Contempt Page 9

  Despite energetic efforts, we were unable to identify any meaningful services actually performed by Webb as the lawyer-consultant for these far-flung clients. Yet he was suddenly making much more money than he ever had as a senior lawyer at the Rose Law Firm.

  This pattern—generous payments made at the behest of the White House for amorphous professional services of dubious value—raised the obvious question: Was this hush money?

  It certainly appeared to be. I felt snookered when we learned the requests to retain Webb, with lofty fees paid in full up front, had come from the White House, not Arkansas friends and supporters. Our growing suspicions were confirmed by the damning content of transcripts of conversations recorded at Webb’s minimum-security prison in Cumberland, Maryland—standard operating procedure in federal prison.

  Conversations between Webb and his wife, Suzy, revealed an understanding that Webb was to keep silent about whatever he knew. At one juncture, Webb remarked, “I guess I need to roll over one more time.”

  Some of Suzy’s comments reflected concern for the security of her own job within the Clinton administration. Suzy was getting a “royal squeeze play” from “Marsha,” someone Webb clearly knew. The inescapable conclusion: the Hubbells were protecting the Clintons.

  We later learned Webb hid his windfall from the IRS. I was taken aback by his stupidity. Webb had a deep stubborn streak of basic dishonesty that kept manifesting itself in baffling ways.

  We eventually launched a second investigation of Hubbell and found enough evidence to go before the grand jury in Washington. I petitioned Reno for authorization. She agreed we should move forward, and if the evidence was convincing, prosecute Hubbell for tax evasion. Webb Hubbell became the Waldo of our work, popping up time and again.

  CHAPTER EIGHT

  Follow the Money

  Our first major trial, scheduled for early 1996, would cover the complex $825,000 loan. Though the press called it the Whitewater trial, we called it the 825 case, focusing on the dirty dealings that also involved the Whitewater land deal.

  Here’s a short version of how 825 worked: Thanks to fraudulently inflated appraisals, Madison Guaranty, owned by Jim and Susan McDougal, made a loan for $825,000 to a man named Dean Paul, a nominee or straw borrower. Paul then “purchased” properties controlled by Hale, adding a phantom “profit” of $500,000, which Hale put into his company, CMS. This allowed CMS to get $1.5 million in additional funds. After his chief lending officer expressed concern that it might not get paid back, McDougal told him, “Stop questioning the loan and put it together.”

  Hale’s company then made four fraudulent loans to McDougall’s designees, one an entity owned by Tucker. None of the loan proceeds were used for the purposes stated. One tranche of $300,000 went to Susan McDougal.

  Hale insisted that Bill Clinton had urged him to make the loan to Susan, to be used in part to bail out the Whitewater project. So far, investigators had been unable to find corroborating documentation.

  Slowly the 825 case wended its way through the labyrinth of investigation and into the judicial system in Little Rock. The McDougals and Tucker were charged with financial fraud and conspiracy on August 18, 1995, in a twenty-one-count indictment.

  We knew that the 825 trial would make or break other investigations in the pipeline. But would a Little Rock jury, even if convinced of the crimes beyond a reasonable doubt, be willing to convict, knowing their verdicts would ruin the political career of Tucker and possibly send the Clintons’ friends to prison? And what would felony convictions mean in terms of getting to the truth of the role, if any, that Bill and Hillary Clinton played in Madison Guaranty and the fraud-infected financing of the Whitewater project?

  To have a shot at success, we needed a level playing field. Other than the strength of the underlying case, that depended more than any other factor upon the judge we drew. In my experience, bad judges are rare in the federal system. Unfortunately, Judge Henry Woods, who had been an overnight guest of the Clintons at the White House, was one of them. A Carter appointee, he did not leave his politics at the courthouse door.

  As a result of Woods’s unprofessional behavior, our investigation suffered significant delays. On September 6, 1995, the judge dismissed our grand jury’s first indictment—against Tucker, his lawyer, and his business partner—on grounds that the OIC lacked authority under the Special Division’s order to bring the prosecution.

  He was dead wrong. We appealed to the Eighth Circuit Court of Appeals in St. Louis, but that took precious time and significant resources. Many months later, the court reversed Judge Woods’s ruling in a severe appellate spanking, and ordered him off the case. To my relief, the case was then reassigned to Judge Stephen Reasoner.

  The 825 case was assigned to a judge of integrity, Judge George Howard Jr. A Democrat and a Carter appointee, Judge Howard couldn’t be dismissed by Clinton and Tucker partisans as a biased Republican in judicial robes. The former civil rights lawyer emerged as a sensitive, caring jurist admirably humble about his considerable power. He reminded me of the sage advice given to new federal judges by a more experienced colleague: “Remember, you were appointed, not anointed.”

  Based upon our painstaking development of the evidence, we believed that our case against Tucker and both McDougals was airtight. Hale would testify at trial, as would a land appraiser who had entered a guilty plea and was cooperating with our prosecutors. But we knew their testimony would be assailed on cross-examination by defense attorneys.

  “Why should the jury believe your testimony? You have admitted committing serious crimes, haven’t you?” That line of attack was fair game. How would our linchpin Hale hold up?

  So our case had to be grounded on financial documents, introduced to the jury by FBI special agents who specialized in financial fraud investigations. Unless they’re doctored up, documents don’t lie. Ours were pristine.

  Especially damning were the bank records on the loan to Susan McDougal, showing that she’d used a portion of the funds to pay personal expenses, such as tennis club dues, and to redecorate her home. We believed everyone on the jury would understand that kind of theft.

  As part of our investigation leading up to the indictments, for the sake of completeness we needed to take the statements of both Clintons.

  As an accommodation to the president and the First Lady, we reached the judgment—in consultation with Sam Dash—that the Clintons should not be required to travel to Little Rock to appear before the grand jury. We would interview them in the White House, and as a courtesy would allow their lawyers to be present. This represented a radical departure from customary grand jury practice, because attorneys are not allowed in the federal grand jury room. (Witnesses can excuse themselves and go outside the room to consult their counsel.)

  That set up our team’s first visit to the White House in April 1995. I was curious to see how Bill and Hillary handled scrutiny under pressure. Bill had long decried the investigation as a witch hunt. Could his testimony save his friends?

  CHAPTER NINE

  White House Depositions

  I swear to tell the truth, the whole truth, and nothing but the truth, so help me God.”

  President Clinton removed his hand from the Bible and sat down in a chair in the Treaty Room of the White House. The OIC team present for the April 22, 1995, deposition consisted of me, Hickman, Mark Tuohey, and Bill Duffey. Several of Clinton’s lawyers, led by David Kendall, were there. We’d agreed in advance that the questions would be limited to Whitewater and Hillary’s representation of Madison Guaranty; questions on other subjects would be left for another time.

  We had first scheduled the depositions for the following day, a Sunday. But the bombing of the federal courthouse in Oklahoma City had occurred the previous Tuesday. Citing the somber mood and the president’s need to fly to OKC on Sunday, Kendall had asked us to switch the deposition to Saturday.


  Bill Clinton entered with a subdued look on his face; he had just spoken on television about the bombing.

  Jim McDougal wasn’t cooperating with us, but he had given an interview to a newspaper describing the day when the sweaty governor had jogged from the Governor’s Mansion to his office and asked McDougal to throw some work Hillary’s way.

  Hickman asked him about the “jogging incident.” We expected him to say it didn’t happen, since he’d denied it during the campaign in writing.

  “You know, Mr. Ewing,” Clinton said, sounding thoughtful, “I’ve read that. But I just can’t remember.”

  Hickman later told me that’s when he knew the president “was a lying dog.”

  In claiming he could not remember, Clinton stepped over the line and, in our view, may have committed perjury. It defied credulity that the president would not remember such an unusual episode. This was no ordinary meeting in the state capital. This was a targeted outreach on behalf of Hillary’s law practice.

  Predictably, the president not only denied any wrongdoing, he denied any knowledge of the financial transactions involving Whitewater. He claimed he was simply a “passive” investor, as was Hillary.

  Clinton also denied receiving any financial gain whatsoever from Madison Guaranty. We already knew that a fund-raiser at Madison Guaranty had raised thirty thousand dollars for Clinton in one night, and that Jim McDougal had funneled cash through his employees and other political pals to Clinton’s campaign.

  We looked ahead with a sense of foreboding. The Clintons would likely be afflicted by purportedly poor memories in all matters related to Whitewater. Our fears were justified. OIC lawyers would eventually question Bill Clinton at the White House five times: twice in 1995, twice in 1996, and once in 1998. Each time, as we saw it, he gave deliberately misleading testimony.

  As the deposition ended, the president was all smiles, shaking everyone’s hand before he left. Then Hillary arrived. She made no effort to be cordial.

  Several minutes into the questioning by Hickman, there was a knock on the door of the Treaty Room. In walked a Filipino Navy steward. He said something quietly to Kendall. Hillary crossed her arms and looked down, her lips tightened in anger. The steward walked over to a closet, removed the president’s golf clubs, and walked out.

  We all sat in silence for a few moments. The president, despite the somber mood of the country, was going to play golf. That was his business, of course, but the moment was awkward.

  As the deposition continued, Hillary repeatedly said, “I don’t know” and “I can’t recall.” She and Bill had entrusted everything about Whitewater to Jim McDougal, though they were jointly liable for the loan. And she denied bringing Madison Guaranty into the Rose Law Firm; a junior associate named Rick Massey had. She performed virtually no work for the thrift.

  We were fumbling in the dark because the Rose Law Firm documents were missing; we had only a few internal memos. Suspecting she was involved in keeping those records from us made her non-answers even more maddening. We were convinced there was a lot Hillary was holding back.

  On Saturday, July 22, 1995, we returned to the back entrance of the White House to continue our depositions of the Clintons. Each time, I had arranged the meetings with White House Counsel Abner Mikva, whom I knew well because we had served together on the D.C. Circuit.

  At 11:30 A.M., I drove my minivan to the White House. Crammed into the back were members of my team, including Hickman, Amy St. Eve, several other prosecutors, and a court reporter. The topics for this session were the 825 loan and Vince Foster’s death, a sobering subject. We went upstairs to the Treaty Room a little after noon. President Clinton was already there, along with five lawyers. He appeared a lot looser than during the session in April. While the court reporter set up equipment, he chatted.

  “Who was your favorite singer growing up?” he asked Kendall. “Mine was Elvis Presley.”

  Kendall replied that his favorite was Little Richard. Both appeared to be trying a friendlier approach.

  “When I was a kid, I’d cut the grass,” Clinton said to no one in particular. “We’d get centipedes and tear them apart and watch them go off in different directions. Hick, I bet y’all did that over in Memphis.”

  “No, Mr. President,” Hickman said, “we didn’t do that in Memphis.”

  Bill was questioned for three hours about Whitewater and the 825 loan by Brad Lerman. He framed a series of “Did you know?” questions. Clinton bobbed and weaved, but was always pleasant as he avoided answering.

  When Hillary arrived, it was a different story. No small talk. For three hours, she answered questions posed by John Bates, a career Assistant U.S. Attorney from Washington. John had risen through the ranks to become one of the senior leaders in that shop.

  Her responses were so glib, so superficial, they were almost “in your face,” alternating on the theme of profound memory loss. In the space of three hours, she claimed, by our count, over a hundred times that she “did not recall” or “did not remember.” This suggested outright mendacity. To be sure, human memory is notoriously fallible, but her strained performance struck us as preposterous.

  Mikva shook my hand as we left that day and thanked me for handling matters with discretion. “I realize it was not done for this president,” he said. “I appreciate your concern for the presidency.”

  I later learned Mikva had reassured Bill Clinton after my appointment that “Ken and I had good relations on the court and I’m sure it will continue.” His cheery view would soon change.

  The following Monday, July 24, back in Little Rock, I invited Hickman and several other people involved in the investigation to have dinner at Kirby’s Grill & Bakery, across the street from the OIC. We had a two-hour briefing on the depositions over steak and baked potatoes. Hillary’s extraordinary lapses of memory—especially for a lawyer and self-described policy wonk—were not credible. Back at our office, we all agreed that we were unimpressed with Hillary’s performance. One staff member described her as “affirmatively dislikable.”

  I asked Hickman what he thought about the Clintons’ testimony.

  “The president I’d give a C,” Hickman said. “The First Lady, an F minus.”

  I had to agree. I was upset over Mrs. Clinton’s performance, and was even considering bringing the matter before the Washington grand jury for possible indictment on perjury.

  But proving that someone knowingly lied when they said “I don’t recall” or “I don’t remember” is extremely difficult, especially if that person is the First Lady. What was clear was that Mrs. Clinton couldn’t be bothered to make it appear as if she were telling the truth.

  In late 1995, Abner Mikva left the White House. He later gave an interview to the New York Times saying his opinion of my character had radically changed after our office summoned Hillary to testify before the grand jury about the missing Rose Law Firm records. As Mikva saw it, we had forced her to go to the courthouse instead of showing deference to her as First Lady.

  “The Judge Starr I knew was cautious, deliberate, careful, not zealous and reckless,” Mikva told a reporter. “The Ken Starr I see now is not the Ken Starr I knew.”

  This was a bum rap. We had specifically offered arrangements for Hillary to enter the courthouse unobtrusively through the basement, with no fanfare whatsoever. She chose instead to arrive at the public entrance and march in alone.

  “As the First Lady has always said, she is as eager as anyone to resolve questions regarding the billing records,” said Mark Fabiani, one of the Clintons’ lawyers, “and she will continue to provide whatever help she can finally to resolve these issues.”

  Hillary made the calculated decision to turn her testimony into a public spectacle—and a public relations opportunity. She wildly succeeded. Tipped off by the White House, the press arrived at dawn to get a glimpse of the historic occasion of a First Lady testify
ing before a grand jury. As CNN’s Bob Franken told Hickman, “This was like the Rose Bowl. You had to get there early to get a seat.”

  CHAPTER TEN

  The 825 Trial

  The 825 trial of the McDougals and Governor Tucker began on March 4, 1996. The temperature outside was near freezing. By the end of the trial in late May, Little Rock sweltered in 100-degree heat.

  From the beginning, it was a media circus, as if America understood what was at stake for the Clintons. In addition to the Arkansas newspapers, the wire services and national media sent reporters.

  The OIC intended to prove that the three defendants had stolen $825,000 by means of an elaborate illegal scheme involving federally insured funds; and that some of the funds had been intended to pay off the McDougals’ and Clintons’ debts on the Whitewater development.

  The prosecution team couldn’t have been stronger. Career federal prosecutor Ray Jahn, a Vietnam veteran, had tried the toughest of cases, including the capital murder trial of Charles Harrelson, arising out of the assassination of federal district Judge John Wood in my hometown of San Antonio. (The killer was the estranged father of actor Woody Harrelson.) At Jahn’s right hand was his wife, LeRoy, also a career prosecutor. They were a formidable duo. Ray tried cases in court. LeRoy, the duo’s central nervous system, prepped Ray and fed him documents as needed during trial.

  Jackie Bennett Jr., a hard-charging former college football player, had risen to prosecutorial fame through the conviction of Congressman Albert Bustamante from San Antonio. He came to Little Rock from the ranks of the Public Integrity Section of the DOJ’s Criminal Division.

  Also from Public Integrity, Rod Rosenstein was an up-and-coming courtroom litigator, with four or five trials under his belt. Though young, he was extremely well prepared and precise.

  Amy St. Eve took on one of the most delicate assignments, questioning a hostile witness, Steve Smith, an Arkansas professor who had pleaded guilty to his role in the 825 loan.