White House Aides Testify on Whitewater

Clinton Administration lawyers delivered 1,000 pages of documents on the Whitewater case to a federal grand jury Thursday while three of six White House aides subpoenaed by the panel appeared at a federal courthouse to discuss controversial contacts between the White House and federal regulators.

The mounting distractions of Whitewater were apparent elsewhere in the capital as well. Treasury Secretary Lloyd Bentsen told Congress of his department’s effort to comply with the Whitewater special counsel’s demands and President Clinton, speaking on crime in New York, lashed out at politicians and reporters who “twist (words) like taffy, to the nth degree.”

In Little Rock, Ark., meanwhile, auditors from the Resolution Trust Corp. have begun examining more than $1 million in billings to the agency by the Rose Law Firm over the past four years.

The investigation was prompted by reports that Rose was trying to determine whether former partner Webster Hubbell, a longtime Clinton friend and now the Justice Department’s No. 3 official, had overbilled the RTC for work done by the firm.

Special counsel Robert B. Fiske Jr. had subpoenaed six White House aides and four current or former Treasury officials in search of evidence that contacts between them might have intruded improperly on the RTC’s investigation of the Whitewater affair.

Fiske and the agency are looking into allegations that the President may have benefited improperly from his association with James B. McDougal, owner of the failed Madison Guaranty Savings & Loan and partner with the President and First Lady Hillary Rodham Clinton in the Whitewater Development Corp. The company was established to develop a resort community in the Ozarks. Also under investigation is the role played by Mrs. Clinton and the Rose firm, in which she was a partner, in representing Whitewater and Madison Guaranty.

Margaret A. Williams, Mrs. Clinton’s chief of staff; Lisa Caputo, her press secretary, and Mark D. Gearan, the White House communications director, all braved a gantlet of photographers and reporters as they headed for a third-floor grand jury room in Washington’s federal courthouse. Leaving after 2 1/2 hours of testimony, Williams said she was “really encouraged to be participating in something where the finding of fact is important, as opposed to innuendo and rumormongering and gossip and sensationalism.”

Caputo also gave testimony.

Nearby, a gaggle of protesters, who said they represented conservative groups, held signs bearing slogans critical of the Administration. “Fess Up,” one said. Another declared: “It’s Ethics, Stupid.”

Although Gearan showed up at the courthouse, it was unclear whether he was called to testify.

“This has been a difficult day for people. It’s been an emotional day,” White House counselor David Gergen said later in a Cable News Network interview. Another senior White House official said the publicity surrounding Fiske’s subpoenas had become “painful” for his family.

Joel Klein, the White House counsel responsible for overseeing compliance with Fiske’s subpoenas, appeared about 3:30 p.m. at the federal courthouse, carrying an attache case with memos, phone logs, letters and other documents related to the aides’ contacts. Four hundred White House employees had been asked to look for germane documents and 30 to 40 of them had provided material that was passed on to Fiske.

“The President and the First Lady complied fully with the subpoenas,” Klein told reporters, adding that the Clintons had not asserted executive privilege to withhold any papers. But he did not disclose whether the Clintons had any documents related to the contacts.

Meanwhile, the Treasury Department plans to deliver a two-foot stack of documents to the grand jury today. Treasury officials explained that they had taken longer to round up the material because they needed to contact supervisors of the agency’s 157,000 employees--including customs employees in distant corners of the world--to satisfy themselves that all relevant documents would be provided.

In testimony before a House subcommittee, Bentsen said that his office was filled with auditors and investigators and that the agency had been forced to rent a warehouse to keep all the unsorted trash that officials thought might contain relevant material.

“I hesitate to say come look at my basement at Treasury, because someone would probably call me a pack rat,” Bentsen said. “We’ve been holding back our trash to the point that I’ve had to use a warehouse . . . to hold the overflow.”

At issue in the controversy surrounding the meetings is whether White House officials tried to interfere with the investigation by regulators or whether the Clintons were improperly informed of progress of the inquiry.

Meanwhile, an RTC official said that the Little Rock audit would attempt to determine whether the bills from the Rose Law Firm were justified and the requested work done. The examination by a team of three auditors is expected to take several weeks, officials said.

The RTC audit brings more unwelcome scrutiny to the Rose firm, which already is under investigation by the special counsel’s office for its possible involvement in the Whitewater case, for possibly destroying evidence. Mrs. Clinton and assistant White House counsel William H. Kennedy III also are former Rose partners.

Ronald M. Clark, the firm’s managing partner, did not return repeated telephone calls seeking comment on the RTC audit.

In the late 1980s, Hubbell had solicited work for Rose from the RTC, which handles the assets of failed savings and loans. The Rose firm was retained in 1990 by the RTC to sue the accountants of the failed Madison Guaranty, whom the RTC accused of misrepresenting the financial condition of the thrift.

Madison was owned by McDougal, the Arkansas businessman with whom the Clintons invested in the Whitewater Development Corp.

The President’s comments came in a seminar, as he talked about how the public debate over national affairs too often involves distortions.

“I don’t know how many people I’ve had--older members of Congress--tell me in the last week how much meaner and more partisan and negative the national arena is,” Clinton said.

On Capitol Hill, Democrats went on the attack after a week of reacting defensively to mounting Republican demands for a congressional investigation of Whitewater. Several defended the Clintons and criticized Republicans for what they said is a politically motivated attempt to paralyze the presidency.

Rallying around Mrs. Clinton, the Democrats also chastised Republicans for alleging that the First Lady may have been guilty of wrongdoing in Whitewater.

Meanwhile, a USA Today-CNN-Gallup telephone poll conducted Monday and Tuesday found that 60% of those surveyed believed that Clinton did something unethical or illegal in Whitewater. Fifty-six percent believed that of Mrs. Clinton.

But another poll, by NBC and the Wall Street Journal, found that only 16% said they believed that Clinton had “committed financial wrongdoing.” Thirty-four percent said the issue was “just being used for political purposes” and 41% said they “don’t know enough to say.”

Times staff writer Michael Ross contributed to this story.

Did the White House Intrude?

The grand jury is questioning current and former Clinton Administration officials to see if they tried to interfere with the investigation of the failed Madison Guaranty Savings & Loan, a thrift owned by a former business partner of the President.

The 10 Who Were Subpoenaed

Lisa Caputo: Mrs. Clinton’s press secretary, leaves courthouse after appearing before grand jury.

Margaret A. Williams: Mrs. Clinton’s chief of staff, after giving testimony Thursday.

Mark Gearan: White House communications director

Bernard Nussbaum: Fromer White House counsel

Bruce Lindsey: Senior presidential adviser

Harold M. Ickes: Deputy White House chief of staff

Roger Altman: Deputy Treasury secretary

Jane Hanson: Treasury general counsel

Josh Steiner: Treasury secretary’s chief of staff

Jack Devore: Treasury press secretary

The Investigator

Special counsel: Robert B. Fiske Jr. is probing matters related to the financial affairs of Bill and Hillary Rodham Clinton, their Whitewater land development partner James B. McDougal, and McDougal’s Madison Guaranty Savings & Loan, which failed in 1989 at a cost to taxpayers of at least $47 million.

His staff: Fiske has assembled a staff of eight current or former prosecutors and more than 20 FBI agents and financial analysts to review more than a million documents.

Inquiries beyond D.C. grand jury: Fiske has established a special grand jury in Little Rock, Ark., with an 18-month term, and a separate arm of his staff is in Washington to investigate the suicide of White House deputy counsel Vincent Foster, who handled Whitewater matters for the Clintons.

The Grand Jury

What they do: Grand juries meet in secret to hear evidence of possible criminal wrongdoing. Prosecutors are empowered to issue subpoenas to compel witnesses to testify under oath or turn over documents. A majority of the quorum of 16 members is needed to bring an indictment--which is an allegation, not a verdict.

Why the secrecy: It is designed to protect reputations of people who are investigated but never charged. Grand jurors an prosecutors are bound by secrecy, but witnesses and their lawyers are free to discuss the testimony.

Source: Times staff and wire reports