S. Rept. 104-204 - PROGRESS OF THE INVESTIGATION INTO WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS AND RECOMMENDATION FOR FUTURE FUNDING104th Congress (1995-1996)
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S. Rept. 104-204 - 104th Congress (1995-1996)
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Senate Report 104-204 - PROGRESS OF THE INVESTIGATION INTO WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS AND RECOMMENDATION FOR FUTURE FUNDING [Senate Report 104-204] [From the U.S. Government Printing Office] 104th Congress 2d Session SENATE Report 104-204 _______________________________________________________________________ PROGRESS OF THE INVESTIGATION INTO WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS AND RECOMMENDATION FOR FUTURE FUNDING __________ R E P O R T of the SPECIAL COMMITTEE TO INVESTIGATE WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS together with ADDITIONAL VIEWS January 22, 1996.--Ordered to be printed SPECIAL COMMITTEE TO INVESTIGATE WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS ALFONSE M. D'AMATO, New York, Chairman PAUL S. SARBANES, Maryland RICHARD C. SHELBY, Alabama CHRISTOPHER J. DODD, Connecticut CHRISTOPHER S. BOND, Missouri JOHN F. KERRY, Massachusetts CONNIE MACK, Florida RICHARD H. BRYAN, Nevada LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California ROBERT F. BENNETT, Utah CAROL MOSELEY-BRAUN, Illinois ROD GRAMS, Minnesota PATTY MURRAY, Washington BILL FRIST, Tennessee PAUL SIMON, Illinois ORRIN B. HATCH, Utah FRANK H. MURKOWSKI, Alaska Howard A. Menell, Staff Director Robert J. Giuffra, Jr., Chief Counsel Philip E. Bechtel, Deputy Staff Director Steven B. Harris, Democratic Staff Director and Chief Counsel C O N T E N T S ---------- Page Summary.......................................................... 1 Preface.......................................................... 2 Discussion....................................................... 2 A. Progress of the Committee's Investigation..................... 2 1. Foster Phase.............................................. 3 2. Washington Phase.......................................... 5 3. Arkansas Phase............................................ 9 B. Obstacles Faced by the Committee.............................. 11 1. Delays in the Production of Documents..................... 11 (a) Telephone Records................................... 11 (b) White House Delays................................... 14 (c) Subpoena for William Kennedy's Notes................. 16 2. Resistance of Witnesses................................... 18 (a) Fifth Amendment Pleas................................ 18 (b) Motions to Quash the Committee's Subpoenas........... 18 3. Objections by the Office of Independent Counsel........... 20 C. Recommendations for Additional Funds.......................... 22 Exhibit I--Testimony of witnesses before the Special Committee to Investigate Whitewater Development Corporation and Related Matters........................................................ 24 Exhibit II--Phase I: Handling of documents in Foster's office.... 30 Exhibit III--Phase II: Washington and Arkansas................... 48 Exhibit IV--Additional document requests......................... 68 Additional views of Senators Sarbanes, Dodd, Kerry, Bryan, Boxer, Moseley-Braun, Murray and Simon................................ 90 I. The Special Committee should adhere to S. Res. 120 and complete its inquiry by February 29, 1996.................. 90 The Committee should complete its investigation by February 29, 1996...................................... 90 The investigation should not be prolonged in an election year................................................... 91 Substantial public funds have already been expended...... 92 The Independent Counsel's investigation should not delay the Committee's investigation.......................... 92 White House compliance with Committee document requests.. 94 II. The Majority's findings are incomplete and one-sided..... 95 III. Conclusion.............................................. 97 104th Congress Report SENATE 2d Session 104-204 _______________________________________________________________________ PROGRESS OF THE INVESTIGATION INTO WHITEWATER DEVELOPMENT CORPORATION AND RELATED MATTERS AND RECOMMENDATION FOR FUTURE FUNDING _______ January 22, 1996.--Ordered to be printed _______________________________________________________________________ Mr. D'Amato, from the Special Committee to Investigate Whitewater Development Corporation and Related Matters, submitted the following R E P O R T together with ADDITIONAL VIEWS Summary The Special Committee to Investigate Whitewater Development Corporation and Related Matters (the ``Committee'') has made significant progress toward completing the mandate of Senate Resolution 120. The Committee has sought to fulfill its mandate in a fair, thorough and impartial manner. In carrying out its constitutional oversight responsibility, the Committee has to date conducted 172 depositions, examined 95 witnesses in 29 days of public hearings, and issued numerous requests and subpoenas for documentary evidence.\1\ This effort has uncovered many new and critical facts regarding the matters of inquiry specified in Senate Resolution 120. \1\ Exhibit 1 accompanying this report provides a comprehensive listing of the witnesses examined by the Committee under oath. --------------------------------------------------------------------------- Although the Committee has made significant progress, much work remains to be done. The Committee has confronted efforts to withhold relevant information from the Committee. The continuing pattern of hinderance by various parties has significantly impeded the progress of the Committee's investigation. The Committee's progress has also been slowed by consideration of the Office of Independent Counsel's concerns about the Committee's examination of witnesses, including witnesses involved in the trial of United States v. James B. McDougal, et. al. prior to its conclusion. That trial has been rescheduled twice. It is currently calendared to begin on March 4, 1996, and is expected to last approximately two months. The Committee therefore does not believe that it can complete the mandate of Senate Resolution 120 by February 29, 1996, and recommends that the Senate authorize the expenditure of $600,000 to continue its investigation beyond that date. The Committee is committed to completing its investigation at the earliest possible date. PREFACE On May 17, 1995, the Senate, by a vote of 96 to 3, adopted Senate Resolution 120, which established the Committee, to be administered by the Committee on Banking, Housing, and Urban Affairs (the ``Banking Committee''). Section 9 of Resolution 120 directs the Committee to evaluate the progress of the investigation, study and hearings authorized by the Resolution and to make recommendations to the Senate with respect to the authorization of additional funds for a period following February 29, 1996. This report to the Senate addresses: (A) the progress of the Committee's investigation into matters authorized by Resolution 120; (B) the obstacles the Committee has encountered during the course of its investigation; and (C) the Committee's recommendations as to the funding necessary to carry out fully the mandate of Resolution 120. Discussion A. PROGRESS OF THE COMMITTEE'S INVESTIGATION The Committee has made significant progress in carrying out the mandate of Senate Resolution 120. The Resolution authorized the Committee to investigate and to hold public hearings into three general subject areas. Section 1(b)(1) authorized investigation into whether White House officials engaged in improper conduct in handling documents in Deputy White House Counsel Vincent Foster's office following his death on July 20, 1993--the so-called Foster Phase of the Committee's inquiry. Section 1(b)(2) authorized investigation into whether the White House improperly interfered with any investigations or prosecutions by various federal agencies relating to, among other things, Whitewater Development Corporation (``Whitewater''), Madison Guaranty Savings & Loan Association (``Madison''), and Capital Management Services, Inc. (``CMS''). This is the Washington Phase of the inquiry. Finally, in the Arkansas Phase, Sec. 1(b)(3) of Resolution 120 authorized the Committee to investigate, among other things, the operations of Whitewater, Madison, CMS and the work and billing practices of the Rose Law Firm with regard to Madison. The Committee has conducted extensive investigation and public hearings in connection with the Foster and the Washington Phases. The Committee has completed the bulk of its inquiry into these matters and has uncovered numerous new and salient facts. However, in light of the scope of the Senate's mandate, the thoroughness with which the Committee has sought to conduct its inquiry and the delay and noncompliance by certain parties with the Committee's inquiry, the Committee has not yet concluded its investigation. The Committee is now analyzing all available evidence in order to identify any additional avenues of investigation with respect to the Foster and Washington Phases of its investigation and to make its final conclusions. With respect to the Arkansas Phase, the Committee is now well into its investigation and has begun to hold public hearings into matters authorized by Sec. 1(b)(3) of Senate Resolution 120. In total, the Committee has conducted 172 depositions, examined 95 witnesses in 29 days of public hearings, and issued numerous requests and subpoenas for documents and records. This report is accompanied by exhibits detailing the Committee's substantial efforts. The Committee has attempted to conduct its investigation in a bipartisan manner. The Chairman and Ranking Member have jointly issued the vast majority of the requests and subpoenas for documentary and testamentary evidence. 1. Foster phase The death of White House Deputy Counsel Vincent W. Foster, Jr., on July 20, 1993, marked the first time since Secretary of Defense James Forrestal died in 1949 that such a high-ranking U.S. official took his own life. Mr. Foster was a close friend of both the President and Mrs. Clinton and provided legal counsel to them on a number of sensitive personal matters, including Whitewater. In the days following his death, White House officials, in particular members of the White House Counsel's office, searched the contents of Mr. Foster's office and, at the same time, prevented law enforcement officials from conducting a similar search. Section 1(b)(1) of Senate Resolution 120 authorized the Committee to inquire ``whether improper conduct occurred regarding the way in which White House officials handled documents in the office of White House Deputy Counsel Vincent Foster following his death.'' The Committee conducted 69 depositions and held 17 days of public hearings to investigate the actions of White House officials in the week following Mr. Foster's death. The Committee's investigation revealed, among other things, the following salient facts: Seven different persons recalled four separate requests by law enforcement officials to White House officials to seal Vincent Foster's office on the evening of his death. The office was not sealed on that night. (Braun, 7/20/95 Hrg. p. 20; Rolla, 7/20/95 Hrg. pp. 31-32; Hines, 7/20/95 Hrg. p. 25; Mathews, 7/25/95 Hrg. pp. 73-74; Gergen, 7/12/95 Dep. p. 29-30; Gearan, 7/6/95 Dep. p. 48; Hubbell, 7/13/95 Dep. pp. 49-51). White House Counsel Bernard Nussbaum, Chief of Staff to the First Lady Margaret Williams, and Deputy Director of the White House Office of Administration Patsy Thomasson conducted a search of Mr. Foster's office on the night of his death. (Nussbaum, 8/9/95 Hrg. p. 11; Williams, 7/26/95 Hrg. p. 154; Thomasson, 7/25/95 Hrg. p. 199). Secret Service Officer Henry O'Neill testified that, on the night of Mr. Foster's death, he saw Ms. Williams remove file folders, three to five inches thick, from the White House Counsel's suite and place them in her office. (O'Neill, 7/26/95 Hrg. p. 22). Ms. Williams testified that she did not remove any files from the Counsel's suite, and submitted results of a polygraph test corroborating her testimony. (Anderson, 7/31/95 Dep. Exh. 1). Department of Justice officials testified that they agreed with Mr. Nussbaum on July 21, 1993, that they would review documents in Mr. Foster's office jointly with Mr. Nussbaum. (Heymann, 8/2/95 Hrg. p. 42; Margolis, 8/10/95 Hrg. pp. 178-179; Adams, 6/29/95 Dep. p. 32). Susan Thomases paged Mr. Nussbaum early morning on July 22, after talking with Mrs. Clinton. (Williams & Connolly Document 001; White House Document Z 000647). Ms. Thomases then called back Mrs. Clinton. Associate White House Counsel Stephen Neuwirth testified that Mr. Nussbaum said later that morning that Mrs. Clinton and Ms. Thomases were concerned about law enforcement officials having ``unfettered access'' to Mr. Foster's office. (Neuwirth, 8/3/95 Hrg. p. 75). Mr. Nussbaum then announced to the law enforcement officials that he had decided to change the procedures for searching Mr. Foster's office. Mr. Nussbaum alone would review the documents contained in the office. (Margolis, 8/10/95 Hrg., pp. 182-183). Justice Department officials told Mr. Nussbaum that he was making ``a terrible mistake.'' (Heymann, 8/2/95 Hrg. p. 46; Margolis, 8/10/95 Hrg. p. 185). Law enforcement officials testified that they were dissatisfied with Mr. Nussbaum's cursory review of documents in Mr. Foster's office on July 22. (Margolis, 8/10/95 Hrg. p. 191; Salter, 7/27/95 Hrg. p. 105; Adams, 7/27/95 Hrg. p. 105; Park Police Document 37). Michael Spafford, an attorney representing the Foster family, testified that he overheard Associate White House Counsel Clifford Sloan tell Mr. Nussbaum after the document review on July 22 that scraps of paper remained at the bottom of Mr. Foster's briefcase. (Spafford, 7/27/95 Hrg. p. 19). Ms. Williams and Mr. Nussbaum conducted a second review of Mr. Foster's office and transported files to the White House Residence on July 22. (Nussbaum, 7/12/ 95 Dep. p. 237; Williams, 7/26/95 Hrg. p. 220-221). Special Assistant to the White House Counsel Thomas Castleton testified that, as he helped carry the files to the residence, Ms. Williams told him that ``the President or the First Lady had to review the contents of the boxes to determine what was in them.'' (Castleton, 6/27/95 Dep. pp. 139-140). Deputy Attorney General Phillip Heymann testified that, dissatisfied with Mr. Nussbaum's procedure for reviewing the documents in Mr. Foster's office, Mr. Heymann asked Mr. Nussbaum on the evening of July 22: ``Bernie, are you hiding something?'' (Heymann, 8/2/95 Hrg. p. 50). White House officials did not discover a note written by Mr. Foster until six days after his death and did not disclose to law enforcement officials the discovery of the note written by Mr. Foster until 28 hours after the discovery. (Nussbaum, 7/12/95 Dep. pp. 278-279; Heymann, 8/2/95 Hrg. p. 53). During the Foster Phase, the Committee faced numerous instances where witnesses provided inconsistent or contradictory testimony to the Committee. Even more often, witnesses provided a rote response of ``I don't recall'' or ``I have no specific recollection or knowledge'' to the Committee's questions relating to crucial facts. The Chairman has asked the Committee's counsel to study whether the Committee should refer the testimony of certain witnesses to the Independent Counsel for him to pursue possible charges. This review, which requires examination of hundreds of pages of depositions and hearing transcripts, is not yet completed. Given the unreliability of the testimony of key witnesses, the Committee continues to pursue its investigation of the Foster Phase and to evaluate the evidence already gathered in this phase of its inquiry. 2. Washington phase In 1992, federal officials began to investigate indications of financial improprieties and violations of federal laws related to the failure of Madison. From the beginning, there were allegations, at times well publicized, of improper conduct relating to, and political pressure being brought to bear on, the sensitive investigation. The Committee focused on these allegations in the Washington Phase of its investigation, deposing 82 witnesses and conducting 9 days of public hearings. Sections 1(b)(2)(A), (B), and (D) of Senate Resolution 120 authorize the Committee to investigate the handling of the Resolution Trust Corporation's (``RTC'') investigation into Madison and Whitewater, including whether confidential RTC information was improperly handled and communicated to the White House and whether RTC investigators were improperly disciplined for pursuing the investigation of Madison and Whitewater. The Committee's investigation has revealed, among other things, the following significant facts: RTC criminal investigators based in Kansas City prepared 10 criminal referrals related to Madison Guaranty. Twelve of the 21 counts contained in the Independent Counsel's indictment of James McDougal, Susan McDougal, and Arkansas Governor Jim Guy Tucker are directly related to these criminal referrals. The first criminal referral was submitted to the Department of Justice on September 1, 1992. However, contrary to prior practice, this referral was not acted upon for over a year until U.S. Attorney Paula Casey declined it on October 27, 1993. (RTC Letter, Sept. 1, 1992; DOJ Letter, Oct. 27, 1993). In January 1994, soon after the RTC reopened its civil investigation of Madison, RTC investigator Gary Davidson wrote that RTC attorney April Breslaw told him that ``there are some RTC people in management positions who would take a `dim view' of [him] investigating Madison Guaranty.'' (RTC Document RI0109). Breslaw had hired the Rose Law Firm to represent the Federal Deposit Insurance Corporation in its suit against Madison's former accountants. (Pillsbury Madison & Sutro LLP, A Report on the Rose Law Firm's Conduct of Accounting Malpractice Litigation pertaining to Madison Guaranty Savings & Loan, p. 8). Soon thereafter, on February 2, 1994, Ms. Breslaw in a taped conversation told another RTC investigator, L. Jean Lewis, that ``I think if they can say it honestly, the head people, Jack Ryan and Ellen Kulka, would like to be able to say `Whitewater did not cause a loss to Madison.' '' (Transcript of Conversation between L. Jean Lewis and April Breslaw, p. 59). In hearings before the Committee at which the tape of this conversation was played, Ms. Breslaw refused to confirm that she had made the statement or even that it was her voice on the tape. (Breslaw, 11/30/95 Hrg. pp. 54-57). Ms. Lewis testified that ``there was a concerted effort to obstruct, hamper and manipulate the results of our investigation of Madison.'' (Lewis, 11/29/95 Hrg., Opening Statement, p. 1). Richard Iorio, her supervisor, testified that ``we have learned that the RTC is not above politics in its handling of investigations of high visibility failed banks. If important people are implicated, special procedures are employed.'' (Iorio, 10/20/95 Dep. p. 66). On August 15, 1994, the three RTC investigators who prepared the criminal referrals related to Madison were placed on administrative leave for two weeks without warning or explanation. (RTC Documents RI0003, RI0012, RI0017). The Independent Counsel is currently investigating this matter. (Noble, 10/20/95 Dep.) The RTC makes criminal referrals to the appropriate U.S. Attorney for further investigation and prosecution if warranted. With respect to Madison and Whitewater, RTC investigators forwarded to the U.S. Attorney for the Eastern District of Arkansas two sets of such criminal referrals. Section 1(b)(2)(C) authorized the Committee to investigate whether the Department of Justice has improperly handled these criminal referrals from the RTC. The Committee's investigation into this matter revealed, among other things, that: The first RTC criminal referral, Referral No. C0004, was made to Charles Banks, the U.S. Attorney for the Eastern District of Arkansas, in September 1992. Banks did not take action on the referral, but on January 27, 1993, sent a recusal letter to the Executive Office of U.S. Attorneys, to which he never received a response. (DOJ Document A7049-7050; Banks dep. 91). High-level Justice Department officials believed that Paula Casey, Mr. Banks' successor, should have recused herself from the case because of her ties to the Clintons and Arkansas Governor Jim Guy Tucker. They communicated this view to her on several occasions. (DOJ Documents GEM-34, OIC 001127, FBI-1922). The director and agents of the Federal Bureau of Investigation similarly expressed concern that U.S. Attorney Casey should recuse herself from Madison- related matters. (DOJ Documents FBI-1287, FBI-1930). Nevertheless, Ms. Casey did not recuse herself until November 5, 1993 and only after declining the first RTC criminal referral C0004. (DOJ Document 5136). Randy Coleman, the attorney for CMS president David Hale, testified that he made an informal proffer during plea negotiations with Ms. Casey on September 7, 1993, but received no response. (Coleman, 11/9/95 Dep. p. 34) Mr. Hale offered to provide information on important Arkansas political figures, including President Clinton, in exchange for a negotiated plea. (Casey, 11/ 1/95 Dep. pp. 63-64) No plea agreement was reached, and David Hale was indicted on September 23, 1993. Ms. Coleman again suggested on September 24, 1993, that Casey recuse herself from the case, and that he be allowed to proffer Mr. Hale's information to the Department of Justice in Washington. (DOJ Document OIC 1074). Even after his recusal from the case in November 1993 (DOJ Document 16848), Associate Attorney General Webster Hubbell, a close associate of the Clintons, possessed the Clinton's personal and campaign files on Whitewater and Madison and was involved in the review and transfer of these documents to the Clinton's personal attorney in November and December 1993 (Hubbell, 10/26/95 Dep. pp. 96-99, 149-151). The Small Business Administration (``SBA'') was among the federal agencies investigating financial improprieties related to matters specified under Senate Resolution 120. CMS was a Specialized Small Business Investment Company owned and operated by David Hale. The SBA licensed and funded CMS to make business loans to socioeconomically disadvantaged persons. Instead, CMS allegedly engaged in a number of sham transactions and made a number of improper loans, including a loan for $300,000 to Susan McDougal--allegedly at the behest of then- Governor Clinton--that was used in part to prop Whitewater. Section 1(b)(3)(E) of Senate Resolution 120 authorized the Committee to investigate the supervision and regulation of CMS by the SBA. The Committee's investigation revealed the following: Former SBA Associate Administrator Wayne Foren testified that David Hale told him that he had access and influence with Governor Tucker and President Clinton. (Foren, 11/14/95 Dep. pp. 27-29). Mr. Hale also offered to arrange a meeting between Mr. Foren and Governor Tucker, which Mr. Foren refused. (Foren, 11/ 14/95 Dep. p. 107). Mr. Foren testified that he briefed SBA Administrator Erskine Bowles on May 5, 1993, about his investigation of CMS and David Hale. (Foren, 11/14/95 Dep. pp. 49- 50). The next day, Mr. Bowles advised Mr. Foren that he had talked with White House Chief of Staff Thomas McLarty about the CMS/Hale matter. (Foren, 11/14/95 Dep. p. 57). Associate White House Counsel Neil Eggleston contacted the SBA and requested confidential information relating to the investigation of CMS and David Hale. On November 16, 1993, the SBA's General Counsel, James Spotila, sent the documents to Mr. Eggleston. On the day that he had retrieved sensitive documents from the SBA, Mr. Eggleston left two messages for Lindsey, saying that it was important that the documents be reviewed. Mr. Eggleston testified that ``no one at the White House saw any of the underlying documents except me.'' (Eggleston, 11/28/95 Hrg., p. 99). However, records produced to the Committee on January 14, 1996, indicate that Mr. Eggleston called Assistant to the President Bruce Lindsey on the same day that he received the documents. The message, taken at 4:58 p.m. on November 16, 1993, and marked ``Important,'' stated: ``Has some Whitewater documents to go over with you. Will come by about 6:00 p.m.'' (White House Document S 012604). The documents remained in his office for two days until the Department of Justice asked that they be returned to the SBA. (Eggleston, 1/16/96 Hrg. p. 27-32, 89-93, 102-105). When Justice Department and FBI officials learned about the transfer, they asked the SBA to retrieve the documents and any copies. (DOJ Document JDA81). Hearings before the Banking Committee in 1994 revealed that a number of administration officials in the Treasury Department and the White House engaged in improper contacts and exchanged confidential law enforcement information relating to the RTC's investigation of Madison and Whitewater. As part of the investigation into these contacts, the Office of Government Ethics (``OGE'') issued a report on the matter. In light of questions about the handling of the OGE report and a related investigation by the Treasury and RTC Inspectors General, Section 1(b)(2)(B) authorized the Committee to investigate whether the White House engaged in improper contacts concerning confidential RTC information about Madison and Whitewater. Relatedly, section 1(b)(2)(E) authorized an investigation into whether the OGE report was improperly released to White House officials prior to their testimony before the Banking Committee or was used to communicate confidential RTC information to the White House. The Committee's investigation into these matters revealed the following: Despite the fact that Treasury Department General Counsel Jean Hanson was a subject of the investigation, Francine Kerner, a member of the General Counsel's office, provided advance copies of investigation transcripts to Ms. Hanson's staff. The transcripts were then disseminated to other senior Treasury officials. (Hrg. 11/8/95, p. 8). The transcripts contained confidential information about RTC criminal investigations and referrals that even Treasury Secretary Lloyd Bentsen should not have been permitted to review. RTC Inspector General John Adair testified that the transcripts contained 90% of the substance of the confidential information in the RTC criminal referrals. (Adair, 11/7/95 Hrg., p. 123). Ms. Kerner also provided Ms. Hanson's staff with draft copies of the RTC Inspector General's conclusions and asked Ms. Hanson's staff to edit the proposed OGE report. (Hrg., 11/7/95, p. 124). The Treasury Inspector General's chief investigator, James Cottos, objected to Ms. Kerner's attempts to alter the draft investigative report. He testified that ``I believe I made the comment we were not the Jean Hanson defense team.'' In addition, ``I felt they were slanting the facts or attempting to slant the facts.'' (Cottos, 11/8/95 Hrg. p. 35-36). Clark Blight, the chief investigator for the RTC Inspector General, testified that he was under the impression that Ms. Kerner was ``an advocate for the White House.'' (Blight, 11/7/95 Hrg. pp. 108-109). Patricia Black, Counsel to the RTC Inspector General, testified that she was ``astonished'' that information from such a meeting was being communicated back to the Treasury General Counsel's office because ``they were the subject of the investigation.'' (Black, 11/7/95 Hrg. p. 114). Confidential transcripts of investigative depositions were given to the White House Counsel's office without the knowledge or consent of the RTC Inspector General's office. Mr. Adair, Mr. Blight and Ms. Black were ``shocked'' by the communication of this information to the White House (Hrg. 11/7/95, pp. 119-20). Stephen Potts, Director of the OGE, testified that, contrary to statements made by White House Special Counsel Lloyd Cutler to the Banking Committee in August 1994, the OGE did not ``informally concur'' in Mr. Cutler's conclusion White House officials did not violate ethical standards with regard to the communication of confidential RTC information from the Treasury Department to the White House. (Potts, 11/8/95 Hrg., pp. 226-27). Mr. Cutler admitted to the Committee that he may have ``transgressed'' and ``may have gone too far when he testified'' before the Banking Committee in August 1994. (Cutler, 11/9/95 Hrg. p. 34). Although the bulk of the Committee's work is done, the Washington Phase of its investigation is not concluded. Due to the repeated delays in the production of documents, the Committee continues to obtain evidence pertinent to its inquiry. For example, the Committee received documents highly relevant to its investigation into contacts between the SBA and the White House as recently as January 14, 1996. 3. The Arkansas phase Section 1(b)(3) authorizes the Committee to investigate and conduct public hearings into what lies at the heart of the Whitewater affair. Whereas the matters covered in the Foster Phase and the Washington Phase concern improper conduct or contacts related to investigations of Whitewater, Madison and CMS, the Arkansas Phase focuses on core allegations of improprieties and criminal activities relating to Whitewater and Madison. As explained below, the Committee's commencement of the Arkansas Phase was delayed by discussions with the Office of Independent Counsel, and the completion of the Committee's investigation is likely to be delayed by concerns expressed by Independent Counsel. Nevertheless, the Committee has to date conducted 21 depositions and held three days of public hearings concerning the Arkansas Phase. This investigation has uncovered the following facts thus far: Mrs. Clinton has stated publicly that Richard Massey, then a young associate at the Rose Law Firm, and not she, arranged to bring in Madison as a client to the firm. However, Mr. Massey testified he did not bring in Madison as a client of the Rose Law Firm. (Massey, 1/ 11/96 Hrg., pp. 230, 232-33). Mrs. Clinton has stated publicly and under oath that she performed little or no work for Madison. However, records of billings by the Rose Law Firm, recently ``discovered'' in the personal quarters of the President and Mrs. Clinton at the White House, indicate that Mrs. Clinton accounted for approximately one-third of the firm's total billings to Madison. (Rose Law Firm Document RLF2 03030; Williams & Connolly Document DKSN028928). Mrs. Clinton billed Madison for approximately 60 hours of work. The Rose Law Firm billed Madison Guaranty more than $21,000. On April 29, 1985, Mrs. Clinton had a telephone conference with Beverly Bassett, the Arkansas securities commissioner who had been appointed to her post by Governor Clinton. The next day, the Rose Law Firm submitted to Ms. Bassett a request for approval of Madison's plan to issue a series of preferred stock as a capitalization measure. Mrs. Clinton billed Madison for more than a dozen conferences with Seth Ward, the Madison employee who was the ``straw'' purchaser of land from the Industrial Development Corporation (``IDC''). Bank regulators have described this transaction as a ``sham'' purchase that was structured to evade regulations limiting the extent to which Madison could invest in real estate. In connection with the IDC/Castle Grande matter, Mrs. Clinton prepared an option agreement under which Madison would have the right to purchase property from Seth Ward for $400,000. The Committee is examining whether the option was designed to be a way for Madison to pay Ward commissions on this transaction without having those commissions reclaimed by federal regulators. The Special Committee continues to investigate the involvement of President and Mrs. Clinton in the affairs of Whitewater, Madison, and CMS, as well as other matters authorized by Section 1(b)(3) of Senate Resolution 120. B. OBSTACLES FACED BY THE COMMITTEE Considerable progress has been made, but much work remains to be done. The Committee has confronted a number of unforeseen obstacles that have significantly hindered the progress of its investigation. The most notable and time-consuming of these obstacles have included (1) the withholding and delay by various persons and entities, including the White House, in the production of documents directly relevant to the Committee's investigation, (2) the noncooperation and resistance of a number of witnesses whose testimony is highly relevant to the Committee's investigation, and (3) the need to accommodate objections of the Independent Counsel that the Committee's inquiry into certain areas would hinder or impede his investigation. 1. Delays in the production of documents by the White House and other witnesses Because the testimony of witnesses before the Committee was often contradictory as to important events and actions, the Committee has placed particular emphasis on available documentary evidence. Unfortunately, throughout the course of its inquiry, the Committee has been hindered by parties unduly delaying the production of, or withholding outright, documents critical to its investigation. Although the White House has most often and most notably engaged in this course of action, the pattern of noncooperation has not been limited to just one party.\2\ \2\ Exhibits 2-4 accompanying this report provides a comprehensive accounting of the Special Committee's numerous document requests and subpoenas and the responses received from the various parties. --------------------------------------------------------------------------- (a) Telephone records On June 30, 1995, the Committee requested that the White House produce the residential telephone records of Margaret Williams, Chief of Staff to the First Lady, for the period July 20-22, 1993. Receiving no response, the Committee repeated its request to Ms. Williams' personal counsel on August 10, 1995. On August 24, 1995, Ms. Williams' counsel represented to the Committee that the telephone company no longer retained the requested records: ``In sum, the telephone records cannot be obtained, and we expect to receive written confirmation of that fact very shortly.'' The Committee received no further confirmation from Ms. Williams. On September 13, 1995, the Committee contacted Ms. Williams' telephone company and was advised that records for Ms. Williams' residence were indeed available for July 1993. On September 14, 1995, the Committee issued a subpoena to the telephone company for those records, which were produced to the Committee approximately one week later. Ms. Williams then informed the Committee that she also had received her telephone records and would cooperate with its investigation. Also, on June 30, 1995, the Committee requested from the White House all records reflecting ``communications that took place between 5:00 p.m. on July 20, 1993 and 5:00 p.m. on July 22, 1993 from or to Hillary Rodham Clinton.'' This request encompassed the telephone records of the Rodham residence in Little Rock, Arkansas, where Mrs. Clinton was visiting during this period. The White House, however, did not respond to this request until after the Committee specifically repeated it on August 9, 1995. On September 20, 1995, approximately three months after the Committee's initial request, the Clintons' personal attorney produced to the Committee records of Mrs. Clinton's telephone calls from the Rodham residence. On July 11, 1995, the Committee requested that the White House produce certain telephone records of Susan Thomases, a close confidant of the First Lady, for July 1993. Receiving no response, the Committee repeated the request to Ms. Thomases' personal counsel on August 9, 1995. On August 11, 1995, Ms. Thomases informed the Committee that neither she nor the telephone company retained any records of calls made from her residence or charged to her calling card. Ms. Thomases did produce to the Committee, on October 2, 1995, certain records of calls made from her office and vacation house. On December 6, 1995, shortly before Ms. Thomases was scheduled to appear before the Committee, counsel for Ms. Thomases advised that, in a routine search of records for an unrelated case, he had discovered certain responsive telephone records that Ms. Thomases had attached to an expense report in September 1993. The letter did not explain why Ms. Thomases had not advised her counsel or the Committee of their existence. Counsel for Ms. Thomases supplemented this production on December 11, 1995, enclosing even more responsive telephone records from Ms. Thomases' office. The various telephone records turned out to be highly relevant to the Committee's investigation into the handling of documents in Vincent Foster's office following his death. The records established the following: Hillary Rodham Clinton called Margaret Williams at 10:13 p.m. EDT, immediately upon hearing of Mr. Foster's death on July 20, 1993. Immediately after speaking with Mrs. Clinton, Ms. Williams proceeded to Mr. Foster's office in the West Wing of the White House. Mrs. Clinton then called Susan Thomases in New York at 11:19 p.m. EDT. After searching Mr. Foster's office, Ms. Williams called Mrs. Clinton in Little Rock at 12:56 a.m. EDT on July 21, 1995, and talked for 11 minutes. At 1:10 a.m. EDT, after her conversation with Mrs. Clinton, Ms. Williams called Ms. Thomases in New York. Early on the morning on July 22, 1993, Ms. Williams called Mrs. Clinton at 7:44 a.m. EDT. After speaking with Ms. Williams for seven minutes, Mrs. Clinton called Ms. Thomases in her Washington, D.C. hotel. Immediately after hanging up with Mrs. Clinton, Ms. Thomases paged White House Counsel Bernard Nussbaum, who later told his associate that the First Lady and Ms. Thomases were concerned about law enforcement officials having ``unfettered access'' to Mr. Foster's office. Ms. Thomases then called back Mrs. Clinton at 8:25 a.m. EDT on July 22. Ms. Thomases called Ms. Williams at 3:08 p.m. on July 22, right before Ms. Williams conducted a second review of Mr. Foster's office with Mr. Nussbaum. The three-month delay in providing telephone records to the Committee cost the Committee considerable investigative time and caused the Committee to revisit its investigation into the handling of papers in Mr. Foster's office. Ms. Williams and Ms. Thomases had to be recalled to the Committee twice in order to explain the contradictions between their sworn testimony and the telephone records and other documentary evidence uncovered by the Committee. The pattern continues. On January 9, 1996, Ms. Thomases produced to the Committee more responsive records, apparently discovered, according to her counsel, after ``expending extraordinary efforts.'' Among the documents provided was a message taken at 1:30 p.m. EDT on July 27, 1993, asking Ms. Thomases to ``please call Hillary.'' (Willkie, Farr & Gallagher Document ST 131). Ms. Thomases had previously testified to the Committee that she did not recall seeing Mrs. Clinton on July 27 and was not involved in Ms. Williams' transfer of Whitewater files from the White House Residence to Mrs. Clinton's personal lawyer, Mr. Robert Barnett--despite records showing that Mrs. Thomases entered and exited the White House Residence contemporaneously with Mr. Barnett and Ms. Williams. The fourth telephone call Mrs. Clinton made on the night of Mr. Foster's death--at 11:41 p.m. EDT, right after talking with Ms. Thomases--was to the number 202-628-7087. Mrs. Clinton's personal counsel represented to the Committee that Mrs. Clinton did not know the identity of the party whom she called, despite additional investigation by her counsel. The Committee then issued a subpoena to the telephone company, which responded that its records indicated that the number was not in service on July 20, 1993. On November 30, 1995, pursuant to Sec. 5(b)(7) of Senate Resolution 120, the Committee issued a set of written interrogatories to Mrs. Clinton to probe her knowledge of this unidentified number. The Committee, after conducting its own independent investigation, advised the White House that it had reason to believe that the number was a special secure White House telephone line. Mrs. Clinton's answer to the interrogatories stated that she did not recall calling 202-628-7087, but that ``[i]t would not surprise me to learn that I had placed a call to the White House that evening.'' Also, on November 30, 1995, the White House confirmed to the Committee that the number was indeed ``an unlisted trunk line that rang on the White House switchboard.'' The line apparently was used to bypass the main White House number. Although the White House did not know to whom Mrs. Clinton was connected after she reached the White House switchboard, ``Bill Burton, Deputy White House Chief of Staff, remembers receiving a call in the Chief of Staff's office from Mrs. Clinton on the evening of July 20 and speaking with her about Vincent Foster's death.'' In light of this new information, the Committee called back Mr. Burton to testify about his telephone conversation with Mrs. Clinton on July 20, again causing the Committee to divert valuable resources to revisit a critical issue in light of newly uncovered evidence. (b) White House delays On August 25, 1995, the Committee requested from the White House all documents that reflect, refer, or relate to, among other things, matters specified in Sec. 1(b)(2) and Sec. 1(b)(3) of Senate Resolution 120--the Washington and Arkansas Phases of the investigation. That request indicated that, in order for the Committee to complete its work as expeditiously as possible, ``it is necessary that the Committee receive these documents by no later than September 7, 1995, and prior to that date, if possible.'' The White House made ``an initial production'' of records on September 15, 1995, and specifically noted that ``[o]ur response to Senator D'Amato's request is not complete.'' On September 25, 1995, the Committee advised the White House that it was very concerned about the slow pace of the White House's response to the August 25, 1995, document request. In order to expedite the process, the Committee agreed to limit the scope of its initial document request. Three weeks later, the White House still had not completed its document production. On October 17, 1995, the Committee agreed to limit its request even further, going so far as to specify exactly which offices the White House needed to search for responsive documents. On the same day, Chairman D'Amato wrote to Judge Abner Mikva, then Counsel to the President, to reiterate that the Committee ``is very concerned about the slow pace of the White House's response to the Committee's August 25, 1995 request for documents that are directly relevant to the Committee's investigation.'' Noting that the Committee had gone out of its way to accommodate the White House's concerns and to answer the White House's questions about that document request, Chairman D'Amato concluded: ``The White House's almost two month delay in producing documents has impacted negatively on the Committee's ability to conclude its investigation by February 1996.'' Still, little progress followed. On October 25, 1995, the Committee met to consider the inadequate response to the Committee's document request by the White House and other parties. Concerned with the undue delay in the production of documents, counsel to the Committee recommended that subpoenas be issued to all parties relevant to the investigation. A congressional subpoena, unlike a document request, carries with it the threat of civil and criminal penalties for noncompliance. On October 26, 1995, the Committee voted unanimously to issue subpoenas seeking all documents requested by the Committee to all parties by letter after August 25, 1995. With a few notable exceptions, the production of responsive documents to the Committee improved significantly. Among the records covered by the Committee's August 25, 1995 letter request and its October 26, 1995 subpoena to the White House were electronic mail messages between certain White House officials relating to matters identified in Senate Resolution 120. These messages are a particularly valuable source of information to the Committee. Electronic mail messages generally are written contemporaneous to the events under investigation and provide the Committee with candid, unrehearsed and uncolored information concerning the actions and motives of key witnesses. For example, during the Foster Phase of the investigation, messages exchanged between two assistants in the White House Counsel's office provided critical information as to the activities of Bernard Nussbaum and his associates in the week immediately after the death of Vincent Foster. (White House Documents Z1209-Z1214). On September 15, 1995, the White House wrote to the Committee that ``we are unable to respond to your request as currently framed'' and asked for clarification of the Committee's request for electronic mail messages. The Committee agreed to limit its request for electronic mail messages to those messages (i) sent to or from particular White house officials, and (ii) containing certain ``key words'' highly relevant to the investigation. Finally, on January 19, 1996, after months of discussions with the Committee's counsel, the White House finally agreed to begin the process of searching for electronic mail. It is not clear when the White House will complete the lengthy process of searching for electronic mail responsive to the Committee's subpoena. In an October 24, 1995 letter, the White House estimated that this process would take approximately twelve weeks. Other executive departments and agencies, including the Department of Justice, the Department of the Treasury, and the Resolution Trust Corporation have already complied with the Committee's requests for electronic messages. Among the records covered by the Committee's August 25, 1995 request and its October 26, 1995 subpoena to the White House and the Clintons were the Rose Law Firm billing records relating services Mrs. Clinton and other attorneys at the firm performed for Madison. These records obviously are critical to the Committee's investigation and had been subpoenaed by other investigative bodies for almost two years. The White House and the Rose Law Firm have consistently maintained that they did not possess such records. On January 5, 1996, David Kendall, personal counsel for the President and Mrs. Clinton, produced copies of the Rose Law Firm's billing records for work performed for Madison Guaranty. In a statement, Mr. Kendall said that the records had been discovered the previous day at the White House by Special Assistant to the President Carolyn Huber. After further inquiries from the Committee, the White House advised that the records had not been stored in Ms. Huber's office, but rather in ``a work room in the White House Residence.'' Ms. Huber testified that she first found the records in the ``book room'' of the White House in the early part of August 1995--during the Committee's hearings into the events subsequent to Vincent Foster's death. The book room is located within the private residence of the White House and access to it is extremely limited. The only persons with regular access to the room, according to Ms. Huber, are the First Family, herself, and Capricia Marshall. Ms. Huber testified that she had not seen the conspicuous billing records when she was in the book room just days prior to their discovery. Thinking that the records, which were folded over, had been left for her to file, Ms. Huber stowed them in a box containing presidential memorabilia. She rediscovered them on January 4, 1996, when she was going through the box and then realized what she had found. (Huber, 1/18/96 Hrg. p. 8-12). The Special Committee is now investigating who had possession of these documents prior to their discovery by Ms. Huber in August 1995 and whether they were taken from Vincent Foster's office following his death. In her testimony, Ms. Huber confirmed that the notes written in red ink on the records are in Mr. Foster's handwriting. (Huber, 1/18/96 Hrg. p. 25). (c) Subpoena for William Kennedy's notes In response to the Committee's October 26, 1995 subpoena for Whitewater-related documents, the White House notified the Committee on November 2, 1995, that it was refusing to produce a number of documents responsive to the subpoena on the grounds of privilege. Among the documents so identified were notes taken by former Associate White House Counsel William Kennedy at a November 5, 1993, meeting of White House officials and the Clintons' private attorneys relating to Whitewater. On December 5, 1995, Mr. Kennedy appeared before the Committee. He was questioned about the November 5 meeting, but, at the direction of counsel for both the Clintons and the White House, refused to answer any questions about the substance of the meeting. (Kennedy, 12/5/95 Hrg. pp. 42-47, 59-61). Mr. Kennedy stated only that ``I have been instructed that the meeting is covered by the attorney-client privilege and I've been instructed to abide by that privilege.'' (Kennedy, 12/5/95 Hrg. p. 42). On December 8, 1995, the Committee issued a subpoena duces tecum to Mr. Kennedy directing him to ``[p]roduce any and all documents, including but not limited to, notes, transcripts, memoranda, or recordings, reflecting, referring or relating to a November 5, 1993 meeting attended by William Kennedy at the offices of Williams & Connolly.'' The Committee advised Mr. Kennedy that, if he had objections to the subpoena, he was invited to submit a legal memorandum to the Committee by December 12, 1995. Mr. Kennedy refused to comply with the Committee's subpoena. On December 12, 1995, the Committee received separate submissions from counsel for Mr. Kennedy, the President and Mrs. Clinton, and the White House raising objections to the Committee's subpoena. On December 14, 1995, the Chairman of the Committee convened a meeting of the Committee to rule on the various objections. After careful consideration, the Chairman overruled the objections to the subpoena, and the Committee voted to order Mr. Kennedy to produce the responsive documents by 9:00 a.m. on December 15, 1995. After Mr. Kennedy failed to comply with this order and after unsuccessful efforts to reach agreement with the White House, the Committee voted on December 15, 1995, to report the matter to the Senate. On December 20, 1995, the full Senate adopted Senate Resolution 199, directing the Senate Legal Counsel to initiate a civil action in federal District Court under 28 U.S.C. Sec. 1365 (1994). That provision permits the Committee, upon authorization of the Senate, to apply to the United States District Court for the District of Columbia for an order requiring the witness to produce the subpoenaed documents. If the district court determines that the witness has no valid reason to withhold the subpoenaed documents, the court would direct the witness to produce them. If that order is ignored, the witness could be found in contempt of court. The district court, in its discretion, could order sanctions against the witness to induce compliance with its order to produce the documents. On December 22, 1995, before the Senate Legal Counsel initiated an action under 28 U.S.C. Sec. 1365, the White House reversed its position and Mr. Kennedy produced his notes to the Committee. The notes turned out to be highly relevant to the Committee's investigation. They contained details that identified numerous investigative avenues for the Committee. For example, Mr. Kennedy made the following notes: ``Try to find out what's going on in Investigation'' (White House Document S 12517). This delegation of legal defense tasks to White House officials falls squarely within matters specified by Sec. 1(b)(2) of Senate Resolution 120. ``July 20th: FBI issued subpena [sic] & took records of municipal judge named Hale. Also the day that VF killed himself Factor'' (White House Document S 12518). The notation suggested a possible link between the FBI's investigation of CMS, which allegedly made an illegal loan to James and Susan McDougal in 1986 at the behest of then-Governor Clinton, and the death of President Clinton's friend and counsel, Vincent Foster. ``Blair could have knowledge Could be source of money to allow McD to purchase stock'' (White House Document S 12520). It was subsequently revealed that James Blair, a close confidant of the Clintons, had provided James McDougal with the $1,000 that McDougal used to acquire the Clintons' Whitewater stock on December 22, 1992. (Mark Hosenball & Michael Isikoff, ``A Churning Scandal,'' Newsweek, Jan. 8, 1996, p. 43). ``Vacuum Rose Law files WWDC docs--subpoena *Documents--Never know go out quietly'' (White House Document S 12523). This cryptic note suggests the possibility of an effort to suppress records critical to the Committee's investigation. William Kennedy testified that this reference as related to a vacuum of information concerning Whitewater and did not denote any effort to destroy evidence. Needless to say, without the unnecessary months-long delay in obtaining Mr. Kennedy's notes, the Committee would have been able to pursue these additional investigative leads more expeditiously and more effectively. Moreover, former Associate Counsel to the President Neil Eggleston has testified that he continued to communicate with the Clintons' private attorneys after the November 5, 1993 meeting, even though that meeting was allegedly to delineate separate spheres of work for the White House lawyers and the Clintons' personal attorneys. Indeed, on November 10, 1993, the Clintons' private counsel shared with the White House a Whitewater chronology. (Eggleston, 1/16/96 Hrg. p. 111-112). Although the Committee ultimately was successful in obtaining Mr. Kennedy's valuable notes, it was only after a long and protracted process involving three different sets of opposing attorneys and the preparation of a lengthy report to the full Senate. The Committee had to divert considerable resources to this process of seeking information--information to which, in the view of the Committee and the Senate, the Committee was legally entitled. This diversion detracted from the Committee's investigative activities and therefore impeded the Committee's progress in fulfilling the mandate of Senate Resolution 120. 2. The resistance of witnesses (a) Fifth amendment pleas The Committee has been significantly hindered in its fact- finding mission by the assertion by various witnesses of the Fifth Amendment privilege. After the Committee scheduled depositions of Herbert Branscum, Robert Hill, Rosalee Wade, and Chris Wade, counsel for those witnesses informed the Committee that they would invoke their right against self-incrimination if called to testify under oath. Herbert Branscum and Robert Hill are co-owners of Perry County Bank, the chief lending institution for Governor Clinton in his 1990 gubernatorial campaign, a matter specifically identified for investigation by Sec. 1(b)(3)(G) of Senate Resolution 120. The former president of the bank, Neal Ainley, has pled guilty to charges stemming from the failure to report cash deposits from Governor Clinton's campaign that totalled more than $10,000. The testimony of Mr. Branscum and Mr. Hill is especially important because, as explained below, the Independent Counsel has asked the Committee not to examine Mr. Ainley until the conclusion of the trial in United States v. James B. McDougal et. al., which is currently scheduled to start in March 1996. Without the testimony of these three critical witnesses, the Committee cannot practically investigate the matters specifically authorized by Sec. 1(b)(3)(G) of Senate Resolution 120. Chris Wade and his wife, Rosalee Wade, were co-owners of Ozarks Realty Company, the principal real estate agent for Whitewater. Their testimony is highly relevant to the Committee's investigation into several potentially questionable transactions involving Whitewater and the Clintons in the 1980s. In addition, Mr. Wade was a principal in Ozarks Air Services, which purchased twenty-four unsold lots owned by Whitewater Development Corporation on May 4, 1985, and participated in James McDougal's real estate development at Campobello Island. Counsel for both Mr. and Mrs. Wade have indicated to the Committee that they are asserting the Fifth Amendment privilege to shield them from investigation or prosecution by the Independent Counsel. (b) Motions to quash the committee's subpoenas The Committee's investigation relies heavily on documentary evidence. Because witnesses before the Committee often offer conflicting or contradictory testimony and because the relevant financial transactions are highly complex, contemporaneous records play a disproportionately important role in the Committee's fact-finding mission. However, documents from three of the most important parties in the Arkansas Phase of the investigation--besides President and Mrs. Clinton--will not be available to the Committee until the end of April 1996 at the earliest, when the trial in United States v. James B. McDougal et. al. is expected to conclude. On December 22 and 27, 1995, the Committee issued subpoenas duces tecum to Arkansas Governor Jim Guy Tucker, James McDougal, and Susan McDougal, commanding the production, by January 5, 1996, of all documents relevant to its investigation. All three are defendants in United States v. James B. McDougal et. al. At the request of counsel for Governor Tucker and Ms. McDougal, the Committee agreed to extend the return date for their subpoenas to January 10, 1996. On January 9, 1996, Governor Tucker filed in the United States District Court for the Eastern District of Arkansas a motion to quash the Committee's subpoena or, in the alternative, to stay the court's proceedings in United States v. James McDougal et. al. The motion asserted that complying with the subpoena would ``interfere with this Defendant's preparation for trial, in that his lawyers would necessarily be involved in the defense of the subpoena and not in trial preparation.'' Governor Tucker argued further that the publicity generated by the Committee's investigation would ``deprive the Defendant of his right to a fair trial by jurors unaffected by the propaganda of the majority.'' On January 11, 1996, counsel for Susan McDougal filed a separate motion to quash the Committee's subpoena before the court. The motion asserted that the work required to comply with the Committee's subpoena would interfere with counsel's representation of Ms. McDougal. Although Mr. McDougal did not file a formal motion to quash the Committee's subpoena, the Committee understands that Mr. McDougal objected to the subpoena on the same grounds as Governor Tucker and Ms. McDougal. On January 12, 1996, the Committee, in deference to the views of the District Court and the Independent Counsel, agreed not to enforce the Committee's subpoenas until after the trial of the three defendants. The motions to quash were consequently withdrawn. The 44,000 pages of documents in the possession of these three witnesses are vital to the Committee's investigation into the matters prescribed in Senate Resolution 120. The McDougals played a pivotal role in the ``activities, investments, and tax liability of Whitewater Development Corporation'' (Senate Resolution 120, Sec. 1(b)(3)(B)) as well as ``the operations, solvency, and regulation of Madison Guaranty Savings and Loan Association.'' (Senate Resolution 120, Sec. 1(b)(3)(A)). The documents in their possession may be the only source of information critical to a true understanding of these subject matters--matters that are central to the mandate of Senate Resolution 120. Likewise, Governor Tucker was intimately familiar with ``the sources of funding and the lending practices of Capital Management Services, Inc.'' (Senate Resolution 120, Sec. 1(b)(3)(E)). A report by the law firm of Pillsbury, Madison and Sutro on behalf of the RTC has documented that Castle Water and Sewer Corporation, a company in which Governor Tucker had a controlling interest, received $150,000 from Capital Management. In addition, a subsidiary of Castle Water and Sewer, Southloop Construction Company, received a $100,000 loan from Capital Management. Documents in the possession of Governor Tucker may shed light on these and other potentially questionable transactions and therefore are critical to the Committee's investigation. 3. Objections by the Office of Independent Counsel Section 7(b)(2) of Senate Resolution 120 encouraged the Committee, to the extent practicable, to coordinate its activities with the investigation of the Office of the Independent Counsel. During the 103d Congress, the Banking Committee, pursuant to Senate Resolution 229, conducted an inquiry into Mr. Foster's death and the subsequent investigation by the Park Police. On July 15, 1994, Special Counsel Robert B. Fiske, Jr., advised the Chairman and the Ranking Member of the Banking Committee that ``public hearings on the subject of the handling of documents in Mr. Foster's office while this investigation is continuing could prejudice our investigation.'' The Banking Committee thus refrained from investigating that subject. By letter dated April 22, 1995, Independent Counsel Kenneth W. Starr notified the Chairman and the Ranking Member of the Banking Committee that his investigation would not be hindered or impeded by an inquiry into whether White House officials engaged in improper conduct in handling documents in Mr. Foster's office following his death. Accordingly, after the passage of Senate Resolution 120, the Committee began its investigation into the matters authorized by section 1(b)(1) of Senate Resolution 120, and held public hearings into those matters between July 18 and August 10, 1995. On August 22, 1995, the Committee advised the Office of the Independent Counsel that it intended to proceed with other aspects of its investigation under Senate Resolution 120, specifically, those matters specified in Section 1(b)(2) and Section (1)(b)(3) of the resolution. On September 27, 1995, Mr. Starr responded that investigations and hearings by the Committee into the following matters would impede his prosecutorial efforts: the operations, solvency, and regulation of Madison; the activities, investments, and tax liability of Whitewater; the policies and practices of the RTC and other federal banking agencies regarding the legal representation of such agencies with respect to Madison; the handling by the RTC and other federal banking agencies of civil or administrative actions against parties regarding Madison; the sources of funding and the lending practices of CMS; the lending activities of Perry County Bank in connection with the 1990 Arkansas gubernatorial election. In short, the Independent Counsel objected the Committee investigating ``six of the thirteen subject matters listed in Section 1(b) of Senate Resolution 120.'' In order to accommodate the Independent Counsel's objection, as directed by Senate Resolution 120, the Committee focused its efforts at that time on the so-called Washington Phase of the investigation--which corresponded roughly with the subject matters specified in Section 1(b)(2) of Senate Resolution 120. The Committee conducted hearings into these matters from November 7 through December 6, 1995. Consistent with Mr. Starr's wishes, those hearings did not delve into matters specified in Section 1(b)(3) of Senate Resolution 120, the so-called Arkansas Phase. Nevertheless, the Committee notified the Independent Counsel that, notwithstanding his concerns, it would press forward with its investigation into the Arkansas Phase. By letter dated October 2, 1995, Chairman D'Amato and Senator Sarbanes explained to Mr. Starr that it was necessary to do so in order to fulfill the mandate of Senate Resolution 120 that the Committee make every reasonable effort to complete its investigation and public hearings by February 1, 1996. Although the Committee thereafter proceeded with its investigation into the Arkansas Phase, the negotiations with the Independent Counsel to ensure that the Committee would not unduly hamper his efforts delayed the Committee's commencement of this phase for over a month. As part of its investigation, the Committee submitted a list of potential witnesses to the Independent Counsel and sought his advice whether his investigation would be hindered or impeded if the Committee examined those witnesses. On December 4, 1995, the Office of Independent Counsel objected to the Committee examining, in any fashion, the following witnesses: 1. Neal Ainley 2. Lisa Aunspaugh 3. Don Denton 4. David Hale 5. Larry Kuca 6. John Latham 7. Dean Paul 8. R.D. Randolph 9. Robert Palmer 10. Stephen Smith 11. Greg Young In addition, the Independent Counsel repeated his position that public hearings into any matter relating to the Arkansas Phase at that time would hinder and impede his investigations and prosecutions. The principal basis for the Independent Counsel's objections was the upcoming trial of United States v. James B. McDougal, et al. The Independent Counsel has repeatedly advised that any public hearings into matters authorized by Section 1(b)(3) of Senate Resolution 120 prior to the completion of that trial would hinder and impede his prosecutorial efforts. In addition, he advised that the above-named individuals are anticipated witnesses at the trial and therefore should not be examined by the Committee before the trial is completed. The trial was scheduled to begin on October 20, 1995, but was moved to January 16, 1996. The Office of Independent Counsel has since advised the Committee that the trial of United States v. James B. McDougal, et al. had been delayed yet again, this time rescheduled to March 4, 1996. The prosecution puts on trial Arkansas Governor Jim Guy Tucker, Jim McDougal, and Susan McDougal--three of the major participants in activities involving Whitewater, Madison, and CMS. It is expected to continue through April 1996. Senate Resolution 120 charged the Committee with three primary mandates: (i) to conduct a full and thorough investigation into matters authorized by the Resolution; (ii) to coordinate with the Independent Counsel so as not to hinder or impede his investigation; and (iii) to complete the Committee's investigation, if possible, by February 1, 1996, and, at the latest, February 29, 1996. Unfortunately, certain circumstances, unforeseen at the time the Senate passed Resolution 120 and beyond the control of the Committee, has made the fulfillment of all three mandates unlikely. The Committee's investigation has been significantly hindered and delayed by the evasion and noncooperation of certain parties. The Committee found itself in the unique, and difficult, position of not only conducting an inquiry, but also of having to ensure continually that its investigation was not being hindered. In addition, deference to the Independent Counsel's ongoing investigation has significantly slowed the progress of the Committee's investigation. The repeated rescheduling of the trial in United States v. James B. McDougal, et al.--which centers on a number of witnesses critical to the Committee's investigation--has already delayed the Committee's investigation and hearings into the Arkansas Phase of its inquiry by approximately two months. The Independent Counsel persists in his strong objections to the Committee examining certain critical witnesses until after that trial ends. If the Committee continues to try to accommodate the Independent Counsel, as encouraged by Senate Resolution 120, the Committee will not be able to complete a full and thorough investigation into matters authorized by Sec. 1(b)(3) of Resolution 120 by February 29, 1995. C. RECOMMENDATIONS FOR AUTHORIZATION OF ADDITIONAL FUNDS. For the reasons discussed in Section B above, the Committee does no anticipate that it can complete its investigation into matters authorized by Senate Resolution 120 by February 29, 1996. The Committee thus anticipates that it likely will be necessary to seek authorization from the Senate for funding of the Committee's work for a period beyond that date. This section discusses the Committee's expenditures to date under Senate Resolution 120 and its recommendations for additional funding necessary to carry out fully the mandate of Senate Resolution 120. Efficient management and the hard work of its staff have enabled the Committee to conduct its investigation at a relatively low cost to taxpayers. Senate Resolution 120 authorized the expenditure of $950,000 by the Committee. The Committee allocated that figure as follows: $200,000 for undesignated administrative expenses; $500,000 for the salary expenses of majority staff; and $250,000 for the salary expenses of minority staff. As of December 31, 1995, the Committee's expenditures were as follows: 1. Administrative Expenses: Hearing and Deposition.............................. $241,000 Witness Travel...................................... 15,000 Stationery and Supplies............................. 14,000 Other Expenses 3............................... 3 Includes telecommunications, publications, mailing and delivery services, audio-visual equipment, and Senate services. 11,500 -------------------------------------------------------- ____________________________________________________ Total Expenditures................................. 281,500 -------------------------------------------------------- ____________________________________________________ Allocated........................................... 200,000 -------------------------------------------------------- ____________________________________________________ Balance............................................ (81,500) ======================================================== ____________________________________________________ 2. Majority Salary Expenses: Total Salary and Expenses........................... 254,836 Allocated........................................... 500,000 -------------------------------------------------------- ____________________________________________________ Balance............................................ 245,164 ======================================================== ____________________________________________________ 3. Minority Salary Expenses: Total Salary and Expenses........................... 138,193 Allocated........................................... 250,000 Balance............................................ 111,807 As the above numbers demonstrate, the most significant expenditure by the Committee has been to cover the cost of preparing official transcripts of sworn depositions and public hearings. The $241,000 expenditure for that purpose alone through December 31, 1995, is well above the $200,000 allocated for total administrative expenses through February 29, 1996. Fortunately, the Committee has been frugal in expending resources for staff salaries and expenses--keeping the level at the minimum level necessary for a full and thorough investigation. The funds expended thus far on salary expenses consequently are well below the allocated amounts. The savings in salary expenses will enable the Committee to offset the unanticipated expenses for depositions and hearings. At this point, the Committee does not anticipate the need for any additional funds to continue its investigation through February 29, 1996. However, as noted above, the Committee probably cannot complete its investigation into the matters authorized by Senate Resolution 120 by February 29, 1996. Consistent with Senate Resolution 120, the Committee will endeavor to finish its work as soon as practicable. However, any prediction about the eventual ending date of public hearings is premature because of the uncertainty surrounding when the trial in United States v. James McDougal et al., will conclude. Until that time, the Committee will not be able to examine a number of critical witnesses. In addition, at the conclusion of its public hearings, the Committee will require approximately two months in order to evaluate all the evidence gathered during its investigation and to prepare its report to the Senate, as directed by Senate Resolution 120. The Committee has identified at least 40 witnesses whom it intends to call to testify at public hearings related to the Arkansas Phase of the investigation. These witnesses are in addition to the 15 witnesses whose cooperation and testimony are contingent on the progress of the trial in United States v. James McDougal et al. The number of witnesses, of course, could change significantly as the Committee presses forward with its investigation into the Arkansas Phase. The time required for this phase of the investigation especially difficult to judge in light of the fact that many of the witnesses reside in Arkansas. Consistent with Senate Resolution 120, however, the Committee remains committed to conclude its investigation and hearings as soon as possible. Based on the Committee's best estimate of what is required to complete fully its investigation under Senate Resolution 120, the Committee recommends that the Senate authorize the Committee to expend $600,000 after February 29, 1996. Exhibit I.--Testimony of Witnesses Before the Special Committee To Investigate Whitewater Development Corporation and Related Matters A. Foster Phase: Matters authorized by Senate Resolution 120 Sec. 1(b)(1) depositions Date, name and agency 1. June 19, 1995, Cheryl Braun, Park Police. 2. June 19, 1995, Brent Chinery, Secret Service. 3. June 20, 1995, Robert Popik, Secret Service. 4. June 20, 1995, John Rolla, Park Police. 5. June 21, 1995, Donald Flynn, Secret Service. 6. June 21, 1995, Robert Hines, Park Police. 7. June 21, 1995, Michelle Macon, Secret Service 8. June 21, 1995, Jimmy Young, White House. 9. June 22, 1995, Paul Imbordino, Secret Service. 10. June 22, 1995, Dennis Martin, Secret Service. 11. June 22, 1995, John Skyles, Secret Service. 12. June 23, 1995, Bruce Abbott, Secret Service. 13. June 23, 1995, Thomas Collier, Department of Interior. 14. June 23, 1995, Deborah Gorham, White House. 15. June 23, 1995, John Magaw, Secret Service. 16. June 23, 1995, Henry O'Neill, Secret Service. 17. June 26, 1995, Marlene MacDonald, White House. 18. June 26, 1995, Betsy Pond, White House. 19. June 27, 1995, Thomas Castleton, White House. 20. June 27, 1995, Robert Langston, Park Police. 21. June 27, 1995, Sylvia Mathews, White House. 22. June 27, 1995, Ronald Noble, Treasury. 23. June 28, 1995, Dennis Condon, FBI. 24. June 28, 1995, John Danna, Park Police. 25. June 28, 1995, Peter Markland, Park Police. 26. June 29, 1995, Phillip Adams, Department of Justice. 27. June 29, 1995, Charles Hume, Park Police. 28. June 29, 1995, Roy Neel, White House. 29. June 30, 1995, Carolyn Huber, White House. 30. June 30, 1995, Peter Markland, Park Police. 31. June 30, 1995, Scott Salter, FBI. 32. July 5, 1995, William Burton, White House. 33. July 5, 1995, Joseph Phillips, Secret Service. 34. July 5, 1995, George Stephanopoulos, White House. 35. July 6, 1995, Mark Gearan, White House. 36. July 6, 1995, Evelyn Lieberman, White House. 37. July 6, 1995, Thomas McLarty, White House. 38. July 6, 1995, Cynthia Monaco, Department of Justice. 39. July 6, 1995, Dee Dee Myers, White House. 40. July 7, 1995, Nancy McFadden, Department of Justice. 41. July 7, 1995, Clifford Sloan, White House. 42. July 7, 1995, Margaret Williams, White House. 43. July 10, 1995, Lisa Caputo, White House. 44. July 10, 1995, Craig Livingstone, White House. 45. July 10, 1995, Stephen Neuwirth, White House. 46. July 11, 1995, William Kennedy, White House. 47. July 11, 1995, Michael Spafford, Private. 48. July 11, 1995, Patsy Thomasson, White House. 49. July 11, 1995, Linda Tripp, White House. 50. July 11, 1995, David Watkins, White House. 51. July 12, 1995, David Gergen, White House. 52. July 12, 1995, Bruce Lindsey, White House. 53. July 12, 1995, Cheryl Mills, White House. 54. July 12, 1995, Bernard Nussbaum, White House. 55. July 12, 1995, Howard Paster, White House. 56. July 12, 1995, James Shea, Secret Service. 57. July 12, 1995, Linda Tripp, White House. 58. July 13, 1995, Webster Hubbell, Department of Justice. 59. July 13, 1995, Bernard Nussbaum, White House. 60. July 14, 1995, Terry Cobey, White House. 61. July 14, 1995, Webster Hubbell, Department of Justice. 62. July 14, 1995, Louis Hupp, FBI. 63. July 14, 1995, John Quinn, White House. 64. July 14, 1995, Diann Walters, White House. 65. July 17, 1995, Susan Thomases, Private. 66. July 24, 1995, William Anderson, FBI. 67. July 24, 1995, Phillip Heymann, Department of Justice. 68. July 31, 1995, Deborah Gorham, White House. 69. July 31, 1995, Linda Tripp, White House. public hearings 1. July 18, 1995, Webster Hubbell, Department of Justice. 2. July 19, 1995, Webster Hubbell, Department of Justice. 3. July 20, 1995, Cheryl Braun, Park Police. 4. July 20, 1995, Robert Hines, Park Police. 5. July 20, 1995, John Rolla, Park Police. 6. July 25, 1995, Mark Gearan, White House. 7. July 25, 1995, Sylvia Mathews, White House. 8. July 25, 1995, Patsy Thomasson, White House. 9. July 25, 1995, David Watkins, White House. 10. July 26, 1995, Evelyn Lieberman, White House. 11. July 26, 1995, Henry O'Neill, Secret Service. 12. July 26, 1995, Maggie Williams, White House. 13. July 27, 1995, Phillip Adams, Department of Justice. 14. July 27, 1995, Donald Flynn, Secret Service. 15. July 27, 1995, Scott Salter, FBI. 16. July 27, 1995, Michael Spafford, Private. 17. August 1, 1995, Deborah Gorham, White House. 18. August 1, 1995, Charles Hume, Park Police. 19. August 1, 1995, Robert Langston, Park Police. 20. August 1, 1995, Peter Markland, Park Police. 21. August 1, 1995, Linda Tripp, White House. 22. August 2, 1995, Phillip Heymann, Department of Justice. 23. August 2, 1995, Louis Hupp, FBI. 24. August 3, 1995, Thomas Castleton, White House. 25. August 3, 1995, Carolyn Huber, White House. 26. August 3, 1995, Stephen Neuwirth, White House. 27. August 3, 1995, Clifford Sloan, White House. 28. August 7, 1995, William Burton, White House. 29. August 7, 1995, David Gergen, White House. 30. August 7, 1995, Thomas McLarty, White House. 31. August 7, 1995, John Quinn, White House. 32. August 8, 1995, Bruce Lindsey, White House. 33. August 8, 1995, Susan Thomases, Private. 34. August 9, 1995, Bernard Nussbaum, White House. 35. August 10, 1995, Bernard Nussbaum, White House. 36. August 10, 1995, David Margolis, Department of Justice. 37. November 2, 1995, Margaret Williams, White House. 38. November 2, 1995, Susan Thomases, Private. 39. December 11, 1995, Ingram Barlow, Williams & Connolly. 40. December 11, 1995, Robert Barnett, Williams & Connolly. 41. December 11, 1995, Linda Blair, Private. 42. December 11, 1995, Margaret Williams, White House. 43. December 13, 1995, William Burton, White House. 44. December 13, 1995, Sylvia Mathews, White House. 45. December 18, 1995, Susan Thomases, Private. B. Washington Phase: Matters authorized by Senate Resolution 120 Sec. 1(b)(2) DEPOSITIONS Date, name, and agency 1. October 10, 1995, Clark Blight, RTC-IG. 2. October 10, 1995, Stephen Switzer, RTC-IG. 3. October 11, 1995, Jane Ley, OGE. 4. October 11, 1995, Robert Mueller, Department of Justice. 5. October 11, 1995, Stephen Potts, OGE. 6. October 12, 1995, Patricia Black, RTC. 7. October 12, 1995, Douglas Frazier, Department of Justice. 8. October 12, 1995, Anthony Moscato, Department of Justice. 9. October 13, 1995, Robert Cesca, Treasury-IG. 10. October 13, 1995, Joseph Gangloff, Department of Justice. 11. October 13, 1995, Donna Henneman, Department of Justice. 12. October 17, 1995, Allen Carver, Department of Justice. 13. October 17, 1995, Laurence McWhorter, Department of Justice. 14. October 17, 1995, Donald Pettus, FBI. 15. October 18, 1995, John Arterberry, Department of Justice. 16. October 18, 1995, James Cottos, Treasury-IG. 17. October 18, 1995, Mac Dodson, Department of Justice. 18. October 18, 1995, Don Mackay, Department of Justice. 19. October 18, 1995, Richard Pence, Department of Justice. 20. October 19, 1995, James Dudine, RTC. 21. October 19, 1995, Fletcher Jackson, Department of Justice. 22. October 19, 1995, Randy Knight, RTC. 23. October 19, 1995, Gerald McDowell, Department of Justice. 24. October 19, 1995, Stephen McHale, Treasury. 25. October 20, 1995, C. Boyden Gray, Private. 26. October 20, 1995, Richard Iorio, RTC. 27. October 20, 1995, John Keeney, Department of Justice. 28. October 20, 1995, Patrick Noble, RTC-IG. 29. October 20, 1995, Kenneth Schmalzbach, Treasury. 30. October 23, 1995, April Breslaw, RTC. 31. October 24, 1995, Charles Banks, Department of Justice. 32. October 24, 1995, Michael Johnson, Department of Justice. 33. October 24, 1995, Robert McNamara, Treasury. 34. October 24, 1995, James Thompson, RTC. 35. October 25, 1995, Karen Carmichael, RTC. 36. October 25, 1995, Edward Knight, Treasury. 37. October 25, 1995, Keith Mason, White House. 38. October 26, 1995, John Adair, RTC-IG. 39. October 26, 1995, Wayne Foren, SBA. 40. October 26, 1995, Webster Hubbell, Department of Justice. 41. October 26, 1995, Ira Raphaelson, Department of Justice. 42. October 27, 1995, Ellen Kulka, Treasury. 43. October 27, 1995, Irvin Nathan, Department of Justice. 44. October 27, 1995, Kenneth Schmalzbach, Treasury. 45. October 30, 1995, Kevin Kendrick, FBI. 46. October 30, 1995, Jean Lewis, RTC. 47. October 30, 1995, Mark Stephens, SBA. 48. October 31, 1995, Erskine Bowles, SBA. 49. October 31, 1995, Jean Lewis, RTC. 50. October 31, 1995, Jane Sherburne, White House. 51. October 31, 1995, Fred Verinder, FBI. 52. November 1, 1995, Paula Casey, Department of Justice. 53. November 1, 1995, William Kennedy, White House. 54. November 1, 1995, Francine Kerner, Treasury-IG. 55. November 1, 1995, Marsha Scott, Private. 56. November 2, 1995, Neysa Day, Treasury-IG. 57. November 2, 1995, Richard Doery, Treasury-IG. 58. November 2, 1995, James Lyons, Private. 59. November 2, 1995, Julie Yanda, RTC. 60. November 3, 1995, Albert Casey, RTC. 61. November 3, 1995, Steven Irons, FBI. 62. November 3, 1995, Bruce Lindsey, White House. 63. November 4, 1995, Neil Eggleston, White House. 64. November 6, 1995, Lloyd Cutler, White House. 65. November 6, 1995, David Dougherty, SBA. 66. November 6, 1995, Thomas McLarty, White House. 67. November 6, 1995, Peter Rittling, Treasury. 68. November 6, 1995, John Spotila, SBA. 69. November 7, 1995, Sharon Conaway, White House. 70. November 9, 1995, Dennis W. Aiken, FBI. 71. November 9, 1995, Randy Coleman, Private. 72. November 9, 1995, Larry Potts, FBI. 73. November 13, 1995, William Barr, Department of Justice. 74. November 13, 1995, Charles Shepperson, SBA. 75. November 17, 1995, Martin Teckler, SBA. 76. November 20, 1995, James Blair, Private. 77. November 20, 1995, Brent Bumpers, Department of Justice. 78. November 20, 1995, Cecilia Seay, SBA. 79. November 21, 1995, Bruce Lindsey, White House. 80. November 27, 1995, Sarah Hawkins, SBA. 81. November 27, 1995, Edith Holiday, White House. 82. December 5, 1995, Mitchell Stanley, SBA. PUBLIC HEARINGS 1. November 7, 1995, John Adair, RTC-IG. 2. November 7, 1995, Lloyd Bentsen, Treasury. 3. November 7, 1995, Patricia Black, RTC-IG. 4. November 7, 1995, Clark Blight, RTC-IG. 5. November 7, 1995, Stephen Switzer, RTC-IG. 6. November 8, 1995, Robert Cesca, Treasury-IG. 7. November 8, 1995, John Cottos, Treasury-IG. 8. November 8, 1995, David Dougherty, Treasury. 9. November 8, 1995, Francine Kerner, Treasury-IG. 10. November 8, 1995, Edward Knight, Treasury. 11. November 8, 1995, Jane Ley, OGE. 12. November 8, 1995, Stephen McHale, Treasury. 13. November 8, 1995, Robert McNamara, Treasury. 14. November 8, 1995, Stephen Potts, OGE. 15. November 8, 1995, Kenneth Schmalzbach, Treasury. 16. November 9, 1995, Llyod Cutler, White House. 17. November 9, 1995, Jane Sherburne, White House. 18. November 28, 1995, John Spotila, SBA. 19. November 28, 1995, Martin Teckler, SBA. 20. November 28, 1995, Neil Eggleston, White House. 21. November 28, 1995, Bruce Lindsey, White House. 22. November 28, 1995, Erskine Bowles, SBA. 23. November 28, 1995, Charles Shepperson, SBA. 24. November 28, 1995, Wayne Foren, SBA. 25. November 29, 1995, Richard Iorio, RTC. 26. November 29, 1995, Jean Lewis, RTC. 27. November 30, 1995, April Breslaw, RTC. 28. November 30, 1995, Karen Carmichael, RTC. 29. November 30, 1995, Julie Yanda, RTC. 30. December 1, 1995, Paula Casey, Department of Justice. 31. December 1, 1995, Randy Coleman, Private. 32. December 1, 1995, Webster Hubbell, Department of Justice. 33. December 1, 1995, Fletcher Jackson, Department of Justice. 34. December 1, 1995, Michael Johnson, Department of Justice. 35. December 5, 1995, Charles Banks, Department of Justice. 36. December 5, 1995, Douglas Frazier, Department of Justice. 37. December 5, 1995, Steven Irons, FBI. 38. December 5, 1995, Kevin Kendrick, FBI. 39. December 5, 1995, William Kennedy, White House. 40. December 5, 1995, Donald Pettus, FBI. 41. December 6, 1995, Allen Carver, Department of Justice. 42. December 6, 1995, Joseph Gangloff, Department of Justice. 43. December 6, 1995, John Keeney, Department of Justice. 44. December 6, 1995, Gerald McDowell, Department of Justice. C. Arkansas Phase: Matters authorized by Senate Resolution 120 Sec. 1(b)(3) DEPOSITIONS Date, name, and agency 1. December 4, 1995, Lex Dobbins, Arkansas Dept. of Health. 2. December 4, 1995, William Teer, Arkansas Dept. of Health. 3. December 5, 1995, Tom Butler, Arkansas Dept. of Health. 4. December 5, 1995, Janice Choate, Arkansas Dept. of Health. 5. December 12, 1995, William Brady, Arkansas Securities Dept. 6. December 12, 1995, Bobby Nash, ADFA. 7. December 14, 1995, William Lyon, Private. 8. December 18, 1995, Russell Webb, Private. 9. December 19, 1995, Charles Handley, Arkansas Securities Dept. 10. December 21, 1995, Lisa Caputo, White House. 11. January 5, 1996, Sam Bratton, Public Service Commission. 12. January 5, 1996, Ronald Clark, Rose Law Firm. 13. January 7, 1996, Neil Eggleston, White House. 14. January 10, 1996, Bruce Lindsey, White House. 15. January 15, 1996, Davis Fitzhugh, Madison Guaranty/ Private. 16. January 15, 1996, William Kennedy, White House. 17. January 16, 1996, Charles Peacock, Private. 18. January 17, 1996, Carolyn Huber, White House. 19. January 18, 1996, Treeca Dyer, Private. 20. January 19, 1996, Charles Singleton, Private. 21. January 22, 1996, Lance Miller, Private. PUBLIC HEARINGS 1. January 11, 1996, Richard Massey, Rose Law Firm. 2. January 16, 1996, Neil Eggleston, White House. 3. January 16, 1996, William Kennedy, White House. 4. January 16, 1996, Bruce Lindsey, White House. 5. January 18, 1996, Ronald Clark, Rose Law Firm. 6. January 18, 1996, Carolyn Huber, White House. Total Depositions Taken: 172. Total Witnesses who Testified at Hearings: 95. Total Number of Hearings: 29. Additional Views of Senators Sarbanes, Dodd, Kerry, Bryan, Boxer, Moseley-Braun, Murray and Simon Democratic Views on Completion of the Investigation Into Whitewater Development Corporation and Related Matters i. the special committee should adhere to s. res. 120 and complete its inquiry by february 29 On May 17, 1995, the Senate adopted Senate Resolution 120, creating the Special Committee to Investigate Whitewater Development Corporation and Related Matters and providing $950,000 to fund the Committee through February 29, 1996. The Majority has stated that it will recommend additional funding of $600,000 for an unlimited period of time. This proposed additional funding would bring Senate expenditures on investigation of Whitewater matters to $2 million. The Committee should complete its investigation within the timetable established by the Senate, without the authorization of additional funds or extension of time. There is sufficient time and money to complete this investigation within the timetable and budget established by the Senate in Resolution 120. The Committee has an obligation to the Senate and to the public to move forward, without delay, in developing the facts relating to the so-called ``Whitewater'' matter. Failure to do so will prolong this investigation well into a presidential election year and will contribute to a public perception that this investigation is being conducted for political purposes. The committee should complete its investigation by February 29 It is well within the ability of the Committee to complete its investigation by the February 29 date provided for in the resolution. The Committee should undertake a schedule for the next six weeks that will enable it to meet that objective. On January 17 the Senate Leadership announced that the Senate will not go to regular voting sessions until February 20. With no competing legislative business in the month leading up to February 20, the Committee can devote its full attention to this investigation. By meeting four or five days a week between now and the end of February (a pace the Committee has on occasion previously followed) the Committee can hold 25 to 30 days of public hearings. Even if only three or four witnesses a day appear before the Committee, this timetable would allow for appearances by well over 75 witnesses (far more than any current projection). The Committee has substantially completed two out of three phases of its work (the ``Foster Papers Phase'' and the ``Washington Phase''). Document production from the White House is now essentially complete (the electronic mail records referenced by the majority are being provided to the Committee). Only the ``Arkansas Phase'' remains to be completed. If the Committee works at this pace over the next six weeks, it can complete that phase within the timeframe originally set out by the Senate. The Committee has demonstrated in the past that it can work at this pace. Between July 18 and August 10, 1995, at a time when the Senate was in session and its Members were handling extensive legislative business, the Special Committee held 13 days of public hearings and examined 34 witnesses. In the past other special committees have accelerated their hearing schedules and completed their work in a timely fashion. For example, between July 7 and August 6, 1987, the Iran- Contra Committee held 21 days of hearings, permitting the Committee to conclude its hearings on August 6. The Iran-Contra comparison is instructive. In that investigation the Committee was established on January 6, 1987, and completed its hearings on August 3, 1987, seven months after its creation. The investigation involved complex transactions, numerous cabinet- level and other high government officials, and problems related to classified national security information and the conduct of foreign policy. This investigation does not involve matters of that complexity and gravity. This Committee has already heard from 83 witnesses over 29 days of hearings and, as noted above, another 75 or more witnesses could be heard before February 29. This schedule would enable the Committee to complete its investigation and adhere to the timetable set forth in Senate Resolution 120. The Committee also has adequate funding to complete its work. The Majority's Report indicates that $275,471 of the $950,000 appropriated in Resolution 120 remains available for completion of the investigation. Appropriating additional public funds would not be necessary. The investigation should not be prolonged in an election year There is an important reason for the Committee to complete the investigation by February 29--this investigation should be completed before the country enters into the presidential campaign. By authorizing funding only through February 29, 1996, Senate Resolution 120 accomplished this objective. The Resolution states that the purposes of the Committee are ``to expedite the thorough conduct of the investigation, study, and hearings'' and ``to engender a high degree of confidence on the part of the public regarding the conduct of such investigation, study, and hearings.'' 1 Extending the life of the Committee beyond February 29 would undermine both those purposes. \1\ S.Res. 120, sec. 7(a). --------------------------------------------------------------------------- As Chairman D'Amato stated in January 1995, when funding for the Committee was addressed: ``We wanted to keep it out of that political arena, and that is why we decided to come forward with the one-year request.'' 2 That was the right approach, and was reflected in the action taken by the full Senate. The Majority's proposal for another $600,000 and an open-ended period of time will project the investigation into the election season, thereby inevitably diminishing public confidence in the impartiality of the inquiry. \2\ Senate Committees Funding Resolution for 1995-1996: Hearings before the Senate Committee on Rules and Administration, 103d Cong., 2d Sess. 80 (Jan. 19, 1995). --------------------------------------------------------------------------- Six weeks of hearings (well in excess of the number held on either the Foster Papers Phase or the Washington Phase) should be more than adequate for the ``Arkansas Phase'' of this investigation. This phase concerns events that occurred in Arkansas some ten years ago, events which have been widely reported on since the 1992 presidential campaign and about which much is already known. Substantial public funds have already been expended Since the Committee can complete this investigation with the funds already appropriated, the Senate should not authorize further expenditure of public funds. If an additional $600,000 should be authorized for this investigation, as the Majority has proposed, it will bring the total amount spent by the Senate alone to investigate Whitewater matters to $2 million. 3 \3\ This total includes $400,000 expended in 1994 pursuant to S.Res. 229 (103d Congress), $950,000 expended pursuant to S.Res 120, and the additional $600,000 the Majority has proposed. --------------------------------------------------------------------------- Approximately $30 million of taxpayer funds have already been expended on Whitewater investigations. The Independent Counsel alone has spent some $23 million through 1995, while the Resolution Trust Corporation has spent almost $4 million, and congressional investigative committees in both the House and Senate have spent millions more. The Independent Counsel recently indicated that he expected his investigation to get all of the facts out before the 1996 presidential election. 4 A comprehensive report by an independent law firm retained by the RTC has now been made public, and its key findings are available. 5 \4\ C-SPAN Interview with Kenneth W. Starr, (C-SPAN Television Broadcast, Dec. 1995). \5\ Pillsbury Madison & Sutro, Madison Guaranty Savings & Loan and Whitewater Development Company, Inc., April 25, 1995 (preliminary report) and December 13, 1995 (supplemental report). --------------------------------------------------------------------------- Furthermore, there are many other issues before the Congress to which the necessary time, attention, and resources should be devoted. As Senator Dole observed in January 1987, when discussing the Iran-Contra investigation, ``We may never have all the facts . . . [t]here are too many other problems, domestic and foreign, that are not going to go away. They cannot, and should not, be swept aside because of an obsession with this Iranian affair.'' 6 The same is true today about the ``Whitewater affair.'' \6\ The New York Times, Jan. 7, 1987, p. A8. --------------------------------------------------------------------------- The Independent Counsel's investigation should not delay the Committee's investigation When the Senate passed Resolution 120, creating the Special Committee and defining its powers and responsibilities, the Independent Counsel's investigation was already well underway. 7 The Senate recognized this fact and provided for it in the Resolution. 8 It was not the intent of the Senate that the Special Committee's work be delayed or put on hold because of the activities of the Independent Counsel. \7\ Special Counsel Robert B. Fiske, Jr. began his investigation in January 1994. Independent Counsel Kenneth W. Starr succeeded Mr. Fiske in August 1994. \8\ For example, section 5(b)(6) requires the Committee to inform the Independent Counsel in writing before granting a witness immunity. --------------------------------------------------------------------------- The Independent Counsel has raised concerns in the past about the Committee's investigation, and the Committee has declined to suspend its work in order to accommodate those concerns. On October 2, 1995, the Chairman and Ranking Member wrote to Independent Counsel Kenneth Starr and advised him that the Committee intended to proceed with its investigation, contrary to the Independent Counsel's wishes as expressed in a September 27, 1995 letter: [W]e believe that the concerns expressed in your letter do not outweigh the Senate's strong interest in concluding its investigation and public hearings into the matters specified in Senate Resolution 120 consistent with Section 9 of the Resolution [by February 29, 1996]. 9 \9\ October 2, 1995 letter from Chairman Alfonse M. D'Amato and Senator Paul S. Sarbanes to Independent Counsel Kenneth W. Starr. The Independent Counsel has brought a criminal case in Arkansas against three individuals (United States v. McDougal). The trial now is scheduled to begin on March 4. This should not affect the Committee's assignment to carry forward and complete its inquiry by February 29. Four witnesses have informed the Committee that they will invoke their right against self-incrimination and refuse to testify. The Senate did not intend for this Committee to allow assertions of Fifth Amendment privileges by witnesses to derail its investigation. The fact that four witnesses have asserted their Fifth Amendment privilege is no reason to extend this investigation into the political season, a result the Senate avoided when it provided funding for this investigation only through February 29, 1996. There is another important reason that witnesses' assertions of the Fifth Amendment privilege against self- incrimination do not justify delaying the Committee's investigation until the conclusion of the McDougal trial: the outcome of that trial will not affect the ability of witnesses to assert their privilege against self-incrimination. These four witnesses are not on trial in that case, and whatever the outcome of that trial, it will give them no assurance that they could not be prosecuted at some future time by the Independent Counsel or some other federal or state prosecutorial authority. Thus they can be expected to continue to assert their Fifth Amendment privilege after the trial concludes. The availability of even the defendants in the McDougal trial will not be affected by the trial's outcome. If the defendants are convicted, appeals likely will follow, probably on numerous grounds, and will take months or even years to conclude. During that time the defendants will retain their Fifth Amendment privilege, notwithstanding the prior trial conviction. In fact, even if the defendants are acquitted at trial they will retain their Fifth Amendment privilege for charges other than those on which they were tried. These two points demonstrate that the Committee should not await the conclusion of the McDougal trial to complete its investigation. The trial already has been rescheduled twice, once from October 1995 to January 1996, and again from January to March 1996. The trial could be further delayed, and once the trial finally begins there is no assurance of how long it will last. The Committee should move promptly to complete its hearings by February 29 and avoid the problem of having public hearings ongoing at the same time as the trial. White House compliance with Committee document requests The Majority report's description of the ``Obstacles Faced by the Committee'' in obtaining documents and testimony from the White House does not allow for the breadth and complexity of the Committee's various document requests. In a number of instances the White House experienced difficulties in complying with document requests because some of the Majority's requests were extremely broad and burdensome. A good example of this problem is the document request the Majority sent to the White House in September calling for the production of, among other things, any record of any communications, contacts, or meetings over an eighteen-month period between anyone in the White House, on the one hand, and anyone on a list of approximately fifty people on any subject matter whatsoever. This extremely broad and onerous request ultimately was narrowed in October, but in the interim it slowed down the document production effort. The Majority's request for electronic mail records encountered the difficulty that the White House did not have an existing capability to retrieve all e-mail messages potentially encompassed by the Committee's request. The White House attorneys explained that the e-mail system implemented by the Bush Administration and inherited by the Clinton Administration did not save e-mail records in retrievable form. Under the Bush Administration system only weekly ``back-up tapes'' for the entire computer network were maintained up until the Clinton Administration put a new system in place in July 1994. (The White House has produced responsive e-mail created after July 1994.) The White House attorneys therefore confronted a problem as to how to proceed under the technical constraints imposed by the Bush Administration system. This matter has now been resolved through a more specific definition by the Committee of the e-mail requests and by the White House committing to major outside computer contractual assistance. Finally, the request for the production of the Kennedy notes raised important questions of lawyer-client privilege. Prominent legal scholars stated that the White House had a legitimate and persuasive claim of privilege, and would have prevailed in litigation seeking to compel production of the notes. 10 The privilege concerns raised by the White House prior to producing the notes were reasonable. In the end a way to address the privilege question was worked out, the notes were produced, and the Committee held a hearing with respect to them. \10\ December 14, 1995 letter to John M. Quinn from Professor Geoffrey C. Hazard, Jr. --------------------------------------------------------------------------- II. THE MAJORITY'S FINDINGS ARE INCOMPLETE AND ONE-SIDED The Majority has submitted partial findings of the Special Committee's investigation to date. We think it is unwise to make findings before the issuance of the Committee's Final Report. We are particularly troubled by the Majority's supposed findings because they are incomplete and one-sided. A few examples of this problem are set forth below. In its discussion of the handling of documents in Vincent Foster's office, the Majority fails even to mention a most important aspect of the testimony of former Deputy Attorney General Philip Heymann. Heymann told the Committee that although Bernard Nussbaum may have made an error in political judgment by declining to allow law enforcement officials to conduct their own search of Foster's office, White House officials did nothing either illegal or unethical: Senator Simon. In terms of Bernie Nussbaum, is it a fair characterization to say that what he did was not illegal, not unethical, but unwise? Mr. Heymann. I think that's basically a fair characterization, Senator Simon. (8/2/95 Hrg. p. 136) The Majority's discussion of the RTC criminal referrals is similarly incomplete and one-sided. The Majority, for example, makes no mention of the consistent testimony of career federal prosecutors that the 1992 referral lacked merit. Gerald McDowell, a career official in charge of the Justice Department's Fraud Section, told the Committee that the referral was ``half-baked'' and ``junky.'' (McDowell, 10/19/95 Dep. pp. 115, 119) Assistant United States Attorney Michael Johnson called the allegations in the referral ``reckless,'' ``irresponsible'' and ``odd'' and noted that the allegations were not supported by the evidence. (Johnson, 10/24/95 Dep. pp. 67, 197) Fraud Section attorney Mark MacDougal, who wrote an analysis of the referral in February 1993, concluded, ``No factual claims can be found in the referral to support the designation of Mr. or Mrs. Clinton as witnesses.'' (DOJ 006680) The evidence also established no impropriety in the way the RTC referrals were handled by the Department of Justice and the United States Attorneys Office in Little Rock. United States Attorney Charles Banks--a Republican appointee--properly declined to act on the 1992 referral prior to the presidential election, despite unusual and persistent pressure from the RTC investigator to open a grand jury investigation. As Banks wrote in an October 16, 1992 letter to the Special Agent in Charge of the local FBI office: While I do not intend to denigrate the work of the RTC, I must opine that after such a lapse of time the insistence for urgency in this case appears to suggest an intentional or unintentional attempt to intervene into the political process of the upcoming presidential election. You and I know in investigations of this type, the first steps, such as issuance of grand jury subpoena for records, will lead to media and public inquiries of matters that are subject to absolute privacy. Even media questions about such an investigation in today's modern political climate all too often publicly purports to ``legitimize what can't be proven.'' . . . For me personally to participate in an investigation that I know will or could easily lead to the above scenario and to the possible denial of rights due to the targets, subjects, witnesses or defendants is inappropriate. I believe it amounts to prosecutorial misconduct and violates the most basic fundamental rule of Department of Justice policy. (DOJ 006688-006689) Chairman D'Amato praised Banks and told him that he ``did absolutely the right thing'' by resisting pressure to open a grand jury investigation shortly before the 1992 Presidential election. (12/5/95 Hrg. pp. 221, 222-223) Senator Sarbanes agreed, telling Banks: I think this letter and the positions you took reflected a determined effort to sustain the integrity of the criminal justice system. I think that ought to be recognized. And I think it's this kind of courage that makes this system work, and I commend you for it. (12/5/95 Hrg. p. 226) Contrary to the Majority's assertion, the evidence also established that in 1993 newly-appointed United States Attorney Paula Casey properly handled plea negotiations with David Hale and his attorney, Randy Coleman. Coleman demanded that Casey give Hale an extraordinarily lenient plea bargain--to a misdemeanor rather than a felony--without requiring that Hale first provide law enforcement officials with a proffer of facts relevant to the pending investigation. Casey repeatedly invited Hale to make a detailed proffer, but consistent with long- standing Department of Justice policy, she declined to reach any plea bargain with Hale without obtaining his proffer in advance. Career Department of Justice prosecutors uniformly approved of Casey's actions and testified that to accede to Coleman's unreasonable demands would have been the equivalent of ``buying a pig in a poke.'' (Carver, 10/17/95 Dep. p. 130; Nathan, 10/27/95 Dep. p. 105; McKay, 10/18/95 Dep. pp. 92-93) When career officials at Main Justice took over the Hale case in November 1993, they approached plea negotiations just as Casey had before them. Specifically, the career officials at the Department of Justice refused to make any deal with Hale absent a detailed factual proffer of Hale's information and an opportunity to evaluate it. (Keeney, 10/20/95 Dep. p. 40) Hale continued to refuse to make a proffer and instead took his allegations to the press. Ultimately, Independent Counsel Robert Fiske required Hale to accept a guilty plea to two felony counts, while Casey had insisted upon a plea to only one felony. III. CONCLUSION For the reasons set forth above, the Committee should complete its investigation of Whitewater matters by February 29, 1996, the date established by Senate Resolution 120. The investigation should not be perceived by the public as influenced by election year politics. The American people deserve to have this matter pursued promptly and fairly. Paul Sarbanes. Chris Dodd. John F. Kerry. Richard H. Bryan. Barbara Boxer. Carol Moseley-Braun. Patty Murray. Paul Simon.