Clintons to Deliver Files on Land Deal to Investigators : Probe: First Family’s action is tied to grand jury subpoena that will help keep the papers private.

President Clinton’s personal lawyer today will begin giving federal investigators records of the First Family’s Whitewater Development Corp. investment after a grand jury subpoena was issued, the White House said Wednesday.

The subpoena, issued Dec. 24 and disclosed in a White House statement Wednesday night, directs that the documents be surrendered to the Justice Department by Jan. 18. The White House said it would comply.

Bruce R. Lindsey, senior adviser to Clinton, said in the statement that the subpoena was issued at the request of the Clintons’ lawyer, David E. Kendall, who sought the order “to assure the integrity of the documents and the privacy of the process.”

Under the subpoena, the papers may only be viewed by Justice Department officials and are less likely to be made public.

It also has the effect of impeding access to the documents by Republicans in Congress who are trying to conduct an independent inquiry, Republican sources in Congress charged Wednesday.

The Justice Department is investigating the Clintons’ investment in an Ozark Mountains vacation property development known as Whitewater to determine whether funds were improperly diverted to the project from Madison Guaranty Savings & Loan, a failed thrift run by James B. McDougal, the Clintons’ partner in the Whitewater deal.

The five boxes of records to be delivered to the Justice Department include papers relating to Whitewater removed from the office of former deputy White House counsel Vincent Foster, who committed suicide last July 20.

The White House agreed two weeks ago to surrender the Foster papers but until Wednesday had not said when it would do so.

With attention to the real estate deal growing, the way the matter is resolved could have a lasting effect on Clinton’s presidency, his advisers and critics agreed.

What had appeared to be benign and small-scale financial dealings while Clinton was governor of Arkansas are now being cast in terms of scandal with a grand jury subpoena, demands for a special prosecutor and calls for congressional hearings unless the White House can provide persuasive answers to dozens of questions.

White House officials--from the Clintons on down--have said they believe that continuing interest in the matter is driven by partisan politics. They have insisted that allegations of financial wrongdoing, conflicts of interest and gross cronyism are groundless.

“It’s nothing but a Republican witch hunt,” said White House political adviser Paul Begala.

But Leonard Garment--who had extensive experience with scandal as a White House lawyer under former President Richard Nixon--said the Whitewater matter could be a continuing migraine for the President and First Lady Hillary Rodham Clinton. In the lingo of Washington journalism, the Whitewater story has “legs”--or staying power, he said.

“The Whitewater affair potentially has legs, arms--and very sharp teeth,” he added.

What is driving the Whitewater story are unanswered questions about the way the Clintons conducted their public and private business dealings. Here is an abbreviated rundown:

*

How much did the Clintons invest in the Whitewater real estate deal and how much did they gain or lose?

According to official accounts from the Clintons, they invested $68,900 in Whitewater beginning in 1978 while McDougal and his wife, Susan, put up $92,000. Despite the unequal shares, the partnership was structured as a 50-50 split. Why?

The Clintons have said they were merely “passive investors” in Whitewater who gave McDougal “total control” over the operation. They said they have no records of their investment or any profit or loss from it. Why not?

The investment raises several additional questions: Did the Clintons really put up their share of the partnership funds or were the funds a loan or gift from McDougal and his wife? If the Clintons did invest the money in Whitewater, where is the documentation?

Whitewater failed to file income taxes for three years in the 1980s and the impact on the Clintons’ tax returns is unclear. Were the Clintons’ finances and tax returns properly handled in those years?

There are also questions about the relationship between Madison Guaranty and Whitewater that may be covered by the records of the two entities, some of which are now in the hands of the Justice Department. Others have not been located.

McDougal said he delivered all the Whitewater records to the Arkansas governor’s mansion in 1987, but the Clintons deny that they ever received them. There are allegations that some Whitewater land sales were sham transactions to hide contributions to Clinton’s gubernatorial campaign and that Madison Guaranty funds were diverted to Whitewater.

Investigators also want to know about the alleged diversion of $110,000 in proceeds from a Small Business Administration-backed loan to buy land for the Whitewater development.

*

Were the Clintons, through their investment, parties to mismanagement of a federally insured thrift?

Madison Guaranty--owned by their friend, political contributor and investment partner McDougal--grew from an institution with assets of $6 million to a $107-million thrift in a three-year period in the early 1980s. Despite warning signs that the S&L; was making questionable loans to insiders and numerous Clinton political associates, authorities did not close the bank until four years later.

A state securities commissioner appointed by Clinton approved a plan to recapitalize Madison Guaranty, which at the time was represented by Hillary Clinton and her partners at a Little Rock law firm. The thrift finally was shuttered in 1989, at a cost to taxpayers of at least $47.6 million.

Was Clinton aware of the thrift’s problems and did the institution receive favorable regulatory treatment while he was governor? Who profited from the long delay in closing it?

Some of the loans that went into default were made to people with close ties to the Clintons--including current Gov. Jim Guy Tucker and Seth Ward, the father-in-law of Webster Hubbell, a former law partner of Hillary Clinton and now the No. 3 official at the Justice Department.

Madison Guaranty executives staged a fund-raiser in early 1985 to help Clinton retire $50,000 in debts from his 1984 gubernatorial campaign. Did the bank or its officers provide any other money for Clinton campaigns before or after 1985? Did the bank do any personal favors for the Clintons?

*

Have the Clintons dealt forthrightly with questions about the matter? Have they or their associates in any way interfered with the inquiries?

Suspicions about suppression of evidence arose last month when it was revealed that Whitewater-related files were secretly removed from the office of Foster and deposited with the Clintons’ personal attorney two days after Foster’s suicide in July.

After initially resisting turning over the files to the Justice Department for its inquiries into McDougal’s business dealings and the death of Foster, Clinton relented just before Christmas and agreed to give up the records.

There is also a question about whether there are additional relevant documents in the files of the Rose Law Firm in Little Rock, where Hillary Clinton, Hubbell and Foster all worked together throughout the 1980s.

All three reportedly performed legal chores for McDougal and Madison Guaranty, but only the Foster files have turned up and it is not known how complete they are.

*

Was the initial investigation of Whitewater/Madison Guaranty delayed for political reasons and is the case being fairly investigated by the Clinton Justice Department?

Former Atty. Gen. William P. Barr, who served under former President George Bush, said Wednesday he believes that the U.S. attorney’s office in Little Rock concealed from him in the fall of 1992 the existence of a Resolution Trust Corp. referral to the Justice Department seeking a criminal investigation of Madison Guaranty and Whitewater.

The delay could have aided then-candidate Clinton’s campaign for the White House by deferring a criminal investigation in the final months of the 1992 campaign.

Barr said the Little Rock office failed to put the referral into two different reporting systems that would have brought the sensitive matter to his attention. He said he learned of the referral shortly before the November, 1992, election.

There are also questions about the ability of the Justice Department under Atty. Gen. Janet Reno, a Clinton appointee, to conduct an impartial investigation of the President.

Republicans in Congress have been pressing her to name an independent counsel to study the Whitewater affair.

What Do the Investigators Want?

Justice Department attorneys are investigating the failed Madison Guaranty Savings and Loan, headed by a former Clinton friend, business partner and political ally, James McDougal. Investigators are trying to determine whether depositors’ funds were diverted to Clinton’s 1984 gubernatorial campaign and to Whitewater Development Corp., a real estate venture once owned by the Clintons and McDougal. Clinton aides have said the President and First Lady Hillary Rodham Clinton never knew the source of the campaign money and were inactive co-owners of what they say was a money-losing real estate deal.

SOME KEY QUESTIONS INVESTIGATORS ARE SEEKING TO ANSWER

* How much did the Clintons invest in the Whitewater deal and how much did they gain or lose from the investment?

* Were the Clintons, through their investment, actively party to the looting of a federally insured thrift?

* Was political influence used to benefit the land investment or delay exposure of wrongdoing at the failed savings and loan? Did Clinton’s political organization benefit from the dealings?

* Have the Clintons dealt forthrightly with the questions about the matter? Have they or their allies in any way interfered with the inquiries into it?

Source: Times Washington Bureau