S&L; Regulator’s, Hillary’s Accounts Differ Somewhat Whitewater Testimony Focuses On 1985 Phone Call About Stock Offering

Arkansas’ former chief savings and loan regulator gave the Senate Whitewater committee on Thursday a different version from Hillary Rodham Clinton’s sworn statement about a 1985 telephone conversation on a proposed stock offering for an ailing thrift owned by the Clintons’ Whitewater partner.

Beverly Bassett Schaffer, who then-Gov. Bill Clinton had appointed to the post a few months earlier, testified that in the five-minute call, Hillary Clinton said “that they had a proposal and what it was about.” Schaffer said she replied that she agreed with Hillary Clinton’s position and soon would be sending her a letter saying so.

Hillary Clinton’s Rose Law Firm had just been hired to represent Madison Guaranty Savings & Loan. James McDougal, the Clintons’ partner in the Whitewater venture and owner of the thrift, has said he hired the Rose firm at Bill Clinton’s urgings.

Madison never made the preferred stock offering and later failed at a cost to taxpayers of more than $60 million.

After Schaffer’s description of the call, Michael Chertoff, the committee’s chief majority counsel, noted that Hillary Clinton had said in sworn answers to the Resolution Trust Corp. that “I may have made one telephone call to the Arkansas Securities Department to find out to whom Mr. (Richard) Massey should direct any inquiries regarding an S&L matter. I do not remember to whom I spoke.”

Schaffer then responded that Hillary Clinton had asked who the firm should work with at the department. “So I don’t think my recollection is inconsistent with that at all,” she said.

Chertoff told reporters during a break that he feels Schaffer’s testimony is significant because it is “the first time we have heard there was substantive conversation” with Hillary Clinton about the stock proposal.

Schaffer and two of her subordinates at the state Securities Department, which oversaw savings and loans, all testified that no one in Clinton’s administration had put any political pressure on them to give Madison special treatment. Schaffer said she knew Clinton and McDougal were friends but didn’t know they were business partners.

Chertoff also questioned Schaffer about a note she had sent an aide in the governor’s office in July 1986, just before federal regulators ordered McDougal to step down as the head of Madison.

“Madison Guaranty is in pretty serious trouble,” she wrote to Clinton aide Sam Bratton. “Because of Bill’s relationship w/McDougal, we probably ought to talk about it.” She attached a letter from federal regulators outlining problems at the thrift, including the names of two entities for which Hillary Clinton had done Madison legal work.

Schaffer said she wrote the memo because she felt that McDougal had abused his relationship with Clinton. “I was concerned that he might try to involve the governor’s office, and I didn’t think they should have anything to do with it.”

A Bratton deposition showed he had passed Schaffer’s information on to Clinton. Federal regulators told the Madison board on July 11 that McDougal had to leave, but it wasn’t publicly known for two weeks.

On July 14, Clinton aide Betsy Wright sent the governor a note asking if he still had his Whitewater stock “pursuant to Jim’s current problem.” Scrawled on the note is: “No - Don’t have any more - B”

The same day, Hillary Clinton sent McDougal a letter returning Madison’s $2,000 monthly retainer check for that month, along with another check for $4,622.53, the thrift’s unused retainer credit. She said in the letter that Madison had relied on other firms and “that our representation has been for isolated matters and has not been continuous or significant.”

At one point, Schaffer, who said she had to take leave from her law firm to deal with Whitewater, said the various investigations have been unfair to her and the entire state of Arkansas.

“It’s really been very personal, very vicious,” she said. “It’s been an effort to vicariously destroy Bill Clinton by … ruining the people he trusted. … And a lot of people have been hurt, unnecessarily, you know, for purposes of winning an election.”