Contempt Page 5

  Practically overnight, this moderate “squish” became a pariah, a Republican pit bull anointed by Senator Jesse Helms to maul the promising career of America’s first baby-boomer president. This imagined conspiracy to scuttle Fiske and install Starr was entirely made up by the Clinton White House. Much of the media ran with the narrative.

  I didn’t give a moment’s thought to resigning. But I was open to at least one entirely fair criticism. Though I had worked on criminal cases, had been a judge, and had argued before the Supreme Court, I had never prosecuted an important white-collar crime investigation.

  How could a neophyte step into the shoes of Robert Fiske, one of America’s premier prosecutors, who had served with great distinction as U.S. Attorney in one of the country’s most high-profile federal districts, which included Wall Street?

  These were entirely reasonable questions. At its core, Whitewater was about bank fraud and related monetary chicanery. Fiske’s expertise was the prosecution of white-collar and financial crimes. Mine was not.

  However, there was precedent for bringing in someone like me. Archibald Cox had been a Harvard labor law professor with no prosecutorial experience. He, however, was lucky to have the despised Nixon as his target. Two of the major subjects of my investigation, in sharp contrast, were President Bill Clinton, the lovable rogue, and his wife, Hillary Clinton, the copresident. Both were lawyers surrounded by smart lawyers.

  The media storm was unpleasant, but I was sure I could weather it, since it would likely be short-lived. Ever the optimist, I anticipated taking six months to wrap things up. From the outside, the Whitewater case looked like nothing more than a failed land deal in Arkansas.

  Not so.

  CHAPTER THREE

  Stepping into Big Shoes

  On the morning of August 9, 1994, I went to Judge Sentelle’s chambers with my briefcase and a carry-on bag. I raised my right hand, placed my left hand on a Bible, and took a solemn oath to support and defend the Constitution of the United States against all enemies, foreign and domestic. The witnesses were few. No family members, no journalists. Just the judge’s staff and the clerk of the Special Division.

  I signed the oath, which made the appointment official, and bade farewell. No photos memorialized the quiet ceremony. The three-judge court spelled out the duties in its order of appointment. Judge Sentelle and his two colleagues did not undertake a rewrite or reset of the investigation. Their order was, in effect, “Carry on.” Fiske was performing well. Keep going.

  Leaving the courthouse out the front entrance, I hailed a cab on Constitution Avenue and headed to the airport. That simple step represented my first action as the new independent counsel. No government drivers, no limos. I was simply off to take on an out-of-town project and get it done professionally.

  With no direct flights to Little Rock, I had to change planes in Memphis. Checking in with my law office from an airport pay phone, I learned that two urgent calls had come in during the first leg of my trip.

  One was from Attorney General Janet Reno, the other from the counsel to the president, Lloyd Cutler.

  Reno was a constitutional officer, nominated by the president and confirmed by the Senate. As a matter of protocol, I called the Attorney General first.

  I had never met her, but I could picture Reno seated in her back office on the fifth floor of Main Justice. I was put straight through and found myself immediately listening to a distinctive voice made familiar to the nation during her own confirmation hearings in March 1993.

  “This is Janet Reno,” she said. “I want to assure you of the full cooperation of the Department of Justice as you go about your work.” Period. Nothing specific, no bill of particulars. All business. I thanked her and was off the line within seconds. I understood her brevity. She could not have been the slightest bit pleased that her able appointee Fiske had been sacked.

  With that tersely stated pledge of DOJ support under my belt, I next called the White House. Once again, in no time at all, I was put through and found myself on the line with Cutler. He was more talkative than the all-business Reno.

  “I wish you well in this new responsibility,” Cutler said. No reference to Fiske, no intimation that I was off base in accepting the assignment. It was lawyer-to-lawyer professional talk. He set forth a happy vision of White House assistance.

  “Ken, I view myself as the counsel to the presidency. David Kendall is the counsel to the president.” He drew a neat distinction, rich in potential meaning. Cutler conceived of his role as institutional, not personal. His task was to protect the presidency and the enduring interests of the Executive Branch of government generally. For personal interests, including any potential criminal liability, the president had to look to his own private lawyer.

  I stated my genuine thanks to Cutler, who I viewed as a great man, and hustled to the nearby Northwest Airlines gate.

  The flight to Little Rock took forty-five minutes. The puddle-jumper flight was entirely uneventful. No press, no curiosity seekers, and right on time. Grabbing my bags, I headed to the cab stand outside the Little Rock airport.

  Fiske had offered to have an FBI agent pick me up. Accepting that suggestion would have been a smart move. I’d made a dumb one instead. I had turned Fiske down, saying that I didn’t want to be a burden. FBI agents should be carrying out their duties, not operating a taxi service.

  I jumped in a cab and was soon zipping past the minor-league Arkansas Travelers baseball stadium. As we drove, I found my resolute calm a bit shaken, increasingly aware of a gnawing feeling that I was entering an unknown new world. I thought of Bob Fiske, too, abruptly removed by the stroke of a judicial pen. He probably would not look kindly on being benched by the Special Division, but I wasn’t worried about how he would treat me, since I knew that Bob was the consummate professional.

  Everything looked modern and well kept as we approached Two Financial Centre, a two-story office building just off the highway on Little Rock’s beautiful west side. But as we pulled into the parking lot, I saw my tactical mistake in not being in the company of an FBI agent. The media frenzy had moved from New Orleans to Little Rock. Somehow, the word got out that the changing of the guard was to occur that afternoon.

  I hadn’t breathed a word. Nor, I was confident, had Judge Sentelle or his staff. But there they were: the soon-to-be-familiar media mob with their cameras and satellite trucks. I made my way as politely as I could through the scrum. All the reporters needed was a brief comment, but I was tone deaf. I could at least have said “I’m glad to be in Little Rock and very much looking forward to meeting with Mr. Fiske.” But I didn’t.

  I smiled, politely brushed off questions, and stayed mum as the cameras flashed and rapid-fire questions were yelled in my direction. Mercifully, one of Fiske’s staff members met me at the front door and whisked me out of the Arkansas heat and immediately into a comfortably air-conditioned office with the venetian blinds closed.

  The offices themselves were nothing fancy. Nondescript government furniture. Virtually no décor or artwork adorning the walls. Family photos on desks represented the only human touches. The implicit message was: “This is all temporary. We’ll be through and then leave ASAP.”

  Trim and athletic with silver hair, sixty-three-year-old Fiske shook my hand. Fiske, whom I knew well, was a Republican first appointed as U.S. Attorney in 1976 by President Gerald Ford, and kept on by President Carter. He had earned his prosecutorial reputation by trying a high-profile labor racketeering case with the help of a young FBI agent, Louis Freeh. That young agent had later been appointed by Bush 41 to serve as a judge on the U.S. District Court for the Southern District of New York. When Clinton appointed Freeh director of the FBI, Freeh fully cooperated with Fiske by providing top-flight FBI agents and analysts.

  Fiske was gracious, with not a scintilla of bitterness or exasperation evident in his greeting. I thought perhaps he was relieved. He
could go home to Connecticut and resume his lucrative law practice.

  Though all business on the surface, in a later memoir Fiske wrote that he was “angry, frustrated, and above all disappointed.” He was close to bringing serious charges against several potential targets. But he was getting hammered by critics in Congress who thought he was moving too slow. That was a bum rap.

  I could understand those feelings, but there was no sign of them on his face then. Fiske wasted no time ruminating about the disruptive effects on the investigation wrought by Judge Sentelle and his colleagues with the unexpected changing of the guard. The briefing was one-on-one for a while, then expanded to include his staff of about ten lawyers.

  The Fiske team was probing, among other things, a fraud-filled Madison Guaranty transaction—what the investigators dubbed the “825 loan”—that appeared to have benefited the Clintons financially. The name given the transaction derived from the loan amount: $825,000.

  A chart displaying the proceeds of the 825 loan was mind-numbingly complex, a financial Rube Goldberg, with arrows pointing in various directions. But the beneficiaries were clear enough, including six figures who would become the hub of the investigation: former municipal judge David Hale, the current governor Jim Guy Tucker, Jim and Susan McDougal, and the Clintons.

  A key portion of the 825 transaction went toward a $300,000 loan to Susan McDougal, doing business as Master Marketing, supposedly to finance marketing efforts, such as a saucy TV ad featuring Susan in shorts astride a stallion, promoting one of the McDougals’ real estate developments. Bank with Madison Guaranty, Susan’s ad suggested, and be part of Little Rock’s cool crowd.

  It seemed that the money had not in fact gone for that ad, though, and that Master Marketing was a phantom company. From that loan, funds had apparently flowed not to Susan’s fictitious marketing enterprise, but to remodel a house, pay personal bills, and repay various loans, including those involving Whitewater Development Corporation, owned partially by the Clintons.

  The evidence was circumstantial but persuasive. It appeared that beneficiaries of the fraudulent Master Marketing loan included the president and the First Lady. The Clintons had denied involvement, though, saying they were simply “passive investors” in Whitewater. They had put up literally no money, but got 50 percent equity ownership. How could that be? I didn’t know, but I could imagine that some fancy economic moves were at play and that there was a chance they were telling the truth.

  Fiske indicated this was the core issue of the “Whitewater investigation”: Did the Clintons knowingly benefit from funds illegally flowing from a failed, federally insured savings and loan? Fiske continued, ticking off various possible crimes committed by others close to the Clintons that had been exposed during the eight months he had been in Arkansas.

  This list was long, and by the time he was done, my mind was reeling. The scope of his investigation was much larger than I had realized, and involved top political leaders in Arkansas and in Washington, D.C. It was a hydra that touched on financial fraud, government corruption, and the political future of the president and First Lady.

  Fiske was moving toward seeking indictments against various defendants. These included:

  Jim and Susan McDougal, the Clintons’ business partners in the Whitewater Development, for fraud relating to the looting of Madison Guaranty.

  Webster Hubbell, for billing fraud and embezzlement of over $300,000 from the Rose Law Firm, where he had worked with Hillary Clinton. He had gone to Washington as Associate Attorney General but resigned in April 1994.

  Arkansas governor Jim Guy Tucker, who had taken over as the state’s chief executive when his predecessor won the presidency, for tax fraud, among other charges.

  Fiske’s key witness was David Hale, the municipal judge turned lender. His company, Capital Management Services (CMS), a federally subsidized lender, worked with Jim McDougal to create the fraudulent 825 loan. Hale claimed that during a meeting at the sales office of Castle Grande, a McDougal real estate project, Bill Clinton pressured him to use a portion of those funds to make the $300,000 loan to Susan McDougal, which would benefit both Clinton and Jim McDougal.

  “My name can’t show up on this,” Bill Clinton allegedly told Hale.

  If Hale’s inflammatory charge was accurate, the current president of the United States would be implicated in a potential felony under federal law.

  The Clintons had denied all Hale’s allegations, painting him as a bitter man who lied to save his own skin. “You know, it’s all a bunch of bull,” Clinton told a reporter for the New York Times in March 1994.

  Fiske had great faith in Hale’s testimony, though. He had thoroughly vetted Hale’s statements about shady financial dealings in the state capital, and in instance after instance, Hale’s information proved accurate. Now, Hale, after pleading guilty along with two codefendants to conspiracy and fraud, had agreed to become a witness against the Clintons, the McDougals, and the others in exchange for consideration on his sentence. In the meantime, he had enough dirt on important people in Arkansas that he was living under protective custody in Louisiana.

  Because Hale had confessed to his own crimes, further documentation was needed for his information to stand up in a court of law. To find that information, Fiske’s team (and their predecessors) had issued approximately four hundred subpoenas for witnesses to testify before a Little Rock grand jury. His investigation in Arkansas was far-reaching and well under way.

  As the sun was setting on that mind-numbing first day, the press melted away outside Two Financial Centre. But my meeting with Fiske and his staff continued into the night. On and on, the “to be investigated” list unfolded, and I was stunned by its breadth. Taking over from Bob Fiske was a tall order.

  Fiske’s sweeping investigative focus—financial chicanery, political fund-raising hijinks, and dubious real estate transactions—was nowhere near my professional sweet spot. I knew federal law and practice issues, but not how to put a commercial real estate deal together, or develop a multistage corporate transaction to launder assets through a fraudulent bankruptcy. I would have to learn.

  As the evening wore on, I stopped taking notes and just tried to absorb it all. I understood two things well: Fiske and his team believed David Hale, who pointed an accusing finger directly at Bill Clinton, and following the leads Hale had provided would take many months, if not years.

  At one point in his briefing, Bob Fiske looked straight at me and said, “Ken, move your family to Little Rock. You’re going to be here for a long time.”

  CHAPTER FOUR

  Changing of the Guard

  Though I grew to love Little Rock, moving my family to Arkansas was a complete nonstarter.

  For our three school-age children, McLean was home. All three Starr kids (Randall, then a sophomore in high school, and his two younger sisters, Carolyn and Cynthia) were lifelong Virginians, enrolled at the rigorous but nurturing Potomac School in McLean. From our house, I could jog to that almost-century-old school through the forests and across creeks or “runs,” which abound in the Old Dominion.

  Alice was thriving in her own rewarding career with one of the largest commercial real estate developers in Northern Virginia. She was also a well-known leader in the community, serving as president of the McLean Chamber of Commerce. Unincorporated, McLean has no separate governance apart from sprawling Fairfax County. Due to the breadth of her community and volunteer activity, however, I dubbed Alice our town’s unofficial “mayor.”

  Home, school, church, dear friends, jogging trails—all were in McLean. We loved it there. Disrupting the children’s lives and Alice’s career because of my “temporary” assignment of unknown length in faraway Arkansas was not in the cards.

  And so the Starr family remained in Northern Virginia. I would commute. In doing so, I took a page from Fiske’s approach. Despite his advice to me, his spouse, Ja
net, had remained at their home in suburban Connecticut. Fiske rented an apartment in Little Rock and commuted from LaGuardia.

  Beginning that August, I flew out of Washington National on Sunday nights and lived in a one-bedroom apartment during the week. It was like being a bachelor again. Reluctantly, I gave up teaching children’s Sunday school and coaching Little League, but in any event, the kids were outgrowing my modest skills.

  I brought the family to Little Rock over the Labor Day weekend and showed them around, kidding that we were all moving to Arkansas. But as much as I tried to maintain a routine, it was difficult to be away from home during the week. I remember talking to one of my children during a bad patch at school. I hung up and thought, “This is really bad that I’m here.”

  Yet despite the difficulties, the trip to Arkansas soon became routine. I flew commercial airlines (coach class) either via Memphis or Cincinnati, then to Little Rock. No government planes or helicopters. And no security. I drove myself in a modest General Services Administration–issued bright red Chevrolet.

  My first goal in Little Rock, besides understanding the general shape of the investigation, was to step into Fiske’s shoes professionally with respect to his personnel. He had assembled a terrific group of lawyers and investigators, and I hoped to lead them well.

  The Fiske team included attorneys taking a sabbatical of sorts from their respective law firms, a few prosecutors detailed from the DOJ, and career federal agents on special assignment to a high-profile financial-crimes investigation, one that implicated both President Clinton and the First Lady.

  When it came to the attorneys, Fiske had created a microcosm of his prestigious law firm, Davis Polk, in New York. Several of his senior attorneys, though still young, came with him from that firm. Others joined the effort from leading law firms on the East Coast, from Boston to Atlanta.