It made little impact on the affairs of state, but last week’s indictment of a small-town Arkansas banker by special prosecutor Kenneth Starr was a sign that the Whitewater affair still simmers with explosive potential in national politics.
Starr and his staff have been tight-lipped about the course of their investigation. Even Republican congressional investigators can only guess about where Starr is going with a multimillion-dollar inquiry and the 100 FBI agents more than chased Mafia don John Gotti - who have been detailed to the Whitewater case.
Last week’s indictment showed that Starr is still following a classic prosecutorial strategy: pressuring small fry such as Neal T. Ainley, the former president of the Bank of Perry County in Arkansas, hoping to use them to land bigger fish, like the president’s aide Bruce Lindsey. Ainley pleaded not guilty Thursday to the charges, and his trial was set for April 10. His lawyer confirmed that Ainley had turned down a plea bargain.
White House aides say it is hard to imagine that Starr, an active Republican before his appointment, won’t try to hook some big prize, and that the GOP Congress won’t use its power to issue subpoenas and hold televised hearings to damage Clinton politically. With four current or former Clinton Cabinet secretaries under investigation for other allegations of impropriety, a growing “sleaze factor” could further hurt the president’s chances for reelection, they say.
It is also true that Clinton’s staff is breathing easier these days. The regular Whitewater crisis management meetings have been canceled, or spread out, in recent weeks. Several tough media critiques have led journalists to reappraise their performance on the Whitewater story. And even Republican congressional aides concede that some of the most sensationalistic allegations from the saga of the failed Arkansas land deal and the swirl surrounding it have now been put to rest, such as the controversy over the suicide of White House deputy counsel Vincent Foster.
The future of the Whitewater case remains murky because of its potential for sprouting new shoots. The charges in the Ainley case, for example, have nothing to do with the original Whitewater allegations that Bill and Hillary Rodham Clinton improperly acted to forestall the failure of Madison Guaranty, an obscure Arkansas savings and loan, whose president was their business partner in the Whitewater land development.
Here is how White House aides, congressional investigators and lawyers involved in the case now see the saga unfolding concerning various figures and aspects:
Former Associate Attorney General Webster Hubbell pleaded guilty to defrauding his clients as a lawyer at the Rose Law Firm in Little Rock, where he was friends with the Clintons and a partner with Hillary Clinton. He has promised to serve as a witness for Starr’s investigation.
The Clinton administration, disregarding appearances, has raised eyebrows by offering Hubbell’s wife a $60,000-a-year federal job - allowing GOP senators to assert the White House is trying to buy Hubbell’s silence.
Investigators in the GOP-controlled Congress, meanwhile, convinced of Hubbell’s dishonesty, are now planning to look into his actions at the Justice Department. Hubbell was the third-ranking official at Justice when nine criminal referrals from the watchdog Resolution Trust Corp., naming the Clintons as potential witnesses in the Madison case, arrived in Washington.
The Senate Banking Committee, under the chairmanship of Sen. Alfonse D’Amato, R-New York, will likely pursue its unproven suspicion that Hubbell may have acted in concert with his White House contacts to track or interfere with the handling of the RTC referrals, according to a GOP committee report.
Though the banking committee found no obstruction of justice after a yearlong investigation in 1994, the new Republican majority is also expected to look for new proof of an illegal cover-up in the tangled web of contacts between White House aides, the Treasury Department and the RTC.
In a little-noted but significant development, Republican investigators from the House Government Operations Committee have concluded that Foster “died from a self-inflicted gunshot wound to the mouth while at Fort Marcy Park,” where his body was found. That same conclusion was reached by former special counsel Robert Fiske, and by the bipartisan members of the Senate Banking Committee last year.
Starr did not accept Fiske’s conclusions, but has conducted his own investigation of the case, calling witnesses before a federal grand jury. But the consensus is that Starr will also rule that Foster killed himself.
THE FOSTER PAPERS
Fiske was ready to conclude last summer that White House aides who interfered with the Park Police investigation into Foster’s death used poor judgment, but were not guilty of obstructing justice. Then, sources say, Fiske’s team uncovered a discrepancy that demanded further investigation.
Starr took over from Fiske and began his own investigation. A Democrat close to the case says Starr “has addressed the discrepancies” and concluded that there was no conspiracy to hide incriminating matters from investigators. In a recent speech to the New York City Bar Association, former White House counsel Bernard Nussbaum gave a public and detailed chronology of the 48 hours that followed Foster’s death.
“The charge has been repeatedly made … that I and others in the White House removed documents from Mr. Foster’s office on the night of his death. That charge is, plain and simple, a lie,” Nussbaum said.
Starr’s office will not comment, but D’Amato says that the special prosecutor is completing this stage of his investigation and that the Banking Committee will hold hearings in May.
At the heart of the Whitewater case is Madison Guaranty. In an attempt to scare onetime principals into testifying, Starr has sent a “target” letter to former Madison president Jim McDougal, warning him of imminent indictment, and has pressured McDougal’s wife, Susan, and others.
Starr is discovering, lawyers close to the case say, that McDougal improperly moved money in and out of several corporations as he struggled to keep Madison afloat. At least one McDougal crony, former judge David Hale, says Clinton joined in the effort.
The McDougals may yet agree to cooperate. But the central Whitewater events took place 10 years ago. McDougal, who has suffered from a variety of physical and psychological problems, has already been found not guilty in federal court of fraud charges regarding Madison.
In the meantime, the original Whitewater theory - that the Clintons pressured state banking regulators to keep McDougal afloat because he was their partner in Whitewater - has taken a beating, most recently in a Harper’s Magazine critique.
Since losing to an Arkansas opponent’s 11th-hour advertising blitz in 1980, Clinton’s established practice in his gubernatorial races was to borrow personally heavy sums from small state banks controlled by political allies, and use the money for television ads and get-out-the-vote drives. After winning office, he would raise funds to both pay off the debts and fuel his political machine for the next two-year cycle.
Over the years, the total borrowed soared to several hundred thousand dollars, and several of the generous bank owners received jobs on state commissions.
Looking at campaign fund-raising, investigators originally focused on an April 1985 fund-raiser thrown by McDougal to help Clinton retire a $50,000 debt. The Ainley indictment showed that Starr is looking at the financing of the 1990 campaign as well, particularly its disbursement of cash as “walk-around” money to get out the black vote.
Ainley is charged with conspiring to conceal last-minute withdrawals from the Bank of Perry County, which loaned Clinton $180,000 in 1990. He allegedly failed to notify the Internal Revenue Service of cash transactions that exceeded $10,000, as required by law.
Starr tried without success to turn Ainley against campaign treasurer Lindsey, say legal sources familiar with the case. As both a Clinton intimate and former White House point man on Whitewater, Lindsey is knowledgeable about all these events. But Starr faces a formidable question: If the Clinton campaign and Ainley were trying to conceal the money, why did Lindsey report the transactions in public campaign records at the time?