With one last whimper about biased jury pools, special prosecutor Kenneth Starr finally ended the prosecution phase of his five-year
Whitewater investigation.Starr extracted a modest plea bargain from the hapless Webster Hubbell and turned to a final report that reportedly will contain a "blistering" section on likely U.S.
Senate candidate Hillary Rodham Clinton.
Yet, the final moments of Starr's criminal pursuit could have been a microcosm of the Whitewater affair: leaks about expected criminal charges, hyped coverage by
both conservative and mainstream news outlets, a climax that falls flat, excuses, and more promised proof of serious wrongdoing.
In late June, the Washington press corps finally was sure that the Hubbell
case would lift the rock on the squirmy Castle Grande land deal and shine a harsh light on Hillary Clinton's unethical legal work for Jim McDougal's Madison Guaranty Savings and Loan.
As word spread that
Hubbell had agreed to a plea bargain, unnamed sources assured reporters that the Castle Grande suspicions had proved out and that Hillary Clinton would be held to account, if not in a court of law, at least
in the court of public opinion.
The right-wing Washington Times quoted "law enforcement sources" announcing that "Hubbell will plead guilty to a felony count of covering up his legal
representation of Castle Grande, a project on which he and Mrs. Clinton worked." The Times announced that "Mr. Hubbell's cooperation could result in charges against the first lady." [WT, June
29, 1999]
The New York Times echoed that assessment, reporting that Hubbell "will plead guilty to a felony charge of lying about the role he and Hillary Rodham Clinton played in a questionable Arkansas
land deal." [NYT, June 29, 1999]
The next day, as this new Whitewater clamor grew, a lead editorial in The Washington Post added that Hubbell "will apparently admit that he lied about his and Hillary
Clinton's work at the Rose Law Firm on a shady deal known as Castle Grande. …
"An admission by Mr. Hubbell that Mr. Starr's narrative is essentially true would be a significant validation of a major
component of the morass of Whitewater-related allegations. It would also eliminate the common vision of Mr. Hubbell as chiefly a victim of Mr. Starr's piling on." [WP, June 30, 1999]
When Hubbell
actually did appear in federal court on June 30, however, a very different story emerged. Hubbell, the Clinton chum and former associate attorney general, pleaded guilty to two technical violations. But
there was no admission about Castle Grande and no evidence against Mrs. Clinton.
In one felony count, Hubbell admitted that he failed to disclose a "potential conflict of interest" in the Rose
Law Firm's representation of the Federal Deposit Insurance Corp. involving a lawsuit in which Madison Guaranty had sued its accountant.
One year after the FDIC asked Rose to take over the lawsuit in the
1980s, Hubbell discovered that Rose had a slight conflict that FDIC officials later said would not have made much difference in their thinking anyway. "Even the opposing attorneys dismissed it as a problem,"
noted Hubbell's lawyer John Nields.
Pillsbury Madison & Sutro, the law firm hired by the Resolution Trust Corp. to investigate Whitewater, also judged that Hubbell had competently handled the case. He
"was not less than aggressive in pursuing" it for the federal government and exacted a $1 million settlement when "substantially less than that was expected."
After entering his guilty plea to this arcane
offense on June 30, Hubbell repeated his long-standing position that he "had no knowledge of any wrongdoing on the part of Mrs. Clinton or the president." Nields added: "It has nothing to do
with Hillary Clinton. It has nothing to do with land deals in Arkansas."
Hubbell also pleaded guilty to a misdemeanor count of tax evasion and promised to try to pay off $761,000 in back taxes that he
failed to pay when he was in prison. Hubbell already has served 16 months in jail on unrelated charges of overbilling clients and cheating on his expense account at the Rose Law Firm in the 1980s.
In
agreeing to plead guilty to the two counts, Hubbell avoided additional jail time and freed his wife, lawyer and accountant from their indictments as co-conspirators. "The Office of Independent Counsel
has finally agreed to leave me, my family and my friends alone, and our lives can begin again," said Hubbell.
To some Starr critics, Hubbell's plea had more the smell of ransom than justice.
"It's highly unusual to say the least," said Washington defense attorney Stanley Brand. "No other person on the face of the planet would be sued criminally for a technical reporting
violation."
But the plea did nothing to advance Starr's goal of indicting Hillary Clinton, one of Hubbell's law partners at the Rose Law Firm. Starr announced that the Arkansas/Whitewater phase of his
investigation "has been concluded by today's activities."
Despite that announcement, Starr would not concede that he was at fault for anything. He explained that he opted for the modest plea
bargain because of public prejudice against his investigation.
After facing hung juries in cases he brought against Susan McDougal and Julie Hiatt Steele, Starr implied that the potential jury pool was
tainted by its "preconceptions" caused by the highly publicized impeachment of President Clinton.
"It is in the public interest, we believe, to find an appropriate and, we believe, just
disposition of these matters and to try to bring our work to as orderly a conclusion as possible," Starr stated outside the federal courthouse in Washington.
The next day, the news media reported the
outcome of the Hubbell plea bargain, but avoided apologies for its erroneous stories from the day before. Most grudging was The Washington Times which highlighted Starr's insistence that if not for the
tainted jury pool, "he was prepared to prove 'all of the factual allegations in Count One of the indictment,' including the Castle Grande allegations involving the first lady." [WT, July 1, 1999]
This pattern of never apologizing for innuendo that is never proven has been one consistency throughout the Whitewater affair. The dark clouds of guilt never lift. One ominous rumble of suspicions follows
the next, with no one noticing that the expected storm never breaks.
The Whitewater storm clouds looked especially threatening during the 1996 presidential race. Then, the press anticipated the
unprecedented moment when the first lady would be indicted, possibly for obstruction of justice. Many of these stories appeared to be leaks from Starr's office. But no indictment of Mrs. Clinton followed.
The reason was simple: the case against Hillary Clinton never held water.
Item One -- often cited against the first lady -- is the mystery of the Rose billing records whose discovery touched off the
speculation about her impending indictment.
The billing records were discovered in the White House living quarters in January 1996, two years after they were among documents that had been subpoenaed. With
great fanfare, Starr hauled Mrs. Clinton before the federal grand jury in Washington.
Most famously, New York Times columnist William Safire seized on the occasion to denounce Mrs. Clinton as a
"congenital liar." Safire asserted that "the records show Hillary Clinton was lying when she denied actively representing a criminal enterprise known as the Madison S&L." [NYT, Jan. 9, 1996]
Largely ignored by the media, however, was the fact that the billing records substantiated Mrs. Clinton's public and sworn statements about her limited work on the Madison Guaranty account. The records
showed that Mrs. Clinton billed Madison Guaranty for 60 hours of work over a 15-month period.
There wasn't much to the mystery of the reappearing records either. After their discovery, White House special
counsel Jane Sherburne interviewed Carolyn Huber, the White House secretary who discovered them, and pieced together the likely story.
The records were removed from the Rose files in March 1992 to answer
questions from New York Times reporter Jeff Gerth. After the election, Huber, a former Rose Law Firm secretary, apparently "packed them up in the governor's mansion in Little Rock before the Clintons
moved to Washington," Sherburne said.
All the Clintons' boxes were stored elsewhere, said Sherburne, and then brought, a few at a time, to the "book room" in the East Wing of the White
House. There, Huber unpacked them and determined what should be done with the contents.
"But in the rush to clear out the book room in 1995 to make office space for the people who were going to help
Mrs. Clinton write her book [It Takes a Village], Carolyn probably threw the billing records she had unpacked into a box along with the old shoes and empty hangers that were also in the box, and moved it to
her office to deal with later," Sherburne explained.
Starr has developed no known evidence to contradict this innocent explanation.
Item Two in the case against the first lady is her representation
of McDougal's Madison Guaranty in the mid- 1980s when McDougal was seeking both to improve his S&L's capital position and to invest further in the booming commercial real estate market.
To raise
money, McDougal wanted to sell $600,000 in uninsured preferred stock. The legal question that McDougal hired the Rose Law Firm to determine was a simple one: Did Arkansas state law allow a state-chartered
S&L to sell preferred stock?
Federal law permitted it and Reagan-era regulators were urging it on S&Ls nationwide, hoping they could "grow" out of the troubles caused by high interest
rates. But McDougal wanted assurance that such an offering would be legal under state law and he hired the Rose firm.
A young associate, Rick Massey, did most of the work, but Mrs. Clinton was made the
billing partner on the account. The Rose firm asked her to exact a $2,000 monthly retainer from McDougal, because in a previous representation he had failed to pay part of his bill.
After Massey researched
the preferred stock question, a letter arguing that it was legal and appropriate for Madison to sell such stock was mailed, under Hillary Clinton's signature, to Arkansas bank regulator Beverly Bassett
Schaffer. Mrs. Clinton also phoned Schaffer to say the letter with the law firm's view was on its way.
Schaffer agreed that Arkansas law, as well as federal law, permitted the sale of preferred stock in
state-chartered thrifts. But Schaffer did not approve the stock issue. Madison would have to meet stringent net worth requirements before that could occur.
Since Madison fell short of those standards,
McDougal never filed a formal application. Mrs. Clinton's actions appeared to be entirely aboveboard.
Item Three is the suspicion surrounding Castle Grande that traces back to late 1985 and early 1986.
In those days before Madison fell afoul of federal regulators, the Rose firm performed some additional work for McDougal, with Hillary Clinton again acting as the Rose firm's billing partner and another
young associate, Richard Donovan, taking the lead.
Donovan researched whether McDougal could build a brewery on the 1,050-acre International Development Corporation property that he and entrepreneur Seth
Ward -- Hubbell's father-in-law -- had bought and divided between them in October 1985. It turned out that he could not.
Donovan also researched whether the IDC property's water and sewer system could sell
water to another real estate development outside its property lines. That, it turned out, was legally permissible.
But Starr focused on another IDC-related issue: a $1,000 option agreement that Hillary
Clinton worked on for two hours in May 1986. Under the agreement, McDougal paid $1,000 for an option on a 22.5-acre parcel of Seth Ward's 650-acre share of the IDC property.
McDougal believed that the
land, known as "Holman Acres," would ultimately be very valuable because on-and-off ramps were slated to be built on the property as part of a proposed "ring road" around Little Rock. The
option pegged the price at $400,000.
But Senate Whitewater Committee testimony showed that the option agreement was never exercised. The planned development also did not materialize and the land did not
skyrocket in price. After the government seized control of Madison Guaranty, federal authorities onloaded the 22.5-acre slice for only $38,000, considered by some a fire sale price.
Though option
agreements are not unusual, this one excited interest from investigators who suspected that Ward was acting as a "straw buyer" for McDougal. The FDIC inspector general concluded that McDougal's
S&L had used the option to deceive federal bank examiners about the payment of lucrative real-estate commissions to Ward.
McDougal's financial shenanigans aside, however, investigators could not
demonstrate that Mrs. Clinton had done any more than execute a routine form. Pillsbury Madison & Sutro found no evidence that Mrs. Clinton had any knowledge of alleged wrongdoing by McDougal or Ward in
the transaction.
"The theories that tie this option to wrongdoing ... are strained at best," stated the 1995 Pillsbury report. "There is no evidence … that the Rose Law Firm had anything to
do with these [suspect] sales" of the IDC or Castle Grande property. There also have been no indictments stemming from the Castle Grande case.
Item Four is the suspicion that Mrs. Clinton lied when
she denied doing work for McDougal's Castle Grande development. But this supposed perjury seemed to rest on a misunderstanding of terminology.
McDougal used the name Castle Grand Estates for a section of
the IDC property set aside for residential development and "Castle Grande" became shorthand that some federal regulators applied to the entire transaction.
When the billing records were
discovered in 1996, they buttressed Mrs. Clinton's testimony that she worked on the commercial part of the IDC property, not the residential section.
Still, the Castle Grande question apparently rested at
the center of a draft indictment prepared by one of Starr's deputies, W. Hickman Ewing. During Susan McDougal's contempt trial earlier this year, Ewing testified that he drew up a draft indictment in
September 1996 because of his misgivings about Mrs. Clinton's honesty.
But the Starr team lacked any concrete evidence of a crime and Ewing's draft indictment never was presented to a grand jury.
By
1998, a more skeptical press might have begun to ask tough questions about what Starr was up to and whether he was operating more as a political hatchet man than an independent prosecutor.
But instead
Starr remained a respected member of the Washington Establishment known for his judicious temperament though chided for having a "tin ear" for public relations.
Barely noticing that the original
Whitewater storm clouds were dissipating, the press corps soon was following Starr after the Monica Lewinsky case.
Only after Starr's advocacy of President Clinton's impeachment and the surprising
Republican setback in the November elections did the press hesitate. Still, the criticism focused on Starr's misjudgment in making a prurient impeachment referral, not on the flimsiness of his criminal
allegations.
On June 30, the air finally went out of the seven-year-old Whitewater balloon. In announcing the conclusion of the Whitewater phase of his investigation, Starr acknowledged that he had no
prosecutable case against Mrs. Clinton.
Despite the stunning development, no major media outlet offered a self-critical assessment of the breathless -- and often mindless -- handling of the story. The
major news outlets, often led by The New York Times and The Washington Post, had dug themselves so deeply into trying to prove the Whitewater case that they saw no way out.
Instead, the newspapers and
networks quickly moved on. What commentary there was focused on the nation's "scandal fatigue" and Starr's political clumsiness. Somehow, those clever Clintons -- like a political Bonnie-and-Clyde
team -- had slipped away from the authorities one more time.
Attention turned, too, to Starr's expected scathing final report, its likely effect on the New York Senate race and what it finally would show
about Hillary Clinton's presumption of guilt.
