociferous political opponents.523 Records 
indicate that Hale made more than forty telephone calls to 
Justice Johnson's office in the period following the July 21, 
1993 FBI raid on Hale's offices.524 With Johnson's 
assistance, Hale and his lawyer also soon were in touch with 
Floyd Brown and David Bossie, the two leading anti-Clinton 
operatives of Citizens United.525
    Hale then went to the media. While still refusing to 
provide his purported information to law enforcement officials, 
Hale first appeared on Floyd Brown's radio show 526 and 
then gave lengthy interviews to several national television 
networks and to The New York Times and The Washington 
Post.527
    David Bossie of Citizens United was present throughout an 
on-camera interview Hale gave to NBC on November 4, 1993 at 
Coleman's law office. As established by the testimony of Joseph 
(Mike) Narisi, the cameraman who filmed the interview for NBC, 
Bossie prompted Hale's answers during the interview:

          Bossie greeted employees of the office by their first 
        names and appeared to be well-acquainted with Coleman 
        and the employees at Coleman's law office. Bossie 
        consulted with Hale and Coleman before the taping of 
        the interview began, was present throughout the 
        interview, and prompted Hale during the videotaping of 
        the interview.528

    Assistant United States Attorney Johnson testified that 
Coleman and Hale were ``manipulating public perception, in part 
through the news media, in an effort to scare [the United 
States Attorney's Office] into capitulating'' regarding Hale's 
indictment.529 John Keeney, the Principal Deputy Assistant 
Attorney General in the Criminal Division at the Department of 
Justice and a career prosecutor with almost 50 years' 
experience, testified that it was ``totally inappropriate'' for 
Coleman and Hale to use the press to pressure the prosecutors 
into agreeing to any particular plea deal.530
    One example of Hale's use of the media to manipulate the 
public's perception was a statement Hale made during his 
November 4, 1993 interview with NBC. ``Out-takes'' of the 
interview indicate that when asked about the status of his plea 
negotiations with the United States Attorney's Office Hale 
stated that the prosecutors had told him: ``We are not 
interested [in your information]. We want you to come over here 
and plead guilty and shut up.'' 531 This, of course, was a 
false and grossly misleading statement of the position of the 
United States Attorney, who had told Hale and his lawyer 
repeatedly, as had her assistants and FBI Special Agent Irons, 
that she wanted to receive a detailed proffer of whatever 
information Hale had to provide.532
    Hale's lawyer also sought to manipulate the White House 
during this time period. Coleman contacted William Kennedy, an 
attorney in the White House Counsel's Office, and told him that 
he had a client facing federal criminal prosecution who was 
considering offering incriminating information about President 
Clinton.533 Coleman testified that he contacted Kennedy 
because he hoped that the White House would misuse the 
information and do something ``foolish'' with respect to the 
federal government's investigation of Hale.534 As 
discussed elsewhere in this report, the evidence established 
that no one at the White House or anywhere else in the Clinton 
Administration made any effort to silence Hale by interfering 
with his prosecution.
    Despite Hale's extraordinary efforts to coerce an 
unreasonably lenient plea agreement from the United States 
Attorney's Office, a federal grand jury in Little Rock issued a 
four-count indictment against Hale on September 23, 1993.
    Donald MacKay, a career prosecutor in the Justice 
Department's Fraud Section, took over the prosecution of Hale 
on November 8, 1993, following the recusal of Paula Casey and 
the United States Attorney's Office in Little Rock.535 
MacKay and the career prosecutors working with him at the 
Department of Justice took the same position with regard to 
Hale's plea demands that Casey had taken. MacKay informed 
Coleman that he would not reach a plea bargain with Hale until 
Hale had informed law enforcement officials what information he 
could provide in exchange for the agreement.536
    Hale continued his refusal to make a proffer to law 
enforcement officials absent an advance promise of blanket 
immunity or the dismissal of charges.537 Instead, Hale 
repeated his unsubstantiated allegation about Governor Clinton 
in the media, in a continuing effort to manipulate public 
opinion.538

4. Hale eventually reached a plea bargain with the independent counsel 
        that required him to plead guilty to two felonies

    Hale finally agreed on March 19, 1994, following the 
appointment of an Independent Counsel, to plead guilty to two 
felonies--a harsher plea agreement than that upon which Paula 
Casey and the career Justice Department officials had 
insisted.539 Assistant United States Attorney Michael 
Johnson testified:

          The United States Attorney's Office offered Mr. Hale 
        a plea agreement which would have required him to plead 
        guilty to a single felony. He rejected that and 
        insisted on receiving immunity, or at most, pleading to 
        a misdemeanor offense. This issue was ultimately 
        resolved between Mr. Hale and the Independent Counsel's 
        Office when Mr. Hale pled guilty to two felony 
        offenses, not one.540

    Although Hale faced the possibility of a longer period of 
incarceration under his plea bargain with the Independent 
Counsel than he would have faced under the plea required by 
Paula Casey, Hale's deal with the Independent Counsel 
nevertheless was generous to Hale in other respects. In 
exchange for Hale's guilty pleas to two felonies, the 
Independent Counsel gave Hale a broad transactional immunity 
from prosecution ``for any crimes related to his participation 
in the conduct of the affairs of Capital Management Services, 
Inc., Diversified Capital, Inc., and Madison Guaranty Savings 
and Loan, and any other crimes, to the extent David L. Hale has 
disclosed such criminal activity to this Office as of the date 
of this Agreement.'' 541 In addition, the Independent 
Counsel promised that, if Hale continued to provide substantial 
assistance to the prosecution, he would file a motion asking 
the judge to exempt Hale from application of the Federal 
Sentencing Guidelines and to show leniency for Hale at the time 
of sentencing.542
    Hale entered his two felony guilty pleas on March 22, 1994 
before United States District Court Judge Stephen M. Reasoner. 
Judge Reasoner placed Hale under oath at the hearing and 
cautioned him to tell the truth:

          The Court: Now, Mr. Hale, since you are now under 
        oath let me caution you if you were to make any false 
        statement to me during these proceedings this morning 
        that could be used against you in later proceedings for 
        perjury or false statement.543

    Hale then told the court, under oath, that he did not 
benefit personally from any of the fraudulent loan schemes to 
which he was pleading guilty:

          The Court: What happened to the money you obtained 
        from the SBA by this plan?
          Mr. Hale: It was loaned to various entities.
          The Court: That's what I was asking. Who was it 
        loaned to?
          Mr. Hale: I can't recall right off, Your Honor. I'm 
        sorry, I can't recall that.
          The Court: Were any of the entities that you had an 
        interest in?
          Mr. Hale: I don't believe so.544

    Two years later, after having received a reduced sentence 
from Judge Reasoner, Hale admitted on cross-examination at the 
Tucker/McDougal trial that he had benefitted personally from 
the fraudulent loan schemes to which he pled guilty and that he 
had misled Judge Reasoner, under oath:

          Q. And what you said to Judge Reasoner when you were 
        pleading guilty was not true, was it?
          A. Like I said when he asked me, I did not know I was 
        going to have to say anything, and when you are 
        standing up there, I was scared to death and I don't 
        even recall what I said except it's recorded.
          Q. Do you lie when you are scared?
          A. No, but I was scared and I don't remember what I 
        said.
          Q. Well, you were talking, though, to the judge.
          A. Yes, sir, I was.
          Q. Mr. Hale----
          A. And I would not under any circumstances want to 
        mislead the judge at all.
          Q. Yeah, but you did.
          A. If that's what I said, I did.545

    In fact, Hale and companies he owned benefitted 
significantly--in the amount of at least $500,000--from illegal 
loans made by Capital Management Services, Inc. For example, 
Hale received $280,000 from an illegal loan he made through 
Capital Management Services, Inc. to the Sunbelt 
Corporation.546 Similarly, Hale received a $200,000 
benefit when Dean Paul released him from a $200,000 mortgage 
obligation in return for an illegal $200,000 loan Hale made to 
Paul through Capital Management Services, Inc.547
    On an analogous subject, Hale also admitted at the Tucker/
McDougal trial that he has not paid taxes on any of his ill-
gotten gains and that he has no intention of paying taxes on 
the approximately $63,000 in cash payments he has received from 
the FBI over the past two years.548 As with Hale's 
admittedly false sworn testimony, Hale has not been prosecuted 
for income tax evasion.549
    When Hale finally went before the court for sentencing on 
March 25, 1996, the Independent Counsel asked the court to 
grant Hale a downward departure from the amount of prison time 
otherwise required by the Federal Sentencing 
Guidelines.550 The court gave Hale a significant break, 
sentencing him to only 28 months in prison instead of the 46 to 
57 months otherwise called for by the guidelines. The court 
also sentenced Hale to three years of supervised release, 
imposed a fine of $10,000, and ordered Hale to pay $2.04 
million dollars in restitution to the Small Business 
Administration.551
    Hale reluctantly admitted on cross-examination at the 
Tucker/McDougal trial that he hopes to receive yet another 
reduction in his sentence with the assistance of the 
Independent Counsel. Hale admitted that he intends to file a 
motion for reduction of sentence under Rule 35 of the Federal 
Rules of Criminal Procedure by March 25, 1997 and that he hopes 
Independent Counsel Starr will support his motion to the 
sentencing judge.552

5. Hale's history of fraud and duplicity

    The two felonies to which Hale pled guilty each involved 
serious fraudulent and deceitful conduct on Hale's part.
    Hale's first felony guilty plea was to a conspiracy to 
defraud the Small Business Administration through the making of 
false statements concerning the capitalization of his company, 
Capital Management Services, Inc., and the status of certain 
loans on its books.553 One overt act of the conspiracy 
involved $800,000 Hale fraudulently removed from an innocent 
woman's account at Prudential-Bache.554 Specifically, Hale 
withdrew $800,000 from Louise Townsend's account on November 4, 
1988 without Townsend's knowledge or permission. Hale then used 
the $800,000 in a series of fraudulent transactions that 
enabled him to obtain federal matching funds from the SBA by 
falsely claiming additional capitalization of Capital 
Management Services, Inc. Hale described the fraud as follows 
during his testimony at the Tucker/McDougal trial:

        [W]e took the $800,000 and put [it] into CMS, and then 
        took the $400,000 to apply for funds from [the] SBA. I 
        credited $400,000 between Sunbelt, Grasby and eighty-
        two fifty on MaBe Communications [delinquent loans]. 
        Then I turned around and loaned that money back out to 
        McIntire, LAME and River Valley, and [then the] funds 
        [were] returned to the Townsend account.555

    Hale's second felony guilty plea, also related to the 
conspiracy to defraud the Small Business Administration, was 
based on a wide variety of false statements and representations 
Hale made to the agency between 1985 and 1991. Hale made these 
false statements and representations with the specific intent 
to defraud Capitol Management Services, Inc. and its 
shareholders and to obtain SBA funds through ``false and 
fraudulent pretenses.'' 556
    Hale admitted at the Tucker/McDougal trial that in the 
1985-1991 time period covered by his guilty plea he submitted 
to the SBA false reporting forms regarding SBA-backed loans he 
made to a large number of companies, including Arkansas 
Commercial Realty Company, Weaver-Bailey, International 
Trading, Midwest Consulting, Liberty Mortgage, Campobello, 
Castle Sewer and Water, The Communications Co., Master 
Marketing, and Paul Sales.557 Hale testified that he 
intentionally provided false information to the SBA ``so that 
it wouldn't appear that it was a fraudulent document. * * * I 
did it for the purpose of covering the fraudulent activity that 
I had done.'' 558
    Hale testified at the Tucker/McDougal trial about a few of 
the many other fraudulent schemes for which he was excused from 
prosecution pursuant to his plea bargain with the Independent 
Counsel. One such scheme involved the falsification of loan 
files to deceive the Small Business Administration into 
believing that bad loans were in good condition. Hale 
explained:

          If I had a loan that wasn't paid that looked like it 
        might get classified, I would show it on the books 
        being sold to another entity, and that entity would in 
        turn give Capital Management a note.559

    Wayne Foren, the Director of the Office of Economic 
Development at the Small Business Administration and a career 
official with sixteen years' experience at the agency,560 
testified that Hale's conduct involving the affairs of Capital 
Management Services, Inc. was ``one of the most blatant cases 
of fraud in the [Small Business Investment Company] program I 
have ever seen.'' 561
    The Special Committee also learned about an allegedly 
fraudulent burial insurance scheme for which Hale still faces a 
likely state prosecution in Arkansas. Hale purchased the 
National Savings Life Insurance Company in 1986. At the time, 
National had 43 insurance agents who sold burial insurance to 
low-income persons in the area of Pine Bluff, Arkansas, a 
predominantly African-American community south of Little Rock. 
For a premium of as little as $1 per month, National committed 
to pay for a casket and funeral service when a policyholder 
died.
    It has been reported that when National filed its financial 
statements with the Arkansas Insurance Department in March 1993 
the statements showed a capital deficiency, rendering the 
company insolvent. Arkansas Insurance Commissioner Lee Douglas 
directed Hale to cure the capital deficiency, and in July 1993 
Hale deposited $150,000 into a company account.562
    It has been reported that in September 1993, a few days 
before Hale was indicted by the federal grand jury in Little 
Rock, the president of National notified state insurance 
regulators that the $150,000 had disappeared. The Insurance 
Department sent examiners to conduct a surprise audit, and they 
found that the $150,000 had been transferred out of National to 
another company controlled by Hale on the same day in July 1993 
on which Hale had put the money into National to cure the 
capital deficiency.563
    State insurance regulators seized National as insolvent on 
September 27, 1993, and in April 1994 Commissioner Douglas 
referred Hale's alleged looting of the company to Pulaski 
County Prosecuting Attorney Mark Stodola for possible 
prosecution.564 Stodola has stated publicly, as well as in 
a letter to Independent Counsel Starr, that he intends to 
obtain a grand jury indictment against Hale prior to the 
expiration of the statute of limitations period on July 6, 
1996.565
    Abundant evidence demonstrated that Hale defrauded even his 
friends and business associates. Dean Paul, for example, a 
former law client and business associate of Hale's, testified 
at the Tucker/McDougal trial about Hale's extraordinary 
abilities as a con man:

          Q. David had been your lawyer?
          A. Yes.
          Q. And you trusted him as a lawyer?
          A. Yes.
          Q. And you trusted him as your lawyer?
          A. As my lawyer.
          Q. And he used that trust to tell you we were going 
        to get us an insurance company, didn't he?
          A. He used that trust. Yes, he painted that picture, 
        yes.
          Q. David painted pictures well, didn't he?
          A. Yes, he did.
          Q. Is David an eloquent man?
          A. I think he is. To me he is.
          Q. Does he present a persuasive picture when he 
        talks?
          A. About as good as I've ever seen.
          Q. And he can paint a picture and make you believe 
        it, can't he?
          A. He did me.
          Q. Have you been conned before so well?
          A. No.566

    Indeed, it appears that no one drawn into Hale's orbit was 
safe from his rapacity. In 1986, Hale learned that his 
secretary's family was having trouble making mortgage payments 
on the family farm. Hale offered his assistance, suggesting 
that if the farm were deeded over to a company controlled by 
him the land could be developed and the creditors kept at bay. 
At the end of the day, no development took place, foreclosure 
ensued, and the family lost the farm. But that was after Hale 
had helped himself to 133 acres.
    According to news reports, testimony in a subsequent civil 
suit showed that Hale was having an affair with his secretary 
at the time and that he persuaded her to convince her family to 
``just sit and wait.'' In 1991, Judge Reasoner entered a 
$468,496 civil judgment against Hale. The family's claims 
against Hale for fraud are still in litigation.567
    Finally, Hale's recent claim that as a cooperating witness 
he required the security services of federal law enforcement 
officers to protect him from undisclosed threats must be 
considered in light of Hale's past behavior as a municipal 
court judge in Little Rock. For while Hale was committing all 
of the aforementioned crimes in the mid-1980s and early 1990s, 
he also was sitting two or three days per week as a judge 
hearing traffic and hot-check misdemeanor cases.
    During this time, at considerable expense to the taxpayers, 
Hale had a bulletproof screen installed in front of his bench 
and a metal detector placed in front of the door to his 
courtroom. On one occasion, Hale, claiming that a group of 
current and former employees were ``plotting to kill him,'' 
arranged to have a deputy sheriff escort him from the municipal 
courthouse. Apparently, one of the ``plotters,'' a former 
employee of Hale's, was celebrating a girlfriend's birthday at 
a local restaurant where she confided in a state trooper, ``if 
Hale died I wouldn't cry.'' This was the sum and substance of 
the supposed murder plot.568
    The cost to the federal government of guarding Hale for the 
two years leading up to the Tucker/McDougal trial (in addition 
to the $63,000 cash the FBI paid to Hale for living expenses) 
has not been disclosed.

6. Hale's unsubstantiated assertion about Governor Clinton

    It was in the context of his imminent federal indictment, 
in the fall of 1993, that Hale asserted for the first time, in 
press interviews, that Governor Clinton had expressed an 
interest back in late 1985 and early 1986 in Hale's making a 
$300,000 SBA-backed loan to Susan McDougal.
    Hale told the press of three supposed encounters with 
Governor Clinton. Hale claimed that the first encounter 
occurred in December 1985 outside the State Capitol Building in 
Little Rock. According to Hale, Governor Clinton approached 
Hale outside the building and asked him, ``Are [you] going to 
be able to help us out, help Jim and I (sic) out?'' 569
    Hale claimed that the second encounter occurred in late 
January or early February 1986 at Jim McDougal's office trailer 
at the Castle Grande Estates. According to the story Hale told 
the press, Governor Clinton offered to put up ``some land in 
Marion County'' as collateral for the loan but insisted that 
his ``name cannot show up in the documents.'' 570
    Hale claimed that his third encounter with Governor Clinton 
occurred at the University Mall in Little Rock. According to 
Hale, Governor Clinton approached him in the mall and asked, 
``Have you heard what that blankety blank Susan has done [with 
the money]?'' 571

7. Hale's allegation that Governor Clinton showed interest in the 
        master marketing loan is riddled with internal inconsistencies

    Hale's unsubstantiated assertion about Governor Clinton's 
supposed interest in Hale's loan to Susan McDougal is riddled 
with internal inconsistencies that further discredit it. A few 
examples of these inconsistencies follow.
    Hale claims that at a meeting at McDougal's office trailer 
in early 1986 Governor Clinton offered to put up some land in 
Marion County as collateral for the loan.572 Hale also 
claims, however, that at the same meeting Governor Clinton 
stated repeatedly that his name ``cannot show up on this.'' 
573
    These two assertions of Hale's cannot stand when viewed 
together. It simply does not make sense that Governor Clinton--
a trained lawyer--would have offered to put up land in his own 
name as collateral for a loan if he was adamant that his name 
not be associated with the loan. Hale was questioned about this 
internal inconsistency at the Tucker/McDougal trial:

          Q. When you own property, that's recorded at the 
        recorder of deeds, isn't it?
          A. If you put up any property, in order to have 
        title, you must record it.
          Q. All right. Now, isn't it also true that if Mr. 
        Clinton had owned property, it would have been forever 
        at the recorder of deeds in Marion County, forever?
          A. Not if he sold it.
          Q. If he sold it, the old deed is still there 
        recorded, isn't it?
          A. It is there, but is shows it was taken out of his 
        name and put in somebody else's.
          Q. But it shows, doesn't it?
          A. Yes, sir.
          Q. Could [anyone] go and find out the sitting 
        governor of Arkansas owned it just before it was 
        conveyed to a Sunbelt type of corporation?
          A. They could have.574

    Also according to Hale, McDougal initially requested a loan 
of only $150,000 and then later increased his request to 
$300,000. Hale claims that he quickly responded ``that that 
would be fine.'' 575
    Hale's willingness to double the amount of the loan is not 
consistent with any notion that he needed encouragement from 
Governor Clinton to convince him to make the loan in the first 
place. If Hale truly had been reluctant initially to make the 
loan, then it is extremely unlikely that he would have agreed 
so quickly to double the amount.

8. Hale cannot keep his story straight

    Additional inconsistent statements Hale has made about 
significant aspects of the $300,000 loan to Susan McDougal cast 
even further doubt on Hale's credibility. As in the previous 
section, a few examples will suffice here.
    As discussed above, Hale now claims that in early 1986 
Governor Clinton offered to put up some land in Marion County 
as collateral for the loan. In 1989, however, Hale said nothing 
in his interview with the FBI about Governor Clinton having any 
involvement with the loan--much less about Governor Clinton 
offering land as collateral. Instead, Hale told the FBI that 
Susan McDougal ``offered [him] a mortgage on some property 
which was located near Castle Grande.'' 576
    It is interesting to note that at the Tucker/McDougal trial 
Hale testified that Governor Clinton referred to the land he 
supposedly offered as collateral simply as ``some property in 
Marion County.'' Hale told the jury that Governor Clinton 
``didn't say'' what property he was referring to and that he 
``didn't know anything about [the Clintons' investment in] 
Whitewater'' at the time. ``I did not know Whitewater,'' he 
said. ``I did not know what they owned up there.'' 577
    However, back in the fall of 1993, as Justice Jim Johnson, 
Floyd Brown, David Bossie and other anti-Clinton forces were 
facilitating Hale's access to the national media, Hale told 
Jeff Gerth of The New York Times that at the 1986 meeting 
Governor Clinton identified the property in Marion County as 
``White-something.'' As reflected in the notes of Bruce Lindsey 
and Mark Gearan, Gerth then reported Hale's allegation to 
them.578 Hale's inclusion of the term ``White-something'' 
in 1993 appears to have been an attempt to pique the interest 
of the media by fabricating a connection between the Susan 
McDougal loan and Whitewater.
    Another example of Hale's inconsistent statements about the 
Master Marketing loan concerns Hale's claimed relationship with 
Governor Clinton. Hale testified at the Tucker/McDougal trial 
that he did not consider himself ``a close personal friend of 
Bill Clinton,'' 579 a point clearly established by 
President Clinton in his sworn deposition.580 But in an 
interview with NBC in November 1993, Hale stated that he was 
``old friends'' with President Clinton and Governor Tucker and 
that he and President Clinton were ``close political friends.'' 
581
    Hale, of course, never was a close personal or political 
friend of Bill Clinton's. Nor was he a friend or political ally 
of Tucker's or McDougal's. Hale was appointed to his municipal 
court judgeship by Governor Frank White, a Republican and 
prominent political opponent of Mr. Clinton's, and he made 
several campaign contributions to Republican candidates, 
including a $2,000 contribution to White in 1986, when White 
ran unsuccessfully to unseat Governor Clinton in the general 
election.582
    Finally, Hale testified at the Tucker/McDougal trial that 
at the time he made the $300,000 loan to Susan McDougal he was 
looking ``to Jim McDougal and Bill Clinton'' for 
repayment.583 Yet when the loan failed, Hale made no 
effort to collect any funds from Governor Clinton.584

9. President Clinton testified that he never spoke with Hale about a 
        loan for Susan McDougal

    President Clinton appeared by videotape as a witness at the 
Tucker/McDougal trial on May 9, 1996 and testified that he 
never spoke with Hale about any loan to be made to Susan 
McDougal:

          Q. Were you ever present in Mr. McDougal's office on 
        145th Street when a discussion occurred about financial 
        assistance from David Hale or his Capital Management 
        Services company involving any other business that you 
        or Mr. McDougal may have had?
          A. No, sir, never.
          Q. Were you ever present at any time for any meeting 
        between Jim McDougal and David Hale?
          A. Never, I never was present at any meeting.
          Q. Were you ever present when there was any 
        discussion of getting any kind of loan from David Hale 
        or his S.B.I.C.?
          A. No.
          Q. Did you ever make a statement that your name could 
        not appear on any loan documents or financial documents 
        related to any type of loan from David Hale or his 
        S.B.I.C.?
          A. Absolutely not.
          Q. Did you ever get assurance from Jim McDougal that 
        your name would be secreted from any loan documents 
        pertaining to any loan from David Hale or his S.B.I.C.?
          A. No, we never had any conversation about it at all.
          Q. Did you ever tell David Hale that you had property 
        in Marion County, Arkansas that you could use as 
        collateral or security for a loan from him?
          A. I did not do that, no.
          Q. Did you ever ask David Hale to make you a loan?
          A. No.
          Q. Did you ever ask David Hale to make Jim McDougal a 
        loan?
          A. No.
          Q. Did you ever ask David Hale to make Susan McDougal 
        a loan?
          A. No, I didn't.
          Q. Did you ever ask David Hale to make Jim Guy Tucker 
        a loan?
          A. No.
          Q. Did you ever, in any shape, form, or fashion, put 
        any pressure on David Hale for the purpose of obtaining 
        a loan or for the purpose of causing him to make loans 
        through his S.B.I.C.?
          A. I did not put any pressure on David Hale.585

10. The jurors in the Tucker/McDougal trial believed President 
        Clinton's testimony and concluded that Hale committed perjury

    Several of the jurors in the Tucker/McDougal trial spoke 
with the press after the verdict and made clear that they 
believed President Clinton's sworn denials of Hale's 
allegation. Juror Tracy Pleasants stated: ``I just felt as 
though he was telling the truth. . . . The president's 
credibility was--I held him in high esteem as far as 
credibility.'' 586 Jury foreperson Sandra Wood added: 
``The President's credibility was never an issue. . . . I just 
felt like he was telling us to the best of his knowledge what 
he knew.'' 587
    On the other hand, the jurors concluded that Hale 
fabricated his testimony concerning his supposed discussions 
with Governor Clinton about the loan to Susan McDougal. Juror 
Colin Capp stated that the jurors considered Hale ``an 
unmitigated liar . . . [who] perjured himself. . . . David Hale 
invoked the President's name for one reason: to save his butt. 
We all thought that way.'' 588 Juror Earnest Williams 
agreed: ``I didn't believe a thing Hale said.'' 589
    Consistent with these comments, the jurors indicated that 
the guilty verdicts they returned in the case were not at all 
based on Hale's testimony. Juror Risa Gayle Briggs stated: 
``There were so many witnesses presented and called, we were 
able to use all the other witnesses. . . . We didn't need to 
use David Hale's testimony.'' 590 Juror Capp added: ``I 
decided I wasn't going to take away anyone's freedom on the 
testimony of David Hale. . . . He's one of the greatest con men 
whom I've ever seen. . . . I think it was an absolute travesty 
that Hale got sentenced to [only] 24 (sic) months.'' 591

11. Hale's technique of embellishment

    It would appear that Hale's testimony about Governor 
Clinton's supposed interest in the $300,000 loan to Susan 
McDougal was an embellishment fabricated by Hale with the hope 
that it would help him secure a better plea deal with an 
Independent Counsel. It is a well known device of a skillful 
liar to use an established fact to provide credibility for his 
false story. In this case, that ``fact'' was Governor Clinton's 
prior relationship with Jim McDougal. Since McDougal was no 
shrinking violet in touting that relationship, all Hale needed 
to do was embroider his story a bit here and there to involve 
Governor Clinton.
    Hale provided an illuminating example of his proclivity to 
embellish his story at the Tucker/McDougal trial, when he 
testified that he knew that part of the proceeds of the 
$300,000 loan went to the Clintons' benefit in 
Whitewater.592 In an earlier CNN interview, Hale claimed 
to ``know that $110,000 of that money went into Whitewater 
Development, which was owned by the McDougals and the Clintons, 
and then in turn Whitewater Development used the $110,000 for a 
downpayment to International Paper on a $550,000 piece of 
property.'' 593
    In testimony at the Tucker/McDougal trial, Hale reiterated 
his claim that the Clintons benefited from the $300,000 
loan.594 However, Hale was forced to admit under cross-
examination that the basis for this statement was not 
contemporaneous information provided to him by Governor Clinton 
or the McDougals, but subsequent information supposedly 
provided to his ``lawyer'' by a reporter from The Washington 
Post.595
    In fact, while $25,000 was used by McDougal to make a 
downpayment on property purchased from International Paper, 
McDougal quickly moved the property out of the Whitewater 
account and never told the Clintons about it. It is undisputed 
that the Clintons never benefitted from McDougal's 
International Paper deal. 596
    Another likely example of Hale's penchant for embellishment 
was his testimony at the Tucker/McDougal trial that McDougal 
told him he was going to meet with Governor Clinton at the 
Governor's Mansion on a particular Saturday in early January 
1986 to discuss the Master Marketing loan.597 Given Hale's 
other problems with dates and the sequence of events, one may 
wonder at the clarity and specificity of this recollection, 
particularly since it does not appear to have been recorded in 
any statement Hale provided to the FBI in the forty-plus 
interviews of him the FBI conducted before his appearance at 
the trial. Is it possible that Hale somehow became aware that a 
log of meetings at the Governor's Mansion on Saturday, January 
18, 1986, showed that Governor Clinton met with McDougal that 
day.598 In fact, contrary to Hale's embellishment, 
evidence in the form of contemporaneous memos establishes that 
the January 18, 1986 Clinton-McDougal meeting was entirely 
unrelated to the Master Marketing loan.599
    Also illustrative of Hale's inventiveness as a liar was his 
unsupported assertion that in seizing records from his office 
on July 21, 1993 pursuant to a search warrant, the FBI lost or 
destroyed a document which supposedly supported Hale's claim 
regarding Governor Clinton's involvement in the Master 
Marketing loan.600 Inconveniently for Hale, the FBI agent 
who supervised the search, Special Agent Steven Irons, 
subsequently became one of the senior agents assigned to 
Independent Counsel Starr's Little Rock operation. No more was 
made about the ``missing'' document.

12. Hale's refusal to testify before the special committee without a 
        grant of blanket use immunity

    Despite having testified for nine days at the Tucker/
McDougal trial on the same subjects about which the Special 
Committee sought to question him, Hale asserted a fifth 
amendment privilege and refused to testify before the Committee 
absent a grant of blanket use immunity. Such a grant of 
immunity, had it been provided, likely would have had the 
effect of interfering with the stated intention of Arkansas 
state authorities to prosecute Hale for other serious alleged 
criminal conduct. The use immunity demanded by Hale was 
precisely the same as that conferred upon Oliver North and John 
Poindexter, whose subsequent Iran-Contra convictions were 
reversed as a direct result of their immunized testimony before 
Congress.
    The Special Committee considered many factors in 
determining whether to grant Hale the blanket use immunity he 
demanded. These factors included the importance of Hale's 
testimony to the Committee's investigation, the strength of 
Hale's fifth amendment claim, the risks that a grant of 
immunity would pose to the future state prosecution in 
Arkansas, the public nature of Hale's nine days of sworn 
testimony at the Tucker/McDougal trial, and the absence of any 
such precondition set by any of the more than 200 other 
witnesses who appeared before the Committee. In a vote of the 
Special Committee on June 11, 1996, a resolution favoring a 
grant of immunity for Hale failed to achieve the two-thirds 
majority required by statute.
    Hale's lawyer informed the Special Committee in a letter 
dated May 23, 1996 that Hale would not appear as required by 
Committee subpoenas for deposition and public hearing 
testimony, which at the time were scheduled for May 24, 1996 
and June 4, 1996, respectively. Hale's lawyer referred in his 
letter to the threatened state prosecution in Arkansas relating 
to Hale's allegedly fraudulent burial insurance scheme and 
stated that Hale was asserting his fifth amendment privilege 
against compulsory self-incrimination.601
     The Special Committee sought the opinion of the Senate 
Legal Counsel as to the validity of Hale's fifth amendment 
claim. In several well-researched and carefully written 
memoranda, the Senate Legal Counsel advised the Committee that 
although he could not say with certainty how a court would rule 
if presented with the issue, he believed that Hale's claim to a 
fifth amendment privilege with regard to matters within the 
scope of S.Res. 120 was weak. More specifically, the Senate 
Legal Counsel advised the Committee that it was unlikely that 
Hale could be prosecuted further, in either federal or state 
court, for crimes related to any of the matters covered by his 
anticipated testimony before the Committee.
    The Senate Legal Counsel thus advised that as long as the 
Committee limited its questions of Hale to the subjects within 
the scope of S.Res. 120--that is, as long as the Committee did 
not question Hale about his allegedly fraudulent burial 
insurance scheme, for which Hale clearly possessed a valid 
privilege against compulsory self-incrimination--Hale likely 
did not have a valid basis on which to assert a fifth amendment 
privilege against testifying before the Committee. Minority 
staff made clear that it would forego questioning Hale about 
the burial insurance matter if that would secure his 
appearance.
    The Senate Legal Counsel also advised the Special Committee 
of the serious risks that a grant of blanket use immunity could 
pose to any future state prosecution of Hale for his alleged 
burial insurance fraud. Those risks emanate principally from 
the binding decision of the United States Court of Appeals for 
the District of Columbia Circuit in United States v. North, 910 
F.2d 843 (D.C. Cir. 1990).
    In that decision, the court reversed Oliver North's 
criminal convictions arising from the Iran-Contra affair, 
holding that the prosecution had failed to meet its heavy 
burden of establishing that North's immunized testimony before 
Congress had no effect on any aspect of North's subsequent 
criminal prosecution. The court stated:

          [The fifth amendment] does not prohibit simply ``a 
        whole lot of use,'' or ``excessive use,'' or ``primary 
        use'' of compelled testimony. It prohibits ``any use,'' 
        direct or indirect. From a prosecutor's standpoint, an 
        unhappy byproduct of the fifth amendment is that 
        Kastigar may very well require a trial within a trial 
        (or a trial before, during, or after the trial) if such 
        a proceeding is necessary for the court to determine 
        whether or not the government has in any fashion used 
        compelled testimony to indict or convict a defendant. 
        We readily understand how court and counsel might sigh 
        prior to such an undertaking. Such a Kastigar 
        proceeding could consume substantial amounts of time, 
        personnel, and money, only to lead to the conclusion 
        that a defendant--perhaps a guilty defendant--cannot be 
        prosecuted.602

    The court thus cautioned that the grave risks to future 
prosecutions must be carefully considered before a decision is 
made to confer a grant of use immunity:

          [T]he fifth amendment requires that the government 
        establish priorities before making the immunization 
        decision. The government must occasionally decide which 
        it values more: immunization (perhaps to discharge 
        institutional duties, such as congressional fact-
        finding and information-dissemination) or prosecution. 
        If the government chooses immunization, then it must 
        understand that the fifth amendment and Kastigar mean 
        that it is taking great chance that the witness cannot 
        constitutionally be indicted or prosecuted.603

    In light of the Court of Appeals' decision in North, the 
Senate Legal Counsel cautioned the Special Committee that Hale 
could obtain for himself an ``immunity bath'' from all future 
prosecutions, including the state prosecution for his alleged 
burial insurance fraud, by providing immunized testimony to the 
Committee which, even if not technically responsive to the 
Committee's questions, touched on matters related to the future 
prosecutions.
    It must be emphasized that the accusations against Hale 
relating to his alleged burial insurance fraud, described 
above, have not been proven. Nevertheless, the accusations are 
extremely serious--that Hale cynically defrauded the poorest 
members of society, who used their modest savings to try to 
provide for a proper burial for their loved ones. Many on the 
Special Committee felt it is was very important to avoid any 
actions that could needlessly interfere with the ability of 
Arkansas state authorities to bring Hale to justice for this 
alleged fraud.
    The Majority's focus on Independent Counsel Starr's 
statement that he did not oppose immunity for Hale misses the 
point. It was Starr, after all, who first approached the local 
prosecutor in Arkansas and asked him to drop the state 
prosecution altogether. The local prosecutor considered the 
Independent Counsel's request and rejected it in a February 13, 
1996 letter to Starr:

          We have completed our review of a state investigation 
        of David Hale and have decided to charge him with 
        violating Arkansas law. Mr. Hale has not only committed 
        multiple crimes against the federal government, but 
        there is also probable cause to believe he has 
        independently violated state law as well. I understand 
        your preference is that this issue be addressed at 
        Hale's federal sentencing; however, I cannot oblige. * 
        * *
          In the final analysis, it is ultimately a decision 
        for the prosecutor, either state or federal, to 
        determine how to best protect society's interest in 
        bringing wrongdoers to justice. In the case at bar, 
        David Hale should be held to answer for what I believe 
        to be his fraudulent representations to the State 
        Insurance Department, which are even more egregious 
        considering that he has also defrauded the federal 
        government.604

    Many Members were concerned that Hale, by making a baseless 
assertion of privilege, was trying to manipulate the Committee 
into giving him a grant of immunity he did not need. Many 
Members failed to understand why Hale was insisting on a grant 
of immunity to testify before the Committee about the same 
matters about which he had already testified--without use 
immunity--for nine days at the Tucker/McDougal trial. Members 
were concerned that Hale was seeking immunity from the 
Committee for the improper purpose of obtaining an ``immunity 
bath'' so that he could avoid subsequent prosecution for the 
alleged burial insurance fraud in Arkansas.* As Senator 
Kerry stated:
---------------------------------------------------------------------------
    \*\ A letter Hale's lawyer sent to the Committee on June 6, 1996 
referred to Hale's concerns about unspecified federal prosecutions in 
addition to his concerns about state prosecutions. (June 6, 1996 letter 
from John A. Mintz to Chairman D'Amato and Senator Sarbanes). Since 
Hale's plea agreement with the Independent Counsel limits Hale's 
protection from federal prosecutions to federal crimes Hale disclosed 
before March 19, 1994, the letter from Hale's lawyer raised the 
question whether Hale has committed additional crimes, as yet 
undisclosed, that would be effectively excused by a grant of blanket 
use immunity.

          Let's have him come up here. If he has no assertable 
        Fifth Amendment privilege, let's put that to the test. 
        Let the system work the way it ought to work. But let 
        the Committee not be bamboozled and bullied by a legal 
        scheme into giving an immunity that we don't need to 
        give. * * *
          By what rights should he go to the [Independent 
        Counsel], cut a deal and agree to talk in court, get a 
        lesser sentence and now come up to the Senate Committee 
        and bamboozle the Committee in an [attempt] to come in 
        here and say absolutely anything that he wants 
        whatsoever with the notion that for whatever he says 
        here he can never be prosecuted? 605


    Senator Boxer added:

          I think it's fair to say that we don't know if he 
        will be indicted, but I have to tell you, to me, if 
        this is true and this is a person who stole from the 
        poorest of the poor who wanted to bury their loved 
        ones, for me to play a part, in essence granting a 
        pardon in advance because, in a sense, that's what it 
        is when you grant immunity--and he may blurt something 
        out--I don't trust him not to. This man, you are not 
        dealing with someone who has a record of honesty here. 
        * * * I think it would be a mistake.606

    Members also noted that little new information was likely 
to be obtained from Hale's testimony before the Special 
Committee. The Committee already had in its possession 1600 
pages of transcript of Hale's testimony in the Tucker/McDougal 
trial on the same subjects about which the Committee sought to 
question Hale; to the extent evidentiary rulings at the trial 
precluded Hale from testifying about certain events, the 
Committee also had in its possession numerous out-of-court 
statements by Hale relating to those events. Thus, there was a 
lesser need for the Committee to obtain Hale's testimony 
without regard to cost than there might have been had Hale 
never testified or spoken previously in a public forum. This 
simply was not a situation in which the Committee faced an 
``immunity or nothing'' decision. As Senator Kerry stated:

          [Hale] has already spent nine days in a court of this 
        country testifying under oath. He has been subjected to 
        cross-examination. That testimony is in our record. 
        There is no great mystery about what he is going to say 
        except what he might say if he had a blanket use 
        immunity, for which he can say anything.607

    In addition, the Committee had the benefit of the jurors' 
post-trial comments about Hale's lack of credibility as a 
witness. Not only did these comments cause some Members to 
doubt the sincerity of Hale's privilege assertion, they also 
raised significant doubt about the value of any testimony Hale 
might provide to the Committee.
    Finally, several Members of the Committee recognized that 
Hale's insistence upon a grant of blanket use immunity was 
unique. The Committee had called before it more than 200 
witnesses, and not one of them had sought a grant of immunity.
    Accordingly, at the Special Committee's public meeting on 
June 5, 1996, the Committee agreed not to vote on a prepared 
resolution to confer blanket use immunity on Hale. Instead, the 
Committee agreed that Hale would be brought in for a deposition 
on June 7, 1996 and that any privilege assertions Hale made in 
response to specific questions posed at the deposition would be 
ruled on first by the Chairman and then by the full Committee, 
as required by S.Res. 120 and other Senate precedents. The 
Committee agreed that if Hale continued to refuse to answer the 
Committee's questions the Committee would seek to bring the 
matter to federal court for a prompt judicial determination of 
the validity of Hale's assertions of privilege.
    After the June 5, 1996 hearing, the Senate Legal Counsel 
advised the Committee that the process of litigating the 
privilege issue in federal court would not be concluded in time 
for the Committee to obtain a court order requiring Hale's un-
immunized testimony before June 14, 1996, the final day for 
public hearings under the Special Committee's charter.
    On June 6, 1996, the Chairman proposed that the question of 
the validity of Hale's assertion of privilege be put to a 
Special Master. This proposal was foreclosed, however, by a 
letter the Committee received later the same day from Hale's 
lawyer.
    The June 6, 1996 letter from Hale's lawyer made clear that 
Hale would not testify before the Special Committee on any 
subject whatsoever without a court order granting him blanket 
use immunity. The letter made clear, therefore, that Hale would 
not abide by the ruling of a Special Master, who had no legal 
authority to bind Hale. Hale's lawyer wrote:

          I have advised the Committee orally and now confirm 
        in writing that Mr. Hale will claim the protection of 
        his Constitutional privilege under the Fifth Amendment 
        to the Constitution of the United States and 
        respectfully decline to testify at deposition and at a 
        public hearing if he is compelled to appear in response 
        to the subpoenas.
          In the absence of a court order to testify and a 
        grant of immunity as provided by Federal law, any 
        testimony by Mr. Hale regarding any matters before the 
        Special Committee may be used against him in some 
        fashion in connection with an announced criminal 
        prosecution of Mr. Hale in Arkansas and any other state 
        or federal prosecution.608

    Citing the letter from Hale's lawyer, the Chairman canceled 
Hale's scheduled deposition and noticed a meeting of the 
Committee for June 11, 1996 to vote on whether to grant 
immunity to Hale. At the meeting, the Committee voted 10-8 in 
favor of granting use immunity to Hale. Because a two-thirds 
majority vote is required to pass a resolution granting use 
immunity, the resolution failed.
    The Minority wanted Hale to testify before the Special 
Committee. Indeed, the Committee's record establishes beyond 
any doubt that, beginning in November 1995 and continuing 
through the late spring of 1996, the Minority sought in vain to 
persuade the Majority to bring Hale before the 
Committee.609 As Senator Sarbanes stated at the 
Committee's public hearing on January 31, 1996:

          Mr. Chairman, I would like to ask about David Hale. * 
        * * [I]n October of last year [1995] you and I wrote to 
        Kenneth Starr, the Independent Counsel, and advised him 
        that the Committee intended to proceed with [its] 
        investigation, notwithstanding Starr's concerns about 
        the effect the Committee's hearings might have on his 
        investigation because of the Committee's strong 
        interest in concluding its work by February 29, 1996 as 
        provided for in the Senate Resolution 120.
          * * * On December 7, [1995], after a meeting with 
        Independent Counsel Starr, who, of course, has 
        interposed objections to us hearing from a number of 
        witnesses, the Chairman asked Minority counsel to work 
        with Majority counsel to arrange for Hale's deposition. 
        Throughout December our counsel, in fact, urged the 
        Majority counsel to begin the process of arranging for 
        Hale's testimony. And we pointed out in early January 
        that no document subpoena or deposition notice had been 
        sent to Hale.
          * * * Now, we have not, as I understand it, issued a 
        subpoena for the Hale documents, we have not made any 
        arrangements to take the Hale deposition, despite 
        efforts to do so beginning well back in the fall. Now, 
        I'm at a loss to understand why there hasn't been any 
        follow-up on this matter, and I've put it on the public 
        record because repeated efforts to explore this matter 
        with the Majority have been unsuccessful.
        * * * We've raised this issue and pressed it 
        repeatedly. No action has been taken. I gather there 
        have been communications by Majority counsel with 
        Hale's lawyer, and I take it with the Independent 
        Counsel as well in which we have not been involved or 
        included, and I just feel that, you know, if it's the 
        intention not to proceed, then I think we ought to know 
        that, but I think that we ought to move ahead and we 
        ought to have a subpoena for the Hale documents and a 
        subpoena for his deposition and then we'll see how Mr. 
        Hale and his attorney react to that request from the 
        Committee. We've been seeking that now for months, 
        literally months, and have gotten--haven't gotten 
        anywhere with it.610

    Despite its repeated attempts to obtain Hale's testimony, 
the Minority voted against a grant of blanket use immunity for 
Hale. The Minority considered all of the factors discussed 
above and concluded that the risk that an immunity order would 
pose to the anticipated state prosecution in Arkansas was too 
great to endure in light of the seriousness of the alleged 
burial insurance fraud and other possible but unspecified 
charges to which Hale's lawyer alluded in his letter to the 
Committee, the public availability of Hale's nine days of 
testimony at the Tucker/McDougal trial and numerous out-of-
court statements by Hale, the absence of a valid legal basis 
for Hale's assertion of privilege, the apparent lack of 
credibility of Hale's testimony, and the absence of any other 
requests for immunity by any of the more than 200 other 
witnesses who appeared before the Committee.

             J. The Pillsbury Madison & Sutro Investigation

1. Introduction

    Pillsbury Madison & Sutro (``PM&S'') was retained by the 
Resolution Trust Corporation (the ``RTC'') in February 1994 to 
investigate potential civil fraud claims * relating to 
Madison Guaranty Savings & Loan (``Madison Guaranty'') and 
Whitewater Development Corporation.611 PM&S was assisted 
by the forensic accounting firm of Tucker Alan Inc. (``Tucker 
Alan'') on the Madison Guaranty and Whitewater investigations. 
PM&S and Tucker Alan spent over two years investigating 
Whitewater and Madison Guaranty, at a cost to taxpayers in 
excess of $3 million.612
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    \*\ ``On February 4, 1994, the Resolution Trust Corporation 
(``RTC'') issued an Order of Investigation in the matter of Madison 
Guaranty Savings and Loan. * * * The Order was issued consistent with 
12 U.S.C. Sec. 1441a(b)(14), as modified by the RTC Completion Act of 
1993 Public Law 103-204. That statute extended the limitations period 
applicable to RTC claims arising from fraud, intentional misconduct 
resulting in unjust enrichment and intentional misconduct resulting in 
substantial losses to the institution.'' (General Report On The 
Investigation of Madison Guaranty Savings & Loan And Related Entities, 
Prepared for the Resolution Trust Corporation by Pillsbury, Madison & 
Sutro, December 28, 1995, p. 1.)
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    The findings of this comprehensive, independent 
investigation, as set out in a series of seven written reports 
totalling over 545 pages, are consistent with the evidence 
collected by the Special Committee over thirteen months of 
investigation involving the review of tens of thousands of 
documents, 282 depositions, 51 days of public hearings, and 8 
public meetings: There is no credible evidence of any 
wrongdoing by President or Mrs. Clinton in connection with 
Whitewater or Madison Guaranty.
    The fact that two separate, independent governmental 
investigations, each conducted at enormous effort and taxpayer 
expense, reached the same result is a point that merits 
emphasis. The following discussion summarizes the key findings 
of the PM&S investigation and explains how those findings are 
consistent with the evidence developed in the Special 
Committee's investigation.

2. The PM&S investigation was conducted by capable, experienced lawyers 
        who were not subject to any outside influence

    Charles Patterson, a senior partner in the Los Angeles 
office of PM&S, was in charge of the overall investigative 
effort undertaken by PM&S on behalf of the RTC. Patterson also 
was the PM&S attorney with primarily responsibility for the 
Castle Grande and 1308 Main Street investigations. Bruce 
Ericson, a partner in the San Francisco office of PM&S, was the 
attorney with primary responsibility for the Whitewater and 
Rose Law Firm investigations. Jay B. Stephens, a partner in the 
Washington, DC office of PM&S and a former United States 
Attorney for the District of Columbia, assisted Patterson and 
Ericson with the investigation in the preliminary stages, but 
did not devote substantial attention * to the matter after 
the fall of 1994.613
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    \*\ During the Special Committee's hearings an issue arose 
concerning Mrs. Clinton's description of her work for Madison Guaranty 
as a ``minimal amount.'' (Senator Shelby, 1/11/96 Hrg. pp. 96-97; 
Hillary Rodham Clinton Whitewater Press Conference, April 22, 1994.) 
Comparing Mrs. Clinton's Madison Guaranty billings with the billings by 
Jay Stephens on the PM&S investigation sheds some light on this issue. 
Stephens testified that he did ``minimal'' work on the PM&S 
investigation of Madison Guaranty, but his billing records show that he 
billed 339.75 hours over 12 months, or an average of 28.3 hours per 
month. (Stephens, 5/17/96 Hrg. pp. 41-45; April 30, 1996 FDIC letter, 
Alice C. Goodman to Chairman Alfonse D'Amato and Senator Paul Sarbanes, 
attaching billing statements submitted to the RTC by Pillsbury, Madison 
& Sutro [Documents Not Numbered].) Mrs. Clinton in contrast, billed 
63.5 hours over 15 months, or an average of 4.23 hours per month. The 
fact that Mr. Stephens testified under oath that his work was 
``minimal'' in amount, when the records of the time he billed to the 
government show he did far more work in 1994 and 1995 than Mrs. Clinton 
did in 1985 and 1986, demonstrates that Mrs. Clinton's description of 
her work for Madison Guaranty as ``minimal'' is fair and accurate. 
(Id.) (The comparison also suggests that Mrs. Clinton's critics may be 
applying a double-standard in an effort to score political points.)
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    Patterson, Ericson, and Stephens appeared before the 
Special Committee on May 17, 1996. At the May 17 hearing, 
Patterson and Ericson defended the quality of their 
investigation, the independence of their firm, and the validity 
of the analysis and conclusions in their reports. Ericson 
testified that, ``The buck stopped somewhere, and as far as I 
am concerned, the buck stops with our firm. Our name went on it 
and we had to be satisfied with the finished product. If we 
weren't we wouldn't have put our name on it.'' 614 While 
Stephens testified that he was not sufficiently involved in the 
investigation to comment on its findings,* he described 
Patterson and Ericson as ``very experienced and talented'' 
attorneys ``who conducted themselves with the highest ethical 
standards.'' 615
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    \*\ When Ericson, Patterson, and Stephens appeared before the 
Special Committee at a public hearing on May 17, 1996, the Majority 
asserted that, in light of Stephens's limited involvement in the PM&S 
investigation, the numerous press accounts which reported that the PM&S 
investigation was spearheaded by Stephens and referred to the reports 
collectively as the ``Stephens Report'' were unfair and inaccurate. (At 
that hearing the Majority Chief Counsel stated that a computer search 
had yielded 429 news stories associating the PM&S report with Stephens. 
(Giuffra, 5/17/96 Hrg. p. 7).) Stephens testified that he had expressed 
to his partners ``some concern . . . that I was getting the credit or 
blame for the reports, since I hadn't written the reports.'' (Stephens, 
5/17/96 Hrg. p. 9). While Stephens's role may have been overstated by 
the news media, it is not surprising that the press and the public 
focused on Stephens. As a former federal prosecutor who had brought 
high-profile cases in Washington, DC, and had considered seeking the 
Republican nomination for the United States Senate from Virginia, his 
involvement in an investigation of matters relating to a Democratic 
President naturally was the subject of considerable media attention. 
(See, e.g., Stephens, 5/17/96 Hrg. pp. 38-40; ``Stephens Considers a 
Senate Race; Former U.S. Attorney May Seek GOP Nomination in 
Virginia'', The Washington Post, 5/15/93; ``Ex-Prosecutor Stephens 
Quits Va. Senate Race'', The Washington Post, Jan. 7, 1994.) Press 
reports at the time of the retention of PM&S by the RTC focused on 
Stephens's involvement in the investigation and on concerns allegedly 
raised at the time by some Clinton Administration officials about 
Stephens's partisan identification. (See, e.g., ``RTC Lawyer Drew White 
House Ire; Clinton Aides Questioned Hiring'', The Washington Post, 3/
26/94.) After these initial reports, Stephens's name continued to be 
linked with the PM&S investigation in press reports, and it is to be 
expected that the press and others, who had no way of knowing that his 
role had diminished, continued to associate Stephens with the 
investigation. The Committee found no evidence that the RTC 
misrepresented Stephens's role or sought to misuse the fact of his 
participation.
---------------------------------------------------------------------------
    Patterson and Ericson told the Committee that no one at the 
RTC ever sought to influence the conduct of their investigation 
or the conclusions in their reports. Patterson testified that 
PM&S's ``conclusions as reached in our reports, were not 
influenced in any untoward way by any outside source.'' 
616 Ericson confirmed that all of the conclusions in the 
Pillsbury Madison & Sutro reports reflected his best 
independent and professional judgment.617 Patterson also 
testified that no one ever reviewed the firm's preliminary 
conclusions and suggested that they needed to be 
changed.618 Patterson summed up his firm's role as 
follows: ``We are an independent law firm and we were asked to 
perform an independent investigation. And I firmly believe that 
if the RTC had asked us to change our conclusions, the stated 
conclusion that they did not agree with, we would not have done 
that.'' 619 Stephens said he had ``no reason to question 
Mr. Patterson's statement.'' 620
    Senior RTC officials confirmed that the agency never sought 
to influence the outcome of the PM&S investigation. Former RTC 
General Counsel Ellen Kulka testified that the RTC never sought 
to influence the PM&S investigation: 621

          Q: Are you aware of any instances where Pillsbury, 
        Madison wanted to look at certain issues or 
        transactions and they were told by the RTC not to look 
        at those issues or transactions?
          A: Absolutely not.

RTC Senior Counsel Mark Gabrellian also testified that no one 
at the RTC ever attempted to influence the findings or the 
conclusions of the PM&S reports.622 RTC Legal Division 
Counsel James Igo testified that he was not aware of any 
instances in which the RTC gave PM&S instructions as to the 
scope or limitations of their investigation.623

3. PM&S's investigation and findings on the Whitewater investment

    In April 1995 PM&S and Tucker Alan submitted a preliminary 
report on Whitewater that described the history of the 
venture.624 The findings of the preliminary report were 
consistent with prior public statements by the Clintons that 
they had been passive investors in Whitewater and that James 
McDougal had managed the investment. The preliminary report 
also concluded that the McDougals had contributed more money to 
pay Whitewater expenses, primarily interest on bank debt, than 
the Clintons. The preliminary report did not, however, answer 
the question of whether the Clintons were aware that money from 
the McDougals (as opposed to money from Whitewater land sales) 
had been used to pay Whitewater expenses.
    In December 1995 PM&S and Tucker Alan completed a 
supplemental report on Whitewater.625 With respect to the 
question of what the Clintons knew about the McDougals' 
payments of Whitewater expenses, the supplemental report 
concluded that ``on this record, there is no basis to assert 
that the Clintons knew anything of substance about the 
McDougals' advances to Whitewater, the source of the funds used 
to make those advances or the source of the funds used to make 
payments on the bank debt.'' 626 That report ``recommended 
that no further resources be expended on the Whitewater part of 
this investigation.'' 627

4. PM&S findings on the Rose Law Firm's legal work for Madison Guaranty

    PM&S prepared two reports on the representation of Madison 
Guaranty by the Rose Law Firm (the ``RLF'').628 The first 
RLF report, completed on December 28, 1995, concluded that 
``[t]he evidence does not provide a basis * * * on which to 
assert claims against the Rose Law Firm that could be pursued 
in a cost-effective manner.'' 629 In testimony provided to 
the Special Committee, the PM&S attorneys amplified on this 
point and made clear that PM&S's conclusion that legal action 
should not be brought against the RLF did not turn on whether 
or not such action would have been cost effective for the RTC. 
When Ericson was questioned at his May 10, 1996 deposition 
about Madison Guaranty's retention of the RLF, he testified 
that the cost-effectiveness consideration ``was of pretty 
marginal materiality. * * *'' 630
    On February 25, 1996, PM&S completed a second report on the 
RLF entitled ``A Supplemental Report on the Representation of 
Madison Guaranty Savings & Loan by the Rose Law Firm'' (the 
``Supplemental RLF Report'').631 With respect to the 
question of whether the retention of the RLF caused any harm to 
Madison Guaranty, the Supplemental RLF Report concluded:

          Mrs. Clinton's recollections and Mr. Massey's 
        recollections differ in some respect, but for present 
        purposes the differences are not material * * * it 
        makes little difference who was right. There is no hint 
        of fraud or intentional misconduct in either version, 
        and the mere act of retaining the Rose Law Firm did not 
        harm Madison Guaranty in any respect.632

In their May 17 hearing testimony Ericson and Patterson 
testified that nothing has come to their attention since the 
completion of the reports that would change their conclusion 
regarding the retention of the RLF.633 The PM&S attorneys 
also dismissed the significance of differing recollections of 
exactly how the RLF came to be retained by Madison Guaranty. At 
his May 10, 1996 deposition Ericson testified that ``there is 
still probably consistency'' between Mrs. Clinton's 
recollection of how Madison Guaranty became a client of the 
Rose Law Firm and Massey's recollection.634
    As to the securities matters on which the RLF advised 
Madison Guaranty, PM&S concluded: ``It does not appear that the 
Rose Law Firm's work deterred Arkansas regulators from doing 
anything they might have done.'' 635 The report also noted 
that ``if anything, the Arkansas regulators took a more 
aggressive position toward Madison Guaranty than did the 
FHLBB.'' 636 (As discussed above, Arkansas Securities 
Commissioner Beverly Bassett recommended to federal authorities 
in 1987 that Madison Guaranty be closed, but the federal 
authorities did not act on that recommendation until 1989.)
    After the RLF billing records were found in the White House 
in January 4, 1995, and provided to the RTC, PM&S conducted 
further investigation of the RLF's work for Madison Guaranty. 
The Supplemental RLF Report describes the significance of the 
billing records as follows:

          The billing records found at the White House and 
        other newly acquired evidence add considerably to the 
        sum of knowledge with respect to this matter. Taken as 
        a whole, however, the new evidence does not change the 
        conclusions stated in the Rose Report. The new evidence 
        has very little effect on the analysis of what the Rose 
        Law Firm knew and did before the acquisition of the IDC 
        property closed. The new evidence shows that, after the 
        acquisition closed, lawyers at the Rose Law Firm (and 
        in particular Mrs. Clinton) had more contact with Seth 
        Ward and performed more services for Madison Guaranty 
        than previously was known, but there remains no 
        substantial evidence that these lawyers knew of or 
        intended to aid and abet McDougal's apparent 
        misconduct.637

The Supplemental RLF Report found that ``a trier of fact is 
highly unlikely to find that there was anything untoward, let 
alone fraudulent or intentionally wrongful, in the 
circumstances of the Rose Law's retention by Madison 
Guaranty.'' 638 Ericson testified that PM&S found no 
evidence that either the Clintons or the RLF engaged in any 
fraudulent activity in connection with the matters under 
investigation: 639

          Q: The conclusions that you reached and put forward 
        involved conclusions about activities of others and 
        involved conclusions about fraud. What was your 
        conclusion about whether Mr. or Mrs. Clinton engaged in 
        fraudulent activity or whether the Rose Law Firm 
        engaged in fraudulent activity?
          A: We found no evidence of either.
          Q: No evidence of fraud either by the Clintons or the 
        Rose Law Firm in connection with the matters under 
        investigation? Is that correct?
          A: That's right.

    PM&S also concluded in the Supplemental RLF Report that 
Madison Guaranty did not retain the RLF as a means to pay 
$2,000 a month to the Clintons:

          The alleged economic motivation makes no sense. 
        McDougal suggests the Clintons needed $2,000 a month, 
        and the implication is that this accounts for the 
        monthly retainer in that amount, but there is no 
        evidence that the Clintons ever received anything like 
        $2000 a month from this engagement, and every reason to 
        believe that they never received more than a trivial 
        sum of money.640

After over two years of investigation, and with the benefit of 
having analyzed the RLF billing records for the Madison 
Guaranty engagement, PM&S dismissed the theory that the purpose 
of Madison Guaranty's retention of the RLF was to confer an 
economic benefit on the Clintons.

5. PM&S key findings on conspiracy theories involving the Rose Law Firm

    PM&S also investigated whether RLF attorneys were involved 
in any misconduct by Madison Guaranty officials in connection 
with the IDC acquisition and the subsequent resales of parcels 
of that property (discussed above). PM&S found no evidence that 
RLF attorneys were aware of any wrongdoing in connection with 
the IDC and Castle Grande property. The first RLF report by 
PM&S concluded:

          The evidence taken as a whole does not amount to 
        convincing proof that the Rose Law Firm knowingly aided 
        and abetted a fraud, or a scheme to circumvent the 
        Arkansas investment limitation regulation. This 
        conclusion does not necessarily mean that the evidence 
        exonerates anyone; it simply means, given the 
        applicable legal standards and the statutory mandate 
        under which the RTC operates, that no reasonable basis 
        has been found to recommend the filing of a claim 
        relating to the acquisition of Castle Grande against 
        the Rose Law Firm.641

    PM&S reaffirmed this conclusion in the Supplemental RLF 
Report 642 and in their testimony at the May 17 
hearing.643 With respect to conspiracy theories, PM&S 
concluded:

          It simply would not be persuasive to argue that, for 
        $21,000 [the amount of legal fees Madison Guaranty paid 
        to the RLF], McDougal corrupted the Rose Law Firm and 
        convinced half a dozen lawyers, most of whom he did not 
        know, to join him in a scheme to violate the 
        law.644

In his testimony at the Committee's May 17 hearing,645 
Ericson also confirmed another conclusion on conspiracy 
theories set out in the Supplemental RLF Report:

          The conspiracy theory [involving the RLF] is 
        hopelessly flawed. The Independent Counsel already has 
        alleged a different conspiracy--the conspiracy with 
        Tucker--involving the same property, IDC/Castle Grande 
        * * * The principals were cut in on the deals, and 
        relatively large amounts of money changed hands (six 
        figures, it is alleged). Whatever one thinks of that, 
        however, it strains common sense to place a second set 
        of conspirators on the same property--a set that 
        included half a dozen lawyers who had never met 
        McDougal before, a set that was not cut in on the 
        deals, a set whose senior members stood to gain 
        something on the order of $20 a month.646

In short, PM&S found no credible evidence that Rose Law Firm 
attorneys were participants in whatever misconduct may have 
occurred in connection with the IDC property.*
---------------------------------------------------------------------------
    \*\ The Majority's report emphasizes information recently provided 
to FDIC investigators by former Madison Guaranty loan officer Don 
Denton. (FDIC Office of Inspector General Interviews of Don Denton, 
June 3 and June 11, 1996 [Documents Not Numbered].) Pillsbury Madison & 
Sutro interviewed Denton in April 1994. (Doc. Nos. SEN 21633--SEN 
21648, Interview of Don Denton, April 28, 1994.) There are significant 
differences between Denton's statements to Pillsbury Madison & Sutro in 
April 1994 and his statements to the FDIC in June 1996. There are also 
significant differences between the June 3, 1996 and June 11, 1996 FDIC 
interview memoranda. These differing versions of statements to federal 
investigators call into question Denton's credibility and reliability 
as a witness.
---------------------------------------------------------------------------

6. The Role of Jay Stephens

    The PM&S reports, particularly the two Whitewater reports 
and the two RLF reports, generally have been viewed as 
favorable to the Clintons and the RLF. Based upon the questions 
raised at the May 17 hearing, it appeared that some Committee 
members may have suspected that RTC officials sought to have 
Stephens removed from the investigation, perhaps because of the 
well-publicized concerns about Stephens that allegedly were 
expressed by some Clinton Administration officials when PM&S 
initially was retained by the RTC. There is no evidence of any 
such RTC action or influence. The PM & S attorneys all 
testified that Stephens's diminished involvement in the 
investigations after the summer of 1994 reflected an internal 
staffing decision by the law firm and was not the result of any 
outside influence. Patterson assigned the areas of 
investigative responsibility, and Stephens's role diminished 
because the work was being done by Patterson and Ericson with 
support from the firm's Los Angeles and San Francisco offices. 
Patterson testified that no one at the RTC ever suggested that 
he remove Stephens from the investigation.647
    It also should be noted that Stephens was invited to review 
the reports his partners had prepared, but agreed to do so only 
in one instance. In late 1994 Ericson provided Stephens a draft 
of the preliminary Whitewater report and solicited his comments 
on the draft.648 Stephens gave Ericson comments, and 
Ericson took those comments into account in preparing the final 
version of the preliminary report.649 Later in 1995, after 
the preliminary report on Whitewater had been made public and 
reported on by the press as generally favorable to the 
Clintons,* Stephens declined to review drafts of the final 
reports:
---------------------------------------------------------------------------
    \*\ See, e.g., ``Report on Arkansas S&L backs up Clintons on 
Whitewater'', The Atlanta Journal and Constitution, June 26, 1995; 
``Whitewater Report Supports Clintons'', Arkansas Democrat-Gazette, 
June 27, 1995.

          Well in fact the RTC asked me to read all the reports 
        when the reports were filed in December. I declined to 
        do that because I had not been involved in the 
        engagement. I thought it was improper and inappropriate 
        for me to review those reports simply so the RTC could 
---------------------------------------------------------------------------
        have my imprimatur on those reports.650

Patterson indicated that he called the RTC about Stephens's 
position on review of the draft reports, and they said, ``no 
problem.'' 651 The RTC did not pursue the matter or 
pressure the firm to have Stephens review the drafts.
    It is not clear why Stephens thought it was ``improper'' 
for him to review drafts of the final PM&S reports when the 
client \652\ and his partners \653\ asked him to do so. 
Stephens seems to have worked on the project enough to be 
generally familiar with the issues in the investigation (he 
billed the RTC $67,950 for 339.75 hours of work in 1994 and 
1995).\654\ In view of Stephens's expertise in criminal law and 
experience as a United States Attorney and a senior official at 
the Department of Justice, it was reasonable for the RTC to ask 
him to review the reports and provide comments.\655\ Clients 
often ask law firms to have a member of the firm who has 
expertise in a particular substantive area review a document 
and provide comments.\656\ In fact, the RTC even followed this 
procedure internally, asking a staff member who had not been 
involved in the Madison Guaranty investigation to review drafts 
of final PM&S reports.\657\ The RTC attorney agreed to review 
the reports even though he had not been involved in the 
investigation. Stephens, in contrast, refused to review the 
drafts, because he did not want to put his ``imprimatur'' on 
the reports. The question remains, however, why the RTC, after 
paying the law firm in which Stephens was a partner over $2 
million for legal services and paying the firm $67,950 \658\ 
for Stephens's own work on the project, was not entitled to 
have Stephens review and provide comments on the final draft 
reports (as he had done with the preliminary Whitewater 
report). In any event, Stephens refused the requests of his 
client and his partners and did not review the draft 
reports.\659\

7. Questions concerning the thoroughness of PM&S's investigation and 
        the validity of the conclusions in the PM&S reports

    The Special Committee reviewed the thoroughness of the PM&S 
investigation and the validity of conclusions in the PM&S 
reports. At the May 17 hearing the Committee explored whether 
PM&S should have interviewed more witnesses in Arkansas. The 
hearing testimony established that PM&S exercised professional 
judgment as to whether or not interviewing a particular witness 
was likely to yield relevant evidence and therefore merited 
deposing or interviewing. While PM&S attorneys acknowledged 
that it always is helpful to interview or depose additional 
witnesses, they did not concede that their inability to 
interview all the persons involved undermines the analysis or 
conclusions in their reports.\660\
    At the May 17 hearing the Majority pointed out that PM&S 
did not interview the McDougals, David Hale, Jim Guy Tucker, 
Chris Wade (except a very preliminary initial interview), Seth 
Ward, John Latham, David Knight, and the Rose Law Firm 
attorneys involved in the acquisition of the IDC property. 
Ericson and Patterson explained that the Office of the 
Independent Counsel refused to allow PM&S to interview some of 
the witnesses.\661\ As to other witnesses, including bank 
officials involved in the Whitewater loan (Frank Burge, James 
Patterson, Ron Procter, and Robert Ritter), Ericson testified 
that their testimony would have been ``of marginal interest and 
basically a waste of money.'' \662\
    Although in a complex investigation it always is difficult 
to establish conclusively that a particular witness need not be 
interviewed (in effect doing so requires one to ``prove a 
negative''), the PM&S attorneys asserted that they conducted 
sufficient interviews and that the additional witnesses 
suggested by the Majority at the May 17 hearing likely would 
not have provided evidence that would change the conclusions 
reached by PM&S and Tucker Alan.\663\ Perhaps most important, 
the hearing testimony made clear that the selection of 
witnesses was made by PM&S without any interference from the 
RTC or anyone else in government and that no one at the RTC 
ever told PM&S not to interview certain witnesses.\664\
    Questions also were raised at the May 17 hearing as to 
whether the cost of the PM&S investigation was justified by the 
amount of potential damages the RTC could potentially recover 
in any civil litigation relating to Madison Guaranty that might 
have been initiated by the agency. The concern raised by the 
Majority seems to have been that while it was apparent to PM&S 
and the RTC early in the investigation that litigation would 
not be cost-effective, lengthy reports that were favorable to 
the Clintons and the Rose Law Firm nonetheless were prepared. 
The witnesses examined by the Special Committee uniformly 
explained that for the RTC the investigation involved the 
integrity of the agency, so more than the cost-effectiveness of 
litigation was at stake.\665\ Gabrellian confirmed that money 
was only one factor in the agency's decision to conduct a 
complete investigation: ``It was pretty clear from the dollars 
involved that, on its own, any claims identified out of the 
relationship with Whitewater would not be cost-effective.'' 
\666\ With respect to the larger question of the credibility of 
the agency, however, Gabrellian explained: \667\

          I think that * * * with respect to pursuit of the 
        investigation phase involving Whitewater Development 
        Corporation, and the explanation that I believe was 
        given on the record before congressional committees by 
        the [RTC] general counsel and [RTC] deputy CEO, as well 
        as the explanations given to me by my upper management, 
        was that Whitewater Development should be thoroughly 
        investigated, and that even though, in and of itself, 
        it may not be a cost-effective claim to pursue, that 
        there were issues of RTC credibility that necessitated 
        pursuing that phase of the investigation as well as 
        other phases of the investigation that may, in and of 
        themselves, lead to cost-effective claims.

    The Committee also explored whether any ``new facts'' have 
come to light since PM&S issued their reports that might change 
the conclusions in the reports. Patterson and Ericson did not 
concede that any of the so-called ``new evidence'' that has 
been obtained by the Special Committee since PM&S completed its 
reports would alter the conclusions in those reports.* Ericson 
testified that no new evidence had come forward since the 
completion of the PM&S reports that made him feel that the 
conclusions in those reports were not accurate.\668\
---------------------------------------------------------------------------
    * As noted above, the Majority report emphasizes information Don 
Denton recently provided to FDIC investigators. (FDIC Office of 
Inspector General, Interviews of Don Denton, June 3 and June 11, 1996 
[Documents Not Numbered].) That information was not available when the 
PM&S attorneys testified before the Special Committee, although PM&S 
attorneys had interviewed Denton in April 1994 and been told that 
Denton was not aware of any involvement by Rose Law Firm attorneys in 
the IDC transactions. Denton, who has been given immunity by the Office 
of Independent Counsel and is now a cooperating witness in that 
investigation, apparently has now changed his story from what he told 
PM&S in 1994.
---------------------------------------------------------------------------
    In short, the conclusions reached by PM&S after two years 
of investigation remain valid and now have been confirmed by 
the Special Committee's own exhaustive investigation.

                                endnotes

    1 Lasater, 2/22/96 Dep. pp.17, 20.
    2 Lasater, 2/22/96 Dep. p.269.
    3 Lasater, 2/22/96 Dep. p.270.
    4 Lasater, 2/22/96 Dep. p.18.
    5 Lasater, 2/22/96 Dep. p.270.
    6 Lasater, 2/22/96 Dep. pp.17-18, 270.
    7 Lasater, 2/22/96 Dep. p.96.
    8 Lasater, 5/1/96 Hrg. p.5.
    9 Lasater, 2/22/96 Dep. p.17.
    10 Lasater, 2/22/96 Dep. p.19.
    11 Lasater, 2/22/96 Dep. p.19.
    12 Lasater, 2/22/96 Dep. p.19.
    13 Lasater, 2/22/96 Dep. p.25.
    14 Drake, 1/24/96 Dep. p.9.
    15 Drake and Lasater, 5/1/96 Hrg. pp.48-49.
    16 Chandler, 5/1/96 Hrg. p.237.
    17 Doc. Nos. DKSN 026137--DKSN 026148, Arkansas Development 
Finance Authority, Bond Underwriters, Bond Counsel & Special Tax 
Counsel.
    18 Drake, 5/1/96 Hrg. p.48.
    19 Drake, 1/24/96 Dep. p.49.
    20 B. Wright, 4/25/96 Hrg. p.193.
    21 Bratton, 4/23/96 Dep. p.81.
    22 Chandler, 5/1/96 Hrg. pp.236-237.
    23 Chandler, 5/1/96 Hrg. p.237.
    24 Hardwicke, 2/15/96 Dep. pp.79-80.
    25 Hardwicke, 5/1/96 Hrg. pp.235-236
    26 G. Wright, 5/1/96 Hrg. p.236.
    27 G. Wright, 5/1/96 Hrg. p.206.
    28 Doc. No. DKSN 026171--DKSN 026172, ADFA (AND AHDA) Use of 
Professional Firms as Underwriters and Bond Counsel.
    29 Stout, 5/1/96 Hrg. p.231.
    30 Hardwicke, 2/15/96 Dep. pp.30-31; G. Wright, 4/24/96 Dep. 
p.24.
    31 Chandler, 4/27/96 Dep. pp.37-38.
    32 Chandler, 4/27/96 Dep. pp.74-75.
    33 Chandler, 4/27/96 Dep. p.39.
    34 Chandler, 4/27/96 Dep. pp.61-62.
    35 Chandler, 4/27/96 Dep. p.42.
    36 Chandler, 5/1/96 Hrg. p.197.
    37 Chandler, 4/27/96 Dep. p.84.
    38 Epes, 2/5/96 Dep. p.208.
    39 Epes, 2/5/96 Dep. pp.71-72.
    40 Lasater, 5/1/96 Hrg. p.37.
    41 Lasater, 5/1/96 Hrg. pp.8-9.
    42 Epes, 2/5/96 Dep. p.48.
    43 Epes, 2/5/96 Dep. p.56.
    44 Epes, 2/5/96 Dep. pp.220-221.
    45 Drake, 1/24/96 Dep. p.201.
    46 See Garner, 6/13/96 Dep. pp.21-22, 25-27, 29-31, 43.
    47 Chandler, 4/27/96 Dep. pp.51, 69, 71.
    48 Chandler, 5/1/96 Hrg. p.255.
    49 Chandler, 4/27/96 Dep. p.52.
    50 Chandler, 4/27/96 Dep. p.70.
    51 Chandler, 4/27/96 Dep. p.54.
    52 Hardwicke, 2/15/96 Dep. p.43.
    53 Hardwicke, 2/15/96 Dep. p.44.
    54 G. Wright, 4/24/96 Dep. p.37.
    55 G. Wright, 4/24/96 Dep. pp.26-27.
    56 G. Wright, 4/24/96 Dep. pp.40-41.
    57 Epes, 2/5/96 Dep. pp.85-86.
    58 Epes, 2/5/96 Dep. p.87.
    59 Snider, 2/7/96 Dep. pp.42-44; Young, 2/27/96 Dep. p.13.
    60 Stout, 5/1/96 Hrg. pp.181-182.
    61 Stout, 5/1/96 Hrg. p.181.
    62 Stout, 5/1/96 Hrg. p.183.
    63 Stout, 5/1/96 Hrg. pp.185-186.
    64 Stout, 5/1/96 Hrg. p.187.
    65 Stout, 5/1/96 Hrg. p.260.
    66 Hardwicke, 5/1/96 Hrg. p. 209.
    67 Hardwicke, 5/1/96 Hrg. p. 217.
    68 Hardwicke, 5/1/96 Hrg. pp. 260-261.
    69 G. Wright, 5/1/96 Hrg. p. 211.
    70 G. Wright, 5/1/96 Hrg. p. 262.
    71 Nash, 4/30/96 Hrg. p. 121.
    72 Nash, 4/30/96 Hrg. p. 121.
    73 G. Wright, 5/1/96 Hrg. pp. 205, 208.
    74 Stout, 5/1/96 Hrg. pp. 223-224.
    75 Stout, 4/30/96 Dep. p. 53.
    76 Stout, 4/30/96 Dep. pp. 77-78.
    77 Stout, 4/30/96 Dep. p. 78.
    78 Lasater and Drake, 5/1/96 Hrg. p. 54; Doc. Nos. DKSN 
026171--DKSN 026172, ADFA (and AHDA) Use of Professional Firms as 
Underwriters and Bond Counsel.
    79 Hardwicke, 5/1/96 Hrg. p. 228.
    80 Lasater, 2/22/96 Dep. pp. 154-155.
    81 Doc. Nos. DKSN 026475--DKSN 026476, January 4, 1985 letter 
from Dan R. Lasater to Honorable Bill Clinton, with Resume of Donald M. 
Spears.
    82 Doc. Nos. DKSN 026450--DKSN 026452, Current Members of 
Board Number 053 Arkansas Development Finance Authority, 1/24/86.
    83 Doc. No. DKSN 026582, April 3, 1985 letter from Patsy L. 
Thomasson to The Honorable Bill Clinton.
    84 Doc. No. DKSN 026581, April 5, 1985 letter from Bill 
Clinton to Patsy L. Thomasson.
    85 Epes, 2/5/96 Dep. p. 211; Doc. Nos. DKSN 026450--DKSN 
026452, Current Members of Board Number 053 Arkansas Development 
Finance Authority dated 1/24/86.
    86 Doc. No. DKSN 027451, March 31, 1983 letter from David A. 
Collins to The Honorable Bill Clinton.
    87 Chandler, 4/27/96 Dep. pp. 53-54.
    88 Chandler, 4/27/96 Dep. p. 45.
    89 Doc. Nos. DKSN 026609, May 1, 1985 letter from Dan R. 
Lasater to the Honorable Bill Clinton; DKSN 026606, May 1, 1985 letter 
from Dan R. Lasater to the Honorable Bill Clinton; DKSN 026616, May 1, 
1985 letter from Dan R. Lasater to the Honorable Bill Clinton.
    90 Doc. Nos. DKSN 026608, May 23, 1985 letter from Bill 
Clinton to Dan Lasater; DKSN 026605, May 23, 1985 letter from Bill 
Clinton to Dan Lasater; and DKSN 026615, May 23, 1985 letter from Bill 
Clinton to Dan Lasater.
    91 Epes, 2/5/96 Dep. p. 211; Doc. No. DKSN 026450--DKSN 
026452, Current Members of Board Number 053 Arkansas Development 
Finance Authority, 1/24/86.
    92 Hardwicke, 2/15/96 Dep. pp. 46-47.
    93 G. Wright, 4/24/96 Dep. pp. 10, 14.
    94 Doc. No. DKSN 026397, Recommendations for Arkansas 
Development Finance Authority.
    95 Drake, 5/1/96 Hrg. p. 55.
    96 Goodwin, 4/30/96 Hrg. p. 45.
    97 Goodwin, 4/30/96 Hrg. p. 11.
    98 Doc. No. DKSN 017816, ``Arkansas State Police Communication 
Systems Financing Alternatives October 1, 1984.''
    99 Snider, 2/7/96 Dep. p. 58-59.
    100 Young, 2/27/96 Dep. pp. 18-19.
    101 Snider, 2/7/96 Dep. p. 64.
    102 Young, 4/30/96 Hrg. p. 87.
    103 Young, 2/27/96 Dep. p. 31.
    104 Snider, 2/7/96 Dep. p. 67-68.
    105 Snider, 2/7/96 Dep. p. 71.
    106 Drake, 5/1/96 Hrg. p. 90.
    107 Young, Dep. pp. 28-29.
    108 Snider, 2/7/96 Dep. pp. 77-78.
    109 Young, 2/27/96 Dep. pp. 29-30.
    110 Drake, 1/24/96 Dep. p. 88; See Drake, 5/1/96 Hrg. pp. 97-
98.
    111 Lasater, 2/22/96 Dep. p. 246.
    112 Young, 4/30/96 Hrg. p. 30.
    113 Snider, Dep. pp. 77-78.
    114 Doc. Nos. DKSN 018193-DKSN 018199, Arkansas Act 817 signed 
by Gov. Clinton on April 4, 1985.
    115 Young, 4/30/96 Hrg. p. 75.
    116 Wright, 4/25/96 Hrg. p. 211.
    117 Young, Goodwin, Mitchum, 4/30/96 Hrg. p. 51; Young, 4/30/
96 Hrg. p. 75.
    118 Bratton, 4/30/96 pp. 125-26, 157.
    119 Doc. DKSN 027584, Minutes of April 4, 1985 meeting of the 
Arkansas State Police Commission.
    120 DKSN 001396, Minutes of May 3, 1985 Meeting of Financial 
Screening Committee.
    121 Mitchum, 4/30/96 Hrg. pp. 47, 76.
    122 Mitchum, 4/30/96 Hrg. pp. 48, 77.
    123 Mitchum, 4/30/96 Hrg. p.48.
    124 Mitchum, 4/30/96 Hrg. p.79.
    125 Mitchum, 4/30/96 Hrg. p.80.
    126 Myers, 4/30/96 Hrg. p.80.
    127 Doc. Nos. DKSN 001407--DKSN 001422, State Police Proposed 
Analysis Dated May 9, 1985.
    128 Myers, 4/30/96 Hrg. p.81.
    129 Myers, 4/30/96 Hrg. p.44.
    130 Young, 2/27/96 Dep. pp.53-54; 126-27.
    131 Young, 4/30/96 Hrg. p.82.
    132 Young, 4/30/96 Hrg. p.104.
    133 Young 2/27/96 Dep. pp.124-125.
    134 Doc. Nos. DKSN 001392--DKSN 001394, Minutes of May 10, 
1985 Arkansas State Police Commission Meeting.
    135 Doc. No. DKSN 001393, Minutes of May 10, 1985 Arkansas 
State Police Commission Meeting.
    136 Doc. No. DKSN 018198, Arkansas Act 817 signed on April 4, 
1985 by Gov. Clinton.
    137 Doc. No. DKSN 027248, Minutes of July 10, 1985 meeting of 
Communications Study Committee.
    138 Wright, 4/25/96 Hrg. p.251.
    139 Doc. No. DKSN 017636, February 27, 1985 article from the 
Arkansas Democrat-Gazette, ``Testimony Links Cocaine Use, Lawmakers' 
Offspring at Trial.''
    140 Goodwin, 4/30/96 Hrg. p.12.
    141 Goodwin, Dep. pp.31-32, 53-54, 120-22.
    142 Goodwin, 4/30/96 Hrg. p.20; April 22, 1996 Memorandum from 
Investigator Don Birdsong to Sergeant Darrell Stayton Regarding 
Congressional Subpoena.
    143 Wright, 4/25/96 Hrg. p.243-244.
    144  Lasater, Dep. p.231-232.
    145 Wright, 4/25/96 Hrg. pp.181, 187, 188-89.
    146 Bratton, 4/30/96 Hrg. p.173.
    147 Gaines, 4/30/96 Hrg. p.161.
    148 Lasater, Dep. pp.188-189.
    149 Drake, 1/24/96 Dep. p.96.
    150 Young, 4/30/96 Hrg. p.87.
    151 Young, 2/27/96 Dep. p.152.
    152 Mitchum, 2/9/96 Dep. p.33.
    153 Mitchum, 4/30/96 Hrg. p.77.
    154 Goodwin, 4/30/96 Hrg. p.11.
    155 Mitchum, 4/30/96 Hrg. p.84-85.
    156 Goodwin, 4/30/96 Hrg. p.42.
    157 Doc. No. DKSN 018193, Arkansas Act 817 of signed on April 
4, 1985, by Gov. Clinton, p.5.
    158 Young, 4/30/96 Hrg. p.102.
    159 Young, 2/27/96 Dep. p.137-138.
    160 Young, 4/30/96 Hrg. pp.33, 75.
    161 Young, 4/30/96 Hrg. pp.33, 75.
    162 Doc. No. DKSN 027162, May 1, 1985 memorandum from Michael 
Gaines to Betsy Wright.
    163 Gaines, 4/30/96 Hrg. pp.133, 135.
    164 Gaines, 4/30/96 Hrg. p.154.
    165 Wright, 4/25/96 Hrg. p.224.
    166 Drake, 5/1/96 Hrg. pp.114-115; See Raney Doc. 139-41, 
April 30, 1985 Memorandum from Michael Drake to Dan Lasater, George 
Locke and Dan Moudy (``the proposals were submitted well in advance of 
a financing date'').
    167 Drake, 5/1/96 Hrg. p.116.
    168 Lasater, 5/1/96 Hrg. p.10.
    169 Lasater, 5/1/96 Hrg. p.10.
    170 Lasater, 5/1/96 Hrg. p.10.
    171 Lasater, 2/22/96 Dep. pp.124-125.
    172 Lasater, 5/1/96 Hrg. p.10.
    173 Lasater, 5/1/96 Hrg. p.10; Lasater, 2/22/96 Dep. p.125.
    174 Lasater, 5/1/96 Hrg. p.11.
    175 Lasater, 5/1/96 Hrg. p.125.
    176 Lasater, 5/1/96 Hrg. p.28.
    177 Lasater, 2/22/96 Dep. p.134.
    178 Lasater, 5/1/96 Hrg. p.28.
    179 Lasater, 5/1/96 Hrg. p.30.
    180 Locke, 4/25/96 Dep. pp.26-27.
    181 Lasater, 5/1/96 Hrg. p.43.
    182 Lasater, 5/1/96 Hrg. p.44.
    183 Lasater, 2/22/96 Dep. pp.83, 87.
    184 Lasater, 2/22/97 Dep. p.113.
    185 Lasater, 5/1/96 Hrg. p. 61; B. Wright, 4/25/96 Hrg. p. 
201.
    186 Lasater, 5/1/96 Hrg. pp. 141-142.
    187 Lasater, 5/1/96 Hrg. pp. 170-171.
    188 Lasater, 5/1/96 Hrg. p. 153.
    189 Lasater, 5/1/96 Hrg. p. 5.
    190 Lasater, 2/22/96 Dep. p. 119.
    191 Lasater, 5/1/96 Hrg. p. 9.
    192 A Supplemental Report On the Representation of Madison 
Guaranty Savings & Loan by the Rose Law Firm, (``PM&S Supplemental Rose 
Report''), Prepared for the Federal Deposit Insurance Corporation by 
Pillsbury, Madison & Sutro, Feb. 25, 1996, p. 26.
    193 Doc. No. 1018026, April 3, 1985 memorandum to File from 
John Mitchell.
    194 Doc. No. MG0000863, April 18, 1985 memorandum from Jim 
McDougal to John Latham.
    195 Doc. No. RS 684, April 16, 1985 memorandum from Davis 
Fitzhugh to John Latham regarding ``Statutes on Issuance of Preferred 
Stock.''
    196 Doc. No. RS 000700, April 3, 1985 handwritten notes from 
Charles Handley to Beverly Bassett concerning ``Can a State Chartered 
Savings and Loan Association Issue Preferred Stock.''
    197 Fitzhugh, 1/25/96 Dep. p. 6.
    198 Doc. Nos. RS 000700--RS 000701, April 3, 1985 handwritten 
notes from Charles Handley to Beverly Bassett concerning ``Can a State 
Chartered Savings and Loan Association Issue Preferred Stock.''
    199 Massey, 1/11/96 Hrg. pp. 46-48.
    200 Massey, 1/11/96 Hrg. pp. 18, 44.
    201 Massey, 1/11/96 Hrg. pp. 18, 23-24.
    202 Statement of Richard Massey to the RTC, June 15, 1995, p. 
3, [Document Not Numbered].
    203 Massey, 1/11/96 Hrg. pp. 44-45, 82, 150-152.
    204 Latham, 5/16/96 Hrg. p. 24.
    205 Latham, 5/16/96 Hrg. p. 35.
    206 Massey, 1/11/96 Hrg. pp. 137, 230-232, 244-245.
    207 Massey, 1/11/96 Hrg. p. 45.
    208 Latham, 5/16/96 Hrg. p. 15.
    209 Doc. Nos. DKSN 000800--DKSN 000801, Interrogatory 
Responses of Hillary Rodham Clinton, May 24, 1995, answer to 
Interrogatory No. 17(a), pp. 34-35; FDIC Interview of Hillary Clinton, 
2/14/96, pp. 29-31.
    210 Interrogatory Responses of Hillary Rodham Clinton, May 24, 
1995, answer to Interrogatory No. 17(a), pp. 34-35; See also Massey, 1/
11/96 Hrg. pp. 25-26, 230-232.
    211 Bunch, 5/16/96 Hrg. pp. 20, 39-40; See Doc. Nos. 00009179-
00009180C, J. Giroir (Rose Law Firm) Oct. 10, 1983 letter to James B. 
McDougal attaching a Dec. 23, 1981 statement for total fees and costs 
of $5,893.63 (the date on the statement may be incorrect, as the 
statement itself indicates that it is for legal services through May 
15, 1982); a Madison Bank general ledger debit ticket reflects a $5,000 
payment on October 23, 1984 (Madison Bank president Gary Bunch 
testified that the ledger ticket is for the payment to the Rose Law 
Firm, Bunch, 5/2/96 Dep. pp. 26-27, 70-71); See also Minutes of the 
Madison Bank and Trust Board Meeting (referring to payment), September 
25, 1984 and November 27, 1984; See also Rose Law Firm fee credit 
reports for November 1984 (Doc. Nos. RS 002905-RS 002907).
    212 Bunch, 5/16/96 Hrg. pp. 20, 39-40; See Doc. Nos. 00009179-
00009180C, J. Giroir (Rose Law Firm) Oct. 10, 1983 letter to James B. 
McDougal attaching a Dec. 23, 1981 statement for total fees and costs 
of $5,893.63 (the date on the statement may be incorrect, as the 
statement itself indicates that it is for legal services through May 
15, 1982); a Madison Bank general ledger debit ticket reflects a $5,000 
payment on October 23, 1984 (Madison Bank president Gary Bunch 
testified that the ledger ticket is for the payment to the Rose Law 
Firm, Bunch, 5/2/96 Dep. pp. 26-27, 70-71); See also Minutes of the 
Madison Bank and Trust Board Meeting (referring to payment), September 
25, 1984 and November 27, 1984; See also Rose Law Firm fee credit 
reports for November 1984 (Doc. Nos. RS 002905-RS 002907).
    213 Knight, 5/16/96 Hrg. p. 31.
    214 Knight, 4/26/96 Dep. pp. 17-18.
    215 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp. 29-
31.
    216 Massey, 1/11/96 Hrg. pp. 21-24, 44-46; FDIC Interview of 
Hillary Rodham Clinton, 2/14/96, pp. 28-30.
    217 Doc. Nos., DKSN 000800-DKSN 000801, Interrogatory 
Responses of Hillary Rodham Clinton, May 24, 1995, answer to 
Interrogatory No. 17(a), pp. 34-35.
    218 Interview of Hillary Rodham Clinton, Federal Deposit 
Insurance Corporation, Transcript of Proceedings, In Matter of Madison 
Guaranty Savings and Loan Association, (hereinafter ``FDIC Interview of 
Hillary Rodham Clinton, 2/14/96, p. ------''), p. 29.
    219 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp. 34, 
39.
    220 Massey, 1/11/96 Hrg. pp. 153-155; R. Clark, 1/18/96 Hrg. 
pp. 93-94; D. Knight 4/26/96 Dep. p. 40.
    221 Massey, 1/11/96 Hrg. p. 107.
    222 Hillary Rodham Clinton Whitewater Press Conference, April 
22, 1994.
    223 Senator Shelby, 1/11/96 Hrg. pp. 96-97; Hillary Rodham 
Clinton Whitewater Press Conference, April 22, 1994.
    224 April 30, 1996 FDIC letter from Alice C. Goodman to 
Chairman Alfonse D'Amato and Senator Paul Sarbanes, attaching billing 
statements submitted to the RTC by Pillsbury, Madison & Sutro 
[Documents Not Numbered]; Stephens, 5/17/96 Hrg. pp. 41-45.
    225 April 30, 1996 FDIC letter from Alice C. Goodman to 
Chairman Alfonse D'Amato and Senator Paul Sarbanes, attaching billing 
statements submitted to the RTC by Pillsbury, Madison & Sutro 
[Documents Not Numbered]; Stephens, 5/17/96 Hrg. pp. 41-45.
    226 As discussed below.
    227 Handley, 1/25/91 Hrg. pp. 57-60.
    228 Doc. No. DKSN 028934, Rose Law Firm 1985 Billing Records: 
Mrs. Clinton's time records for 4/24/85, 4/24/85, and 4/25/85.
    229 Knight, 4/26/96 Dep. pp. 12-20; Latham, 5/15/96 Dep. pp. 
7-15.
    230 Knight, 4/26/96 Dep. pp. 16-18.
    231 Massey, 1/11/96 Hrg. p. 45.
    232 Latham, 5/16/96 Hrg. p.35.
    233 Latham, 5/15/96 Dep. p.7.
    234 Massey, 1/11/96 Hrg. pp.21-24, 44-46; FDIC Interview of 
Hillary Rodham Clinton, 2/14/96, pp.28-30.
    235 William C. Rempel and Douglas Frantz, ``Fallout From 
Collapse of S&L Shadows Clinton'', Los Angeles Times, Nov. 7, 1993.
    236 PM&S Supplemental Rose Report, 2/25/96, p.25.
    237 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.22-
23, 26; See also PM&S Supplemental Rose Report, 2/25/96, p.25.
    238 Knight, 4/26/96 Dep. p.52.
    239 William C. Rempel and Douglas Frantz, ``Fallout From 
Collapse of S&L Shadows Clinton'', Los Angeles Times, Nov. 7, 1993.
    240 Knight, 4/26/96 Dep. p.7.
    241 Knight, 4/26/96 Dep. p.46.
    242 Massey, 1/11/96 Hrg. pp.151-152, 170.
    243 Doc. No. DKSN 028934, Rose Law Firm 1985 Billing Record.
    244 Knight, 4/26/96 Dep. p.20.
    245 PM&S Supplemental Rose Report, 2/25/96, p.26.
    246 Doc. No. RS 000700, April 3, 1985 handwritten notes from 
Charles Handley to Beverly Bassett regarding ``Can a State Chartered 
Savings and Loan Association issue Preferred Stock.''
    247 Handley, 1/25/96 Hrg. p.242; Handley, 12/19/95 Dep. pp.48-
50.
    248 Handley, 1/25/96 Hrg. p.242; Handley, 12/19/95 Dep. pp.48-
50.
    249 Handley, 1/25/96 Hrg. p.242; Handley, 12/19/95 Dep. pp.48-
50.
    250 Doc. Nos. RS 000684--RS 000685, April 16, 1985 memorandum 
from Davis Fitzhugh to John Latham regarding ``Statutes on Issuance of 
Preferred Stock.''
    251 Doc. No. DKSN 028943, Rose Law Firm 1985 Billing Record.
    252 Doc. No. DKSN 028943, Rose Law Firm 1985 Billing Record; 
FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.33-35.
    253 Schaffer, 1/25/96 Hrg. p.44.
    254 Schaffer, 1/25/96 Hrg. p.44.
    255 FDIC Interview Hillary Rodham Clinton, 2/14/96, pp.33-34.
    256 Doc. No. RLF1 03182, April 30, 1985 letter from the Rose 
Law Firm to Charles Handley regarding ``Authorization and Issuance of a 
class of Preferred Stock by Madison Guaranty, a Savings and Loan 
Chartered under the laws of the State of Arkansas.''
    257 Doc. No. RLF1 03185, May 6, 1985 letter from Charles 
Handley to Beverly Bassett Schaffer regarding ``April 30, 1985 Rose Law 
Letter to Charles Handley.''
    258 Doc. No. RLF1 03184, May 14, 1985 letter from Beverly 
Bassett to Hillary Rodham Clinton regarding ``Authorization and 
Issuance of a Class of Preferred Stock by Madison Guaranty.''
    259 Fitzhugh, 1/15/96 Dep. pp.13-14.
    260 Doc. No. 0000084, May 14, 1985 letter from Richard Massey 
to Charles Handley.
    261 Doc. Nos. RS 000593--RS 000594, May 22, 1985 letter from 
Charles Handley to Beverly Bassett and Nancy Jones regarding 
``Application by Madison Guaranty Savings and Loan Association to form 
a Second-Tier, Wholly-Owned Service Corporation which would engage in 
the Securities Broker-Dealer Business.''
    262 Doc. No. RS 000594, May 22, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    263 Doc. No. RS 000594, May 22, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    264 Doc. No. RS 000545, June 17, 1985 letter from Richard 
Massey to Beverly Bassett, Nancy Jones, and Charles Handley regarding 
``Application by Madison Guaranty Savings and Loan to engage in 
brokerage activities.''
    265 Doc. No. RS 000546, June 17, 1985 letter from Richard 
Massey to Beverly Bassett, Nancy Jones, and Charles Handley regarding 
``Application by Madison Guaranty Savings and Loan to engage in 
brokerage activities.''
    266 Doc. No. RIC-0392, June 18, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    267 Doc. No. RIC-0392, June 18, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    268 Doc. Nos. RS 000502--RS 000503, July 10, 1985 letter from 
Richard Massey to Beverly Bassett, Nancy Jones and Charles Handley 
regarding ``Application by Madison Guaranty Savings and Loan 
Association to Engage in Brokerage Activities.''
    269 Doc. Nos. RS 000502--RS000503, July 10, 1985 letter from 
Richard Massey to Beverly Bassett, Nancy Jones and Charles Handley 
regarding ``Application by Madison Guaranty Savings and Loan 
Association to Engage in Brokerage Activities.''
    270 Doc. No. RIC-039348, July 17, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    271 Doc. No. RIC-039349, July 17, 1985 letter from Charles 
Handley to Beverly Bassett and Nancy Jones regarding ``Application by 
Madison Guaranty Savings and Loan Association to form a Second-Tier, 
Wholly-Owned Service Corporation which would engage in the Securities 
Broker-Dealer Business.''
    272 Doc. Nos. RLF1-03513--RLF1-03514, July 25, 1985 letter 
from Richard Massey to Beverly Bassett, Nancy Jones and Charles Handley 
regarding ``Application by Madison Guaranty Savings and Loan 
Association to Engage in Brokerage Activities.''
    273 Doc. Nos. RIC-039380--RIC-039381, July 27, 1985 letter 
from Charles Handley to Beverly Bassett and Nancy Jones regarding 
``Application by Madison Guaranty Savings & Loan Association 
(``Association'') to act as a Broker/Dealer through a Service 
Corporation.''
    274 Doc. Nos. RIC-039380--RIC-039381, July 27, 1985 letter 
from Charles Handley to Beverly Bassett and Nancy Jones regarding 
``Application by Madison Guaranty Savings & Loan Association 
(``Association'') to act as a Broker/Dealer through a Service 
Corporation.''
    275 Doc. No. RLF2 03492, September 9, 1985 letter from Richard 
Massey to Beverly Bassett regarding ``Madison Guaranty Savings & Loan 
Application to Engage in Brokerage Activities.''
    276 Doc. No. RLF2 03492, September 9, 1985 letter from Richard 
Massey to Beverly Bassett regarding ``Madison Guaranty Savings & Loan 
Application to Engage in Brokerage Activities.''
    277 Doc. No. RLF2 03492, September 9, 1985 letter from Richard 
Massey to Beverly Bassett regarding ``Madison Guaranty Savings & Loan 
Application to Engage in Brokerage Activities.''
    278 Doc. Nos. RLF1 03174--RLF1 03175, September 12, 1985 
handwritten memorandum from Charles Handley to Beverly Bassett 
regarding ``Madison S&L's Application to engage in Brokerage 
Activities.''
    279 Doc. Nos. RLF1 03174--RLF 1 03175, September 12, 1985 
handwritten memorandum from Charles Handley to Beverly Bassett 
regarding ``Madison S&L's Application to engage in Brokerage 
Activities.''
    280 Doc. No. RLF1 03178, October 17, 1985 letter from Beverly 
Bassett to Richard Massey regarding ``Madison Guaranty Savings & Loan 
Application to Engage in Brokerage Activities.''
    281 Doc. No. RLF 1 03178, October 17, 1985 letter from Beverly 
Bassett to Richard Massey regarding ``Madison Guaranty Savings & Loan 
Application to Engage in Brokerage Activities.''
    282 Doc. No. RS 000648, December 9, 1985 letter from Charles 
Handley to Richard Massey regarding ``Madison Guaranty Savings & Loan 
Association (``Madison'').''
    283 Doc. Nos. RS 00646--RS 000647, December 18, 1985 letter 
from Richard Massey to Beverly Bassett and Charles Handley regarding 
``Madison Guaranty Savings and Loan (``Madison'') application to engage 
in brokerage activities (``Application'').
    284 Doc. Nos. KF 0435--KF 0442, July 11, 1986 minutes 
regarding ``Board of Directors Meeting at the Federal Home Loan Bank of 
Dallas''; Schaffer, 1/25/96 Hrg. p.191.
    285 Schaffer, 1/25/96 Hrg. pp.42-43, 223-224; Doc. Nos. KF 
0435--KF 0436, July 11, 1986 minutes regarding ``Board of Directors 
Meeting at the Federal Home Loan Bank of Dallas.''
    286 Schaffer, 1/25/96 Hrg. pp.42-43, 223-224; Doc. Nos. KF 
0435--KF 0436, July 11, 1986 minutes regarding ``Board of Directors 
Meeting at the Federal Home Loan Bank of Dallas.''
    287 Schaffer, 1/25/96 Hrg. pp.42-43, 223-224; Doc. Nos. KF 
0435--KF 0436, July 11, 1986 minutes regarding ``Board of Directors 
Meeting at the Federal Home Loan Bank of Dallas.''
    288 CNN Interview of Walter Faulk, 4/28/94.
    289 ``Madison Guaranty Savings & Loan And Whitewater 
Development Company, A Preliminary Report to the Resolution Trust 
Corporation'' (``PM&S Whitewater Report''), Prepared for the Federal 
Deposit Insurance Corporation by Pillsbury, Madison & Sutro, April 24, 
1995, p.132.
    290 Clark, 1/30/96 Hrg. p.114.
    291 PM&S Whitewater Report, 4/24/96, p.152.
    292 Doc. Nos. CCBW 884--CCBW 887, July 2, 1986 note to Sam 
Bratton regarding Madison Guaranty; Doc. Nos. DEK 218778--DEK 218780, 
June 19, 1986 FHLBB letter from Walter Faulk to Board of Directors, 
Madison Guaranty Savings and Loan Association regarding examination of 
Madison Guaranty's financial condition and operating practices.
    293 Schaffer, 1/25/96 Hrg. pp.21-23; Doc. Nos. CCBW 884--CCBW 
887, July 2, 1986 note to Sam Bratton regarding Madison Guaranty.
    294 Schaffer, 1/25/96 Hrg. p.31.
    295 Schaffer, 1/25/96 Hrg. p.50.
    296 Schaffer, 1/25/96 Hrg. p.48.
    297 Schaffer, 1/25/96 Hrg. pp.129-135, 185; Doc. Nos. DEK 
218778--DEK 218780; see also, Doc. No. 5722, Madison Guaranty Minutes 
of Board of Directors, July 18, 1985; FSLIC Order to Cease and Desist, 
FHLBB Resolution No.: 86-851, August 15, 1986, pp. 27-28.
    298 Schaffer, 1/25/96 Hrg. p.178.
    299 Bratton, 1/5/96 Dep. pp.156-157, 224, 236.
    300 Wright, 1/26/96 Dep. pp.53-55.
    301 Schaffer, 1/25/96 Hrg. pp.129-135, 185.
    302 Schaffer, 1/25/96 Hrg. pp.50-51.
    303 Schaffer, 1/25/96 Hrg. p.193.
    304 Doc. Nos. 5000326-5000327, December 10, 1987 letter from 
Beverly Bassett to Stewart Root (Director, Federal Savings and Loan 
Insurance Corporation) regarding insolvent State chartered savings and 
loan associations.
    305 Schaffer, 1/25/96 Hrg. pp.197-199.
    306 Schaffer, 1/25/96 Hrg. pp.257-259.
    307 CNN Interview of Walter Faulk, 4/28/94.
    308 Handley, 1/25/96 Hrg. pp.194-195.
    309 54 Fed. Reg. 9890 (1989), published March 8, 1989. Notice 
is hereby given pursuant to the authority contained in section 
406(c)(1)(B)(i)(I) of the National Housing Act, as amended, 12 U.S.C. 
1729(c)(1)(B)(i)(I) (1982), the Federal Home Loan Bank Board duly 
appointed the Federal Savings and Loan Insurance Corporation as sole 
conservator for Madison Guaranty Savings and Loan Association, McCrory, 
Arkansas on February 28, 1989.
    310 ''Implications for Soundness,'' American Banker, November 
4, 1985.
    311 Schaffer, 1/25/96 Hrg. pp.54-57.
    312 49 Fed. Reg. 29, 357 (1984).
    313 50 Fed. Reg. 20550 (1985). Effective date: 12/5/84.
    314 Handley, 12/19/96 Dep. pp.4-5.
    315 Handley, 1/25/96 Hrg. p.264.
    316 Schaffer, 1/25/96 Hrg. p.93.
    317 Schaffer, 1/25/96 Hrg. pp.270-271.
    318 Schaffer, 1/25/96 Hrg. pp.45-46.
    319 Schaffer, 1/25/96 Hrg. pp.52-54; see also CNN Interview of 
Walter Faulk, 4/28//94.
    320 PM&S Supplemental Rose Report, 2/25/96, p.49, note 113, 
citing IG Ex. III-33, a Rose Law Firm ``New Matter Master Form'' dated 
Aug. 2, 1985.
    321 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.44.
    322 PM&S Supplemental Rose Report, 2/25/96, p.49, n. 115, 
citing Hubbell Interview, Dec. 27, 1995, pp. 8:15-9:8. (Webster Hubbell 
reportedly recalls that Seth Ward referred the matter to the Rose Law 
Firm at the direction of James McDougal.)
    323 Doc. No. DKSN 028979, Rose Law Firm 1985 Billing Record.
    324 Doc. Nos. DKSN 028979 and DKSN 029000, Rose Law Firm 1985 
Billing Records; see also Thrash, 1/31/96 Hrg. pp.230, 289-292; Dover, 
1/31/96 Hrg. pp.255-259.
    325 Doc. No. DKSN 028979, Rose Law Firm 1985 Billing Record.
    326 Doc. No. DKSN 029000, Rose Law Firm 1985 Billing Record.
    327 Doc. No. DKSN 028979, September 20, 1985 Rose Law Firm 
statement for services rendered to Madison Guaranty on the IDC matter, 
does not include any charges for work by Mrs. Clinton.
    328 Doc. No. SW1-004, September 3, 1985 letter from Jim 
McDougal to Seth Ward regarding ``Industrial Property.''
    329 Doc. Nos. 0000091, September 12, 1986 Minutes of Meeting, 
Board of Directors, Madison Financial Corporation; RIC 023349, August 
20, 1985 Meeting of the Board of Directors of Madison Financial 
Corporation; See also A Report On the Representation of Madison 
Guaranty Savings & Loan by the Rose Law Firm, (``PM&S Rose Report, 12/
28/95''), Prepared for the Federal Deposit Insurance Corporation by 
Pillsbury, Madison & Sutro, 12/28/95, pp.20-26.
    330 Rule V(C) of the Rules and Regulations of the Arkansas 
Savings and Loan Association Board, as discussed above; See also PM&S 
Rose Report, 12/28/95, pp.55-56.
    331 Latham, 5/15/96 Dep. p.36.
    332 Fitzhugh, 1/26/96 Dep. pp.55-56.
    333 Doc. Nos. SEN 21633--SEN 21648, Pillsbury Madison & Sutro 
Interview of Don Denton, April 28, 1994, p.8 (Memorandum from Gary 
Davidson to File dated June 1, 1994); See also FDIC Office of Inspector 
General, Interview of Don Denton, June 11, 1996, p.4. [Memorandum of 
Interview is incorrectly dated 6/11/86] (hereinafter ``FDIC-IG 
Interview of Don Denton, 6/11/96'').
    334 Ward, 2/12/96 Dep. pp.10-11, 61.
    335 Ward, 2/12/96 Dep. pp.10-11, 61.
    336 Ward, 2/12/96 Dep. pp.11-12.
    337 Latham, 5/15/96 Dep. p.34.
    338 Ward, 2/12/96 Dep. pp.13, 113-114.
    339 PM&S Supplemental Rose Report, 2/25/96, pp.57-58.
    340 PM&S Supplemental Rose Report, 2/25/96, pp.57-58.
    341 Doc. No. 0000091, September 12, 1986 Minutes of Meeting, 
Board of Directors, Madison Financial Corporation; RIC 023349, August 
20, 1985 Meeting of the Board of Directors of Madison Financial 
Corporation; PM&S Rose Report, 12/28/95, pp.20-26.
    342 Ward, 2/12/96 Dep. pp.14, 31-34; Doc. No. SW1-040, October 
15, 1985 Seth Ward application for loan No. 2962-50.
    343 Doc. No. RIC 023349, August 20, 1985 Meeting of the Board 
of Directors of Madison Financial Corporation; September 12, 1986 
Minutes of Meeting, Board of Directors, Madison Financial Corporation; 
PM&S Rose Report, 12/28/95, pp.20-26.
    344 Doc. Nos. SW1-005, September 24, 1985 final agreement; 
Ward, 2/12/96 Dep. pp.6, 16-23, 40, 97-98.
    345 FDIC Office of Inspector General, Interview of Don Denton, 
June 3, 1996, p.4. [Document Not Numbered] (hereinafter ``FDIC-IG 
Interview of Don Denton, 6/3/96'').
    346 Doc. Nos. SEN 21633--SEN 21648, Pillsbury Madison & Sutro 
Interview of Don Denton, April 28, 1994, p.8 (Memorandum from Gary 
Davidson to File dated June 1, 1994).
    347 PM&S Rose Report, 12/28/95, pp. 34, 58-60.
    348 Ward, 2/12/96 Dep. pp.42-44, 115.
    349 Latham, 5/15/96 Dep. p.37.
    350 FDIC Office of Inspector General, Interview of James T. 
Clark, June 10, 1996, p.3. [Document Not Numbered].
    351 Doc. Nos. DKSN 028979--DKSN 028980, Rose Law Firm 1985 
Billing Records; Thrash 1/31/96 Hrg. pp.230-231; see also PM&S Rose 
Report, 12/28/95, pp.24, n.113.
    352 Ward, 2/12/96 Dep. pp.6, 40, 123-124.
    353 Ward, 2/12/96 Dep. pp.6, 16-17.
    354 Hubbell, 2/7/96 Hrg. pp.3-4; Hubbell, 10/26/95 Dep. 
pp.144-145.
    355 Hubbell, 2/7/96 Hrg. pp.32-33.
    356 PM&S Supplemental Rose Report, 2/25/96, pp.153-154, citing 
Hubbell, 12/27/95 FDIC Interview, pp. 15:1-16:15.
    357 2/14/96 FDIC Interview of Hillary Rodham Clinton, pp.59-
60; Supplemental Interrogatory Responses of Hillary Rodham Clinton, 
Jan. 20, 1996, answers to Interrogatories Nos. 49(e) and 49(f), 6-7 
(referring to Doc. Nos. SW1-005--SW1-009).
    358 2/14/96 FDIC Interview of Hillary Rodham Clinton, pp.59-
60; Supplemental Interrogatory Responses of Hillary Rodham Clinton, 
Jan. 20, 1996, answers to Interrogatories Nos. 49(e) and 49(f), 6-7 
(referring to Doc. Nos. SW1-005--SW1-009).
    359 Ward, 2/12/96 Dep. pp.30-31, 78; Thrash, 1/31/96 Hrg. 
p.237.
    360 Ward, 2/12/96 Dep. pp.31-34; Doc. No. SW1-040, October 15, 
1985 Seth Ward application for loan No. 2962-50.
    361 Ward, 2/12/96 Dep. pp.114-117.
    362 Ward, 2/12/96 Dep. pp.114-117; Hubbell, 2/7/96 Hrg. pp.32, 
200, 211-214.
    363 Doc. No. DD000000020--DD000000021, March 31, 1986, 
$400,000 loan agreement.
    364 Doc. No. DD000000021, March 31, 1986, $400,000 loan 
agreement.
    365 Doc. No. DD000000019, Madison Guaranty Loan Committee 
Minutes.
    366 Doc. Nos. DD000000023--DD000000024, March 31, 1986 
$400,000 mortgage and attached legal description; See also Doc. No. 
DD000000053, July 14, 1986 memorandum from Don Denton to John Latham.
    367 Ward v. Madison Guaranty Savings and Loan Financial 
Corporation, No. 87-7580 (Pulaski Cty. Cir. Ct.) [hereinafter ``Ward v. 
Madison'' or if referenced to the trial transcript, ``Ward v. Madison 
R.T.''], p.28 (SEN 32839).
    368 FDIC Office of Inspector General Interview of Don Denton, 
6/11/96, p.2.
    369 FDIC Office of Inspector General Interview of Don Denton, 
6/11/96, p.2.
    370 Doc. No. DD000000031, April 4, 1986 board resolution.
    371 FDIC-IG Interview of Don Denton, 6/3/96, p.7.
    372 Ward v. Madison R.T., pp.51-52 (SEN 32862--SEN 32863).
    373 FDIC-IG interview of Don Denton, 6/3/96, p.10.
    374 Doc. No. DKSN 029024, Rose Law Firm 1986 Billing Record.
    375 FDIC-IG Interview of Don Denton, 6/3/96, p.10.
    376 FDIC-IG, 6/11/96, pp.2-3.
    377 Doc. No. DD000000241, telephone message from ``Sandra of 
Hillary Clinton's Office''; Denton's notes.
    378 Doc. Nos. DD000000242--DD000000243, Denton's handwritten 
notes relating to the ``Babcock'' matter.
    379 FDIC-IG Interview of Don Denton, 6/11/96, p.2.
    380 FDIC-IG Interview of Don Denton, 6/11/96, p.2.
    381 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    382 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    383 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    384 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    385 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    386 FDIC-IG Interview of Don Denton, 6/11/96, p.3.
    387 Doc. No. DD000000241, telephone message from ``Sandra of 
Hillary Clinton's Office''; Denton's notes.
    388 Doc. No. DKSN 029030, Rose Law Firm 1986 Billing Records.
    389 Doc. No. DKSN 029030, Rose Law Firm 1986 Billing Records.
    390 Doc. Nos. DD000000020--DD000000021, March 31, 1986 
$400,000 loan agreement.
    391 Doc. No. DD000000023, March 31, 1986 $400,000 mortgage and 
attached legal description.
    392 Doc. No. DD000000024, March 31, 1986 $400,000 mortgage and 
attached legal description.
    393 Compare Doc. No. DD000000035 with Doc. No. SW1-070--SW1-
072.
    394 Doc. No. DD000000035, May 1, 1986 Madison Guaranty board 
resolution approving option; See also Doc. No. SW1-070--SW1-074 
(original option); Doc. No. SW1-063--SW1-068 (revised option).
    395 FDIC-IG Interview of Don Denton, 6/11/96, p.8.
    396 PM&S Rose Report, 2/28/95, p.32, citing communication 
between Bruce A. Ericson and Alden Atkins of Vinson & Elkins (``Counsel 
for the Rose Law Firm states that this option was created at the Rose 
Law firm and that the letter `g' in the word processing code identifies 
the author as Mrs. Clinton''); R. Clark, 1/18/96 Hrg. pp.187-188.
    397 Doc. No. DKSN 029026, Rose Law Firm computer-generated 
billing memorandum for the Madison Guaranty ``General'' matter, May 13, 
1986.
    398 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.83.
    399 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.84.
    400 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.85.
    401 Ward v. Madison R.T., p.56 (SEN 32867).
    402 Ward, 2/12/96 Dep. pp.100-101.
    403 Ward, 2/12/96 Dep. p.101.
    404 Ward v. Madison R.T., p.232 (SEN 33043); Ward, 2/12/96 
Dep. p.101.
    405 Ward, 2/12/96 Dep. pp.49, 97.
    406 Doc. No. DKSN 029026, Rose Law Firm 1986 Billing Record.
    407 Doc. No. DKSN 29024, Rose Law Firm 1986 Billing Record.
    408 PM&S Supplemental Rose Report, 2/25/96, p. 130.
    409 PM&S Supplemental Rose Report, 2/25/96, p.160.
    410 Ward, 2/12/96 Dep. pp.27-29, 122-123; Fitzhugh, 1/31/96 
Hrg. pp.70, 160.
    411 Fitzhugh, 1/31/96 Hrg. pp.107-109.
    412 J. Clark, 1/30/96 Hrg. pp.133-134; PM&S Madison Guaranty 
Real Estate Report, 12/19/95, pp.14-19.
    413 J. Clark, 1/30/96 Hrg. pp.138-140; PM&S Madison Guaranty 
Real Estate Report, 12/19/95, pp.10-12.
    414 J. Clark, 1/30/96 p.138; PM&S Madison Guaranty Real Estate 
Report, 12/19/95, pp.9-10.
    415 J. Clark, 1/30/96 pp.138, 141-142; PM&S Madison Guaranty 
Real Estate Report, 12/19/95, pp.19-23.
    416 PM&S Madison Guaranty Real Estate Report, 12/19/96, pp.26-
29.
    417 PM&S Madison Guaranty Real Estate Report, 12/19/95, pp.7-
29.
    418 PM&S Madison Guaranty Real Estate Report, 12/19/95, 
pp.9,11.
    419 PM&S Supplemental Rose Report, 2/25/96, p.92.
    420 PM&S Madison Guaranty Real Estate Report, 12/19/95, p.29.
    421 January 5, 1996 Letter from David Kendall to Robert 
Giuffra, Chief Counsel, Committee on Banking, Housing and Urban 
Affairs. (Cover Letter accompanying DKSN 28928--DKSN 29043).
    422 PM&S Supplemental Rose Report, 2/25/96, p.3.
    423 PM&S Supplemental Rose Report, 2/25/96, p.91.
    424 Fitzhugh, 1/31/96 Hrg. pp. 3, 9-10; Fitzhugh, 1/26/96 Dep. 
p.13.
    425 Fitzhugh 1/26/96 Dep. p.72.
    426 Thrash, 1/31/96 Hrg. pp.266-267.
    427 Lyon, 12/14/95 Dep. pp.38,43, 81.
    428 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.70-
71, 79, 86-87.
    429 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.71.
    430 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.86-
87.
    431 Ward, 2/12/96 Dep. p.75.
    432 Lyon, 1/23/96 Hrg. p.12; Lyon 12/14/95 Dep. p.75.
    433 Lyon, 12/14/95 Dep. p.12; Ward, 2/12/96 Dep. pp.73-75.
    434 Lyon, 1/22/96 Dep. pp.19, 25.
    435 Lyon, 12/14/95 Dep. p.26.
    436 Lyon, 12/14/95 Dep. pp.16-18, 26-28.
    437 Lyon, 12/14/95 Dep. pp.16-18, 26-28.
    438 Lyon, 1/22/96 Hrg. p.33.
    439 Doc. No. MG-000555, November 20, 1985 letter from Jim 
McDougal to Seth Ward.Doc.
    440 Doc. No. MG-000555, November 20, 1985 letter from Jim 
McDougal to Seth Ward.Doc.
    441 Ward, 2/12/96 Dep. pp.73-75.
    442 Lyon, 12/14/95 Dep. pp.38-39.
    443 Lyon, 12/14/95 Dep. pp.39, 45-46.
    444 Lyon, 12/14/95 Dep. p.40.
    445 Lyon, 12/14/95 Dep. pp.40-41.
    446 Doc. No. DKSN 29002, Rose Law Firm 1985 Billing Record.
    447 Doc. No. DKSN 29011, Rose Law Firm 1985 Billing Record.
    448 Doc. No. DKSN 29011, Rose Law Firm 1985 Billing Record.
    449 Doc. No. DKSN 29011, Rose Law Firm 1985 Billing Record.
    450 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.70-
71.
    451 Doc. No. DKSN 29011, Rose Law Firm 1985 Billing Record.
    452 Doc. No. DKSN 29011, Rose Law Firm 1985 Billing Record.
    453 Doc. No. RLF2 02981-86 (Doc. No. 0000090), January 3, 1986 
memorandum from Richard Donovan to Hillary Rodham Clinton regarding 
``Wet/Dry'' issue.
    454 Donovan, 1/31/96 Hrg. p.223.
    455 Donovan, 1/31/96 Hrg. p.224; Doc. No. 0000090, January 3, 
1986 memorandum from Richard Donovan to Hillary Rodham Clinton 
regarding ``Wet/Dry'' issue.
    456 Donovan, 1/31/96 Hrg. p.224; Doc. No. 0000090, January 3, 
1986 memorandum from Richard Donovan to Hillary Rodham Clinton 
regarding ``Wet/Dry'' issue.
    457 Donovan, 1/31/96 Hrg. p.224; Doc. No. 0000090, January 3, 
1986 memorandum from Richard Donovan to Hillary Rodham Clinton 
regarding ``Wet/Dry'' issue.
    458 Donovan, 1/31/96 Hrg. p.224; Doc. No. 000090, January 3, 
1986 memorandum from Richard Donovan to Hillary Rodham Clinton 
regarding ``Wet/Dry'' issue.
    459 Doc. No. RLF2 02988, note from Hillary Rodham Clinton to 
Richard Massey regarding meeting with Seth Ward [Document Not Dated].
    460 Doc. No. DKSN 29011, Rose Law Firm 1986 Billing Record.
    461 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.70-
71.
    462 Doc. No. DKSN 29011, Rose Law Firm 1986 Billing Record.
    463 Doc. No. DKSN 29011, Rose Law Firm 1986 Billing Record.
    464 Document No. RLF2 02968, January 16, 1986 memorandum from 
Rick Donovan to Becky Arnold regarding research in the Pulaski County 
Court Clerk's office on ``Wet/Dry'' issue.
    465 Doc. No. DKSN 29013, Rose Law Firm 1986 Billing Record.
    466 Doc. No. RLF2 02965, January 23, 1986 followup memo from 
Rick Donovan to Hillary Rodham Clinton regarding ``Wet/Dry'' issue.
    467 Doc. No. RLF2 02965, January 23, 1986 follow-up memo from 
Rick Donovan to Hillary Rodham Clinton regarding ``Wet/Dry'' issue.
    468 Doc. No. 000090, February 7, 1986 memorandum from Jim 
McDougal to Jim Guy Tucker.
    469 Doc. No. DKSN 29027, Rose Law Firm 1986 Billing Record.
    470 Doc. No. DKSN 29016, Rose Law Firm 1986 Billing Record.
    471 Doc. No. DKSN 29013, Rose Law Firm 1986 Billing Record.
    472 Doc. No. DKSN 29013, Rose Law Firm 1986 Billing Record.
    473 Doc. No. DKSN 29016, Rose Law Firm 1986 Billing Record.
    474 Doc. Nos. RLF2 02932--RLF2 02943, February 17, 1986 
memorandum from Rick Donovan to Hillary Clinton regarding ``Madison 
Guaranty Savings & Loan/IDC.''
    475 Doc. Nos. RLF2 02932--RLF2 02943, February 17, 1986 
memorandum from Rick Donovan to Hillary Clinton regarding ``Madison 
Guaranty Savings & Loan/IDC.''
    476 Doc. Nos. RLF2 02932--RLF2 02943, February 17, 1986 
memorandum from Rick Donovan to Hillary Clinton regarding ``Madison 
Guaranty Savings & Loan/IDC.''
    477 Doc. Nos. RS 000941--RS 000944, March 4, 1986 memorandum 
from Rick Donovan to Hillary Clinton regarding ``Madison Guaranty 
Savings and Loan/IDC.''
    478 Doc. Nos. RS 000941--RS 000944, March 4, 1986 memorandum 
from Rick Donovan to Hillary Clinton regarding ``Madison Guaranty 
Savings and Loan/IDC.''
    479 Doc. Nos. RS 000941--RS 000944, March 4, 1986 memorandum 
from Rick Donovan to Hillary Clinton regarding ``Madison Guaranty 
Savings and Loan/IDC.''
    480 RS 000944, March 4, 1986 memorandum from Rick Donovan to 
Hillary Clinton regarding ``Madison Guaranty Savings and Loan/IDC.''
    481 PM&S Supplemental Rose Report, 2/25/96, p.111.
    482 Knight and Latham, 5/16/96 Hrg. pp.11-14, 36; Latham, 5/
15/96 Dep. pp.12-16.
    483 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.68-
69.
    484 Doc. No. 000090, February 7, 1996 memorandum from Jim 
McDougal to Jim Guy Tucker.
    485 Lyon, 1/23/96 Dep. pp.90-91.
    486 Thrash, 1/31/96 Hrg. p.250.
    487 Doc. No. DKSN 029008, Rose Firm 1986 Billing Record.
    488 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.68-
71.
    489 FDIC Interview of Hillary Rodham Clinton 2/14/96, p.70.
    490 Doc. No. DKSN 029011, Rose Law Firm 1986 Billing Record.
    491 Clark, 1/18/96 Hrg. p.106.
    492 FDIC Interview of Hillary Rodham Clinton, 2/14/96, p.64.
    493 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.64-
65.
    494 Clark, 1/18/96 Hrg. pp.103-104.
    495 FDIC Interview of Hillary Rodham Clinton, 2/14/96, pp.50-
52.
    496 Fitzhugh, 1/26/96 Dep. pp. 53, 58-60; See also U.S. v. 
McDougal and Tucker, W. Ray Jahn, Opening Statement, 3/11/96 pp.59-60.
    497 Ward, 2/12/96 Dep. pp.9-10; Fitzhugh, 1/31/96 Hrg. pp.42-
44.
    498 Latham, 5/15/96 Dep. pp.34-35.
    499 Reuters, ``Whitewater Juror Says Clinton Was 
`Magnificent,' '' May 29, 1996; Stephen Labaton, ``Jurors Say Clinton 
Testimony Was Credible, But Incidental,'' The New York Times, May 30, 
1996, p.A1.
    500 Associated Press, ``Juror Says There Is No Evidence That 
Clinton At Fault in Whitewater,'' May 29, 1996.
    501 ABC ``Nightline,'' 5/28/96.
    502 CNN ``Inside Politics,'' 5/29/96.
    503 United States v. McDougal, LR-CR-173 (E.D. Ark., May 15, 
1996), pp.7968-7969.
    504 United States v. McDougal, LR-CR-95-173 (E.D. Ark., May 
15, 1996), p.7969.
    505 FBI Form FD-302 for interview of David Hale, 10/10/89 
pp.1-2.
    506 FBI Form FD-302 for interview of David Hale, 10/10/89 
pp.1-2.
    507 Foren, 10/26/95 Dep. p.42.
    508 Foren, 10/26/95 Dep. pp.68-70.
    509 Coleman, 12/1/95 Hrg. p.75.
    510 Mays, 11/21/95 Dep. pp.10-17.
    511 Mays, 11/21/95 Dep. pp.15-16.
    512 Mays, 11/21/95 Dep. p.16.
    513 Coleman, 12/1/95 Hrg. p.81.
    514 Coleman, 12/1/95 Hrg. p.6.
    515 Casey, 11/1/95 Dep. p.104.
    516 Coleman, 11/9/95 Dep. pp.117-118.
    517 Casey, 11/1/95 Dep. pp.65-66.
    518 Casey, 11/1/95 Dep. p.65; Casey, 12/1/95 Hrg. p.196.
    519 Johnson, 12/1/95 Hrg. p.209.
    520 Carver, 10/1/95 Dep. p.130; Nathan, 10/27/95 Dep. p.105; 
MacKay, 10/18/95 Dep. pp.92-93.
    521 Johnson, 12/1/95 Hrg. pp.209-210.
    522 Irons, 12/5/96 Hrg. p.199.
    523 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3732-3734; James Stewart, Blood Sport, pp.47, 313-314.
    524 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3733-3734.
    525 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
9, 1996), pp.4069-4070; James Stewart, Blood Sport, pp.316, 318.
    526 United States v. McDougal, LR-CR-95-173 (E.D. Ark. April 
5, 1996), p.3737.
    527 United States v. McDougal, LR-CR-05-173 (E.D. Ark., April 
4, 5, 8, 9, 1996), pp.3652-3656, 3737, 3899-3903, 3909-3911, 4202-4203, 
4241-4243, 4246-4248.
    528 Affidavit of Joseph (Mike) Narisi, June 13, 1996, p.1.
    529 Johnson, 12/1/95 Hrg. p.208.
    530 Keeney, 12/6/95 Hrg. pp.51-52.
    531 NBC Interview of David Hale, 2 of 4, 11/4/93, pp.8-11.
    532 Casey, 12/1/95 Hrg. p.196; Johnson, 12/1/95 Hrg. p.209.
    533 Coleman, 12/1/95 Hrg. pp.10-13.
    534 Coleman, 12/1/95 Hrg. p.81.
    535 MacKay, 10/18/95 Dep. p.13.
    536 MacKay, 10/18/95 Dep. pp.92-93.
    537 MacKay, 10/18/95 Dep. p.40.
    538 United States v. McDougal, LR-CR-05-173 (E.D. Ark., April 
4, 5, 8, 9, 1996), pp.3652-3656, 3737, 3899-3903, 3909-3911, 4202-4203, 
4241-4243, 4246-4248.
    539 March 19, 1994 letter from Robert Fiske to Randy Coleman, 
[Document Not Numbered].
    540 Johnson, 12/1/95 Hrg. p.208.
    541 March 19, 1994 letter from Robert Fiske to Randy Coleman, 
p.1., [Document Not Numbered].
    542 March 19, 1994 letter from Robert Fiske to Randy Coleman, 
p.2., [Document Not Numbered].
    543 United States v. Hale, LR-CR-93-147 (E.D. Ark., March 22, 
1994), p.14.
    544 United States v. Hale, LR-CR-93-147 (E.D. Ark., March 22, 
1994), pp.23-24.
    545 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
9, 1996), pp.4097-4098.
    546 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
4, 1996), pp.3575-3576.
    547 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
4, 1996), pp.3592-3593.
    548 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3791-3795.
    549 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3791-3795.
    550 United States v. Hale, LR-CR-93-147 (E.D. Ark., March 25, 
1996), p.7.
    551 United States v. Hale, LR-CR-93-147 (E.D. Ark., March 25, 
1996), pp.6, 34-36.
    552 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3776-3790.
    553 Superseding Information, United States v. Hale, LR-CR-93-
147 (E.D. Ark., filed March 22, 1994), p.1.
    554 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
4, 1996), pp.3594-3596.
    555 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
4, 1996), pp.3594-3596.
    556 Superseding Information, United States v. Hale, LR-CR-93-
147 (E.D. Ark., filed March 22, 1994), pp.5-6.
    557 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
2 and 3, 1996), pp.3157-3159, 3238-3289, 3200-3202, 3304-3305, 3506-
3507.
    558 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
9, 1996), pp.4126-4128.
    559 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), pp.3743-3745.
    560 Foren, 10/26/96 Dep. pp.4, 7-8.
    561 Foren, 8/7/95 House Banking Committee Hrg. p.200.
    562 Jonathan Weil, ``While Starr Tackles Hale,'' Arkansas 
Democrat-Gazette, November 20, 1995.
    563 Jonathan Weil, ``While Starr Tackles Hale,'' Arkansas 
Democrat-Gazette, November 20, 1995.
    564 Jonathan Weil, ``While Starr Tackles Hale,'' Arkansas 
Democrat-Gazette, November 20, 1995.
    565 Grant Tennille, ``Stodola still wants Hale tried on state 
charges,'' Arkansas Democrat-Gazette, May 30, 1996; February 13, 1996 
letter from Mark Stodola to Kenneth Starr, pp.1-3, [Document Not 
Numbered].
    566 United States v. McDougal, LR-CR-95-173 (E.D. Ark., March 
26, 1996), pp.2046-2049.
    567 George Wells, ``Hale hit with $468,496 judgment,'' 
Arkansas Democrat-Gazette, May 1991, p.1B.
    568 John Haman, ``Character Witnesses,'' The Arkansas Times, 
March 1996, pp.1-4.
    569 CNN Interview of David Hale, 11/24/93, pp.18-19.
    570 CNN Interview of David Hale, 11/24/93, pp.22-25.
    571 NBC Interview of David Hale, 1 of 4, 11/4/93, pp.26-27.
    572 United States v. McDougal, LR-CR-93-173 (E.D. Ark., April 
2, 1996), pp.3322-3324.
    573 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
2 and 8, 1996), pp.3222-3224, 3969-3970.
    574 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
8, 1996), pp.3972-3973.
    575 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
2, 1996), p.3303.
    576 FBI Form FD-301 for interview of David Hale, 10/10/89 p.2.
    577 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
8 and 11, 1996), pp.3969-3970, 4559.
    578 Doc. No. BL 11721, Lindsey notes of 9/20/93 meeting with 
Gerth; Doc. No. S020300, Gearan notes of 9/20/93 meeting with Gerth.
    579 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
5, 1996), p.3614.
    580 United States v. McDougal, LR-CR-95-173 (E.D. Ark.) 
(deposition of President Clinton, videotaped April 28, 1996) (played at 
trial May 9, 1996), p.7477.
    581 NBC Interview of David Hale, 1 of 4, 11/4/93, pp.11-12.
    582 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
8, 1996), pp.3966-3967.
    583 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
2, 1996), pp.3314-3315.
    584 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
10. 1996), pp.4433-4434.
    585 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
28, 1996) (transcript of videotape of President Clinton's testimony, 
pp.22-24) (played for the jury on May 9, 1996, p.7477).
    586 CNN ``Inside Politics,'' 5/29/96.
    587 ABC ``Nightline,'' 5/28/96.
    588 Stephen Labaton, ``Jurors Say Clinton Testimony Was 
Credible, But Incidental,'' The New York Times, May 30, 1996, p.A1.
    589 Associated Press, ``Juror Says There Is No Evidence That 
Clinton At Fault in Whitewater,'' May 29, 1996.
    590 Associated Press, ``Juror Says There Is No Evidence That 
Clinton At Fault In Whitewater,'' May 29, 1996.
    591 Julian E. Barnes, ``Jury Saved Hardest For Last,'' 
Arkansas Democrat-Gazette, May 30, 1996.
    592 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
10, 1996), p.4380.
    593 CNN Interview of David Hale, 11/24/93, p.33.
    594 United States v. McDougal, LR-Cr-95-173 (E.D. Ark., April 
10, 1996), p.4380.
    595 United States v. McDougal, LR-CR-96-173 (E.D. Ark., April 
10, 1996), p.4241.
    596 ``Madison Guaranty Savings & Loan & Whitewater Development 
Corporation, Inc., A Supplemental Report To The Resolution Trust 
Corporation,'' Prepared by Pillsbury, Madison & Sutro, December 13, 
1995, pp.62-64.
    597 United States v. McDougal, LR-CR-95-173 (E.D. Ark., April 
10, 1996), pp.4333-4335.
    598 Doc. No. DKSN 012983, Governor's Mansion log.
    599 Doc. No. DKSN 013423, January 18, 1986 memorandum from Jim 
McDougal to Governor Clinton, regarding problems with sanitation 
department; Doc. No. DKSN 013418, January 30, 1986 memorandum from 
Janice Choate to Governor Clinton, regarding ``Jim McDougal.''
    600 Coleman, 11/9/95 Dep. pp.156-158; Jackson, 10/19/95 Dep. 
pp.115-118.
    601 May 23, 1996 letter from Theodore B. Olsen to Michael 
Chertoff and Richard Ben-Veniste, [Document Not Numbered].
    602 United States v. North,  910 F.2d 843, 860-61 (D.C. Cir. 
1990).
    603 United States v. North,  910 F.2d 843, 862 (D.C. Cir. 
1990).
    604 February 13, 1996 letter from Pulaski County Prosecuting 
Attorney Mark Stodola to Independent Counsel Kenneth Starr, pp.1-3, 
[Document Not Numbered].
    605 Senator Kerry, 6/5/96 Hrg. pp.14, 27.
    606 Senator Boxer, 6/5/96 Hrg. p.56.
    607 Senator Kerry, 6/5/96 Hrg. p.27.
    608 June 6, 1996 letter from John A. Mintz to Chairman D'Amato 
and Senator Sarbanes, [Document Not Numbered].
    609 November 20, 1995 memorandum from Lance Cole to Alice 
Fisher, regarding ``Minority's proposed witness list,'' [Document Not 
Numbered]; December 27, 1995 memorandum from Richard Ben-Veniste and 
Lance Cole to Michael Chertoff and Bob Guiffra, regarding ``January 
Deposition Schedule,'' [Document Not Numbered]; January 3, 1996 
memorandum from Richard Ben-Veniste, Neal Kravitz and Lance Cole to 
Michael Chertoff and Bob Guiffra, regarding ``David Hale Documents and 
Deposition Testimony,'' [Document Not Numbered]; February 14, 1996 
memorandum from Richard Ben-Veniste to Michael Chertoff, regarding 
``David Hale Subpoena,'' [Document Not Numbered]; February 22, 1996 
memorandum from Richard Ben-Veniste to Michael Chertoff, regarding 
``David Hale Testimony,'' [Document Not Numbered]; February 26, 1996 
memorandum from Richard Ben-Veniste to Michael Chertoff, regarding 
``Majority Staff Memorandum of February 23, regarding David Hale,'' 
[Document Not Numbered]; April 29, 1996 memorandum from Richard Ben-
Veniste to Michael Chertoff, regarding ``David Hale Subpoena,'' 
[Document Not Numbered].
    610 Senator Sarbanes, 1/31/96 Hrg. pp.125-129, 151-152.
    611 RTC order of investigation, In the Matter of Madison 
Guaranty Savings and Loan (7236), McCrory, Arkansas, February 4, 1994.
    612 Ericson, 5/17/96 Hrg. pp.36-37; Ericson, 5/10/96 Dep. 
pp.10-12.
    613 Stephens, 5/17/96 Hrg. p.116.
    614 Ericson, 5/10/96 Dep. p.246.
    615 Stephens, 5/17/96 Hrg. pp.33,74.
    616 Patterson, 5/17/96 Hrg. p.36.
    617 Ericson, 5/10/96 Dep. p.296.
    618 Patterson, 5/17/96 Hrg. p.36.
    619 Patterson, 5/14/96 Dep. p.100.
    620 Stephens, 5/16/96 Dep. pp.260-261.
    621 Kulka, 5/29/96 Dep. p.36.
    622 Gabrellian, 5/29/96 Dep. pp.84-85.
    623 Igo, 5/24/96 Dep. p.55.
    624 ``Madison Guaranty Savings & Loan and Whitewater 
Development Company, Inc.: A Preliminary Report to the Resolution Trust 
Corporation'', Prepared by Pillsbury Madison & Sutro, April 24, 1995.
    625 ``Madison Guaranty Savings & Loan and Whitewater 
Development Company, Inc.: A Supplemental Report to the Resolution 
Trust Corporation'', Prepared by Pillsbury Madison & Sutro, December 
13, 1995.
    626 PM&S Supplemental Whitewater Report, 12/13/95, p.77.
    627 PM&S Supplemental Whitewater Report, 12/13/95, p.78.
    628 ``A Report on the Representation of Madison Guaranty 
Savings & Loan by the Rose Law Firm'', Prepared for the Federal Deposit 
Insurance Corporation by Pillsbury Madison & Sutro, December 28, 1995; 
A Supplemental Report on the Representation of Madison Guaranty Savings 
& Loan by the Rose Law Firm, Prepared for the Federal Deposit Insurance 
Corporation by Pillsbury Madison & Sutro, February 25, 1995.
    629 PM&S Rose Report, 12/28/95, p.79.
    630 Ericson, 5/10/96 Dep. pp.136-137.
    631 ``A Supplemental Report on the Representation of Madison 
Guaranty Savings & Loan by the Rose Law Firm'', Prepared for the 
Federal Deposit Insurance Corporation by Pillsbury Madison & Sutro, 
February 25, 1995.
    632 Ericson, 5/17/96 Hrg. pp.99-100; See also PM&S 
Supplemental Rose Report, 2/25/96, p.23.
    633 Ericson, 5/17/96 Hrg. pp. 99-100; See also PM&S 
Supplemental Rose Report, 2/25/96 at p.23.
    634 Ericson, 5/10/96 Dep. pp.156-157.
    635 PM&S Rose Report, 12/28/95, p.50.
    636 PM&S Rose Report, 12/28/95, p.52.
    637 PM&S Supplemental Rose Report, 2/25/96, p.42.
    638 PM&S Supplemental Rose Report, 2/25/96, p.26; Ericson, 5/
17/96 Hrg. pp.100-101.
    639 Ericson, 5/17/96 Hrg. p.73.
    640 PM&S Supplemental Rose Report, 2/25/96, p.24; Ericson, 5/
17/96 Hrg. p.101
    641 PM&S Rose Report, 12/28/95, p.78.
    642 PM&S Supplemental Rose Report, 2/25/96, p.42.
    643 Patterson and Ericson, 5/17/96 Hrg. pp.102-103.
    644 PM&S Supplemental Rose Report, 2/25/96, p.163.
    645 Ericson, 5/17/96 Hrg. pp.104-105.
    646 PM&S Supplemental Rose Report, 2/25/96 pp.163-164.
    647 Patterson, 5/17/96 Hrg. pp.72-73.
    648 Stephens, 5/17/96 Hrg. p.127; Ericson, 5/10/96 Dep. p.268.
    649 Stephens, 5/17/96 Hrg. pp.127-128; Stephens, 5/15/96 Dep. 
pp.110-111.
    650 Stephens, 5/17/96 Hrg. pp.126, 130.
    651 Patterson, 5/17/96 Hrg. pp.130-131.
    652 Kulka, 5/29/96 Dep. pp.23-25; Igo, 5/24/96 Dep. pp.50, 81-
82.
    653 Patterson, 5/14/96 Dep. 143; Ericson, 5/10/96 Dep. p.268; 
Stephens, 5/17/96 Hrg. p.127.
    654 April 30, 1996 FDIC letter from Alice C. Goodman to 
Chairman Alfonse D'Amato and Senator Paul Sarbanes, attaching billing 
statements submitted to the RTC by Pillsbury, Madison & Sutro 
[Documents Not Numbered]; Stephens, 5/17/96 Hrg. pp. 41-45.
    655 Gabrellian, 5/29/96 Dep. pp.60-61.
    656 Igo, 5/24/96 Dep. p.91.
    657 Kulka, 5/29/96 Dep. pp.60-62; Igo, 5/24/96 Dep. pp.81, 91-
93.
    658 April 30, 1996 FDIC letter from Alice C. Goodman to 
Chairman Alfonse D'Amato and Senator Paul Sarbanes, attaching billing 
statements submitted to the RTC by Pillsbury, Madison & Sutro 
[Documents Not Numbered]; Stephens, 5/17/96 Hrg. pp.41-45.
    659 Gabrellian, 5/29/96 Dep. pp.66-67; Stephens, 5/17/96 Hrg. 
pp.126, 130.
    660 Ericson, 5/15/96 Dep. pp.312-316; Ericson, 5/17/96 Hrg. 
pp.73-77, 101-105, 109, 115.
    661 Patterson, 5/17/96 Hrg. p.95; Ericson 5/10/96 Dep. p.100.
    662 Ericson, 5/15/96 Dep. pp.312-316; Ericson, 5/17/95 Hrg. 
pp.111-112, 120.
    663 Ericson, 5/15/96 Dep. pp.107-114, 310-316; Ericson and 
Patterson, 5/17/96 Hrg. pp.99-106.
    664 Ericson, 5/17/96 Hrg. pp.73, 119.
    665 Ericson, 5/10/96 Dep. pp.103-104.
    666 Gabrellian, 5/29/96 Dep. p.48.
    667 Gabrellian, 5/29/96 Dep. pp.78-79.
    668 Ericson, 5/17/96 Hrg. p.106.
                            IV. Foster Phase

                            a. introduction

    Senate Resolution 120 authorized the Committee to review 
``whether improper conduct occurred regarding the way in which 
White House officials handled documents in the office of White 
House Deputy Counsel Vincent Foster following his death.'' This 
inquiry focused on the entry by three White House officials of 
Foster's office the night he died, the review two days later of 
documents in Foster's office by White House officials in the 
presence of law enforcement personnel, and the subsequent 
disposition of those documents, including personal papers of 
President and Mrs. Clinton.
    Some witnesses had differing recollections regarding those 
events or were unable to recall events in detail. This is not 
surprising, given the emotional stress that many of those 
individuals experienced following the suicide and the two years 
that have passed since those events. It is inevitable that the 
testimony is incomplete or contradictory in some respects.
    The Majority seeks to make much of these inconsistencies. 
Yet, the Majority often ignores divergent testimony when the 
testimony does not fit its theories. The Majority's selective 
recitation of testimony, however, cannot alter the fact that 
the Committee has not heard evidence demonstrating an effort to 
destroy or suppress any documents that were in Foster's office 
at the time of his suicide.
    With respect to the entry of Foster's office the night he 
died, it has not been established that any improper conduct 
occurred. At the request of David Watkins, Patsy Thomasson 
entered Foster's office the night of July 20, 1993 to look for 
a suicide note. Bernard Nussbaum and Margaret Williams also 
entered the office, to look for a note and grieve. While their 
recollections differ as to the order in which they entered and 
left the office, they all testified that they remained in the 
office briefly, reviewed no documents, and removed nothing.
    With respect to the review of documents, the procedures 
employed by White House Counsel Bernard Nussbaum did not impede 
the investigation of Foster's death. The Park Police had no 
authority to review all the documents in Foster's office, and 
in any event were interested only in documents that would shed 
light on Foster's state of mind. The Park Police were provided 
with all documents in which they expressed an interest; some 
were provided to them on the spot while others were provided 
within a few days.
    Finally, with respect to the disposition of documents, it 
was appropriate for Nussbaum to transfer the Clintons' personal 
files to the custody of their private attorney, Robert Barnett 
of Williams & Connolly. No evidence presented to the Committee 
indicates that any personal files of the Clintons' present in 
Foster's office at the time of his death were removed or 
altered before they were transmitted to Williams & Connolly.
1. Events at Foster's office the night of his death
            a. David Watkins asked Patsy Thomasson to look in Foster's 
                    office for a suicide note
    In July 1993, David Watkins was serving as Assistant to the 
President for Management and Administration. In that position, 
he supervised the provision of administrative and personnel 
services to the fourteen agencies within the Executive Office 
of the President. Watkins's principal assistant was Patsy 
Thomasson, Special Assistant to the President and Director of 
the Office of Administration.
    Because his duties frequently involved interaction with the 
United States Secret Service, Watkins was one of the first 
members of the White House staff to learn of Foster's death. On 
the night of July 20, 1993, Watkins was paged by the Secret 
Service. When he returned the page, the Secret Service informed 
him of the discovery of Foster's body and provided him with a 
telephone number for the Park Police.1 Watkins called and 
arranged for Park Police Sergeant Cheryl Braun and Detective 
John Rolla to pick him up so that he might accompany them to 
the Foster home to notify Mrs. Foster of her husband's 
death.2
    Watkins described the scene at the Foster home as one of 
``sadness, extreme grief:''

          * * * I arrived with the officers * * * from the Park 
        Police, Ms. Braun and Mr. Rolla * * * just as we 
        arrived, Sharon Bowman, a sister of Mr. Foster, and 
        Sheila Anthony, another sister, and Web Hubbell 
        arrived. * * * The officers notified Lisa that Vince 
        had shot himself and there were cries of anguish and 
        everyone was trying to comfort the family and comfort 
        those that were there.3

    A short while later, Watkins paged Thomasson from the 
Foster home to notify her of Foster's death:

          I beeped Patsy to notify her of the death. She was my 
        deputy. She knew Vince. She was from Arkansas, and just 
        to notify her.4

    Watkins had learned from the Park Police officers that no 
suicide note had been found at Fort Marcy Park.5 By the 
time Thomasson returned Watkins's page, there had been 
conversation at the Foster home regarding a suicide note and it 
was apparent that Foster had not left a suicide note at his 
home either.6 Watkins ``advised her of Vince's death and I 
asked her to go to his office and look for a note, a suicide 
note.'' 7

          I said we were wondering if there might be a note in 
        Vince's office, would you go look for one? That's what 
        I asked her.8

    Thomasson's recollection of how she came to enter Foster's 
office that night corresponds with Watkins's. She testified

          On July 20, 1993, I had dinner with a friend from 
        Arkansas. * * * As we left the restaurant after dinner, 
        I received a page from the White House operator telling 
        me to page David Watkins with my location. * * * I went 
        into the restaurant and called from a pay phone. The 
        White House operator asked me to give her a phone 
        number so that Mr. Watkins could call me. I told her * 
        * * I would prefer to hold while she got Mr. Watkins on 
        the phone for me.
          After a wait of several minutes, the operator 
        connected Mr. Watkins and me. He told me at that time 
        that Vince Foster had killed himself. I was in shock. I 
        was in disbelief. I could not believe that my friend 
        and colleague had killed himself. I asked Mr. Watkins 
        at the time to repeat that message to me. I immediately 
        asked David how I could help. He asked me to go to 
        Vince's office to see if Vince left a suicide note. He 
        told me to page him after I looked and let him know 
        what I found.9

    Watkins did not discuss the contents of Foster's office 
with Thomasson, did not ask her to look for any papers in 
Foster's office other than a suicide note, and did not ask her 
to remove any papers from the office.10

b. Patsy Thomasson briefly looked in Foster's office for a suicide note

    After her telephone conversation with Watkins, Thomasson 
took a taxi to the White House and entered her own office 
briefly. On the first floor of the West Wing, she recalled 
seeing several White House staff members, including White House 
Counsel Bernard Nussbaum. Thomasson recalled the mood at the 
White House was one of shock and grief:

          Everyone who was at the White House that I saw was 
        very distraught. Most everyone there was in tears, both 
        men and women.11

    She described her own state of mind as ``distraught:''

          I was so crushed that my friend killed himself, 
        someone I worked with on a day-to-day basis. I felt 
        somehow that I had failed. To not recognize in someone 
        you work with every day that they were depressed and 
        that stressed out was somehow a failure on the part of 
        those who worked with him every day.12

    Thomasson recalled that she and Nussbaum entered Foster's 
office together.13 She told the Committee of her brief, 
unsuccessful effort to locate a suicide note in the office:

          As we entered, I looked on the surfaces of the 
        furniture to see if I could see a note. Nothing was 
        immediately apparent. * * * I sat at Vince's desk, 
        opened the drawers to the desk to see if there was 
        anything that looked like a suicide note. I looked in 
        the top of his briefcase, which was sitting on the 
        floor.14

    Thomasson did not study the particular documents in or on 
Foster's desk. She noted,

          I didn't go through every individual file in his desk 
        or anything like that. I just looked in the top of the 
        drawers and the top of the desk to see if there was 
        something there that would be a suicide note.15

    She did not pull out the papers that were in the 
briefcase.16
    Thomasson recalled that Nussbaum left the office for a few 
minutes, during which time Margaret Williams entered.

          Maggie Williams came in and sat down opposite me. She 
        was crying and visibly grieving. We sat together, me at 
        Vince's desk, Maggie across from me, crying, and asking 
        each other why.17
          We did talk about Vince and we talked about how 
        helpful he always was to us * * * and so we were really 
        going to miss him.18
          She and I talked and cried together for several 
        minutes and then Maggie left and Nussbaum came back 
        in.19

    Thomasson recalled she spent approximately 10 minutes in 
Foster's office that night.20 She recalled that she and 
Nussbaum left Foster's office together, removing 
nothing.21 Neither she, nor Nussbaum, nor Williams removed 
or destroyed any documents from Foster's office.22

c. Bernard Nussbaum also entered Foster's office to look for a suicide 
                                  note

    While Nussbaum recalled his movements that night somewhat 
differently than did Thomasson, he also recalled that they were 
in Foster's office for no more than 10 minutes and removed 
nothing. Nussbaum was paged in a restaurant on the night of 
July 20 and informed of Foster's apparent suicide. Nussbaum 
returned first to the White House residence; after President 
Clinton left the residence for the Foster home, Nussbaum 
returned to the White House Counsel's suite. He intended to 
telephone members of his staff from his office to break the 
news of Foster's death.23 He recalled that Thomasson and 
Williams were in Foster's office when he arrived:

          As I walked to my office it occurred to me that 
        perhaps Vince left a note telling us why he had taken 
        his life. I decided to go to his office, which was next 
        to mine, to see if there was a suicide note. When I 
        reached the White House Counsel's suite at around 10:45 
        p.m., I found the door open. Patsy Thomasson and Maggie 
        Williams * * * were in Vince's office. Maggie was 
        sitting on Vince's sofa crying. Patsy, who was sitting 
        behind Vince's desk, said they had just arrived. * * * 
        Patsy told me she was looking for a suicide note. Patsy 
        and I checked the surfaces in Vince's office. We opened 
        a drawer or two looking for a note. No one * * * looked 
        through Vince's files. Patsy did not examine any 
        individual file. She did not rummage through or examine 
        any individual file, nor did I.
          * * * The three of us then left the office. Nothing 
        was removed by any of us. We were there no more than 10 
        minutes.24

    Thomasson described Nussbaum's activities in Foster's 
office that night as follows:

          Bernie was grieving. He was walking back and forth in 
        the office. * * * running his hands through his hair. * 
        * * He was very upset that night. * * * He was very 
        distraught about Vince's death that night. * * * it was 
        apparent that Mr. Nussbaum had been crying * * * 
        25

    Nussbaum was quite clear that while the Counsel's suite may 
have been unlocked for approximately one hour, during which 
time he was calling his staff from his office, he, Thomasson 
and Williams were in Foster's office for only 10 
minutes.26

  d. Margaret Williams went to Foster's office out of a sense of grief

    Margaret Williams, Assistant to the President and Chief of 
Staff to the First Lady, received two telephone calls at home 
from Mrs. Clinton on the night of July 20. Mrs. Clinton first 
called en route from California to Arkansas, informing Williams 
she would call again after her airplane landed.27 Mrs. 
Clinton then called again and informed Williams of Foster's 
suicide. Mrs. Clinton made no reference to any files in 
Foster's office.28 Mrs. Clinton did not instruct Williams 
to go to Foster's office.29
    Williams testified she called her assistant, Evelyn 
Lieberman, ``almost immediately'' after speaking with Mrs. 
Clinton.30 Mrs. Lieberman's recollection was the same:

          Maggie called and she said either Vince was dead or 
        Vince committed suicide. She was very upset, very 
        upset, and I just said stay there, I'm coming to get 
        you, and I put down the phone. I mean, it was very 
        brief.31

    Mrs. Lieberman testified she picked Williams up: ``she got 
into the car, and she was crying, pretty hysterical.'' 32
    Williams and Mrs. Lieberman then returned to the White 
House; Lieberman explained:

        we wanted to see if we were needed. I didn't know what 
        else to do, and we just drove over there. I don't think 
        there was much talk of where should we go and what 
        should we do.33

    Once at the White House, Williams reviewed a copy of the 
press release announcing Foster's death, and sought a copy of 
the First Lady's schedule, to determine if any events needed to 
be canceled.34
    Later that night, Williams entered Foster's office. She 
described her reasons for doing so as follows:

          At some point in that evening, I noticed a light was 
        on in Vince Foster's office. All evening, I had been 
        avoiding looking in the direction of Vince's office as 
        I entered and left the First Lady's suite. But in a 
        strange way, when I saw the light on in his office, I 
        had this hope, albeit irrational, that I would walk in 
        and I would find Vince Foster there.35

Williams recalled that Thomasson was in Foster's office when 
she entered:

          When I walked into his office, I found Patsy 
        Thomasson sitting behind Vince's desk, looking, as I 
        later learned, possibly for a suicide note. I began to 
        cry. I sat on Vince's couch, and I cried the whole 
        time.36
          I remember her saying * * * something to the effect 
        that we could give Lisa some comfort if there was a 
        note or if there was a note, we could give Lisa some 
        comfort.37

    While Thomasson recalled that Williams entered after 
Nussbaum left, Williams recalled that Nussbaum entered while 
she was in Foster's office. Her description of Nussbaum's 
behavior echoed that of Thomasson:

          Bernie Nussbaum at one point came in and wandered 
        around the office. He seemed at a loss for what he 
        should do.38
          He was pacing and scratching the back of his head and 
        trying to think of something to say to either of 
        us.39

Williams's recollection, that she and Nussbaum left ``fairly 
close to each other in time'' 40, with Thomasson remaining 
in the office, differs from Thomasson's recollection. As 
described above, Thomasson recalled that Williams left first 
and that she and Nussbaum left together.
    After returning home late that night Williams spoke by 
telephone with the First Lady, and spoke with her again the 
next day. They did not have any discussion of files in Foster's 
office.41

                     e. Officer O'Neill's testimony

    On duty at the White House the night of July 20, 1993 was 
Officer Henry O'Neill of the Uniformed Division of the U.S. 
Secret Service. Alone among the witnesses who appeared before 
the Committee, Officer O'Neill recalled that Margaret Williams 
had removed something from the White House Counsel's office 
that night.
    In July 1993, Officer O'Neill was assigned the task of 
accompanying cleaning crews as they went about their nightly 
rounds in the West Wing of the White House. At 10:42 p.m. on 
July 20, 1993, Officer O'Neill unlocked the door of the White 
House Counsel's suite in the West Wing so that the cleaning 
crew could enter.42 Officer O'Neill recalled that shortly 
thereafter, Bernard Nussbaum ``walked into the office, and just 
about the same time I noticed other figures walk in behind him 
and I heard women's voices.'' 43 Officer O'Neill could not 
recall whether Nussbaum was accompanied by one or two other 
people.44 He recalled that they entered Nussbaum's office, 
not Foster's.45
    Officer O'Neill recalled that after leaving the Counsel's 
suite, he encountered Howard Paster, Assistant to the President 
for Legislative Affairs, who informed him of Foster's 
suicide.46 He then returned to the hallway outside the 
Counsel's suite, where he recalled that he spoke with a woman 
who appeared to him to have just come out of the suite.47 
He recalled that this woman, who introduced herself as Evelyn 
Lieberman, ``asked me about locking up the office, and I said I 
would take care of it.'' 48
    Officer O'Neill recalled that some time later, he returned 
to the Counsel's suite to lock it. As he was entering Foster's 
office, he saw a woman whom he later learned to be Patsy 
Thomasson sitting at Foster's desk.49 He left the suite 
again, and later returned a third time.50 Officer O'Neill 
testified that at this time he

        saw Evelyn Lieberman walk out of the counsel's suite. 
        She stood in front of the doorway and I looked at her, 
        and, again, it was mentioned about locking the office. 
        And then a few seconds after I saw her come out, Mr. 
        Nussbaum walked out behind her and walked through the 
        hallway, toward the stairs, past the elevator, and 
        within a few more seconds, I saw Maggie Williams walk 
        out of the suite and turn to the right in the direction 
        that I was standing. * * * She was carrying what I 
        would describe, in her arms and hands, as 
        folders.51

Officer O'Neill then locked the Counsel's suite, according to 
records at 11:41 p.m.52 Officer O'Neill recalled that 
Williams was the last person he saw exit the Counsel's suite 
that night.53

            f. Contradictions in Officer O'Neill's testimony

    In the deposition he gave to Committee counsel on June 23, 
1995, Officer O'Neill was uncertain as to what he had seen 
Williams carry. At his deposition, Officer O'Neill first 
testified that he saw Williams carrying ``files * * * folders 
on top of each other.'' 54 At a later point, he added

          In fact, she may have even been carrying a box. I 
        can't remember. She had her hands down in front of her. 
        I remember that, and she was carrying something in 
        front of her. I think I remember folders as I saw her 
        approach in my direction, and it was like folders. But 
        I can't remember if there was a box on top of them, 
        like a cardboard box that is used for files also. I 
        can't remember that.
          Q. Do you have some picture in your mind of a box?
          A. Kind of like, yeah.
          Q. How big is that box in the picture in your mind?
          A. Like a hat box, a small hat box. I don't know.
          Q. Was the box open?
          A. No. I said files originally. I said 3 to 5 inches, 
        and it seemed--I mean, I know that it was a bundle. I 
        told you that. It was something that was of some 
        weight. That's basically how I would like to continue 
        to state it. I don't want to try to dream up a box. 
        This is getting confusing now because I can't remember 
        if I saw her--I know I remember seeing her carry 
        something in her arms.55

Asked by Senator Boxer at the Committee's hearing about this 
testimony, Officer O'Neill suggested, ``let's just strike the 
hatbox.'' 56
    Officer O'Neill testified before the Committee that the 
cleaning crew he was escorting never entered Foster's 
office.57 In fact, the cleaning crew did remove the trash 
from Foster's office; Sylvia Mathews later recovered it and it 
was made available to the investigators. In his deposition, 
Officer O'Neill testified that there was a burn bag in Foster's 
office on July 20, 1993, and that he had not emptied the burn 
bags in the Counsel's suite that night.58 One month later, 
testifying before the Committee, Officer O'Neill could not 
recall whether there was a burn bag in Foster's office, nor 
whether he had collected the burn bag material in the reception 
area of the suite.59
    Officer O'Neill was not required to file any report 
concerning the events of that night and did not do so, nor did 
he make any personal notes of his observations. In fact, he had 
no opportunity to recount his recollections until April 1994, 
nine months later, when he was interviewed by FBI agents 
assigned to Independent Counsel Fiske.60 In the meantime, 
press attention had been focused on the contents of Foster's 
office by a December 20, 1993 newspaper article regarding the 
removal of Whitewater documents from Foster's office. Officer 
O'Neill was aware of these articles; at his deposition, he 
stated

          I remember sometime later, not close or near the time 
        of the events surrounding the [July] 20th, it was 
        sometime later that I remember for the first time 
        noticing in the newspaper about documents, stated in 
        the newspaper articles that I read about documents 
        being taken from the counsel's office. In fact, I think 
        by Maggie Williams, in fact.61

While he initially testified before the Committee that he ``had 
never read anything about anyone taking any files out of any 
office;'' he later amended that testimony, saying, ``I did read 
something about it, yes.'' 62
    Williams was quite clear in her testimony that she did not 
remove documents from Foster's office:

          I took nothing from Vince's office. I didn't go into 
        Foster's office with anything in mind concerning any 
        documents that might be in his office. I did not look 
        at, inspect or remove any documents. At no time was I 
        instructed by anyone nor was there any suggestion from 
        anyone that I go into Vince's office on the evening of 
        July 20th. I disturbed nothing while I was 
        there.63
          Mr. Ben-Veniste: When you left the office, Ms. 
        Williams, again, did you take any material of Mr. 
        Foster's from that office?
          Ms. Williams: No, I did not.
          Mr. Ben-Veniste: Did anyone ask you to take any 
        material, files, folders, boxes, any materials from 
        that office that night?
          Ms. Williams: No.64

    Williams's testimony is supported by the results of two 
polygraph examinations. The first polygraph was arranged by her 
counsel and administered by a distinguished expert in the 
field, a former Federal Bureau of Investigation Special Agent. 
He asked Williams the following questions:

          Did you remove any documents from Foster's office 
        that night?
          To your personal knowledge did anyone remove 
        documents from Foster's office that night?
          Did you discuss removing any documents, excepting a 
        suicide note, from Foster's office that night?
          Were you aware that night of others discussing 
        document removal excepting a suicide note?
          Do you now know of anyone removing documents from 
        Foster's office that night?
          Excepting a suicide note, do you now know of any 
        discussion by anyone about removal of documents from 
        Foster's office that night? 65

Williams answered ``no'' to each question, and the polygrapher 
concluded ``it is my opinion Williams was not deceptive (was 
truthful) when she answered these issue questions above as she 
did.'' 66 Williams also volunteered to a polygraph 
examination by the Office of Independent Counsel. Williams's 
counsel provided the Committee with a sworn affidavit, stating

          After the examination was completed, the polygrapher 
        advised * * * that the examination indicated that Ms. 
        Williams was truthful in her assertion that she did not 
        remove any documents from Foster's office on the night 
        of his death.

    The Special Committee requested a copy of this polygraph 
report from the Office of the Independent Counsel. The Special 
Committee also requested reports of interviews the Independent 
Counsel's Office conducted of Williams and Officer 
O'Neill.67 Officer O'Neill testified that he was 
interviewed by FBI agents and representatives of the Office of 
the Independent Counsel five or six times.68 The 
Independent Counsel declined to produce this information, 
citing a policy against disclosure of investigative work 
product. 69 * No explanation has been given to the Special 
Committee regarding why the Independent Counsel found it 
necessary to conduct so many interviews of Officer O'Neill.
---------------------------------------------------------------------------
    \*\  It is difficult to square the Independent Counsel's 
unwillingness to make available the FBI polygraph of Ms. Williams or 
the FBI notes of Officer O'Neill's interviews with his willingness to 
provide the Committee with FBI work product regarding fingerprint 
analysis of the Rose Law Firm billing records. See below.
---------------------------------------------------------------------------
    No witness other than Officer O'Neill claims Williams 
removed anything from Foster's office that night. Mrs. 
Lieberman testified she did not see Williams carry any files, 
folders or boxes the night of July 20.70 Nussbaum 
testified that to his knowledge no one removed anything from 
Foster's office on July 20.71 Thomasson is not aware of 
anyone removing any documents from the office that 
night.72 Officer O'Neill himself is uncertain as to what 
he recalls Williams was carrying. He did not memorialize his 
observations at the time of the events, and testified to them 
only after reading in the newspapers about documents taken from 
Foster's office. Officer O'Neill may have seen Williams 
carrying folders on another occasion, which he now recalls to 
have been the night of July 20, 1993.** It is also 
possible that when questioned regarding the events of July 20, 
1993, his memory was inaccurately stimulated by the news 
articles of December 1993.*** Given these factors, the 
evidence does not establish that Williams removed anything from 
Foster's office on the night of July 20, 1993.
---------------------------------------------------------------------------
    \**\ Officer O'Neill worked a full shift at the White House on July 
22, 1995. Ms. Williams testified that she accompanied Thomas Castleton 
as he carried a box of files out of the White House Counsel's suite 
that day. See below.
    \***\ The eventual release of the FBI reports of the series of 
interviews of Officer O'Neill presently withheld by the Independent 
Counsel may shed further light on the reliability of Officer O'Neill's 
testimony.
---------------------------------------------------------------------------

g. White House officials told law enforcement about the search for the 
                              suicide note

    White House officials told law enforcement officials about 
the search for a suicide note on July 20. This suggests that 
their entry into Foster's office was as they testified: a brief 
review of the office for a suicide note.
    Thomasson made no effort to keep her trip to the White 
House secret. To the contrary, she notified the Secret Service 
when she entered her office. 73 Further, she recalled she 
told Nussbaum in the presence of other White House staff that 
Watkins had asked her to look for a suicide note in Foster's 
office:

          [Mr. Nussbaum] walked up while I was talking to some 
        of the others and I said, Bernie, I've been asked by 
        David to go up to Vince's office to look for a note, 
        will you go with me? 74

    At his first opportunity, on the morning of July 21, 
Nussbaum told Detective Peter Markland, the Park Police 
detective in charge of investigation Foster's death, that he, 
Patsy Thomasson and Maggie Williams had entered Foster's office 
the night before to look for a suicide note.75 Nussbaum 
testified, ``I told him that Patsy and I briefly looked for a 
suicide note and found nothing.'' 76 Detective Markland 
included this information in his report.77
            2. White House officials did not receive a request from the 
                    Park Police to seal Foster's office
    Sergeant Braun and Detective Rolla picked up David Watkins 
at his home and drove him to the Foster home in Georgetown, so 
he could accompany them when they notified Mrs. Foster of her 
husband's death.78 The Park Police officers remained at 
the Foster home for approximately one hour.
    Sergeant Braun recalled that she ``had a brief conversation 
with Mr. Watkins as [she] was on [her] way out the door.'' 
79 While Sergeant Braun does not recall the exact words 
she used, she remembered that she ``asked that Mr. Watkins see 
that Mr. Foster's office was secured so that we could send 
somebody in the morning out to check his office.'' 80 ``I 
explained to him that the office would need to be closed so 
that we could go through it the next day to look for a suicide 
note or evidence that would confirm the suicide.'' 81 She 
specifically testified that she did not request that the office 
be ``sealed;'' she simply ``wanted to keep the office intact 
the way it was when Mr. Foster left it and to keep people from 
rummaging through.'' 82 She did not ask, nor did she 
intend, that White House personnel authorized to enter Foster's 
office be barred from entry.83 Sergeant Braun recalled 
that Watkins ``acknowledged my request.'' 84
    While Sergeant Braun recalls making this request of 
Watkins, she did not mention making such a request in her 
written report of the visit to the Foster home.85 Asked 
why she did not include this information, she said, ``it did 
not come to me as I was sitting there at the PC putting 
together my report.'' 86 Neither did she mention such a 
request to Captain Hume when she briefed him the next morning 
on the events of the previous night.87
    Watkins has no recollection of Sergeant Braun making such a 
request.88 He testified further

        the Park Police had been in touch with the Secret 
        Service for some five hours prior to making that 
        request. * * * they had not shown a locality of 
        interest to me, at least, in the office of Vince 
        Foster's [sic]. And I assumed that if this had been of 
        great concern with them, they would have contacted the 
        Secret Service, whom they had been in touch 
        with.89

    Sergeant Braun, Detective Rolla and Watkins agree that the 
scene at the Foster house that night was chaotic. Detective 
Rolla described the scene as ``traumatic'' and said the family 
members were ``crying, screaming, collapsing.'' 90 Watkins 
described it as ``a scene of sadness, extreme grief;'' there 
were ``cries of anguish'' when the Foster family first learned 
of their loved one's death.91
    Park Police Captain Charles Hume, Assistant Commander of 
the Criminal Investigations Branch in Washington, DC, did not 
believe that a request had been made on July 20 of the White 
House that Foster's office be sealed. Captain Hume testified 
that when he arrived at the White House around 11:00 a.m. on 
July 21, he asked the Secret Service to seal that 
office.92 He ``thought that was the first request'' from 
the Park Police that the office be sealed.93 The Secret 
Service told Captain Hume that the office ``had already been 
sealed or posted.'' 94
    Major Robert Hines, Public Information Officer for the Park 
Police, received a telephone call at home at approximately 9:45 
p.m. on July 20, 1993.95 He was told to call White House 
Deputy Chief of Staff William Burton to inform him of the 
discovery of Foster's body. Major Hines recalls that in the 
course of his conversation with Burton, he asked Burton to 
``secure or lock'' Foster's office.96 Sylvia Mathews 
recalled that Bill Burton ``suggested that the office of 
Vincent Foster be locked'' following a telephone conversation 
between Burton and the Park Police.97 She recalled ``the 
general gist was that Mr. Nussbaum should lock the office.'' 
98 Indeed, the office suite was locked at 11:41 
p.m.99
    It seems possible that Sergeant Braun intended to request 
of Watkins that Foster's office be secured, but neglected to do 
so in the confusion of events. It also seems possible that she 
did make the request, but that Watkins did not hear it or 
register it in the confusion. A further possibility is that 
Watkins heard and registered the request at the time but does 
not recall it.
    Far from treating the contents of Foster's office 
cavalierly, White House staff made independent efforts to 
preserve the contents of the office intact. In July 1993, 
Sylvia Mathews worked for Robert Rubin, at that time Assistant 
to the President for Economic Policy. After learning of 
Foster's death, it occurred to Mathews that the contents of 
Foster's trash can might be relevant to his death.100 She 
suggested that the contents should be retrieved, to which 
senior White House staff responded positively.101 Mathews 
retrieved the trash bag from Foster's office, brought it to the 
Chief of Staff's office for safekeeping, and made an inventory 
of the bag's contents, which were examined later.102 This 
action to preserve evidence regarding Foster's death was taken 
by the White House staff on their own initiative, without any 
request from the Park Police or any other agency.103
            3. Park Police had no authority to review all documents in 
                    Foster's office
    On July 21, White House officials met with representatives 
of the Park Police and the Justice Department to discuss 
reviewing the contents of Foster's office. The unanimous 
opinion of the law enforcement witnesses who appeared before 
the Committee was that neither the Park Police nor the Justice 
Department had the authority to enter or review documents in 
Vincent Foster's office. In the view of Major Robert Hines, 
Public Information Officer for the Park Police, the Park Police 
would not have been able to obtain a search warrant for 
material in Foster's office ``without any evidence of a crime 
being committed.'' 104 Park Police Detective Markland 
testified, ``we were not under the assumption that we had the 
absolute right to enter the office.'' 105 Captain Hume 
testified that he shared Detective Markland's view.106
    Deputy Attorney General Philip Heymann testified that the 
Justice Department could not have obtained a search warrant or 
a subpoena for items in Foster's office because no crime had 
been committed.107 ``I would have thought that we did not 
have the basis for saying that there should be a grand jury to 
investigate a crime and issue subpoenas.'' 108 Similarly, 
Heymann testified the Park Police ``lacked probable cause for a 
search'' of Foster's office.109

 a. Park Police were interested only in documents relevant to Foster's 
                             state of mind

    In keeping with their limited authority, the Park Police 
never expressed a desire to review all documents in Vincent 
Foster's office. To the contrary, their focus was much 
narrower. All testimony before the Committee, both from the 
Park Police and other investigators and from the White House, 
indicated that the Park Police wished to examine Foster's 
office only for a suicide note or other personal documents that 
could shed light on Foster's state of mind.
    Sergeant Braun testified that in a typical suicide case, 
she would enter the victim's home ``to look for information 
that would confirm that the suicide victim was despondent or 
had made prior attempts, anything that would help confirm our 
suspicions that it was, in fact, a suicide.'' 110 The Park 
Police allowed Mrs. Foster to search the Foster home for a 
suicide note.111 When no note was found at the scene of 
Foster's death or in the Foster home, it occurred to Sergeant 
Braun that Foster might have left a suicide note at his office.
    While Sergeant Braun did not go to Foster's office herself, 
she indicated the type of documents she would have been looking 
for:

          If it had been myself, I would have been looking for 
        a note, basically, that says I couldn't go on any 
        longer or something to the effect that he had committed 
        suicide. I would be also looking for insurance papers, 
        things to show that he had his life in order and was 
        ready to hand over to his family. I would have been 
        looking for a journal, a diary * * * an appointment 
        book with maybe appointments with psychiatrists or 
        something like that. I would have been looking for 
        things that would have helped confirm that this was a 
        suicide.112

    Major Hines's explanation of the sort of material the Park 
Police would look for in Foster's office is in keeping with 
Sergeant Braun's description. Major Hines stressed that the 
Park Police wanted to ``examine'' Foster's office rather than 
``search'' it:

          I'll use `examination' as opposed to `search' because 
        we're looking for limited information that might lead 
        us to believe that his suicide--to prove that he had 
        intent.
          We would want to find out if there's a suicide note. 
        We would want to find out if there's anything there 
        that he might have left that would give him a reason or 
        show his state of mind. We'd want to check his records 
        and see if he had financial problems * * * items like 
        this.113

    Park Police Detective Peter Markland was assigned on July 
21, 1993 to investigate Foster's death. He testified that when 
he arrived at the White House that day, expecting to review the 
contents of Foster's office, he was interested in seeing 
``anything that might support the physical evidence we had that 
indicated a suicide.'' 114 Detective Markland conceded 
that the death of an attorney does not permit the police 
authority investigating that death to examine confidential 
client information in the attorney's files.115
    The White House staff present at the July 21 meeting made 
no objection to the Park Police's request.116 Nussbaum 
explained,

          The search was for a suicide note, an extortion note 
        or some similar document which reflected depression or 
        acute mental anguish. That is the request law 
        enforcement officials made of me. They did not ask to 
        read every piece of paper in Foster's office, every 
        official White House record there, every personal file 
        there to see if there was any indication of concern 
        about any matter Vince had been working on. I was not 
        faced with a request for some general excursion through 
        documents to determine Vince's state of mind about 
        matters he was working on.117
            4. Recollections differ as to whether Bernard Nussbaum 
                    agreed that Department of Justice attorneys would 
                    review Foster's documents
    The Committee heard divergent testimony about whether an 
agreement was reached on July 21, 1993 between Bernard Nussbaum 
on behalf of the White House and Deputy Attorney General Philip 
Heymann on behalf of the Justice Department concerning the 
procedures for the review of the documents in Foster's office. 
Department of Justice officials (Philip Heymann, David Margolis 
and Roger Adams) testified that Nussbaum agreed on July 21 that 
Margolis and Adams would review Foster's documents. Nussbaum 
and staff of the White House Counsel's office testified that 
there was no such agreement.
    Heymann cannot recall how he entered into discussions 
regarding the role Department of Justice lawyers would play in 
the review of Foster's office.* 118

    \*\ Mr. Nussbaum testified that he called Mr. Heymann: ``I thought 
there might be multiple requests for information, so I called Mr. 
Heymann...and asked if the Justice Department would agree to coordinate 
the investigations of Foster's death.'' (Nussbaum, 8/9 Hrg. p.14).
---------------------------------------------------------------------------
          Senator Kerry. * * * You're unclear in your 
        deposition as to how you initiated the first contact 
        with the White House or they with you; is that correct?
          Mr. Heymann. That is correct.
          Senator Kerry. You're still unclear at this point in 
        time?
          Mr. Heymann. I'm still unclear--let me get the right 
        day.
          Senator Kerry. The 21st, I think, was your first--
          Mr. Heymann. By the end of the 21st, I know that we 
        have an understanding as to how the search of Mr. 
        Foster's office will be done.
          Senator Kerry. How many conversations did it take to 
        reach that understanding?
          Mr. Heymann. That's what I can't remember. And I 
        can't remember whether--how many of them are 
        conversations between me and Margolis and Adams which 
        are then carried over to conversations between them and 
        Mr. Nussbaum and others, and how many of them are 
        direct conversations between me and Mr. Nussbaum. I 
        know that I must have talked to somebody in the White 
        House to make arrangements that Adams and Margolis are 
        going to go over and represent us and why they were 
        going.
          Senator Kerry. Do you have a specific recollection as 
        to at least one conversation with Mr. Nussbaum?
          Mr. Heymann. I think that I talked to Mr. Nussbaum 
        that day about it, but I wouldn't bet--I wouldn't bet 
        $500 on it.
          Senator Kerry. On what do you base the notion, then, 
        that you had an agreement or an understanding?
          Mr. Heymann. Well, besides the fact that I believe 
        that Mr. Nussbaum and I had that conversation and 
        agreed, both Margolis and Adams returned that evening 
        from having met with the White House people. They 
        described the same agreement as having been reached * * 
        *119

Heymann cannot remember whether he reached this agreement with 
Nussbaum, or whether Margolis and Adams reached this agreement 
with Nussbaum: ``I don't remember whether it was directly or 
through them.'' * * * 120
    Nevertheless, Heymann recalled that he understood that the 
Justice Department lawyers would mediate the issue of 
investigators' access to documents between the Park Police and 
the White House.121 He recalled that Margolis and Adams 
would review the documents:

          The understanding was that they would see, these two 
        senior prosecutors, not the investigators, but the 
        prosecutors would see enough of every document to be 
        able to determine whether it was relevant to the 
        investigation or not.122

    Heymann testified he did not believe Nussbaum had committed 
irrevocably to such a procedure:

          I didn't feel that I had a binding commitment by Mr. 
        Nussbaum or anyone else. We simply all had talked about 
        it by then and we all were on the same track, we all 
        were on the same page, we all thought it would be done 
        [that] way * * * 123

He explained further:

          I don't like calling it an agreement [because] I 
        would have felt perfectly comfortable the next day 
        calling up Mr. Nussbaum and saying, you know what we 
        talked about yesterday, I don't think that's adequate, 
        I think we have to do more.124
          * * * I had no problem at all with his changing his 
        mind the next day. I didn't think he had promised in a 
        sense that kept him from changing his mind * * * 
        125

    Associate Deputy Attorney General David Margolis recalled 
that on July 21, 1993, Heymann asked him to go to the White 
House with Adams in connection with the investigation of 
Vincent Foster's death.126 Margolis recalled that Heymann 
``said that he had reached a tentative agreement with Mr. 
Nussbaum that Roger and I were to go through at least the first 
page or two of each document in order to determine whether they 
were relevant to our investigation.'' 127

          Phil told me that he believed he'd had an agreement 
        in principle with Bernie Nussbaum to do it that way, so 
        I should go finalize it and then begin the search 
        process.128

    Margolis and Adams met with Nussbaum on July 21 to discuss 
the procedures that would be used to review the documents in 
Foster's office. Margolis testified that during his meeting 
with Nussbaum on July 21, 1993, ``we finalized that agreement, 
and * * * we both agreed to it.'' 129 Adams testified:

          The purpose of the discussion was to go over the 
        ground rules under which the search would be conducted. 
        The discussion lasted, as best I can recall, 10 or 15 
        minutes, maybe 20. First thing we agreed on was that 
        because of the lateness of the hour and people from the 
        White House having been through considerable strain the 
        night before * * * that it not take place that day, 
        that it go over until the next day. There was no 
        disagreement on that point.
          There then ensued a fairly brief discussion about how 
        the search should be conducted. The gist of the 
        discussion was that Mr. Margolis and myself, together 
        with Mr. Nussbaum, would examine at least the outside 
        of each file to determine, first of all, relevance to 
        the suicide investigation, and, if it were deemed 
        relevant, to then address issues of possible privilege.
          I think the understanding was just about as I have 
        described it, that Mr. Margolis and I together with Mr. 
        Nussbaum would make this very cursory review of at 
        least the title or possibly the first page of each 
        file.130

Adams conceded, however, that he didn't know ``what was in Mr. 
Nussbaum or Mr. Neuwirth's mind.'' 131
    The possibility that there was no agreement reached between 
the Justice Department and the White House Counsel's office is 
raised by the fact that at this very meeting, Assistant White 
House Counsel Stephen Neuwirth stated that Nussbaum alone would 
review the documents. Margolis testified:

          When we finished, Mr. Neuwirth on his staff, as I 
        recall, attempted to restate the agreement, and got it 
        what I believe was exactly wrong, and said, `The way 
        we're going to do it is that Bernie will go through the 
        documents, and he'll give you what is both relevant and 
        non-privileged to review,' and I said that that's 
        exactly wrong. We just agreed to the other procedure. 
        And * * * Mr. Nussbaum agreed with me that Mr. Neuwirth 
        was wrong, and that we had that other 
        agreement.132

Adams's testimony was similar:

          After this agreement was reached, Mr. Neuwirth, 
        either attempting to summarize the agreement or to 
        change the terms of the agreement, made a statement to 
        the effect okay, Bernie will examine each file and 
        Bernie will determine issues of relevance and 
        privilege.
          He was immediately corrected, I think, by Mr. 
        Margolis, and we restated the agreement, as we had 
        agreed to, which was namely that Mr. Margolis and I 
        would examine the title or the first page of each file 
        to determine issues of relevance and privilege.133

    Contrary to the testimony of the Department of Justice 
officials, the White House Counsel's office staff testified 
clearly that no agreement was reached on July 21 that Margolis 
and Adams would review the documents. Nussbaum testified,

          One option we discussed on July 21 was the 
        possibility of allowing Justice Department lawyers to 
        look at a portion of each document to see if it was 
        privileged. I said--I did say I would consider that 
        option. I did not say I would agree to it.134

    Nussbaum was clear that no agreement was reached with 
Margolis and Adams on July 21:

          Senator Shelby. When you broke up the meeting, did 
        you have an agreement?
          Mr. Nussbaum. No.
          Senator Shelby. Well, what did you have? Why would 
        they leave?
          Mr. Nussbaum. We had an issue which had remained 
        unresolved and which we agreed to meet the next morning 
        to have further discussions. That is my memory.135

Nussbaum said, ``we agreed a search would be conducted the next 
day, and we would conclude the next day as to how the search 
would be conducted.'' 136
    Neuwirth testified regarding the discussion on July 21,

        * * * Mr. Nussbaum indicated that one of the ways that 
        an accommodation could be reached that would not 
        undermine the privileges or cause a waiver of the 
        privileges would be for Mr. Nussbaum to be the person 
        who would review the contents of the documents and 
        describe them to law enforcement officials.
          I think that from the first time we discussed this, 
        Mr. Margolis expressed a different view. * * * I think 
        that Mr. Margolis suggested that it would be in the 
        best interest of the White House to let Mr. Margolis 
        play the type of role that Mr. Nussbaum suggested that 
        he himself should play in the review.137

Neuwirth was certain that there was no agreement:

          Mr. Ben-Veniste. To the best of your recollection, 
        what was Mr. Nussbaum's response to [Mr. Margolis's 
        suggestion] on the 21st?
          Mr. Neuwirth. That he didn't agree that that was a 
        procedure that necessarily could work because having 
        the Justice Department play that role could cause the 
        very type of waiver that the accommodation was meant to 
        avoid.
          Mr. Ben-Veniste. And to the best of your 
        recollection, how was the matter left then on the 21st?
          Mr. Neuwirth. It was left without resolution with the 
        understanding that there would be further discussion 
        about it.138
        * * * I certainly, during that meeting and at any other 
        time, did not understand there to have been an 
        agreement and, in fact, thought that the disagreement 
        between Mr. Margolis and Mr. Nussbaum was quite clear 
        throughout all of these discussions.139
          My vivid recollection is that Mr. Margolis and Mr. 
        Nussbaum disagreed about the best option to pursue 
        under the circumstances.140

Sloan and Quinn also did not recall an agreement being reached 
on July 21st.141
    Nussbaum recalled that he told Margolis and Adams,

        * * * this is a lawyer's office. There is sensitive 
        materials in that office. [sic] There's confidential 
        stuff, there is privileged stuff in that office. * * * 
        I have obligations as a lawyer * * * as counsel to the 
        President in his official capacity * * * that affect me 
        as a government lawyer, as well as the same kind of 
        obligations when I was a private lawyer.
          I got to work out some way of dealing with these 
        issues with you. I just cannot let you go in and open 
        the door and look at every document in the 
        office.142
          They said we understand it, Bernie, we understand, 
        you know, that you have these obligations as counsel to 
        the President, as a government lawyer, you have these 
        obligations because these obligations apply also to a 
        government lawyer, but they said, maybe we can work 
        something out.143

The White House Counsel's office was concerned that allowing 
the Justice Department attorneys to review Foster's documents 
directly could constitute a waiver of privileges attaching to 
those documents.144 Nussbaum explained these concerns for 
the Committee:

          As White House Counsel, I was * * * concerned with 
        maintaining the credibility of federal law enforcement, 
        but I was bound to act in accordance with my 
        obligations as a lawyer, and I did not believe that 
        doing so * * * would undermine the credibility of 
        federal law enforcement. It was my ethical duty as a 
        lawyer and as White House Counsel to protect a client's 
        information and confidences and not to disclose them 
        without a prior review by me. It was my duty to 
        preserve the right of the White House, of this 
        President and future Presidents to assert executive 
        privilege, attorney-client privilege and work product 
        privilege. It was my duty to do nothing that could 
        result in an inadvertent waiver of these privileges. It 
        was my duty to protect the confidentiality of other 
        matters as well, including sensitive government 
        documents in that office.145

Nussbaum said, ``By the next day [July 22], I had determined 
that this [the procedure suggested by the Justice Department] 
would create an unacceptable risk of disclosure of confidences 
and an equal unacceptable risk of waiver of the privileges I 
was obligated to protect.'' 146
              5. The Difference of opinion between senior Justice 
                    Department officials and White House counsel 
                    reflected differing judgments about appearances 
                    rather than about legal rights
    Margolis and Adams testified that when they arrived at the 
White House on the morning of July 22, 1993, Nussbaum told them 
he had changed the procedures for the document review, and that 
only he would examine the documents for relevance and 
privilege.147 Margolis and Adams expressed their opinion 
that ``he was making a mistake.'' 148 They did not believe 
that Nussbaum was mistaken as a matter of law; as Adams told 
the Committee, ``I don't think we had any legal tool that we 
could have pulled out and demanded to see the documents right 
there.'' 149
    While Margolis believed that he had more experience than 
Nussbaum in reviewing documents in connection with a criminal 
investigation, he was largely concerned about the appearance of 
impartiality.150 Margolis testified:

          We were very concerned as how this would appear to 
        the public in terms of law enforcement, and in terms of 
        whether we were running a credible investigation. And--
        God forbid, but appearances being one thing, if we 
        weren't running a credible investigation regardless of 
        appearances, if we missed something because of the way 
        we were doing it, there could be all hell to pay. So it 
        was very important to us, both in terms of perceptions 
        and fact.151

    Margolis's and Adams's concern about appearances was 
consistent with the views of Heymann, who told the Committee,

          I believed then * * * that there was one central 
        question * * * who should determine what documents 
        would be made available to the investigators. * * * I 
        thought that for the White House counsel's office to 
        make these decisions largely by itself, as it did, was 
        simply not an acceptable way of addressing 
        them.152
          The federal law enforcement authorities have a 
        responsibility to assure a process that credibly 
        promises objectivity when high officials are part of 
        the investigation. To keep this promise of objectivity, 
        even in a case that showed all the early signs of being 
        a suicide, the White House counsel could not be the one 
        to decide what documents would be shown to the 
        investigators and which would be retained or 
        distributed as irrelevant to the investigation or as 
        privileged despite potential usefulness to the 
        investigation.153

Heymann also testified that the procedure followed by Nussbaum 
was legal and ethical.154 In letting the investigators 
into Foster's office at all, Nussbaum was, in Heymann's view, 
``going beyond what could be legally required of the White 
House counsel.'' 155 Heymann testified further that 
Nussbaum's procedures did not obstruct the investigation of 
Foster's death.156
    At Margolis's suggestion, Nussbaum spoke by telephone with 
Heymann. Heymann recalled

        being very angry and very adamant and saying this is a 
        bad--this is a bad mistake, this is not the right way 
        to do it, and I don't think I'm going to let Margolis 
        and Adams stay there if you are going to do it that way 
        because they would have no useful function.157

Heymann recalled that Nussbaum responded, ``I'll have to talk 
to somebody else about this or other people about this, and 
I'll get back to you, Phil.'' 158 Heymann testified, ``I 
had obviously shaken him enough that he wanted to consider 
whether he should come back to what we had agreed to the day 
before on the 21st, but there were other people involved that 
he had to talk to about that.'' 159
    Nussbaum did not recall Heymann telling him he was making a 
mistake.160 Nussbaum also did not recall that he was to 
call Heymann back following his discussions with 
others.161
    Margolis recalled that Nussbaum ``was obviously concerned 
about the arguments we would make, and he said he wanted to 
think about them before he reached a final decision.''162 
Adams also recalled Nussbaum ``said he was considering whether 
to allow us to see the documents. * * *'' 163
    Following these discussions with Heymann, Margolis and 
Adams, Nussbaum met with Bruce Lindsey, Jack Quinn, Bill Burton 
and Steven Neuwirth. Nussbaum recalled that Quinn urged that he 
not even allow the law enforcement officials into Foster's 
office:

          I was urged by one senior White House official, Jack 
        Quinn * * * not to permit law enforcement agents to 
        enter Vince Foster's office at all. Jack was not 
        concerned about particular documents or files. We never 
        had a discussion about any sensitive matter. Jack was 
        concerned and properly concerned about setting an 
        unfortunate precedent for the future and the 
        institutional need of the White House to preserve 
        confidentiality, concerns I shared.164

    Lindsey recalled that Nussbaum was trying to devise a 
procedure to accommodate the request of the Park Police to look 
for either a suicide note or some evidence of Foster's state of 
mind ``with the need for protecting documents that could either 
be covered by one of several privileges--executive privilege, 
attorney-client privilege, and so forth.'' 165 Lindsey 
stated ``the purpose of the meeting was to try to balance their 
needs so that they could feel that their purpose was served and 
yet still protect the privileges.'' 166 Lindsey testified 
the White House officials were not concerned about particular 
files that might be in Foster's office:

          Senator Kerry. Let me ask you directly, Mr. Lindsey. 
        Was there any discussion there among those present 
        about any issues of embarrassment or liability or 
        questions that you somehow felt were of particular 
        concern?
          Mr. Lindsey. Absolutely not. It was simply a question 
        of the legal principles involved.167

Lindsey concluded that Nussbaum ``decided on a procedure that 
he thought would accommodate both the Park Police's need and 
the privilege issue.'' 168
    Michael Spafford, attorney for the Foster family, recalled 
that Nussbaum

        was concerned that if he showed any of the documents to 
        one of the investigators it may be construed as a 
        waiver of that privilege. He also said there may be 
        personal documents in there which may raise personal 
        issues * * * 169

Spafford recalled no discussion of Whitewater documents or 
Travel Office documents.170
    Nussbaum explained for the Committee the difficult issues 
associated with waiver of legal privileges:

          You cannot just partially disclose a portion of a 
        document or of a conversation without waiving not only 
        the entire conversation as to the entire document, but 
        indeed perhaps as to the entire subject matter covered 
        by this document. In other words, there may be other 
        documents covering this subject matter, there may be 
        other communications covering this subject matter. So 
        when you waive is a tricky thing, and two, how much 
        you're waiving is even trickier at times. That's what a 
        lawyer thinks about when he's faced with a request for 
        somebody to look at a part of or the first page of 
        various documents. And I was extremely concerned about 
        that at the time.171

    When the law enforcement officials and White House 
officials assembled in Foster's office on the afternoon of July 
22, Nussbaum explained that he would attempt to balance the 
interests of the White House and those of the law enforcement 
personnel investigating Foster's death. Nussbaum recalled he 
``decided I was not going to keep law enforcement officials out 
of Vince's office. I chose a middle ground. I chose a procedure 
that balanced and accommodated the interest of confidentiality 
and law enforcement interest.'' 172 ``* * * I didn't think 
it was necessary to bar the door to Foster's office in order to 
adequately protect our rights, the right to protect 
confidentiality and privilege and to preserve the right to 
protect privilege and law enforcement issues.'' 173
            6. Park Police expressed no interest in reviewing Foster's 
                    substantive files
    According to Sloan, Nussbaum went through Foster's files, 
giving a ``general description'' of each to the law enforcement 
personnel assembled in the office.174 No Park Police, FBI 
or Department of Justice officials ever requested that they be 
allowed to search the Clintons' personal files to determine if 
they had any influence on Foster's state of mind:

          Senator Kerry. * * * Did you say these are personal 
        files of the Clintons'?
          Mr. Nussbaum. Yes.
          Senator Kerry. * * * Did they ask to see any of those 
        files?
          Mr. Nussbaum. No, sir.
          Senator Kerry. At no time did they ask to see those?
          Mr. Nussbaum. At no time did they ask to see any of 
        those files.
          Senator Kerry. Did they ask them to be set aside for 
        further review at a later time?
          Mr. Nussbaum. They did not, Senator.175
          Mr. Nussbaum testified,
          No one said to me, `Mr. Nussbaum, we want to look 
        through all the files. We want to read every document. 
        We want to see every matter Vince Foster was working 
        on, personal--we want to see every Clinton personal 
        file, because we want to determine the state of mind. 
        We want to see if there's any potential scandal. We 
        want to see what might have driven him to this thing.' 
        No one--there was no basis for that--no one made that 
        suggestion. It was a search * * * for a suicide 
        note.176

    The Park Police never requested that any of the Clinton 
personal files be set aside for review during or after the 
review of documents in Foster's office as evidence of Foster's 
state of mind.177 Adams testified that had he known 
Foster's office contained ``things like tax returns and 
personal financial information of the Clintons,'' he ``would 
have assumed they didn't have much to do with a suicide 
investigation.'' 178 He said

        we had little interest--or no interest, I should say--
        in anything that didn't appear to be relevant to a 
        suicide investigation, such as a note or evidence that 
        Mr. Foster was being blackmailed, evidence that he was 
        a victim of a crime, something like that, something 
        that would explain why a man like Mr. Foster would take 
        his own life.179

Adams noted that in July 1993 he was not familiar with the name 
Whitewater and that a Whitewater file would have meant nothing 
to him.180
    Margolis himself testified, ``the President's personal 
papers I was not concerned with.'' 181 According to 
Margolis, the Park Police were narrowly focused on material 
setting forth Foster's state of mind, such as a suicide note or 
an extortion threat.'' 182 Margolis testified

        if Mr. Nussbaum had showed me a bunch of financial 
        documents that day, I wouldn't have been very 
        interested in them, I wouldn't have understood them, I 
        don't think my agents would have had any interest in 
        them.183

Heymann was also quite clear that the investigators were not 
interested in files pertaining to the Clintons' tax returns or 
real estate investments.184 ``They would have been 
prepared to treat them as not relevant to Vince Foster's 
death.'' 185

    a. No Instructions Were Conveyed to Bernard Nussbaum Regarding 
                      Documents in Foster's Office

    Susan Thomases, a partner in the law firm Willkie Farr & 
Gallagher, has known President Clinton for over 20 years and 
Mrs. Clinton for nearly 20 years. During the 1992 Presidential 
campaign, she lived in Little Rock for six months while serving 
as director of scheduling and advance for the Clinton/Gore 
campaign.
    On the night of July 20, Mrs. Clinton called Thomases at 
her apartment in New York and told her of Foster's 
suicide.186 They shared their grief at the loss of their 
close friend and colleague. Thomases informed Mrs. Clinton 
that, in keeping with her long-standing practice of traveling 
to Washington on Wednesdays to conduct business, she was 
planning to travel to Washington the following 
afternoon.187 Thomases recalled that Mrs. Clinton then

        said, would you please find out when my husband, the 
        President, is going to be there and please be sure to 
        see him; and, also please be sure to talk to Maggie 
        Williams to see if she were okay.188

Mrs. Clinton did not suggest that Thomases change her plans so 
as to arrive in Washington earlier.189 Asked whether the 
contents of Foster's office came up in that conversation, 
Thomases replied, ``Absolutely not.'' 190
    Telephone records indicate that Thomases made a series of 
telephone calls to Williams, Nussbaum and McLarty, or their 
offices, on July 21 and 22, 1993. At 12:15 a.m. on July 21, 
Thomases paged Williams. Williams called Thomases at 1:10 a.m.; 
they spoke for fourteen minutes. Thomases recalled that, in 
their first conversation after Foster's suicide, Williams told 
her that she and Thomasson had been in Foster's office.191 
There was no discussion of Foster's documents. Williams 
testified, in her deposition and before the Committee, that she 
did not recall speaking with Thomases by telephone during that 
week, but did recall Thomases coming by her office in 
person.192
    On July 22, Williams called the Rodham residence in 
Arkansas, where the First Lady was staying, at 7:44 a.m. and 
spoke for one minute. Williams did not recall whether she spoke 
to Mrs. Clinton at that time.193 She does not recall 
discussing Whitewater with the First Lady in connection with 
Foster's death, nor discussing Foster's documents other than 
regarding moving documents to the residence.194 A three-
minute call was placed from the Rodham residence to Thomases's 
hotel in Washington at 7:57 that morning. Thomases did not 
recall the details of the conversation; she speculated that 
Mrs. Clinton may have asked her about her conversation with the 
President, whom she had seen the day before, and that they may 
have discussed Thomases's decision not to attend Foster's 
funeral.195 Thomases does not recall discussing Foster's 
documents or Whitewater with the First Lady on July 22.196
    Thomases paged Nussbaum at 8:01 that morning. She called 
the Rodham residence, where Mrs. Clinton was staying, at 8:25 
am. Thomases left a message for Williams at the White House at 
9:00 a.m. Thomases called the First Lady's office in the White 
House at 11:04 a.m. for six minutes, at 11:37 a.m. for 11 
minutes, at 11:50 a.m. for four minutes, and at 3:08 p.m. for 
10 minutes. These calls were made to Mrs. Clinton's general 
office telephone number, rather than to Williams's direct 
line.197 Thomases called McLarty's office at 9:30 a.m. to 
leave a message for Burton, at 10:48 a.m. for three minutes, at 
11:11 a.m. for three minutes, and at 11:16 a.m. for one minute.
    The records do not indicate how many conversations Thomases 
had, nor with whom. Thomases does not recall the conversations 
and does not believe she reached McLarty on any of those 
occasions.198

          * * * I was reaching out for Mack and I was anxious 
        to speak to him because he had a very special 
        relationship with Vince, and I wanted to talk to him. 
        And unfortunately I do not believe that I was able, nor 
        can I remember, that I was able to reach him that 
        day.199

McLarty also did not recall receiving any telephone calls from 
Thomases and did not recall speaking with her on July 
22.200 Burton recalled that at one point he spoke with 
Thomases regarding travel arrangements to a funeral; he could 
not recall if it was to Foster's funeral or that of President 
Clinton's mother.201
    Thomases recalled speaking with Nussbaum on the morning of 
July 22 and described her motivation for doing so:

          I was not looking for * * * Bernie Nussbaum to talk 
        about the review of documents in Vince Foster's office. 
        I was really trying to reach him to talk about how he 
        was feeling and how he was doing. I had known that he 
        and Vince had grown to be very good friends and that it 
        was a very difficult thing for him to have lost his 
        trusted deputy at this particular time. I was really 
        calling to check in with my friend to see how he was 
        doing.202

According to Thomases, Nussbaum himself raised the subject of 
the review of documents in Foster's office:

          He told me he had made a decision and that he was in 
        charge, and that he was going to do it, and that he had 
        taken great care into thinking through how it was going 
        to be divided up; and that other people were going to 
        be there, and the proper documents were going to be 
        given to the proper person.203

She did not express to him a view that the investigators' 
ability to review the documents should be limited.204 At 
the time of her conversation with Nussbaum, she ``had not heard 
about any issue in the White House'' regarding investigators' 
access to Foster's office.
    Nussbaum recalled mentioning the review of documents with 
Thomases but noted, ``I didn't even discuss with her, I don't 
believe, exactly how it should be done.'' 205 Nussbaum 
testified,

          I talked to a number of people about this issue as to 
        how the search for a suicide note should be conducted. 
        But I did not speak to the President or the First Lady 
        about this matter, nor did Susan Thomases or anyone 
        else convey a message to me from either of them. Susan 
        Thomases did not discuss the First Lady's views with me 
        * * * 206

Thomases did not mention the President or the First Lady during 
the conversation.207

          Senator Boxer. * * * Did the First Lady personally 
        tell you how to handle the papers in the office?
          Mr. Nussbaum. No.
          Senator Boxer. Did she tell you what to do through 
        Susan Thomases?
          Mr. Nussbaum. No.
          Senator Boxer. Did she tell you what to do through 
        any other intermediary?
          Mr. Nussbaum. No.208

    Neuwirth stated that, around the time of the review of 
documents in Foster's office, Nussbaum mentioned a conversation 
he had had with Thomases.209 Neuwirth stated his 
``understanding was that Nussbaum felt that Thomases and the 
First Lady may have been concerned about anyone having 
unfettered access to Mr. Foster's office.'' 210 Nussbaum 
did not indicate to Neuwirth whether Thomases had spoken with 
Mrs. Clinton.211 Nussbaum does not recall these 
conversations with Neuwirth.212
    Thomases testified specifically that she did not act as an 
intermediary for Mrs. Clinton with Nussbaum on this 
occasion.213 She testified she was unaware of the meeting 
on July 22 between Messrs. Nussbaum, Lindsey, Burton, Quinn and 
Neuwirth regarding the review of Foster's documents and did not 
call in an attempt to influence that decision.214 She 
explained her 8:01 a.m. page to Nussbaum:

          I don't remember making that call, but I want to put 
        it in a context where I think it was. I had not yet 
        talked to Bernie who was my very close friend. His 
        deputy, Vince Foster, had shot himself. I wanted to 
        know how Bernie was doing because he had been working 
        with Vince day in and day out and he had been feeling 
        very good about how things were going and then his 
        deputy goes out and kills himself.215

She did not pass on to him any information regarding how he 
should handle the Park Police request for access to Foster's 
office.216 Nussbaum agreed:

          I know Hillary Clinton for over 20 years now * * * 
        and in the White House we had quite a good relationship 
        * * * [She] and I have talked on many occasions in our 
        lives. If Hillary Clinton wants to say something to me, 
        she says it to me.* * * If she wants to deliver me a 
        message, Hillary Clinton delivers me a message herself. 
        If I want to deliver her a message, I deliver her a 
        message myself. She doesn't need any messengers to 
        deliver messages between her and myself.217

    Thomases saw President Clinton at the White House on July 
21; during that conversation they shared their sadness at 
Foster's death.218 Asked whether there was any discussion 
of the contents of Foster's office during that conversation, 
Thomases replied, ``None whatsoever.'' 219
    Williams did not recall whether she actually spoke with 
Thomases on any of the occasions when Thomases called her 
office on July 21 and 22.220 Williams recalled that 
Thomases came by her office during that time.221 Thomases 
recalled speaking to Williams on both July 21 and July 
22.222 Thomases recalled clearly she ``had no conversation 
with Maggie Williams about Vince Foster's papers.'' 223 
She stated,

          I can imagine myself talking to Maggie at length. 
        Maggie was very upset by Vince's death, and I thought 
        of her often on the 22nd. I could have called and 
        talked to her. I could have called and talked to Evelyn 
        [Lieberman] to find out how she was doing. Any of those 
        things could have caused me to call that . . . number. 
        But I wasn't calling Maggie Williams about any 
        papers.224
          I talked to her about how she was holding up. I 
        talked to her about going to the funeral. I talked to 
        her about how I was holding up. I talked to her about 
        how much work I had and how pressured I was feeling at 
        the time.225

    Thomases told the Committee:

          I never received from anyone or gave to anyone any 
        instructions about how the review of Vince Foster's 
        office was to be conducted or how the files in Vince's 
        office were to be handled.226

She had no conversation with Mrs. Clinton regarding the 
documents in Foster's office.227

          I'm absolutely firm that had [Mrs. Clinton] discussed 
        documents with me at this time, I would have noticed 
        it. It would have been a memorable thing for her to 
        have mentioned because we were talking about emotions, 
        children, religion, feelings, friendship; and had she 
        brought up documents, it would have been so distinct I 
        believe I would have remembered it.228

She testified again, ``I remember no discussions about 
documents with either Mrs. Clinton or Maggie Williams. The only 
person who discussed documents with me during that period was 
Bernie Nussbaum.'' 229
            7. Park Police investigation was not hindered by Nussbaum's 
                    review of Foster documents
    The document review procedures employed by Nussbaum did not 
impede the Park Police's investigation of Vincent Foster's 
death. Nussbaum provided the law enforcement officials on July 
22 with a general description of the documents. The law 
enforcement officials were able, on that date or shortly 
thereafter, to review and copy all documents in which they 
expressed an interest.
    Witnesses agree that Nussbaum separated the documents in 
Foster's office into piles, although there are differing 
recollections as to how many piles and what the piles 
represented. Margolis and Adams recalled that one pile was 
material to be redistributed within the White House Counsel's 
Office, a second pile was personal material of Foster's to be 
provided to the Foster family's lawyer, and a third pile was 
personal material of President and Mrs. Clinton to be provided 
to their private lawyer.230
    Nussbaum testified,

          As I went through the files in Vince Foster's office, 
        the agents did * * * ask to see and read certain 
        documents. I set those documents aside. Subsequently, 
        after we reviewed them, every document the agents asked 
        for was, within a matter of days, given to the law 
        enforcement officials.231

    Sloan explained that as Nussbaum provided a general 
description of the documents, the law enforcement officials 
identified particular items in which they were 
interested.232 Neuwirth confirmed that ``there was an 
opportunity during the review for the law enforcement officials 
to identify documents or categories of documents that they 
wanted to see.'' 233 In fact, Nussbaum specifically told 
Sloan to make the documents available to the Park 
Police.234 Nussbaum allowed the Park Police to make copies 
of those documents.235 Neuwirth and Sloan were both of the 
understanding that following the review, all of the documents 
that had been requested were made available to the law 
enforcement officials who had requested them.236 In fact, 
Margolis recalled that Nussbaum gave some documents to the Park 
Police on the spot, including Foster's calendar and a map of 
the Washington area that had been in Foster's 
possession.237
    Captain Hume testified that the Park Police reviewed the 
materials that Nussbaum removed from Foster's office and 
provided to Foster's attorney.238 On July 30 he reviewed 
the documents remaining in the White House Counsel's office 
that the investigators had identified as of interest to them, 
including Foster's telephone logs. Captain Hume testified, 
``[f]rom those phone logs, we were able to get the phone number 
for his doctor. * * * I was able to talk to his doctor and 
confirm that he was ill.'' 239 Captain Hume reviewed all 
the documents in which he had an interest.240 Asked about 
White House Counsel's office attorneys attending Park Police 
interviews of the White House Counsel's office staff, Captain 
Hume testified, ``the end result is all the questions that I 
asked got responses so there was no interference.'' 241
    When the document review was completed, none of the law 
enforcement officials present expressed any concern about the 
movement of the Clinton personal documents out of the White 
House Counsel's suite; they had not expressed any interest in 
reviewing any of those documents.242 After Foster's note, 
which refers to the Travel Office matter, was turned over to 
the Park Police, no law enforcement officials asked for 
documents in Foster's office relating to the Travel Office 
matter.243
    Whatever opinions can be formed regarding the way in which 
White House officials responded to the Park Police's request to 
examine Foster's office for a suicide note or other evidence of 
his state of mind, it is clear that the investigation of his 
death was not hindered. Major Hines told the Committee, ``we 
had a thorough enough investigation to determine that it was a 
suicide.'' 244 Margolis testified quite clearly that the 
procedures determined by Nussbaum did not hinder the Park 
Police investigation of Foster's death. Instead, Margolis was 
concerned about the appearance created by those procedures, not 
about their impact on the investigation itself.

          Senator Shelby. Do you believe, Mr. Margolis, that 
        the conduct of the White House Counsel in setting the 
        ground rules of the so-called search, later dispersing 
        papers and so forth, without the Justice Department 
        having an opportunity to evaluate them, compromised or 
        contaminated the investigation?
          Mr. Margolis. I can't say that Senator. What I would 
        say--
          Senator Shelby. What would you say?
          Mr. Margolis. I would say, and I think Mr. Heymann 
        said it perfectly--
          Senator Shelby. Okay.
          Mr. Margolis. --that the way this was done--and I 
        don't think I can capture his exact words--
          Senator Shelby. Okay.
          Mr. Margolis. But the way this was done, it managed 
        to cast substantial doubt on the bona fides of the 
        investigation with no evidence that anything wrong was 
        ever done.245
            8. The torn note is found in Foster's briefcase

    a. Nussbaum Overlooked the Note in Foster's Briefcase on July 22

    In the course of reviewing the documents in Foster's 
office, Nussbaum removed files from Foster's briefcase, which 
was propped against a wall. Nussbaum testified he did not open 
the briefcase and look inside after he had removed the 
files.246 He said, ``I remember just simply pulling the 
files out, realizing, or feeling in effect, or looking, 
glancing, that the files were all out and then, as you can see, 
the briefcase apparently sort of shuts by itself.'' 247
    Bill Burton stood behind Nussbaum during the review of 
Foster's documents. When Nussbaum removed the files from 
Foster's briefcase, Burton was able to see inside.248 He 
testified,

          I saw that * * * Mr. Nussbaum had taken all the files 
        out of the briefcase and that the briefcase otherwise 
        looked empty to me, like your briefcase might look 
        empty or my briefcase might look empty after you've 
        taken all the files out. There was litter in the bottom 
        of the briefcase, paper clips, a Post-it note * * * 
        249
          There was nothing in me that made me think at the 
        time perhaps we should see if there's a note tucked 
        away in that litter.250

    Witnesses differed in their recollections as to whether 
Nussbaum looked in the empty briefcase. Margolis recalled he 
``was satisfied that [Mr. Nussbaum] had looked in the briefcase 
and had represented to us that there was nothing else in 
there.'' 251 Spafford did not recall whether Nussbaum 
looked inside the briefcase.252 Agent Salter also did not 
see Nussbaum look inside the briefcase.253 While Margolis 
``cannot absolutely swear that [he] remember[s] him looking in 
the briefcase,'' he believes Nussbaum did look in the 
briefcase.254
    Detective Markland testified Nussbaum looked in the 
briefcase:

          When Mr. Nussbaum concluded the emptying of the 
        briefcase, he looked in it, said that's it; it's empty. 
        He again looked at it, actually picked it up and looked 
        into the briefcase, set it down on the floor, and it 
        was pushed to the wall behind him.255

Margolis testified, though, that based on where people were 
sitting in the office Detective Markland could not have seen 
whether Nussbaum looked in the briefcase: ``I don't see how he 
[Markland] could have seen into the briefcase in those 
circumstances.'' 256
    Captain Hume testified in his deposition that Nussbaum

        never took that briefcase and spread it open and looked 
        down at it like I would or you would now in retrospect 
        if we thought something was in there. That never 
        happened * * * I can tell you at no point do I remember 
        him picking that briefcase up and pulling it out like I 
        would, like I looked in it when I went back up there 
        the following week or whatever, after we had gotten the 
        call about the note.

    Senator Sarbanes read Captain Hume's deposition to him at 
the Committee's hearing and asked him, ``is that still your 
recollection today of what took place?'' 257 Captain Hume 
replied, ``That's correct, Senator, that's still my 
recollection.''
    Spafford testified that after the investigators had left 
Foster's office, Sloan noticed pieces of paper in the bottom of 
the briefcase. Spafford recalled that ``Mr. Sloan had the 
briefcase in his hand * * * and he made the comment at that 
point in time that there appeared to be scraps in the bottom of 
the briefcase.'' 258 Spafford recalled that Nussbaum 
responded to the effect that other materials had to be reviewed 
as well and ``we will look through that later.'' 259 
Spafford testified, ``it was an off-the-cuff remark by Mr. 
Sloan to which I attached very little significance at the time, 
and it appeared that Nussbaum attached very little significance 
to it as well.'' 260 To Spafford, Nussbaum ``looked very 
tired, exhausted.'' 261
    Sloan first learned of the pieces of paper on July 27; he 
believes that had the earlier incident occurred he would have 
recalled it when he learned of the note.262 He said, ``as 
far as I am concerned, it did not happen because I don't 
remember anything remotely like that, and I believe that I 
would have recalled it the following week.'' 263 Nussbaum 
also did not recall that conversation and believes it did not 
happen.264
    On July 26 Deborah Gorham, Foster's secretary, ``picked 
up'' Foster's briefcase ``at which time [she] moved it from the 
corner of his desk to the front of his bar . . .'' 265 
Inside the briefcase she ``saw the top of the cut of a third 
cut folder and the color of yellow.'' 266 Gorham testified 
she saw ``the color of yellow, not the form or shape or if 
there was writing on it or not.'' 267 At Foster's request, 
Gorham had from time to time placed yellow Post-It notes in his 
briefcase for his use.268 Linda Tripp, Nussbaum's 
secretary, recalled Gorham said to her

        either `it was empty' or `there's nothing in there' 
        followed by `except for a bunch of little yellow sticky 
        notes;' she may have said `at the bottom.' 269

Gorham did not recall this conversation.270 However, she 
believes she may have associated ``something yellow'' with the 
yellow Post-It notes she placed in the briefcase.271
    Even if the scraps of yellow paper were brought to 
Nussbaum's attention on July 22, none of the individuals who 
saw them concluded that they may have been evidence of Foster's 
state of mind; none of them suggested to Nussbaum that they 
might be a suicide note.272
    Neuwirth testified that he found the scraps of paper on 
July 26:

          On Monday the 26th at Mr. Nussbaum's request I was 
        preparing an inventory of the contents of Mr. Foster's 
        office. One of the things that I did in connection with 
        that inventory was to put into a box towards the latter 
        part of my inventory process items that belonged to Mr. 
        Foster personally, like photographs. And in the process 
        of putting materials in that box I saw the briefbag 
        leaning against the back wall of Mr. Foster's office. I 
        understood it to be empty. I knew that it belonged to 
        Mr. Foster. I picked it up and brought it to put into 
        the box. I had laid two large--one or two or maybe even 
        three large black and white photographs of Mr. Foster 
        and his daughter with the President on the top of the 
        box, and in an effort to avoid damaging those 
        photographs, I turned the * * * briefbag to fit into 
        the box, and in the process of turning it, scraps of 
        paper fell out of the brief bag.273

Upon discovering what appeared to be Foster's handwriting on 
them, Neuwirth ``looked in the bag to see if there were other 
scraps of paper because only a few had fallen out, and I saw 
that there were more scraps of paper at the bottom of the bag. 
I had to stick my hand into the bag to scoop many of them out * 
* *'' 274 Neuwirth brought the pieces of paper to the 
conference table in Nussbaum's office, where he assembled them 
into the note.275

b. The Note Was Given to the Department of Justice the Day after It Was 
                                 Found

    Upon hearing of the note, Nussbaum sought to inform 
McLarty; McLarty was with the President in Chicago. Nussbaum 
informed Burton, who called McLarty.276 Nussbaum recalled

          I waited a day to turn the list over because I 
        believed then and I believe now that it was common 
        decency to allow Lisa Foster to see the writing before 
        it was turned over, to see it before it could be leaked 
        or before it could be on national TV in some fashion. 
        Lisa saw it on the afternoon of July 27. I thought it 
        also appropriate that the President, who was out of 
        town that day, have a chance to see it, if he wished, 
        before it was turned over. This one-day delay had no 
        impact whatsoever on any investigation.277

Nussbaum called Mrs. Foster's attorney, James Hamilton, on July 
26; Hamilton informed Mrs. Foster of the note that day or the 
next.278
    David Gergen similarly recalled that the White House staff 
hoped to accomplish two items before turning the note over to 
law enforcement:

        one was to talk to the widow and to ensure that she 
        felt comfortable * * * As I recall, she was on her way 
        back that day from Arkansas and was not available until 
        sometime in the afternoon. * * * And the other 
        precondition was to talk to the President and to make 
        sure that he was comfortable with it, which he--as I 
        said at least in my first hearing, he wanted it turned 
        over. Obviously, if those two preconditions had been 
        met earlier * * * it would have been better, but under 
        the circumstances, that was the earliest we could get 
        it all done.279

    Neuwirth told the Committee that his initial reaction upon 
finding Foster's writing was

        it was something that was appropriate to advise the 
        investigators of immediately * * *'' 280 He 
        recalled, ``Mr. McLarty was very concerned * * * about 
        being respectful to Mrs. Foster. And I think in the 
        conversation it pretty quickly came up that she was 
        coming to Washington the next day, and an effort was 
        being made to show her the note before it was turned 
        over to any investigator so that, for example, she 
        wouldn't read about it in the press before having seen 
        it.281

    Neuwirth recalled that in the course of discussion 
regarding what to do with the note, ``Mr. Burton raised the 
question of whether the fact that Foster was talking about 
matters on which he had worked in a note that was undated and 
made no reference to suicide, whether the contents of the note 
might be covered by attorney-client privilege.'' 282 
Burton recalled the discussion of whether any privilege 
attached to the note, but did not recall who raised the 
issue.283
    Nussbaum also called Thomases to tell her that a note had 
been found in Foster's briefcase.284 Thomases testified, 
``* * * I think he told me because he knew that I was very 
close to Vince, and I was very close to both the President and 
the First Lady.'' 285 Thomases does not recall discussing 
with Nussbaum whether and how the note should be turned over to 
law enforcement officials.286 She also does not recall 
discussing the note with Mrs. Clinton.287 Nussbaum does 
not recall discussing the note with Thomases on July 
26.288
    On July 27, 1993, Attorney General Reno and Deputy Attorney 
General Heymann were asked to come to the White House. They met 
with Nussbaum, McLarty, Burton, David Gergen, and Mark Gearan. 
Heymann recalled that Nussbaum told him and Attorney General 
Reno of the discovery of the torn-up note:

        he said yesterday we found these, we found a torn-up 
        note. * * * He had written down what the note said and 
        he read us the note. They wanted to know what we 
        thought should be done with it. The Attorney General 
        said turn it over to the Park Police immediately. She 
        then asked why are we just getting it now if it was 
        found I guess it's 30 hours--it was 30 hours before 
        then.
          The White House people, I don't know whether it was 
        Mr. Nussbaum or who, said that there was--they wanted 
        first to show it to Mrs. Foster and they wanted to show 
        it to the President who might, if he had wanted to, 
        have asserted executive privilege, they said.289

The note was provided to the Park Police that night.
    Margolis testified ``the delay of 27 hours, I don't see 
what practical significance that made. What it did, once again, 
was it's the optics, you know, people then begin once again to 
question the bona fides.'' 290
    Heymann then directed the FBI to investigate the 
circumstances regarding the discovery of the note.291 At 
the time, Heymann did not believe that misbehavior had occurred 
with respect to the discovery of the note; instead, he was 
concerned that the investigation appear to be 
impartial.292 FBI Agent Salter testified regarding the 
investigation by the FBI of the circumstances surrounding the 
note. The FBI report concluded there was no evidence that the 
note was somewhere other than the bottom of Foster's briefcase 
on July 22, that there was no evidence to contradict Neuwirth's 
testimony that he discovered the note in the bottom of the 
briefcase on July 26, and that there was no evidence that any 
White House official attempted to conceal the note or its 
contents from the law enforcement personnel investigating 
Foster's death.293
    After it was provided to the Park Police, the Park Police 
spoke with Mrs. Foster regarding the note. Captain Hume 
testified,

          She had stated to us that she had asked Mr. Foster to 
        write down some of the things that were bothering him 
        or troubling him and she believes he wrote that note 
        about a week to a week and a half before his 
        death.294

Mrs. Foster told the Park Police that when she looked at the 
note she was certain the note was in her husband's 
handwriting.295
    The fact that the note was found on July 26th rather than 
July 20th or 22nd made no difference to the Park Police's 
investigation of Foster's death. The note does express Foster's 
concern regarding the Travel Office matter; however, this 
concern was known to the Park Police within hours of the 
discovery of Foster's body. On the car ride to the Foster home, 
David Watkins told Sergeant Braun and Detective Rolla that 
Foster had been upset about the Travel Office matter.296
            9. Removing the Clintons' personal files from the White 
                    House counsel's office was appropriate
    Following the review of documents in Foster's office, 
Nussbaum determined to provide the Clintons' personal files to 
their personal attorneys, Williams & Connolly:

          I knew that Vince had been assisting the First Family 
        in completing financial disclosure statements, filing 
        tax returns and creating a blind trust. * * * it is 
        proper and indeed traditional for the White House 
        Counsel's office to assist in that official function. 
        Mr. Foster needed access to the Clinton personal files 
        for these official purposes. * * * I knew that the work 
        on the projects for which the personal files were 
        needed had recently been completed. * * * Shortly after 
        the search of Vince's office was completed, I asked 
        Maggie Williams * * * to help me transfer these files 
        to the Clintons and to their personal lawyers.297
          I had just transferred the Foster personal files to 
        the Foster personal lawyers. I was anxious to get on 
        with the work of my office. I had told the Department 
        of Justice * * * that I was going to move the working 
        files to other lawyers who would work on them. It 
        seemed the most natural thing in the world for me, at 
        that point, having just transferred the Foster personal 
        files, to now transfer the Clinton personal 
        files.298

    Neither the Justice Department attorneys, Margolis and 
Adams, nor the Park Police investigators present during the 
document review objected to Nussbaum's intention to send the 
Clintons' personal files to their private attorneys; nor did 
they ask Nussbaum to prepare an index of those documents. 
Nussbaum testified,

          Mr. Adams * * * understood that the Foster personal 
        files were going to the Foster family lawyers. Indeed, 
        I handed those files to the Foster family lawyers right 
        in front of the Justice Department. No one asked me to 
        make a log. No asked me to make an index. They were 
        right there * * * they knew what was happening.299

    Margaret Williams recalled that Bernard Nussbaum indicated 
to her ``that he was distributing the documents from Vince's 
office.'' 300 Nussbaum asked her to deliver certain 
personal documents of President and Mrs. Clinton from Foster's 
office to their personal attorney:

        * * * on the afternoon of Thursday, July 22, the day 
        before Vince Foster's funeral in Little Rock, I 
        received a call from Bernie Nussbaum asking me to come 
        to Vince's office and to take care of having the 
        personal files of the President and Mrs. Clinton 
        delivered to their personal lawyer, who was Bob Barnett 
        of Williams & Connolly at the time.301

    Sometime shortly thereafter, Williams met Nussbaum in 
Foster's office.302 He directed her ``to either a stack of 
files * * * or * * * to a box in which there were files'' that 
he had already identified as personal files of President and 
Mrs. Clinton.303 She testified

        he asked me to take a look around--eyeball--the 
        remaining files to see if there were any that should be 
        included. * * * I did look because he asked me to, and 
        I pulled out--I saw a file that said `taxes' on it. * * 
        * I picked it up and I put it on the table that had the 
        other files that Nussbaum had directed me to 
        take.304

Nussbaum did not indicate that the files contained documents 
related to Whitewater or to the White House Travel Office; the 
only file Williams recalled discussing with Nussbaum pertained 
to renovations of the White House residence.305
    Nussbaum recalled that Williams

        glanced at particular file folders, the titles, just to 
        make sure, and she glanced in the area in which the 
        Clinton personal files were which was in the credenza 
        or some of them may have been pulled out of the 
        credenza, just to see if there was anything, any 
        obvious personal file that I overlooked. She wasn't 
        conducting a search or a review of any file * * * 
        306

    Williams testified that later that afternoon, having 
attended to other matters in the meantime, she decided not to 
deliver the files to Barnett that day:

          I took several calls in my own office in the West 
        Wing. * * * I know I had several telephone calls back 
        and forth * * * So the day started getting a little 
        later. * * * I had finally made a determination that I 
        was going to go to Vince's funeral the next day. And, 
        quite frankly, I was tired. And when I thought about 
        the time it would take * * * both to get a messenger, 
        clear them in and actually have them get in and collect 
        the box, I decided I could be at home in that time, and 
        I decided that the sending and the waiting for someone 
        to pick up the documents would have to wait until 
        later.307

    Rather than leave the files in Foster's office or in her 
own office, Williams decided to put them in the White House 
residence. She testified, ``since Bernie Nussbaum had asked me 
to take care of the personal files, I felt as if I needed to 
place them somewhere.'' 308

          I was looking for both a way to accommodate Bernie 
        Nussbaum's asking me to take the files, the personal 
        files, and put them away, and to accommodate my wanting 
        to leave there. So I thought if I cannot get them to 
        the personal lawyer * * * because of my own selfish 
        reasons * * * I thought where else could I put them 
        that would safeguard them, perhaps giving Bernie peace 
        of mind, gave me peace of mind and I thought they're 
        personal files, I'll put them in the residence.309

    Williams telephoned Mrs. Clinton and

        told her that there were personal files that weren't 
        going to get to the lawyer because I was just tired, 
        and I was going to put them in the White House, in the 
        residence, and where did she want them.310

Mrs. Clinton told Williams to call Carolyn Huber for guidance 
on where to put the box; Mrs. Clinton did not give Williams any 
further instructions regarding the files.311 Huber 
recalled that Williams called her ``and said that Mr. Clinton 
had asked her to call me to take her--she had a box of records 
to store. She wanted me to take them to the residence on the 
third floor, where we have an office and we keep their personal 
records.'' 312
    Williams recalled asking Thomas Castleton, an assistant in 
the White House Counsel's Office, to carry the box of files to 
the White House residence.313 Castleton recalled that he 
``volunteered to help carry the box.'' 314
    Castleton recalled that as they were walking to the White 
House residence, Williams told him the box ``contained personal 
and financial records pertaining to the First Family and that 
we were moving the boxes to the residence for them to be 
reviewed.'' 315 Williams does not recall telling Castleton 
that the documents had to go to the residence so that President 
Clinton or Mrs. Clinton could review their contents.316
    Neither Adams nor Margolis objected to Nussbaum's intention 
to send the Clintons' personal files to their personal 
attorneys following the document review.317 As Adams 
testified, ``there would be nothing impermissible with the 
President or Mrs. Clinton looking at the files pertaining to 
their own private affairs.'' 318

    A. Documents Were Transferred to Williams & Connolly on July 27

    While recollections differ as to the exact sequence of 
events, it is certain that the personal files of President and 
Mrs. Clinton that had been in Vincent Foster's office were 
retrieved by the Clintons' personal lawyer on July 27, 1993.
    Robert Barnett, a member of the Williams & Connolly law 
firm, was serving as President and Mrs. Clinton's personal 
lawyer in July 1993. He recalled that he went to the White 
House on July 27, 1993, having previously arranged with 
Margaret Williams to pick up personal documents of the 
Clintons.319 Williams took him to a room on the third 
floor of the White House residence, where they removed the box 
of documents from a closet.320 Barnett testified that he 
opened the box, reviewed the file labels, placed all the 
contents back in the box, and taped the box shut.321 He 
estimated this process took no more than 10 minutes.322 
Barnett recalled that Williams arranged for an employee of 
Williams & Connolly to be cleared into the White House to pick 
up the box.323 While Barnett does not recall seeing or 
speaking with Mrs. Clinton that day, he testified he ``cannot 
21/2 years later rule out the possibility.'' 324 He 
was certain that Mrs. Clinton was not present while he reviewed 
the contents of the box.325
    Like Barnett, Williams recalled that Barnett assumed 
custody of the Clintons' personal files on July 27. Her 
recollection differed from his regarding the sequence of events 
leading up to the transfer of documents that day. While she 
recalled speaking with Barnett about transferring the Clintons' 
files to him at some point, she did not recall arranging with 
Barnett that he pick up the documents that day.326 She 
recalled encountering Barnett speaking with Mrs. Clinton on the 
second floor of the White House residence on July 27.327 
Williams does not recall accompanying Barnett to the third 
floor of the White House residence; she recalled accompanying 
the Williams & Connolly employee to the third floor.328
    There is no evidence that any files were removed or 
tampered with before they were transferred to Williams & 
Connolly. Barnett testified,

        * * * neither the President nor the First Lady nor 
        Margaret Williams nor Susan Thomases nor Socks the cat 
        instructed me to do anything improper with those 
        documents, and if they had, they would have received a 
        response from me that neither they nor I would have 
        forgotten.329
        * * * on no occasion, no occasion, did Mrs. Clinton 
        suggest, instruct or any other way indicate that 
        anything improper should be done with the files or 
        anything involving the matters that the files deal 
        with. And nothing was done.330

    On July 26, 1993, Susan Thomases called Mrs. Clinton's 
scheduler; she does not recall what she discussed with the 
scheduler.331 She does not recall having an appointment to 
see Mrs. Clinton on July 27.332 Thomases traveled to 
Washington, DC on July 27, 1993. Although she does not remember 
it, White House records indicate she visited the residence that 
day.333 Thomases did not remember seeing Mrs. Clinton on 
July 27.334 Thomases testified that she did not know that 
a box of documents from Foster's office had been moved to the 
White House, and never saw the box.335

          ``I can * * * tell you that I had no knowledge that a 
        box of documents from Vince Foster's office ever went 
        to the White House residence. I know no one even talked 
        to me about it before it happened, and I certainly 
        never saw or handled the box of documents.'' 336

She does not remember discussing Foster's documents with Mrs. 
Clinton at that time:

          ``I don't think that I ever discussed documents with 
        Hillary Clinton in any time proximate to Vince Foster's 
        death, and for at least more than a year after that.'' 
        337

B. Introduction to Rose Law Firm Billing Records

    The Special Committee devoted substantial attention to the 
discovery in January 1996 of Rose Law Firm billing records in 
the White House. The Committee attempted to ascertain who 
brought the records into the White House and who handled them 
once they were there. Given the fallibility of individuals' 
recollections and the passage of time, it may not be possible 
to answer these questions fully. Based on an incomplete record, 
the Majority suggests the possibility of two improper acts: 
that the billing records may have been removed from Vincent 
Foster's office after his death, and that they were 
deliberately withheld from the Special Committee, the 
Independent Counsel, and the Federal agencies that were seeking 
them. Such deductions are not supported by the record. They 
also cannot obscure two salient points regarding the billing 
records: they were produced to the Committee, the Independent 
Counsel and others, and they do not contradict other statements 
by Mrs. Clinton and other partners of the Rose Law Firm 
regarding the representation of Madison Guaranty.
            1. Billing Records Were Produced by the White House
    Carolyn Huber has served as Special Assistant to the 
President for Personal Correspondence since February 1, 
1993.338 Huber opens and disburses all personal 
correspondence for President and Mrs. Clinton. She also 
prepares the Clintons' personal bills, maintains their personal 
financial records, and attends to the Clintons' house guests at 
the White House. Huber served as administrator of the Arkansas 
Governor's Mansion from 1979 to 1980 and as Administrator of 
the Rose Law Firm from 1981 to 1993.339
    In January 1996, Huber had some furniture removed from her 
White House East Wing office. She used the occasion to review 
the contents of a box of photographs and other materials to be 
catalogued that had been under a table, and discovered the Rose 
Law Firm billing records:

          I had some new furniture built in my office. I have 
        some new built-ins. And I had this big table in there. 
        When I got my new built-ins I didn't need a table 
        anymore because I have shelves and I can put all my 
        things up. So I had called to have it moved that 
        morning [January 4, 1996]. * * * So they took the table 
        out. So then I decided I'd start trying to put my 
        things up on the shelves, and I picked up this billing 
        memo and opened it, and I was surprised.340
          I had a large table, about a 6-foot table by 3 feet. 
        This table was beside my old desk over these records. 
        On Thursday morning [January 4, 1996], the movers came 
        over, moved out the table and it just exposed all the 
        stuff on the floor. I thought I have to get this stuff 
        up off the floor. I needed to have some kind of 
        organization in my office. So, I went over to the box 
        and picked up these records, opened it up.341

    Huber believed that these records had been requested by 
investigating authorities, and immediately called David 
Kendall, the personal attorney for President and Mrs. 
Clinton.342 When Kendall returned her call, she asked him 
to come to her office because she wanted to show him the 
documents she had found.343 Kendall came to Huber's office 
approximately one hour later, looked at the documents, and left 
them with Huber.344
    Later that afternoon, Kendall returned to Huber's office, 
accompanied by Special Counsel to the President Jane Sherburne 
and Huber's personal attorney, Henry Schuelke.345 They 
proceeded to review the documents together. Kendall testified,

          We decided that we had to review the documents more 
        carefully so we moved to an office just down the hall, 
        which was a little bit bigger than Huber's office. Ms. 
        Huber was able then to sit at a desk and review the 
        documents with us page by page, as the three of us 
        stood around her and could observe each page. * * * 
        [They learned] that each of these pages did appear to 
        in some way reflect law firm records of the billing for 
        the Madison Guaranty representation in the 1985-86 
        period. There was a little work in '87. And the top 
        document appeared to be a client billing and payment 
        history which had a run date of February 12, 
        1992.346

    At the end of this review, the lawyers concluded that the 
billing records were called for by various requests for 
documents from government agencies.347 They decided to 
copy the documents, so that copies could be given to each of 
the entities that had requested it. Because the documents 
contained some colored handwriting and Post-it notes, they 
decided to make color photocopies. Kendall testified,

        * * * we had a discussion, both during the review and 
        then after the review was completed, in which we had 
        jointly decided that we needed to produce the documents 
        as quickly as possible, we needed to keep a copy, and 
        we should get this done as quickly as possible.
          * * * And Ms. Huber and Ms. Sherburne set out at the 
        end of our review process to try and locate, in the 
        White House, a color photocopier.348
          A color copier was located in the New Executive 
        Office Building, and between about 7:00 and about 10:00 
        we were able to make two copies. It was a very slow, 
        slow process.349

    Kendall recalled that when he first looked at the documents 
with Huber, ``I told Ms. Huber that I thought we would 
immediately produce the documents.'' 350 Indeed, the 
documents were copied on the night of January 4 and produced to 
the Independent Counsel, the Senate Special Committee, the 
House Banking Committee, and the FDIC the next day, January 5, 
1996.351

    a. Billing Records Do Not Contradict Mrs. Clinton's Statements 
              Regarding Representation of Madison Guaranty

    The documents found by Huber are copies of Rose Law Firm 
billing records for the firm's representation of Madison 
Guaranty in the mid-1980's. While these records provide more 
detail than was previously available, they do not contradict 
what Mrs. Clinton and Rose Law Firm lawyers have said about the 
representation of Madison Guaranty. The Rose Law Firm was not 
Madison Guaranty's regular outside counsel, and handled only 
certain discrete assignments for the institution. Within the 
firm, Mrs. Clinton's work for Madison Guaranty was limited in 
time and scope. Work performed for Madison Guaranty comprised 
only a small fraction of the firm's total billings and of Mrs. 
Clinton's total billings.
     The billing records reflect time billed by Rose Law Firm 
personnel to Madison Guaranty from April 1985 to March 1987. 
The firm billed Madison Guaranty $19,344.75 for 205.95 hours of 
work by 15 Rose Law Firm attorneys and paralegals during that 
time.* Rose Law Firm associate Rick Massey billed the most 
time, 80.5 hours. Work performed was divided among six 
individual ``matters.'' These were General, Preferred Stock 
Offering, Limited Partnership, Bibler Golden, Industrial 
Development Corporation, and Babcock Loan. The Limited 
Partnership matter was billed the greatest number of hours, 
60.5; the Preferred Stock Offering was billed the next greatest 
number of hours, 55.1.
---------------------------------------------------------------------------
    \*\  See (Doc. Nos.DKSN 028928-DKSN 29043, Rose Law Firm Billing 
Records.) The documents reflect time billed by Rose Law Firm personnel 
Becky Arnold, Les Baledge, Kevin Burns, Hillary Clinton, Rick Donovan, 
Watt Gregory III, Sharon Grimes, William Kennedy, David Knight, Rick 
Massey, Chet Roberts, Herb Rule, Gary Speed, R. Davis Thomas Jr., and 
Thomas Thrash.
---------------------------------------------------------------------------
    The documents reflect that Hillary Rodham Clinton billed 
59.8 hours to the representation of Madison Guaranty over a 15-
month period, from April 1985 through July 1986.** The 
largest portion of her time, 24.45 hours, was billed to the 
Industrial Development Corporation matter. She also billed 13.6 
hours to the Preferred Stock Offering matter, 10.4 hours to 
General, 8.8 hours to the Babcock Loan matter, and 5.8 hours to 
the Limited Partnership matter. Her work on the Preferred Stock 
Offering occurred from April 1985 to December 1985; her work on 
the Industrial Development Corporation matter occurred from 
December 1985 to April 1986. Ronald Clark, chief operating 
officer of the Rose Law Firm, verified for the Committee what 
is evident to even a casual observer: 60 hours of work over a 
15-month period is not a significant amount of work for an 
attorney.352
---------------------------------------------------------------------------
    \**\  The documents show Mrs. Clinton billed an additional 3.7 
hours to the Madison Guaranty General matter on March 16, 1987. By way 
of comparison, Jay Stephens billed 339.75 hours to Pillsbury, Madison & 
Sutro's investigation of Madison Guaranty for the Resolution Trust 
Corporation over a 12 month period at a cost of some $67,950 to the 
government. Mr. Stephens testified that his involvement was ``minimal'' 
after March 1994 during which he billed 193 hours over 10 months. 
(Stephens, 5/17/96 Hrg. pp. 42-44.)
---------------------------------------------------------------------------
    The billing records do not contradict Mrs. Clinton's 
statements regarding her representation of Madison Guaranty. 
Mrs. Clinton was asked about the Preferred Stock Offering 
matter at a press conference on April 22, 1994. In particular, 
she was asked about a letter she sent to Arkansas Securities 
Commissioner Beverly Bassett on behalf of Madison Guaranty. 
Mrs. Clinton explained that Massey performed the legal work 
with respect to Madison Guaranty's application to issue 
preferred stock, and that she signed the letter in her capacity 
as billing partner on the matter:

          The young attorney, [Mr. Massey and] the young bank 
        officer [Mr. Latham] did all the work, and the letter 
        was sent. But because I was what you call the billing 
        attorney, in other words I had to send the bill to get 
        the payment made, my name was put at the bottom of the 
        letter.

Mrs. Clinton provided additional detail regarding the Preferred 
Stock Offering matter in response to interrogatories by the 
Resolution Trust Corporation. She stated,

          In April 1985, the Rose Law Firm communicated with 
        the Arkansas Securities Department with regard to a 
        proposal by Madison Guaranty to issue preferred stock 
        in order to raise capital and thereby increase its 
        regulatory net worth. As I understood it, the law firm 
        had been retained by Madison Guaranty to accomplish two 
        things: (1) to determine whether it was permissible 
        under Arkansas law for a savings and loan association 
        to issue preferred stock, and (2) if it was, to secure 
        permission from the Securities Department to issue that 
        stock through a wholly-owned brokerage firm. While I 
        was the billing partner on this matter, the great bulk 
        of the work was done by Richard Massey, who was then an 
        associate at Rose and whose specialty was securities 
        law. I was not involved in the day-to-day work on the 
        project. My knowledge of the events concerning this 
        representation * * * is largely second-hand since my 
        contemporaneous involvement in the representation was 
        minimal and since Mr. Massey primarily handled the 
        matter.353

She stated that Massey

        kept me generally advised of what he was doing and may 
        have sent me drafts of the documents he was preparing. 
        I was not, however, an expert on securities law. I 
        believe that Massey consulted with members of the 
        firm's securities department.\354\

    The billing records discovered by Huber do not contradict 
these statements. They show that Massey billed 26 hours to the 
Madison Guaranty Preferred Stock Offering matter (13.3 hours in 
April, May, June and July, 1985 and another 12.7 hours in 
November and December, 1985). Massey's time entries indicate he 
performed legal research regarding the proposed stock offering 
and drafted the offering materials. Mrs. Clinton billed roughly 
half as much time to this matter as Massey, namely 13.6 hours 
(7.1 hours in April, May and June, 1985 and 6.5 hours in 
November and December, 1985). Her time entries indicate that 
she reviewed documents; they do not indicate that she drafted 
any documents.

          Responding to the RTC's interrogatories regarding 
        this subject, Mrs. Clinton stated,
          I was not involved in any meetings with state 
        regulators on these matters. I may have made one 
        telephone call to the Arkansas Securities Department to 
        find out to whom Mr. Massey should direct any inquiries 
        regarding an S&L matter. I do not remember to whom I 
        spoke.\355\

The billing records indicate Mrs. Clinton had one telephone 
conversation, with Bassett on April 29, 1985.
    Similarly, the billing records do not contradict Mrs. 
Clinton's statements regarding her work on the Industrial 
Development Corporation matter. The RTC by interrogatory asked 
Mrs. Clinton about her knowledge of a real estate project known 
as Castle Grande; Mrs. Clinton replied she did not believe she 
knew about this project prior to 1992.\356\ Confusion arose 
because the RTC used the term ``Castle Grande'' to refer to an 
entire 1,050 acre tract of property that IDC sold to Madison 
Financial and Seth Ward in 1985. In response to further 
interrogatories from the RTC, Mrs. Clinton explained that she 
understood Castle Grande to refer to just a portion of the 
property, a residential development that she was not aware of 
at that time:

        * * * ``IDC'' was the billing name for work involving 
        that property at the Rose Law Firm. My knowledge about 
        the IDC PROPERTY was limited, and I can recall knowing 
        nothing about the Castle Grande Estates portion of it. 
        * * * I believe that my work on the IDC matter was 
        confined to discrete legal questions which arose after 
        the acquisition of the IDC PROPERTY.\357\

Consistent with Mrs. Clinton's statement, the Rose Law Firm 
billing records refer to this matter strictly as ``Industrial 
Development Corporation,'' and never as ``Castle Grande.'' Rose 
Law Firm attorneys Massey, Clark, Fitzhugh, Thrash, Donovan and 
Dover also all testified that the firm's work was referred to 
as ``IDC,'' not ``Castle Grande.''
    The billing records indicate Mrs. Clinton billed 24.45 
hours to the Industrial Development Corporation matter from 
December 1985 to April 1986. This time included telephone 
conversations with Seth Ward and review of a memorandum 
prepared by Rose Law Firm attorney Rick Donovan. Mrs. Clinton 
stated to the RTC,

          I remember almost nothing about this work, but after 
        reviewing certain memoranda prepared by Rose Law Firm 
        lawyer Rick Donovan and copies of the Rose Law Firm 
        billing records * * * I believe that the work I did on 
        this matter consisted primarily of supervising research 
        concerning legal issues, such as whether it would be 
        legal to open a tasting room for a proposed brewery, in 
        light of the fact that the land was, arguably, located 
        in what had once been a ``dry'' township, and other 
        questions relating to the provision of water and sewer 
        service by a utility which was located within the IDC 
        PROPERTY. I believe that, based upon my time records, I 
        conferred with Seth Ward on several occasions, and I 
        believe that I would have discussed the legal research 
        the firm was conducting, but I have no recollection of 
        the content of these conversations. Also * * *. I 
        believe that I had some limited involvement with an 
        option agreement between Mr. Ward and Madison Financial 
        (which appears to have been billed as a ``General'' 
        rather than an ``IDC'' matter), although I have no 
        recollection of that project.\358\

Mrs. Clinton billed 10.4 hours to the Madison Guaranty 
``General'' matter over the period September 1985 to March 
1987; 2.4 hours of that time billed in May and June 1986 
includes time preparing the option agreement and a telephone 
conversation with Seth Ward regarding the option.

b. Chain of Custody of Billing Records Before Discovery in January 1996

    The Special Committee sought to establish the chain of 
custody of the Rose Law Firm billing records prior to their 
discovery by Huber in January 1996. The Client Billing & 
Payment History bears a run date of February 12, 1992, 
suggesting that the document was generated during the 1992 
Presidential campaign to collect available billing information 
then available; this suggestion is supported by testimony of 
Webster Hubbell and others. Huber testified that she first 
encountered the documents in the White House Residence in the 
summer of 1995. It is not possible on the existing record to 
ascertain when and by what means the billing records were 
brought into the White House, and in whose custody they 
remained once they were there. While the records seem to have 
been in Vincent Foster's possession during the 1992 campaign, 
it is not clear whether he brought them to the White House, or 
whether he provided them to someone else before his death. 
Through her attorney, Mrs. Clinton has stated that she was 
unaware that the billing records were in the White House. She 
stated publicly on January 26, 1996, ``I do not know how the 
billing records came to be found where they were found, but I 
am pleased that they were found, because they confirm what I 
have been saying.''
    Huber testified before the Committee that she first 
encountered the billing records during the first or second week 
of August 1995.\359\ She first saw them in the ``Book Room,'' a 
room on the third floor of the White House residence used at 
that time to store gifts, photographs, newspaper and magazine 
articles, and other items to be catalogued.\360\

          I go up into that room periodically to pick up * * * 
        the knickknacks to take down to my office, and that day 
        I went up to get a bunch of magazines and newspaper 
        clippings that we have kept over the years to take them 
        over to my office in the East Wing so that I could get 
        them catalogued. * * * And I had several boxes, and 
        there was a particular box on top of the table that I 
        had--had some of the knickknacks in, and over on the 
        edge of the corner was these documents. And I saw them. 
        I just--they were folded. I didn't open them. I just 
        picked them up and plunked them down into the box. And 
        I called the usher's office, if they could come help me 
        tote all these boxes back to my office. So they came up 
        with their little dollies. We carried them to my 
        office. I put them on the floor and left them 
        there.\361\

    I thought it had been left there for me to take down and 
file it in the filing that I do.\362\ Huber testified that the 
documents were not on the table in the Book Room when she last 
had occasion to be in that room, a week or two before.\363\
    Huber retrieved four or five boxes of materials to be 
catalogued from the Book Room that day.\364\ She testified that 
the documents remained undisturbed in a box on the floor of her 
office from August 1995 to January 4, 1996, when the table was 
removed from the office and Huber examined the contents of the 
box.\365\
    Jane Sherburne testified that on January 4, 1996, Huber was 
unclear as to when she had first encountered the billing 
records and whether she had recognized them:

          I recall Ms. Huber as being--she said a number of 
        different things that were inconsistent. She was 
        flustered, she was upset, her hands were shaking. She 
        said that she had brought the documents over from the 
        residence at some earlier point. She said she thought 
        it was maybe three months ago. A little while later in 
        the conversation, she referred to bringing them over 10 
        months ago. She was very confused about the timing. She 
        also said that--we asked her where she had found the 
        records in the White House. She said they were in the 
        third floor, and she identified the book room.\366\
          The chronology was that at some earlier point, what 
        appeared to be in her mind somewhere between three and 
        10 months prior to January 4, she had been in the book 
        room in the residence, which is on the third floor, and 
        that she had identified these documents when she was 
        putting a box together or a couple of boxes together of 
        material that she was going to move to her East Wing 
        office, and sort out later and decide what to do 
        with.\367\
          * * * At one point I recall her indicating that when 
        she had first seen the records, they appeared to her to 
        be Rose Law Firm billing records. But then again at 
        another point, I understood her to say she had first 
        seen these documents and just considered them to be a 
        sheaf of documents.\368\
          * * * I certainly thought she was confused that 
        night. I heard her testimony as well when she testified 
        before this Committee and recognized that her 
        description of the events had become much more precise. 
        That doesn't change the fact that on the night of the 
        4th of January when she was describing this, that she 
        was very confused and that her recollections were very 
        imprecise.\369\

    Whether or not the billing records were in the Book Room in 
August 1995, it appears that the billing records were in the 
possession of Vincent Foster in February 1992. Webster Hubbell 
testified that during the Presidential campaign early in 1992, 
an issue arose regarding contacts Mrs. Clinton may have had 
with the Arkansas Securities Department on behalf of Madison 
Guaranty.\370\ Either Hubbell or Foster requested that the 
billing records be printed by the Rose Law Firm accounting 
department.\371\

          I recall in 1992 that the issue regarding our 
        representation of Madison and specifically our work 
        before the Arkansas Securities Department was of 
        interest to Mr. Gerth of The New York Times, and that 
        our firm was being questioned by people within the 
        campaign about her work in that regard. We did some 
        work in trying to organize and pull up the files. And 
        in connection with that, bills were pulled and reviewed 
        by myself and Mr. Foster and Mr. Massey, I 
        believe.\372\

    Hubbell reviewed the billing records at the Rose Law 
Firm.\373\ Hubbell believes he gave the records to Foster after 
reviewing them.\374\ He identified Foster's handwriting on the 
records; he does not recall having seen Foster's handwriting on 
the records in 1992. * \375\ Hubbell believes Foster wrote on 
the documents at the time he reviewed them in 1992.\376\ He 
does not recall seeing the records again after reviewing them 
in February 1992, did not remove them from the law firm, and 
does not know if Foster removed them.\377\ The billing records 
were not provided to Hubbell when he was assembling various 
files from the Rose Law Firm and the campaign regarding Madison 
Guaranty.\378\ Hubbell did not know if the billing records were 
in Foster's office at the time of his death; Foster never 
discussed them.\379\
---------------------------------------------------------------------------
    * Ms. Huber also identified Vincent Foster's handwriting on the 
documents in red ink. (Huber, 1/18/96 Hrg. p.25.)
---------------------------------------------------------------------------
    For a few weeks in 1992, Thomases helped the Clinton 
campaign prepare answers to press inquiries regarding 
Whitewater.\380\ A reporter asked Thomases about legal work 
Mrs. Clinton had done for Madison Guaranty.\381\ Thomases 
called Hubbell to ask him about the records of Mrs. Clinton's 
work at the Rose Law Firm.\382\ Her notes of her telephone 
conversation with Hubbell indicate that he provided her 
information based on Mrs. Clinton's time records.\383\ Thomases 
never saw the billing records prior to their discovery in 
January 1996.\384\ Hubbell recalled discussing the billing 
records with Loretta Lynch, but did not recall discussing them 
with Thomases.\385\
    Hubbell's and Thomases's testimony regarding the billing 
records are supported by Loretta Lynch, a Clinton campaign 
worker. Along with Hubbell and Thomases, Lynch became involved 
in February 1992 in responding to press inquiries regarding 
Whitewater.\386\ She recalled that, in the course of that 
assignment, Hubbell indicated to her that he had reviewed the 
Rose Law Firm's billing records for Madison Guaranty.\387\ He 
also told her that he had discussed the existence of such 
billing records with Vincent Foster.\388\ Lynch also discussed 
this matter with Thomases at that time; Thomases did not 
indicate that she had reviewed the billing records.\389\
    The fingerprint analysis of the documents performed by the 
Federal Bureau of Investigation for the Independent Counsel 
also supports Hubbell's and Thomases's testimony.\390\ The FBI 
found fingerprints of Foster and Mrs. Clinton; these prints 
could have been made when the records were reviewed during the 
campaign, in February 1992, in keeping with Hubbell's 
testimony. The FBI also found fingerprints of three individuals 
who were employees of the Rose Law Firm in February 1992: 
Carolyn Huber, Mildred Alston and Sandra Hatch.* The FBI found 
no fingerprints of Susan Thomases; this supports her testimony 
that she never saw the documents. The FBI also found no 
fingerprints of Margaret Williams; this supports her testimony 
that she did not remove any documents from Vincent Foster's 
office the night of his death.
---------------------------------------------------------------------------
    * The only other fingerprints the FBI identified on the documents 
were those of Marc Rolfe, an employee of Mr. Kendall's law firm, 
Williams & Connolly.
---------------------------------------------------------------------------
    The testimony and the fingerprint analysis leave open the 
possibility that Foster brought the billing records to the 
White House. If so, they may have passed out of his possession 
before his death. Linda Tripp, a secretary in the White House 
Counsel's office testified that Huber brought files into and 
out of Foster's office ``fairly often.'' \391\ It is possible 
that the billing records were moved into or within the Book 
Room inadvertently. There was construction in and around the 
Book Room in the summer of 1995, in connection with repairs to 
the White House heating, ventilation and air conditioning 
system.\392\ Although the construction workers were instructed 
not to move anything without permission, items were moved in 
order to expedite the construction.\393\
    Other suppositions are no doubt possible as well, given the 
incomplete state of the record. There is no evidence in the 
record at all, however, of any concerted effort to suppress the 
billing records. Given that the billing records do not 
contradict other statements regarding the Rose Law Firm's 
representation of Madison Guaranty, a motivation to suppress 
the records is not readily apparent. The record is clear that 
Mrs. Clinton was not part of the chain of custody of these 
documents: on January 5, 1996, Kendall issued a statement 
saying, ``the First Lady was not aware until today that these 
records were located in the White House.'' On January 26, 1996, 
Mrs. Clinton herself told the press, ``I do not know how the 
billing records came to be found where they were found, but I 
am pleased that they were found, because they confirm what I 
have been saying.''

                                Endnotes

    1 Watkins, 7/25/95 Hrg. pp.16-17.
    2 Watkins, 7/25/95 Hrg. p.17.
    3 Watkins, 7/25/95 Hrg. pp.39-40.
    4 Watkins, 7/25/95 Hrg. p.41.
    5 Watkins, 7/25/95 Hrg. p.18.
    6 Watkins, 7/25/95 Hrg. pp.139, 41.
    7 Watkins, 7/25/95 Hrg. p.158.
    8 Watkins, 7/25/95 Hrg. p.42.
    9 Thomasson, 7/25/95 Hrg. pp.192-93.
    10 Watkins, 7/25/95 Hrg. pp.177, 118, 158.
    11 Thomasson, 7/25/95 Hrg. p.234.
    12 Thomasson, 7/25/95 Hrg. pp.264-65.
    13 Thomasson, 7/25/95 Hrg. pp.194, 204.
    14 Thomasson, 7/25/95 Hrg. p.194.
    15 Thomasson, 7/25/95 Hrg. p.206.
    16 Thomasson, 7/25/95 Hrg. p.207.
    17 Thomasson, 7/25/95 Hrg. pp.194-95.
    18 Thomasson, 7/25/95 Hrg. p.268.
    19 Thomasson, 7/25/95 Hrg. p.208.
    20 Thomasson, 7/25/95 Hrg. p.217.
    21 Thomasson, 7/25/95 Hrg. p.195.
    22 Thomasson, 7/25/95 Hrg. p.26.
    23 Nussbaum, 8/9/95 Hrg. pp.76-77.
    24 Nussbaum, 8/9/95 Hrg. pp.11-12.
    25 Thomasson, 7/25/95 Hrg. pp.194, 205, 231, 234.
    26 Nussbaum, 8/9/95 Hrg. pp.233, 235.
    27 Williams, 7/26/95 Hrg. p.188.
    28 Williams, 7/26/95 Hrg. pp.216-17.
    29 Williams, 11/2/95 Hrg. p.79.
    30 Williams, 7/26/95 Hrg. p.189.
    31 Lieberman, 7/26/95 Hrg. p.190.
    32 Lieberman, 7/26/95 Hrg. p.191.
    33 Lieberman, 7/26/95, Hrg. p.192.
    34 Williams, 7/26/95 Hrg. p. 194-96.
    35 Williams, 7/26/95 Hrg. pp.153-54.
    36 Williams, 7/26/95 Hrg. p.154.
    37 Williams, 7/26/95 Hrg. p.198.
    38 Williams, 7/26/95 Hrg. p.154.
    39 Williams, 7/26/95 Hrg. pp.198-99.
    40 Williams, 7/26/95 Hrg. p.162.
    41 Williams, 7/26/95 Hrg. pp.217-18.
    42 O'Neill, 7/26/95 Hrg. p.11.
    43 O'Neill, 7/26/95 Hrg. p.12.
    44 O'Neill, 7/26 Hrg. p.49.
    45 O'Neill, 7/26/95 Hrg. p.48.
    46 O'Neill, 7/26/95 Hrg. pp.15-16.
    47 O'Neill, 7/26/95 Hrg. p.16.
    48 O'Neill, 7/26/95 Hrg. p.17.
    49 O'Neill, 7/26/95 Hrg. pp.18-19.
    50 O'Neill, 7/26/95 Hrg. p.20.
    51 O'Neill, 7/26/95 Hrg. pp.21-22.
    52 O'Neill, 7/26/95 Hrg. p.24; Doc. No. Z598 White House 
Entrance/Exit Log for Mr. Foster's Office.
    53 O'Neill, 7/26/95 Hrg. p.61.
    54 O'Neill, 6/23/95 Dep. p.81.
    55 O'Neill, 6/23/95 Dep. pp.175-76.
    56 O'Neill, 7/26/95 Hrg. p.104.
    57 O'Neill, 7/26/95 Hrg. p.49.
    58 O'Neill, 6/23/95 Dep. pp.24, 147-48.
    59 O'Neill, 7/26/95 Hrg. pp.14, 27.
    60 O'Neill, 7/26/95 Hrg. p.30.
    61 O'Neill, 6/23/95 Dep. p.106.
    62 O'Neill, 7/26/95 Hrg. pp.84, 121.
    63 Williams, 7/26/95 Hrg. p.155.
    64 Williams, 7/26/95 Hrg. pp.199-200.
    65 Anderson, 7/26/95 Hrg. p.204.
    66 Anderson, 7/26/95 Hrg. p.205.
    67 See July 11, 1995 and July 18, 1995 Letters to Judge Starr 
from Mr. Chertoff and Mr. Ben-Veniste [Document not numbered].
    68 O'Neill, 7/26/95 Hrg. pp.35-36.
    69 See July 19, 1995 and August 3, 1995 Letters to Chairman 
D'Amato and Senator Sarbanes from Judge Starr [Document not Numbered].
    70 Lieberman, 7/26/95 Hrg. p.275.
    71 Nussbaum, 8/9/95 Hrg. p.79.
    72 Thomasson, 7/25/95 Hrg. pp.218, 262.
    73 Thomasson, 7/25/95 Hrg. p.221.
    74 Thomasson, 7/25/95 Hrg. p.222.
    75 Braun, Rolla, Hines, 7/20/95 Hrg. p.59; Markland, 8/1/95 
Hrg. p.263.
    76 Nussbaum, 8/9/95 Hrg. p.12.
    77 Markland, 8/1/95 Hrg. p.263.
    78 Watkins, 7/25/95 Hrg. p.17.
    79 Braun, 7/20/95 Hrg. p.20.
    80 Braun, 7/20/95 Hrg. pp.145, 20.
    81 Braun, 7/20/95 Hrg. p.31.
    82 Braun, 7/20/95 Hrg. p.87.
    83 Braun, 7/20/95 Hrg. p.137.
    84 Braun, 7/20/95 Hrg. p.20.
    85 Braun, 7/20/95 Hrg. p.57.
    86 Braun, 7/20/95 Hrg. p.104.
    87 Braun, 7/20/95 Hrg. pp.103-04.
    88 Watkins, 7/25/95 Hrg. pp.36, 43-44.
    89 Watkins, 7/25/95 Hrg. p.62.
    90 Rolla, 7/20/95 Hrg. p.80.
    91 Watkins, 7/25/95 Hrg. pp.39, 72.
    92 Hume, 8/1/95 Hrg. p.163.
    93 Hume, 8/1/95 Hrg. p.201.
    94 Hume, 8/1/95 Hrg. p.163.
    95 Hines, 7/20/95 Hrg. p.24.
    96 Hines, 7/20/95 Hrg. p.25.
    97 Mathews, 7/25/95 Hrg. pp.29-30.
    98 Mathews, 7/25/95 Hrg. p.74.
    99 O'Neill, 6/23/95 Dep. pp.91-92.
    100 Mathews, 7/25/95 Hrg. pp.47-48.
    101 Mathews, 7/25/95 Hrg. p.116.
    102 Mathews, 7/25/95 Hrg. pp.49-51.
    103 Mathews, 7/25/95 Hrg. pp.47-48.
    104 Hines, 7/20/95 Hrg. p.63.
    105 Markland, 8/1/95 Hrg. p.192.
    106 Hume, 8/1/95 Hrg. p.192.
    107 Heymann, 8/2/95 Hrg. p.65.
    108 Heymann, 8/2/95 Hrg. p.65.
    109 Heymann, 8/2/95 Hrg. p.69.
    110 Braun, 7/20/95 Hrg. pp.15-16.
    111 Rolla, 7/20/95 Hrg. p.51.
    112 Braun, 7/20/95 Hrg. p.19.
    113 Hines, 7/20/95 Hrg. pp.127, 26.
    114 Markland, 8/1/95 Hrg. p.159.
    115 Markland, 8/1/95 Hrg. p.206.
    116 Braun, Rolla, Hines, 7/20/95 Hrg. p.70.
    117 Nussbaum, 8/9/95 Hrg. p.16.
    118 Heymann, 8/2/95 Hrg. p.37.
    119 Heymann, 8/2/95 Hrg. pp.153-55.
    120 Heymann, 8/2/95 Hrg. p.126.
    121 Heymann, 8/2/95 Hrg. p.92.
    122 Heymann, 8/2/95 Hrg. pp.42-43.
    123 Heymann, 8/2/95 Hrg. p.42.
    124 Heymann, 8/2/95 Hrg. p.59.
    125 Heymann, 8/2/95 Hrg. p.101.
    126 Margolis, 8/10/95 Hrg. p.178.
    127 Margolis, 8/10/95 Hrg. p.178.
    128 Margolis, 8/10/95 Hrg. p.179.
    129 Margolis, 8/10/95 Hrg. p.179.
    130 Adams, 7/27/95 Hrg. p.94.
    131 Adams, 7/27/95 Hrg. p.154.
    132 Margolis, 8/10/95 Hrg. p.179.
    133 Adams, 7/27/95 Hrg. p.95.
    134 Nussbaum, 8/9/95 Hrg. p.21.
    135 Nussbaum, 8/9/95 Hrg. pp.110-11.
    136 Nussbaum, 8/9/95 Hrg. pp.113-14.
    137 Neuwirth, 8/3/95 Hrg. p.117.
    138 Neuwirth, 8/3/95 Hrg. p.118.
    139 Neuwirth, 8/3/95 Hrg. pp.132-33.
    140 Neuwirth, 8/3/95 Hrg. p.193.
    141 Sloan, 8/3/95 Hrg. p.118; Quinn, 8/7/95 Hrg. p.30.
    142 Nussbaum, 8/9/95 Hrg. pp.108-09.
    143 Nussbaum, 8/9/95 Hrg. p.109.
    144 Neuwirth, 8/3/95 Hrg. p.87.
    145 Nussbaum, 8/9/95 Hrg. p.6.
    146 Nussbaum, 8/9/95 Hrg. p.21.
    147 Adams, 7/27/95 Hrg. pp.96-97; Margolis, 8/10/95 Hrg. 
pp.182-83.
    148 Adams, 7/27/95 Hrg. p.97; 8/10/95 Hrg. p.185.
    149 Adams, 7/27/95 Hrg. pp.120-21.
    150 Margolis, 8/10/95 Hrg. p.206.
    151 Margolis, 8/10/95 Hrg. p.184.
    152 Heymann, 8/2/95 Hrg. p.30.
    153 Heymann, 8/2/95 Hrg. p.33.
    154 Heymann, 8/2/95 Hrg. p.136.
    155 Heymann, 8/2/95 Hrg. p.70.
    156 Heymann, 8/2/95 Hrg. p.74.
    157 Heymann, 8/2/95 Hrg. pp.46-47.
    158 Heymann, 8/2/95 Hrg. p.47.
    159 Heymann, 8/2/95 Hrg. p.48.
    160 Nussbaum, 8/9/95 Hrg. pp.116-17.
    161 Nussbaum, 8/9/95 Hrg. p.119; Nussbaum, 8/10/95 Hrg. p.42.
    162 Margolis, 8/10/95 Hrg. p.186.
    163 Adams, 7/27/95 Hrg. p.100.
    164 Nussbaum, 8/9/95 Hrg. p.17.
    165 Lindsey, 8/8/95 Hrg. p.72.
    166 Lindsey, 8/8/95 Hrg. p.72.
    167 Lindsey, 8/8/95 Hrg. pp.86-87.
    168 Lindsey, 8/8/95 Hrg. p.87.
    169 Spafford, 7/27/95 Hrg. p.44.
    170 Spafford, 7/27/95 Hrg. pp.81-82.
    171 Nussbaum, 8/10/95 Hrg. p.74.
    172 Nussbaum, 8/9/95 Hrg. pp.18-19.
    173 Nussbaum, 8/10/95 Hrg. pp.27-28.
    174 Sloan, 8/3/95 Hrg. p.80.
    175 Nussbaum, 8/9/95 Hrg. p.92.
    176 Nussbaum, 8/10/95 Hrg. pp.141-42.
    177 Nussbaum, 8/9/95 Hrg. p.26.
    178 Adams, 7/27/95 Hrg. p.118.
    179 Adams, 7/27/95 Hrg. pp.122-23.
    180 Adams, 7/27/95 Hrg. pp.189-90.
    181 Margolis, 8/10/95 Hrg. p.196.
    182 Margolis, 8/10/95 Hrg. p.201.
    183 Margolis, 8/10/95 Hrg. p.235.
    184 Heymann, 8/2/95 Hrg. p.89.
    185 Heymann, 8/2/95 Hrg. p.89.
    186 Thomases, 8/8/95 Hrg. p.73.
    187 Thomases, 8/8/95 Hrg. p.74.
    188 Thomases, 8/8/95 Hrg. p.75.
    189 Thomases, 8/8/95 Hrg. p.75.
    190 Thomases, 8/8/95 Hrg. p.74.
    191 Thomases, 11/2/95 Hrg. pp.40-41.
    192 Williams, Dep. p.57; Williams, 7/26/95 Hrg. p.234; 
Williams, 11/2/95 Hrg. p.34.
    193 Williams, 11/2/95 Hrg. p.20.
    194 Williams, 11/2/95 Hrg. p.63.
    195 Thomases, 11/2/95 Hrg. p.57.
    196 Thomases, 11/2/95 Hrg. p.62.
    197 Thomases, 11/2/95 Hrg. p.90.
    198 Thomases, 11/2/95 Hrg. pp.89, 93.
    199 Thomases, 11/2/95 Hrg. p.95.
    200 McLarty, 8/7/95 Hrg. p.26.
    201 Burton, 8/7/95 Hrg. pp.27-28.
    202 Thomases, 8/8/95 Hrg. p.64.
    203 Thomases, 8/8/95 Hrg. p.109.
    204 Thomases, 8/8/95 Hrg. p.67.
    205 Nussbaum, 8/9/95 Hrg. p.57.
    206 Nussbaum, 8/9/95 Hrg. p.17.
    207 Nussbaum, 8/9/95 Hrg. p.58.
    208 Nussbaum, 8/10/95 Hrg. p.30.
    209 Neuwirth, 8/3/95 Hrg. p.71.
    210 Neuwirth, 8/3/95 Hrg. p.71.
    211 Neuwirth, 8/3/95 Hrg. pp.71-72.
    212 Nussbaum, 8/9/95 Hrg. p.60.
    213 Thomases, 11/2/95 Hrg. p.60.
    214 Thomases, 8/8/95 Hrg. p.107.
    215 Thomases, 11/2/95 Hrg. p.52.
    216 Thomases, 11/2/95 Hrg. p.43.
    217 Nussbaum, 8/9/95 Hrg. p.179.
    218 Thomases, 8/8/95 Hrg. p.76.
    219 Thomases, 8/8/95 Hrg. p.76.
    220 Williams, 7/26/95 Hrg. p.234.
    221 Williams, 7/26/95 Hrg. pp.234-35.
    222 Thomases, 8/8/95 Hrg. p.97.
    223 Thomases, 8/8/95 Hrg. pp.110, 108.
    224 Thomases, 8/8/95 Hrg. p.108.
    225 Thomases, 8/8/95 Hrg. p.184.
    226 Thomases, 8/8/95 Hrg. pp.12-13; Thomases, 11/2/95 Hrg. 
p.35.
    227 Thomases, 8/8/95 Hrg. pp.68-69.
    228 Thomases, 8/8/95 Hrg. p.180.
    229 Thomases, 8/8/95 Hrg. p.151.
    230 Margolis, 8/10/95 Hrg. pp.194-95; Adams, 7/27/95 Hrg. 
p.102.
    231 Nussbaum, 8/9/95 Hrg. pp.19-20, 80-81.
    232 Sloan, 8/3/95 Hrg. p.164.
    233 Neuwirth, 8/3/95 Hrg. p.149.
    234 Sloan, 8/3/95 Hrg. p.258.
    235 Sloan, 8/3/95 Hrg. p.260.
    236 Neuwirth and Sloan, 8/3/95 Hrg. pp.149, 165.
    237 Margolis, 8/10/95 Hrg. pp.190-91, 213, 215.
    238 Hume, 8/1/95 Hrg. p.275.
    239 Hume, 8/1/95 Hrg. p.222.
    240 Hume, 8/1/95 Hrg. p.275.
    241 Hume, 8/1/95 Hrg. p.265.
    242 Nussbaum, 8/10/95 Hrg. p.139.
    243 Nussbaum, 8/10/95 Hrg. p.158.
    244 Hines, 7/20/95 Hrg. p.160.
    245 Margolis, 8/10/95 Hrg. p.234.
    246 Nussbaum, 8/9/95 Hrg. p.163.
    247 Nussbaum, 8/10/95 Hrg. p.80.
    248 Burton, 8/7/95 Hrg. p.33.
    249 Burton, 8/7/95 Hrg. p.33.
    250 Burton, 8/7/95 Hrg. p.82.
    251 Margolis, 8/10/95 Hrg. p.193.
    252 Spafford, 7/27/95 Hrg. p.17.
    253 Salter, 7/27/95 Hrg. p.130.
    254 Margolis, 8/10/95 Hrg. p.193.
    255 Markland, 8/1/95 Hrg. p.172.
    256 Markland, 8/10/95 Hrg. p.223.
    257 Hume, 8/1/95 Hrg. p.262.
    258 Spafford, 7/27/95 Hrg. p.19.
    259 Spafford, 7/27/95 Hrg. p.20.
    260 Spafford, 7/27/95 Hrg. pp.20-21.
    261 Spafford, 7/27/95 Hrg. p.36.
    262 Sloan, 8/3/95 Hrg. pp.107-08.
    263 Sloan, 8/3/95 Hrg. p.188.
    264 Nussbaum, 8/10/95 Hrg. pp.65, 83.
    265 Gorham, 8/1/95 Hrg. p.99.
    266 Gorham, 8/1/95 Hrg. p.99.
    267 Gorham, 8/1/95 Hrg. p.120.
    268 Gorham, 8/1/95 Hrg. p.146.
    269 Tripp, 8/1/95 Hrg. p.26.
    270 Gorham, 8/1/95 Hrg. p.26.
    271 Gorham, 8/1/95 Hrg. p.146.
    272 Nussbaum, 8/10/95 Hrg. pp. 94-95.
    273 Neuwirth, 8/3/95 Hrg. pp. 121-22.
    274 Neuwirth, 8/3/95 Hrg. pp. 122-23.
    275 Neuwirth, 8/3/95 Hrg. p. 123.
    276 McLarty, 8/7/95 Hrg. p. 10.
    277 Nussbaum, 8/9/95 Hrg. pp. 27-28.
    278 Nussbaum, 8/10/95 Hrg. p. 22.
    279 Gergen, 8/7/95 Hrg. pp. 116-17.
    280 Neuwirth, 8/3/95 Hrg. p. 289.
    281 Neuwirth, 8/3/95 Hrg. p. 289.
    282 Neuwirth, 8/3/95 Hrg. p. 137.
    283 Burton, 8/7/95 Hrg. p. 50.
    284 Thomases, 11/2/95 Hrg. p. 115.
    285 Thomases, 11/2/95 Hrg. p. 118.
    286 Thomases, 11/2/95 Hrg. p. 121.
    287 Thomases, 12/18/95 Hrg. p. 80.
    288 Nussbaum, 8/10/95 Hrg. p. 19.
    289 Heymann, 8/2/95 Hrg. pp. 53-54.
    290 Margolis, 8/10/95 Hrg. p. 277.
    291 Heymann, 8/2/95 Hrg. p. 56.
    292 Heymann, 8/2/95 Hrg. p. 88.
    293 Salter, 7/27/95 Hrg. p. 134.
    294 Hume, 8/1/95 Hrg. p. 249.
    295 Langston, Markland, Hume, 8/1/95 Hrg. p. 278.
    296 Watkins, 7/25/95 Hrg. p. 66.
    297 Nussbaum, 8/9/95 Hrg. pp. 24-25.
    298 Nussbaum, 8/9/95 Hrg. p. 149.
    299 Nussbaum, 8/9/95 Hrg. p. 170.
    300 Williams, 7/26/95 Hrg. p. 167.
    301 Williams, 7/26/95 Hrg. p. 155.
    302 Williams, 7/26/95 Hrg. p. 170.
    303 Williams, 7/26/95 Hrg. p. 171.
    304 Williams, 7/26/95 Hrg. pp. 172-174.
    305 Williams, 7/26/95 Hrg. p. 220.
    306 Nussbaum, 8/10/95 Hrg. pp. 100-101.
    307 Williams, 7/26/95 Hrg. p. 181.
    308 Williams, 7/26/95 Hrg. p. 185.
    309 Williams, 7/26/95 Hrg. p. 273.
    310 Williams, 7/26/95 Hrg. p. 182.
    311 Williams, 7/26/95 Hrg. pp. 314, 221-222.
    312 Huber, 8/3/95 Hrg. p. 55.
    313 Williams, 7/26/95 Hrg. p. 178.
    314 Castleton, 8/3/95 Hrg. p. 7.
    315 Castleton, 8/3/95 Hrg. p. 21.
    316 Williams, 7/26 Hrg. pp. 306, 308.
    317 Adams, 7/27/95 Hrg. pp. 126, 156.
    318 Adams, 7/27/95 Hrg., p. 125.
    319 Barnett, 12/11/95 Hrg. pp. 11, 77.
    320 Barnett, 12/11 Hrg. pp. 13-14.
    321 Barnett, 12/11/95 Hrg. p. 15.
    322 Barnett, 12/11/95 Hrg. p. 16.
    323 Barnett, 12/11/95 Hrg. pp. 20-21.
    324 Barnett, 12/11/95 Hrg. pp. 12, 49.
    325 Barnett, 12/11/95 Hrg. p. 49.
    326 Williams, 12/11/95 Hrg. pp. 12, 37.
    327 Williams, 12/11/95 Hrg. pp. 7-8, 24.
    328 Williams, 12/11/95 Hrg. p. 26.
    329 Barnett, 12/11/95 Hrg. p. 68.
    330 Barnett, 12/11/95 Hrg. pp. 102-103.
    331 Thomases, 12/18/95 Hrg. p. 29.
    332 Thomases, 12/18/95 Hrg. p. 34.
    333 Thomases, 12/18/95 Hrg. p. 41.
    334 Thomases, 12/18/95 Hrg. p. 39.
    335 Thomases, 12/18/95 Hrg. p. 4.
    336 Thomases, 12/18/95 Hrg. p. 4.
    337 Thomases, 12/18/95 Hrg. p. 62.
    338 Huber, 1/17/96 Dep. p. 5.
    339 Huber, 1/17/96 Dep. p. 13.
    340 Huber, 1/18/96 Hrg. p. 18.
    341 Huber, 1/17/96 Dep. p. 84.
    342 Huber, 1/18/96 Hrg. pp. 18-19.
    343 Huber, 1/17/96 Dep. p. 86.
    344 Huber, 1/17/96 Dep. p. 88.
    345 Huber, 1/17/96 Dep. p. 88-89.
    346 Kendall, 2/8/96 Hrg. p. 53-54.
    347 Kendall, 2/8/96 Hrg. p. 54.
    348 Kendall, 2/8/96 Hrg. p. 55-56.
    349 Kendall, 2/8/96 Hrg. p. 56.
    350 Kendall, 2/8/96 Hrg. p. 49.
    351 Sherburne, 2/8/96 Hrg. p. 60.
    352 Clark, 1/18/96 Hrg. p. 135.
    353 Doc. No. DKSN 000806, Interrogatory Response of Hillary 
Rodham Clinton, May 24, 1995, answer to Interrogatory No. 17.
    354 Doc. No. DKSN 000801, Interrogatory Response of Hillary 
Rodham Clinton, May 24, 1995, answer to Interrogatory No. 17.
    355 Doc. No. DKSN 000807, Interrogatory Response of Hillary 
Rodham Clinton, May 24, 1995, answer to Interrogatory No. 17.
    356 Doc. Nos. DKSN 000839--DKSN 000840, Interrogatory Response 
of Hillary Rodham Clinton, December 21, 1995, answer to Interrogatory 
No. 53.
    357 Supplemental Interrogatory Responses, January 18, 1996, p. 
9.
    358 Supplemental Interrogatory Responses, January 18, 1996, 
pp. 12-13.
    359 Huber, 1/18/96 Hrg. p. 8.
    360 Huber, 1/18/96 Hrg. p. 5.
    361 Huber, 1/18/96 Hrg. pp. 8-9.
    362 Huber, 1/18/96 Hrg. p. 12.
    363 Huber, 1/18/96 Hrg. pp. 10, 27-28.
    364 Huber, 1/18/96 Hrg. p. 39.
    365 Huber, 1/18/96 Hrg. p. 35.
    366 Sherburne, 2/8/96 Hrg. pp. 50-51.
    367 Sherburne, 2/8/96 Hrg. pp. 51-52.
    368 Sherburne, 2/8/96 Hrg. p. 52.
    369 Sherburne, 2/8/96 Hrg. p. 89.
    370 Hubbell, 2/7/96 Hrg. p. 42.
    371 Hubbell, 2/7/96 Hrg. p. 48.
    372 Hubbell, 2/7/96 Hrg. p. 42.
    373 Hubbell, 2/7/96 Hrg. p. 43.
    374 Hubbell, 2/7/96 Hrg. p. 50.
    375 Hubbell, 2/7/96 Hrg. p. 47.
    376 Hubbell, 2/7/96 Hrg. p. 48.
    377 Hubbell, 2/7/96 Hrg. pp. 43, 52.
    378 Hubbell, 2/7/96 Hrg. pp. 163-64.
    379 Hubbell, 2/7/96 Hrg. pp. 53, 165.
    380 Thomases, 5/14/96 Hrg. p. 79.
    381 Thomases, 12/18/95 Hrg. pp. 48-49.
    382 Thomases, 12/18/95 Hrg. p. 48.
    383 Doc. No. ST32, S. Thomases notes of conversation with 
Hubbell regarding Hillary Rodham Clinton's time records.
    384 Thomases, 5/14/96 Hrg. p. 49.
    385 Hubbell, 2/7/96 Hrg. pp. 54, 126.
    386 Lynch, 5/14/96 Dep. pp. 21-22.
    387 Lynch, 5/14/96 Dep. p. 104.
    388 Lynch, 5/14/96 Dep. p. 112.
    389 Lynch, 5/14/96 Dep. pp. 110-11.
    390 Letter to Robert J. Giuffra, Jr. from John Collingwood, 
Inspector in Charge, Office of Public and Congressional Affairs, 
Federal Bureau of Investigation [Document not numbered].
    391 Tripp, 7/12/95 Dep. p. 84.
    392 Marshall, 2/8/96 Hrg. pp. 186-87.
    393 Marshall, 2/8/96 Hrg. p. 201.
                                   Paul S. Sarbanes.
                                   Christopher J. Dodd.
                                   John F. Kerry.
                                   Richard H. Bryan.
                                   Barbara Boxer.
                                   Carol Moseley-Braun.
                                   Patty Murray.
                                   Paul Simon.

                                
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