Updated 7-4-97


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A Starr-Crossed Investigation The three-year, $30 million probe of a small-time Arkansas land deal has taken some troubling turns. (6/30/97)


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Clinton's Testimony From The First Whitewater Trial

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Whitewater has come to encompass many issues and controversies. But it began with a failed real estate venture that Bill and Hillary Clinton entered into with their friends Jim and Susan McDougal in 1979 -- 42 lots along the scenic Whitewater river in norther Arkansas. whitwater

Sales were dismal, and in 1992, the Clintons sold their remaining interest in Whitewater to McDougal for $1,000. Arkansas business practices have historically been notoriously murky, however, and how the Clintons had managed their unfortunate investment was scrutinized briefly by a New York Times reporter who suggested the Clintons might have taken improper tax deductions, and that their losses might have been heavily subsidized by the McDougals. The Clinton campaign managed to quell the controversy quickly by showing the couple had lost $68,000 on the deal.

Then, on July 20, 1993, White House counsel and longtime Clinton associate Vincent Foster committed suicide in a Washington park. What caused Foster to kill himself, and the manner in which White House officials dealt with Park Service officials who sought access to Foster's office in the days following, thrust the smoldering Whitewater issue back onto the national stage. Republicans suspected Foster was depressed over controversies dogging the Clintons and might even have been murdered. They also suspected Clinton aides had removed incriminating documents from Foster's office in the days immediately following his death.

In an ensuing uproar, both Clintons went on national TV to answer questions about Foster, Whitewater, and the failure of Madison Guaranty, a savings and loan owned by Jim McDougal for which Mrs. Clinton performed legal work as a partner with the Rose Law firm. As pressure continued, the president asked Attorney General Janet Reno to appoint an independent counsel.

Reno chose New York attorney Robert Fiske, whose investigation concluded Foster's death was a suicide, and that Clinton aides had not improperly interfered with an investigation launched by the Resolution Trust Corporation (RTC) into Whitewater and Madison. That investigation, in turn, found no wrongdoing on the Clintons' part. Months of House and Senate investigations during the 103rd and 104th Congress yielded smoke but no real fire.

Yet the ongoing Whitewater investigation, now led by independent prosecutor Kenneth Starr, continues to cast a shadow over the White House. Starr was appointed in August 1994 to replace Fiske, whose investigation was viewed by some as lackluster. Starr has maintained active investigations in both Washington and Little Rock, Ark.

He's kept busy. In December 1994, former Associate Attorney General Webster Hubbell, previously a law partner of Hillary Clinton and golfing buddy of Bill Clinton, pleaded guilty to bilking the Rose Law firm of hundreds of thousands of dollars. In a stunning move, Starr subpoenaed Hillary Clinton in January 1996 to testify before a federal grand jury in Washington, after her Rose Law firm billing records -- under subpoena for two years -- mysteriously appeared in the Clintons' White House residence. In fact, court documents establish that Mrs. Clinton is a major ongoing focus of Starr's probe. trial.1

In May 1996, Starr's team prosecuted and won jury convictions for Jim and Susan McDougal (now divorced) and then-Arkansas Gov. Jim Guy Tucker on charges they defrauded the Small Business Administration. The government's star witness, Arkansas banker and former municipal judge David Hale, made the sensational claim that then-Gov. Clinton had discussed an illegal $300,000 loan with himself and McDougal. Though not a defendant, President Clinton denied the charge in videotaped testimony.

Tucker faces another trial in September on charges he obscured the profits of a lucrative cable TV deal. Susan McDougal has been jailed for refusing to answer investigators' questions. Meanwhile, Jim McDougal has been cooperating with Starr's probe and according to recent reports, has reversed himself and now says Clinton took part in the conversation about the illegal $300,000 loan. McDougal is not viewed as a reliable witness, though, and Starrr may be trying to corroborate his statements. trial.2

In another trial, longtime political supporters of Bill Clinton, Arkansas bankers Herby Branscum Jr. and Robert Hill, were charged with using bank deposits to reimburse themselves for contributions to Clinton's 1990 gubernatorial campaign and allegedly hiding $52,000 worth of campaign funds from tax authorities. In a setback for Starr, on Aug. 1, 1996, a jury acquitted Branscum and Hill on four charges and deadlocked on the rest.

Attorney General Reno has enlarged the scope of Starr's mandate to investigate whether the Clintons or other White House officials broke laws or obstructed justice during inquiries into the firing of seven longtime White House travel office workers (the controversy known as "Travelgate"), and the White House security office's improper collection of 900 FBI background files (AKA "Filegate").

Critics have portrayed Starr, who is a Republican, as politically motivated, a charge the president himself has made. Though some predicted Starr might pull "October Surprise" indictments, he kept a low profile through the fall presidential campaign. Reports suggested his investigation moved into a crucial phase, earlier this year, and that Starr and his staff are deciding whether to bring indictments against the president, the first lady and/or some of their associates.


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