The Special Committee's Whitewater Report

BACKGROUND

The death of any senior U.S. official is sure to be a matter of public concern. But Mr. Foster's death swelled into a substantial controversy because of two additional factors. First, Mr. Foster had a very close and long-standing personal and professional relationship with the President and Mrs. Clinton. As a prominent lawyer in Arkansas and then as Deputy White House Counsel, he provided legal counsel to them on a number of sensitive personal matters. Questions therefore arose as to whether concerns about any of these matters, including the Whitewater and Travelgate affairs, contributed to Mr. Foster's death. Second, senior White House officials, particularly members of the Office of the White House Counsel, took actions in the days following Mr. Foster's death to search and to review the contents of Mr. Foster's office while preventing law enforcement officials from doing the same. These actions raised serious questions about whether, in the wake of Mr. Foster's death, the Office of the White House Counsel was misused to serve the purely personal legal and political interests of the President, the First Lady and their associates.

I. Mr. Foster's Involvement in the Clintons' Personal Matters

Vincent Foster was born on January 15, 1945 in Hope, Arkansas. He attended kindergarten with future President William Jefferson Clinton and future White House Chief of Staff Thomas "Mack" McLarty. Mr. Foster graduated from Hope High School in 1963 and from Davidson College in 1967. Mr. Foster graduated first in his class from the University of Arkansas School of Law in 1971, and passed the bar exam later that year with the highest score in the state. He then joined the Rose Law Firm in Little Rock, Arkansas, and became a full partner two years later, in 1973. Mr. Foster's partners included future First Lady Hillary Rodham Clinton, future Associate Attorney General Webster Hubbell, and future Associate White House Counsel William Kennedy.

Messrs. Foster and Hubbell participated in efforts during the 1992 presidential campaign to control damage arising from the Whitewater matter and, specifically, to Mrs. Clinton's representation of the Madison Guaranty Savings and Loan Association. James and Susan McDougal, the Clinton's partners in the real estate venture at the heart of the Whitewater affair, owned and controlled Madison. On May 28, 1996, James McDougal was convicted of eighteen federal felonies and Susan McDougal was convicted of four federal felonies. These convictions related both to the operations of Madison and the Whitewater real estate investment. During the 1992 campaign, Mr. Hubbell improperly removed from the Rose Law Firm its files concerning its representation of Madison. Messrs. Hubbell and Foster also reviewed Rose Law Firm billing records relating to Rose's representation of Madison.116 These records were found in the White House Residence in August 1995 and finally turned over to investigators in January 1996, more than two years after they were first subpoenaed. The records contain handwritten questions from Mr. Foster to Mrs. Clinton; it is not possible to date when these questions were put to Mrs. Clinton.

In January 1993, President-elect Clinton asked Mr. Foster to become White House Deputy Counsel. Mr. Foster's office on the second floor of the West Wing of the White House was in the same suite as that of White House Counsel Bernard Nussbaum. The Counsel's suite was located right next to the West Wing office suite of the First Lady.

As Deputy Counsel, Mr. Foster worked on many sensitive legal and political matters for the Clintons. In May 1993, Mr. Foster assigned his former law partner, Associate White House Counsel William Kennedy, to investigate allegations of mismanagement and misappropriation of funds in the White House Travel Office. On May 19, 1993, the White House fired seven career employees of the Travel Office. Almost immediately, the White House came under intense criticism for its handling of these firings. According to press reports, less than a month after President Clinton's inauguration, Catherine Cornelius, the President's cousin, wrote a memorandum proposing that the White House dismiss the career employees of the Travel Office and that she run the operation.117 The memorandum cast doubts on the administration's claim that the seven career employees were fired for financial misconduct. In addition, Harry Thomason, a close friend of the Clintons, reportedly had attempted to steer the White House's lucrative charter business to an aviation company that he partly owned.118 Rebuffed by the career employees of the Travel Office, Mr. Thomason reportedly accused them of wrongdoing.119

As public criticism mounted, the White House asked a senior FBI official, John Collingwood, to attend a "political strategy session" with senior presidential advisers on how to deal with the growing scandal.120 On the same day, the White House took the highly unusual step of releasing a confidential FBI statement confirming that the bureau was investigating possible criminal misconduct in the Travel Office.121

Thus, in addition to allegations of cronyism underlying the firing of the career employees, the White House came under fire for misusing the FBI, an independent investigative agency, for its own political ends, a charge that would surface time and again as the White House attempted to contain and manage embarrassing and potentially incriminating information through contacts with federal investigative agencies. Protocols required that White House contacts with the FBI go through the Department of Justice, and "[b]y calling on the FBI to help save the Administration from embarrassment, the White House appeared to be deviating from two decades of efforts to insulate the law-enforcement agency from even the appearance of Presidential manipulation."122 The FBI conducted an internal inquiry into contacts between its agents and the White House, and the White House initiated its own investigation into the matter. On July 2, 1993, the White House released the report of its internal review, which sharply reprimanded Mr. Kennedy and others. Although Mr. Foster was not formally reprimanded, he felt personally responsible for the affair and insisted that Mr. Nussbaum allow him to shoulder the blame.123 Mr. Foster's secretive files on the Travel Office controversy were in his briefcase at the time of Mr. Foster's death, together with a torn-up note purportedly discovered six days later. The note listed Mr. Foster's troubles and concerns, many of which dealt with the Travel Office controversy.

The Travel Office affair apparently weighed heavily on Mr. Foster's mind at the time of his death.124 Many colleagues, confidantes, and friends of Mr. Foster stated to investigators that "the single greatest source of his distress was the criticism he and others within the Counsel's office received following the firing of seven employees from the White House Travel Office."125 However, according to a FBI report of an interview with Susan Thomases, who "got to know Vince Foster fairly well" from her work with the Clinton campaign, transition, and administration,126 "[h]is death came as a complete shock to her and she can offer no reason or speculation as to why he may have taken his life."127 According to the FBI report, Ms. Thomases last saw Mr. Foster on "Wednesday or Thursday before his death," when "they had lunch together with some people in Washington."128

Ms. Thomases has made subsequent statements that contradict the FBI report of her interview. In Blood Sport, an account of the Whitewater affair, author James Stewart reported that Ms. Thomases last saw Mr. Foster on the Wednesday evening before his death.129 Their last meeting was not a public luncheon, as the FBI report recorded, but was at the Mansion on O Street, a private hotel frequented by Ms. Thomases. Ms. Thomases had suggested the location after Mr. Foster asked to speak to her "off the campus."130 According to Blood Sport, Mr. Foster confided in Ms. Thomases during that last meeting, telling her about his personal and professional troubles. Mr. Foster reportedly did not want to "let the president and Hillary down" and, in particular, referred to the Travel Office affair. Mr. Foster reportedly stated to Ms. Thomases that "he didn't trust David Watkins, who he feared might fabricate or embellish the facts to cover himself--possibly at the expense of the first lady."131

When asked about the apparent discrepancy between her FBI statement and her interview with Mr. Stewart, Ms. Thomases told the Committee that she told the FBI agent about her last meeting with Mr. Foster at the Mansion on O Street.132 She offered no explanation as to why the agent failed to record this significant fact. Ms. Thomases admitted that she spoke to Mr. Stewart in connection with Blood Sport, but claimed, "I don't believe that I said that that's what happened with [Mr. Foster] that night. I think [Mr. Stewart] probably put together different pieces of a different conversation."133 Ms. Thomases maintains that her statement to the FBI that "she can offer no reason or speculation as to why he may have taken his life,"134 was correct, because "I still do not feel that I'm ready to speculate on why he took his life."135

During his brief tenure as Deputy White House Counsel, Mr. Foster handled a number of sensitive personal matters for the President and the First Lady--continuing, even though he was now on the public payroll, his Arkansas role as personal lawyer to the Clintons.136 For example, among the files in Mr. Foster's office at the time of his death were the following:

1. Whitewater Development137
2. Clinton Exploratory Committee138
3. Clinton Fund Raiser "Dream Team" Reception139
4. Clinton Physician140
5. Arkansas Home141
6. HRC: Personal & Confidential142
7. HRC: Financial143
8. Clinton Financial Statements144
9. 1992 Income Tax Returns145
10. First Family -- 1993 Income Tax Returns146
11. Clintons: 1992 and 1993 Projected Income Taxes147
12. WJC Passport148
13. Personal -- Clinton Campaign '92 Correspondence149
14. Personal -- Clinton Papers150
15. Personal -- Clinton -- Legal151
16. First Family -- 1994 Income Tax Returns.152
17. First Family -- General153
18. HRC -- CLE/Arkansas Law License154
19. First Couple -- Blind Trust155
20. First Family -- Arkansas Home156

Perhaps the most sensitive matter that Mr. Foster handled for the Clintons concerned their investment in Whitewater. In 1978, the Clintons and James and Susan McDougal jointly purchased 233 acres in the Arkansas Ozarks. Neither the Clintons nor the McDougals contributed any equity into the purchase. Instead, Jim McDougal and Bill Clinton, then Attorney General and the Governor-elect of Arkansas, borrowed $20,000 from Union National Bank. Mr. McDougal's loan officer at Union National Bank, Harry Denton, would later become the chief lending officer at Mr. McDougal's Madison Guaranty S&L. The rest of the purchase money was financed by a mortgage of $182,611.20 from Citizens Bank of Flippin, a loan in which Union National Bank took a 50 percent participation.

In June 1979, the Clintons and McDougals formed Whitewater Development Company, Inc. ("Whitewater") and eventually transferred ownership of the land to the new corporation. The Clintons and McDougals intended to subdivide the property into lots for sale as vacation property. Slow sales at lower than anticipated prices, however, resulted in a cumulative loss of $193,189 for Whitewater by the end of 1986. Although the McDougals and the Clintons purportedly were equal partners in the project, their contributions to the company to cover its losses were greatly disproportionate. Of the $194,493 that the shareholders contributed to Whitewater, the McDougals and their companies contributed $158,523, while the Clintons advanced only $35,970.

When Bill Clinton ran for President in 1992, the Whitewater investment and his relationship with James McDougal became a source of political embarrassment. Over the years, the Clintons took a series of questionable deductions on their federal income tax returns related to their investment in Whitewater.(157) And, in March 1989, federal regulators closed Madison Guaranty S&L. Madison's insolvency ultimately cost federal taxpayers over $60 million.(158)

On March 8, 1992, the front page of the New York Times carried this headline: "Clintons Joined S&L Operator In An Ozark Real-Estate Venture." The article, written by Jeff Gerth, reported the ties between the Clintons and the McDougals, focusing attention on their investment in Whitewater and the questionable tax deductions taken by the Clintons in 1984 and 1985. The Times report suggested that Whitewater may have been used as a conduit to funnel money to the Clintons or to Bill Clinton's political campaigns.

Ms. Thomases played a key role in responding to the Times inquiries about Whitewater. She and Loretta Lynch, another attorney working for the Clinton campaign, gathered information relating to Whitewater and, specifically, to Mrs. Clinton's representation of McDougal's Madison Guaranty before state regulators.

Mr. Hubbell and Mr. Foster compiled information from the Rose Law Firm to help the response effort. 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."(159)

Indeed, in notes taken during the 1992 campaign, Susan Thomases recorded a February 24, 1993 conversation with Webster Hubbell about the Rose Law Firm's representation of Madison. According to the 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 Jim McDougal, Madison President John Latham, and Rick Massey, then a junior associate at the firm.(160) The notes also indicated that Mrs. Clinton had reviewed some documents and that she had one telephone conversation with Beverly Bassett Schaffer in April 1985.(161) Ms. Thomases recorded in the margin of her notes at this point: "Acc. to time Rec." She testified that "[t]his is my notation for according to time records,"(162) which is what Mr. Hubbell had indicated to her.(163) Ms. Lynch confirmed that Mr. Hubbell reviewed timesheets and billing records relating to the Rose Law Firm's representation of Madison.(164)

The billing records mysteriously disappeared after the 1992 campaign. Despite four subpoenas from separate federal investigations for over two years, the billing records were not disclosed until they were "discovered" in the third floor of the White House Residence, next to Mrs. Clinton's office in the private quarters.

Eventually, the Clinton campaign released a report on the Whitewater investment authored by James Lyons, a Colorado attorney retained by the campaign. The Lyon's report stated that, rather than gaining an illicit profit from their association with Mr. McDougal, the Clintons actually lost $68,900 on their investment in Whitewater. Mr. Lyons apparently prepared two versions of his report. In a confidential letter to the Clintons on April 10, 1992, he enclosed a "complete report" on Whitewater by Patten, McCarthy & Associates, an accounting firm he had retained to study Whitewater. Mr. Lyons wrote:

Please note the enclosed complete report discusses such things as the $9,000 interest deduction taken by you in 1980 (paragraph 4, page 5), lot 13 and -borrowings associated with it (paragraph 5, page 5), and the sale of 24 lots in 1985 to Ozark Air for assumption of the mortgage and an airplane (paragraph 6, page 6). None of these items is set out in the summary report which was released to the press.(165) Mr. Lyons advised the Clintons that there are only three copies of the complete report, and wrote that "it is my recommendation to you that you maintain the complete report in strictest confidence and do not waive either the attorney/client or accountant/client privilege which attaches to the enclosed report."(166) Mr. Foster assisted Mr. Lyons in preparing the report.(167)

The Lyons report temporarily quelled the media interest in the Whitewater story, but Clinton advisors remained worried over legal and political implications of this investment. Among the documents in Mr. Foster's office at the time of his death was his handwritten note: "Get out of White Water."(168) To that end, Mr. Foster, Mr. Hubbell and others in the Clinton organization met with Mr. Lyons on November 24, 1992, two weeks after Mr. Clinton was elected President.(169)

The point man for the Clinton team in this effort was James Blair, General Counsel of Tyson Foods and a longtime friend and advisor to the Clintons. Mr. Blair had also known Mr. McDougal for over 30 years and had contacted Mr. McDougal in early 1992 when questions arose about Whitewater.(170) Mr. Blair called Mr. McDougal's attorney, Sam Heuer, and told him that "the Clintons and the McDougals needed to be totally separated over the Whitewater thing."(171) According to Mr. Blair, he suggested that Mr. McDougal pay a nominal amount to buy the Clintons' interest in Whitewater.(172) "I think we settled on a thousand dollars as an appropriate nominal amount."(173) There was one problem: "McDougal doesn't have a thousand dollars."(174) Mr. Blair then told Mr. Heuer, "[W]ell, what the heck, I will loan him the thousand dollars. I'll just Fed Ex you a check to your trust account. And I believe that's what I did."(175) Mr. McDougal has never repaid Mr. Blair.(176)

On December 22, 1993, Mr. McDougal and the Clintons executed the transaction to get the Clintons out of Whitewater. Mr. Blair then assigned Mr. Foster the task of contacting the accountants and preparing the Clintons' tax returns.(177) The issue facing Mr. Foster in the months preceding his death was how to treat the $1000 sale on the Clintons' 1992 tax returns. The basic dilemma stemmed from the Clintons' claim, bolstered by the publicly released Lyons report, that they had incurred significant losses on their investment in Whitewater. The problem with declaring the loss on the Clintons' tax return was the lack of a proper basis with which to calculate the cost of the venture to the Clintons. Despite their claim that they were 50% partners in the venture, the Clintons had contributed less than 25% of the funds used to cover Whitewater's losses.

Among the documents in Mr. Foster's office at the time of death were his notes of conversations with the Clintons' accountant, Yoly Redden.(178) The notes, in Mr. Foster's hand, identified the tax problem as a "can of worms you shouldn't open."(179) His notes in the file outlined the basic tax issues the Clintons faced in connection with Whitewater:

"1)

What was nature of deductions

A. How deduct interest/principal payments for corp.?

2)

Can you use contribution which predated incorporation?

3)

Contribution/advancements of $68,900 to the McD

4)

Inability to utilize $8000 capital loss"(180) Mr. Foster's objective was to avoid calling attention to Whitewater during the annual audit of the President and Mrs. Clinton's tax returns by the Internal Revenue Service audit.(181) One approach was simply to report a wash, that is, to show no loss and no gain from the venture, thereby obviating the need for any tax treatment. The problem with such treatment, however, was that it would have bolstered the allegation that the Clintons were insulated from Whitewater losses and thus the company was a vehicle for Mr. McDougal to channel funds to the Clintons. In notes titled "Discussion Points," Mr. Foster wrote:

1)

An argument that they were protected against loss:

A) wash is consistent with this theory(182) But Mr. Foster did not a have a proper cost basis with which to calculate the Clintons' true losses or gains. His discussion points continued:

2)

Improper to reduce basis by improper tax benefit

3)

Computation of economic loss was based, in part, on assumptions

Whereas computation of tax gain or loss must be defensible in audit.(183)

Therein lay the problem. To claim a loss based on economic assumptions, as the Lyons' report did, was one thing.1 But to claim a loss on the Clintons' 1992 tax returns without proper support and documentation increased the likelihood of calling attention to Whitewater during the IRS audit--of opening the can of worms that Mr. Foster and the Clintons' accountant wished to keep sealed.(184) Mr. Foster's notes summarized the options as follows:

"10

Options

$1000 basis

so no tax effect

but is arbitrary & still risks audit

vs

0 basis w/ $1000 gain

avoids any audit of issue"(185) In a letter to Mr. Foster days before the tax returns were due, Ms. Redden, the accountant the Clintons hired to handle Whitewater tax issues, wrote: "Because of the numerous problems with Whitewater records and the commingling of funds with other companies and individuals, I believe many explanations may have to be made if we claim a loss."(186) This letter, addressed to Mr. Foster, was not among the documents in Mr. Foster's office that the White House produced to the Special Committee. It was obtained by the Special Committee through another source.(187) Ms. Redden testified that after the Clintons were in the White House she had a number of discussions with Mr. Foster concerning tax issues related to Whitewater.(188) The main focus of these numerous communications was the tax basis for the Clintons' contributions to Whitewater and how to treat the $1000 payment.(189)

The Clintons' final tax returns for 1992 reported a capital gain of $1000 from the sale of stock to Mr. McDougal.(190) According to Ms. Redden, "I think we need to claim no gain or a loss."(191) Mr. Foster did not follow her advice, however, because he was also consulting with another accountant, and "[a]t the end we compromised what we were going to put in the return in connection with Whitewater."(192)

For reasons unknown, on June 16, 1993, Mr. McDougal called Mr. Foster at the White House. Unable to reach Mr. Foster, he left a message with his secretary: "re tax returns of HRC, VWF and McDougal."(193) It is unclear whether Mr. Foster returned Mr. McDougal's telephone call, and it is unclear why Mr. McDougal contacted Mr. Foster about Mr. Foster's tax returns.

Mr. Foster also worked with Ricki Seidman, then Deputy Assistant to the President and Deputy Director of Communications, on the Whitewater matter in the first half of 1993. In June 1994, Ms. Seidman told the FBI the following about her relationship with Mr. Foster and her involvement in Whitewater:

Seidman was asked about FOSTER's involvement with Whitewater. She said the only Whitewater issue she could recall was in April, 1993 in connection with the CLINTONs tax returns. The tax returns show that the CLINTONs had divested themselves of their interest in Whitewater. SEIDMAN's involvement was from a "communications perspective". The Whitewater issue had surfaced during the campaign, interest had then ended, and it was believed the tax returns would bring the Whitewater issue into the "public domain again". SEIDMAN said there was discussion regarding the "soundest way" to seek closure to the issue. The options considered were (1) declare a loss; (2) declare an even split; and (3) declare the Clintons received a $1000 gain. SEIDMAN said she and FOSTER were discussing these options. She remembered attending meetings at WILLIAMS and CONNOLY [sic] on the issue.(194)

The Clintons' Whitewater investment created other problems that occupied Mr. Foster's time as Deputy White House Counsel. Among the documents found in Mr. Foster's office following his death were campaign disclosure forms, required by law, accounting the personal finances of the Clintons and of their campaign organization.(195) On January 10, 1992, the Clinton for President campaign filed a disclosure form that failed to disclose that the Clintons had personally guaranteed a loan to the Whitewater Development Corporation.(196) Yoly Redden, the Clintons' accountant, testified that she assisted the campaign in preparing the disclosure statements.(197) According to Ms. Redden, there were discussions about the Clintons' Whitewater investment, and a decision was made to omit it from the statements. "We were told, it was our understanding that the Whitewater investment was worthless, they were not going to get anything out of it at that point in time."(198)

On April 6, 1992, after the New York Times article detailing the Clintons' Whitewater investment, the campaign revised the statement to disclose the Clintons' personal liability for the Whitewater loan.(199) The revision, however, did not deal with the more troublesome issue concerning disclosure: how to treat the McDougals' disproportionate share of Whitewater losses? By assuming more than 50 percent of Whitewater losses, the McDougals had in effect given money to the Clintons, their supposed equal partners in Whitewater. This transfer could be treated as a gift, a loan, or income. Although the Clintons would incur a tax liability only if the transfer was considered income, campaign laws required disclosure of all three categories, a requirement that had not been met with respect to the McDougals' contributions to Whitewater. At one point, Mr. Foster complained to his friend and the Clintons' confidant, Susan Thomases, about the poor condition of the Clintons' Whitewater records.(200)

Mr. Foster was working on another matter involving the Clintons' financial investments in the months and days preceding his death. On June 18, 1993, USA Today published an article on Hillary Clinton's investment in a limited partnership named Value Partners, managed by Smith Capital Management of Little Rock, Arkansas.(201) The article noted the success of the investment for Mrs. Clinton, but erroneously reported that Mrs. Clinton's "investments are now held in a blind trust."(202) A copy of the article was found in Mr. Foster's office following his death. Mr. Foster personally circled two places where the article asserted that Mrs. Clinton's assets had been placed in a blind trust. He sent copies of the article to Lisa Caputo, Mrs. Clinton's press secretary, Ricki Seidman, White House Deputy Communications Director,2 and Margaret Williams, Mrs. Clinton's Chief of Staff. His handwritten comments identified a problem: "The assets are not yet in a blind trust. The document has been approved but is not signed yet, pending working out some details."(203) The article apparently bothered Mr. Foster enough to prompt him to complain immediately to Bill Smith, the head of Smith Capital Management. Smith replied apologetically that his company does not talk to the press about the First Lady's investment, "particularly during the recent flurry of articles and interviews regarding the holdings of health care stocks in Value Partners."(204)

The "flurry of articles" concerned the strategy of Value Partners to profit by selling stocks "short." A short-seller borrows stocks from his broker to sell at current market price, anticipating that the value of the stock will fall. When the price does fall, the short-seller buys the lower-priced stock to return to his broker, profiting from the difference in price. On May 31, 1993, the Wall Street Journal disclosed that Value Partners actively sold short several health care stocks.(205) At this time, Mrs. Clinton was directing the administration's efforts to reform the nation's health care system. The Administration's proposal depressed the value of health care stocks.3 Value Partners was structured as a limited partnership, and no evidence exists that Mrs. Clinton directed or reviewed the fund's investment decisions. However, Mrs. Clinton's investment amounted to nearly $100,000 in a fund that dedicated 13% of its $1.3 million portfolio to short positions in health care stocks.(206) Mrs. Clinton thus came under media criticism for personally benefiting from her high-profile public campaign.

In addition to an appearance of impropriety, the investment in Value Partner posed a potential legal problem. Title 18, Section 208 of the United States Code exposes an executive officer or employee to felony liability for participating "personally and substantially" in a "particular matter" in which he is aware of a financial interest. Mr. Foster apparently had advised Mrs. Clinton that she need not be concerned by this criminal statute because she was not an officer or employee of the executive branch.(207) In reaching this conclusion, Mr. Foster apparently did not consult with the Office of Legal Counsel of the Department of Justice, and ignored a contrary opinion issued by that office 17 years earlier.(208)

Mr. Foster's conclusion that the First Lady was not covered by government ethics laws also conflicted with the position of the White House in Association of American Physicians and Surgeons v. Clinton.(209) That litigation sought to compel the White House to release the documents and deliberations of Mrs. Clinton's health care task force. The Federal Advisory Committee Act ("FACA") compels such public disclosure if a government agency, like the health care task force, consults advisers who are not government employees.(210) The plaintiffs alleged that Mrs. Clinton is such a nongovernmental adviser and thus the records of the task force were covered by FACA. In order to avoid disclosure, the White House argued that Mrs. Clinton was indeed a federal official and therefore FACA did not apply to the task force. The United States Court of Appeals for the D.C. Circuit agreed with the White House. Recognizing the potential spillover effect of the holding, however, the court cautioned in a footnote: "We do not need to consider whether Mrs. Clinton's presence on the Task Force violates . . . any conflict of interest statutes."(211)

The matter apparently weighed heavily in Mr. Foster's mind. The Wall Street Journal, in a series of editorials, criticized Mr. Foster for his role with respect to the Health Care Task Force.(212) Mr. Foster complained to James Lyons, a Foster friend and former legal adviser to the Clinton campaign, that "the press had been particular vicious in their attacks on members of the Rose Law Firm."(213) In particular, Mr. Foster complained about criticisms for his handling of the Association of American Physicians and Surgeons v. Clinton litigation.(214) Mr. Lyons told the FBI in an interview:

FOSTER won a victory for the Task Force (and by association, for HILLARY RODHAM CLINTON) on that matter and the Wall Street Journal accused him of "sharp tactics". LYONS advised that the allegation really bothered Foster.(215) In the note apparently discovered in Mr. Foster's briefcase six days after his death, Mr. Foster wrote, "The Wall Street Journal editors lie without consequence."(216)

Just before his suicide, Mr. Foster concentrated on finalizing plans to place the First Family's investments in a blind trust, which would have remedied the ethical and legal problems posed by the Value Partners investment. In Mr. Foster's papers was a facsimile from Brantly Buck, a partner of the Rose Law Firm, who had been retained to assist in the creation of the blind trust. The facsimile, dated July 19, 1993, the day before Mr. Foster's suicide, forwarded draft statements of financial objectives for the blind trust. White House phone records indicated that Mr. Buck called Mr. Foster twice on the morning of his suicide.(217)

Mr. Foster's phone log also showed that he received a call from James Lyons, the author of the Whitewater report for the Clinton campaign, at 11:11 a.m. on July 20, 1993, the morning of Mr. Foster's death.(218) When contacted by the Park Police, Mr. Lyons said that he had spoken with Mr. Foster on July 18, and they had agreed to meet for dinner on July 21. According to a Park Police report, "Lyons had told Foster he would call him and let him know when he would leave Denver and arrive in Washington. This is the reason for the phone message on the morning of July 20, 1993."(219) In a later interview with the FBI, Mr. Lyons provided more detail into his scheduled dinner with Mr. Foster. Mr. Foster was very concerned about the Travelgate affair and regarded himself and Bill Kennedy as potential witnesses in the matter. According to the FBI report, Mr. Foster "felt strongly that White House should hire outside counsel to be handling the Travelgate matter for this reason. He also believed that he would be needing a personal attorney to represent him in the matter."(220) It was to seek personal representation that Mr. Foster purportedly scheduled dinner with Mr. Lyons. Mr. Foster, however, also complained to Mr. Lyons about the extent to which he and other members of the Counsel's office were handling personal matters for the Clintons:

FOSTER believed that private sector attorneys should be handling many of the matters they [White House Counsel's office] were handling, both for ethical and workload reasons. The CLINTON administration had called for a 25 percent cut. Under the BUSH administration the Counsel's office had 18 to 20 lawyers at its peak and when CLINTON took office there were only 6 or 7.4 There were many discussions about the composition and character of the associates in the Counsel's office and everybody was spread incredibly thin.(221)

Linda Tripp, Mr. Nussbaum's executive assistant, testified that she approached Mr. Nussbaum and questioned him, based on her experience in the previous administration, about the inordinate amount of time that Mr. Foster seemed to spend on the Clintons' personal matters. Ms. Tripp believed that Mr. Foster worked mostly on personal matters for the Clintons. According to Ms. Tripp, "I questioned the role of the deputy counsel in the Clinton Administration as opposed to what I had perceived it to be in the Bush Administration."(222) Indeed, C. Boyden Gray, President Bush's White House Counsel testified that, under President Bush, "[p]ersonal, what I would call personal work, taxes, blind trusts, problems involving his residence, his house in Maine, for example, those matters would be handled by his private counsel. How to deal with the book royalties from Mrs. Bush's book, for example; they would be handled by his personal lawyer."(223) When asked why, Gray explained that "I don't think the taxpayers should pay for personal matters, I suppose, is the short way to answer it."(224)

II. The Traditional Independence of the White House Counsel's Office

The Office of the White House Counsel originated from presidential custom. The Reorganization Act of 1939,(225) which authorized the modern White House staff, did not mention a legal adviser to the President. The first such legal adviser came to the White House under President Franklin Delano Roosevelt. When Roosevelt was governor of New York, he had a close personal adviser in Samuel Rosenman, who held the title of "Counsel to the Governor."(226) Upon his election as President, Roosevelt prevailed on Mr. Rosenman, then a judge on New York's highest court, to join his staff. President Roosevelt wanted to give Mr. Rosenman the title of "Counsel to the President," the Washington equivalent of his title in Albany. However, Attorney General Francis Biddle objected, "`on the grounds that such a title would undercut the role of the Attorney General as the President's chief legal adviser.'"(227) Consequently, Mr. Rosenman was given the title of "Special Counsel to the President."

Despite its origins in the personal, rather than institutional, needs of the President, the Counsel's office has become firmly established within the White House.(228) The role of this office has varied from administration to administration. Mr. Rosenman, consistent with the practice in Albany, served not just as President Roosevelt's legal counselor, but as one of his key advisers. He was the principal speech writer and spent most of his time drafting the President's public statements--a task for which he recruited Clark Clifford as his assistant.

Mr. Clifford continued the tradition as special counsel to President Truman. He later recounted that his job was to do "[w]hatever the President wanted." Mr. Clifford saw his role "as an adviser or counselor, and not as an administrator or bureaucrat."(229) His advice to President Truman was not strictly legal, but often political. Secretary of State Marshall complained to President Truman about Mr. Clifford's participation in White House discussions on U.S policy toward Palestine: "I fear that the only reason Clifford is here is that he is pressing a political consideration with regard to this issue. I don't think politics should play any part in this."(230)

Similarly, Theodore Sorenson, special counsel to President Kennedy, and Harry McPherson, special counsel to President Johnson, were among the principal policy and political advisers to each president. Both participated fully in the major deliberations of their administrations. In 1985, when organizers of a conference of presidential chiefs of staff discovered that no such position existed in the White House under Presidents Kennedy and Johnson, they invited the two advisers who most closely approximated that role, Mr. Sorenson and Mr. McPherson.(231) Myer Feldman held the post, with the title of "Counsel to the President," for one year between Mr. Sorenson and Mr. McPherson. For reasons unknown, Mr. McPherson retained the old title of Special Counsel. When Richard Nixon became President, he appointed John Ehrlichman as "Counsel to the President." A year later, however, the title was discarded again and three top advisers--Murray Chotiner, Harry Dent, and Charles Colson--held the title of "Special Counsel" simultaneously.

In 1971, President Nixon appointed John Dean as White House Counsel and relied on Mr. Dean primarily for legal advice on particular matters. While Lloyd Cutler, President Carter's White House Counsel, noted that his job primarily concerned the legal aspects of matters that came to the President's attention,(232) he also played a "Clark Clifford role" in the White House.(233) That means that "I can dispense advice and get involved in any question that interests me."(234) Even with Mr. Cutler, however, it was clear that the modern White House counsel was no longer the equivalent of the chief of staff, as Mr. Sorensen was under President Kennedy. In the Reagan White House, each of the three successive counsels--Fred Fielding, Peter Wallison, and A.B. Culvahouse--reported to the President's respective chiefs of staff--James Baker, Donald Regan, and Howard Baker. Although C. Boyden Gray reportedly enjoyed special influence in the Bush White House stemming from his long-standing relationship with the President, he generally viewed himself not as a political adviser, but as counsel on legal problems.(235)

Against this historical background, President Clinton appointed Bernard Nussbaum to head the Counsel's office. In addition to being Counsel, Mr. Nussbaum held the honorific "Assistant to the President," a title not given to any previous holder of the office. Mr. Nussbaum had worked with Mrs. Clinton--he as the senior lawyer, she as a young law school graduate--on the staff of the House Judiciary Committee Impeachment Inquiry, the Watergate Committee.(236) By his own account, Mr. Nussbaum was among the President's inner circle of advisers and enjoyed free access to the President. "I see the President any time I think it's reasonably necessary. Unfortunately, it's been necessary too many times."(237)

Mr. Nussbaum's background as a private lawyer defined where his loyalty laid as White House Counsel. "When you're down to one client--the President--the only thing that counts is your relationship with that client."(238)5 When Mr. Nussbaum resigned from his office, he wrote to the President:

As I know you know, from the day I became Counsel, my sole objective was to serve you well as effectively as I could, consistent with the rules of law, standards of ethics, and the highest traditions of the Bar. . . . Unfortunately, as a result of controversy generated by those who do not understand, nor wish to understand the role and obligations of a lawyer, even one active as White House Counsel, I now believe I can best serve you by returning to private life.(239) Mr. Nussbaum has explained elsewhere that "[t]he principal source of that misunderstanding, I think, is the failure to appreciate . . . that fact that the president's lawyer is a lawyer, and that every lawyer--even one representing the president in his official capacity--has an obligation to represent his client faithfully and zealously."(240) Those who criticized his conduct in office "have it exactly backward: The problem is not that lawyers who are in the public arena are too zealous in representing their clients; it is that they--and others in the public arena--are often not zealous enough, because of a fear of appearances, of negative publicity and, consequently, of unpopularity, of loss of position."(241)

Whether or not Mr. Nussbaum is correct in his ethical vision or his assessment of the public interest, the mandate of Resolution 120 requires the Special Committee to answer a more immediate question: whether, in their zeal to serve and protect their clients, President and Mrs. Clinton, Mr. Nussbaum and other White House officials engaged in any improper conduct in handling the papers in Mr. Foster's office following his death.


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