Once-Secret Memos Question Hillary Clinton's Honesty

The Washington Times reports:

A decade before Sen. Hillary Rodham Clinton admitted fudging the truth during the presidential campaign, federal prosecutors quietly assembled hundreds of pages of evidence suggesting she concealed information and misled a federal grand jury about her work for a failing Arkansas savings and loan at the heart of the Whitewater probe, according to once-secret documents that detail the internal debates over whether she should have faced criminal charges.

Ordinarily, such files containing grand jury evidence and prosecutors' deliberations are never made public. But the estate of Sam Dash, a lifelong Democrat who served as the ethics adviser to Whitewater Independent Counsel Kenneth W. Starr, donated his documents from the infamous 1990s investigation to the Library of Congress after his 2004 death, unwittingly injecting into the public domain much of the testimony and evidence gathered against Mrs. Clinton from former law partners, White House aides and other witnesses.

The documents, reviewed by The Washington Times, identify numerous instances in which prosecutors questioned Mrs. Clinton's honesty, an issue that continues to dog her on the campaign trail after she was forced to acknowledge earlier this year exaggerating a story about coming under sniper fire as first lady during a visit to Bosnia in 1996.

For instance, the papers say prosecutors thought Mrs. Clinton first concealed her legal representation of Madison Guaranty Savings and Loan Association — and the money she made doing it — during the 1992 presidential campaign when she and her husband, then-Arkansas Gov. Bill Clinton, came under fire in a questionable Arkansas real estate project known as Whitewater.

Beginning in March 1992 and continuing over the next several years, Mrs. Clinton steadfastly denied that she ever "earned a penny" in representing her Rose Law Firm clients, including the failing thrift's owners, James and Susan McDougal — the Clintons' partners in the Whitewater Development Corp. project.

But the newly discovered records, more than 1,100 pages in 30 separate documents, tell a different story.

A June 1998 draft indictment of Mrs. Clinton's Rose firm partner Webster L. Hubbell, who followed the Clintons to Washington in 1993 as associate attorney general, said Mrs. Clinton did legal work for Madison "continuously" from April 1985 to July 1986. It also said she represented the thrift before the Arkansas Securities Department for approval to issue preferred stock, helped Madison obtain a questionable broker-dealer license to sell the stock and was actively involved in a failed Madison project known as Castle Grande.

The draft indictment clearly asserts that Mrs. Clinton, despite her denials, represented Madison and its projects "in a series of real estate and financial transactions." A separate 183-page report included in the Dash documents said Mr. Hubbell and Mrs. Clinton "concealed from federal investigators the true nature of their work" with Madison and its various entities.

Clinton campaign spokesman Jay Carson disputed the allegations.

"This is a baseless accusation which was looked into over a decade ago in an investigation that took $71.5 million and eight years to determine there was no case," he said.

But exit polls from Tuesday's North Carolina and Indiana primaries found that about half of the voters in each state said they didn't find Mrs. Clinton "honest and trustworthy."

Mrs. Clinton misspoke in March when she claimed she had come under sniper fire during a trip to Bosnia in 1996. She said she and her daughter, Chelsea, ran for cover under hostile fire shortly after her plane landed in Tuzla. She later admitted to making a "mistake."

The Library of Congress documents have not been released publicly. A library official said they are still being "processed."

In April 1998, Whitewater prosecutors, divided over Mrs. Clinton's truthfulness, argued over whether to indict her on charges of lying under oath about her legal work for Madison. Lawyers and others close to the probe said a draft indictment of the first lady became "a work in progress" after Mrs. Clinton's January 1996 grand jury appearance in U.S. District Court in Washington.

Prosecutors concluded at the time, the sources said, that she had testified falsely in denying doing legal work in the Castle Grande venture.

"There is concern among some about how successful they might be in bringing a criminal indictment against Mrs. Clinton for obvious reasons, but there is no lack of desire to do so," one lawyer familiar with the probe said at the time. The lawyer said the decision rested on two major points: whether there was sufficient evidence to contradict her sworn testimony and, more importantly, whether prosecutors could win the case in court.

No indictment was sought, but Whitewater prosecutors noted at the time, according to the Dash documents, that sworn statements by Mrs. Clinton were contradictory and misleading and that her involvement with Madison"s failed real estate project known as Castle Grande project was only fully detailed with the discovery of her Rose firm billing record summaries in the White House living quarters in January 1996 — two years after they had been subpoenaed.

A week before the summaries were found, the Resolution Trust Corp. (RTC) said in a Dec. 28, 1995, report it had little information on Mrs. Clinton's ties to Madison or Castle Grande. After their discovery, the agency concluded Mrs. Clinton was more involved with the two entities than was previously known.

The summaries said Mrs. Clinton billed Madison for 60 hours of legal work, spoke with Madison officials about the Castle Grande project on 14 occasions, discussed legal matters with Madison's owners — the McDougals — 16 times, had 28 meetings with Rose firm lawyers on Madison, and met with state regulators about Madison at least twice.

At the time, Madison was seeking help from Mrs. Clinton's Rose Law Firm in Little Rock to fend off state and federal regulators concerned that the thrift was insolvent. Madison also wanted to jump-start a questionable preferred stock deal to pump much-needed cash into the operation and was desperate to keep the government from shutting it down.

In December 1995, the Senate Whitewater Committee also made public handwritten notes of a telephone conversation that contradicted assertions made by Mrs. Clinton during the 1992 presidential race that she had little participation in the legal representation of Madison when state and federal regulators were deciding whether to shut it down.

The notes, by New York lawyer Susan Thomases, one of the first lady's closest advisers, said Mrs. Clinton had numerous conferences with officials at Madison, that she reviewed documents, that she made calls to discuss a preferred stock plan aimed at keeping the failing thrift afloat, and that "she did all the billing."

The committee released 350 pages of Madison files that said Mrs. Clinton, according to the billing summaries, had made significant claims on the thrift for legal services, and at one point was listed exclusively as the billing attorney. The summary is all that remains, since the original Rose firm billing records for Madison disappeared.

In May 1995, as the Whitewater investigation expanded into separate probes by Senate and House committees, the Federal Deposit Insurance Corp. (FDIC), the RTC and a federal grand jury, Mrs. Clinton denied in sworn affidavits any knowledge of a Madison real estate project known as Castle Grande, saying she had "no recollection" of doing legal work for the 1,050-acre development.

Madison was closed in 1989 at a cost to taxpayers of $70 million. Castle Grande failed at a taxpayers' loss of $4 million.

Another major area of concern, authorities said, was an option agreement regulators said "facilitated" a questionable $300,000 payment to Seth Ward, the Madison official to whom Mrs. Clinton had spoken about Castle Grande. The agreement was written by Mrs. Clinton and Mr. Hubbell and guaranteed Mr. Ward a payoff and negated his liability in the project. While the option was never exercised, it disguised the reason for the payment and created a paper trail to justify the outlay to Mr. Ward, who was Mr. Hubbell's father-in-law.

Mrs. Clinton told the RTC in May 1995 she had no memory of providing legal services for Mr. Ward and said in a sworn statement she did not know the Castle Grande name, thinking the project was called IDC even though the Castle Grande name was widely associated with the site.

Not truthful

According to the Dash documents on Whitewater, investigators also challenged Mrs. Clinton's public statements on what she knew at the time of Mr. Hubbell's March 1994 Justice Department resignation. Mrs. Clinton told reporters she thought he quit over an "internal billing dispute" with his former Rose firm partners that "likely would be resolved."

But the records said that three months before the resignation, Mrs. Clinton had been told by another Rose firm partner, Allen Bird, that Mr. Hubbell's "billing problems were very serious" and documents released during the Senate Whitewater hearings in 1996 said that two weeks before Mr. Hubbell resigned, Mrs. Clinton was notified formally that her former law partner was involved in a conflict-of-interest investigation and he might have lied in a sworn statement to federal regulators.

The Dash records also state that Mr. Hubbell's extensive role in a conflict in the Rose firm's representation of Madison and his testimony under oath to the RTC had meticulously been described in a March 1, 1994, memo written by White House Associate Counsel W. Neil Eggleston and forwarded to Mrs. Clinton by White House Deputy Chief of Staff Harold Ickes.

The records said Mr. Eggleston's seven-page memo described concerns by the RTC and the FDIC on whether the Rose firm had disclosed its prior legal representation of Madison in an FDIC lawsuit against the thrift's former auditors and whether Mr. Hubbell had disclosed his relationship with Mr. Ward in Castle Grande.

Mr. Eggleston's memo, according to the records, said the RTC had concluded the Rose firm disclosed neither the prior representation nor Mr. Hubbell's relationship, noting that an "ultimate finding" of nondisclosure would mean that "Mr. Hubbell was not truthful in his recollection." Mr. Eggleston said a finding against the firm would mean that it was "permanently barred from any further work for the RTC or the FDIC (and possibly other banking regulators.)"

He also said that while it was "not clear" whether the FDIC or the RTC would review the accusations under an actual conflict standard, there was the possibility of sanctions in the case, including "criminal liability," the records said.

The records also said Whitewater investigators were concerned that Mrs. Clinton played a key role in helping Mr. Hubbell obtain consulting contracts after his March 14, 1994, Justice Department resignation.

In a report titled "Hubbell Hush Money Summary," Whitewater investigators said that a day before Mr. Hubbell quit, Mrs. Clinton and other top administration officials met privately at the White House to arrange for him to receive hundreds of thousands of dollars in consulting fees at a time his cooperation in the Whitewater probe could have resulted in charges against the then-first lady.

The records said Mrs. Clinton took an active role in White House efforts to "take care of" Mr. Hubbell financially, helping to locate campaign supporters who divvied up more than $450,000 over the next nine months mostly for consulting work he never did.

In 1997, Mr. Starr subpoenaed White House records to determine whether the consulting fees were intended to guarantee Mr. Hubbell's silence in the Whitewater probe. Mr. Starr also wanted to know whether the White House had sought or directed the payments.

An Oct. 22, 1998, report said Mr. Hubbell's fees were arranged through "high administration officials or advisors," including Mrs. Clinton, whom was described as "the direct impetus for at least one client." Others who helped were identified as White House Chief of Staff Thomas F. "Mack" McLarty; former Democratic National Committee Chairman Truman Arnold; Washington lawyer Vernon Jordan; Small Business Administration Chairman Erskine Bowles, a former White House chief of staff; and U.S. Trade Representative Mickey Kantor, the Clinton-Gore campaign chairman in 1992 who later served as commerce secretary.

An April 21, 1998, report questioned why White House officials would choose to "support Hubbell and take care of him" at a time "[Mrs. Clinton] was on notice that Hubbell engaged in a widespread pattern and practice of cheating the [Rose Law Firm]." The report said a "sinister reason" could be Mr. Hubbell knew about Mrs. Clinton's role in doing legal work for Madison and other related companies.

A May 21, 1997, memo, noted that most of the company officials who paid him consulting fees said no work product was ever produced. The report said one employer told investigators the only document Mr. Hubbell produced was "his bill."

Mr. Hubbell pleaded guilty in December 1994 to mail fraud and income-tax evasion in the theft of $482,410 from his Rose firm clients and partners and failing to pay $143,747 in taxes. He was sentenced to 21 months in prison, serving 16 before being released.

The Whitewater probe ended on March 21, 2002, when Independent Counsel Robert W. Ray, who succeeded Mr. Starr, concluded in a final report there was "insufficient evidence" to bring charges against the Clintons. But the report also said statements by the Clintons to investigators were "factually inaccurate" and that White House delays in the production of evidence and the "unmeritorious litigation" by its lawyers "severely impeded the investigation's progress."