The real Whitewater shocker

The independent counsel's report concedes there was no Clinton scandal, but details another one -- the role the first Bush administration played.

Published March 22, 2002 1:20AM (EST)

The final report on the Whitewater investigation released Wednesday by the Office of Independent Counsel (OIC) confirmed what had been known for some time -- that after all the tens of millions of dollars and eight years of investigation, the OIC found no evidence of any criminal activity on the part of Bill or Hillary Clinton in the various dealings that fell under the catchall heading of "Whitewater."

The highlights of the report -- as judged by the headlines of the major national dailies -- were Robert Ray's criticism of President Clinton for disparaging the Starr-Lay investigation, and Ray's claim of inaccuracies in now-Sen. Hillary Clinton's testimony about billing records for Madison Guaranty, the failed S&L whose owners, the McDougals, were partners with the Clintons in a real estate company named Whitewater.

But both missed the real shocker in the report: new details of how the scandal was fueled in its early days by the Justice Department of George H. W. Bush, who was facing a daunting election against the upstart governor from Arkansas.

While the aim of the report was clearly to defend the integrity of the investigation that produced it, tucked away toward the end is information that points to an opposite conclusion. Critics of the Starr and Ray investigations have long held that the Whitewater probe was partisan from the start, born in dirty tricks and manipulation that began with the first Bush administration. Now the OIC itself is presenting facts that substantiate those claims.

According to the report, in the late summer of 1992 a referral file from the Resolution Trust Corp. came before U.S. Attorney Charles A. Banks and local FBI officials in Little Rock, Ark. It was a potential case of check kiting against Jim McDougal, Susan McDougal and Lisa Aunspaugh. It also mentioned Bill and Hillary Clinton as possible witnesses in the case. And as all the players in the drama realized, that made all the difference in the world.

The 50-odd pages in this section of the report reveal how political appointees at the highest level of the first Bush administration actually intervened in the normal process of the investigation, not to slow it down but to speed it up -- and with the pretty obvious intention of getting the matter before the public prior to Election Day, 1992. This is not the first time this story has been told (it was previously pointed out in "The Hunting of the President," by Joe Conason and Gene Lyons). But it is the first time it's been told in such detail, with so much sworn testimony, and from a source that will be difficult for supporters of the OIC to question.

From the start, Banks, a former Republican candidate for Congress whom the first President Bush had recently nominated to the federal bench, had misgivings about the quality of the potential case, and he was suspicious about its timing. But there is no evidence, as even the OIC report concedes, that Banks treated the matter in anything but a proper manner.

At around the same time, though, people at the highest levels of the Bush administration found out about the Whitewater referral and started in motion a series of actions intended to speed up the handling of it. According to the report, on Sept. 17, 1992, Edie Holiday, the secretary to the Cabinet in the Bush White House, contacted then Attorney General William Barr and -- after some awkward back and forth -- asked Barr if he "would be aware of a pending matter in Justice (she may have said it was a criminal referral) about a presidential candidate or a family member of a presidential candidate."

At around the same time, according to the report, then-White House counsel C. Boyden Gray also apparently took action. He inquired about the status of the referral with the head of the Resolution Trust Corp. (RTC), the agency from which the referral to the U.S. attorney originated.

Washington is replete with rules prohibiting or discouraging contact that might create the appearance of a conflict of interest. And most cover inappropriate contact between the political side of the executive branch and the law enforcement side of the executive branch, for obvious reasons. During a later phase in the Whitewater investigation, the general counsel at the Treasury gave White House lawyers a heads up about a possible upcoming indictment of Jim McDougal and possibly President Clinton, which was being reported in an internal RTC newsletter called the "early bird report." That incident was enough to get several White House officials hauled before a federal grand jury and led to the eventual resignations of White House counsel Bernie Nussbaum and Deputy Treasury Secretary Roger Altman. The series of incidents noted in Wednesday's Whitewater report are considerably more serious: political appointees trying to use their influence over the executive law enforcement agencies for political gain.

And it has former Clinton staffers steamed.

"It doesn't pass the smell test," says one legal source close to the former president. "How did anybody at the White House even know about it? It suggests to us clearly that they were using the Justice Department and an investigation to influence the election." How did Edie Holiday find out about the referral? Or C. Boyden Gray? Why did they try to intervene as they did? What other officials were involved? On all of these questions the report is silent.

What is clear is that Barr went on to get in touch with Ira Raphaelson, the Justice Department's special counsel for financial institution fraud, and asked him to find out whether such a referral existed. When Raphaelson didn't uncover one at first, Barr asked him to try again. From here, the story takes a turn that is either comic or Kafkaesque.

Though Barr had no apparent reason to believe that the budding case against the McDougals was being handled inappropriately, he instructed his subordinates at the Department of Justice and the FBI to commence a series of contacts with local officials in Little Rock to make sure the case was being handled appropriately. The OIC Report is replete with self-serving statements from these officials, to the effect that they simply wanted to make sure it was handled neither more quickly nor more slowly than any other similar case. Barr, the report explains, told a subordinate that "he did not want action on it artificially sped up or slowed down -- it was to be dealt with on its merits and in the normal course."

In the succeeding pages, statements such as these are coupled with actions that clearly belie them. Everything in this case should be handled like every other case, Washington seemed to be telling the U.S. attorney in Little Rock. But after reading the OIC's recounting, it is virtually impossible to conclude that Barr and his colleagues at Justice were concerned with anything except the possibility that the potential case might not be moving as quickly as it could.

On Oct. 7, 1992, Banks informed his superiors in Washington that based on his review of the referral he was not inclined to open an investigation or move toward issuing indictments. Justice and FBI officials then met and responded to Banks' message by ordering him to commence an investigation and report back to them on Oct. 16.

Banks had little doubt about the origins of the sudden urgency to move ahead with the case. "All of a sudden, we had this FBI pressure that something had to be done by October 16th," he later told the OIC. But Banks and other law enforcement officials in Little Rock held their ground.

Officials in the Bush Justice Department apparently realized that it wouldn't do to order local officials to fast-track the case, but they nudged them as much as they could. It reflects well on Banks that he didn't let his superiors convince him that they knew better than he did. He believed he was being angled into issuing subpoenas in the case before the November election, and later testified that he would have resigned before doing so.

There are many passages in the OIC report that beg the question of whether more questions would have been asked if the independent counsel were interested in scrutinizing the behavior of former Bush administration officials rather than people tied to the Clinton administration. Why did the independent counsel choose to investigate possible foot-dragging on the part of U.S. Attorney Banks (who is completely vindicated in the report), when Banks had no reason to help Bill Clinton, and ignore the possibility that inappropriate pressure tactics were employed by Attorney General Barr, when Barr had a vested interest in seeing Clinton lose in November?

After Banks refused to pursue the Whitewater investigation, and after Bill Clinton's election, departing Bush Justice Department officials revealingly lost their sense of urgency about the case. Whitewater ultimately came into full bloom when Clinton requested a special prosecutor to look into it in 1994, following pressure from the media and critics.

Another tantalizing tidbit in the report is the central role that FBI director Robert Mueller, then assistant attorney general for the criminal division, played in Barr's fishing expedition. From the facts contained in the report, it's not clear that Mueller was doing anything more than overseeing the execution of decisions made by others or overseeing meetings of Justice Department and FBI officials in Washington. But he was clearly in the center of the drama and in the position to see almost everything that was going on.

It would be fascinating to look more deeply into what communications took place between the Bush White House, the Justice Department and officials at the RTC in those desperate weeks and months before the first Bush presidency became history, and the scandal-plagued Clinton presidency, which was hunted by scandal-mongers, as we know now, well before he took office. But for that we will need a real investigation. Not the one that officially ended Wednesday.

By Joshua Micah Marshall

Joshua Micah Marshall, a Salon contributing writer, writes Talking Points Memo.

MORE FROM Joshua Micah Marshall

Related Topics ------------------------------------------