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Mrs. Clinton Turned $1,000 Stake Into $99,000 Profit : White House: Her aides detail investments made in '70s at direction of broker who was later barred from trading.

March 30, 1994|JOHN M. BRODER | TIMES STAFF WRITER

WASHINGTON — Hillary Rodham Clinton, acting on the advice of a commodities broker later barred from trading for ethical reasons and the lawyer for one of Arkansas' largest state-regulated businesses, turned a $1,000 stake into a $99,000 profit in less than a year in the late 1970s, the White House disclosed Tuesday.

Officials said that there was nothing improper in Mrs. Clinton's speculation in cattle futures and other commodities, saying she benefited from a bull market "when a lot of people made a lot of money."

Mrs. Clinton bailed out of the high-risk venture 10 months after she started because, an aide said, she became pregnant.

But after closing out one account that produced spectacular profits, Mrs. Clinton opened a second commodities trading account, losing a little more than $1,000 over five months. She finally left the market in 1980 just after the birth of her daughter, Chelsea.

The new information sheds light on the Clintons' approach to investing, which involved little cash and large amounts of expert advice from well-connected friends. And the disclosures raised new questions about Mrs. Clinton's relationship to commodities broker Robert L. (Red) Bone, who was disciplined by market regulators for "serious and repeated" violations of exchange rules before and after Mrs. Clinton opened her commodities trading account with him.

The White House released the additional information about the commodities investment in response to numerous inquiries about the profits and after Newsweek magazine claimed that Mrs. Clinton had not invested any of her own money and had benefited from a "sweetheart deal."

Newsweek has since backed off its report.

On Tuesday, the White House issued a statement that said, "Mrs. Clinton put up her own money, invested it in her own accounts and assumed the full risk of loss."

Mrs. Clinton did, however, benefit from the market savvy of James B. Blair, a close friend of the Clintons and at the time the principal outside attorney for Arkansas-based Tyson Foods Inc., the nation's largest poultry producer. He is now the company's full-time legal counsel and director of a number of the chicken concern's subsidiaries.

White House aides said Tuesday that Blair advised Mrs. Clinton to get into the commodities market and, along with unidentified others, guided her trades.

The White House statement said Mrs. Clinton opened a "margin" account at the Springdale, Ark., office of the Ray E. Friedman & Co. commodities brokerage of Chicago. Her broker was Bone, a former professional poker player and executive at Tyson Foods.

A month before Mrs. Clinton opened her account, Bone had completed a one-year prohibition on trading commodities for his own account. The penalty was levied by the Commodities Futures Trading Commission over allegations that he had tried to manipulate the egg futures market in 1970.

Mrs. Clinton's initial investment on Oct. 11, 1978, was $1,000. By the next day, successful trading had swollen her account balance to $5,300 and the profits (and some relatively small offsetting losses) began accumulating from there.

By the end of 1978, Mrs. Clinton showed net profits of $26,541. Through the first seven months of 1979, she had built profits of $109,600, offset by losses of $36,600, for a net gain of $72,996. She closed the account in October with a total gain of $98,537.

Two months later, the Chicago Mercantile Exchange disciplined Bone for "repeated and serious violations of record-keeping functions, order-entry procedures, margin requirements and hedge procedures."

The Mercantile Exchange also had received complaints that Bone had illegally allocated profits to favored investors in his office, but no such charges were ever proved.

The actions against Bone were first reported by Securities Week, an industry newsletter.

A senior White House official said Tuesday that Mrs. Clinton "had no knowledge of any allocation of trades" by Bone. Further, the aide said, the First Lady was "not aware of his previous difficulties" with market regulators.

The aide said Blair gave Mrs. Clinton advice on the timing of trades, sharing with her his deep knowledge of agricultural commodities gained from his work at Tyson Foods. But the aide insisted that Mrs. Clinton spoke with other people about her trading and did not take all of Blair's advice.

Blair, in an interview with the Wall Street Journal published in Tuesday's editions, said Mrs. Clinton did not get special treatment in the investment. He denied that she benefited from the allocation of profitable trades to her account while losing cattle trades were dumped in other investors' accounts.

An aide to Mrs. Clinton said that, despite her remarkable success in the tricky commodities market, she decided to stop making the investments in July, 1979, shortly after becoming pregnant with Chelsea because the quick movements of the markets and the increasingly large dollar amounts at stake were "too nerve-racking."

The aide said that "it was her (Mrs. Clinton's) account and her risk," and that as far as the aide knew, then-Gov. Bill Clinton was not involved in her investment activities.

All the profits were reported as short-term capital gains on the couple's joint income tax returns for 1978 and 1979.

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