[Congressional Record Volume 142, Number 113 (Monday, July 29, 1996)]
[Senate]
[Pages S9082-S9083]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE POLITICS OF WHITEWATER
Mr. SIMON. Mr. President, my attention has been called to an
article in the Miami Herald by Ernest Dumas, who is described in the
Miami Herald as ``Sometime critic of Bill Clinton who teaches
journalism at the University of Central Arkansas, and writes a column
for the Arkansas Times. A former political writer, and associate editor
of the Arkansas Gazette in Little Rock, he wrote this article for the
Herald.''
I don't believe I've ever met Mr. Dumas, but he has written an
article that gives a perspective on the Whitewater situation that I
frankly have not seen in the media elsewhere.
I call this to the attention not only of my colleagues in the Senate
and in the House, but I call this to the attention of editorial writers
who may be looking through the Congressional Record.
It gives a very different perspective on ``The Politics of
Whitewater.''
I ask that the Miami Herald article be printed in the Congressional
Record.
The article follows:
[From the Miami Herald, June 23, 1996]
The Politics of Whitewater
(By Ernest Dumas)
When Sens. Jesse Helms and Lauch Faircloth, the North
Carolina Republicans, had lunch in 1994 with their old friend
and protege, Judge David R. Sentelle of the U.S. Court of
Appeals for the District of Columbia, even they must have
have fathomed the importance of what Sentelle was about to
agree to do.
His Judicial panel would remove Robert B. Fiske Jr. as the
independent counsel for Whitewater and replace him with a far
more doctrinaire Republican, Kenneth W. Starr, who had lost
his job as solicitor general when Bill Clinton became
president and who was representing the Republican National
Committee and groups hostile to the Clinton administration,
including the tobacco industry.
Starr would keep the Whitewater investigation on track for
the 1996 presidential election all right, but he would prove
far more valuable to his party.
The majority report of the Senate Special Whitewater
Committee last week said the two lending institutions that
were the heart of the scandal were ``piggy banks for the
Arkansas political elite.''
It was half true. A who's who of Arkansas Republicans had
helped David L. Hale plunder his federally subsidized small
business investment company.
Hale, who triggered the Whitewater investigation and the
appointment of an independent prosecutor when he accused
President Clinton of asking him to make an illegal loan in
1986, actually was illegally channeling federal tax dollars
into the campaign of Clinton's Republican opponent. Moreover,
according to his testimony at the trial in April, he was
paying the Republican state chairman to help him defraud the
federal Small Business Administration. Another former state
Republican chairman and perennial candidate was on the books
for a substantial federally subsidized loan when the Clinton
administration moved to shut Hale down in 1993. Other
prominent Republicans collaborated with Hale to skim money
from the company.
Other than Gov. Jim Guy Tucker, then a private businessman,
and the ubiquitous James D. McDougal himself, the owner of
Madison Guaranty Savings and Loan Corp., no Democratic
political figure had anything to do with the dummy companies
and scams that Hale ran.
Thanks to Kenneth Starr, this is not the picture Americans
got of Whitewater.
Not only did Starr not seek indictments against the
Republicans when they began to turn up on every chapter of
the examinations of Hale's small-business lending company, he
did not call them as witnesses at the trial at Little Rock.
The prosecutors persuaded the trial judge not to allow the
deeds of Hale's Republican collaborators to be used as proof
of selective prosecution. It would have confused the picture
of Whitewater, a story about the rascality of Bill Clinton
and his Democratic friends.
The special prosecutor's refusal to explore any of the
Republican bigwigs to the glare of trial--while leveraging
misdemeanor pleas from many spear carriers in the real estate
deals who made no profits from the deals--makes a compelling
case that the investigation is politically motivated and the
prosecution selective.
Hale ran a federally licensed and subsidized small business
investment company at Little Rock called Capital Management
Services, which in 1992 applied to the Small Business
Administration for another $45 million. It claimed an
expanded capital base. He didn't get approval before the
election and Clinton's SBA in 1993 got suspicious. When
auditors began digging into the company's records, Hale told
the SBA to just forget the whole thing. Clinton's new SBA
director, Erskine Bowles, referred the matter to the Justice
Department. When the SBA put Hale's
[[Page S9083]]
company in receivership, 86 percent to fits loans were
overdue and its accumulated losses exceeded its private
capital by 171 percent.
On July 20, 1993, the FBI raided Hale's offices and
confiscated his files. By August Clinton's new U.S. attorney
for the Eastern District of Arkansas, Paula Casey, prepared
to ask a federal grand jury to indict Hale for defrauding the
SBA.
What the SBA inspectors and the FBI had found was that Hale
had essentially been dealing with himself and a few cronies,
including two state Republican chairmen and other Republican
politicians and, briefly, seven years earlier, Jim McDougal
and Jim Guy Tucker, then a private citizen licking the wounds
of a crushing defeat at the hands of Bill Clinton in the 1982
governor's race.
Hale's story about Clinton asking him to make an illegal
loan to one of his old business partners seems implausible
because Hale at the time was funneling money illegally from
his small business development company into the campaign of
Clinton's Republican opponent, former Gov. Frank White, who
had appointed Hale to his municipal judgeship in 1981.
Here are details about some of the Arkansas Republicans who
have avoided the harsh light of Special Prosecutor Starr:
Hale's fellow municipal judge, Bill Watt, testified at the
April trial that Hale had written a $10,000 check to the
company headed by his law partner, Richard M. Grasby, the
Republican county chairman, with directions that $2,000 of it
be laundered and put into White's campaign against Clinton.
Watt contributed $1,000 in the name of his secretary and
$1,000 in the name of the secretary's daughter. The gifts
never showed up in White's campaign reports. White says he
doesn't think he got them. Using the proceeds of a federally
backed small business loan for political gifts is illegal.
Defense attorneys elicited the story from Watt, a prosecution
witness.
Starr is prosecuting two rural bankers this week on charges
that they arranged $13,000 in contributions to Clinton's
campaign and reimbursed themselves by padding their expenses
at the bank. The gifts to White's campaign from federal funds
seemed to be analogous, but Starr passed when the gifts came
to light last year.
More intriguing was Starr's pass on Bob Leslie, a Little
Rock lawyer who was the state Republican chairman and later
national committeeman, during the 1980s. Leslie had been the
Republican candidate for Congress from South Arkansas' Fourth
District in 1982. When Hale was on the stand, a defense
lawyer, Bobby McDaniel of Jonesboro, asked him about a
$20,000 SBA-guaranteed loan to Leslie. Hale said it was a
``pay-off'' for Leslie's help in a scheme to defraud the
Small Business Administration. Leslie had written legal
opinions to the SBA saying Hale qualified for more SBA funds
when he didn't.
``He had a tax problem, and I loaned that money to him,''
Hale said, ``The U.S. attorney said they were not going to
charge him.''
Leslie wasn't called as a witness. He told reporters he had
done nothing wrong.
Hale also made a federally backed loan of $275,000 to a
minority mortgaging company Leslie formed, which was not
repaid. Leslie told a reporter that he actually didn't get to
use the money.
Hale had an unusual affinity for Republican chairmen.
Leslie's predecessor as state chairman was Ken Coon, the
Republican nominee for governor in 1974 and an unsuccessful
candidate for Congress in the Republican primary last month.
When he applied to the SBA for leverage capital the last
time, Hale listed Coon as the recipient of a substantial loan
for a disadvantaged business if the SBA was forthcoming. Coon
was a director of a burial insurance company Hale owned.
Another rising Republican star who became entangled in
Hale's web but was ignored by the special prosecutor was
Robert Boyce, a young businessman who ran unsuccessfully for
the legislature in 1992 from Little Rock's silk-stocking
Pulaski Heights district.
Boyce was president of a company that was supposed to
handle liquidation sales for stores going out of business. In
November 1988 Hale wired $300,000 into Boyce's account and he
wrote checks totaling $250,000 to two men who were later
convicted of conspiring with Hale to defraud the SBA. Boyce
told SBA inspectors in 1994 that while he was the purported
owner and president of Retail Liquidators Hale secretly owned
it and used it as a front to obtain loans from his SBA
lending company. Federal law bars small business lending
companies from lending to the owners.
Boyce wasn't charged or called as a witness at the trial.
The most fetching story is that of Sheffield Nelson, the
former Republican state chairman and now the Republican
national committeeman from Arkansas. Nelson, the former
president of Arkansas Louisiana Gas Co., the state's largest
natural gas distributor, was the Republican nominee for
governor in 1990 against Clinton and would be defeated again,
this time by Tucker, in 1994.
It was Nelson who arranged for Jim McDougal, a friend and
business partner, to tell a New York Times reported in 1992
about his ancient Whitewater land deal with the Clintons.
Unlike the Clintons, who lost money, Nelson and his pal,
Jerry Jones, owner of the Dallas Cowboys, profited immensely
from real-estate dealings with McDougal.
While perusing the want ads of The Wall Street Journal in
the early `80s, McDougal was attracted by an ad for the sale
of land on Campobello Island, off the coast of Maine,
President Franklin D. Roosevelt, McDougal's idol, had
summered there as a youth. The owners wanted $825,000 for
3,400 acres.
Convinced that the land could be developed for quick
resale, McDougal persuaded Nelson and Jones to invest with
him. Nelson and Jones put up $225,000 each. It was the first
real estate venture for McDougal's new thrift, Madison
Guaranty. The savings and loan subsequently would put up
millions of dollars to develop the desolate and blustery land
but the agents would never find buyers.
Despite the early charges, Whitewater Development Corp.,
the Clintons' partnership with the McDouglas, never cost
Madison Guaranty and the American taxpayers a penny. But
Campobello Estates cost them plenty. It was the single
biggest contributor to the S&L's demise. The Federal Home
Loan Bank Board warned as early as 1984 that the investment
was imprudent and that it was imperiling the thrift's
solvency. Nelson and Jones never put anything more into it.
It was Madison's money.
After McDougal was ousted from the management of Madison in
1986 and it was closed in 1989, the Resolution Trust Corp.
found itself owning Campobello. Nelson and Jones wanted out
of the deal. Amazingly, an old football-playing buddy of
Jones at the University of Arkansas, Tommy Trantham, had been
appointed supervisor of Madison. Trantham arranged for
Madison to buy out Nelson and Jones at a handsome profit of
$136,500 each, a buy-out ultimately borne by the taxpayers.
The RTC, then under the George Bush administration, approved
the buy-out.
William Seidman, who headed the Federal Deposit Insurance
Corp. and the RTC at times during the banking and thrift
crises, later expressed shock at the buy-out. His experience,
he told The Fort Worth Star Telegram, was that limited
partners didn't even get their money back, much less a hefty
profit.
Nelson's and Jones' roles never surfaced in the special
prosecutor's case. They never got a summons from Sen. Alfonse
D'Amato, R-N.Y., to explain themselves before the Senate
Whitewater Committee.
It is this selective prosecution that is the peril of
political investigations like Starr's. The prosecutor does
not try to solve a crime and punish the perpetrator but to
identify one subject or group and then find a crime.
``Therein lies the most dangerous power of the
prosecutor.'' Justice Robert Jackson of the U.S. Supreme
Court, who would be the chief prosecutor at Nuremberg, warned
in 1940, ``that he will pick people that he thinks he should
get, rather than cases that need to be prosecuted. With the
law books filled with a great assortment of crimes a
prosecutor stands a fair chance of finding at least a
technical violation of some act on the part of almost
anyone.''
With 50 FBI agents and an army of attorneys at his disposal
and boundless jurisdiction, the Whitewater prosecutor's
problem was that he found more than he cared to prosecute,
and in exactly the wrong places.
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