Clintons Pay $14,615 for Tax Errors in ‘79-80
President Clinton and First Lady Hillary Rodham Clinton on Monday paid $14,615 in back taxes and interest on newly discovered profits from Mrs. Clinton’s commodity trading in 1979-80.
“The Clintons do not know how the error occurred but accept responsibility for it,” said the Clintons’ personal attorney, David E. Kendall. “They view it as their duty to come forward, disclose the mistake and pay what is owed.”
A senior White House aide said that previous statements about Mrs. Clinton’s trading are now “inoperative.”
Documents detailing the trading gains were found among the Clintons’ personal records within the last week, but aides could not explain why they were not available at the time the couple prepared their income tax forms 14 years ago. The newly found $6,498 in profits from commodities trading in 1979-80 was simply “overlooked” at the time, a senior Administration aide said.
The new profits are in addition to the nearly $100,000 in gains that Mrs. Clinton made trading in cattle futures with powerful friend James B. Blair at the Springdale, Ark., office of a major Chicago commodities brokerage. Officials said Monday that the Internal Revenue Service audited the 1979 return on which most of those gains were reported and found it to be in order.
Mrs. Clinton later made trades in a separate account at Stephens Inc. in Little Rock, Ark., which the White House described less than two weeks ago as a money loser. Officials at that time provided documents which showed that the second account was opened with a $5,000 deposit and closed after Mrs. Clinton lost $1,009.
But a review of the couple’s records revealed that the account in fact yielded a $6,498 profit on a variety of trades in sugar, copper, wheat and lumber futures, some of them in substantial amounts. The Clintons are now paying $3,315 in back taxes and $10,134 in interest to the federal government and $514 in back taxes and $652 in interest to the state of Arkansas on that unreported gain.
White House Press Secretary Dee Dee Myers described the $6,498 profit as “a small amount of income that was previously undetected.”
Kendall noted that the statute of limitations on tax evasion has long since passed and that the Clintons were making the back payments voluntarily. He said that the interest charges were calculated from IRS and Arkansas revenue department tables.
This is the first acknowledgment of money due the government by the Clintons since extensive scrutiny of their finances began in connection with the controversy surrounding their investment in Whitewater Development Corp. while Clinton was governor of Arkansas.
Records on that land deal are expected to be released in Little Rock today by the Clintons’ partner in the failed land development, James B. McDougal.
In announcing the back-tax payment, the White House also acknowledged that in the main trading account, Blair directed virtually all of the trades, contrary to earlier assertions that Mrs. Clinton placed her own trades.
“I think it’s become clear that he (Blair) placed most of the trades,” Myers said.
When the trades first came to light last month, the White House had said that Blair was one among several advisers. Aides said initially that Mrs. Clinton decided when to enter the volatile cattle futures market and directed her broker, Robert L. (Red) Bone, on when and what to trade for her account.
But officials said Monday that Blair in fact ordered the majority of trades in Mrs. Clinton’s account, while insisting that the fortuitous decision to bail out of cattle futures in July, 1979, just before a major crash in the market, was Mrs. Clinton’s alone.
“I don’t think we were as clear as we should have been on how exactly the trades were executed,” Myers acknowledged Monday afternoon.
The White House also moved to clear up misstatements last week by the President, who said that Mrs. Clinton’s decision to get out of the risky commodities market came shortly before their daughter, Chelsea, was born and because Mrs. Clinton had received a margin call. A brokerage house demands a higher margin account balance when the potential losses exceed the amount of money available in a customer’s account to cover them.
But a senior White House aide who briefed reporters on the newly found trading records said that he had found no evidence Mrs. Clinton was ever subjected to a margin call.
The new documents also reveal that Mrs. Clinton was actively placing large commodities orders in January, February and March of 1980--at one point purchasing $61,250 in copper futures.
The President said that his wife got “cold feet” and bailed out of the market before Chelsea was born on Feb. 27, 1980. But the very week of Chelsea’s birth, Mrs. Clinton bought $29,164.80 worth of sugar futures, $41,340 worth of lumber futures and $51,450 worth of copper futures. The three trades netted her more than $10,700 in profit.
She liquidated most of her commodities positions in March and closed out the account in May with the $6,498 profit that White House aides just discovered.
The White House also provided more complete records of her successful foray into the cattle futures market in 1978 and 1979. There were 31 individual trades executed in Mrs. Clinton’s account between October, 1978, and July, 1979, yielding a net profit of $98,537 on an initial investment of $1,000.
Of the 31 trades, 26 were winners and only five were losers, a batting average that astounds commodities market experts. More than three quarters of futures players lose money, and Mrs. Clinton’s success as a neophyte was remarkable, traders have said.
In an effort to answer critics who claim that Mrs. Clinton was the recipient of a sweetheart deal or the beneficiary of money-making trades allocated to her account after the fact, the White House engaged Leo Melamed, former chairman of the Chicago Mercantile Exchange, to review her trading records.
Melamed, in a statement released by the White House, said: “What these records show is that Mrs. Clinton was, during 1978 and 1979, a relatively modest trader who traded in a variety of commodities, including cattle, soybeans and hogs. She paid normal, full commissions. She made money on a lot of trades, lost money on some--sometimes these losses were substantial--and, on balance, she did extremely well. . . .
“Mrs. Clinton was clearly receiving very good and well-educated advice, as she had every right to do and as she has herself acknowledged,” Melamed said. In his opinion, he said, she “violated no rules in the course of these transactions.”
Melamed said it appeared that Mrs. Clinton’s broker or someone else was executing successful trades on her behalf but described her profits as “minuscule when measured against the background” of a booming market in cattle.
Melamed also noted that Mrs. Clinton at times traded on insufficient margin and would not be allowed to trade today with such a small initial investment and low net worth. He said these were violations by her broker, Ray E. Friedman & Co., and not by Mrs. Clinton.
