An Entangling Scandal Born in Arkansas Woods

And so, after six years, the original Whitewater mystery remains unsolved. Three independent counsels spent $52 million and convicted 14 people but found no conclusive answer to the initial question: Did Bill and Hillary Rodham Clinton know about their partners’ fraudulent loans in a 1978 Arkansas real estate deal?

Yet “Whitewater” as a political phenomenon outgrew its backwoods origins long ago. The tangled little land controversy launched an investigative juggernaut that became the Clinton administration’s deepest political crisis. It helped bring about a period of almost unprecedented rancor in American politics. It produced the impeachment and trial of a president for only the second time in our history. And it led to changes in the law--including the end of the independent counsel system itself.

Whitewater, in short, seemed to harm everyone who touched it.

It began in 1978, when Bill Clinton, then Arkansas’ 31-year-old state attorney general, joined his wife in what looked like a sweet deal: a real estate partnership with almost no money down. But the deal turned bad. The Clintons’ partners borrowed from their own savings and loan association and the S&L; failed, at taxpayer expense.

When Clinton ran for president in 1992, his detractors revived the issue--and raised enough questions to prompt the appointment of an independent counsel in 1994. The Clintons insisted that they had not known about their partners’ bad loans but investigators believed they were not getting the whole truth. Mrs. Clinton had done legal work for the real estate partnership but said she could not remember much about the deals she worked on. Her law firm billing records disappeared, only to turn up inexplicably on a table in the White House family quarters. There also were questions about the Clintons’ truthfulness on a range of other subjects: the way they fired aides in the White House Travel Office, the use of confidential FBI files, the president’s personal relationship with a White House intern, Monica S. Lewinsky.

The case and its byways may be debated forever as one of history’s unsolved mysteries--unless, of course, one of the protagonists reveals new facts in his (or her) memoirs later in the 21st century.

Clinton partisans will argue that the independent counsels’ inability to prove wrongdoing shows that the president and first lady were blameless victims of overzealous prosecutors. Clinton opponents will assert, instead, that it means they succeeded in a cover-up.

“The argument will never end,” said Larry Sabato, a professor at the University of Virginia who has made a specialty of studying political scandals. “This story of scandal and impeachment is part of the permanent historical definition of this administration.”

‘Complicated Scandal’ Didn’t Move Voters

The Whitewater issue itself never became a major political problem for Clinton because it was so tangled, Sabato said: “The public can’t interpret a complicated scandal.”

But it laid the political groundwork for other charges against the president, he said. Much of the press and public, after puzzling over the mysteries of Whitewater, were more ready to doubt Clinton’s word when he denied having an affair with Lewinsky.

“Whitewater was significant in that it created a background subtext for all the other scandals that followed,” Sabato said. “The very same factors were at work: untrustworthiness, dishonesty, conspiracy theories. It set a precedent for all the succeeding scandals.”

Whitewater also set a worrisome precedent, he said, in the way the investigation grew. “One lesson of Whitewater is that a scandal lasts forever,” he said. “There’s a clear beginning but not necessarily an end.”

When it all began, Clinton was earning $26,500 a year as state attorney general but he was favored to become the next governor. His wife, like her husband a Yale Law School graduate, was earning a bit more as a private lawyer.

They were offered half interest in a 230-acre land development along the Whitewater River in the Ozarks and it would cost them nothing. James B. McDougal, a banker and real estate developer, was anxious to have the soon-to-be governor as his business partner. Sale of the vacation plots was supposed to pay the cost of the loan for the purchase of the land and leave the partners with a healthy profit.

But the get-rich-easy scheme turned into a fiasco. Few plots actually were sold and McDougal diverted money from his savings and loan to pay off the loans.

The Clintons ended up losing money in the deal; exactly how much is disputed.

More important, the long inquiry has failed to conclusively answer the questions that started it: Did Gov. Clinton or his wife know anything about the wrongdoing of their business partner?

On the one hand, independent counsel Robert Ray says, there is “insufficient evidence” to prove any wrongdoing. Given the extraordinary intensity of the investigation, the Clintons can claim that they were cleared of the charges.

On the other hand, Ray did not clear them himself and his report suggests that he thinks the Clintons engaged in questionable behavior and sought to cover it up.

But the length and intensity of the investigation has convinced many in Washington that the time has come to de-escalate the partisan combat.

Former House Speaker Newt Gingrich (R-Ga.), who led the conservative Republican offensive against Clinton, politely declined a request to talk about it Wednesday. “He thinks getting back into all the scandal stories doesn’t serve any purpose,” spokesman Mark Shields said. “It’s all been said and done.”

However, the Whitewater case has left the office of the president weakened.

Until Whitewater, it had been assumed that lawyers in the White House counsel’s office had a special status as legal advisors for the president that shielded their conversations from prosecutors’ eyes.

But Kenneth W. Starr, Ray’s predecessor, sought the notes of two White House lawyers who spoke with Mrs. Clinton and her private lawyer after her grand jury testimony. The lawyers refused, citing the attorney-client privilege.

The U.S. Court of Appeals rejected their claim and ruled that White House lawyers are government employees who owe a duty to help federal prosecutors, not to protect the privacy of the president or first lady. The Supreme Court left the precedent in place.

A separate case--a sexual harassment lawsuit brought against the president by Paula Corbin Jones, a former Arkansas state employee--led to a Supreme Court ruling that allows the chief executive to be sued for damages for private wrongdoing.

If such a case arises, a future president will have to consider meeting separately with his official lawyers and his private lawyers.

“We are going to rue the day we decided presidents can’t consult their [official] lawyers and get the best legal advice,” said George Washington University law professor Stephen A. Saltzburg.

But the Whitewater saga also led to widespread demands for limits to prosecutors’ actions. The zealous investigation of the Clintons succeeded in convincing both parties--Democrats as well as Republicans--that the Independent Counsel Act was a mistake.

During the 1980s, Republicans had chafed as a series of independent counsels pursued the Reagan administration. When the independent counsel law lapsed, Democrats insisted on reviving it.

But when the law came up for renewal in 1999--after Clinton’s impeachment--both parties were ready to walk away from it.

‘Part of the White Noise of . . . Politics’

A future attorney general is empowered to seek an outside counsel to investigate a sensitive matter, as Atty. Gen. Janet Reno did in choosing former Sen. John C. Danforth to look into government actions in the fire that killed about 80 cult members after a long siege near Waco, Texas, not long after Clinton took office. But in these cases, the attorney general retains the ultimate authority to name the lawyer, decide what is investigated and end the inquiry if she wishes.

Even without an independent-counsel law, Sabato believes the political use of scandals will inevitably continue, if at a lower temperature.

“It’s very unlikely to be this intense in the next administration,” he said. “But it’s part of the white noise of American politics. It’s always going to be there--if not investigations, demands for investigations. It’s particularly natural for the minority party [in Congress] to use as a weapon, as a way to get some traction. It’s an opportunity that probably will not be passed up.”

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MRS. CLINTON’S REACTION

The Senate candidate says she’s glad the Whitewater inquiry “is finally over.” A17