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The Clinton Scandals

Blood Sport: The President and His Adversaries

by James B Stewart
Simon and Schuster, 479 pp., $25.00

Madhouse: The Private Turmoil of Working for the President

by Jeffrey H Birnbaum
Times Books, 261 pp., $25.00

Madison Guaranty Savings & Loan and Whitewater Development Company, Inc.: A Preliminary Report to the Resolution Trust Corporation

Madison Guaranty Savings & Loan and Whitewater Development Company, Inc.: A Supplemental Report to the Resolution Trust Corporation Prepared by Pillsbury Madison & Sutro LLP, San Francisco, California, with financial and economic analysis support from Tuc

A Report on Certain Real Estate Loans and Investments Made by Madison Guaranty Savings & Loan and Related Entities

A Report on the Rose Law Firm’s Conduct of Accounting Malpractice Litigation Pertaining to Madison Guaranty Savings & Loan Prepared for Resolution Trust Corporation by Pillsbury Madison & Sutro LLP

A Supplemental Report on the Representation of Madison Guaranty Savings & Loan by the Rose Law Firm Prepared for Federal Deposit Insurance Corporation by Pillsbury Madison & Sutro LLP

When President Clinton held a dinner honoring Thomas Jefferson in 1994, his wife sat at the table between Maya Angelou and C. Vann Woodward. Ms. Clinton knew beforehand that Angelou had grown up in Arkansas but not that Woodward had been born there. Standing up at the dinner’s end, she said, “See what good folk come from Arkansas? Why is it the press can find only the same few scumbags there?” That prompts a more important question: Why did the Clintons deal with the “scumbags” being questioned by the press? I assume that Ms. Clinton had in mind not only such colorful Arkansans as Gennifer Flowers and Paula Jones but others, like James and Susan McDougal or David Hale, who have given the Clintons as much grief as any erupting bimbos.

And behind this is another question. Assuming the desire of a smart Southern politician to use political position for private gain, the task is not unusual or even very difficult. As the late Willmoore Kendall used to say, all you have to do is stand on the right corners and money will silt up in your pockets. Witness the exploding bank accounts of Lamar and Honey Alexander.1 I am not talking about breaking laws, just about what George Washington Plunkitt called “honest graft”—which he defined as picking all the apples in the paradise of politics while staying away from the tree of death, the Penal Code.2 Plunkitt would be ashamed of the Clintons. They did not make any of the obvious money from big-time contacts. They dealt with obscure wheeler-dealers who actually lost them money. They get all the blame for graft and none of the gain (with the exception of Ms. Clinton’s famous killing in cattle futures). Instead of letting money silt up in their pockets, they seemed to do cartwheels in order to shake it out.

This is not only a strange story but an extremely complicated one. The beginnings of understanding are now available for a wider audience in a book by James Stewart, the Pulitzer Prize–winning journalist formerly of The Wall Street Journal who wrote the best-selling Den of Thieves. He performs the great service of putting faces on the names that come and go in the public allegations and partial representations of what went on at Whitewater, Madison Guaranty, Castle Grande—all those household words that might as well refer to outer galaxies for all the reality they carry in the minds of most people who hear them.

It has always been obvious that the culture, social as well as financial, of Arkansas had much to do with the story. Stewart takes us into the odd world of big money and small-time operators rubbing shoulders in Little Rock or at remote Arkansas developments. The many advantages of this approach lead to one disadvantage. Stewart gets close to people like Jim and Susan McDougal, or David Hale, or the four troopers who have given accounts of Bill Clinton’s philandering. Like a good journalist, he is empathetic, trying to get into their minds. But, more than a good journalist should, he ends up trusting almost everything they have to say. This does not invalidate his book. He tries to be fair to everyone, and he is especially good on the troubled personality of Vincent Foster. But in matters where the word “character” often comes up, and documents are often lacking, Stewart is surprisingly confident that he can rely on the words of people with extremely wobbly characters, short on both integrity and stability.

The shortcomings of Stewart’s book are clearest where his account overlaps that of the investigation of the McDougals’ dealings with the Rose Law Firm, at which Ms. Clinton was a partner—an investigation made for the FDIC (Federal Deposit Insurance Corporation). This thorough investigation, government financed, was conducted by Jay Stephens, a San Francisco lawyer and Republican activist, no friend to the Clintons, whose appointment George Stephanopoulos protested as stacking the deck. That makes the findings of the investigation which have been issued in the series listed above all the more convincing. 3

The Stephens commission’s findings were of the man-bites-dog sort, yet they have been downplayed by the regular press and vilified by the scandal industry that has grown up around “Whitewater.” The complaint is that the report is based on only some allegations (those concerned with the Rose Law Firm); that it is based on incomplete evidence (all that can be found, not all that has not been found and may not exist); and that it is technically legal in its conclusion (that the FDIC should not pursue the Rose Law Firm for losses to the government).

But you can bet that there would have been a great whoop from the same quarters if the findings had upheld even one tiny part of the industry’s blizzard of allegations. The report’s disinterestedness would be defended, despite Stephens’s ties. What is important about the report is the extensive, plodding examination of every shred of evidence on the questions it covers, and the contrast between its methods and those of others who have dealt with the same matters, even of so thorough and honest a reporter as James Stewart. Read together, the Stewart book and the Stephens report give us our best way into the labyrinth called Whitewater.

1.

Dogpatch Connections

I first heard of the White River, along whose right bank some real estate was named Whitewater, during the 1992 campaign, when Hillary Rodham Clinton took me to her husband’s campaign headquarters to discuss the strange Arkansas constitution with Diane Blair, the University of Arkansas political scientist who had written the best book on the state’s political structure.4 Ms. Clinton had been regaling me with tales of her time in Fayetteville, the site of the state’s university in the upper corner of the state—a place of rural preachers, charming but arbitrary judges, and other characters who seem to have wandered out of Al Capp’s Li’l Abner comic strip.

At the campaign building, we went into the deserted “Coca-Cola room” where Ms. Blair and Ms. Clinton continued their reminiscing about Fayetteville. They had been fellow faculty members before they became faculty wives (both their husbands taught in the university law school). They talked of picnics and their outings by the White River, remembering how Bill Clinton derailed such escapes by talking endlessly with any potential voter he came across in the woods. The women had been amused by the mingling of their academic colleagues with the local characters of Fayetteville, in what was at once a backward part of the state and a sophisticated one—a reality embodied in the most famous Fayetteville native, William Fulbright, president of his home town’s university, who became a powerful senator in Washington but still had to defend segregation in order to hold his own region’s vote.

Fulbright was the unintentional first link in what became the Whitewater scandal. While Bill Clinton was working as a student aide to Fulbright, he met one of the senator’s former aides, James McDougal, a flamboyant man from a tiny town (Arkadelphia) who wore Savile Row suits and drove a Mercedes 280-S. McDougal had entered the university at Fayetteville, but dropped out to go directly into politics—and was soon an aide to Senator John McClellan, then to Fulbright, then to a friend, Bob Riley, the Arkansas lieutenant governor who served as interim governor when Dale Bumpers moved to the Senate. Armed with these experiences, McDougal became the head of the political science department at Ouachita Baptist University in his home town—even though he still had no college degree himself.

McDougal, a reforming alcoholic, was smitten by a beauty queen in the student body, Susan Henley, a nineteen-year-old senior whom he had to woo by subterfuge, since a Baptist college would not countenance a divorced thirty-four-year-old professor dating a student. McDougal found ways to court her, despite her immurement in an all-girls dorm. He proposed to her on a student trip to Washington, where he had arranged to show off his important contacts. Melodramatic as always, he swept Susan away on graduation day, not letting her stay for the commencement ceremony her parents were about to attend. He said it was now or never. If she hesitated he would leave her for good.

McDougal affected a learning he did not have by using his good memory. He liked to quote passages from his hero James Madison, after whom he later named several businesses. The Clintons attended the McDougals’ wedding, after which Jim took his backwoods bride to Europe on borrowed money. According to James Stewart, there was always tension between Ms. Clinton and the new Ms. McDougal. The latter affected cutoff jeans and tight tank tops. Ms. Clinton was no doubt made uneasy by her husband’s admiring references to “that pretty girl,” to Jim’s “child bride.” McDougal, in his pompous suits, was Jubilation T. Cornpone with Daisy Mae in tow.

The garrulous and energetic McDougal had kept up his political contacts around the state. When Bill Clinton ran for attorney general, McDougal contributed funds to this race by a fellow veteran of Fulbright’s staff. After his marriage, McDougal had found a new outlet for his energy. His sponsor in Alcoholics Anonymous introduced him to the promises of money made in real estate. McDougal’s first land purchase was turned over in six months for double the price. The land bug had bitten.

McDougal, who liked to boast of his royal ancestry, was fond of playing patron to friends. He was soon offering quick land profits to people he wanted to impress, including his former patron, Senator Fulbright. Fulbright let McDougal handle an investment for him in 1973. Though Fulbright was a partner of record in the land purchase, he never saw the property and had nothing to do with its disposal (he was campaigning at the time). Yet he walked off with triple his investment.

The Ouachita professor and the university president would seem an odd pair in any setting but that of Fayetteville. The Clintons felt that McDougal, for all his weird ways, might do for them what he had for Fulbright. And, sure enough, he did. In 1976, he suggested that Clinton buy five acres of land for $500 down and monthly payments of $175. In 1978, just as Clinton was beginning his campaign for governor, McDougal sold the land for him, giving him $2,150 in profit. It was not spectacular, but it was painless.

McDougal seemed to be on a roll. In 1976, he had taken a trip into the northwest hills and saw a newspaper ad for the sale of twelve hundred acres of land. After buying it sight unseen, he went to the office of a real-estate representative in Flippin, Arkansas, and met Chris Wade. The land was divided into lots, which Wade resold even before McDougal finished payment on the whole tract—a neat profit for McDougal, with little capital needed.

  1. 1

    For the Alexanders’ financial and political fortunes, see The Washington Post, February 10, 1996, pp. A1 and A10, and The New York Times, February 28, 1996, p. A10.

  2. 2

    William L. Riordan, Plunkitt of Tammany Hall (Meridian, 1991), p. 30.

  3. 3

    The report on the Rose Law Firm is not being released by the FDIC while related cases are under trial or investigation. Congressman Henry Gonzalez of Texas released the final (“supplemental”) report on which the FDIC acted. Copies of the reports, of which several were prepared for the Resolution Trust Corporation before it was absorbed by the FDIC, must be sought from congressional staff members.

  4. 4

    Diane D. Blair, Arkansas: Politics and Government (University of Nebraska Press, 1988).

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