August 8, 1995 in Nation/World

House Opens Whitewater Hearings Republican Accuses Clintons Of Benefiting From Failed Arkasas Land Deal

Chicago Tribune

Describing the Whitewater affair as a rueful lesson in hypocrisy, conflict-of-interest and the arrogance of power, the Republican head of the House Banking Committee alleged Monday that President and Hillary Clinton got “substantial” benefits from the failed Arkansas real estate deal.

But no “Gotcha” emerged by the end of the first day of an intensely quarrelsome hearing.

Republicans lambasted the president as part of an “Arkansas mafia” and Democrats dismissed the hearings as political theater.

The committee chairman, Rep. James Leach, R-Iowa, said his weeklong hearings will show the link between the Clintons and the failure of Madison Guaranty Savings and Loan.

Leach promised to reveal a diversion of Madison’s funds to bolster the Clinton’s Whitewater investment and Bill Clinton’s 1990 re-election campaign for governor of Arkansas.

“Part of these funds were used to reduce the governor’s personal debt and campaign liabilities,” Leach contended, saying he would offer documents showing that the Clintons have not told the truth about several aspects of the original land deal, including their claim to being “passive investors.”

In a deposition released by the White House last Friday, the Clintons described themselves as passive investors in the 1978 Whitewater project along with James McDougal.

“The White House has contended that no favors were granted” to the Madison savings and loan or to its controlling owner, James McDougal, but, Leach said, “the facts are otherwise.”

“In this venture called Whitewater,” he said, “the McDougals provided virtually all the money; the governor-in-the-making provided his name.”

Leach called five federal bank examiners and other mid-level government officials to give a historic overview of Whitewater and to connect then-Gov. Clinton with the practices that led to the downfall of the Madison Guaranty savings and loan.

But former Federal Home Loan Bank Board examiner Dawn Pulcer, who examined Madison Guaranty in 1986, told the panel: “In my work I saw no connection between the Clintons and Madison Guaranty. …”

Rep. Henry Gonzalez of Texas, the committee’s former chairman, called the Republicancontrolled hearings merely illustrate “partisan muscle.”

From the opening gavel, such sniping dispelled any notion that this hearing would be different from the other three congressional investigations of Whitewater, including the concurrent Senate hearing about the actions of administration staffers following the suicide of deputy White House counsel Vincent Foster.

Some of Monday’s new information included:

A record of scores of contacts or communications between the McDougals and Clintons in the late 1970s and 1980s. They included an Oct. 12, 1981, letter from Hillary Rodham Clinton to McDougal saying, “If Reaganomics works at all, Whitewater could become the Western Hemisphere’s mecca.”

Details of harsh criticism by federal regulators of the lending practices of Madison Guaranty, McDougal’s savings and loan, and Capital Management Services, a federally backed lending company that made loans to several Arkansas political figures.

L. Jean Lewis, the federal investigator whose suspicions about Madison helped touch off Starr’s inquiry, is expected to testify Tuesday that her efforts were impeded by senior officials in Little Rock and Washington, according to copies of the prepared text for her testimony.

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