The Electronic Telegraph   Sunday 13 March 1994   World News

FOCUS - SCANDAL IN THE WHITE HOUSE: Whitewater: the flood may be still to come
By Ambrose Evans-Pritchard

Washington has been slow to grasp the scale of the scandal, writes Ambrose Evans-Pritchard

THE Whitewater scandal has reached the point of spontaneous combustion. Administration officials may continue to go through the motions of governing, but to all intents and purposes Washington is paralysed and is likely to remain so until the probity of the Clintons is established, or demolished, in Congressional hearings.

It is less than Watergate, yet greater. The downfall of President Nixon involved a constitutional struggle between Congress and the White House over the release of the Oval Office tapes.

The end came when the tapes confirmed that Mr Nixon had been involved in a cover-up of the Watergate burglary, and was planning to use the CIA to deflect an investigation by the FBI. It involved a single incident, badly handled, that led the president down the slippery slope of a cover-up. Twenty years later, Mr Nixon is not exactly rehabilitated but he is at least respected as an authority on Russia and China.

Mr Clinton will be lucky to escape with so much of his reputation intact, for the Whitewater affair reaches deep into the past. Ultimately, it is the Arkansas political machine he ran for more than a decade that is on trial. A whole way of doing business is being opened up to scrutiny for the first time, and anybody who has studied the anthropology of "Arkansas Mores" knows that the findings will not be kind to the Clintons.

At best, they will puncture the moral pretensions of this White House: at worst, they will lead to criminal indictments and bring down the whole administration.

Washington has been slow to grasp the gravity of it all. Throughout last week editorials were castigating the White House for incompetence in handling the affair. The Clintons, so it went, had turned a petty, 10-year-old controversy into a scandal by failing to get the facts out promptly.

The Washington Post described it as a "Day of Disgrace" as White House aides lined up to receive their subpoenas on Thursday.

But it is slowly dawning on the political establishment that the cover-up may not have been a "mistake". If the Whitewater files were removed from the White House office of the late Vince Foster, and if the Foster files at the Rose Law firm in Arkansas were shredded, it was almost certainly because the information in these documents had such devastating implications that a cover-up was worth the risk.

Word is that the Whitewater land deals are just an appetiser for a monumental scandal, a mere bagatelle compared with Whitewater II, III and IV.

Not that Whitewater I is to be sniffed at. On March 28 a former judge, David Hale, will go on trial in Arkansas, accused of conspiring to defraud the US federal government. He claims that Mr Clinton pressured him into making an illegal $300,000 loan, drawn from funds earmarked for minorities and the disabled.

The money allegedly went to Mr Clinton's business partner, Susan McDougal, and from there $110,000 found its way into the Whitewater account. The rest vanished.

Then there is the matter of the Clinton tax returns. Mr and Mrs Clinton claim that they lost $69,000 on Whitewater. Congressman Jim Leach, the ranking Republican on the House Banking Committee, says that they made a profit.

Even so, Whitewater is not the heart of the matter. By 1985 the company was no longer in a position to serve as a slush fund for the Clintons - if that is what it was - and new and much more lucrative instruments were created that could do the job. It is widely suspected that the Arkansas Development Finance Authority, created in 1985, was turned into a "piggy bank" for the benefit of the Governor and his coterie. State bond deals are also under scrutiny. So is the alleged hollowing out of the state pension funds.

Mr Leach has been goaded into action by a Clinton plan to merge all five agencies of financial oversight into a single body, one that would be easier to manipulate from the Oval Office. His aides say that he will fight to prevent Mr Clinton from doing to the federal government what he has already done to his home state.

This week the Democratic leadership began to turn against Mr Clinton. You could hear the rumblings of an avalanche on Capitol Hill.

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