[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)] [Extensions of Remarks] [Page E] From the Congressional Record Online through the Government Printing Office [www.gpo.gov] [Congressional Record: March 24, 1994] From the Congressional Record Online via GPO Access [wais.access.gpo.gov] THE CLINTON YEARS--PART 4 ______ speech of HON. ROBERT K. DORNAN of california in the house of representatives Wednesday, March 23, 1994 Mr. DORNAN. Mr. Speaker, this would by my special order using a very broad, generic term, ``The Clinton Years--Part 4.'' I will probably try and do one tomorrow night, and then we are out for almost 2 weeks for district work period, so people can take a breather and try and absorb all of the material that is absolutely exploding on the front pages of newspapers across the country. On the day after St. Patrick's Day, out of deference to the surname Kennedy, I called for the resignation or firing of William H. Kennedy III, on the 18th of March from this microphone. I notice today our Whip, Mr. Gingrich of Georgia, has joined me in that call. On the evening news tonight they said that the White House has limited his duties and taken away anything that has to do with security passes, because we know that hundreds of White House compound workers' security passes have been bottled up in Mr. Kennedy's White House office. What it turns out to be is that Mr. Nussbaum, who used to be his boss, Vincent Foster was in between them before he killed himself, he actually had pulled out of the security pass process, some security clearances, and buried them in his desk. This involves some pretty well-known names. Dee Dee Myers should have had her security clearance, because as the White House spokesperson and the main person who interfaces with the world's news media, she should have a top secret clearance. She says it is just procrastination. She is a nice lady, so I will take that on its face. However, Patty Thomasson, who was over here testifying to the Committee on Rules the other day, or excuse me, she was testifying to the Appropriations Subcommittee, and could not answer a lot of questions about what is going on over there. She said she dearly wanted to answer questions, but the special prosecutor, Mr. Fiske, was preventing her from doing that. She is the chief of White House administration. She does not have a security clearance. The rumors are starting to fly that some of these people from the flower child generation cannot cut it, that they cannot get security clearances. Although Mr. Kennedy has had some of his duties taken away from him, William Kennedy III, no relation to the New England Kennedys, as I have said last night, and I have confirmed that and that is so, he is now partially crippled. It says on the front page of many of the newspapers across the country, here is a headline, a Rowan Scarborough story in the Washington Times: ``Passes stalled by White House Aide. While House Associate Counsel''--by the way, he is the last of the gang of four, kind of a rough term, because it conjures up Mrs. Mao Tse-tung, but the gang of four, as the press calls them, is Mrs. Hillary Rodham Clinton, Vince Foster, who took himself out at the barrel of a gun, Webb Hubbel, who was probably forced to resign by his 60 former colleagues at the Rose law firm, who are probably now going to take him before the Supreme Court's Committee on Ethics Violations as an Arkansas lawyer for overbilling, so Bill Kennedy is the last one from the Rose law institute to work in the White House. Now he has had his duties crippled. It says, ``Mr. Kennedy paid $1,352 in delinquent social security taxes under his wife's maiden name, Leslie Gail McCrae. He said, `She likes to keep her maiden name,''' as Mrs. Rodham Clinton did during the first 2 years of Clinton's governorship in Arkansas, and now they are going through a divorce, which is tragic, but he says she wanted to keep her maiden name alive. I guess she will be going back to her maiden name. he filed all of these back social securities for nannies of the male Nannygate under her name. The headline was, ``House Planning for Whitewater Hearings.'' Surprise. I mentioned the 408 to 15 vote. I guess I did not understand it, because our fine Speaker warns that it does not necessarily ensure an inquiry. I guess the heat has to be turned up, and I am convinced there is going to be a hearing. It even goes beyond the front pages. Here is Washington's liberal paper of record, ``Clinton Aide Pays Back Taxes.'' That is Kennedy again. That is above the fold with a photograph, and it was Roger Altman accompanied by two unidentified men that their faces are blocked, ``arrive at the U.S. Courthouse to testify before the grand jury.'' And in the same block there is a subtitle, ``Altman-White House Discuss Recusal.'' I call for, on St. Paddy's Day itself, I called for Altman's resignation, and Gene Hanson, one of his deputies who sat in on at least three, or maybe four meetings, and said either nothing, making mistakes on the Record, and making him look like a liar. But I give him the benefit of the doubt that he did not know what he was saying. Anyway, people in the White House say she is going to take it in the eyes, so that was no big call for her resignation. And the other two I called for resignations were, of course, Patty Thommason, and then one that no one is talking about, and that is the former captain of troopers in Little Rock, Clinton's closest confidante on all trooper activities, who on July 21 of last year was given double salary and moved from his trooper status over to FEMA, out of Denton, TX. And I am still waiting for the public records of whose payroll he was on when he flew up to the Oval Office to discuss, inside the Oval Office, what to do with the troopers. This was around the week before Christmas, and calls were made from the Oval Office, admitted at both ends to Troopers Ronny Anderson and Trooper Danny Ferguson. Ferguson was subsequently given a promotion from sergeant to lieutenant. I have called for him to come forward and am calling for Ronny Anderson to come forward. I know it is tough. I know he has five children, and three of them are triplets, but they have to come out and tell the truth because the Los Angeles Times has them on a tape recording, and particularly has Danny Ferguson on a tape recording saying he brought Paula Corbin Jones up to a hotel room in the Excelsior Hotel where she claims in a signed affidavit, backed up by two signed affidavits by two of her friends about the type of things that Anita Hill did not have a shred of, but yet she became the poster woman of feminist groups in the United States, radical groups, moderates, and otherwise on no evidence but her word against a distinguished jurist. Now we have three signed affidavits, and the press is still spiking that story. Do not worry. It will all come out, because it is front page material in the European press and in the major Asian press, particularly the English Asian press like Singapore and Hong Kong. Coming to the L.A. Times, you have a battle going on I think still between Jack Nelson, the Washington spokesman, born in Atlanta, cutting his journalistic teeth on the Atlanta Constitution in Georgia, called up in the Carter years to be the L.A. Times's man in Washington. He told me he was out of the loop on the whole trooper story, that part of it that was done with great investigative reporting, including phone records by the L.A. Times, and yet 5 days after Jack Nelson told me that, there he sits on Washington Week in Review, given a leading question that he was told about before the show, because one of the staffers told me this, asked about his role in all of this by the retiring Paul Duke--I guess he has retired now--and Jack Nelson of the L.A. Times went on to say that, ``Oh, I was given the transcript before it went to print on the front page of the L.A. Times about all of the Troopergate story, and I made some changes.'' Jack, Jack, you told me you were out of the loop and you did not touch it. Made changes. Well, we are going to have to decide from whence we should get our L.A. Times news, Jack Nelson, or from Doug France and Bill Rimple, because Bill Rimple has a front page story in today's L.A. Times on Whitewater financial details. So the story grows. Now it is starting to spill back onto the style section. Here is the style section from today's Washington Post, ``The Man Hillary Ushered Out.'' I mentioned his name last night, reading from the Wall Street Journal, Chris Emery, fired White House staffer. His title was usher, whatever that means, at the White House, ``Chris Emery says he still doesn't know what hit him. But it hurts.'' By Martha Sherrill. ``A few Secret Service agents have called him, upset and sympathetic.'' This is why Hillary cannot stand the Secret Service. ``The National Enquirer has checked in--to see if he is ready to blab-- '' probably for money, which I hope he does not take. ``And a British paper has offered money.'' Oh, here we go. His story will not be believed if he takes the money. Do not take the money, Chris, let us go for the truth. ``Four Members of Congress have gotten in touch--one Democrat who said she'd heard `things were pretty bad over there,''' meaning the White House, and one Republican who was dying to have lunch, probably hoping Chris Emery had some dirt to dish. ``He doesn't. Only a puzzling account of how he was abruptly fired by Hillary Rodham Clinton 3 weeks ago--and how he says he still doesn't have a clue why. ```I'm very comfortable that I didn't do anything indiscreet,' says Emery, 36, a White House usher for the past 8 years. `And I never made a pass at anybody.' A lot of people in this town cannot say that. `Insulted anybody, made a racial joke, took money from the cash box or ever snooped around in their private affairs. But this is the kind of thing that's been waking me up in the middle of the night for 3 weeks.''' Folks, this is no way to treat a government employee of 8 years of honorable service. And the story goes on. It says his face is tense, his haircut is smooth and fresh, and he is sitting in the living room of his home in Howard County, wearing blue pants, white T-shirt. They were a little dramatic, but they did it with feeling in the style section. What I said here on the floor was only what I had heard or read, that he had talked to Barbara Bush once or twice on the phone to tell her how to set up her PC, her personal computer unit at home, and when Hillary found out that he had been discussing with Barbara Bush, she has since commented that he should not have done that, out the door he went. Remember the article I mentioned last night, ``The Name of Rose,'' by L.J. Davis, subtitled ``An Arkansas Thriller''? Mr. Speaker, I think we are dealing with such important material now that I would like to put in the Record, if the cost is less than $2,000, because my special order itself is going to cost more than that, and I will be reading about that in the papers, but I think this whole article, ``The Name of Rose,'' referring to the Rose law firm should go into the Record. So I would submit that into the Record. Mr. Speaker, here is why I think the taxpayers will want to go to the library next week and get the Congressional Record for March 23, and why they should beat a path to the newsstand if they are in a big city, and buy today's Wall Street Journal. Listen to this, Mr. Speaker, my colleagues who are watching in their offices, and all Americans who are following this by C-Span, and by satellite ships at sea, ``Censored in Arkansas,'' Wall Street Journal, ``Earlier in the week we commended L.J. Davis's New Republic cover story on Whitewater and on the culture of Arkansas. This story that will be in the Record when published in the wee hours of this morning, ``reflects a curious dichotomy in Whitewater press coverage. A lot of the news has been broken by publications willing to report what they learn, even at the risk that now and then some of its may be overtaken by other facts.'' This is the face of a moving story, Mr. Speaker, the Washington Times, the New York tabloids. Please, a footnote here. When they say New York tabloids in this context, they do not mean the kooky world report that has flying saucers capturing the Clinton's and injecting them with wisdom or something, and they did not mean the star that Gennifer Flowers went to, or the National Enquirer that is worlds above the others because they can be sued and have been sued by people like Carol Burnett for huge out-of-court settlements. They do have to watch their research because they claim to be a part of the real world. What this means by New York tabloids, that is an old word in newspapers that mainly describes the size of the newspaper. Now in Hollywood, the Daily Variety is a tabloid size, while the Hollywood Reporter is newsletter size. Tabloids means in Chicago the Sun Times, and it means in New York the Daily News and the New York Post, papers that are easier to read on the subway without banging your knuckles into the next person's face. So, backing up, the Washington Times, the New York tabloids, the American Spectator, the British press are publishing facts that you can't get in American newspapers. The mainstream American press has come in for much derision overseas. Their newsmagazine, the Economist, which has the Time-Newsweek-U.S. News & World Report world to themselves likened Whitewater to the 1936 episode in which the American press was reporting, and the British press covering up, the romance of Madam Simpson, an American, leading to the abdication of Edward VIII. This was not quite fair, since the story came back to life in December. Trooper Gates started that. The American press has mostly done a commendable job of plumbing the finances of Arkansas and the Clintons and kibbitzing every move in Washington's procedural chess game. For better or worse, however, the respectable press has shown little to no appetite for publishing anything about violence and sex. Stories on these subjects, of course, circulate constantly among reporters and in the cloakrooms, I might add, and shape the understanding of events within the press corps if not among its readers. That is the U.S. public. Somehow we think the readers ought to know the following account from Mr. L.J. Davis, a contributing editor to Harper's magazine, inside liberal publication, since 1978. He, Mr. Davis, was returning to his room at Little Rock's Legacy Hotel about 6:30 after an interview on the evening of February 13. That is last month, folks, 5 weeks ago, plus. The last thing he remembers is putting his key in the door, and the next thing he remembers is waking up face down on the floor with his arm twisted under his body and a big lump on his head above his left ear. His room door was shut and still locked. Nothing was missing except for four significant pages of his notebook that included a list of sources in Little Rock. He did not file a police report, saying he wanted to get out of town and was not sure what had happened to him. Now, cynics are already saying, oh, another phony story like the man who lived next door to Gennifer Flowers and was beaten up terribly in his apartment, had his spleen ruptured, underwent surgery, and the tapes that he said he had through the door of Clinton coming down the hall to meet with Flowers, and he was the next apartment to her, that was all confirmed by the news media, but they did not print it, they said, well, he might have made this all up. But let me tell you something, when you get hit as hard as he was hit, he thought, I have since found out from friends of his, that he had had a heart attack or had a stroke or fell forward against the door. He was not sure what happened to him. And when he felt the lump on his head, he was frightened and he wanted out of town. What did he do when he left town? He went to his doctor. Listen to this, ``I thought I was walking on a trampoline for 3 days.'' That means constant motion sickness. ``He told us, and then he consulted his physician. Mr. Davis says his doctor found his injury inconsistent with a fall,'' a fall from passing out, ``and that he had been `struck a massive blow above the left ear with a blunt object.' He suffered both a concussion and an amnesiac episode from the blow.'' With Mr. Davis'-- and that is all in quotas--with Mr. Davis' permission, Dr. Richard Wagman has confirmed the doctor's diagnosis to us, the Wall Street Journal. Along similar lines throughout the world, except in the United States, Sally Purdue is now a household name. She is a former Miss Arkansas from my time in the 1950's. She is 55 years of age, and is 8 years older than Mr. Clinton, and a TV reporter. She now works with Down's syndrome children in St. Louis. Sounds like a good lady who has turned her life around. She went on one talk show in September of 1992, and I added the month, Sally Jessy Raphael, to say she had had an affair with Bill Clinton in 1983. The news media spiked, censored, all of this, because they had their game plan. They knew who they wanted to win the election. Mickey Kouse and the same New Republic magazine said it. This was only briefly noted, although the Washington Post did report that Jack Paladino, hotshot San Francisco private investigator hired by the Clinton campaign to squelch ``bimbo eruptions,'' so titled not by my pal Mary Matalin, now of TV fame on CNBC, but so titled by Betsy Wright, former co-McGovern precinct walker and organizer with young Bill Clinton in 1972 in east Texas, and now a freelance public relations person in town, and his chief of staff when he was Governor, said she was in charge of suppressing bimbo eruptions, and right there, legally as it should be in all of the campaign FEC, Federal Election campaign forms from the Clinton campaign are these huge thousands of dollars of fees to Jack Paladino. Back to the Wall Street Journal: Like all other bimbo eruptions, this one, Sally Purdue, had been spiked, subjected to a universal U.S. news blackout, but the Sally Purdue story took a different turn. Last January, Ms. Purdue told Ambrose Evans-Pritchard of the Sunday Telegraph, million circulation, one of the biggest papers in London, all of England for that matter, given the trains, that she had been threatened with violence if she continued to talk. She named the name. I said that on radio months ago, named Ron Tucker. She said he claimed to represent the Democratic Party. She says Mr. Tucker first offered her a Federal job in exchange for silence, and then added, and this has been in magazines, ``If I didn't take the offer, then they knew that I went jogging by myself, and he couldn't guarantee what would happen to my pretty legs.'' This story was spiked the very same month that Nancy Kerrigan's actual blow to her leg to keep her out of Olympic competition, to which Tonya Harding has pleaded guilty, I mean, bargain-pled for a lesser charge, because everybody knows now she was guilty of being in on this sports atrocity that became an international story every day at the Olympics, and other young athletes of every nation had to watch any of their moments in the Sun overshadowed by this bust in the knee, the very same month the media, all the big papers, were spiking this story about Sally Purdue. Afterward, the Wall Street Journal continues, Ms. Purdue says she received threatening phone calls and threatening letters, one of which she made available to the Sunday Telegraph in London and they printed it. She says she found an unspent shotgun shell on the seat of her Jeep, and later the back window was shattered. She reported this to the FBI, which told the Sunday Telegraph there was an ongoing investigation. Hey, my former members of the media, here, Mr. Speaker, they ought to be going after that Pulitzer Prize. The FBI is going to say, ``We can neither confirm or deny,'' but they told the Sunday Telegraph in London there is an ongoing investigation. Mr. Tucker's employee at the time, now get this, folks, John Newcomb, of Marion Mining added the confirmation that Mr. Tucker told him that he had been asked to get to this woman and get her to shut up. That was Sally Purdue's boss. In an interview with the Wall Street Journal, us, this week, Mr. Ron Tucker, this is the guy allegedly who made the threats, said, ``Sally Purdue is a flake stirring up a hornet's nest. I only met with her for 10 to 15 minutes once. I am not a political animal,'' and then degenerated into a series of threats and obscenities directed at the Wall Street Journal, and I guess everybody in general. Editors and reporters have to grapple with a flood of stories, charges, and rumors of violence, even deaths in Arkansas. Footnote, the head of security for Mr. Clinton's campaign before the Secret Service took over after the convention, he was murdered in Arkansas. I do not even know the date. It is not a story. It was not on the evening news. He was chased by a car down a road in Little Rock, two bullets were fired at the back of the car, at least, and maybe others missed, and hit the car, and they then pulled up alongside of the car and fired four more and hit him as he careened off to the side of the road, dead or dying, and the car pursuing him obviously pulled over, and somebody got out and gave him the coup de grace. At least seven shots, maybe more, killing the head of security for Mr. Clinton during the campaign. I mean, what is going on down there in Arkansas? Continuing and finishing the Wall Street Journal thing, the State seems to be a congenitally violent place and full of colorful characters with stories to tell, axes to grind, and secrets of their own, and now the whole thing is going to be contaminated down there with tabloid money. Now, let me take a pause here. We, the Wall Street Journal, believe Mr. Davis, and that is the first violent story, smashed in the head in his hotel room and his papers rifled and some stolen. The Wall Street Journal believes this. The Telegraph story included a lot of corroboration, though, of course, no evidence that anyone ordered Mr. Tucker to say what Ms. Purdue charges he said. Yet, as the story develops, we are increasingly coming to the conclusion that the respectable press is spending too much time adjudicating what the reader has the right to know and too little time with the old spirit of, ``Stop the presses, we have a breaking story.'' Mr. Speaker, last night, I put in the Congressional Record at the end of my remarks the transcript of a special ``60 Minutes'' show that was only 13 minutes long. This was the show hosted by the youngest of the incomparable ``60 Minutes'' team, Steve Croft. It was suggested to them by a competitor, ABC, FOB, Friend of Bill, Rick Kaplan, who within weeks would be giving candidate Governor Clinton Colonel Holmes' letter that Colonel Holmes had kept in his possession for 23 years, the infamous letter that opens up, ``Thank you for helping me avoid the draft,'' and goes on to say, ``We,'' all of these idealists of the 1960's who were pro-Hanoi, ``We have come to loathe the U.S. military,'' that letter. Kaplan gave it to Clinton, and he had 3 days to prepare for a personal Nightline show. The Nightline show was on February 12, Lincoln's birthday, for us Republicans to grit our teeth. Mr. Speaker, this is not as long as the Rose story, but if it is less than $2,000, I would like to ask permission to at this point, so I can comment on it tomorrow, put in the Record Ted Koppel's Nightline interview with candidate Clinton, February 12, 1992. Mr. Speaker, here is the transcript, and this will be in your library pretty soon across America around our country. This is March 22, 1994, page H--for House--1885. For those of you not familiar with the Congressional Record, we alternate on days whether we start with the Senate proceedings or House proceedings. This particular record of yesterday's legislative transactions, 1-minute speeches, special orders, begins with the Senate. So it is House page 1885, sequential numbering going back to January, the beginning of the 2d session of the 103d Congress. It begins with Steve Croft, host: ``Are you prepared tonight to say that you have never had an extramarital affair?'' Governor Bill Clinton: ``I am not prepared tonight to say that any married couple should ever discuss that with anyone but themselves and lawyers, like us, during divorce battles.'' Croft: ``I am Steve Croft, and this is a special abbreviated edition of 60 Minutes,'' 13 minutes long. ``Tonight, Democratic presidential hopeful Governor Bill Clinton and his wife Hillary talk about their life, their marriage, and the allegations that have all but stalled his Presidential campaign.'' Mr. Speaker, any American interested in this, this was one of the slickest jobs of covering a story up, thanks to national ABC's Rick Kaplan giving exclusive--recommending an exclusive to CBS's ``60 Minutes'' show, which, by the way, immediately followed the Superbowl show of January 26, 1992. Fifty million in the audience, maybe. The reason I put this in the Record and want to discuss it tonight is that in rereading this 2 years and 2 months later, it is a joke, it is a joke. Hillary only speaks three times. Here is her first utterance. It is two words: ``Oh, sure.'' It was in response to this: They get into a discussion of Gennefer Flowers. Everything we now know about all of this period, none of this is true. Croft says, referring to Flowers, ``Was she a friend, an acquaintance, did your wife know her?'' He gestured to Hillary, and Clinton says, ``Yes.'' Hillary says, ``Oh, sure.'' Bill Clinton: ``She was an acquaintance, I would say a friendly acquaintance.'' Those became infamous words, sort of like, ``I did not inhale.'' So Hillary gives a noise, and then Clinton says, ``When this rumor story got started in the middle of 1980 and she was contacted and told about it, she was so upset and she called back and said, `How could I be listed on this'''--that was infamous list of Larry Nichols-- ``I haven't seen you for more than 10 minutes in 10 years.'' She would call from time to time when she was upset or thought she was really in--being hurt by the rumors. And I would call her back--either she would call the office or I would call her back there at the office or I would call her back at the house. Hillary knew when I was calling her back. I think once she called her, when we were together, I think,'' lawyer talk, ``so there is nothing out of the ordinary there.'' Steve Croft says, ``She is alleging and has described in some detail in the supermarket tabloid the Star what she calls a 12-affair with you.'' Clinton says, ``It--that allegation is false.'' Croft was not a good enough lawyer to come back and say, ``Well, now are you saying the 12-year arrangement is now false?'' Keep in mind that Gennefer Flowers has not only come back from a successful cabaret tour in Europe, where the song most in demand, and she belts it out pretty good, is ``Stand by Your Man,'' but she has a book coming out, and she has 1 hour and 9 minutes of tape, I think she said, and she only released 8 at the stupidly conceived press conference at the ritzy Waldorf Astoria in New York after taking $50,000 from this senior sister publication of National Enquirer. Now, here is Hillary Clinton's only long statement on this show. Clinton says, ``It--that allegation is false.'' Hillary: ``When this woman first got caught up in these charges, Gennefer, I felt as I felt about all of these women''--all of what women?--``that, you know, that they have just been minding their own business.'' That sounds like Frankie Fontaine. ``And that got hit by media. I mean it was no fault of their own. They were caught in Clinton's past. This is no fault of all these women. We reached out to them, I expected her to say, I felt their pain. I met with two of them to assure them. They were friends of ours.'' Who? Bobbie Jo Williams, Marilyn Jo Jenkins, Elizabeth Ward, Sally Perdue, Gennefer Flowers? There is a list floating around in the newsroom, about 25 names. She says, ``They were friends of ours. I felt terrible about what was happening to them. You know, Bill talked to these women, to this woman every time she called, distraught, Flowers.'' This is a few days after Flowers' press conference at the Waldorf Astoria. She was saying her life was going to be ruined. She was asking for Federal jobs and got one at more pay than the lieutenant governor, Guy Jim Tucker, who is now the Governor. And you know, he would get off the phone and he would, ``tell me that she said sort of whacky things, which we thought were attributable to the fact that she was terrified.'' Clinton comes in, ``It was only when money came out, when the tabloid went down there offering money to say that they had been involved with me that she changed her story. There is a recession on.'' No, there wasn't. It was over about a year. ``Times are tough, and I think you can expect more and more of these stories as long as they are down there handing out money.'' These stories did not pop out on Senator Bob Kerrey, former Senator Tsongas, they did not pop out on Jerry Brown, with his 800 number and wide turtleneck. They could have called in stories easy there. They did not pop out on old tough former House Member Tom Harkin, no, they were only popping out on him. Croft says, ``I am assuming from your answer that you are categorically denying that you ever had an affair with Gennefer Flowers.'' ``I have said that before, and so has she.'' You see, he brings her into the denial, Flowers. Croft: ``You said your marriage had problems, you had difficulties. What do you mean by that, what does that mean? Is that some kind of a--help us break the code.'' Here Croft is trying to do his job. ``I mean does that mean--``I don't mean''--that is not a good sentence, but it is the transcript that CBS sent me. He meant to say ``me.'' ``I don't mean''--Croft interrupts and says, ``You were separated? Does that mean you had communication problems? Does that mean that you contemplated divorce? Does it mean adultery?'' Clinton: ``I think the American people, at least people that have been married for a long time, know what it means and know the whole range of things that that can mean.'' Croft says, ``You have been saying all week that you have got to put this issue behind you.'' He was in a free fall in the primary in New Hampshire about this time, running a poor third, ``Are you prepared tonight to say that you never had an extramarital affair?'' ``I am not prepared to say tonight that any married couple should ever discuss that with anybody but themselves. I am not prepared to say that about anybody. I think that's the issue''--``excuse me, but that is what you have been saying essentially for the last''--``that is what I believe--look, Steve, you go back and look at what I said. You know I have acknowledged wrongdoing, and I have acknowledged causing pain in my marriage, I have said things to you tonight, to the American people from the beginning, that no politician ever has.'' Oh, no, Gary Hart came clean with a lot, and it drove him out of the race. ``I think most Americans watching this tonight, they will know what we are saying, they will get it, and they will feel that we have been more candid. And I think that what the press has to decide is are we going to engage in a game of gotcha,'' that is kind of what he is saying now. ``You know, I can remember a time when it was said when a divorced person could not run for President.'' Now he is bringing Reagan into the pack here. ``That time, thank goodness, is past. Nobody is prejudiced against anybody because he is divorced.'' Now he has roped in about a third of the Nation who are married. ``Are we going to take the reverse position now that if people have problems in their marriage or things in their past which they do not want to discuss which are painful to them, that they can't run?'' Croft: You're trying to put this issue behind you, and the problem with the answer is not a denial, and people are sitting there, voters, and they are saying, ``Look, it's really pretty simple. If he's never had an extramarital affair, why doesn't he say so?'' Well, that may be what they are saying, but you know what I think they are saying? I think they are saying, ``Here is a guy who is leveling with us.'' You, you may not think that, that we should say more, that we should keep--that you should keep asking the questions, but I'm telling you. I think that what we--I'll come back to what I said. I've told the American people more than any other candidate for President. They are the result of what has been going on--result of what has been going on in my State and spending more time trying to play gotcha. Now here comes Hillary: There is not a person watching this who would feel comfortable sitting on this couch detailing everything--they did not detail anything--that ever went on in the life of their marriages, and I think it's real dangerous for this country if we don't have a zone of privacy for everybody. I mean I think that is absolutely critical. Croft: I, I, I couldn't agree with you more, and I think and I agree with you that everyone wants to put this behind you, and the reason it hasn't gone away is that your answer is not a denial; is it? Clinton: But interesting. Let's assume it's not a denial, Croft says. Of course it's not, Clinton says. And then he goes into a long, complex sentence. Croft comes back and says I don't like these questions any better than you do, but the question of marital infidelity is an issue with a sizable portion of the electorate according to the latest CBS News poll which was just taken. It will decide 14 percent of the registered voters in America. Clinton: I know it's an issue, and, and, and, but what does that mean? That means that 86 percent of the American people either don't think it's relevant to Presidential performance--he was banking on that, and that is not what it means--or look at whether a person looking at all the faxes, the best person to serve. He said we have gone further than anybody. Hillary says--we know of, and that's all we're going to say, and people can ask us a hundred different ways and a hundred different directions, and we're just going to leave the ultimate decision up to the American people. Croft: I think most Americans would agree that it's admirable that you have--have stayed together, that you have worked your problems out, that you have seemed to reach some sort of an understanding and an arrangement. Clinton: Wait a minute, wait a minute. Croft: But-- Wait a minute. You're looking at two people who love each other. This is not an arrangement or an understanding. This is a marriage and a very difficult thing. And then Hillary comes in with her famous line: You know I'm not sitting here like some little woman standing by my man like Tammy Wynette. I'm standing here because I love him, respect him. I honor what he's been through and what we have been through together. You know, if that is not enough for people, then the heck with it. Don't vote for him. Folks, without reading the last few lines, get your Congressional Record. Here is what happened: The impression they left with the American people was that they were separated at one point, maybe thinking about divorce, happens in most marriages today, and that maybe there was during this separation period one indiscretion; at the outside, two. They patched it up, and they got back together. According to the troopers that is about as far from the truth as anything could possibly be. Mr. Croft was had, ``60 Minutes'' was had with their 13-minute show, CBS was had, and tomorrow night I will discuss how Ted Koppel was had on that February 12 ``Nightline'' show. Mr. Speaker, I know the Speaker pro tempore has to go to a function, a very important function, and I am going to cut short my special order tonight. I can hear groans from across America, Mr. Speaker, but I will tell you there are a lot of people in your cloakroom who know that Bob Dornan may come off in the well like a Tasmanian devil sometimes, a tiger, but I have talked to several people on your side, one of them, one of the best orders on the floor, told me he is gone, he is going down, referring to the President. Another one told me, ``I had to defend him last night on television. What am I going to do? We all know--don't know enough about this stuff to mount a credible defense.'' Here is a story that I would like to ask permission, if it costs less than $2,000 to put in the Record, and I think all of these will cost about $500, if that. ``Money Audits the Clintons.'' That means ``Money'' magazine. Subtitle: ``They may owe $45,000 in back taxes and interest. Here's what you can learn from their mistakes.'' It is by Teresa Tritch and Mary L. Sprouse. I place this in the Record at this point: [From Money; April 1994] Money Audits the Clintons (By Teresa Tritch and Mary L. Spouse) Although virtually every one of Bill and Hillary Clinton's moves has been recorded, analyzed and debated, there is one facet of their lives that hasn't gotten the same level of scrutiny until now. Over a nine-week period that ended in early March, Money focused on that unglamorous and overlooked area--the Clintons' record as taxpayers. After studying each of their federal income tax returns for the years 1980 through 1992 (they hadn't yet filed for '93), we pieced together a portrait that many of Money's affluent readers might recognize: The Clintons tend to get tripped up by the tax complications that come with professional and financial success. A close examination of the Clintons' tax returns, which they have made public, suggests that the First Couple committed three glaring mistakes: Though both are sophisticated lawyers, they didn't keep adequate records, they tended to overestimate certain deductions, and they relied far too much on their tax preparer to get everything right. In all, their questionable write-offs indicate that the Clintons may have underpaid their income taxes by $16,358 over the 13-year period--which means their total liability today would be $45,411 if you include interest the IRS charges for underpayment. Their questionable write-offs dealt with (1) their charitable contributions, (2) his business expenses as Arkansas governor, (3) her automobile depreciation and, most important, (4) their Whitewater real estate development deal, which went bad. Three working days before our deadline in March, Money sent 16 written questions based on our reporting to Bruce Lindsey, special assistant to the President. Though Lindsey had granted us an earlier interview, he declined to answer any of the 16 for publication despite repeated requests from the magazine's management . . . (see ``How Hillary Manages the Clintons' Money,'' Money, July 1992), he maintained a colorful habit for at least seven years while Arkansas governor: He took time out every few months to hand-write a list of his small deductible charitable contributions ranging from his now storied skivvies to a brass key ring. The write-offs have gained wide press attention because many of them seem too high--$100 for a sport coat, for example. They may lack the records needed to back up their biggest Whitewater tax moves. Even if the Clintons can document all their Whitewater deductions with their canceled checks, that may not be enough to preserve the write-offs in an IRS audit. They would need Whitewater records too, to show that were entitled to the deductions. And those crucial documents are so far either missing or unavailable. In January, the White House's Lindsey told the Washington Post: ``If anyone knew the entire corporate history would be paraded before the American public, they might have kept more documents and better records.'' They sailed into Whitewater without proper tax advice. Every one of the five tax experts consulted by Money agrees on one issue: The Clintons either didn't seek, or didn't heed, the right tax advice from the moment they entered the complicated Whitewater deal back in 1978 and '79. ``There is no evidence of the hand of a tax professional in any of it,'' says Jack Porter, national tax director at the accounting firm BDO Seidman in Washington, D.C. The Clintons relied on two certified public accountants in Little Rock to prepare their returns for the years in question--Gaines Norton from 1980 to '83 and Yoly Redden from '84 to '92; both declined to discuss their work with our reporters. (Money has some history with Redden: She took our tax preparers' test in 1989 and concluded that our hypothetical family owed only $16,618. Our expert set the correct tax 41% higher at $23,393). Our audit, like official IRS inquiries, aims to challenge questionable return entries and estimate what taxes and interest might be owed. Also like the IRS, we are raising tax questions, not affixing legal blame. In an audit, you have the opportunity to defend your tax moves by simply showing, for example, that you made the payments you claimed as deductions and that you are entitled to the write-offs. Moreover, the 4,000-page U.S. tax code is often open to wide interpretation. Therefore, to be fair, we have noted the documents the Clintons would need to produce in an actual audit, and the arguments they might make to justify their tax stance. Our findings: charitable deductions The Clintons' claim--$177,047. Potential added tax--$1,651. From 1980 through '92, the Clintons wrote off charitable gifts totaling $160,886 in cash contributions and $16,161 worth of noncash donations. Often the gifts went to the Salvation Army, churches and educational charities. Given their incomes and prominence, the Clintons' generous level of giving is not in itself a cause for audit scrutiny. Beginning with their 1983 return, however, the Clintons attached a list--usually handwritten--itemizing and valuing their noncash contributions. They noted things like $30 for three shower curtains, $5 for an electric razor, $40 for running shoes. Many tax pros say such detail invites IRS scrutiny, even if you have filed a perfect return. Attaching a list is particularly dicey with noncash charitable donations, since there is often no way to prove an item's fair market value. In an audit, such disputes boil down to the taxpayer's word vs. the auditor's judgment. Guess what? The auditor usually prevails. There is a valid question about whether the Clintons padded the value of the underwear and other stuff they donated from 1983 through '89. In our audit, Money relied on Goodwill Industries' and the Salvation Army's flexible guidelines, which are sometimes used by IRS auditors. We also gave the Clintons the benefit of the doubt. For example, for 1984 they claimed $100 for a gray three-piece suit; we gave them the full $100. Still, some items--particularly shoes, underwear and T-shirts--seem overvalued at times. For example, in 1988 the Clintons deducted $15 for long underwear; we reduced it to $2. In another instance, we allowed $30 for a pair of brown shoes they valued at $80. We concluded that the Clintons may have overvalued their noncash contributions by a total of $2,939 from 1983 through '89. The tax due: $1,187. To rebut that assessment, they would have to offer convincing oral testimony. At best, they might get to split the difference between their estimate and the auditor's. The Clintons also deducted a $1,405 cash contribution in 1990 to ``Vance Hall Sporting Goods,'' which doesn't sound like a charity. An IRS spokesman told Money that there are cases where a retailer makes an IRS-approved arrangement with a tax-exempt organization; if you write a check directly to such a store sponsoring a charitable event, you can claim a deduction. But unless the Clintons can prove that Vance Hall was qualified to accept tax-deductible donations, they would lose the deduction and owe additional tax of $464, for a grand total of $1,651. One more thing: Amid all the cataloguing of charitable minutiae, one sign of sloppiness cropped up in 1990. That year's return failed to note $11,662 of the couple's contributions to 19 charities. Redden then filed an amended 1040, which brought the couple's charitable deductions that year to an eye-catching record high of $36,875. his expenses The Clintons' claim--$29,190. Potential added tax--$5,765. Bill Clinton's $35,000 annual salary during most of his 10 years as Arkansas governor was the lowest in the 50 states. But he also got $70,000 a year to cover expenses--a $19,000 public relations fund for work-related costs and a $51,000 mansion fund for meals, household items and official entertaining at the Governor's residence. Let's start with the $19,000. For most of his tenure, Clinton was reimbursed in full from this fund for all of his official expenses. And so, quite correctly, he never claimed any deduction on his tax return for expenses. For a 26-month period from January 1989 through February '91, however, the State of Arkansas decreed that the $19,000 public relations fund should be included in Clinton's taxable income. (The same went for the six other Arkansas officials who got such funds.) So Clinton began deducting unreimbursed employee expenses, claiming write-offs totaling $13,212 in 1989, $12,912 in '90, and $3,066 in '91. In themselves, there's nothing suspicious about the write- offs. But they could nonetheless draw an auditor's attention for this reason: The unique nature of a politician's job-- part public servant, part campaigner--makes it imperative to separate deductible business expenditures from nondeductible campaign costs. Bill Clinton's 1989 to '91 write-offs for printing ($7,316, including $4,812 for brochures), travel ($3,696) and advertising ($1,638) are particularly questionable. An auditor would ask whether they were actually nondeductible campaign expenses. Bill Clinton might also have to explain the $2,848 in ``meal-seminar/forums'' expenses he deducted on his '90 return. If the meals and gatherings happened at the Governor's mansion, they should have been paid by the mansion account. And under the tax law, you can't deduct expenses your employer would have normally covered. ``I don't think meals for visiting groups in the mansion are a deductible expense, since this [mansion] fund should be used to pay for them,'' says James Pledger, director of the Arkansas Department of Finance and Administration. To keep the deductions, Clinton would have to show that the meals did not take place at the mansion and that the amounts he claimed were ``ordinary and necessary'' business expenses. Finally, his $3,066 in 1991 employment-related deductions would raise a question. Clinton would have to demonstrate that this money was spent on deductible business expenses before March 1991. After that, the state law once again allowed him to be reimbursed as he submitted expense receipts. All in all, there's a lot in these expenses for an auditor to chew on. car depreciation The Clinton's claim--$8,168. Potential added tax--$501. In 1986, while Hillary Clinton worked as an attorney at the Rose Law Firm and was Arkansas' First Lady, she bought a $12,615 Oldsmobile that she drove for business purposes 52% of the time. (You can claim accelerated depreciation for a car only if you use it for business more than 50% of the time.) The Clinton's accountant, Redden, correctly depreciated the business portion of the car over three years on their 1986, '87 and '88 returns, for a total allowable write-off of $6,565. According to the tax law, further depreciation would be permitted only if Hillary Clinton increased her use of the car for business. And sure enough, in 1990, she drove it 60.52% of the time for business. But in calculating the four-year-old car's extra depreciation, Redden employed a formula that applied to newly acquired property placed in service after 1986. As a result, she overstated the deduction by $1,518, causing the Clintons to underpay their taxes by $501. Unfortunately, even when a professional tax preparer causes the goof, a taxpayer must pay any tax shortfall the IRS discovers within three years. In addition, Redden herself could be hit with a preparer penalty of up to $1,000. whitewater The Clinton's claim--$24,154. Potential added tax--$8,441. Navigating Whitewater takes total concentration as the numbers whiz by. Since the Clintons have refused thus far to disclose their relevant 1978 and '79 tax returns, you must start midstream with the twisting, tortuous flow of the interest deductions they took in '80 and then again from '84 through '88. The write-offs, totaling $24,154, are for interest payments they claim to have made on three separate Whitewater loans: The first was a $20,000 down payment loan at 10% in 1978 from Union National Bank in Little Rock. The loan was taken out by Bill Clinton and James McDougal, the politically connected developer who, with his wife Susan, had just invited the Clintons to become their fifty-fifty partners in a then promising venture to develop the 230-acre Whitewater tract in Arkansas' popular Ozark Mountains. The second loan was a $182,611 mortgage at 10%, also in 1978, from Citizens Bank in Flippin, Ark., cosigned by the Clintons and McDougals. Together, the two loans covered the purchase price of the Whitewater site. The third was a $20,800 note at 11.5% in 1983 from Security Bank in Paragould, Ark. taken out by Bill Clinton. According to the White House, he used that money to pay off a $30,000 loan at a whopping 20% that Hillary Clinton had gotten from James McDougal's Bank of Kingston in Kingston, Ark. in 1980. She used the original loan to put a model home on a Whitewater lot. An audit of interest deductions ought to be simple. In general, all taxpayers must prove is that they made payments they claimed as a deduction, that the expense was indeed interest for which they were liable, and that they paid the interest in the year they wrote off the deduction. But the complex Whitewater loans made the Clintons' subsequent tax write-offs anything but routine. Also, the Clintons' argument--that they couldn't have done anything wrong because they didn't make money on the disappointing deal and didn't even claim a capital loss in the end--is as irrelevant as it is self-serving. A taxpayer can lose everything and still file incorrectly, thereby incurring back taxes, interest and penalties. Our audit indicates the Clintons may face precisely those consequences in the following intances: The first--and largest--of the Whitewater deductions on the returns Money examined is a $9,000 interest payment to ``James McDougal'' in 1980. The $9,000 entry is audit bait for two reasons: A business partner is rarely listed as a mortgage lender, and mortgage interest is almost never a round number. The White House has said the Clintons paid McDougal the $9,000 to reimburse him for interest payments he made on their behalf in 1978 and '79. That might explain why the figure is rounded: Although the Clintons and McDougals were fifty-fifty partners, the law does not require that every payment be split equally. Because of the irregularities, however, an auditor would demand both a bank statement showing how much of the amount was interest, if any, plus a signed, dated receipt from McDougal acknowledging the interest repayment. Without this hard proof, an auditor could treat the $9,000 as a nondeductible repayment of loan principal, not deductible interest. If the Clintons' undisclosed 1978 and '79 returns surface, they may well spark more audit questions. For example, the White House claims the Clintons deducted $10,000 in interest on Whitewater loans in 1978. But Time magazine recently reported that records it reviewed show the banks received at most $5,752. The second largest Whitewater deduction also appears on the Clintons' 1980 return--$4,350 paid to Citizens Bank in Flippin, which provided the $182,611 mortgage in 1978. But even that seemingly innocuous entry has a twist. In 1979 the Clintons and McDougals formed the Whitewater Development Corp. and contributed the 230-acre site to the newly formed company. This turn of events could prompt an auditor to ask for proof that the Clintons were the party entitled to the $4,350 mortgage interest write-off. The White House has insisted in published reports that the Whitewater corporation did not assume the loans. Rather, the explanation goes, when the land went to the corporation, the Clintons, in effect, got a note from the Whitewater company obligating it to the same terms as on the loans they took out to buy the property. In that case however, an auditor would expect the Clintons to have reported Whitewater's interest payments on their returns as income and then claim an offsetting deduction for the interest they paid. But they did not do that; they never reported any interest income from Whitewater. What actually may have happened is that all three--the Clintons, the Whitewater company and the McDougals--made loan payments directly to the bank at various times. When Whitewater didn't have enough money to make the payments, ``McDougal would call up the Clintons and say . . . `Can you write the check?'' So Clinton would write a $4,000 check, or whatever, so the bank wouldn't foreclose on the loan,'' Lindsey told Money in a January interview. Whoever made payments during the year took deductions at tax time. Despite that unorthodox approach, some tax experts think the Clintons could keep the deduction in an audit. ``You have a leg up in defending your interest deductions as long as you actually made the payment,'' says a former high-ranking IRS official who requested anonymity. Yet other tax experts, including Lee Sheppard, a tax lawyer and contributing editor of the professional journal Tax Notes, take a tougher stance: She says that when the land used as collateral for the loan was transferred to Whitewater, the corporation assumed the loans de facto and thus was solely entitled to the interest deduction no matter who, if anyone, paid the interest. If there were a legal challenge to their deduction, the Clintons could rebut it by citing to the IRS federal court cases won by taxpayers in similar circumstances. Even then, however, they would have to present more Whitewater documents than they have so far. The worst-case outcome: The Clintons' $4,350 deduction would be denied. The third set of Whitewater deductions, from 1984 through '88, relate to $20,800 that Bill Clinton borrowed from the Security Bank in Paragould in '83. In 1984 and '85, the Whitewater company paid Security $5,133 in loan interest and deducted it. A 1992 analysis commissioned by the Bill Clinton for President Committee and coordinated by James Lyons, a Denver tax attorney and family friend, revealed that the Clintons had also deducted the $5,133. The Clintons explained that the bank erroneously sent them a $5,133 interest statement, which they forwarded to their tax preparer, Redden. She then dutifully entered the deduction on their returns. To make good, the Clintons say they voluntarily paid the IRS some $4,000 in back taxes and interest in 1992. The Clintons' Whitewater headache doesn't end there, though. Any IRS auditor who asks Bill why he borrowed the $20,800 would learn of Hillary's earlier $30,000 loan--and the many tax questions that surround it. When she borrowed the $30,000 from Kingston Bank in 1980 to build a model home on a Whitewater lot, the corporation transferred the three- acre lot to her; she then used the land, at the time worth about $5,500 according to Whitewater real estate agent Chris Wade, as collateral. Records examined by Money show that she paid $10 to record the deed; but it's unclear whether she paid a cent more than that. The upshot: The Clintons may be on the hook for a taxable capital gain on the transfer of the $5,500 lot in 1980. The Clinton's gain would equal the fair market value of the lot, minus their tax basis (that is, essentially, the amount they invested in Whitewater from their own pockets). In the absence of further documentation, an auditor would assume a very low basis figure, say the $500 that the couple have said they contributed to the corporation when it was formed. Here's the math: The lot's $5,500, minus the $10 Hillary paid for the deed, minus her $500 basis, equals a $4,990 capital gain. The audit tally on this transaction alone: $4,454, made up of tax ($1,098) and interest ($3,356). To beat an IRS challenge, the Clintons would have to prove that they either paid much more for the lot, or that it was worth much less than $5,500 or that their tax basis in Whitewater was far higher than $500. One more Whitewater matter: As we went to press, AP reported that in 1984 and '88 the Clintons deducted more than $1,400 in Whitewater property taxes they had paid but may have been reimbursed for later on. Whatever the final outcome, the drip-drip-drip of Whitewater revelations will likely continue for years to come. And then, Mr. Speaker, finally so you can get to that event and I can go home and prepare to discuss tomorrow, and hopefully I will talk to Ted Koppel tomorrow, the show that was structured by an ABC producer named Rick Caplan who produces World News Tonight, gave that letter to Bill Clinton 3 days in advance, and Mandy Grunwald whose dad was 25 years ahead of Time magazine, she in that same Style section could not keep quiet a secret. She claimed authorship of the line: ``They're accusing me of sleeping with a woman I didn't,''--wrong-- ``and dodging a draft I didn't,''--wrong, dodged it three times. Here is an article that will probably be a first in my life. Never have I put in an article from a homosexual magazine, and I would not put this one in with titles around the edges like: ``Roseanne's Lesbian Kiss''; ``Canada's Politically Correct War''; ``The Gay Oscars''; ``The Gay Menendez Jurors.'' Randy Shilts, 1951 to 1994, died at age 43 of AIDS who wrote the book, ``The Band Played On.'' He tried to blame everything on Reagan and Bush. It would not fly, but I feel very sorry he died. The cover story is a picture of the Surgeon General of the United States, the leading voice on health matters in the United States. It is titled, and this is the March 22 issue of the Advocate, a homosexual tabloid, tabloid size. It is titled, ``Condom Queen.'' ``Surgeon General Joycelyn Elders,'' and I cannot read on the Xerox the subtitle, but there is a big picture with a button with a lightning bolt on it. I do not know what that means, but it says: ``The Condom Queen Reigns. Surgeon General Joycelyn Elders speaks out where the President fears to tread,'' by Chris Bull. He is a prominent homosexual writer, and I want this in the Record because tonight I am calling for her resignation or firing. I am joining the front page story of today's Washington Times where Cardinal Hickey--what did I do with that--here it is--Cardinal Hickey, never known as a conservative cardinal, the cardinal for the Archdiocese of Washington, DC; he says, ``her advocacy of homosexual behavior, her support for homosexual adoptions is outrageous. The President must publicly disavow her positions,'' and this is quoting from a letter from the Archbishop of Washington to the President of the United States. Furthermore Cardinal Hickey says, ``I deeply regret her apparent intolerance of people whose religious faith and moral values collide with her own ill-considered views. The Surgeon General irresponsibly accuses religious leaders,'' and it goes on and on with some of the absurd statements that she has not denied in her exclusive interview with this outrageous homosexual tabloid. So, Mr. Speaker, with that there is plenty of things to discuss tomorrow night, Mr. Speaker, and I would like to be courteous to you. The news is exploding. I do not know where to go next. So, we will be back tomorrow with some more fascinating stuff and an analysis of the February month in the campaign and the very cleverly structured ``Nightline'' show with Ted Koppel which put away the draft issue until I brought it back into the public consciousness from this microphone in September 1992. The articles referred to are as follows: [From the Advocate, March 22, 1994] The Condom Queen Reigns Surgeon General Joycelyn Elders speaks out where the president fears to tread (By Chris Bull) In a memorable and often-quoted line uttered in 1989 while she served as the director of the Arkansas Department of Health under then-governor Bill Clinton, Joycelyn Elders, who is now Clinton's U.S. surgeon general, compared driver's education for young people to sex education in the schools. ``We taught them what to do in the front seat of the car,'' she said. ``Now it's time to teach them what to do in the backseat.'' Elders made the remark as part of an aggressive campaign to lower the rate of teenage pregnancy in the state, which at the time had the second highest rate in the nation, after Mississippi. But Elders says that the now-famous quote should apply equally to gay youths who are at high risk for infection with HIV. The federal government, she insists, has a responsibility to teach young gay men ``what to do in the backseat'' to protect themselves from HIV, especially in the light of several recent studies indicating that a sizable number of young gay men have not been reached by AIDS education campaigns and are continuing to engage in unprotected sex. ``If there are young gay men out there who are not hearing the message, then we have to step in and figure out how to get to them.'' Elders says. ``The federal government has a responsibility to all of our citizens, not just the heterosexual citizens. This country has to get over the judgmental way it makes decisions and make sure we are fair to all our citizens.'' Statements like these have earned Elders a reputation as the most fearless and most outspoken member of the Clinton administration; so much so, in fact, that she appears to be on a collision course with her boss. Last December, for instance, Elders precipitated a political firestorm by saying that legalizing drugs would reduce crime and violence. Clinton quickly distanced himself from his surgeon general by insisting that drugs would ``not be legalized on my watch.'' Elders is able to maintain this stance without jeopardizing her relationship with Clinton--who is known for his political caution--through a combination of personal popularity and political savvy. ``Elders is widely perceived as sincere, well-meaning, and tough,'' says Christopher H. Foreman Jr., a research associate at the Brookings Institution, a Washington, D.C.-based policy-analysis group. ``Those qualities will keep her in good stead in a time when so many politicians are seen as weak and insincere.'' Although she rarely addressed gay and lesbian issues during her six-year stint as Arkansas's top health official, as U.S. surgeon general Elders now appears ready to risk the president's ire by speaking out on behalf of gay causes. For this interview Elders insisted that she wanted to address gay-related topics gingerly until she had thoroughly familiarized herself with them, but then she proceeded to unhesitatingly express her opinion on a wide range of gay- related causes. Elders endorsed gay and lesbian adoption, advocated suicide-prevention efforts aimed at gay and lesbian youths, termed the Boy Scouts of America's ban on gay scouts and scout leaders ``unfair,'' denounced antigay campaigns by conservative religious groups, and said that Americans ``need to be more open about sex.'' Indeed, Elders is seemingly willing to address topics that have landed other Administration officials in hot water. Last October, for instance, after receiving flak from conservative groups, the White House's AIDS policy coordinator, Kristine Gebbie, was forced to back off her statement that sex is ``an essentially important and pleasurable thing'' that continues to be ``repressed'' by the country's ``Victorian morality.'' Before the outcry over her remarks occurred, Gebbie had said she considered it part of her job to stand on the ``White House lawn talking about sex with no lightning bolts falling on my head.'' Elders does not appear to fear lightning bolts. What underlies antigay attitudes in this country, she says, is an irrational ``fear of sexuality'' in general. ``Society wants to keep all sexuality in the closet,'' she says. ``We have to be more open about sex, and we need to speak out to tell people that sex is good, sex is wonderful. It's a normal part and healthy part of our being, whether it is homosexual or heterosexual. There are certain times and places where sex is inappropriate, but just because it is inappropriate at certain times does not mean that it's bad. I think the religious right at times thinks that the only reason for sex is procreation. Well, I feel that God meant sex for more than procreation. Sex is about pleasure as well as about responsibility.'' During a 1992 campaign stop, Clinton refused to criticize the Boy Scouts ban on the grounds that as a private organization it is entitled to set its own policies. But Elders says she opposes the ban ``in principle'' because of its negative effect on the mental health of gay youths. and she has promised to oppose it publicly. ``If we have important organizations that we are all supporting, I certainly think that all our youth should be allowed to participate,'' she says. ``Once again we are dealing with the ignorance of our society about what gay people are like and the effect of policies like this on them.'' Elders says the fight for full equality for gays and lesbians depends at least in part upon the ability of most Americans to ``learn that gay people are not just out there wanting to have sex with anybody who walks down the street and that gay people have real loving, lasting relationships and families.'' As a result, Elders says gays and lesbians can play an important societal role by adopting children as well as by raising their own. ``I feel that good parents are good parents--regardless of their sexual orientation.'' she says. ``It's clear that the sexual orientation of parents has nothing to do with the sexual orientation or outlook of their children. Many children in this society are born unwanted, and I feel that if gay or lesbian couples feel that they want children enough to adopt, well, then they are probably just as capable of being good parents as heterosexual parents who choose to adopt. Gays and lesbians are not going to choose to adopt or have their own children unless they really want children. They are making a conscious choice. We have too many parents who did not choose nor did they want, to be parents.'' Despite what seem to be enlightened convictions, this is the first time that Elders has been asked to address gay and lesbian health issues in a comprehensive manner--a task she says has been one of the most difficult challenges she has faced since assuming her post last September. ``One of the biggest problems in this job that I am facing is that I don't know enough about gay and lesbian issues,'' she admits. ``I'm trying to get educated as fast as I can. I don't want to do a lot of speaking out until I am comfortable with the issue and I can answer all the questions that are posed to me from both sides.'' Even so, Elders is taking some tentative steps toward addressing gay-related health issues. During a Jan. 18 meeting, for example, Elders surprised lesbian-health advocates by suggesting that the Department of Health and Human Services (HHS) fund the creation of brochures aimed at educating health care workers about lesbian health concerns. ``I can see that there are many problems that lesbians face that physicians have yet to address,'' Elders says. ``We have to train our nation's physicians to ask the right questions and to offer lesbians advice that is appropriate to them. Many times doctors may be concerned that women are taking proper contraception, but if some women are having sex only with other women, that's not the right kind of concern to have.'' At other times, though, Elders has been on the defensive. During a public appearance last December for World AIDS Day, Elders was targeted by Luke Sissyfag, a 20-year-old AIDS activist who loudly accused her and the president of dragging their feet on issues revolving around AIDS. But Elders took the protest in stride. ``I've met Luke on several occasions now, and I respect what he's doing,'' she says. ``I think that it's OK for him to feel like we're not doing enough. I don't feel like we're doing enough. One of the wonderful things about America is that Luke can go around and be critical of me and of the president if he doesn't think we're doing enough. There are many ways of skinning the cat.'' Elders is facing a learning curve on gay-related issues in part because she steered clear of them while in Arkansas. Eric Camp, a spokesman for the Arkansas Gay and Lesbian Task Force, a statewide political group based in Little Rock, says that addressing homosexuality publicly in the state would have amounted to political suicide. ``She was already seen as an extremist in the state for talking about birth control and abortion,'' he says. ``Her programs never would have gone anywhere had gay and lesbian issues been included. But I think that on the national level she will be far more inclined to consider gays and lesbians part of her constituency.'' Elders says she did not consciously dodge the issue, though. ``I did talk to gay groups in Arkansas, and when I did it got a lot of press,'' she says. ``I've spoken out before, It was not as well-organized a constituency there as some other groups might have been, but that would not have been a reason to avoid it.'' In Arkansas, Elders focused primarily on what has been a lifetime mission: reducing the rate of teenage pregnancies, which she says have made a generation of young women into a ``slave class'' by forcing them to raise children before they are ready to do so at the expense of their own educational and employment opportunities. Among her initiatives was a controversial plan to place medical clinics in each of the state's 300 school districts that would dispense condoms, sex education, and health care. So far, 24 districts have installed clinics, and 28 more are on a waiting list for state funds to established them. Elders' emphasis on youth and sexuality as public health concerns may lend itself easily to addressing AIDS and gay- related issues. Kerry Lobel, lead organizer for the Arkansas Women's Project, a Little Rock-based advocacy group, says that when seeking support from Elders, gay and AIDS activists would be well-advised to frame the issue in terms of youth, prevention of sexually transmitted diseases, and reproductive health. ``Dr. Elders will stick up for children and young people no matter what,'' she says. ``If the issue can be presented that way, she will listen. That's where her heart is.'' Elders, a pediatrician by training, indeed becomes most passionate when the topic turns to gay and lesbian youth. While the school-based clinics in Arkansas were designed to focus primarily on the needs of heterosexual students, Elders says they should eventually address the needs of young people who are struggling to come to terms with their sexuality as well. ``We can't just write off 10% of our student population.'' Elders says. ``We should certainly work on gay and lesbian health issues. We need to make sure our teachers are educated about sexuality and that counselors know how to address the issue in a sensitive manner.'' Commenting on a hotly contested 1989 HHS report-later suppressed by the Bush administration--that found that gay and lesbian youths represent approximately 30% of teenage suicides, Elders says that ``when we are talking about young people taking their own lives, that's the worst health threat we can possibly face. So for me it has to be an issue. Again I have to admit stupidity on exactly how to address the issue, but certainly we should make educators and counselors aware of the issue and make sure they know how to respond to the situation when it arises. I certainly see addressing gay and lesbian youth suicide as part of my mission. My job as surgeon general is to talk about all of the health issues that have an impact on Americans.'' Elders has been able to speak out forcefully on a variety of topics in Arkansas and in Washington, D.C., in part because of her personal popularity with the public. The daughter of sharecroppers who lived in rural Arkansas, the 60-year-old Elders overcame poverty to serve in the U.S. Army as a first lieutenant. She later attended the University of Arkansas Medical School on the GI Bill. That modern Horatio Alger story has helped to disarm some of her critics. During her contentious confirmation hearings last July, for instance, Elders repeatedly invoked her upbringing to explain her position on a number of issues. Still, the Senate finally confirmed Elders in a less-than- overwhelming 65-34 vote. ``She's a very sympathetic figure, and even her critics have to be careful not to appear to be attacking a black woman,'' says Foreman. Elders also benefits from a close relationship with Clinton, who stood behind her despite fierce attacks from right-wing pressure groups and conservative members of Congress. During the confirmation hearings the Traditional Values Coalition, a conservative lobbying group, dubbed Elders the nation's ``condom queen'' for her staunch support of condom distribution in the schools and said she was ``clearly the worst Clinton nominee yet.'' After her confirmation Elders responded in an interview with The New York Times by saying, ``If I could be the `condom queen' and get every young person who is engaged in sex to use a condom in the United States, I would wear a crown on my head with a condom on it.'' Conservative members of the Senate were most critical of a 1992 remark that Elders made attacking the Roman Catholic Church. Elders said the church hierarchy's opposition to abortion rights is more vehement than was its opposition to the Holocaust and ``the 400 years in which black Americans had their freedom aborted.'' Sen. Don Nickles (R-Okla.), who led the opposition to Elder's nomination, said the statement ``exhibited strong anti-Catholic belief.'' Clinton's support also helped Elders withstand attacks from right-wing groups in Arkansas. After conservative opponents spread false rumors that the clinics she had proposed for the state's schools would perform abortions for students, Elders, a Methodist, called them ``very religious non-Christians'' who ``love little babies as long as they are in someone else's uterus.'' Conservatives demanded an apology, and Elders complied in a letter to the state legislature, but she continues to use the phrase to describe her opponents anyway. By way of contrast, Clinton did not display the same fortitude when another black female nominee, Lani Guinier, came under attack for statements and beliefs that are less incendiary than some of Elders's. In fact, longtime Arkansas political observers say that Clinton and Elders have for years played out a political cat-and-mouse game that benefits both players. An incident at the 1987 press conference where Clinton introduced Elders to the state illustrates the point. In response to a question as to whether she planned to distribute condoms in public schools, Elders said, ``Well, we won't be putting them on their lunch trays, but yes.'' Press reports at the time described Clinton as blushing from embarrassment but nodding in agreement with Elders. ``Clinton relies on Dr. Elders to say the things he cannot say for political reasons,'' says Lobel, who has observed the complex political relationship between the two for years. ``When he finally said that he was pro-choice, we all said, `Well, of course he's pro-choice,' but we really only knew that because she had been so outspoken and he would not have let her do that unless he agreed with her.'' That same dynamic was at work during the outcry over Elders's December statement about legalizing drugs; the situation escalated further when her 27-year-old son, Kevin, was arrested in Little Rock on drug charges. Sen. Robert Dole (R-Kan.) said Americans ``must be wondering if the surgeon general is hazardous to our health,'' and Nickels called for her resignation. Elders said she had ``no second thoughts'' about the remark, and Clinton said he remained ``four-square'' behind her. ``When you have someone who is outspoken and energetic like she is,'' he said, ``there are going to be times when she'll be outspoken and energetic in a way that I don't necessarily agree with.'' Marj Plumb, health policy director for the National Gay and Lesbian Task Force, a Washington, D.C.-based political group, says she has seen that dynamic at work on gay-related topics as well. During the meeting at which Elders suggested developing lesbian-health brochures, Plumb recalls that she turned to Patsy Fleming, special assistant to HHS secretary Donna Shalala, who was sitting next to Plumb, and said, ```Are your sure you want to take the heat for something like this?'' and when Patsy said, ``Marj, this is Dr. Elders you are talking about.' So even internally at HHS there is a general understanding that she is going to articulate a vision that is not necessarily politically safe for others to articulate.'' Elders's ability to speak out on national health issues is also aided by the surgeon general's office, which has little official authority but has come to serve as a bully pulpit for the officeholder's political and medical agenda. The office has just ten full-time employees and a $550,000 annual budget. In contrast, the administration's AIDS policy office, headed by Gebbie, has 55 employees and a $5-million annual budget. Dr. C. Everett Koop, who served as President Reagan's surgeon general from 1984 to 1988, paved the way for Elders on AIDS-related issues. Though considered a staunch conservative when he was nominated for the post, Koop nevertheless bucked the Reagan administration by advocating humane treatment of people with AIDS and supporting sexually explicit educational campaigns to stem the spread of HIV. Elders says she intends to continue Koop's tradition. ``If AIDS had started out as a disease of upper-middle-class white babies, it would have gotten a lot more attention,'' she says. ``Koop recognzied this and did what a surgeon general has to do. You have to stand up for what's right--based on the medical and scientific data--regardless of what your personal beliefs are.'' Elder's outspokenness occasionally offends even her allies. In 1991, for instance, Elders said that one of the benefits of legal abortion is the reduction of severe birth defects, citing Down's syndrome as an example. A number of parents of children with Down's syndrome protested, saying that Elders was implying that handicapped babies should not be allowed to be born. Elders responded that she had a nephew with the syndrome whom she loved and that she cared for many Down's patients in her pediatric practice. But the comment raises disturbing questions for gays and lesbians as well. With increasing evidence of a genetic basis for homosexuality, some scientists and medical ethicists have raised the possibility that antigay parents, upon learning that their fetus carries a gene for homo-sexuality, could opt for an abortion rather than give birth to a child that might grow up to be gay. Elders refuses to get drawn into that debate, though. ``I think that's a decision only parents can make, she says. ``If a woman had an abortion because they located the gay gene, it would not upset me any more than choosing an abortion on any other grounds. It's not a position for the government to take. The choice has to be left up to the individual. No one can try to make such a choice for a woman. That nonjudgmental view is consistent with Elder's approach to gay rights in general. Commenting on antigay campaigns undertaken by conservative religious groups, Elders says that if '`you are truly right within your heart and with Christianity, you know in advance that you do not know in advance that you do not know enough about other people's lives to judge them. You do not love enough to make decisions about how other people should live their lives. How can I be judgmental of you when in the sight of God you may think you are better than me? You have to wonder how much love that people who hate gay people have in their hearts.'' ____ [From the New Republic, Apr. 4, 1994] The Name of Rose (By L.J. Davis) You see a girl walking down the street. You can say, ``There goes a beautiful girl'' or ``There goes a whore.'' What the hell's the difference? They've both got legs. --Jon E.M. Jacoby, executive vice president of Stephens Inc., explaining the Arkansas system of politics and finance as it reached perfection during the Clinton years. an arkansas thriller. i. In Arkansas, the latest backstairs of the national political system, you hear a lot of things. Concerning Whitewater, for example, you are constantly--and probably correctly--reminded that the dustup involves nothing but a typical loony tunes S&L deal from the 1980s, despite the august personages involved and their perplexing insistence on behaving like refugees from a Raymond Chandler novel. In Arkansas memories are long, political rascality is king of regional sports and rumor and truth tend to commingle until otherwise reasonable people are driven slightly bonkers trying to sort out one from the other, In Little Rock the whole Whitewater affair is regarded as something of a hoot-- the Yankee carpetbagger press, with the reality of Arkansas staring it in the face, has gone and missed the real story again. But if Whitewater was nothing but a minor peccadillo that the press has glommed onto because it thinks it understands it--and compared with the private financial shenanigans of Arizona Governor Fife Symington, Whitewater resembles a misdeed along the lines of crossing the street against the light--why, then, has the Clinton administration so frantically placed its back to the door, as though a peek beyond would reveal grandpa tied to a chair, surrounded by his looted bank books? In Arkansas the answer to this question verily resembles the epitaph on the tombstone of Sir Christopher Wren: if you would see Clinton's monument look around. When it comes to Bill Clinton's home state, the national press has repeatedly looked, seen everything and observed next to nothing (the honorable, largely ignored exception being the Los Angeles Times). Visiting Little Rock in search of atmosphere during the presidential campaign, reporter after reporter dutifully described the imposing Stephens Building, the elegant Capitol Hotel, the Worthen Bank tower and the headquarters of Arkla Petroleum, future White House Chief of Staff Mack McLarty's gas company, without realizing that all of these things were either owned, controlled or under the influence of a single, immensely powerful family: the Stephenses. By a happy chance, the family is also the stellar client of Hillary Rodham Clinton's old employer, the Rose Law Firm. Although it usually served as a hired gun with a conveniently blind eye, Rose proves to be a handy prism for observing a Gothic, sometimes darkly humorous tale of bonds, banks, a friendly cocaine distributor, sinister Pakistanis, shadowy Indonesians and the uses to which an agreeable state government can be put. The story is in fact three connected stories, combined in a typically Southern saga: Stephens Inc. and the Worthen Bank Corporation; the Rose Law Firm itself; and the Arkansas bond business, which, like most bond businesses, is extremely difficult for the well-educated layman to understand, thus making it an excellent place to hide things in plain sight. Central to the story is a pair of siblings named Witt and Jackson Stephens. ii. In one sense, nothing unusual occurred in Arkansas during the 1980s: tales of high jinks in high places have always figured prominently in American discourse, and some of the most colorful stories--a number of them actually true--have come out of the Bubba Belt of the South and Southwest, whose geographical heart happens to be occupied by Arkansas. But Arkansas is rendered sui generis by the presence of the only major investment bank not headquartered on Wall Street, Stephens Inc. of Little Rock, which does much to explain some of the arresting peculiarities of a state that is more than a little strange even when judged by the spacious standards of its region. For one thing, although Arkansas is the home to some of the nation's wealthiest families, it is one of the poorest states in the country, although there is no reason for it to be poor at all. Abundantly endowed with minerals, petroleum, timber and some of the most fertile agricultural land on the surface of the planet, it bears a close resemblance to a Third World country, with a ruling oligarchy, a small and relatively powerless middle class and a disfranchised, leaderless populace admired for its colorful folkways, deplored for its propensity to violence (on a per capita basis, Little Rock has one of the highest murder rates in the nation) and appreciated for its willingness to do just about any kind of work for just about any kind of wage. In the words of one local wag, the farther you get from Arkansas, the better the Stephens boys look. Indeed, the family's sanitized, Horatio Alger-like biographies have been featured, accompanied by a remarkable lack of examination, in publications as various as Forbes and Golf Digest. The dynasty's founder, Witt Stephens, together with his younger brother by sixteen years, Jackson, grew up on a hardscrabble farm near the town of Prattsville, the sons of a small-time speculator in oil stocks and sometime state legislator, A.J. Stephens, who remained a power in state Democratic politics until the end of his life. An eighth-grade dropout. Witt first makes his living by peddling Bibles and belt buckles before he discovered a pair of bonanzas in undervalued, Depression-era municipal bonds and the natural gas with which Arkansas is so richly endowed. Meanwhile, Jackson briefly served as a page with his father in the state legislature and went on to become a classmate of future President Jimmy Carter at the Naval Academy, a circumstance that would later serve the family's fortunes well while causing a disaster of still unmeasured magnitude in the American banking system. After World War II the brothers joined forces at Stephens Inc, in Little Rock, with Witt--or Mr. Witt, as he came to be known--serving as the company's colorful, cigar-chumping and aphoristic face to the world (or as much of the world as paid attention) while the taciturn Jack toiled away in the back office, revealing a golden touch at investment strategy. These things are relative, of course; by the time Witt (who died in 1992 at the age of 83) handed over the reins to Jack in 1957, while retaining his petroleum interest and serving as the presiding genius of the firm. Stephens Inc. was worth a beggarly $7.5 million. But in the Arkansas of 1957, a financial institution with $7.5 million had the money and the clout to do a number of things--including purchase a governor. Witt, like his father before him, was a staunch hereditary Democrat, a supporter and friend of such Arkansas luminaries as Senator William Fulbright. He was also a great patron of the infamous, six-term Orval Faubus--not, apparently, because of the governor's segregationist policies (to the family's credit, Jack Stephens, a trustee of the University of Arkansas since 1948, had successfully lent his voice to the cause of integrating the institution), but because Faubus was sound on the subject of natural gas, a subject dear to the Stephens' heart. As the family's fortune continued to wax after the Faubus years, it became an axiom of Arkansas policies that someone could occasionally become governor without permission from Stephens headquarters, but the politician was unlikely to remain governor for very long unless be paid close attention to the care and feeding of the brothers--the great exception to the rule being two-term Republican Winthrop Rockefeller, the beneficiary, representative and broken reed of an even vaster American fortune, who became the failed hope of Arkansas liberalism. Decades later, when the self-effacing Jack became chairman of the Augusta National Golf Club in Georgia, naive visitors were quickly enlightened on the subject of how a man so shy could assume a post so prominent in the sport of the moneyed and the gently bred, ``Jackson Stephens?'' it was explained. ``He's the man who owns Arkansas. It was Jackson Stephens at the helm that Stephens Inc. propelled itself into the stratosphere of the American financial plutocracy, making a bewildering variety of investments in enterprises as various as real estate, hazardous waste incineration, data processing, nursing homes, trucking and airplane maintenance, while simultaneously diversifying into the business of underwriting issues of common stock. In its new role, the firm called on the services of young C. Joseph Giroir, the only trained securities lawyer in the state, and his paralyzing respectable firm, Rose. The securities business, in turn, led to a chain of peculiar events beginning in 1977 (the year, it so happened, that Bill Clinton became Arkansas attorney general and the Rose hired his wife). That year, no less a figure than T. Bertram Lance appeared on the corporate doorstep of his old friend's classmate, bringing with him a load of troubles and a glittering opportunity. Lance was compelled to resign as head of Jimmy Carter's Office of Management and Budget because of his long history of questionable financial practices in Georgia. As a result of that history, he was also beset by a negative net worth, substantial loans from banks in Chicago and New York and a large stock holding in the National Bank of Georgia. Sadly for Lance the price of the bank stock was depressed and its sale on the open market could not rescue him from the specter of bankruptcy, which was the dilemma Stephens Inc, was invited to solve. A solution was soon found in the form of the now notorious Bank of Commerce and Credit International (BCCI), although whether Lance introduced Stephens to the Pakistani-run scam or vice versa is a matter of some debate. Beyond dispute, however, it is the fact that the comptroller of the currency, the nation's principal regulator of commercial banks, had clearly stated that BCCI was never to enter the American banking system under any circumstances. Oddly, this unambiguous order did nothing to prevent Stephens Inc. from solving Lance's problems while settling a small score of its own. The National Bank of Georgia was controlled by a holding company called Financial General one of the few entities in the country allowed to engage in interstate banking under the laws of the time. The Stephens interests controlled slightly less than 5 percent of Financial General and the investment had soured, partly because Financial General refused to hire the family data processing company. It was, Stephens soon persuaded BCCI, just the sort of investment BCCI was looking for, the comptroller's edict notwithstanding. In short order, Stephens launched Lance on the path to renewed solvency, assembled blocks of stock for purchase by the front men who would conceal BCCI's identity, effected an introduction to the subsequently disgraced Democratic wise man Clark Clifford, turned a small but tidy profit on the sale of its own shares, pocketed fees of at least $95,000-- and, in return for a sum that in Stephens terms amounted to chump change, set in motion the process that would give BCCI involvement by the Securities and Exchange Commission, Stephens Inc. neither admitted nor denied the SEC's findings but promised to go and sin no more. But BCCI was not the only exotic party attracted by Lance's bank holdings. Also appearing on the scene was Mochtar Riady, one of the wealthiest men in Indonesia, with far-ranging interests and a known connection to his country's dictator, General Suharto. When someone went into business with Riady, there was also the possibility that they were in business with the general, a fairly decent chap by dictatorial standards (he had begun his reign with the slaughter of 200,000 supposed Communists, a feat he had not found necessary to duplicate except on the island of Timor) but a tyrant nonetheless. Stephens Inc., which appeared to be uninterested in the true activities of BCCI, exhibited a similar indifference when it came to Riady. Moreover, the Stephens people did not appear to be the least bit curious about the business endeavors of the distinguished former statesman who effected the introduction between Jakarta and Little Rock. This was Robert B. Anderson. Formerly a secretary of the treasury in the Eisenhower administration, Anderson had carried out diplomatic assignments for President Lyndon Johnson in the Middle East and had served as President Richard Nixon's chief negotiator in the Panama Canal talks before opening an offshore bank--Commercial and Trade Bank and Trust Ltd. on Anguilla--that catered to people who needed to launder money, evade taxes, or both. Jack Stephens had willingly presided over the handoff of a big hunk of an American bank to a bunch of Pakistani thugs, but he was not willing to let Riady go so easily. ``He wanted to buy into an American bank, an idea I was not enthusiastic about,'' Stephens told an interviewer some years later, perhaps making an unconscious semantic distinction. He'd seen nothing wrong with selling BCCI an American bank--they even named it First American--but he and Riady soon began planning an entirely new kind of Arkansas bank holding company, for which they required the services of Giroir and his expertise in securities law. But they also needed something that increasingly became a hallmark of the Rose firm: a willingness to perpetrate a subtle conflict of interest. Founded in 1820, well before Arkansas became a state, Rose is one of the oldest surviving law firms west of the Mississippi, one of the most competent and one of the most quietly influential. Often, in looking at the state government of Arkansas, the Rose firm and the Stephens interests, it is hard to escape the impression that one is looking at a single entity, rather along the lines of NATO. The law partnership takes its curious name from U.M. Rose, a talented attorney who dominated the firm from the mid-1860s to the end of the century, was one of the founders of the American Bar Association and is one of two Arkansans whose statues adorn the Capitol in Washington. Over the years Rose has provided Arkansas with numerous legislators and justices of the state supreme court. In 1957, when the modern civil rights era was born in Governor Faubus's refusal to integrate Little Rock's Central High, it was a Rose lawyer who acted as lead counsel to the school board. (Rose still has no black partners.) And from 1975 until 1988 the firm enjoyed a spectacular run--growing from seventeen lawyers to fifty- three--under the leadership of the dapper and charming Giroir, the first and only chairman in the history of Rose, who deeply entwined the partnership and his personal destiny in the affairs of the Stephens family's empire. During the Clinton administration, the history of the Rose firm could be divided into two periods: the Giroir years, and the shorter period, from 1987 to 1992, when the firm claimed to be a democracy, voting on its future rather than blindly following a single, charismatic leader. This democracy, however, was publicly dominated by three partners: the amiable Webster Hubbell, who was until a few days ago associate attorney general; the quiet Vincent Foster, who was deputy White House counsel until his suicide last summer; and Hillary Rodham Clinton, who as of press time is still First Lady. The firm's sea change, which generated a certain amount of hoopla from the legal press, was more apparent than real. Under the surface, Rose was much the same as always, doing good for its friends and clients while doing well for itself, but much more silently. In his years as Rose's chief, Giroir conspicuously chaired a group drawn from the State's so-called Good Suit Club. The club successfully lobbied the legislature to change the state usury law, which made owning an Arkansas commercial bank a much more attractive proposition. It also was active in convincing the State's lawmakers to revise the law restricting the formation of bank holding companies, which enabled Giroir, Riady and Stephens to make a substantial and potentially lucrative investment. On his own, Giror had purchased control of four Arkansas banks. He sold all four--including the second largest bank in the city of Pine Bluff--to Worthen Banking Corporation, the new holding company Riady and Stephens had been able to set up after state law, with Giroir's help, had been made more congenial to such things. For his part in the deal, Giroir was compensated with $53,760,294 in cash, stock and assumed debt. He also became a major stockholder of Worthen (named after the venerable and very large Little Rock bank that was the pride of the Stephens commercial banking empire) and a powerful member of its board. He received further income by renting property to the company, and he pocketed an additional $2.1 million when he sold part of his stockholdings to a company affiliated with Riady's son James (who was also Worthen's co-president). More important, he managed to create a whole new client for his firm; Rose became Worthern's principal outside counsel. These things are complicated, dull and dry, which is an excellent form of concealment, but consider the sequence of events. With the stroke of a pen and without a visible second thought, then-Governor Bill Clinton, following his traumatic period as a voter-rejected civilian between 1980 and 1982, gave life to two pieces of legislation inspired by his wife's boss--revising the usury laws and permitting the formation of new banking holding companies. In a State as small as Arkansas, where everybody of importance knows everybody else, it seems impossible that Governor Clinton could not have known that the relevant legislation would be of immense personal benefit to the boss in question, the state's most powerful family and an Indonesian investor whose presence in Arkansas seemed to be regarded a the most natural thing in the world. Last and not incidentally, the governor, by permitting the creation of the Worthen Bank Corporation, had arranged a new payday for the Clinton family through the windfall in legal fees provided to the Rose firm (Hillary Rodham Clinton, partner). When the compensation of the firm's partners was computed. Rodham Clinton has insisted, she specifically exempted herself from receiving a share of Rose's business with the state. But although Worthen could not have been brought to life without the help of her husband's government, it was not a government agency, Rodham Clinton was therefore not excluded from a partner's share of its fees. More important, Worthen also became a major depository of the state's tax receipts. Nothing unusual here; governments frequently park their deployed funds with large private banking institutions until they decide what to do with the money. But the results soon proved to be imprudent under the most charitable interpretation of the word. In 1985 Worthen Bank managed to lose $52 million of Arkansas state taxpayers' money in a purchase of government securities from a New Jersey brokerage with a questionable past and no future whatever; several of its principals ended up in the jail for fraud. With its capital wiped out in a single stroke and a seizure by federal regulators imminent, Worthen was swiftly rescued with a $30 million cash infusion from its major stockholders, in the form of a loan that paid the Stephens partners a handsome 10 percent--together with additional funds from Stephens Inc., which pocketed a $3.2 million fee for its trouble. (The risk, is true Stephens fashion, was not great. Two-thirds of the funds were swiftly replaced by Worthen's insurance company, which made Stephens Inc.'s noble rescue of the bank--and of a big hunk of the Arkansas treasury--an almost surefire, profitable investment.) Also conspicuous during the complex negotiations were Joe Giroir and his partner Webb Hubble, appearing in their capacity as members of Rose. Two questions surround this incident. First, how could Worthen have allowed the state to make such an obviously tainted investment via the New Jersey brokerage firm? Second, and more important, why did nobody in Arkansas appear before the bar of justice? The New Jersey firm was a direct lineal descendent of a peculiar regional phenomenon: the world of so-called bond daddies. The bond-daddy racket, long centered in Memphis but with many of its members drawn from Arkansas, specialized in selling questionable government securities to gullible investors, principally small banks with little financial sophistication. Here is where the oddity begins, at least as it concerns Worthen. The Stephens brothers, if not Giroir and Riady, were intimately familiar with the black arts of finance. They were also experts in the government bond market. Moreover, at least one of the principals in the New Jersey brokerage of Bevill, Bresler & Schulman Inc. (which executed the transaction for Worthen and the state of Arkansas) was well- known in the region. Bevill's operations had all the earmarks of a standard bond-daddy scam, and yet Worthen committed $52 million anyway. (At the bank, the official explanation was that co-president Jim Jett acted naively, on his own and without the supervision of his principal stockholders, which is possible but not entirely plausible, since Giroir, who represented the Stephenses, sat on the board.) Consider a virtually identical event at the same time in Ohio, in which a savings bank controlled by Marvin Warner, Jimmy Carter's ambassador to Switzerland, invested in the same kind of fraudulent securities, destroyed itself, ignited a statewide financial panic and caused Governor Richard Celeste to declare the first Ohio bank holiday since the Great Depression. A number of the responsible parties, including Warner, found themselves behind bars, some for a very long time. Why? Under long established Anglo-American law, an officer or director of a bank is governed by the ``prudent man'' rule, which states that he is personally responsible for the financial and legal consequences of his acts. In Arkansas, where the prudent man rule seems to have been suspended, a number of people were fired, but the Clinton government hauled precisely no one into court on criminal charges. Once again in Clinton's Arkansas, the law seemed to be different than it was in the rest of the United States--which makes certain Arkansans smile in knowing amusement over the fact that Bill Clinton now happens to be running the United States. iii. The near failure of Worthen in 1985, like the arrival of BCCI, proved to be another pivotal event in recent Arkansas history: Stephens, Worthen, Rose and the Clintons remained at the center of the stage, but the cast of supporting players began to change. A former Stephens executive named Ray Bradbury, who had been deeply involved in the BCCI negotiations--hardly a job qualification, one would think--took the helm at Worthen, where he discovered that the bank was also stuffed with bad real estate loans. Meanwhile, federal regulators learned that the bank had made an excessive number of insider loans, particularly to the Riadys, although what happened next is, as usual, a matter of mutually exclusive explanations. Knowledgeable observers in Little Rock and elsewhere say that the Riadys were slowly forced out of the bank by the federal government; at Worthen, the official version says that the Riadys disengaged because it was clear the troubled bank could not be a major force in international finance. In any event, the Riadys soon departed. The role of Joe Giroir also underwent a change. As a principal owner of Worthen, he was charged with securities fraud in a shareholder suit; he was also sued by Worthen itself for taking illegal ``short-swing'' profits when he sold stock to the Riady affiliate. Not only did Giroir lose his board position and partial ownership of the bank--with Giroir and Riady out of the picture, the Stephenses gradually increased their stockholding to more than 40 percent, while stoutly denying they controlled the place--but, following Giroir's disgrace in 1988, Rose lost Worthen as a client that had once paid the firm hundreds of thousands of dollars per year. As for Giroir, his troubles were far from over. In 1986 he was revealed to be a shareholder in and a substantial borrower from a Pine Bluff thrift called FirstSouth, the first billion-dollar S&L failure in the country. Before the dust had cleared, the head of FirstSouth had gone to jail together with a former president of the Arkansas Bar Association, and Giroir had sued the federal regulators while the federal regulators were suing him, putting a considerable crimp in the plans of his partners. Hubbell and Foster, to create a lucrative practice in the cleanup of the S&L crisis. (At failed S&Ls, the fees for firms like Rose could be enormous. According to one frustrated federal investigator, private lawyers in Dallas were making $500,000 per month from the thrift catastrophe, more than the total annual budget for the federal cleanup effort in the entire state of Texas--and in Arkansas, where lawyers were cheaper, the damage per capita was among the worst in the country. Somehow, Governor Clinton escaped criticism for this interesting fact.) It was clear that Joe Giroir, who had built the modern Rose Law Firm, was not the partnership's greatest liability--the firm's reputation aside, federal regulators charged that Giroir had used Rose letterhead to give FirstSouth legal advice beneficial to himself; Rose was forced to settle with the Federal S&L Insurance Corporation regulators for a reported half-million dollars--although once again there is a contradictory official version of his abrupt departure. Giroir once claimed that he left the firm voluntarily but will no longer comment on the matter. The Rose firm fell abruptly silent on this and all other subjects following recent allegations that it had shredded its Whitewater files, but its spokesman told American Lawyer in 1992 that Giroir departed in a coup arranged by litigators who were miffed that he and the firm's other rainmakers were paid substantially more than the lawyers who actually did the scut work in court--litigators prominently including Hubbell, Foster and Rodham Clinton, who actually seemed to be engaged in very little legal work at all. With the departure of Giroir, life at Rose became quieter if no less active. The three partners became the firm's public face to the world. The most physically imposing and locally active of these was Hubbell, a six-foot, five-inch giant of a man who had played football for the University of Arkansas, had almost made it into the big time with the Chicago Bears, had served briefly as mayor of Little Rock (when Rose received a significant portion of the city's bond business) and had received an interim appointment as chief justice of the Arkansas Supreme Court from Governor Clinton. (According to a reliable source, Hubbell's father-in-law. Seth Ward, a septuagenarian self-made entrepreneur, once complained that keeping Hubbell in politics cost him $100,000 a year.) The second was Foster, once described as an immaculately brown-suited man in an immaculate brown office, who was regarded as the ``soul'' of a firm that, according to grand jury testimony, shredded volumes of his records the moment an independent federal prosecutor appeared in the vicinity. The last was Rose's first female partner, Rodham Clinton, who occasionally did some lawyering in the intervals when she wasn't working for the Children's Defense Fund, attending to her personal business affairs or serving as the governor's first lady. The three were described to American Lawyer as ``big, big buddies''; Rodham Clinton's office was next door to Hubbell's, and much of her work was actually done by Foster. The three also were closely entwined in a curious financial arrangement. This was Mid-life Investors, a partnership set up by E.F. Hutton in 1983. Hubbell, Foster and Rodham Clinton each kicked in $15,000 and named each other--rather than their spouses--as beneficiaries. But although the fund was active at least until 1991, Rodham Clinton reported annual dividends of under twenty dollars from Mid-life Investors, a sum that comes as a surprise to Roy Drew, the financial counselor who supervised the partnership and invested its money in such 1980s takcover candidates as Diamond Shamrock and Firestone Tire. According to Drew, with the likes of Sir James Goldsmith and the Japanese offering huge sums for the stock of Shamrock and Firestone, there was no way Mid-life Investors could have failed to reap substantial profits. Although Rodham Clinton was a litigator--that is, a lawyer whose task is to appear in court, if only to force the other side to settle--and an attorney who was named one of the 100 most influential in the country by the National Law Journal in 1988 and 1991, she was almost never seen in the courtrooms of Little Rock; some court reports remember an occasional appearance, and one could not remember having seen her at all. According to a search conducted by American Lawyer, she tried just five cases during her fifteen years at Rose; other published sources say her work revolved around copyright infringement cases involving songwriters and bread companies. But paradoxically, in view of what happened to Giroir, she (like Giroir) received extra compensation for the business she generated from her extracurricular activities, even if she did not work on the cases at all. For example, she was only one of two Rose partners to act as a corporate director, serving at various times on the boards of four companies carning $64,700 on 1991 from director's fees alone. (Her 1991 salary from Rose was in the vicinity of $110,000; her husband earned $35,000 and go to live in a free house.) She was on the board of Wal-Mart, a Rose client that Stephens had launched on the road to glory. (Rodham Clinton also owned $80,000 worth of Wal-Mart stock.) She served Southern Development Bancorp, a holding company created to give development loans in rural Arkansas, which, according to the The Washington Post, paid Rose somewhere between $100,000 and $200,000 in fees. In 1989 she joined the board of TCBY yogurt company, which occupies the tallest building in Little Rock. TCBY then proceeded to pay Rose $750,000 for legal work during the next few years. Last, and puzzlingly, she was a director of Lafarge, a giant French cement company that had no discernible, connection to Arkansas except like Stephens Inc., it was engaged in burning hazardous waste. (As president, Bill Clinton did nothing to stop operation of an Ohio Waste incinerator, partly backed at one time by Stephens Inc., despite the fact that it didn't work, had no legal permit and his own vice president had promised that it would never operate until it was thoroughly investigated, which it wasn't.) With Rodham Clinton aboard at Rose, the firm's long established connections to the governor's office were made firmer still. Rose, the gold standard of Arkansas law firms, had long enjoyed unusual access to the state's corridors of power. It both advised and did the bidding of the powerful family that acted as the state's shadow government, and during the Clinton years, the Rose Law Firm sometimes behaved as though it were an agency of the state rather than a legal partnership with offices in a converted YMCA. The intimate connection between Rose, Stephens Inc. and the governor's office may help explain how the Stephens family made a vast amount of money when its most visible enterprises were doing no such thing. The investment bank had hit a gusher when it took Wal-Mart public, made a pleasing sum on the stock of Tyson Foods, the nation's largest chicken processor, but otherwise cut no great swath in the stock market. Until recently, Worthen was a disaster area. At least part of the answer for the family's continued prosperity seems to reside in the unusual way Bill Clinton's state dealt with Stephens Inc.'s old specialty, government bonds. iv. The crown jewel of Bill Clinton's avowed attempt to create industries and jobs in the state was an unusual entity called the Arkansas Development Finance Authority (ADFA). According to well-established common law, a government-chartered authority is supposed to be an independent body, insulated from the hurly-burly of everyday political life and its temptations. But ADFA, written into law with the help of Webb Hubbell, was no such thing. All ten members of its board were appointed by the governor. Though it was specifically granted the power to issue industrial development bonds, the governor, personally, was required to approve every bond issue. State agencies with the ability to issue industrial bonds are supposed to distribute the money (and thus create jobs and wealth) to companies and individuals who can't receive lines of credit on favorable terms from the usual financial institutions or venture capitalists. On significant occasions, however, ADFA spread its bounty to less than deserving clients. Nor do the peculiarities of this body end here. Although it issued bonds, ADFA did no due diligence--the common practice of engaging an outside financial expert to examine the applicants for the proceeds and determine if they actually need the money and are otherwise worthy recipients. (Due diligence, according to an ADFA spokesman who happens to be the brother-in-law of one of Witt Stephens' daughters, was the responsibility of the purchasers of the bonds under the ancient principle of caveat emptor--a practice that had previously helped the region's bond daddies flourish and had wiped out the capital of the Worthen bank.) While its spokesman is a little fuzzy on the subject, it seems that there was no regular ADFA oversight to ensure that money was being spentaccording to the original purpose of the loan, although an ADFA employee might occasionally be sent into the field to discover if everything was tickety- boo. It is also somewhat difficult to discover just what ADFA was actually doing. A recent examination of the log kept at ADFA headquarters for the enlightenment of wandering reporters and inquisitive citizens reveals just twenty-five bond issues from 1985 to the present--or twenty-six, if you count the paperwork on a bond issue that was removed in a reporter's presence. Moreover, the log suggests that ADFA was heavily involved in good works with religious orders. But according to the Los Angeles Times' count of ADFA's activities, the authority released seventy industrial bond issues--according to my count, the number is sixty-five--none of them to religious charities or university hospitals, and most of them missing from the official log. Which begs the question: Just what was ADFA doing with the $719 million it dispensed (or whose dispensation it authorized) as of January 1992? ``AFDA,'' says Larry Nichols, a dismissed authority official, ``was set up by Clinton for Dan Lasater.'' Now, it should be borne in mind that Nichols is something of an Arkansas character and, in some circles, a figure of fun. A well-known supporter of the Nicaraguan contras, Nichols was also the person who originally alleged that Clinton had an affair with Gennifer Flowers and four other women, only to destroy his credibility when he retracted his charges in a document remarkable for its abject contrition. But there are those in Arkansas who insist that Nichols is neither entirely a vindictive nut nor the sort of notorious regional liar who has to hire a man to call his own dog. ``You ought to listen to Larry Nichols,'' says a Little Rock political consultant. ``He says a lot of things, but sometimes he tells you something you really need to know.'' And, certainly, there is something intriguing about Bill Clinton's relations with Lasater, a man no governor in his right mind would let in the front door. If Dan Lasater was not the largest cocaine user in the state of Arkansas, he was certainly the most conspicuous one. A prosperous Little Rock bond dealer, he was an acquaintance of the Clinton family and a contributor to the governor's political fortunes. Lasater distinguished himself in other ways, too. He served ashtrays full of cocaine at parties in his mansion, stocked cocaine on his corporate jet (a plane used by the Clintons on more than one occasion) and later told the FBI that he had distributed cocaine on more than 180 occasions. ``I shared my success . . . in that manner,'' he explained. He was also a patron of Governor Clinton's cocaine-using half-brother, Roger, employing the younger man in his thoroughbred racing stables in Florida and claiming that he gave Roger Clinton $8,000 to pay off debts to drug suppliers. By 1985 it was also known that Lasater was the subject of a police investigation that even the most uneducated guess would suggest, could end in only one way. But that year, Governor Clinton deemed Lasater worthy of handling a $30.2 million bond issue to modernize the state police radio system, despite the fact that the expenditure would normally be made by an appropriation from the treasury and the fact that Lasater was about to be busted. Nonetheless, Clinton vigorously lobbied the legislature, ignored the wishes of the Stephens family and won the day, giving Lasater & Co. a handsome $750,000 underwriting fee, according to the Los Angeles Times. In 1986 Lasater was sentenced to two and a half years in prison, with Roger Clinton testifying against him at his trial. In 1990 he received a state pardon from Governor Clinton. For whatever it's worth, one of the few people to have access to the office of the late Vincent Foster during the three days it was unsealed following his suicide was White House official Patsy Thomasson, who managed Lasater's business affairs while he was in jail. But in the Clinton system, perfected in Little Rock and now being practiced in Washington, none of these things should be considered a mistake or an aberration. Lasater was not the only strange thing about the Arkansas bond business during the time of Bill Clinton. Whenever a normal state issues bonds, there are many ways for a variety of people to get well on the public nickel. The beneficiary of the proceeds receives a loan at below-market rates. The financial institution that sold the bonds receives underwriting fees. For each bond issue, an outside attorney is engaged to certify that the deal conforms to the law and prepares the documents required by the Internal Revenue Service and the federal treasury. A bank is chosen as trustee for the money, collecting the repayments from the lucky borrowers and making the repayments to the purchasers of the bonds. And the borrower itself almost invariably retains a lawyer. But when one examines the activities of ADFA, a certain pattern emerges concerning at least some of the beneficiaries of Arkansas largess. For example, one of the very first ADFA bond issues provided $2.75 million to POM, a manufacturer of parking meters in Russellville, whose president happened to be Seth Ward II, the brother-in-law of Webb Hubbell. Despite the fact that Hubbell was chairman of the conflicts committee at Rose, he seemed to see nothing amiss in the fact that Rose then collected a fee as ADFA's certifying attorney or that he himself served as POM's attorney. Nor did Hubbell seem to see anything unusual in the fact that he was representing the Resolution Trust Corporation in its case against the auditors of Madison Guaranty, despite the fact that his father-in-law, the senior Ward, had not repaid millions in loans from the thrift, or that Ward had received an airplane from Madison in the bargain. Between 1985 and mid-1992 Stephens Inc. was involved in the underwriting and sale of 78 percent of ADFA's housing and industrial bonds, an unsurprising figure considering the firm's familiarity with the market and its clout in the state. Still, considering Stephen's involvement in the authority's affairs, Governor Clinton did not appear to feel that it was ever so slightly wrong to appoint two Stephens associates--a vice president of one of Worrhen's banks and a vice president of a chain of nursing homes partly controlled by the Stephens empire--to ADFA's ten-member board. Nor did the man who signed off on every single ADFA bond issue exhibit suspicion when Stephens seemed to be supplementing its brokerage fees by helping itself to ADFA's money in the form of favorable loans. Meanwhile, at least another member of the board, the vice president of Twin Cities Bank, an institution that served as trustee in one of ADFA's tangled deals, appeared to take a similar double-dip. And the governor's wife's law firm was not only receiving a healthy chunk of ADFA's legal business, but Rose apparently found nothing wrong with affiliates of Stephens receiving ADFA money, or with the fact that on not one but two occasions, ADFA issued bonds that benefited the relatives of Rose partners. In 1988 and 1989 ADFA lent a total of $1.37 million to the Pine Bluff Warehouse Company. Rose received $22,321 in legal fees from ADFA. The trustee bank was Worthen's National Bank of Commerce in Pine Bluff, whose vice president sat on the ADFA board and whose chief executive officer was not merely a member of Pine Bluff Warehouse's board but the father of a senior Rose partner, William Kennedy III, now associate White House counsel. Stephens, unsurprisingly, underwrote the bonds. In 1989 ADFA loaned $4.67 million to Arkansas Freightways, whose largest outside stockholder was Stephens Inc. Co- counsel on the bond issue was Rose. The trustee bank's executive vice president was a member of the ADFA board. The underwriter was Stephens. Also in 1989 ADFA tried to loan $83 million to a Texas entrepreneur for the purpose of bailing out Beverly Enterprises, the country's largest operator of nursing homes, 10 percent owned by Stephens, whose vice president sat on the ADFA board, at a time when Beverly's stock was being hammered by the company's persistent losses. A swift and decisive halt to the deal was called by Arkansas Attorney General Steve Clark, a rising political star who was expected to be a strong gubernatorial candidate in 1990, and who claimed that a Stephens-Beverly lobbyist had offered him a $100,000 bribe (as campaign contributions, of course) if he would just lay off and let the deal go through. The lobbyist was later cleared by an Arkansas court, but Clark was caught charging personal expenses on his state credit card. His political career in shambles, he was later disbarred. Current reports place him somewhere in the state of Georgia. But these were only the most conspicuously questionable of ADFA's doings, the ones most easily understood by the public and the press. There was also the question of the true extent of Rose's involvement in the authority's bond business. According to the Daily Record, a Little Rock business journal, Rose ranked fourth among the law firms working directly for ADFA, with fees of only $175,000 for the years up to 1991. But not everyone agrees with this assessment. When Frank White, the only man ever to defeat Clinton in a gubernatorial election, tried to repeat the feat in 1986, his campaign claimed that Rose had actually been in on every ADFA deal (for the authority or for the recipient) while Clinton was governor. Unfortunately, the relevant data was assembled under the supervision of White's political consultant, Darrell Glasscock, a former Louisiana state official and a great supporter of the contras (an occupation that appears to have been an Arkansas cottage industry). Reached recently by phone, former Governor White, now an official of Worthen's principal competitor, the First Commercial bank holding company, clearly wishes he had never heard of Glasscock, cheerily questions Glasscock's veracity and pleasantly turns aside any questions about Rose. When a visitor to ADFA asks for the complete documentation on any particular bond issue, he is presented with a thick volume that, if placed on a chair, would allow him to dine with the grown-ups. A small sampling of these volumes reveals an interesting thing: every company examined, including POW, Arkansas Freightways, Pine Bluff Warehouse and Concert Vineyards appears to be eminently creditworthy. These are the sorts of enterprises that could walk in the door of any bank and walk off with any reasonable sum they needed. Why, then--in addition to the mutual back-scratching described above--were they being given loans at below market rates by a desperately poor state with other uses for its money? This question takes added luminosity from the fact that ADFA really didn't work very well. The old Arkansas Industrial Development Commission, started by Orval Faubus, created 90,000 jobs in nine years. And it had no bonding power. After seven years under the Clinton regime and with tens of millions in issued loans, ADFA had created just 2,700 jobs, many at wages significantly below the national standard. This anemic showing obscures the fact that ADFA had yet another purpose: its generosity was returned in the form of campaign contributions for William Jefferson Clinton. According to the Los Angeles Times, in the 1990 race for the governorship, the recipients of ADFA's largess contributed $400,300, nearly one-fifth of the Clinton war chest. They then kicked in with millions more for the presidential race. Outside Arkansas the white-shoe investment bank of Goldman Sachs, which later contributed its co- chairman, Robert Rubin, to President Clinton's inner circle of economic advisers, raised millions for the presidential race and even paid for a substantial hunk of the Democratic National Convention. According to ADFA's incomplete records, Goldman was either the lead or sole underwriter of at least $400 million in ADFA bonds. In addition, two of ADFA's board members were active Clinton fund-raisers, which raises yet another question among many: Wasn't this against the law? For once, the answer is terse and straightforward. Not in Arkansas. Under the Arkansas ethics-in-government act, passed in 1988 and, according to state legislators, either drafted or inspired by Hubbell, state legislators were required to report possible conflicts of interest. Surprisingly, the laws specifically exempted the governor and other elected or appointed officials, including officials of state agencies and commissions. Moreover, these officials were not even required to report dealings with entities--such as Rose--that employed their relatives. This was not the only remaining service that Rose had provided to the governance of its state. When the time came to rewrite the state's incorporation laws, it was Rose that drew up the 397-page treatise that formed the basis of the legislation. Well, somebody has to draft a state's legislation, and under Arkansas' unusual ethics law, it was perfectly all right for Rose to do just that. Less clear (if anything in these murky waters can be described as clear) is just why Clinton seemed so eager to assist the Stephens family, which was hardly enamored of the man and kept bankrolling the candidates who ran against him for governor until it experienced a change of heart in 1990. Witt Stephens habitually referred to Clinton as ``that boy.'' In a moment of candor his brother Jack once remarked that ``it would be awfully easy for Stephens, if we wanted to be close to a governor, to be close to Bill Clinton.'' Nonetheless, the Clinton governorship's assistance to Stephens extended well beyond ADFA. During Clinton's years in Little Rock, the Stephens interests were involved in some 61 percent of the $7 billion of all the state bonds issued in Arkansas. Contrary to state law, Stephens Inc., according to the Arkansas Democrat-Gazette, was given the underwriting for the state university system without competitive bids from other bond dealers. The Fayetteville campus alone, where the Clintons had once taught law, had $33 million in bonds outstanding. Under Clinton, Stephens devised a plan to rescue the state's troubled student loan authority, in which the authority's bonds would be bought by the state employees' retirement funds. An independent consultant--Roy Drew, the very man who created Mid-life Investors for Hubbell, Foster and Rodham Clinton--was brought in to examine the deal. Drew thought it was a terrible investment and so did the state's auditor, Julia Hughes Jones. But Drew was dismissed, Jones's budget failed to pass the legislature (the first time ever for an Arkansas state auditor) and she began to receive late- night harassing calls from a collection agency--concerning, ironically, her own daughter's student loan, which was current. In the upshot, the retirement funds bought $100 million of the loan authority's bonds, another $100 million in the bonds of two other state agencies, ADFA was given the task of overseeing the retirement fund's investment policies and Stephens Inc., according to The Philadelphia Inquirer, made $1.8 million. These were very considerable favors to a family that not only bankrolled Clinton's opponents but seemed to despise him as a man. But Bill Clinton's canny instinct that the Stephenses needed to be appeased--rather than ignored-- eventually paid off. After Clinton's unexpected loss in the New Hampshire primary, with the campaign coffers bare, the staff paying its bills on their personal credit cards and federal matching funds just beyond reach, the Worthen Bank rescued the candidacy with a prearranged $3.5 million line of credit, selflessly advanced at a lucrative rate of interest. Later, Worthen--whose executives, like many Stephens executives, experienced a spasm of Arkansas patriotism that caused them to reach for their checkbooks--became the Clinton campaign's depository of $55 million in federal campaign funds, which, in effect, was free money. Worthen did not have to pay any interest on this staggering sum, but as long as it was on deposit (and as long as Worthen, with its undistinguished track record in the department of government deposits, managed not to lose it), the bank was free to use it to make itself some money that it got to keep. And when the votes were counted, everybody who wanted to go to Washington got to go to Washington: Bill Clinton and Hillary Rodham Clinton, president and First Lady; Mack McLarty, White House chief of staff; Vince Foster, deputy White House counsel; Webb Hubbell, associate attorney general; Patsy Thomasson, a White House aide. Jack Stephens, though mentioned as a candidate for secretary of the treasury, had, it now seems safe to say, the good sense to stay home. Oh, and one last thing: when Whitewater special prosecutor Robert Fiske--who once defended Clark Clifford, the famed friend of Jack Stephens' old client, BCCI--arrived in Little Rock, something strange happened. Worthen Bank had a fire. Is this a great country, or what? ____________________