Cutler Defends Critics of RTC Investigator : Politics: Clinton aides reportedly asked about firing Jay Stephens, a GOP lawyer hired to probe Whitewater-related case.

TIMES STAFF WRITER

The White House on Saturday defended two top aides to President Clinton who reportedly had asked whether a prominent Republican lawyer could be removed from an investigation of civil claims arising from the failure of a Whitewater-related savings and loan in Arkansas.

Lloyd N. Cutler, special White House counsel, downplayed the episode, saying in a statement released Saturday that "it was perfectly natural that White House officials would be surprised" by the Resolution Trust Corp.'s hiring of Republican lawyer Jay B. Stephens to look into the failure of Madison Guaranty Savings & Loan.

Cutler's statement came in response to reports by Time magazine and the Washington Post that such inquiries were made by senior presidential adviser George Stephanopoulos and Harold M. Ickes, deputy White House chief of staff.

Stephens, a former U.S. attorney now in private practice, had sharply criticized the Clinton Administration for removing him from office in March, 1993, along with other political appointees from the George Bush Administration.

He was hired by the RTC in February to handle potential civil suits stemming from the closing of Madison Guaranty.

The thrift's owner, James B. McDougal, was a partner with Bill and Hillary Clinton in Whitewater Development Corp., established in the 1970s to construct a resort community in the Ozarks.

Although Stephens remains in his RTC post, inquiries by White House aides to determine whether he could be replaced would be the first confirmed intervention by people from Clinton's inner circle in the politically sensitive case.

White House Chief of Staff Thomas (Mack) McLarty ordered an internal review of the matter after learning that special counsel Robert B. Fiske Jr., appointed to investigate the Whitewater controversy, was examining the inquiries, Administration officials said.

In the statement issued to reporters traveling in Texas with Clinton, Cutler said he did not know all the facts because Fiske has asked that no interviews be conducted with White House witnesses until his inquiry is over.

But "it would have been better had these conversations not occurred," he said.

"I am confident that such conversations will not be repeated. At the same time, these conversations should not be blown out of proportion," he added.

According to the reports, Stephanopoulos and Ickes asked Deputy Treasury Secretary Roger Altman, who is acting head of the RTC, and Joshua Steiner, the Treasury Department's chief of staff, about replacing Stephens.

Both Treasury officials said nothing could be done about the selection of Stephens, and the White House apparently dropped the issue, the reports said.

Altman has since announced that he would recuse himself from the RTC's investigation of the Madison Guaranty case.

Stephanopoulos, in an interview with CNN on Saturday, said he was "just trying to get information" and had expressed anger at the hiring of Stephens. "Do I wish now that I hadn't gotten angry, that I hadn't blown off steam? Of course I do. I wish I hadn't gotten angry."

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