‘Insufficient Evidence’ Ends Whitewater Case


After seven years and $70 million, the Whitewater independent counsel said Wednesday there was insufficient evidence that former President Clinton and his wife, Hillary Rodham Clinton, did anything illegal or profited from a looted Arkansas savings and loan institution.

Counsel Robert W. Ray said his office would not bring criminal charges on any of the long list of allegations that were pursued by him and his predecessor, Kenneth W. Starr.

For the record:

12:00 a.m. March 22, 2002 FOR THE RECORD
Los Angeles Times Friday March 22, 2002 Home Edition Main News Part A Page 2 A2 Desk 1 inches; 28 words Type of Material: Correction
Whitewater probe--A story in Section A on Thursday incorrectly identified the Arkansas river at the center of the financial scandal that engulfed the Clinton administration. It is the White River.

His final report brings an inconclusive end to one of the most costly, confusing and controversial investigations in American history.

The Whitewater issue dogged Clinton during his 1992 run for the presidency, and the criminal probe loomed over the White House for most of his time there.

It led directly to his impeachment in 1998, even though the allegations lodged against him had nothing to do with the Arkansas financial fraud that started it all.


The Whitewater investigation proved to be a disappointment to Clinton’s critics, while his supporters viewed it as an infuriating abuse of power.

Ray, who is running for the Republican Senate nomination in New Jersey, lauded the fairness and thoroughness of his office. He said his investigators examined 10 million pages of documents and interviewed under oath more than 3,000 witnesses.

Ray also defended the man he succeeded. “No more decent individual graced this office” than Kenneth W. Starr, he said.

“The allegations [against the Clintons] were credible, substantial and required a thorough investigation to resolve them,” Ray wrote. “Indeed, the principal value of the independent counsel law was to ensure public acceptance of a decision not to prosecute. This does not mean that the impetus for the investigation was ‘bogus’ or that the allegations were a ‘fraud.’ ”

He was responding to President Clinton’s labeling of the Whitewater probe as “bogus from day one” and “a fraud.”

‘The Most Expensive Exoneration in History’

On Wednesday, the Clintons’ attorney, David Kendall, called Ray’s final report “the most expensive exoneration in history. . . . It ends as it began: with no evidence of wrongdoing by the Clintons.”

At its start, the Whitewater probe began with a simple query.

In 1978, Clinton, then Arkansas’ 32-year-old state attorney general, was running for governor, and he agreed to invest in a real estate venture being put together by James B. McDougal, a small-town banker. The idea was to sell lots for vacation homes along the Whitewater River in the Arkansas Ozarks. Until that point, their small real estate deals had proved to be profitable.

In 1982, McDougal took over a federally insured savings and loan, named it Madison Guaranty, and then drove it into bankruptcy. He used money from Madison for a series of real estate loans for himself and his friends.

Many of the investments, including Whitewater Corp., lost money. Few of the lots were selling, and the Clintons were forced to put up more money to keep the venture alive. McDougal was anxious to keep Whitewater afloat, since it was to his benefit to have the governor as a business partner.

By 1986, however, Madison Guaranty was hopelessly insolvent, and McDougal was removed. Its collapse eventually cost taxpayers $73 million.

So, when Clinton ran for the presidency in 1992, the question arose: Did the Clintons know about McDougal’s scams and did they illegally benefit from them?

Ray’s five-volume final report is notable mostly for what he did not find.

Repeatedly, he concluded there was “insufficient evidence to prove” that Bill or Hillary Clinton knew of McDougal’s improper dealings or benefited illegally from them.

Clinton denied under oath that he knew McDougal had funneled some of Madison’s assets into the Whitewater Development Corp.

There also were unproved allegations that Madison Guaranty funds had been used to support Clinton’s run for the presidency.

As a result of Starr’s probe, McDougal and his wife, Susan, were convicted of fraud and conspiracy in 1996 and sent to prison. Clinton, testifying at trial on their behalf, sought to distance himself from any wrongdoing.

“Insufficient evidence exists to establish beyond a reasonable doubt that either Governor or Mrs. Clinton knowingly participated in the criminal financial transactions used by McDougal,” Ray’s report said.

A large part of the investigation focused on a questionable $300,000 federally backed loan that former Municipal Judge David Hale claimed he was pressured by Clinton to make to Susan McDougal. Hale at the time headed a small venture capital firm known as Capital Management Services that was backed by the Small Business Administration.

Hale and James McDougal both testified that Clinton knew about and approved of the decision to have Capital Management make the fraudulent loan, but in view of Clinton’s denial “the independent counsel concluded that this evidence was insufficient to warrant prosecution of President Clinton because the evidence did not establish [his] knowing participation in a criminal scheme,” the report said.

Ray comes closest to implicating the Clintons directly in his probe of Hillary Clinton’s legal work at the Rose Law Firm in Little Rock, Ark. She worked on several land transactions that were later exposed as questionable. But Ray could not show that Clinton knew the Whitewater deal was suspicious.

Ray also failed to resolve a central mystery of the investigation: how Clinton’s subpoenaed law firm’s records ended up in an upstairs office at the White House. She testified that she did not know how the long-missing records got there. Ray cites three people who said they saw her carrying a box that “had the appearance of the billing records.” But there it ends.

Clinton, now a Democratic U.S. senator from New York, refused to comment separately on Ray’s final report.

Inquiry Directly Led to Impeachment

While trying in vain to catch the Clintons in wrongdoing, the Whitewater investigation netted plenty of little fish and a few large ones. And the probe ultimately led to President Clinton’s impeachment.

In January 1998, when Starr’s pursuit had reached something of a dead end, his office received a call from Linda Tripp, the Pentagon employee who had been taping her phone calls with former White House intern Monica S. Lewinsky.

Tripp said she was a “witness” and was being threatened. She had tipped the Dallas lawyers representing Paula Corbin Jones in her sexual harassment case to Lewinsky’s secret affair with Clinton. And they in turn asked Tripp and Lewinsky to file sworn statements.

Tripp said Lewinsky was urging her not to reveal what she knew. So, to prevent this potential witness tampering and obstruction of justice, the independent counsel put aside Whitewater and took on the Lewinsky case.

Nine months later, Starr told the House of Representatives and the world that the president should be impeached.