The records had been subject to several different federal subpoenas, besides that of the Special Committee, for nearly two years. When federal investigators served their subpoenas, the billing records were nowhere to be found. Despite extensive searches conducted by the Rose Law Firm, neither the originals nor copies were discovered.(1212) The billing records were not in the firm's computers, its client files, or its storage facility.(1213) The disappearance was not isolated, but rather occurred in the context of a larger pattern of removal, concealment and, at times, destruction of records concerning Mrs. Clinton's representation of Madison. I.
The Destruction and Mishandling of Rose Law Firm Files.
In 1988, Mrs. Clinton ordered the Rose Law Firm to destroy records relating to her representation of Madison.(1214) This was not a routine destruction of records. At the time, federal regulators were investigating the operations and solvency of Madison, in anticipation of taking over the institution. These Rose Law Firm records, which, after Madison's failure would belong to the RTC,(1215) would have been directly relevant to that investigation.
By ordering their destruction, Mrs. Clinton eliminated pertinent records and also exposed her firm to potential liability with respect to her representation. If such representation was proper, as Mrs. Clinton has claimed, her document destruction deprived the law firm of the records necessary to defend itself in a suit by federal investigators. Moreover, in 1988, Seth Ward, a former associate of Mr. McDougal and Webster Hubbell's father-in-law, was suing Mr. McDougal over the Castle Grande land deal that federal regulators have described as a fraud.(1216) Mrs. Clinton had performed work on the project, including numerous telephones calls and meetings with Mr. Ward, and the law firm's records of her work and the transactions surrounding this land deal certainly would have been highly relevant to the conduct of that suit.
The pattern recurred only a few years later. According to the Rose Law Firm, Mr. Hubbell obtained some billing records reflecting Rose's representation of Madison in 1989 or 1990. The Rose Law Firm represented to the Special Committee that a firm partner, then representing the RTC in litigation concerning Madison Guaranty, provided all billing records for Madison to Mr. Hubbell to ascertain whether the firm had a potential conflict of interest.(1217) According to the Rose Law Firm: "The Rose partner was assured by Mr. Hubbell a few days later that the prior representation had been disclosed to the RTC. Rose does not know what Mr. Hubbell did with the records."(1218)
The mishandling of Madison documents continued during the 1992 presidential campaign. After questions arose about the Clintons' investment with the McDougals in Whitewater and Mrs. Clinton's representation of Madison Guaranty before a state agency, Mrs. Clinton's then-law partner, Vincent Foster, collected all the information he could on the Madison representation from the Rose Law Firm's files. At the conclusion of the campaign, the firm's files on Madison, which were by now the property of the RTC as conservator of Madison, as well as certain files of other Rose clients for whom Mrs. Clinton had performed legal services, were secretly removed from the firm by another then-Rose Law Firm partner, Webster Hubbell. Mr. Hubbell removed these files, some of which were the firm's only copies,(1219) without obtaining the consent of the firm or client.(1220) II.
The "Disappearance" and "Discovery" of the Rose Law Firm Billing Records.
During the 1992 presidential campaign, on February 12, 1992, an unknown person printed out a set of the Rose Law Firm's computerized records of billings to Madison Guaranty.(1221) These computerized records were the only source of detailed information about the services that the Rose Law Firm provided and billed to Madison Guaranty. The records provide information well beyond that reflected in bills sent to Madison--such as the date services were performed, the amount of time expended by particular lawyers, and precise services performed, including the identity of persons with whom Rose lawyers spoke or met in the course of representing Madison.(1222)
Mr. Hubbell asserted that either he or former Deputy White House Counsel Vincent Foster, also a Rose partner, directed the Rose accounting department to print the billing records for Madison.(1223) In addition to obtaining the computerized billing records, Mr. Hubbell also retrieved other files and documents relating to Mrs. Clinton's work for Madison:
I recall in 1992 that the issue regarding our representation of Madison and specifically our work before the Arkansas Securities Department was of interest to Mr. Gerth of The New York Times, and that our firm was being questioned by people within the campaign about her work in that regard. We did some work in trying to organize and pull up the files. And in connection with that, bills were pulled and reviewed by myself and Mr. Foster and Mr. Massey, I believe.(1224) Because of allegations that Mrs. Clinton had a conflict of interest in appearing before her husband's appointee, Beverly Bassett Schaffer, Arkansas Securities Commissioner, Mr. Hubbell reviewed the records in 1992. During his review, Mr. Hubbell made notations next to entries in the bills related to the firm's work in connection with Madison's novel proposed preferred stock offering before the Arkansas Securities Department. According to Mr. Hubbell, "the issue then, way back when, was did Mrs. Clinton ever have any contact with the Arkansas Securities Department. When we went back to the bills, that was the only, I believe, indication on the bills of a direct contact with the Arkansas Securities Department, so I underlined that -- probably gave that to Vince."(1225)
Indeed, in notes taken during the 1992 campaign concerning Whitewater, Susan Thomases recorded a February 24, 1993 conversation with Mr. Hubbell about the Rose Law Firm's representation of Madison. According to her notes, Mr. Hubbell told Ms. Thomases that Mrs. Clinton did all the billing for the Rose Law Firm to Madison, and that she had numerous conferences with Mr. McDougal, Madison President John Latham, and Rick Massey, then a junior associate at the firm.(1226) Ms. Thomases' also indicated that Mrs. Clinton had reviewed some documents and that she had at least one telephone conversation with Ms. Schaffer in April 1985.(1227) Ms. Thomases recorded in the margin of her notes next to this entry: "Acc. to time Rec." She testified that "[t]his is my notation for according to time records,"(1228) and that the notation reflected what Mr. Hubbell had indicated to her.(1229)
Ms. Thomases asserted, however, that she herself did not see the billing records,(1230) nor did she ever ask to see the time records.(1231) Ms. Thomases further claimed that, other than her conversations with Mr. Hubbell in 1992, she never had any discussions with anyone about the billing records.(1232) She contended that she had no knowledge concerning the handling of billing records and how records were transported from Little Rock to the White House Residence.(1233)
In addition to Ms. Thomases, Mr. Hubbell discussed the contents of the records in 1992 with Loretta Lynch, an attorney working on Whitewater issues for the Clinton campaign.(1234) Ms. Lynch testified that, in response to press inquiries, she talked to Ms. Schaffer and reviewed the files of the Arkansas Securities Department in an attempt to reconstruct Mrs. Clinton's role in representing Madison before state regulators.(1235) During the course of this investigation, she and Ms. Thomases agreed that they should ask members of the Rose Law Firm about billing records.(1236) Ms. Lynch talked to Mr. Hubbell about Mrs. Clinton's work for and billings to Madison Guaranty,(1237) who advised her that he had reviewed the Rose Law Firm's billing records concerning Madison Guaranty.(1238) Ms. Lynch also knew that Mr. Foster had reviewed the billing records,(1239) but she does not recall speaking with anyone else at the Rose Law Firm regarding the billing records.(1240) Ms. Lynch testified that she did not handle any records reflecting billings by the Rose Law Firm to Madison Guaranty, and that she had no knowledge regarding how those records came to be deposited in the White House Residence.(1241)
When Mr. Hubbell and Mr. Foster reviewed the billing records in 1993, they spoke with each other about the Rose Law Firm's representation of Madison. Mr. Hubbell identified the notes written by Mr. Foster in red ink on the billing records found in the White House Residence--e.g., "HRC--this suggests 1st matter"(1242) or "HRC I believe there was a subsequent bill"(1243). These notes suggested to Mr. Hubbell that "[w]e were both working on it, and this is what he did to ultimately give it to somebody to indicate what was going on, what the records showed highlighted."(1244) As of the time Mr. Hubbell handled the records, Mr. Foster had not written or made any notations on the records.(1245)
According to Mr. Hubbell, Mr. Foster was the last person he saw handling the billing records.(1246) Mr. Hubbell did not know who removed the records from the Rose Law Firm,(1247) or how they came to be left in the White House Residence.(1248) He claimed not to have spoken with anyone about the billing records since the 1992 presidential campaign.(1249)
Mr. Hubbell stated that he may have spoken with Carolyn Huber, Special Assistant to the President and Special Director of Correspondence for the White House, about the records when she was the administrator of the Rose Law Firm, but not when she was at the White House.(1250) When Mr. Hubbell learned that Ms. Huber had discovered the billing records in her office, "I kind of smiled."(1251) According to Mr. Hubbell, "I know Ms. Huber, and it just didn't surprise me that all of a sudden she discovered them."(1252) He explained, somewhat cryptically: "First of all, I felt sorry for her, but just that all of a sudden, oh, you're looking for the billing records, here they are. You know, it just wouldn't surprise me that something like that happened. I read about it, but I just smiled about it."(1253)
During the first two weeks of August 1995, while the Special Committee was holding hearings into the handling of documents in Mr. Foster's office at the time of his death, Ms. Huber testified that she saw the Rose Law Firm billing records for the first time.(1254)
The billing records, which were subject to several different federal subpoenas, were in the Book Room, a small room on the third floor of the First Family's private quarters in the White House Residence.(1255) The room is adjacent to Mrs. Clinton's private office and is accessible only to a limited number of private guests and staff.(1256) Gifts, book, and memorabilia are stored in the Book Room until they can be catalogued and put away.(1257) In the center of the room sits a large table where such memorabilia are piled.(1258)
In early August 1995, Ms. Huber was gathering newspaper and magazine clippings in the Book Room when she noticed the records in clear view on the edge of the table.(1259) The records were folded in half, and Ms. Huber recognized the records, from her experience at the Rose Law Firm, to be billing records.(1260) Ms. Huber recalled that, specifically, the records were not on the table a week or two earlier when Ms. Huber was last in the Book Room.(1261) Because Ms. Huber thought that the billing records were left in the Book Room for her to file,(1262) she placed the records in a box to be taken to her office without studying them.(1263) White House ushers carried this box, along with several others, and placed them on the floor of Ms. Huber's office.(1264) Later, a table was placed over these boxes.(1265)
For several months, Ms. Huber forgot about the records. Meanwhile, the Special Committee, continuing its investigation into activities and transactions relating to Whitewater and Madison, held several hearings in December 1995 on the extent of Mrs. Clinton's role in the Madison representation. The billing records figured prominently in these hearings. On December 1, 1995, Mr. Hubbell was unable to provide complete answers about the Mrs. Clinton's role in the Rose Law Firm's representation of Madison because he did not have the billing records to refresh his memory.(1266) Likewise, Ms. Thomases testified on December 18, 1995, about her work during the campaign and her notes about billing records relating to Mrs. Clinton's work for Madison.
On the morning of January 4, 1996, Ms. Huber was having new furniture placed in her office in the East Wing of the White House.(1267) In the process, the table that had concealed the box containing the billing records for five months was removed.(1268) Once the boxes were uncovered, Ms. Huber began to file the contents of the boxes.(1269) As she was filing, Ms. Huber pulled the billing records out of their box and examined them more closely.(1270)
Immediately, Ms. Huber realized the billing records were related to Madison Guaranty.(1271) She was horrified because she understood their significance; she had seen several subpoenas calling for the production of Madison Guaranty records, including these very records.(1272) She had also assisted the President and Mrs. Clintons' personal counsel, David Kendall in searching and reviewing documents in the White House responsive to those subpoenas.(1273) Ms. Huber contacted Mr. Kendall and asked him to meet her in her office as soon as possible because she had found some documents.(1274) After calling Mr. Kendall, Ms. Huber called her attorney, Henry Shuelke.(1275)
Early in the afternoon on January 4, Ms. Huber met with Mr. Kendall.(1276) She gave him the records and explained her discovery.(1277) Worried, Ms. Huber asked Mr. Kendall whether she had done the right thing in contacting him.(1278) Mr. Kendall assured Ms. Huber that she had made the correct decision.(1279) Mr. Kendall examined the billing records and asked Ms. Huber whether she could identify the handwriting in red ink.(1280) Ms. Huber identified some of the notations as Mr. Foster's handwriting.(1281) Mr. Kendall then told Ms. Huber to maintain custody of the records,(1282) and that he would contact White House counsel and meet with her later in the day.(1283)
Mr. Kendall then contacted Special Counsel to the President Jane Sherburne and Mr. Shuelke, who agreed to meet around 5:00 p.m. in Ms. Huber's office.(1284) Ms. Sherburne informed her supervisor, Deputy Chief of Staff Harold Ickes, and her staff of the discovery of the billing records.(1285) No one contacted the Independent Counsel or any other investigative agency, including the Special Committee. Mr. Kendall and Ms. Sherburne claimed that they did not inform Mrs. Clinton on January 4 about the discovery of the billing records.(1286)
Ms. Huber, Mr. Kendall, Ms. Sherburne and Mr. Shuelke met that evening.(1287) Ms. Huber once again explained her discovery of the records.(1288) Ms. Huber told the assembled attorneys -- as she also had testified to before the Special Committee -- that she clearly recalled seeing the records in early August 1995. Ms. Huber and the lawyers together examined the billing records page by page.(1289) Ms. Huber identified for them some of the handwriting on the billing records as Mr. Foster's and some as the Rose Law Firm bookkeeper.(1290) In view of Mr. Foster's notes in red ink, the billing records were obviously a copy of the original records.(1291) Other handwritten notes appear to have been made on the original and then copied.(1292)
At one point in the meeting, Ms. Sherburne asked to speak with Mr. Kendall and Mr. Shuelke in the hallway.(1293) Ms. Sherburne raised the issue of how the documents should be reproduced and whether the integrity of the documents should be preserved in case the records would later be examined for fingerprints.(1294) The attorneys never considered contacting the Independent Counsel for advice on how best to proceed.(1295)
Mr. Kendall and Mr. Shuelke returned to Ms. Huber's office and photographed the box in which Ms. Huber found the records earlier in the day.(1296) Ms. Sherburne and Ms. Huber searched for a color copier in the White House offices.(1297) After finding a copier, Ms. Huber made copies, while Ms. Sherburne collated and checked for completeness.(1298) Two color copies of the billing records were made.(1299) Mr. Kendall took the original set of the billing records and one copy with him that evening. Ms. Sherburne took the other copy of the billing records to examine and to keep for White House records.(1300)
The next morning, January 5, 1996, Mr. Kendall and Ms. Sherburne notified the Independent Counsel of the discovery of the billing records.(1301) That same morning, Ms. Sherburne informed President Clinton of their discovery.(1302) Later that afternoon, Mr. Kendall produced a copy of the billing records to the Special Committee.(1303) Copies of the billing records were also produced to the other investigative agencies.(1304) III.
Mrs. Clinton's Statements in Light of the Rose Law Firm Billing Records.
The billing records provide the best evidence of the legal services performed by Mrs. Clinton for Madison Guaranty and, as a result of the failed memories of many Rose Law Firm attorneys, are the only source of detailed information about the legal services rendered to Madison. Whereas the bills and statements sent to clients indicate only the total amount due and the general services performed, these computerized billing records provide detailed information on the specific task performed, the date that it was performed, the person who performed the task, and the amount of time expended on the task.(1305) The computerized billing records are thus an invaluable asset in reconstructing Mrs. Clinton's actual involvement in the matter. This is especially so with respect to Mrs. Clinton's billings to Madison, because her timesheets were apparently destroyed in 1988.(1306)
In total, Mrs. Clinton billed Madison Guaranty for 89 tasks, including 33 conferences with Madison Guaranty officials, on 53 separate days.(1307)
A. Madison's retention of the Rose Law Firm
During the 1992 campaign, the Clinton campaign sought the facts surrounding the Rose Law Firm's retainer with Madison Guaranty in 1985 and 1986. In a March 18, 1992 memorandum to senior campaign officials Bruce Lindsey and David Wilhelm, Loretta Lynch noted that the campaign had conducted an exhaustive review of available documents, but certain questions regarding the retainer remain that "simply must be answered by Hillary and Bill themselves." Among these questions were:
1. Did Bill Clinton solicit a retainer agreement for the Rose Law Firm from Jim McDougal? If so, when did that happen and what were its terms? Who, other than Jim and Susan were privy to that discussion?
* * *
7. When was the Rose Law Firm put on retainer by McD and for what business (LL has asked Webb Hubbell this question numerous times. The answer continues to change, despite the repeated press inquiries on this exact point).(1308)
This memorandum was prepared after the Clinton campaign had already released a fact sheet stating that Richard Massey, a young associate in the Rose Law Firm in 1985, was responsible for the retainer--not Mrs. Clinton:
The Rose Law Firm was retained to represent Madison Guaranty. The business was brought to the firm not by Hillary Clinton but by Richard Massey, long time friend of John Latham, Madison's CEO.(1309)
The circumstances surrounding the Rose Law Firm's retainer with Madison were not resolved during the 1992 campaign. Mrs. Clinton, and others on her behalf, have repeatedly made statements that Mr. Massey brought in Madison Guaranty as a client and that, even though she was the billing partner on the matter, she was merely a "backstop" because the firm did not permit associates to bill clients directly.(1310)
During a press conference on April 22, 1994, Mrs. Clinton stated that Mr. Latham, the President of Madison Guaranty, asked Mr. Massey whether he would be interested in representing Madison in connection with a proposed stock offering. Mrs. Clinton claimed that she became involved in the matter only because Mr. Massey "needed a partner to serve as his backstop, and that was one of the rules of our firm."(1311) Mrs. Clinton further explained that Mr. Massey was aware that she knew Mr. McDougal, so "he came to me and asked if I would talk with Jim to see whether or not Jim would let the lawyer and the officer go forward on this project. I did that, and I arranged that the firm would be paid $2,000 retainer."(1312)
In an unsworn statement to the RTC in November 1994, Mrs. Clinton similarly told investigators that "she recalled Massey came to her and asked her to be the billing attorney which was a normal practice when an associate was handling the matter. . . .Mrs. Clinton recalled that a Madison official (individual unknown) approached Rick Massey regarding a preferred stock offering in an effort to raise capital."
In a sworn response to an RTC interrogatory in May 1995, Mrs. Clinton elaborated on her story. Mrs. Clinton stated that Mr. Massey approached her because "certain lawyers" in the Rose Law Firm were "opposed" to representing Mr. McDougal until Mr. McDougal paid an outstanding bill, and he was aware that Mrs. Clinton knew Mr. McDougal. Mrs. Clinton wrote:
In the spring of 1985, Massey came to see me because he had learned that certain lawyers at the firm were opposed to doing any more work for Jim McDougal or any of his companies until he paid his bill and then only if Madison Guaranty agreed to prepay a certain sum. . . I believe Massey approached me about presenting this proposal to Jim McDougal because he was aware that I knew him.
Mr. Massey, however, directly contradicted Mrs. Clinton's account in sworn testimony before the Special Committee. According to Mr. Massey, he was not responsible for bringing in Madison as a client.(1313) Mr. Massey testified specifically that Mr. Latham never offered him Madison's business,(1314) and that he did not recall approaching Mrs. Clinton with a proposal to represent Madison.(1315) Mr. Massey also indicated that he did not ask Mrs. Clinton, as she claimed, to be the billing attorney.(1316)
David Knight, a former Rose partner specializing in securities law, testified that he attended the lunch meeting during which, according to Mrs. Clinton, Mr. Latham allegedly retained Mr. Massey and the Rose Law Firm.(1317) Mr. Knight confirmed Mr. Massey's testimony that Mr. Latham did not ask Mr. Massey to represent Madison on the preferred stock offering. Quite to the contrary, according to Mr. Knight, the subject of that stock offering never arose.(1318) In fact, Mr. Latham informed Messrs. Knight and Massey at the lunch that Mr. McDougal made all hiring decisions and that Madison already had outside counsel.(1319)
Mr. Latham testified that Mr. McDougal, not he, made the decision to retain the Rose Law Firm.(1320) In an interview with RTC investigators, Mr. Latham similarly stated that "McDougal had friends over there and he suggested we use them. When asked who the friends were Latham said that they were Hillary Rodham Clinton and others."(1321)
Mr. McDougal has also contradicted Mrs. Clinton's account about the retainer. Mr. McDougal has stated that he put Mrs. Clinton on retainer as a favor to then-Governor Clinton. In 1992, Mr. McDougal told Jim Blair and Loretta Lynch that Governor Clinton, wearing jogging pants, visited his office and told him that he and Mrs. Clinton were pressed for money and asked Mr. McDougal to give some work to Mrs. Clinton.(1322) Two hours later, Mrs. Clinton visited Mr. McDougal to set up the retainer.(1323) According to notes taken by Mr. Blair, Mr. McDougal said that he remembered the encounter "explicitly" because Governor Clinton, in his exercise clothes, left a permanent stain on Mr. McDougal's "new leather contour chair."(1324)
In 1993, Mr. McDougal repeated this account of the so-called "jogging" incident to the Los Angeles Times. Governor Clinton reportedly dropped by Mr. McDougal's trailer office, told Mr. McDougal that the Clintons were financially strapped, and asked Mr. McDougal to throw some work to Mrs. Clinton.(1325) Mr. McDougal also repeated to the newspaper what he had told Mr. Blair: "I hired Hillary because Bill came in whimpering they needed help." Mr. McDougal said he had no specific legal work in mind when he hired Mrs. Clinton.(1326) That same day, Mrs. Clinton visited Mr. McDougal's office, and Mr. McDougal put her on retainer for $2000 a month.
On May 8, 1996, during the Tucker-McDougal trial in Little Rock, Mr. McDougal revised his story somewhat. He testified that President Clinton came by one morning and, "I said to Bill something to the effect of, `We're needing more legal work. Would it help Hillary if we gave some of the work to the Rose Firm?' And he said yes."(1327) Mr. McDougal did not recall telling Mr. Blair that Bill Clinton specifically said he "needed" money.(1328) Although Mr. McDougal denied stating in an FBI interview that "Clinton came in claiming he had financial problems,"(1329) he did recall that Mrs. Clinton "came by the same day" to set up the retainer.(1330)
At the Tucker-McDougal trial, President Clinton testified that he recalled visiting Mr. McDougal, but did not recall asking Mr. McDougal to place Mrs. Clinton on retainer.(1331)
Mrs. Clinton's account of her role in connection with the Madison retainer turns on the alleged existence of a debt that Mr. McDougal's Madison Bank & Trust owed to the Rose Law Firm in 1985. According to Mrs. Clinton, she insisted on the $2000 per month retainer to assure her partners that Mr. McDougal would pay the firm's fees--an issue that, she claims, arose because of Mr. McDougal's failure to pay fees owed to the Rose Law Firm in connection with its representation of Madison Bank & Trust.
Documentary evidence and testimony provided to the Special Committee, however, indicate that the outstanding balance of Rose's bill to Madison Bank & Trust was paid in late October 1984, many months prior to Mrs. Clinton's retainer in April 1985.
Gary Bunch, President of Madison Bank & Trust since 1970, provided the Special Committee with documents showing that the legal fees owed to the Rose Law Firm were paid in late October 1984. The Minutes of Madison Bank & Trust for October of 1984 indicate that $5,000 in legal fees were owed to the Rose Law Firm for work on the "Huntsville move appeal,"(1332) a matter concerning the relocation of the bank, and that "Mr. McDougal seconded that Mr. Bunch will negotiate settlement with the firm."(1333) Mr. Bunch confirmed that Mr. McDougal directed him to pay the outstanding Rose Law Firm bill for the Madison Bank & Trust matter in full in October 1984.(1334)
A receipt from Madison Bank & Trust's debit ledger show $5,000 in legal fees were paid on October 23, 1984.(1335) In addition, the bank's minutes for November 27, 1984 confirm this payment: "The reduction in earnings was attributed to heavy accounting fees for the audit and a payment of legal fees from 1983 lawsuit."(1336)
Among the billing records discovered in the Book Room of the White House Residence was a 1981 bill from the Rose Law Firm to Madison Bank & Trust. This bill, for over $13,000, was marked "Paid." A note in Mr. Foster's hand, however, stated: "HRC I believe there was a subsequent bill."(1337)
Following the discovery of the billing records and the testimony of Mr. Massey before the Special Committee, Mrs. Clinton changed her story in a February 1996 interview with RTC investigators. According to Mrs. Clinton, the late Vincent Foster, not Mr. Massey, first informed her that Mr. Massey wanted to do work for Madison: "I believe it was Vince Foster who came to me, who said that Mr. Massey wanted to do this work, but the partners didn't want him to do it."(1338) When asked who suggested that she approach Mr. McDougal, Mrs. Clinton answered: "I don't have a specific recollection. I believe it was Vince Foster, but I'm not positive."(1339)
Mrs. Clinton's contacts with regulator Beverly Bassett Schaffer.
In 1985, the Rose Law Firm represented Madison in connection with a proposal for a preferred stock offering before the Arkansas Securities Department. During the 1992 campaign, allegations surfaced that Beverly Bassett Schaffer, who Governor Clinton appointed as Arkansas Securities Commissioner, gave preferential treatment to Madison Guaranty because of her relationship with the Governor and Mrs. Clinton. The Clinton campaign denied that Mrs. Clinton attempted to influence Commissioner Bassett.
The billing records show that Mrs. Clinton called Ms. Schaffer the day before the Rose Law Firm submitted Madison's proposal for its preferred stock offering to the Arkansas Securities Department.(1340) The records reflect that Mrs. Clinton billed as much as one hour to the call.(1341) Ms. Schaffer notified Mrs. Clinton of the approval of the proposal two weeks later in a letter addressed to "Dear Hillary."(1342)
Prior to the discovery of the billing records, Mrs. Clinton claimed in her sworn responses to RTC interrogatories in May 1995 that she called the Arkansas Securities Department to find out "to whom Mr. Massey should direct any inquiries."(1343) She did not recall to whom she spoke.(1344)
In testimony before the Special Committee, former Commissioner Schaffer directly contradicted Mrs. Clinton and stated that the proposal was discussed during the phone call. According to Ms. Schaffer:
[Mrs. Clinton] called and said they had a proposal, and what it was about; and I said I'm familiar with that; I've already looked at that. You know, I agree with the-basically I have no problem with that position, and you'll be getting a letter soon to that effect. . . . I think in substance I said, basically,I agree with the position-I mean, that preferred stock can be issued pursuant to the Business Corporation Code.(1345)
Mr. Massey similarly disputed Mrs. Clinton's account of the phone call to Ms. Schaffer. Mr. Massey testified that he drafted the proposal and knew exactly to whom the proposal should be sent.(1346) Mr. Massey further testified that Mrs. Clinton never instructed him about whom to address the transmission letter.(1347) Mr. Massey did not recall asking Mrs. Clinton to make such an inquiry and was not aware that she had.(1348)
Mrs. Clinton's role in Madison's proposed preferred stock deal.
Mrs. Clinton has minimized her role in the Rose Law Firm's representation of Madison before the Arkansas Securities Department in connection with Madison's proposed stock offering. Although she was the billing partner, Mrs. Clinton has denied that she handled much of the workload on the matter. When asked about the subject during a press conference on April 22, 1994, Mrs. Clinton told reporters that "the young attorney, the young bank officer did all the work. . . . It was not an area that I practiced in it was not an area that I really know anything to speak of about."(1349)
In a 1994 sworn statement to the FDIC, Mrs. Clinton similarly stated:
While I was the billing partner on the matter, the great bulk of the work was done by Mr. Richard Massey, who was then an associate at the Rose Law Firm and whose specialty was securities law. I was not involved in the day to day work on that project. . . Mr. Massey primarily handled the matter. . . I was not involved in any meetings with state regulators. . . .(1350) Mrs. Clinton likewise told RTC investigators in 1994 that Mr. Massey was the lead attorney on the matter.(1351) And, in sworn interrogatories to the RTC in May 1995, Mrs. Clinton stated, "While I was the billing partner on the matter, the great bulk of the work was done by Mr. Richard Massey, who was then an associate at the Rose Law Firm and whose specialty was securities law." Mrs. Clinton added that "I was not in charge of the Rose Law Firm's work for Madison Guaranty in 1985-86, although I was the billing partner."(1352)
The billing records and Mr. Massey's testimony directly contradict Mrs. Clinton's claim that her role on the matter was merely to serve only as a "backstop." Mrs. Clinton billed 6.2 hours on the preferred stock deal for conferences alone that she had with Mr. McDougal, with Mr. Latham and Davis Fitzhugh, two other Madison S&L officers involved in the stock offering.(1353) In addition, Mrs. Clinton had at least six conferences with Mr. Massey, the young Rose Law Firm associate on the matter.(1354) Mrs. Clinton also reviewed the amendments to the application submitted to the Arkansas Securities Department.(1355)
Mr. Massey testified that he did his work under the supervision of Mrs. Clinton.(1356) According to Mr. Massey, "Mrs. Clinton was the billing attorney and had a relationship with me such that she needed to know what I was doing so she could be prepared to update the client at any time."(1357) When asked whether Mrs. Clinton's work on the stock proposal deal was "minimal," Mr. Massey responded, "In my own mind it's a significant amount of time."(1358)
Mrs. Clinton's role in the Castle Grande transaction.
Before the billing records were discovered, little was known about the nature of the Rose Law Firm's representation of Madison Guaranty in connection with the Castle Grande land transaction. Perhaps because Mrs. Clinton had ordered the destruction of Madison-related records in 1988, the Rose Law Firm no longer possessed any file related to the Castle Grande deal.
Federal investigators described the Castle Grande transactions as a series of land flips and transactions that cost the American taxpayers $4 million.(1359) The land deal was designed to conceal Madison Guaranty's investment in Castle Grande through its subsidiary, Madison Financial Corporation. Mr. Ward was the "straw man" purchaser in the project--one who lends his name to the title, but does not actually have an ownership interest.(1360) Arkansas regulations limited an S&L's direct investment in its subsidiaries or affiliates to 6 percent of total assets.(1361) Mr. Ward was needed as the straw man because "had MGSL purchased Castle Grande directly, they would have exceeded their direct investment limit."(1362) Madison, in effect, paid for Mr. Ward's share in the venture, and was promised $300,000 in commissions for lending his name.
In 1995, when the RTC asked about her knowledge of Castle Grande, Mrs. Clinton stated "I do not believe I knew anything about any of these real estate parcels and projects." (1363) The billing records suggest otherwise.
The billing records identify Mrs. Clinton as the billing partner on the matter--even though Mrs. Clinton claimed that she had no idea how the Rose Law Firm became involved in the matter.(1364) These records indicate that Mrs. Clinton billed more time on the Castle Grande matter--29.5 hours, or 54 percent of total billings on the matter--than any other lawyer at the Rose Law Firm. Indeed, nearly half of Mrs. Clinton's total billings to Madison were for work on Castle Grande. In the months following the initial transaction, Mrs. Clinton had at least 12 conferences with Mr. Ward and numerous meetings with Madison officials in connection with the subsequent sales that she billed to the IDC/Castle Grande matter. One of the conferences with Mr. Ward even related to "the purchase from Brick Lile," the seller of the IDC/Castle Grande property. Mrs. Clinton also had conferences with two attorneys who were involved in the initial transaction -- Thomas Thrash, the associate at the Rose Law Firm who attended the closing, and Daryl Dover, the attorney for the seller.
In January 1986, Mrs. Clinton tripled Rose's bill to Madison for her work on the Castle Grande/IDC matter without providing any supporting information. Mrs. Clinton has claimed that this fee, representing 14.5 hours, was for work that she did between January 15 and January 30, 1986, which she forgot to enter on her time sheets as "work in progress."(1365)
After the discovery of the billing records, Mrs. Clinton attempted to explain the apparent contradiction between her statements about her minimal involvement in the Castle Grande transaction and the billing records. In a television interview, Mrs. Clinton explained that she did not know the Castle Grande property by this name, and that the matter she worked on was known by the name of the seller, IDC. She explained that it was a "separate deal" entirely:
Again, there's not a contradiction. Castle Grande was a trailer park on a piece of property that was about 1,000 acres big. I never did work for Castle Grande. Never at all. And so, when I was asked about it last year, I didn't recognize it, I didn't remember it. The billing records show I did not do work for Castle Grande. I did work for something called IDC, which was not related to Castle Grande. . . . Separate deal completely.(1366) When asked by the Pillsbury Firm what she meant by "separate deal," Mrs. Clinton gave a similar answer:
Well, my understanding is that the work for Madison concerned property that was referred to then at the time and continually by the Rose Firm as IDC or Industrial Development Corporation property. I know that work as IDC. That's how it was billed. And I did not know that there was something called Castle Grande, to the best of my recollection, until it came to my attention through these investigations, the entire thousand acres that we referred to as IDC was being called Castle Grande . . . .
I was informed sometime within the last year or two that there was a trailer park on the IDC property called Castle Grande Estates. To the best of my recollection, that was the first I had ever heard of Castle Grande Estates.(1367)
Substantial evidence, however, contradicts Mrs. Clinton's statements concerning the name of this project. Madison Guaranty officials and federal regulators all commonly referred to the entire parcel of land as "Castle Grande." Television advertisements in Little Rock promoting the land development referred to the land as "Castle Grande." Susan McDougal told ABC news that the entire development was considered "Castle Grande." Internal Madison Board Minutes dated September 12, 1985, referred to "Castle Grande Estates." Harry Don Denton, a Madison officer, testified at the Tucker-McDougal trial that the entire property was named Castle Grande immediately after its purchase from IDC.(1368) Finally, records reflecting a meeting between Alston Jennings, former attorney for Mr. Ward, and Mr. Kendall, the Clintons' attorney, on January 11, 1996--the week after the billing records were discovered--referred to "Castle Grande."(1369) No mention was made of IDC.(1370)
More important than the mere extent of her services related to the Castle Grande, however, is the nature of her work. For his role as the "straw man" and other related services to the project, Mr. Ward was owed a commission. On March 31, 1986, Madison Guaranty loaned $400,000 to Mr. Ward.(1371) One week later, on April 7, 1986, Madison Financial Corporation, a subsidiary of Madison Guaranty, executed two promissory notes, for $300,000 and $70,943, purporting to reflect loans from Mr. Ward to Madison Financial.(1372) Thus, except approximately $30,000 for administrative expenses, the two Madison Financial notes offset Mr. Ward's debt to Madison Guaranty. At the end of the day, Mr. Ward kept the bulk of the $400,000 as his commission for the Castle Grande fraud.
At about this time, bank examiners were auditing Madison Guaranty's books, and James Clark, the chief examiner, asked whether the three notes were related.(1373) Madison official, Mr. Denton, assured him that these notes were not related.(1374) According to Madison official John Latham, however, the three notes were related, and the $400,000 March 31 loan from Madison Guaranty was intended to pay Mr. Ward's commissions.(1375)
The Rose Law Firm billing records revealed for the first time that on April 7, 1986, the day the Madison Financial notes were executed, Mrs. Clinton billed 10 minutes to the IDC/Castle Grande matter for "Telephone conference with Don Denton."(1376) A message slip produced by Mr. Denton reflects that Mrs. Clinton called him from the Rose Law Firm on April 7, 1986.(1377) In a June 11, 1996 interview with FDIC investigators, Mr. Denton stated that Mrs. Clinton called seeking copies of the notes between Mr. Ward, Madison Financial, and Madison Guaranty.(1378) Mr. Denton told investigators that during the conversation he cautioned Mrs. Clinton that a problem might exist with respect to the April 7th notes to Mr. Ward because "they constituted in effect a parent entity fulfilling the obligation of a subsidiary,"(1379) a violation of the so-called direct investment rule. Mrs. Clinton, however, "summarily dismissed" that concern in a way that he took to mean that "he would take care of savings and loan matters, and she would take care of legal matters."(1380)
The billing records showed that on May 1, 1986, Mrs. Clinton billed Madison Guaranty for two hours for the following work: "Conference with Seth Ward; telephone conference with Seth Ward regarding option; telephone conference with Mike Shauffler; prepare option."(1381) Indeed, a May 1 option agreement between Mr. Ward and Madison Financial bore a word processing code ("0190g") that, according to the Rose Law Firm's counsel, indicates the document was created at the Rose Law Firm by or for Mrs. Clinton.(1382)
The May 1st agreement gave Madison an option from Mr. Ward to convey his portion of the Castle Grande property back to Madison. Mr. Clark, the bank examiner, told investigators that, after reviewing the records and in light of Mr. Denton' testimony, he believed that the May 1st option prepared by Mrs. Clinton "was created `in order to conceal the connection--whatever it was--between'" the March 31st and April 7th notes.(1383)
On June 13, 1996, in light of the significant new evidence offered by Mr. Denton and Mr. Clark relating to the extent and nature of Mrs. Clinton's role in Castle Grande, the Special Committee requested that Mrs. Clinton "refresh her memory about these transactions, and to inform the Special Committee of what she recalls about them" in writing, under oath."(1384) In her response affidavit, Mrs. Clinton did not answer the question, but simply referred to her attorney's transmittal letter "addressing certain allegations recently made by Mr. Don Denton."(1385) In his letter, Mr. Kendall maintained that Mr. Denton's recollection is "wholly unreliable"66 but gave no indication as to the recollection of the First Lady.(1386) Mrs. Clinton, therefore, has neither denied nor confirmed Mr. Denton's account. IV.
The Federal Investigations into the Rose Law Firm's Representation of Madison.
When the FDIC assumed control of Madison in 1989, Madison had a pending lawsuit against its former independent accountants, Frost & Company ("Frost").(1387) The suit was filed in 1988 by the Memphis law firm of Gerrish & McCreary and alleged malpractice on the part of Frost in connection with its audits of Madison performed in 1984 and 1985.(1388) The Frost litigation was assigned to FDIC attorney April Breslaw, who removed Gerrish & McCreary from the case and hired the Rose Law Firm to handle the matter.(1389) Rose partner Webster Hubbell was the billing partner and lead trial counsel on the case.(1390) Although the original claim was for $10 million, Rose settled the case in late February 1991 for $1.025 million.(1391) The firm was paid $375,380 for its work.(1392)
In 1994, the FDIC Office of the Inspector General ("FDIC-IG") and the RTC-IG began investigations into possible conflicts of interests related to the Rose's representation of those agencies in the Frost litigation.
During a February 24, 1994 hearing before the Senate Banking Committee, Ranking Member Alfonse D'Amato raised questions about a February 17, 1994 report of the FDIC Legal Division regarding the FDIC's hiring of Rose as counsel with respect to Madison.(1393) This report was prompted by stories appearing in the media in late 1993 and early 1994 alleging that Rose had failed to disclose conflicts related to its representation of Madison before the Arkansas Securities Department and the litigation against Madison brought by Mr. Hubbell's father-in-law, Seth Ward.(1394) The FDIC Legal Division concluded that neither Rose's representation of Madison before the Arkansas Securities Department nor Mr. Ward's suit against Madison constituted a conflict.(1395) At Senator D'Amato's urging,(1396) then FDIC Acting Chairman Andrew C. Hove agreed to ask the FDIC-IG to conduct an investigation.(1397)
On February 8, 1994, the RTC's Office of Contractor Oversight and Surveillance ("OCOS") issued a report dismissing allegations of conflicts of interest related to Rose's representation of the RTC in the Frost case.(1398) On February 24, 1994, RTC Interim Chief Executive Officer ("CEO") Roger Altman agreed to ask the RTC-IG to review the OCOS Report.(1399) On March 2, 1994, RTC Deputy and Acting CEO John Ryan requested that the RTC-IG investigate the matters raised in the OCOS Report.(1400)
The FDIC-IG issued its report on July 28, 1995, days before Ms. Huber discovered the billing records in the Book Room of the White House Residence. In the course of its investigation, the IG reviewed (1) the alleged conflicts of interest related to the FDIC's retention of Rose; (2) the FDIC Legal Division's conflicts report; (3) and certain legal fee payments made by the FDIC to Rose.(1401)
With respect to the conflicts related to the FDIC's retention of Rose, the IG concluded that the Rose Law Firm and, specifically, that Mr. Hubbell had failed, as required by ethical rules, to disclose the firm's prior representation of Madison. The FDIC-IG reported:
The results of our investigation evidenced conflicting relationships among the Rose Law Firm, Rose partner Webster L. Hubbell, and Mr. Hubbell's father-in-law since 1971, Seth Ward. During the time that Mr. Hubbell represented the Madison Conservatorship on behalf of the FDIC, Mr. Hubbell's father-in-law was engaged in litigation adverse to the Madison Conservatorship. We found that neither the Firm nor Mr. Hubbell had informed FDIC of these relationships when the Firm was hired in March 1989 to handle the lawsuit against Frost or while the Firm was acting as litigator for the Madison Conservatorship.(1402) The report further found that Mr. Hubbell's representation of the FDIC was improper in light of Rose's prior representation of Mr. McDougal's S&L:
The results of our investigation also evidenced conflicting representations on the part of the Rose Law Firm with respect to its representation of FDIC regarding the Madison Conservatorship. Specifically, we found that the Firm had represented Madison and its wholly owned subsidiary, Madison Financial Corporation, in 1985 and 1986 on various legal matters, including representation of Madison in 1985 before the Arkansas Securities Department (ASD). During its 1985 representation of Madison the Firm submitted materials to the ASD which were prepared by Frost, the firm that was later sued by Rose on behalf of FDIC for the Madison Conservatorship. We further found that for many years the Rose Law Firm represented Mr. Hubbell's father-in-law, Seth Ward, or Mr. Ward's companies regarding various legal matters. However, there was no evidence to show that Mr. Hubbell or the Rose Law Firm disclosed these representations to FDIC when the Firm was hired or during its representation of the Madison Conservatorship in the Frost lawsuit.(1403)
In its review of the FDIC Legal Division's February 17, 1994 Report, the FDIC-IG determined that the Legal Division failed to consider certain conflicts criteria and additional evidence obtained by the IG.(1404)
The RTC-IG, after a separate investigation, issued its report on August 3, 1995--again days before someone placed the billing records in the Book Room.67 The RTC-IG found that "Rose Law Firm did not disclose actual or potential conflicts relating to Madison and another six of the 17 institutions for which the firm represented FDIC and RTC."(1405)
Among the "undisclosed" matters identified by the RTC-IG Report related to Rose's involvement in the Castle Grande land deal:
At the time it assisted MADISON GUARANTY with the CASTLE GRANDE deal, ROSE LAW FIRM was aware of regulatory concerns about the soundness of the institution, particularly its net worth, through its representation of MADISON GUARANTY on applications with the ARKANSAS SECURITIES DEPARTMENT to issue preferred stock and to commence broker/dealer operations. Although FROST & COMPANY's defense called the conduct of MADISON GUARANTY management into question and ROSE LAW FIRM had represented MADISON GUARANTY/MADISON FINANCIAL/SETH WARD in an acquisition of property orchestrated by that management and subsequently heavily criticized by the regulators, ROSE LAW FIRM did not disclose fully its relationship with MADISON GUARANTY in the purchase and development of the IDC property to FDIC or RTC when it was retained in the suit against FROST & COMPANY.(1406)
Mr. Adair, Inspector General of the RTC, provided further explanation of the conflicts problem posed by Rose's involvement in Castle Grande in his testimony before the House Banking Committee in August 1995:
Arkansas State Regulations had prohibited Madison Guaranty from acquiring a tract of property that became known as Castle Grande, and as an entity the Rose Law Firm was aware of this restriction because it had previously represented Madison Guaranty in other work involving the Arkansas Securities Department.
According to a subsequent Home Loan Bank Board examination that was done, to avoid this restriction, Madison Guaranty assigned the right to purchase part of the property to an employee of the institution who was the father-in-law of a Rose partner.
Madison Guaranty financed 100 percent of that employee's purchase, providing over $1 million in non-recourse financing and obtained an option from the employee to convey the property back to Madison Guaranty.
Essentially, the purchase appears to have been structured to avoid violation of state law by Madison Guaranty. Madison Guaranty paid the Rose Law Firm for legal services in connection with the transaction.
In a report of examination of March 1986, Federal Home Loan Bank Board examiners identified this transaction as one of a series of fictitious transactions causing losses to Madison Guaranty.
When Madison Guaranty's independent public accountant was sued by FDIC for its part in the failure of the institution, the accounting firm's defense called the conduct of Madison Guaranty's management into question for several transactions including Castle Grande.
Although the Rose Law Firm had earlier assisted Madison Guaranty management in the original Castle Grande transaction, the Rose Law Firm did not disclose its role in that transaction when later retained by the FDIC in the malpractice suit against Madison Guaranty's independent public accountant.(1407)
On December 29, 1995, RTC General Counsel William Collishaw informed the Arkansas Supreme Court Committee on Professional Conduct that the RTC-IG Report "provides a sufficient indication of the existence of possible undisclosed conflicts of interest by the Rose Law Firm such that it raises concerns about the Rose Law Firm's compliance with the Arkansas Rules of Professional Conduct."(1408) The matter is still pending before the Committee on Professional Conduct.(1409)
Relying primarily on the report of the RTC-IG, the Pillsbury Firm reviewed Rose's representation of the FDIC and the RTC.(1410) Pillsbury determined that "[b]etween the time the Rose Law Firm was substituted in and the time the Frost case settled, the Rose Law Firm developed an impermissible conflict of interest, which it neither fully disclosed to its client, the RTC, nor had waived."(1411) Pillsbury concluded that "[a] claim could be asserted against the Rose Law Firm with respect to the conflict of interest."(1412) Specifically, Pillsbury identified Seth Ward and the Castle Grande transaction as among the factors leading to its conclusion that Rose had a conflict of interest.(1413)
Ms. Black, counsel to the RTC-IG, stressed the significance of the billing records found in the Book Room of the White House to her investigation. She explained that the records related to the key transactions at issue in the allegations of conflicts of interest:
The investigation which we were performing in 1994 and completed in the summer of 1995 was an investigation of actual or potential conflicts that the Rose Law Firm might have had with regard to its work for initially the FDIC and then the RTC. As a part of that investigation, we looked at the firm's work for Madison Guaranty. We also looked at the firm's work, if any, for Seth Ward.
We looked at various transactions, including Castle Grande, IDC, the Frost litigation, the representation before the Arkansas Security Department and general work that they did for Madison Guaranty. These records -- the records that were available to us at the time we were doing our investigation were very sparse. It was very difficult for us to understand what the Rose Law Firm had in fact done. We had no more than a handful of invoices, five or six.(1414) Ms. Black stated that the billing records were the best available evidence of the work Rose performed for Madison and that those records were "considerably more detailed than what was available to us before."(1415)
Ms. Black testified that if the RTC-IG had the billing records during its investigation, "certainly there would have been questions that we asked witnesses that we did not ask. There would have been lines of inquiry that we would have pursued that we did not pursue. There might have been witnesses that we would have asked to interview that we did not ask to interview."(1416)
In particular, the Rose billing records increased the RTC-IG's knowledge of Mrs. Clinton's role in Rose's representation of Madison. When Ms. Black testified before the House Banking Committee in August 1995 about her report, all that she could say was that Mrs. Clinton worked for Madison. "We don't know what it was. The bills that were submitted by Rose had the names of attorneys who did the work at the top, and then they had a block discussion of the activities that occurred, and we don't know who did what."(1417) Ms. Black further testified in 1995 that "[w]e have no evidence that she [Hillary Clinton] worked on Castle Grande."(1418)
After the billing records were discovered, Ms. Black testified that the RTC-IG learned, for the first time, of the following relevant matters:
Mrs. Clinton's role in drafting the May 1, 1986 option agreement between Madison and Seth Ward;
Mrs. Clinton's telephone conference with Beverly Bassett Schaffer the day before the Rose Law Firm sent a letter to Ms. Schaffer requesting approval of Madison's plan to issue a series of preferred stock;
Mrs. Clinton's review of a letter discussing the Arkansas banking regulation which limited direct investments by an S&L in an affiliate or subsidiary; and
Mrs. Clinton 15 conferences, either in person or on the telephone, with Seth Ward, the key player in the Castle Grande deal.(1419) Ms. Black stated that the RTC-IG would have interviewed Mrs. Clinton if it had the billing records during its investigation.(1420) V.
The Special Committee's Investigation into the Circumstances Surrounding the Discovery of the Billing Records.
The FDIC-IG issued its report on the Rose Law Firm's conflicts of interest stemming from its representation of Madison on July 28, 1995. The RTC-IG issued its report on the same matter on August 3, 1995. During the two week period following the publication of these reports, Ms. Huber first saw the billing records in the Book Room of the White House Residence, next to Mrs. Clinton's office.
The Special Committee conducted hearings in December 1995 into matters relating to the Rose Law Firm and Mrs. Clinton's representation of Madison. Specific questions were raised regarding the existence of the billing records. Mr. Hubbell claimed that he could not provide complete answers about the Mrs. Clinton's representation of Madison because he did not have the billing records to refresh his memory.(1421) Ms. Thomases similarly testified about her campaign notes relating to billing records reflecting Mrs. Clinton's work for Madison.(1422) About two weeks later, on January 4, 1996, Ms. Huber examined the records she recovered from the Book Room and realized that they were the missing billing records.(1423)
Because of the importance of the records and the mysterious circumstances of their disappearance and discovery, the Special Committee conducted an exhaustive investigation to identify the person or persons who removed them from the Rose Law Firm in 1992 and who placed them in the Book Room of the White House Residence in August 1995.
The White House produced to the Special Committee records reflecting all persons who entered the White House Residence from July 20 through August 14, 1995.(1424) The White House provided lists of construction workers who were on the payroll of contractors performing renovations in the White House Residence during this period.(1425) Finally, the White House produced lists of overnight guests of President and Mrs. Clinton during this period.(1426)
The White House informed the Special Committee that approximately 206 persons had access to the Book Room during the relevant period from July 20 to August 14, 1995, when Ms. Huber testified she found the billing records.(1427)
Of the 206 persons with access to the Bookroom during the relevant period, 28 were White House Residence Staff.(1428) The Chief Usher, Gary Walters, testified that the Residence staff may not place documents in, or move documents around, the White House Residence without authorization.(1429) According to Mr. Walters, it is highly unlikely that a member of the Residence staff placed the records in the Book Room.(1430) Because the White House Residence employees would have had little opportunity to gain access to the billing records and no reason to place them in the Book Room, the Special Committee concluded that no residence employee placed the billing records in the Book Room.
After eliminating the 28 members of the Residence Staff, 178 persons remained. Of those, approximately 30 construction workers, who were involved in ongoing work in the Book Room or in the adjacent Exercise Room, were given access to the Book Room. Dennis Freemyer, the Deputy Head Usher in charge of construction projects, testified that the construction workers and outside contractors were all instructed not to touch or move anything in the White House Residence.(1431) According to Mr. Freemyer: "They are asked not to touch anything. If they need something moved, they're to ask either the National Park Service or a member of our staff, if they are present."(1432) All construction workers and outside contractors were escorted by either Secret Service or White House Ushers at all times while they were in the Residence.(1433) For security reasons, the escorts specifically check at the completion of each day's work to ascertain whether the workers had left anything behind.(1434) According to Mr. Freemyer, it is highly unlikely that a construction worker or outside contractor placed the records in the Book Room.(1435) Because the outside contractors had no opportunity to gain access to the billing records or reason for placing them in the Book Room, the Special Committee concluded that no outside contractor placed the records in the Book Room.
After eliminating the construction workers, 148 persons remained, including 55 public officials.(1436) These public officials included 24 U.S. mayors, President and Mrs. Kim of South Korea, and various Cabinet officials and National Security Staff.(1437) Given their official positions and their lack of access to the billing records or motive to place them in the Book Room, the Special Committee concluded that none of these individuals placed the Rose Law Firm billing records in the Book Room.
Of the remaining 93 persons who had access to the White House residence during the period from July 20 through August 14, 1995, records of the Secret Service and the White House Usher's Office identified 60 Residence guests.(1438) The Special Committee sent interrogatories to these guests. Each guest responded that he or she did not handle the records, have any discussions about the records, or have any knowledge of how they came to appear in the Book Room of the White House Residence.
Apart from the Residence guests, construction workers, and staff, the remaining 33 individuals who had access to the Book Room during the relevant period had a past or present working relationship with the President and the First Lady. Of these 33 persons, the Special Committee received evidence from all except the President and the First Lady. Ten were sent interrogatories, and the others gave testimony directly to the Special Committee. All denied having handled the records, having any discussions about the records,68 or having any knowledge about how the records appeared in the Book Room of the White House Residence.
The President and Mrs. Clinton are the only persons on the list of 206 persons having access to the White House Residence from whom the Special Committee has not received evidence. On June 13, 1996, the Special Committee requested that Mrs. Clinton respond in writing, under oath, about "any knowledge she may have concerning the Rose Law Firm billing records bearing Bates Stamp numbers DKSN028928 through DKSN029043, including whether she has reviewed, handled, or discussed (other than with counsel) these records, and her knowledge relating to the disappearance or discovery of these records."(1439)
On June 17, 1996, Mrs. Clinton responded: "I do not know how the billing records (DKSN028928 through DKSN029043) came to be identified by Mrs. Huber at the White House on January 4, 1996, although I have read various media accounts." In light of the Special Committee's request for detailed and specific information relating to any knowledge she had concerning the disappearance or discovery of these records, Mrs. Clinton's answer is incomplete. For example, she does not state whether she has any knowledge as to how the billing records were removed from the Rose Law Firm; who possessed the billing records between February 1992 and August 1995; where they were stored between February 1992 and August 1995; and, most importantly, who placed them in the Book Room of the White House in August 1995. There is no mystery as to how Ms. Huber came to identify the records on January 4, 1996. These other, more important questions, however, remain to be answered.
On June 4, 1996, the FBI informed the Special Committee that the fingerprints of six persons were found on the Rose billing records discovered in the Book Room.(1440) In addition to fingerprints of Ms. Huber and Marc Rolfe, a Williams & Connolly legal assistant who stamped numbers on the records to prepare them for production,(1441) the FBI also identified the fingerprint of Sandra Hatch, a Rose Law Firm file clerk assigned to Mr. Foster in 1992,(1442) and a palm print of Mildred Alston, Mrs. Clinton's Rose Law Firm secretary and currently Special Assistant for White House Personal Correspondence.(1443)
Ms. Hatch testified that, as Mr. Foster's file clerk, she was often asked by Mr. Foster or his secretary to photocopy documents and files--which, on occasions, included timesheets and billing records of the size and description similar to those found in the White House Book Room.(1444) She did not, however, recall a specific instance when Mr. Foster asked her to photocopy or handle such records.(1445) She did not recall handling, discussing, or overhearing any discussions about records specifically relating to the Rose Law Firm's work for Madison.(1446) Ms. Hatch testified that although she packed some of Mr. Foster's personal files from the Rose Law Firm for shipment to the White House in January 1993, she did not, see any records resembling the billing records discovered in the Book Room.(1447) She had no knowledge of how the billing records got to the White House Residence.(1448) When asked to speculate how her fingerprint got onto the billing records, Ms. Hatch replied, "It's very possible I could have been asked to pick them up. I don't know. It would just be a guess."(1449)
Mildred Alston testified that, although she had been to Mrs. Clinton's office on the third floor of the White House Residence, she had never been to the adjacent Book Room.(1450) Prior to her appearance before the Grand Jury in 1996, Ms. Alston had never seen the billing records discovered in the Book Room since she came to Washington.(1451) She did see and handle records resembling those found in the Book Room while she worked at the Rose Law Firm,(1452) and speculated that "I'm sure if the tests indicate that my palm print is wherever on this piece of paper, or on the original of this piece of paper, then I handled them, or touched them or leaned on them" while she was at the Rose Law Firm.(1453) Ms. Alston testified that, in January 1992, she helped pack Mrs. Clinton's documents and left some of them in the custody of Amy Stewart, a Rose lawyer, to be shipped to the White House.(1454) Ms. Alston did not know whether the billing records found in the Book Room were among the files shipped to the White House from Mrs. Clinton's officeat the Rose Law Firm.(1455)
The FBI also identified the fingerprints of Mrs. Clinton and Vincent Foster on the billing records.(1456) Mr. Foster received the billing records in during the 1992 Presidential campaign, and was the last known person to have handled the records.(1457) Lawyers for the Clintons, both from the White House and from Williams & Connolly, have stated that Mrs. Clinton "may have handled the billing records in 1992."(1458) What is left unanswered by this statement, however, are the critical questions concerning the mystery of the billing records: when did Mrs. Clinton handle them? Why did she handle them? And specifically, what information was she attempting to glean from them?
A close analysis of the billing records, Mr. Foster's notations, and the location of Mrs. Clinton's and Mr. Foster's fingerprints reveal at least some answers to these questions. The records disclose Mrs. Clinton's role in advising Mr. McDougal's Castle Grande transaction and they indicate Mrs. Clinton's and Mr. Foster's concern over Mrs. Clintons' involvement in the transactions.
Mrs. Clinton left her fingerprints at two places on the billing records. The FBI identified "[o]ne fingerprint located on the front bottom near the left edge of the page DEK 014950."(1459) At approximately this location on the page,69 is an entry reflecting that Mrs. Clinton participated in a "teleconference with B. Bassett, Securities Commissioner."(1460) The entry is underlined in an unidentified hand, but the presence of Mrs. Clinton's fingerprint at this approximate location, and the absence of any other identifiable finger print on the page,(1461) strongly suggest that Mrs. Clinton made the markings.
This entry on the billing records, for upwards of one hour on the day before Rose submitted Madison's novel preferred stock proposal to Ms. Schaffer,(1462) contradicts Mrs. Clinton's response to RTC interrogatories that in May 1995, when she called the Arkansas Securities Department to find out "to whom Mr. Massey should direct any inquiries," she did not recall to whom she spoke.(1463) Mrs. Clinton's sworn statement is contrary to the testimony of the other two participants in the telephone conference, Ms. Schaffer and Mr. Massey.(1464) Ms. Schaffer, in particular, testified that she substantively discussed the legality of the preferred stock proposal.(1465)
Mrs. Clinton's fingerprints and the markings on the billing records at this entry indicate that Mrs. Clinton was aware of the nature of her contact with Ms. Schaffer as recently as February 1992, three years before her sworn answer to the RTC interrogatories. Ms. Schaffer recalled the substance of the conversation from over ten years ago, and it is unclear why Mrs. Clinton provided inaccurate information to the RTC on the conversations about which she had substantive knowledge as recently as 1992.
Mr. Foster's fingerprints on the billing records indicate his attention to Mrs. Clinton's role with respect to the Castle Grande transaction, a "land flip" deal that federal regulators have described as a fraud costing the taxpayers $4 million.(1466) The transaction was fraudulently structured to evade Arkansas' "direct investment" rule, which limits an S&L's investment in its subsidiaries and service corporations.(1467)
The FBI identified "[o]ne fingerprint on the front lower right corner of page DEK 014969" belonging to Mr. Foster.(1468) At approximately this location on the page,70 is an entry reflecting that Mr. Massey participated in a conference with Sarah Hawkins, a Madison official, and the Federal Home Loan Bank "regarding brokerage activities and direct investment rule."(1469) The entire entry is circled, most probably by Mr. Foster, given the presence of his fingerprint proximate to the entry. The markings suggest that Mr. Foster recognized the significance of the direct investment rule as it related to the activities of Madison.
The importance of Mr. Foster's recognition as it related to Mrs. Clinton's representation of Madison becomes clear with the FBI's identification of "[o]ne fingerprint on the front upper right corner of page DEK 015030" belonging to Mr. Foster.(1470) At approximately this location on the page71 is an entry reflecting that Mrs. Clinton had a telephone conference with Donald Denton, a Madison official, for approximately 12 minutes on April 7, 1986.(1471) Someone, apparently Mr. Foster, circled the name of the attorney on the entry: "HRC."(1472)
This telephone call is among the critical events in illuminating the nature of Mrs. Clinton's work in connection with the fraudulent Castle Grande transaction. The land deal, as noted above, was a sham transaction designed to conceal Madison Guaranty's investment in Castle Grande through its subsidiary, Madison Financial. Mr. Ward was the "straw man" purchaser in the project--one who lends his name to the title, but does not actually have an ownership interest.(1473) In order to conceal the commissions owed to Mr. Ward for his services, Madison Guaranty, Madison Financial, and Mr. Ward executed a three promissory notes purporting to evidence loans but, in fact, were a means to pay Mr. Ward for his commissions. Two of these notes were executed on April 7, 1986.
That same day, Mr. Denton, Madison's loan officer, received a message from Mrs. Clinton.(1474) According to Mr. Denton, Mrs. Clinton called seeking copies of the April 7th notes between Mr. Ward and Madison Financial.(1475) When Mr. Denton cautioned Mrs. Clinton that the April 7th notes from Madison to Mr. Ward may pose a problem because "they constituted in effect a parent entity fulfilling the obligation of a subsidiary,"(1476) Mrs. Clinton "summarily dismissed" Mr. Denton's warning.(1477) She replied in a manner he took to mean that "he would take care of savings and loan matters, and she would take care of legal matters."(1478)
She indeed took care of matters. The Rose Law Firm billing records indicate that, three weeks later, on May 1, 1986, Mrs. Clinton prepared an option agreement between Mr. Ward and Madison Financial.(1479) The word "HRC" in the entry was, as in the April 7th entry, circled apparently by the same hand.(1480) Based on the new evidence derived from Mr. Denton and the billing records, the federal regulator who examined Madison in 1986 believed that Mrs. Clinton's May 1 option "was created `in order to conceal the connection--whatever it was--between'" the March 31 and April 7 notes.(1481)
On June 13, 1996, the Special Committee requested that the First Lady attempt to refresh her recollection regarding the matters discussed by Mr. Denton and to inform the Committee of what she recalls about them.(1482) On June 17, 1996 the Special Committee received an affidavit from Mrs. Clinton accompanied by a letter from Mr. Kendall. In the affidavit, Mrs. Clinton gave no answer to the question posed by the Special Committee; instead, she simply referred to Mr. Kendall's letter "addressing certain allegations recently made by Mr. Don Denton."(1483) In his letter, Mr. Kendall maintained that Mr. Denton's recollection is "wholly unreliable"72 but gave no indication as to the recollection of the First Lady.(1484) The First Lady thus has neither confirmed nor denied Mr. Denton's testimony.
The significance of the billing records as they relate to Castle Grande is perhaps best illustrated by the activities of Mrs. Clinton's legal defense team immediately after the discovery of the records. A message slip from John Tisdale, the Clintons' Arkansas lawyer to Alston Jennings, Seth Ward's former attorney on Castle Grande, indicate that, on June 5, 1996, the day after Ms. Huber discovered the records in her White House office, Mr. Kendall called Mr. Tisdale and Mr. Jennings to arrange a meeting.(1485) One week after the records were discovered, on January 11, 1996, Mr. Kendall flew to Little Rock and met first with Mr. Jennings and then with Mr. Ward.(1486) The meeting with Mr. Ward lasted 30-40 minutes.(1487) Curiously, Mr. Kendall had also contacted Mr. Jennings in August 1995. Subsequent to that contact, Mrs. Clinton summoned Mr. Jennings to the White House for a personal meeting on August 10, 1995, around the time that the billing records were placed in the Book Room of the White House residence.
Mrs. Clinton, as the billing partner and lead attorney for Rose on the matter, most likely would have appreciated the importance of the billing records and the information they impart on Castle Grande. What remains unanswered is how Mr. Foster gained knowledge of the significance of these transaction--sufficient knowledge apparently to highlight the entry on the billing records for Mrs. Clinton's April 7th telephone call with Mr. Denton and for her preparation of the May 1 option. Given that Mr. Foster's directed his handwritten notes on the billing records to Mrs. Clinton, the most reasonable inference is that Mrs. Clinton shared her recollection of the transactions with Mr. Foster, and the two collaborated in reviewing the billing records some time after February 1992. If that is so, then the question arises as to why Mrs. Clinton stated to investigators in 1995 that "I do not believe I knew anything about any of these real estate parcels and projects."(1488)
The billing records, and the evidence from Mr. Denton which the entries on the billing records elicited, indicate that Mrs. Clinton either had knowledge of or consciously avoided the fact that the Castle Grande transactions potentially violated bank regulations. That knowledge provides a powerful motive to protect the billing records from careful scrutiny by investigators. Because Mrs. Clinton had ordered the destruction of other documents relating to Mrs. Clinton's representation of Madison--including her timesheets and other work files directly relating to Castle Grande--the billing records were the only documentary evidence available which reflected the true extent and nature of Mrs. Clinton's role with respect to the fraudulent scheme.
The evidence strongly suggests that Mr. Foster and Mrs. Clinton, at some time after February 1992, worked together to reconstruct Mrs. Clinton's role in Castle Grande. The evidence also indicates that Mr. Foster and Mrs. Clinton appreciated the significance of Mrs. Clinton's April 7 telephone call to Mr. Denton and her preparation of the May 1 option, in the words of a federal regulator, "to conceal" the true nature of the transaction.(1489) Both had a powerful motive to protect the billing records from scrutiny. Mr. Foster is now deceased.
Part II Endnotes