Clintons’ Tax Returns Show Big Losses, Gains : Presidency: White House releases 1977-79 records in response to questions about Whitewater deal.
The White House, in response to continuing questions about the personal finances of President Clinton and First Lady Hillary Rodham Clinton, on Friday released their tax returns for 1977-79, the President’s early years in public life in Arkansas.
The documents paint a fascinating picture of a young, relatively low-paid couple dabbling in highly speculative commodity and real estate ventures that in one case paid spectacular returns and in another--the ill-fated Whitewater deal--resulted in sizable financial losses and incalculable political costs.
The tax returns also reveal that the Clintons were involved in an earlier real estate investment with their Whitewater partner, James B. McDougal, that made them a modest $2,150 profit and emboldened them to try their luck in the much larger Whitewater project.
The tax returns were made public by the Clintons’ private attorney, David Kendall of the Washington law firm Williams & Connolly. Kendall, in a briefing for reporters at the White House, also provided additional documentation on the Clintons’ losses in the Whitewater deal.
Kendall said the Clintons were releasing the 1977-79 tax returns “in a spirit of full cooperation and openness,” noting that the First Family has now made public 16 years of tax filings.
Kendall said all the material had been provided to special counsel Robert B. Fiske Jr., who is investigating Whitewater Development Corp. and related matters involving the Clintons’ years in Arkansas and the Administration’s handling of the aftermath of the collapse of Madison Guaranty Savings & Loan, a Little Rock, Ark., thrift owned by McDougal.
The news came as the grand jury investigating the Whitewater matter issued a subpoena to another senior White House aide. The White House issued a brief statement saying that staff secretary John Podesta had been summoned to testify about his knowledge of contacts between the White House and the Treasury Department in relation to the investigation of Madison Guaranty.
The Clintons’ tax returns for the years 1977-79 show a remarkable growth in income for the couple, from $41,731 in 1977 to $85,214 in 1978 and $158,495 in 1979.
Salary increases account for little of the growth. In 1977, Clinton’s first year as Arkansas attorney general, he was paid $25,378.77 while his wife, who then used her maiden name, Hillary Rodham, was paid $14,800 as a first-year associate at the Little Rock law firm Rose, Nash, Williamson, Carroll, Clay & Giroir--now known simply as the Rose Law Firm.
She started at the firm in March that year and was paid for only 10 months. The low salary also is an indication of the low wages paid lawyers in small towns. At the time, associates at law firms in New York or Los Angeles made at least twice as much.
That year, the Clintons reported virtually no additional outside or investment income.
In 1978, their combined salaries grew to about $51,000, but they also reported income from two investments--a land deal with McDougal known as Rolling Hill Manor, for which they claimed a capital gain of $2,150, and profits of $26,541 from commodity trading.
That year also marked the establishment of Whitewater Development, a 50-50 partnership with McDougal and his then-wife, Susan, to buy 230 acres of land along the White River in northern Arkansas. The two couples borrowed $203,000 to buy the property and the Clintons claimed an interest deduction of $10,131 for payments made on the loans in 1978.
Hillary Clinton began trading in commodities in October, 1978, at the urging of the Clintons’ close friend, Arkansas lawyer James B. Blair, now the general counsel of Tyson Foods Inc., the nation’s largest poultry producer.
Her investment in the high-risk cattle futures market is surprising, given that the Clintons had relatively low incomes and very few assets. White House aides would not say how much of her own money Hillary Clinton put at risk or how much of the trading was done on credit.
In 1979, Clinton took office as governor and earned a salary of $33,519.14, while Hillary Clinton became a partner at the Rose Law Firm and saw her income rise to $38,615.60. But her luck in the futures market continued and she reported profits of $72,996 before bailing out of commodities in October of that year.
The Clintons that year continued to pour money into the Whitewater project without reporting any income from the land deal, the returns show. They paid $11,990.02 in interest charges on the venture, as well as making a $500 capital contribution, about which officials could not provide any detail.
After they got out of the commodities market, the Clintons’ income fell substantially. Previously released tax returns show that their adjusted gross income for 1980 was $87,175, almost all of it from their salaries. By 1992, their income had grown to $280,000, most of it from Hillary Clinton’s law firm earnings and fees for serving on boards of directors.
In addition to the new tax returns, the White House provided a new accounting of the Clintons’ Whitewater investment. The Clintons now believe that they lost $46,635.75 on the land deal, rather than the $68,900 they had claimed for the last two years, Kendall said.
President Clinton said Thursday that he had assumed erroneously that $22,000 he borrowed to help his late mother buy a home in Hot Springs, Ark., actually had been borrowed for the Whitewater project. Clinton told a news conference Thursday night that he discovered the mistake when he was proofreading his mother’s autobiography, “Leading with My Heart,” which refers to a loan that he took out to help pay for the house.
Asked about the discrepancy Friday, Clinton said: “Keep in mind all this happened in the heat of the ’92 campaign. Keep in mind, when I was first asked about this back in ‘92, just off the top of my head, I said we lost money but I don’t think it was a great deal.”
James M. Lyons, a Denver attorney and Clinton friend who prepared an earlier analysis of the Whitewater deal, has now revised his estimate of the Clintons’ losses to reflect the new information. But he still stands by his estimate that McDougal, who was purportedly the Clintons’ equal partner, lost $92,200 on the venture.
In a letter released Thursday, Lyons also offered his opinion that the Clintons owe no additional taxes as a result of the revision of the Whitewater account because they were entitled to deduct the interest payments on the $22,000 loan for the President’s mother even though the money wasn’t borrowed for the Whitewater venture. But White House aides have said it is possible that additional tax liability may be discovered and that the Clintons are prepared to pay any back taxes.
A source familiar with the Clintons’ finances who briefed reporters Friday could not account for the difference in losses between the two partners and would not comment on whether the discrepancy represented a gift from McDougal to the Clintons.
The tax returns show that the Clintons in 1978 paid $10,130.58 in interest to Great Southern Land Co., an entity that officials said was a McDougal company that used the money to make payments on Whitewater loans.
