-- 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.
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 inquires 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, `hmmmmmmm.'"(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 "dim view" of him investigation 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. § 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)33
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.