GOP calls Clinton insider who profited


WASHINGTON -- In a brutally partisan opening day of House Whitewater hearings, the Republican chairman of the Banking Committee accused President Clinton yesterday of belonging to an "insider political class" that "considered itself above the law."

During hearings to examine the failure of a savings and loan with ties to the president and his wife, the committee chairman, Rep. Jim Leach of Iowa, charged that as governor of Arkansas, Mr. Clinton granted favors to James B. McDougal, his partner in the Whitewater land deal and owner of the failed thrift.

In exchange, Mr. Leach argued, the Clintons received substantial financial gain from the Whitewater investment in which their out-of-pocket costs were "minimal."

"In this venture called Whitewater, the McDougals provided virtually all the money," Mr. Leach said, banging his gavel often during the rancorous proceedings. "The governor-in-the-making provided his name."

Democrats on the committee denounced the hearings, calling them pure political theater and saying the Republicans were presenting a distorted view by calling only witnesses who supported their theories. More than $20 million in taxpayer money, they said, has been spent on Whitewater investigations now under way.

"This is basically a partisan witch hunt," said Rep. Albert R. Wynn, a Democrat from Prince George's County. "It's fueled by conspiracy theories and conspiracy fantasies."

The ranking Democrat on the Banking Committee, Rep. Henry B. Gonzalez of Texas, who chaired last summer's Whitewater hearings by the committee, acknowledged that Mr. McDougal had improperly used his thrift, Madison Guaranty Savings & Loan, to prop up his various enterprises. But, Mr. Gonzalez added, "there is no evidence that either Bill or Hillary Clinton knew anything about those manipulations, much less participated in them."

Federal investigators who testified before the committee yesterday said that Madison, which left taxpayers with a $60 million bill when it failed, was indeed used to finance sham transactions.

James Clark, a bank examiner, testified that financial abuses at Madison were among the worst he has seen. But he and the other witnesses said they knew of no instances in which the Clintons were involved in any illegal acts.

Still, Republicans insisted that the Clintons presided over a "financial Peyton Place" and were part of the 1980s decade of greed even as they postured in public as "defenders of the little guy."

For instance, Mr. Leach said, the faltering Whitewater deal received money from a government-backed investment company that was supposed to have made loans to the socially disadvantaged but instead was "subverted to aid Arkansas' business and political elite."

Republicans on the Banking Committee also sought to show that contrary to her assertions, Mrs. Clinton was more than a passive investor. They introduced a note that Mrs. Clinton wrote to Mr. McDougal in 1981 about their joint investment. "If Reaganomics works at all," Mrs. Clinton wrote, "Whitewater could become the Western Hemisphere's mecca."

And Rep. Peter T. King, Republican of New York, offering a review of the Clintons' tax returns endorsed by former IRS Commissioner Donald Alexander, said the Clintons claimed tax benefits between 1978 and 1988 related to Whitewater to which they were not entitled, and thus owe $13,272 in back taxes.

The Clintons have acknowledged that they took about $5,000 in Whitewater-related deductions that were improper. They have repaid the money. David E. Kendall, the Clintons' attorney, said in a statement yesterday that Mr. King's allegation is "wrong" but would be reviewed. He noted that at least one of the returns challenged by the Republican was audited by the IRS and approved.

Republicans released a huge stack of documents yesterday that show a record of more than 150 communications between Mr. McDougal and Mr. Clinton from 1978 to 1988, with one document entitled "The Clinton/McDougal Relationship: A Pattern of Quid Pro Quos."

They charge, for example, that Mr. McDougal spoke to then-Governor Clinton in 1984 about the proposed construction of a brewery at Castle Grande Estates, a Madison-financed project. Mr. McDougal wrote to a businessman, "I have spoken with the Governor on this matter and expect it will be approved." Mrs. Clinton represented Madison in the matter.

About the same time, Mr. McDougal notified the governor that he was paying down a bank loan to Mr. Clinton out of proceeds from the Whitewater account.

Republicans pointed to this as an example of the "extraordinary resources available to McDougal in negotiating the state regulatory terrain" because of his relationship with Mr. Clinton. But Democrats like Mr. Wynn said the facts amounted to "innuendo without concrete evidence" of any wrongdoing.

Also yesterday, members of the Senate's Whitewater committee questioned four current and former presidential aides on their actions after the 1993 suicide of Vincent W. Foster Jr., the deputy White House counsel.

Thomas "Mack" McLarty, the former White House chief of staff, said he waited a day before telling the president about the torn-up note that Mr. Foster had written. The note, which lamented life in Washington, was found by a White House aide six days after Mr. Foster shot himself.

"I was perplexed by it, and I made a decision not to tell the president," Mr. McLarty told the committee. "It did not seem to me a matter that should be brought to his attention that night until we could review the matter."

Today's round of hearings should offer more fireworks. In the House, three investigators from the Kansas City office of the Resolution Trust Corp., the federal agency charged with the savings and loan clean-up, are expected to testify that their supervisors in Washington tried to suppress their investigation of Madison and Whitewater.

Across Capitol Hill, the Senate committee is scheduled to hear from Susan Thomases, a confidante of Mrs. Clinton who is likely to be questioned about her conversations with White House officials -- and the first lady -- in the aftermath of the Foster death.

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