To the Editors:
Joseph Lelyveld’s review of The Clinton Wars [NYR, May 29] was a missed opportunity for him to clarify and add to the historical record. He was a direct participant in the events I chronicle in it, and though he notes his participation he elides it with a reiteration of the old New York Times line on the Clintons, which he fails to acknowledge I criticize.
In his letter in the last issue of The New York Review of Books [June 12], responding to a column in Salon by Joe Conason, Lelyveld corrects certain errors in his review involving his claims that I omitted material that was, in fact, in The Clinton Wars. Nonetheless, he avoids dealing with the question of his responsibility for the Times‘s Whitewater coverage.
At the heart of his review is a defense of his handling for more than a decade, as managing editor and executive editor of The New York Times, of what is called the Whitewater story, about a failed real estate investment by Bill and Hillary Clinton in 1978. It was this initially minor issue, reported in a page-one article of the Times on March 8, 1992, that metastasized into the impeachment trial of President Clinton.
In his review Lelyveld calls Whitewater a “sweetheart deal” for the Clintons and depicts the facts as set forth in that first Whitewater article by reporter Jeff Gerth as incontrovertible: “The story said that the Clintons had a half-interest in a real estate development company in the Ozarks and that the other half was owned by an old friend who was at the helm of the biggest savings and loan association in the state when it became insolvent.” The article, inaccurately headlined “Clintons Joined S&L Operator in an Ozark Real-Estate Venture,” began with a lead sentence that compounded the error: “Bill Clinton and his wife were business partners with the owner of a failing savings and loan association that was subject to state regulation early in his tenure as Governor of Arkansas, records show.” But in fact, when the Clintons made their investment, Jim McDougal, their partner, had not yet established the Madison Guaranty S&L.
Lelyveld homes in on conflict-of-interest as driving the newspaper’s interest in the story: “It [the article] said nothing about laws having been broken but asked ‘whether a governor should be involved in a business deal with the owner of a business regulated by the state.’” The theme was that a state regulator appointed by Governor Clinton was granting preferential treatment to a bank owned by his business partner. Gerth wrote that the Arkansas securities commissioner, Beverly Basset Schaffer, approved “two novel proposals to help the savings and loan,” and that “Mrs. Schaffer, now a Fayetteville lawyer, said she did not remember the Federal examination of Madison but added that in her view, the findings were not ‘definitive proof of insolvency.’”
But in fact, Schaffer had not approved “two novel proposals” to keep Madison afloat. She had argued that the S&L would have to meet stringent federal and state requirements, but the bank never attempted to do so and the proposals died. Moreover, she had given Gerth a twenty-page memo detailing her efforts to close the bank, which included calling attention to its problems to the Federal Home Loan Bank Board and the Federal Saving and Loan Insurance Corporation; among other actions, she wrote a strenuous letter urging closure on December 10, 1987. (It took these agencies, headed by appointees of the G.H.W. Bush administration, fifteen months to act on her recommendation.) But, as I write in my book, though she gave these details to Gerth before his article was published, hers was “an account Gerth ignored.” On January 25, 1996, she testified before the Senate Whitewater Committee that she had not approved the Madison proposals and that she had given Gerth a memo saying so. Was Lelyveld ever made aware of Schaffer’s memo, which set forth facts undermining the chief premise of Gerth’s article?
Other fundamental errors or misjudgments marred the initial New York Times coverage. For example, Gerth wrote, “Available records covering the most active period of the real estate corporation, called Whitewater Development, appear to show that Mr. McDougal heavily subsidized it, insuring that the Clintons were under little financial risk in what turned out to be an unsuccessful enterprise.” In fact, this qualified supposition (“available” records that “appeared to show”) was untrue: the Clintons had joint liability on all bank loans, making them completely responsible.
Lelyveld writes now that Gerth’s article “had multiple sources.” But a single source had given Gerth the tip on the story and arranged for him to meet Jim McDougal, who was at the time suffering from manic depression, drug addiction, alcoholism, and bankruptcy. That source was Sheffield Nelson, an embittered partisan Republican rival of Bill Clinton, who had run against him for governor in 1990. Nelson’s pertinence to Madison Guaranty was that he’d contributed to breaking it. As I write in my book: “McDougal and Nelson had been business partners in a deal to buy Campobello Island, FDR’s famous summer place, and turn it into resort lots. More than any other scheme, that failed one had helped pull the Madison bank under. But the Campobello deal went unmentioned in Gerth’s account.”
At first, Gerth’s Times article had little impact. As I write, “McDougal retracted his charges, saying Clinton had done nothing illegal or unethical. A forensic accountant scratched through the confused records and issued a report showing no wrongdoing by the Clintons, while they lost about $65,000.” However, a Republican activist, L. Jean Lewis, who worked as an investigator at the Resolution Trust Corporation, the federal agency dealing with failed savings and loans associations, read the article and became the prime mover in turning its allegations into a criminal referral. Then, many months later, during the presidential campaign in October 1992, Bush White House legal counsel C. Boyden Gray asked the chief executive of the RTC to look into this referral. The US Attorney in Arkansas, Charles Banks (a Republican appointee), looked into it, and on October 7, 1992, the following telex, which I cite in The Clinton Wars, was sent to Washington: “It is the opinion of Little Rock FBI and the United States Attorney…that there is indeed insufficient evidence to suggest the Clintons had knowledge of the check-kiting activity conducted by McDougal…. It was also the opinion of [Banks that] the alleged involvement of the Clintons in wrong-doing was implausible….” When Attorney General William Barr nonetheless tried to revive Lewis’s referral, Banks rebuked his boss: “I must opine that after such a lapse of time the insistence of urgency in this case appears to suggest an intentional or unintentional attempt to intervene into the political process of the upcoming presidential election.” Then, prophetically, he added: “You and I know in investigations of this type, the first steps, such as issuance of grand jury subpoenas for records, will lead to media and public inquiries [about] matters that are subject to absolute privacy. Even media questions about such an investigation in today’s modern political climate all too often publicly purport to ‘legitimize what can’t be proven.’” He suggested that participating in such an investigation “amounts to prosecutorial misconduct and violates the most basic fundamental rule of Department of Justice policy.” In another telex the Little Rock FBI office added that there was “absolutely no factual basis to suggest criminal activity on the part of any of the individuals listed as witnesses in the referral”—that is, the Clintons. Although the Los Angeles Times reported these memos and telexes on August 9, 1995, the Nexis database reveals no mention in The New York Times. Was Lelyveld ever made aware of these documents at the time?
Lelyveld argues that the Clintons responded to the revival of Whitewater—achieved by media speculation on its possible connection to White House deputy legal counsel Vincent Foster’s suicide in July 1995—by “throwing up a smokescreen of fibs and disclosing as little as possible.” As I write, “The files were scattered and incomplete—nobody really knew how much—and the Clintons were unfamiliar with them.” But they certainly handed over their records to the federal authorities investigating the matter as soon as they were located. Lelyveld does not fully distinguish between disclosure to the proper authorities and disclosure to the press, which is hardly the same thing. They did not release all the documents to the already sensationalizing media for precisely the reasons raised by Charles Banks in his 1992 letter. They believed they should follow the legal model according to which responsible agencies would investigate and issue reports. As I write, the Clintons’ lawyers “gave stern advice to their clients that they should give the files only to legal authorities; otherwise they would find themselves being tried in the press….”
On December 13, 1995, the Resolution Trust Corporation issued its comprehensive report on Whitewater, having studied more than 200,000 documents and interviewed forty-five witnesses. RTC had obtained “essentially all of the documents regarding Whitewater” relevant to the Clintons, it said, and concluded: “On this record, there is no basis to charge the Clintons with any kind of primary liability for fraud or intentional misconduct. This investigation has revealed no evidence to support any such claims. Nor would the record support any claim of secondary or derivative liability for the possible misdeeds of others.” Although The Wall Street Journal reported on this conclusion, The New York Times did not—except that two weeks later, a few lines buried in a “News of the Week in Review” summary mentioned that the RTC had decided not to sue the Clintons, omitting any mention of its conclusion that the Clintons were not responsible for McDougal’s illegal actions and that, in regards to them, “no further resources need be expended on the Whitewater part of the investigation.” Was Lelyveld ever aware of this Whitewater report or ever read its conclusions? Did he know of its issuance at the time?
On May 15, 1996, when Jim and Susan McDougal were on trial in Arkansas, Ray Jahn, the prosecutor for the Office of the Independent Counsel, repeatedly stressed, in his closing argument (I quote it in my book), that President Clinton had absolutely nothing to do with McDougal’s misdoings, even though the defense had tried to claim that he did. McDougal was found guilty on nineteen of twenty-one counts, his wife on four; and his key supporting witness, David Hale—the only “witness” against Clinton in the entire Whitewater saga, a corrupt former municipal court judge whom I discuss at length—was discredited. A juror was quoted afterward as saying that Hale was “an unmitigated liar…. We all felt that way.” But not one line reporting on Jahn’s extraordinary summation, which vindicated the President so conclusively, appeared in The New York Times. Was Lelyveld ever aware of it? Did he know that Hale’s credibility had been shattered?
