Clinton Calls for Special Counsel to Probe Land Deal : Presidency: Aides say request for Reno to name investigator is designed to end ‘barrage of innuendo’ that may threaten agenda. First Family denies wrongdoing.

President Clinton, grudgingly capitulating to intense political pressure, asked Atty. Gen. Janet Reno on Wednesday to name a special counsel to investigate the tangled Whitewater real estate and banking affair.

In a letter to Reno from White House Counsel Bernard Nussbaum, Clinton called for appointment of a “respected, impartial and qualified attorney, who is not a member of the Department of Justice or an employee of the federal government, to conduct an appropriate independent investigation of the Whitewater matter and report to the American people.” The investigation should be done “as expeditiously as possible,” the letter said.

Reno said she had begun compiling a list of candidates for the position and intended to name the special counsel “as soon as possible.”

Although she declared that the appointee would be granted substantial authority and should be “ruggedly independent,” she left vague the parameters of the forthcoming investigation. She said she would “make sure that the scope of the investigation was sufficient to achieve the purpose that we’re trying to secure by seeking an appointment.”

The move, designed to end a political nightmare that has consumed vast amounts of White House time and energy, comes after three weeks of public pounding during which Clinton and his wife, Hillary Rodham Clinton, have insisted on their innocence and staunchly resisted an independent inquiry.

White House aides said the Clintons gradually found their position politically untenable. The impression of White House stonewalling “could end up interfering with the President’s agenda,” senior adviser George Stephanopoulos said in announcing the decision. “We did not want that.”

He said the Clintons reluctantly agreed to the naming of a special counsel in hopes of putting an end to what he called “a barrage of innuendo, political posturing and irresponsible accusations.”

The White House announcement came hours after Senate Minority Leader Bob Dole (R-Kan.) demanded a congressional investigation of Whitewater events. White House aides, asserting that their decision would thwart such a step, pointed to Dole’s own declaration in a letter to Reno last week that if she appointed an special counsel, “there would be no second-guessing” of the investigation.

Under congressional rules, the Republican minority cannot conduct an investigation on its own, and Democratic leaders seem unlikely to permit such an investigation to start now.

“Calls for a select congressional committee are unnecessary and are clearly an attempt to politicize this matter,” Senate Majority Leader George J. Mitchell (D-Me.) said in a statement. “As previous experience has shown, an immediate congressional inquiry will complicate and could even undermine the efforts of the special counsel.”

For Clinton, this week was supposed to be dominated by high-profile meetings in Europe. But senior White House aides here and in Europe found themselves spending hours on transatlantic phone lines over the last three days and nights, devising a strategy for handling the messy affair involving the Clintons’ dealings with an Arkansas real estate investor and savings and loan operator.

Even as he was appearing with Ukrainian President Leonid Kravchuk on Wednesday to announce an agreement for the nuclear disarmament of Ukraine, Clinton was dogged by questions about his Arkansas business dealings.

“I have nothing to say about that on this trip,” the President said. “I have nothing else to say about it.”

After a day full of meetings on Tuesday, the Clintons and their aides concluded that the appointment of a special counsel, however unpalatable it might be in the short run, would quickly remove Whitewater from the front pages of the nation’s newspapers. A key factor in the decision, officials said, was Hillary Clinton’s agreement that only the naming of a special counsel could control the political damage caused by the Whitewater story.

Whitewater Development Corp. was an Ozark Mountains vacation resort in which the Clintons invested with a friend, James B. McDougal, and his wife, Susan, in 1978. McDougal owned Madison Guaranty Savings & Loan, which was seized by federal regulators in 1989 at a cost to taxpayers of at least $47.6 million.

The real estate deal went sour as well, with the Clintons, by their account, losing $68,900.

Republican members of Congress and government investigators have raised questions about whether money from the thrift may have found its way into Whitewater’s coffers or into Clinton’s 1984 campaign for governor. They have also asked whether the thrift may have received favorable treatment from Arkansas authorities while Clinton was governor.

The White House judgment that naming a special counsel will quickly reduce the political pain of the affair is probably correct, said Marlin Fitzwater, who was press secretary to Ronald Reagan and George Bush during several independent investigations, including one involving the covert sale of arms to Iran and the diversion of profits to Nicaragua’s Contra rebels.

While presidents and their aides frequently resist such investigations, they actually serve the interests of the White House in the long run, Fitzwater said.

The independent investigation “was crucial for us during Iran-Contra,” Fitzwater said. “Although there was some initial to-ing and fro-ing over who knew what when, essentially the White House was able to take the position from that point on that this was all being investigated by the independent counsel, which relieved them from the obligation of answering any questions. It’s an enormous asset.”

Clinton White House officials made it clear Wednesday that they intend to adopt exactly the same tactic.

“Absolutely,” a senior White House aide said. “There may be a few questions we can answer, but on the whole it will be inappropriate to comment” from now on about all matters related to Whitewater.

Despite the utility of an independent investigation, the Clintons and their aides resisted it for several weeks. They made clear that their acquiescence was grudging.

“We still think it’s wrong,” Stephanopoulos said. “But the political reality developed, and we didn’t want to be distracted from our work any more. We’re still against it.”

Paul Begala, a political adviser to the White House, added: “It’s a recognition of the reality of the way the political culture works that people who haven’t done anything wrong have to call for a special investigation of themselves. You can make me accept it, but you can’t make me like it.”

Asked why the Clintons resisted an independent inquiry for so many weeks, Begala said: “The instinct to fight back when you’re accused is very strong. Some of us who were trying to help may have hurt” by encouraging the Clintons to fight what was seen as a partisan vendetta.

Other Administration officials noted that in addition to that motivation, White House aides who have been counseling the Clintons do not know precisely what happened in the Whitewater affair or what the Clintons’ files on the matter may contain.

Only a few people other than the Clintons’ personal lawyer, David E. Kendall, have seen the files, and no one on the White House staff has fully investigated the matter.

Clinton aides insisted that they believe that the President has done no wrong. On the other hand, several have bitter memories from early in the presidential campaign when Clinton assured them that there was nothing in the history of his dealings with the military draft that required an investigation.

Those sorts of doubts always nag at White House aides, Fitzwater said. “In Iran-Contra, nobody knew what happened,” he said. “When you don’t know all the facts, it’s very frightening to ask for an outside investigation.”

Times staff writer Ronald J. Ostrow contributed to this story.

Inquiry Request

The text of a letter, dated Jan. 12, from White House Counsel Bernard Nussbaum to Atty. Gen. Janet Reno:

Dear Madam Attorney General:

The President has directed me to request you to appoint as special counsel a respected, impartial, and qualified attorney, who is not a member of the Department of Justice or an employee of the federal government, to conduct an appropriate independent investigation of the Whitewater matter and report to the American people.

In view of the gravity of the President’s responsibilities and the need for a prompt resolution, I respectfully request that this investigation be conducted as expeditiously as possible.

Very truly yours, Bernard W. Nussbaum

Counsel to the President

BACKGROUND

The major difference between the special counsel who will conduct the Whitewater inquiry and the independent counsels who looked into such recent Washington scandals as the Iran-Contra affair is who appoints them. A special counsel is authorized by Justice Department regulations and is appointed by the attorney general. An independent counsel, authorized by a provision of the 1978 Ethics in Government Act that expired at the end of 1992, was named by a special three-judge panel appointed by the Chief Justice of the United States, usually acting on a request by the attorney general. The special counsel, like the independent counsel, can be fired “only for good cause, physical disability, mental incapacity or any other condition that substantially impairs the performance” of the counsel’s duties, according to Justice Department regulations. Despite that, Atty. Gen. Janet Reno had repeatedly argued in the Whitewater case that the naming of a special counsel should wait until Congress restored the independent-counsel provision of the 1978 law. She said an independent counsel named by a court would automatically appear more independent of the Clinton Administration than anyone she selected.