Clintons’ Whitewater Loss Overstated, Lawmaker Says

Rep. Jim Leach (R-Iowa), chairman of the House Banking and Financial Services Committee, directly contradicted the White House on Monday, charging that President Clinton and First Lady Hillary Rodham Clinton put almost none of their own money into the Whitewater real estate deal, then stood by as their business partner looted a state-regulated savings and loan to fund the scheme.

While the thrift’s failure cost taxpayers $60 million, it cost the Clintons nothing, Leach declared.

“In a nutshell, Whitewater is about the arrogance of power [and] an insider political class that considered itself above the law,” said Leach, a mild-mannered Iowa Republican who has immersed himself in the House investigation of Whitewater, an Ozark development in which the Clintons were partners while the President was governor of Arkansas.

In the Senate, meanwhile, another committee continued to hear testimony about the handling of the office files of Deputy White House Counsel Vincent Foster after his suicide.

On the land deal, Leach said his committee wants to tell the full story of Whitewater, from the time 32-year-old Bill Clinton was running for his first term as Arkansas governor to an alleged cover-up that extended into the White House.

The House committee staff has examined nearly 400,000 pages of documents, Leach said.

While Mrs. Clinton has asserted that she and her husband put at least $46,000 into the venture, the committee staff has said it could find no canceled checks or bank statements to verify those expenditures.

Angry Democrats, however, called the latest hearings nothing more than a “partisan spectacle” and a “summer rerun.”

“It’s August in Washington, and it’s circus time,” said Rep. Paul E. Kanjorski (D-Pa.). “With apologies to Winston Churchill, the sad truth of this case is that ‘never before in the history of our nation has so much been spent by so many to produce so little.’ ”

So far, the Democrats said, the various investigations of Whitewater have cost the government more than $20 million, at least 200 times the cost of the original Whitewater investment--estimated at $88,000.

Compared to the billion-dollar busts that befell S&Ls; in Texas, California and Florida during the 1980s, Madison Guaranty Savings & Loan, the Arkansas thrift owned by James B. McDougal, the Clintons’ partner in Whitewater, was small potatoes, Leach conceded.

“In proportion to its deposit base,” however, “it’s the most egregious failure in the sorry S&L; saga,” he asserted.

In 1982, when McDougal took control of Madison Guaranty, it had $6.7 million in assets. By the time federal regulators seized it in 1989, taxpayers were obligated for debts than ran to $60 million.

A former federal bank examiner, who examined the books of the thrift in 1986, told the committee it was one of the worst operations he had ever encountered. “Essentially, a group of insiders were using it to obtain cash in what amounted to a pyramid scheme,” said James T. Clark, the bank examiner.

But neither the Republican committee, nor other investigators, have shown that the Clintons, then the first family of Arkansas, knew that McDougal had funneled money from Madison to prop up their Ozark real estate development.

For the last three years, the Clintons have maintained that they were victims of McDougal’s misdeeds, not co-conspirators.

In sworn statements released by the White House on Friday, the President and his wife said they believe they had paid an equal share of the cost to obtain their 50% interest in the Whitewater development. The statements were made to the Resolution Trust Corp., the federal agency charged with handling the bailout of failed S&Ls; from the thrift crisis of the 1980s.

In August, 1978, Bill Clinton, the Arkansas attorney general, was running for governor.

“I had known Jim McDougal for about 10 years, and it was my impression that he was a successful real estate developer,” the President said in his deposition. Without visiting the Ozark property, he said, he and Mrs. Clinton entered into an oral agreement to form a real estate partnership with McDougal and his wife Susan.

In 1992, when Clinton was running for President, he said his tax adviser had calculated that he and his wife had put $68,000 into the Whitewater project. In return, they got nothing.

In the deposition released Friday, Mrs. Clinton cited a lower figure.

“I do not know how much the McDougals spent on the project, but I believe that we spent over $46,600,” she said.

On Monday, the banking committee chairman and his staff disputed that calculation.

“In this venture called Whitewater, the McDougals provided virtually all the money. The governor-in-the-making provided his name,” Leach said. “The Clintons put essentially no resources of their own into Whitewater, except for loans paid back largely by the company or others.”

Committee investigators said that in most instances they could find no canceled checks, bank statements or other documentation to confirm Mrs. Clinton’s statements that the couple put their money into the project. Leach estimated that the Clintons spent only $11,000 on the Whitewater development.

The committee documents also detail a scheme in which McDougal bought a large chunk of remote Campobello Island off Maine, the legendary summer home of Franklin D. Roosevelt, then tried to sell parcels to wealthy Arkansans.

When he was governor, Clinton stopped by several parties in Little Rock that were in fact lavish sales pitches for Maine real estate, the committee said. At one, he presented McDougal with a bust of Roosevelt.

The scheme ended up costing Madison--and then the taxpayers--more than $4 million, the committee said.

In the Senate, the Whitewater investigating committee was told Monday that then-White House counsel Bernard Nussbaum actually was on the verge of granting investigators full access to Foster’s office shortly after his suicide but changed his mind at the behest of John M. Quinn, a lawyer and chief of staff to Vice President Al Gore.

Quinn told the committee that he forcefully urged Nussbaum not to grant Justice Department and U.S. Park Police investigators “unfettered access” to documents in Foster’s office until the papers had been screened by the White House to avoid unwitting disclosures of information that might violate national security concerns or the attorney-client privilege--as well as executive privilege enjoyed by the President.

Nussbaum initially was “quite resistant” to his arguments, but gradually came around to his viewpoint, Quinn testified.

Nussbaum, who has returned to his New York law practice, has come under fire for preventing investigators from inspecting the West Wing office of Foster, who was Nussbaum’s deputy when he committed suicide in a Virginia park overlooking the Potomac River in July, 1993.

Republicans on the committee, led by chairman Alfonse M. D’Amato (R-N.Y.), said they found such concern over protecting privileged information inconsistent with the fact that Nussbaum at the same time allowed two White House aides, including Margaret Williams, the First Lady’s chief of staff, full access to Foster’s office.

Much of Monday’s testimony focused on why White House officials took more than 24 hours to tell President Clinton that a note--torn into pieces--had been found at the bottom of Foster’s briefcase in which the late White House deputy counsel lamented the quality of political discourse in Washington.

But Thomas (Mack) McLarty, then White House chief of staff, said that he did not rush to tell the President because he, McLarty, had been told that Mrs. Clinton already had been informed and because he did not consider it a “suicide note.”

Times staff writer Edwin Chen contributed to this story.