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Clintons' Whitewater Loss Overstated, Lawmaker Says

August 08, 1995|DAVID G. SAVAGE | TIMES STAFF WRITER

WASHINGTON — Rep. Jim Leach (R-Iowa), chairman of the House Banking and Financial Services Committee, directly contradicted the White House on Monday, charging that President Clinton and First Lady Hillary Rodham Clinton put almost none of their own money into the Whitewater real estate deal, then stood by as their business partner looted a state-regulated savings and loan to fund the scheme.

While the thrift's failure cost taxpayers $60 million, it cost the Clintons nothing, Leach declared.

"In a nutshell, Whitewater is about the arrogance of power [and] an insider political class that considered itself above the law," said Leach, a mild-mannered Iowa Republican who has immersed himself in the House investigation of Whitewater, an Ozark development in which the Clintons were partners while the President was governor of Arkansas.

In the Senate, meanwhile, another committee continued to hear testimony about the handling of the office files of Deputy White House Counsel Vincent Foster after his suicide.

On the land deal, Leach said his committee wants to tell the full story of Whitewater, from the time 32-year-old Bill Clinton was running for his first term as Arkansas governor to an alleged cover-up that extended into the White House.

The House committee staff has examined nearly 400,000 pages of documents, Leach said.

While Mrs. Clinton has asserted that she and her husband put at least $46,000 into the venture, the committee staff has said it could find no canceled checks or bank statements to verify those expenditures.

Angry Democrats, however, called the latest hearings nothing more than a "partisan spectacle" and a "summer rerun."

"It's August in Washington, and it's circus time," said Rep. Paul E. Kanjorski (D-Pa.). "With apologies to Winston Churchill, the sad truth of this case is that 'never before in the history of our nation has so much been spent by so many to produce so little.' "

So far, the Democrats said, the various investigations of Whitewater have cost the government more than $20 million, at least 200 times the cost of the original Whitewater investment--estimated at $88,000.

Compared to the billion-dollar busts that befell S&Ls in Texas, California and Florida during the 1980s, Madison Guaranty Savings & Loan, the Arkansas thrift owned by James B. McDougal, the Clintons' partner in Whitewater, was small potatoes, Leach conceded.

"In proportion to its deposit base," however, "it's the most egregious failure in the sorry S&L saga," he asserted.

In 1982, when McDougal took control of Madison Guaranty, it had $6.7 million in assets. By the time federal regulators seized it in 1989, taxpayers were obligated for debts than ran to $60 million.

A former federal bank examiner, who examined the books of the thrift in 1986, told the committee it was one of the worst operations he had ever encountered. "Essentially, a group of insiders were using it to obtain cash in what amounted to a pyramid scheme," said James T. Clark, the bank examiner.

But neither the Republican committee, nor other investigators, have shown that the Clintons, then the first family of Arkansas, knew that McDougal had funneled money from Madison to prop up their Ozark real estate development.

For the last three years, the Clintons have maintained that they were victims of McDougal's misdeeds, not co-conspirators.

In sworn statements released by the White House on Friday, the President and his wife said they believe they had paid an equal share of the cost to obtain their 50% interest in the Whitewater development. The statements were made to the Resolution Trust Corp., the federal agency charged with handling the bailout of failed S&Ls from the thrift crisis of the 1980s.

In August, 1978, Bill Clinton, the Arkansas attorney general, was running for governor.

"I had known Jim McDougal for about 10 years, and it was my impression that he was a successful real estate developer," the President said in his deposition. Without visiting the Ozark property, he said, he and Mrs. Clinton entered into an oral agreement to form a real estate partnership with McDougal and his wife Susan.

In 1992, when Clinton was running for President, he said his tax adviser had calculated that he and his wife had put $68,000 into the Whitewater project. In return, they got nothing.

In the deposition released Friday, Mrs. Clinton cited a lower figure.

"I do not know how much the McDougals spent on the project, but I believe that we spent over $46,600," she said.

On Monday, the banking committee chairman and his staff disputed that calculation.

"In this venture called Whitewater, the McDougals provided virtually all the money. The governor-in-the-making provided his name," Leach said. "The Clintons put essentially no resources of their own into Whitewater, except for loans paid back largely by the company or others."

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