S&L; Examiner Says Officials Impeded Probe

A federal bank examiner who looked into the failure of an Arkansas savings and loan owned by a former business partner of President Clinton told a House committee Tuesday that she was removed from her job because she aggressively urged a criminal investigation of those involved.

“We uncovered rampant bank fraud, including check kiting,” Jean Lewis, a Kansas City-based investigator for the Resolution Trust Corp., said of her examination of old check stubs from the Madison Guaranty Savings & Loan. Nonetheless, higher-level officials in Little Rock, Kansas City and Washington refused to undertake a full-scale criminal investigation, she said.

“I believe there was a concerted effort to obstruct, hamper and manipulate the results of our investigation,” Lewis charged.

Justice Department officials objected to Lewis’ testimony. “It is 100% wrong . . . and totally wrong for her to say that the Justice Department ignored her [criminal] referral,” said department spokesman Carl Stern.

Meanwhile, in parallel Senate hearings on Whitewater, a close confidante of First Lady Hillary Rodham Clinton denied that she or Mrs. Clinton sought to prevent investigators from examining White House Deputy Counsel Vincent Foster’s office in the hours after his 1993 suicide.

“I never, I say never, received from anyone or gave to anyone any instructions about how the review of Vince Foster’s office was to be conducted or how the files in Vince Foster’s office were to be handled,” said Susan Thomases, a New York attorney and longtime adviser to the Clintons.

The second day of hearings in the House Banking and Financial Services Committee was again marked by partisan bickering. Frustrated Democrats charged the Republican majority with stacking the hearings with witnesses who saw Whitewater as a massive conspiracy.

This “is absolutely McCarthyite,” snapped Rep. Barney Frank (D-Mass.). He accused Republicans of putting out unfounded allegations about the Clintons and other officials and then denying the accused a right to respond during the hearings.

Democrats also noted that while Tuesday’s hearing highlighted shoddy bank practices at the failed Arkansas thrift, none of this evidence directly implicated President and Mrs. Clinton.

Letters and memos released by the department and the RTC show that officials--many of them appointees of former President George Bush--agreed that unethical bank practices were the norm at Madison Guaranty, which was owned by James B. McDougal, the Clintons’ partner in the Whitewater real estate development. But the officials concluded that the mismanagement did not amount to criminal violations.

For example, on Oct. 16, 1992, the U.S. attorney in Little Rock, Ark., said in a letter to the FBI that he did not believe he could win a criminal prosecution against McDougal and his wife, Susan.

“While participation of some or all of these witnesses certainly suggests poor judgment, possible conflicts of interest or ethical infractions, proving specific intent or knowing criminal conduct would be a prosecutorial burden that could not be carried beyond a reasonable doubt,” wrote Charles A. Bank, a Bush appointee. He noted that McDougal had been tried and acquitted earlier on other bank charges.

Four months later, an attorney in the Justice Department’s criminal fraud section came to the same conclusion. “Mr. and Mrs. McDougal’s conduct may have constituted a breach of duty, abuse of position and self-dealing,” wrote attorney Mark J. MacDougall in a memo to the chief of the fraud division. “However, [the] factual allegations [are not] sufficient to establish the elements of any of the criminal statutes used in the prosecution of bank fraud.”

Still, while Lewis’ charges might not have stood up in a court of law, they made for dramatic testimony in a House hearing.

“As a public servant, working on behalf of the depositors and taxpayers of this country, it is my job to follow the evidence wherever it leads,” she said. “When powerful people, including high officials, violate their trust to enrich themselves, they not only break the law, but they betray the American people.”

She said canceled checks show that McDougal juggled money between accounts and funneled some of it into Clinton’s 1985 Arkansas gubernatorial campaign fund. Other checks were diverted into Whitewater, the real estate business owned jointly with the Clintons.

“In short, McDougal was making an investment in Gov. Clinton,” said Rep. Peter T. King (R-N.Y.).

The daughter of an Army general, the determined Lewis has led a behind-the-scenes effort to revive the investigation into Madison and Whitewater.

Last year, her superiors at RTC, upset over her persistence as well as her refusal to investigate other, larger bank failures, put her and two co-workers on leave as a disciplinary measure. Later, they were removed entirely from the Madison case.

In the Senate hearings, Republicans have theorized that White House officials tried to keep investigators out of Foster’s office for fear that damaging files on Whitewater might be revealed.

But Thomases, like other witnesses before her, said that friends and co-workers were not thinking about Whitewater files because they were distraught about Foster’s death. She described the numerous conversations that she had with Whitewater officials as purely therapeutic in nature and not aimed at restricting a search of Foster’s office.

Former White House Counsel Bernard Nussbaum, who is scheduled to testify today, has acknowledged that he restricted access to Foster’s files after his death.