by Ann Coulter
PART THREE
Obstruction of Justice
Chapter Fourteen
Whitewater
This is the boring part. Whitewater gets interesting only when you understand why it is boring. It is boring by design, like a New York Times editorial. Don’t skip to the next chapter! That’s just what the Clintons want you to do.
The reason the constellation of crimes orbiting Whitewater seems tedious and complicated is the reason all pyramid schemes seem tedious and complicated: The fraudulent transactions are purposely structured in an extremely complex manner in order to keep government regulators in the dark for as long as possible. In the case of the “Whitewater” scandals there were multiple loans criss-crossing one another as down-payments. It is not necessary to comprehend the precise form these transactions took to understand the scandal known as Whitewater. In fact, it is probably an impediment.
Whitewater is about two very simple things: stealing and lying—stealing from taxpayers and lying to prosecutors, judges, and juries. The “failed land deal” that Whitewater Independent Counsel Kenneth W. Starr has supposedly spent $40 million investigating has already led to the convictions or plea agreements of fourteen people, including the Clintons’ partners in Whitewater—James and Susan McDougal, and the former sitting governor of Arkansas, Jim Guy Tucker, who succeeded Bill Clinton.
The heart of Whitewater is Madison Guaranty Savings and Loan, operated by the Clintons’ friend and business partner James McDougal, and insured by the government. The Madison-McDougal-Tucker-Clinton scandals are collectively known as “Whitewater” because the shady Whitewater land deal happened to be the first of the overlapping scandals that directly implicated the Clintons to surface in the news. But, as with Copernicus’s discovery, the Whitewater universe makes sense only when it is understood that Whitewater revolved around Madison, not Madison around Whitewater.
McDougal was looting the federally backed Madison Guaranty he is said to have called his “candy store.”1 McDougal used Madison depositors’ money to gamble on high-risk real-estate ventures such as Whitewater. In case his real-estate gambles didn’t pay off, McDougal also directly defrauded his own S&L in a variety of sham transactions to ensure that he and his friends would make money out of his operation of Madison Guaranty.2 He made bad loans to friends, business partners, and other insiders, knowing the loans would not be repaid, and knowing that the government, through deposit insurance programs, would be left holding the bills.
Everyone involved in these deals benefitted, save the American taxpayers—who were still on the hook for the $60 million McDougal had given away. Eventually, the government caught up with McDougal and shut down Madison Guaranty.
McDougal and his wife, Susan, were, it seems, crooks. On May 28, 1996, James McDougal was convicted on eighteen felony counts related to bad loans by Madison, including conspiracy, fraud, and making false statements. That same day, Susan McDougal was convicted on four felony counts, including mail fraud, making false statements, and misapplication of funds. He was sentenced to three years in prison, she to two years in prison, plus community service. Between them they were ordered to pay more than $4.5 million in restitution and fines, still far short of the $60 million they stole.
But James and Susan McDougal, of course, weren’t the president and first lady. Associating with crooks may have been enough for James Madison to impeach a president, but it is unlikely to be enough today. The Clintons’ apparent wrongdoing stemming from the McDougals’ $60 million swindle, however, goes deeper than mere friendship. There are reasons to believe that the Clintons may have been among the friends who benefitted from McDougal’s crimes, whether or not those reasons rise to the level of proof beyond a reasonable doubt.
OVERVIEW OF CLINTON CONNECTIONS TO MCDOUGAL’S CRIMES
The Clintons deny any role in Madison Guaranty’s fraudulent loans. In the abstract, it might have been just a coincidence that Mr. Clinton was governor and Mrs. Clinton performed legal work for Madison while McDougal was looting the S&L. But both of the Clintons have more direct involvement in some of the known crimes surrounding Whitewater.
• First, the Clintons were equal partners with James and Susan McDougal in Whitewater, the failed Arkansas land deal. Some of the fraudulent loans issued by McDougal on behalf of Madison went to prop up the ailing Whitewater Corporation. The Clintons and their flacks repeatedly note that they “lost money” on the Whitewater land deal.3 While it is possible the Clintons were completely innocent of criminal intent with regard to the Whitewater venture, the fact that they lost money on the deal has absolutely nothing to do it. McDougal was stealing from Madison to prop up Whitewater: If Whitewater had succeeded, the Clintons stood to make a large profit, having put little of their own money down. Mrs. Clinton’s defense—repeated incessantly—that they “lost money” is the equivalent of stealing money to buy a lottery ticket and then saying no theft occurred because the lottery ticket didn’t win.
• Second, wherever the Clintons’ full share of Whitewater payments were coming from, they were not coming from the Clintons. Even if the Clintons knew nothing of McDougal’s financial double-dealing with Madison, they had to know they were not paying their fair share in the Whitewater partnership, raising the possibility that McDougal was using his Whitewater partnership with the Clintons to bribe the young attorney general and then sitting governor. There is a reason the thieving owner of a corrupt S&L might have wanted to bribe the governor.The Clintons have maintained that they were merely passive investors uninvolved in the day-to-day details of the Whitewater venture. Thus, their story is, if they were being bribed, they didn’t know it.
At least one Resolution Trust Corporation (RTC) officer investigating Whitewater doubts the Clintons’ purported naivete. And, as the New York Times has noted, Mrs. Clinton must have been at least vaguely familiar with the workings of Madison Guaranty since she was one of its lawyers.4
• Third, if McDougal thought he was paying bribes, he got all he could have wanted out of Clinton. The Senate Whitewater Committee turned up a series of favors Mr. Clinton performed for Madison Guaranty while he was governor of Arkansas, concluding that “substantial evidence supports Mr. McDougal’s claims that he had ‘clout’ with the governor.” These included sending valuable state leases to Madison, and signing special interest legislation intended to benefit Madison. While back-scratching is nothing new to politics, most politicians could expect to see their presidential aspirations dashed for such back-scratching with a crook.Governor Clinton cast a crucial veto in June 1987, striking down legislation that was designed to help Madison Guaranty, Jim Guy Tucker, and Tucker’s business partner.5 But prior to casting the veto, Clinton was unaware of the bill’s intended effect on Madison. Members of his “political family” did not waste time in bringing this detail to the governor’s attention by leaving a message for Mr. Clinton, asking whether the veto would stand and “mention [ing] a meeting between [Clinton], Tucker, and Jim McDougal a couple years ago which involved $33,000.”6 As the governor’s secretary noted on the phone message, the caller was “pretty cryptic.” A few weeks later, Clinton reversed his veto, and the bill became law.7
At one point, the governor’s wife was lobbying the governor’s appointee on behalf of Madison—a matter in which the governor had a financial interest. The Clinton-appointed securities commissioner, Beverly Bassett Shaffer, approved some of Mrs. Clinton’s requests on behalf of Madison, though apparently not for any nefarious purpose. Interestingly, however, top White House aides were not confident about that. According to notes taken by then-White House Communications Director Mark Gearan at a January 1994 White House meeting on Whitewater, Clinton’s top aides were extremely concerned about what Shaffer might say. Harold Ickes, Clinton’s deputy chief of staff, was quoted in the notes saying: “Bassett is so f—ing important, if we f—this up, we’re done.”
Of course, as Clinton would later say of shady contributors to his presidential campaigns, “I don�
�t believe you can find any evidence of the fact that I had changed government policy solely” out of political patronage.
• Fourth, Madison’s legal work was performed by the once prestigious, now infamous, Rose Law Firm. McDougal said that, under pressure from the governor, he arranged for his S&L to pay the Rose Law Firm a monthly retainer simply as a personal favor to Hillary. He admitted this even while still trying to “protect” the president, on cross-examination during his 1996 trial. McDougal’s claim is supported by contemporaneous notes James Blair took of a conversation with Mr. McDougal in 1992. Blair is the longtime Clinton back-scratcher who helped Mrs. Clinton place her fabulously lucrative cattle futures trades. The Clintons deny McDougal’s claim.
• Finally, whether or not McDougal’s retainer payments to the Rose Law Firm were intended as a bribe, the arrangement led to the peculiar situation of the governor’s wife lobbying the governor’s appointees on behalf of Madison Guaranty. The retainer also gave Hillary the opportunity to perform much of the legal work that enabled McDougal to pass bad loans, bankrupting the S&L and costing the taxpayers $60 million. The transaction at the heart of Castle Grande—one of Madison’s most fraudulent schemes—hinged on a legal document drafted by Hillary Clinton. As we will see, it is undisputed that Mrs. Clinton drafted a document used to defraud the RTC. But a prosecutor would have to prove that she did so knowing that the document would be used to defraud. The only thing that stands between Hillary and a prison cell for her work on this document is the possibility that instead of being a criminal lawyer, she is an incompetent lawyer.
That’s “Whitewater” without the bank ledgers. But two Whitewater-related deals involving the Clintons deserve closer review: Castle Grande and FOB David Hale’s Small Business Administration (SBA) loan.
CASTLE GRANDE
Castle Grande was one of McDougal’s most corrupt Madison ventures, becoming the fulcrum of his last loan-swapping fraud in the dying days of Madison Guaranty. Mrs. Clinton drafted one of the documents central to the Castle Grande fraud.
McDougal had been looting Madison Guaranty for years. By 1984 federal regulators were nipping at his heels. As part of a scheme to pad Madison’s accounts in order to keep bank examiners at bay a little longer and to keep the inside deals flowing, McDougal hired Seth Ward, Webb Hubbell’s father-in-law, to scout out new deals that would pump up Madison’s books. (Hubbell—Bill’s friend and Hillary’s law partner—served in Clinton’s Department of Justice before going to jail.)
Ward recommended “Castle Grande,” as McDougal would later christen a thousand acres of swampland south of Little Rock. In an intentionally complex transaction, Madison bought the land, using Ward as the purchaser on paper, or the “straw man” purchaser. Castle Grande was then used as a huge Ponzi scheme, benefitting Ward, McDougal, Jim Guy Tucker, and various other Madison insiders—everyone involved except the U.S. taxpayers, who were left to pay the bill once the government caught up with McDougal.
The pyramid scheme consisted of McDougal issuing risk-free loans from Madison Guaranty to friends and insiders to buy lots on Castle Grande. The loans, often far exceeding the purchase price of the lots, were secured only by the land itself, and were not expected to be repaid.8 In any event, the details of the pyramid scheme are not as important as the fact that it was a pyramid scheme.
The Castle Grande deals alone looted more than $3 million from Madison Guaranty. Ward walked off with $300,000 in phony sales commissions related to Castle Grande, other insiders with $460,000.9
The Castle Grande transactions managed to fool federal regulators for a while by listing each sale of a Castle Grande plot as a profit for Madison Financial, a subsidiary of Madison Guaranty. But the profits were bogus, because the plots had been purchased with bad loans from Madison Guaranty. The subsidiary seemed to be taking in huge amounts of money with each sale of a Castle Grande plot, but its parent, Madison Guaranty, was the only entity actually forking out money for the plots—money insured by the taxpayers.
Still, since the lots were sold by a subsidiary of Madison, the purchases were listed on paper as profits for Madison Guaranty, thus artificially inflating Madison’s net worth by about $1.5 million.
MRS. CLINTON DRAFTS THE FRAUDULENT OPTION AGREEMENT
The original sham transaction that made the rest of the Castle Grande pyramid schemes possible was an agreement between Seth Ward and Madison Guaranty making Ward the straw man purchaser. The document intended to deceive federal regulators as to the nature of the fraudulent scheme was drafted by Hillary Clinton.
On paper Ward had purchased the lion’s share of Castle Grande for $1.15 million in October 1985. Madison Financial Corporation, the Madison subsidiary, bought the rest for $600,000. In fact, Ward paid nothing for the land. Madison Guaranty paid the entire purchase price with a risk-free loan to Ward, secured only by the land itself. Madison needed to use Ward as a straw man purchaser because rules governing savings and loan institutions prohibited it from buying the entire property itself. But this is exactly what Madison had done.
This raw transfer of money to Ward in the form of an unsecured loan would be difficult to explain to federal bank examiners. To disguise the true nature of the transaction—Madison using Ward as a straw man purchaser—Madison needed to cook up some phony debt it owed Ward. An option agreement dated May 1, 1986, described the cooked-up debt; the agreement gave Madison Financial an option to buy from Ward 22.5 acres of Castle Grande land—a portion of his total share—for $400,000, a grossly inflated price. Madison Financial paid Ward $35,000 for the option.
Again, the details of the option agreement, titled “Option to Purchase Real Estate,” are not particularly important, beyond the fact that it was used to deceive federal regulators.
The federal examiner who reviewed the May 1, 1986, option agreement has expressly found that the option was used to deceive him when he reviewed Madison’s transactions that year. The examiner, Jim Clark, said that the option agreement was “deceptive on its face,”10 and “was created in order to conceal” the fact that Madison was the real purchaser.
But it was not until Mrs. Clinton’s billing records surfaced in the White House residence on January 4, 1996, that the lawyer who drafted the option agreement was conclusively established. The drafter was none other than Hillary Clinton.
Though Mrs. Clinton drafted the option agreement that incontrovertibly was used to deceive federal regulators, it is possible that she did not have the requisite criminal intent to be guilty of any crime herself. The woman who was named one of the nation’s top one hundred lawyers in 1988 and 1991 by The National Law Journal may have simply been hornswoggled by Jim McDougal.
MRS. CLINTON ACTS LIKE A GUILTY PERSON
A number of odd events somewhat undermines the theory that Mrs. Clinton was an unwitting cat’s paw for McDougal’s criminality.
First, in 1988, Mrs. Clinton directed the Rose Law Firm to destroy her files on Castle Grande. This was not illegal, but it was unusual, especially because of the irregular banking practices engaged in by this particular client. In another year, Madison’s Castle Grande project would itself be the focus of a criminal investigation against James McDougal. The remaining Rose Law Firm records of Mrs. Clinton’s work on Castle Grande vanished from the firm during Clinton’s 1992 presidential campaign, only to materialize in the White House residence four years later.
Also raising questions about the first lady’s self-portrait as an unwitting dupe are her unequivocal denials that she had performed any work on Castle Grande—until her billing records materialized in January 1996.
Until the billing records surfaced, the RTC had been completely in the dark about Mrs. Clinton’s involvement with Castle Grande. One RTC officer testified in 1995, for example: “We have no evidence that [Mrs. Clinton] worked on Castle Grande.”11 This is hardly surprising. On May 24, 1995, Mrs. Clinton had given a sworn statement to the RTC saying, “I do not believe I knew anything about any of these real estate parc
els and projects”—specifically including Castle Grande.12 Indeed, Mrs Clinton had stated in two separate federal investigations that she had had absolutely nothing to do with Castle Grande.
It was peculiar that she had been unable to recall her work on Castle Grande. Her billing records revealed that she had been the billing partner for Madison Guaranty generally, and on Castle Grande in particular. She had billed the bulk of her work for Madison Guaranty to Castle Grande.13 In fact, she had billed more time to Castle Grande than had any other partner at the Rose Law Firm for the period of time leading up to the Castle Grande option.14 Most significantly, of course, she had drafted the sham option agreement used to defraud the federal regulators in Castle Grande, according to her own billing records.
The FBI tested the billing records for fingerprints in early 1996 and found Mrs. Clinton’s fingerprints on two pages: the page summarizing all her work for Madison, and the page giving a detailed account of her work on Castle Grande exclusively.
After her billing records mysteriously surfaced in the White House—about two years after they had been subpoenaed by congressional investigators—she had some explaining to do.
Mrs. Clinton clarified her earlier denials by saying she had known Castle Grande by another name—“IDC.” This was the Rose Law Firm’s internal billing code for the matter, referring to the company that sold the property to McDougal. Mrs. Clinton said she believed “Castle Grande” referred exclusively to a trailer park called “Castle Grande Estates” that was to be located on “Castle Grande”—or “IDC,” in her lexicon—and she had done no work on the trailer park.
