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104th Congress 2d Session SENATE Report
PROGRESS OF THE INVESTIGATION INTO WHITEWATER DEVELOPMENT CORPORATION
AND RELATED MATTERS AND RECOMMENDATION FOR FUTURE FUNDING
R E P O R T
SPECIAL COMMITTEE TO INVESTIGATE
WHITEWATER DEVELOPMENT CORPORATION
AND RELATED MATTERS
January 22, 1996.--Ordered to be printed
SPECIAL COMMITTEE TO INVESTIGATE WHITEWATER DEVELOPMENT CORPORATION AND
ALFONSE M. D'AMATO, New York,
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
Philip E. Bechtel, Deputy Staff
Steven B. Harris, Democratic Staff
Director and Chief Counsel
C O N T E N T S
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
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
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
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
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.
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.
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.
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
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.
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
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
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
1. Delays in the production of documents by the White House and other
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
\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
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
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
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
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
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.
(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
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
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
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.
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
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
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
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
the operations, solvency, and regulation of Madison;
the activities, investments, and tax liability of
the policies and practices of the RTC and other
federal banking agencies regarding the legal
representation of such agencies with respect to
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
the lending activities of Perry County Bank in
connection with the 1990 Arkansas gubernatorial
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
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
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
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.
Total Expenditures................................. 281,500
2. Majority Salary Expenses:
Total Salary and Expenses........................... 254,836
3. Minority Salary Expenses:
Total Salary and Expenses........................... 138,193
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
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
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.
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
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
8. October 12, 1995, Anthony Moscato, Department of
9. October 13, 1995, Robert Cesca, Treasury-IG.
10. October 13, 1995, Joseph Gangloff, Department of
11. October 13, 1995, Donna Henneman, Department of
12. October 17, 1995, Allen Carver, Department of Justice.
13. October 17, 1995, Laurence McWhorter, Department of
14. October 17, 1995, Donald Pettus, FBI.
15. October 18, 1995, John Arterberry, Department of
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
22. October 19, 1995, Randy Knight, RTC.
23. October 19, 1995, Gerald McDowell, Department of
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
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
41. October 26, 1995, Ira Raphaelson, Department of
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
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.
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
33. December 1, 1995, Fletcher Jackson, Department of
34. December 1, 1995, Michael Johnson, Department of
35. December 5, 1995, Charles Banks, Department of Justice.
36. December 5, 1995, Douglas Frazier, Department of
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
43. December 6, 1995, John Keeney, Department of Justice.
44. December 6, 1995, Gerald McDowell, Department of
C. Arkansas Phase: Matters authorized by Senate Resolution 120
Date, name, and agency
1. December 4, 1995, Lex Dobbins, Arkansas Dept. of Health.
2. December 4, 1995, William Teer, Arkansas Dept. of
3. December 5, 1995, Tom Butler, Arkansas Dept. of Health.
4. December 5, 1995, Janice Choate, Arkansas Dept. of
5. December 12, 1995, William Brady, Arkansas Securities
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
10. December 21, 1995, Lisa Caputo, White House.
11. January 5, 1996, Sam Bratton, Public Service
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/
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.
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
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
\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\ 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
\6\ The New York Times, Jan. 7, 1987, p. A8.
The Independent Counsel's investigation should not delay the
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
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
\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
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
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
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.
John F. Kerry.
Richard H. Bryan.