Ex-Clinton Partner Says Papers in Foster’s Office Belong to Him : Arkansas: McDougal claims Whitewater files were loaned to White House aide for him to do taxes on failed real estate project. New details emerge.

The Whitewater papers found in the White House office of the late Vincent Foster were legally the property of James B. McDougal, President Clinton’s former business partner, and were not intended to be in Foster’s possession at the time of his death, according to several sources involved in the matter.

The current Whitewater controversy erupted in December with the discovery that a White House official had found the papers in Foster’s office shortly after his apparent suicide in July and had transferred them quietly to the Clintons’ private attorney.

The new details, provided by McDougal in an interview at the home of a friend here and by sources who did not want to be identified, provide insight into the episode.

Under terms of a December, 1992, contract by which Clinton and his wife, Hillary Rodham Clinton, sold their interest in the Whitewater Development Corp. to McDougal, Foster was to have prepared the land company’s delinquent taxes and promptly return all Whitewater-related documents to McDougal.

But Foster was swamped with his duties as deputy White House counsel and feeling pressure because of failed White House nominations and the botched firing of five aides in the White House travel office. He delayed preparing the tax returns for six months, and the papers still sat in his office at the time of his apparent suicide.

“Vince had them because he had been working on the taxes, and then he killed himself before returning them,” said a senior White House official involved in handling the Whitewater case. “Instead of McDougal having them, we had them, and the rest is history.”

The papers, which McDougal said are a much more complete record of Whitewater’s finances than the Clinton representatives have acknowledged, were found in Foster’s office within hours of his death on July 20.

White House Counsel Bernard Nussbaum, who announced his resignation last weekend amid continuing Whitewater revelations, quietly removed them from Foster’s office and sent them to David Kendall, the Clintons’ private attorney. Kendall declined to comment.

The Clintons initially refused to release the papers to the Justice Department, which was investigating the failure of a savings and loan owned by McDougal. They yielded only after Kendall negotiated the terms of a Justice Department subpoena that covered a wide range of Clinton papers.

But questions about the Clintons’ handling of the matter persisted for weeks, finally forcing them reluctantly to approve the appointment of a special counsel to investigate the Whitewater case. Robert B. Fiske Jr., a Republican from New York, subsequently was named to the post.

In an interview this week, McDougal said that--when the Clintons sold their interest in the Whitewater real estate project to him in December, 1992, for $1,000--the contract called for the tax returns to be prepared by Foster, a longtime friend of the Clintons and, like Mrs. Clinton, a former partner in the prestigious Rose Law Firm in Little Rock.

The contract gave Foster 90 days to complete the task. Afterward, he was to return all the underlying documentation to McDougal or to his Little Rock attorney, Sam Heuer.

McDougal said that Foster was working from the only complete set of Whitewater financial documents, including the general ledger, deeds and contracts, records of all land transactions, canceled checks and previous tax returns.

McDougal said that he had sent all this material to the Clintons at the Arkansas governor’s mansion in December, 1987. The papers were physically handed over to the Clintons by William Henley, the brother of McDougal’s ex-wife, Susan, he said.

Toward the end of the 90-day period in which he was to complete the tax returns, Foster called Heuer to plead for more time. Those early weeks of the Clinton Administration had been hectic, including the controversies over the nomination of Zoe Baird and probable nomination of Kimba M. Wood to be attorney general and numerous other problems.

“Vince told me he had an incredible workload and couldn’t get these taxes done this quickly,” Heuer said in an interview. “I told him not to worry about it, and ultimately he did produce them.”

McDougal said that he began to grow impatient by June and called Foster’s office to learn what had become of the taxes and the Whitewater papers. “He never called back,” McDougal said.

But Heuer said that Foster called “sometime in June” to say that he was “getting the taxes together.” Heuer said he received a packet containing the completed returns from an accounting firm hired by Foster to do the final tax filings in the summer of 1993, a few weeks after Foster’s death.

He said that the Whitewater papers used to prepare the returns--the complete Whitewater financial record--were not returned with the tax papers.

Heuer said that although his client is entitled to the Whitewater papers, he is not interested in pursuing the matter now. “How can I call the President of the United States and say: ‘Give me the documents?’ ” Heuer said. “Besides, I’d just have to bear the cost of copying them and turning them over to the special prosecutor.”