JOE CONASON & GENE LYONS
THE
HUNTING
— of —
HILLARY
Adapted and updated from
The Hunting of the President: The
Ten-Year Campaign to Destroy Bill and
Hillary Clinton
With a new introduction
The hunTing of hillary. Copyright © 2015 by Joe Conason and
Gene Lyons. All rights reserved. No part of this e-book may be
used or reproduced in any manner whatsoever without written per-
mission except in the case of brief quotations embodied in critical
articles or reviews.
Published by Eastern Harbor Media, LLC. 37 West 17th Street, New
York, N.Y. 10011. Designed by Sam Reisman. Cover design by Jillian
Burr.
ISBN: 978-0-692-43696-7
First edition published 2000 by Thomas Dunn Books, an imprint of
St. Martin’s Press, as The Hunting of the President: The Ten-Year Cam-
paign to Destroy Bill and Hillary Clinton.
www.nationalmemo.com
– of –
the
hUNtING
hILLARY
JOe CONASON & GeNe LYONS
ADAPteD AND UPDAteD FROM
The Hunting of the President: The Ten-Year
Campaign to Destroy Bill and Hillary Clinton
JOE CONASON is editor-in-chief of The National Memo, the
online newsletter and website that he co-founded with his wife,
Elizabeth Wagley, in 2011. He also serves as editor-at-large of
The Investigative Fund at The Nation Institute, where he oversees
award-winning reporting projects that appear on a wide variety of
print, online, and broadcast platforms.
Conason has covered every U.S. presidential election since 1980
(and nearly every presidential scandal as well). During the Clinton
presidency, his reporting on the Whitewater investigation brought
his work to national media attention. His articles have appeared
in Esquire, The Nation, The New Republic, The Guardian (London),
Harpers, and The New Yorker, among dozens of other periodicals and
newspapers. He appears frequently as a commentator on television
and radio and his columns are distributed nationally by Creators
Syndicate.
From 1992 to 2010, he wrote a popular political column for
The New York Observer. He also served as the Manhattan weekly’s
executive editor from 1992 to 1997. He wrote weekly columns and a
blog for Salon.com, the Internet magazine, from 1998 to 2010.
Conason was previously a national correspondent and columnist
for The Village Voice, where he covered stories from City Hall and
Capitol Hill to Tiananmen Square. While reporting for the Voice
he won the New York Press Club’s Byline Award for breaking
news coverage. In 1985, his exposé of Ferdinand Marcos’ hidden
Manhattan real estate holdings caused an international sensation,
leading to congressional hearings and the election that preceded the
Philippine dictator’s overthrow, which he reported from Manila.
He is the author of Big Lies: The Right-Wing Propaganda Machine
and How It Distorts the Truth (St. Martin’s Press, 2003), and (with
co-author Gene Lyons) The Hunting of the President: The Ten-Year
Campaign to Destroy Bill Clinton (St. Martin’s Press, 2000). Both books
About the Authors
The Hunting of Hillary | v
were New York Times bestsellers. He is currently working on a book
about Bill Clinton’s post-presidency for Simon & Schuster, slated for
publication in 2016.
Joe Conason graduated from Brandeis University in 1975 with
honors in history. He was born in New York City, where he still lives
with his wife and their two children.
GENE LYONS has written a column for the Arkansas Times
since 1994. He previously spent five years as general editor at
Newsweek, and was associate editor at Texas Monthly for a year. In
1980, he won the National Magazine Award for Public Service for
the Texas Monthly article “Why Teachers Can’t Teach.” A prolific
author, Lyons has written hundreds of articles, essays, and reviews
for such magazines as Harper’s, The New York Times Magazine, The
New York Review of Books, Entertainment Weekly, Washington Monthly,
The Nation, Esquire, Slate, and Salon.
Lyons graduated from Rutgers University in 1965, and earned a
Ph.D. in English from the University of Virginia in 1969. He taught
at the Universities of Massachusetts, Arkansas, and Texas before
becoming a full-time writer in 1976. A native of New Jersey, Lyons
has lived in Arkansas with his wife Diane since 1972. Their two adult
sons live in the Little Rock area. The Lyons live on a cattle farm near
Houston, Ark., with a half-dozen dogs, several cats, three horses,
and a growing herd of Fleckvieh Simmental cows.
Books: The Higher Illiteracy (University of Arkansas, 1988),
Widow’s Web (Simon & Schuster, 1993), Fools for Scandal (Franklin
Square, 1996) and, with Joe Conason, The Hunting of the President:
The Ten Year Campaign to Destroy Bill and Hillary Clinton (St. Martin’s,
2000). In 2004, Mozark Productions released a movie version of The
Hunting of the President.
vi |
Contents
About the Authors
iv
Contents
vi
Introduction
vii
From Trivial Things, A National ‘Scandal’ Rises
1
Swindling (And Smearing) The Clintons
11
U.S. Attorney Blocks Partisan Political Probe
18
The Lonely Death Of Vince Foster
22
A Tainted Accuser – And His Far-Right Friends
27
An Old Enemy From ‘White Haven’
33
A ‘Totally Inappropriate’ Call To The FBI
37
Another Watergate? Media Dreams And Frenzies
41
The Strange Secrets of Richard Mellon Scaife
45
Praising Robert Fiske – Only To Bury Him
50
Appointing A Not-So-Independent Counsel
58
Stirring Paranoia With False Prophets (And Real Profits)
66
A $100,000 Windfall – And A $9 Million Myth
77
Newt Gingrich’s Contract – On The Clintons
81
Alfonse D’Amato’s Ethical Crusade
87
Star Witness Faints At Hearing – And Nobody Notices
95
As National Media Turn Away, A Moment Of Truth
102
Billing Records, Lost And Found – And Exculpatory
109
A Pulitzer Winner’s Bloody Blunders
115
How Starr Fumbled – And Fled
122
After Five Years, Nothing ‘Substantial And Credible’
135
The Clintons, Their Enemies, And The American Public
137
Appendix: Where Are They Now?
144
| vii
For Republicans, the strong likelihood that their presidential
nominee will face a Democrat named Clinton is not a happy pros-
pect—especially when that Democratic candidate could make histo-
ry as America’s first female president. Which must be why they have
been at work for many months already, seeking every possible means
to denigrate, demean, and discredit Hillary Rodham Clinton.
It is important for voters, perhaps younger voters in particular,
to understand that we have seen this movie before—too many times.
When journalists warn that Hillary Clinton is ���polarizing,” a
favorite media cliché, what they mean is that we can expect a steady,
increasingly vituperative barrage of insults, gossip, and sensational
headlines directed toward her, with or without substance. The Re-
publican opposition research specialists are experimenting daily to
discover which topics and themes resonate most powerfully against
Clinton, one of the best-known and most durably popular political
figures in the country.
But the partisan operatives, eager and unscrupulous as they are,
know very well that Hillary Clinton too has seen all of this before.
With the exception of her husband, there is no living public figure in
this country who has survived such harsh scrutiny for so long.
She has endured far worse attacks than those she is likely to
encounter in 2016. When Bill Clinton was still president, she became
a primary target of independent counsel Kenneth Starr, his hard-
shelled deputy prosecutors and scores of FBI agents, who spent five
years and over $50 million attempting to prove, among other things,
that the then-First Lady had not testified with perfect accuracy about
Introduction
viii | Introduction

a minor Arkansas real-estate transaction—a deal that had occurred
years before her husband’s inauguration.
Having created the ballyhooed Whitewater “scandal,” most of
the nation’s news organizations, including three or four television
networks and the two most important daily newspapers, cheered
Starr on, spending millions more in their own zeal to get Hillary.
There was no accusation too obscure or dubious to make headlines,
in publications that routinely anticipated her imminent criminal in-
dictment. Editors of The New York Times, America’s newspaper of
record, employed not one but two op-ed columnists, William Sa-
fire and Maureen Dowd, whose only seeming purpose in life was
to bring her down. Safire warned repeatedly that she would go to
prison, promising to “eat crow” if his direst predictions proved
wrong. (While the old Nixon hand has since passed away, Dowd still
pursues the same old obsession in the same space, as she devolves
into self-parody.)
When she ran for the United States Senate in 2000, the ugliness
only intensified, with Rupert Murdoch’s New York Post publishing
false accusations of anti-Semitism against Hillary, articulated by a
pair of Arkansas con artists and that ultimate hustler, Dick Morris.
What Morris said had as little credibility as any of his statements—
he had published a book only two years earlier, declaring that he
would never forget Hillary’s kindness to his elderly Jewish parents,
with no mention of any alleged anti-Semitic remarks by her. But as
with any “Clinton scandal,” credibility and facts mattered little.
Eight years later, campaigning for the Democratic presidential
nomination, Clinton waded through a barrage of biased, sexist me-
dia coverage that left even the most jaded political journalists shak-
ing their heads. In the aftermath, Mark Halperin, the peripatetic Time
magazine, ABC News and now Bloomberg News pundit—who has
showed little sympathy toward her over the years—offered a confes-
sion on behalf of his profession. Admitting that the ordinary flaws
in campaign coverage, “wild swings, accentuating the negative—are
magnified 50 times when it comes to her,” Halperin said, “It’s not a
level playing field.” Washington Post columnist Dana Milbank agreed
that the political press “will savage her no matter what, pretty much.
There’s no question they have their knives out for her.” Many have
Introduction | ix
drawn their knives again, as she attempts once more in 2016 to make
presidential history.
The promotion of scandal narratives will remain a favored
weapon. As Jeet Heer noted recently in The New Republic, the ghosts
of old scandals, mostly imaginary and even paranoid, “are likely to
re-emerge in the conservative and even mainstream press.”
Certainly there is little doubt that right-wing propaganda op-
erations, from Fox to the SuperPACs, will aim to reinforce the old
negative memes about Hillary’s candor. But so far, her angry crit-
ics on the right have been unable to revive the scandal stories that
dogged the White House and dominated media coverage during her
Bill Clinton’s presidency. Although critics often complain of “Clin-
ton fatigue” and snark continuously about her “baggage,” rarely do
they refer directly to the Nineties sensations that became famous as
Whitewater, Travelgate, Filegate, and so on.
Her opponents don’t usually mention those moldy tales because
despite tens of millions of taxpayer dollars spent by congressional
committees and special prosecutors investigating them, they were all
proved bogus. And despite constant projections that Hillary Clinton
would be disgraced or even indicted in the Whitewater probe, she
was ultimately cleared of every accusation—and the same was true
of Travelgate and Filegate, whose media monikers indicate the level
of premature excitement that those stories once encouraged.
Unable to refresh such material, Clinton’s determined antago-
nists have instead sought to capitalize on Benghazi, where Libyan
terrorists killed four Americans, including U.S. Ambassador Chris
Stevens. After numerous investigations, however—including an
official probe that led to disciplinary action against several State
Department officials and many changes in diplomatic security pro-
cedures—the notion that Clinton had personally done wrong, or
misled investigators, proved baseless.
Yet the Republicans haven’t quite given up on Benghazi—even
after the Republican-led House Permanent Select Committee on In-
telligence definitively dismissed the charges against Clinton last year.
The recent furor over her State Department emails arose from
efforts by Rep. Trey Gowdy (R-SC) to restore the Benghazi issue as
x | Introduction

a political weapon. According to the evidence that has emerged so
far, however, Clinton appears to have done nothing more egregious
with her emails than her predecessors. Until the appointment of
Secretary John Kerry to succeed Clinton, no Secretary of State had
ever used a government email address exclusively. While she has
turned over tens of thousands of emails to the State Department,
former Secretary of State Colin Powell admits that he destroyed all
the electronic records of his tenure.
Nevertheless, the double standard of the political media re-
mains intact. Journalists and commentators who never noticed the
Bush White House destruction of millions of government emails
now bitterly protest Clinton’s alleged electronic misdemeanors. The
Republican National Committee—which helped Karl Rove conceal
and destroy hundreds of thousands of emails while he served as
George W. Bush’s top political advisor—complains loudly about
Clinton, “the Secretary of Secrecy.”
When Clinton’s pursuers pause from talking about emails and
Benghazi, they invariably turn to the Bill, Hillary and Chelsea Clin-
ton Foundation, which has raised hundreds of millions of dollars to
pursue health, environmental, educational, and civil society projects
in America and around the world. A significant portion of that mon-
ey was raised abroad from governments and other donors that have
endorsed the foundation’s work for very good reason. Supported by
that funding, for instance, the foundation’s crusade against HIV/
AIDS, tuberculosis and malaria in poor countries has improved and
even saved millions of lives.
Much like other charities, from Oxfam to the World Food Pro-
gramme, the Clinton Foundation has received money from autocrat-
ic governments in the Middle East, including Saudi Arabia. A Saudi
billionaire, not connected to the ruling family in Riyadh, donated
millions to provide anti-retroviral drugs to AIDS-afflicted Ethiopi-
ans, and this too fed the “scandal” narrative. Yet it seems morally
dubious to argue that the Clinton Foundation ought to have refused
the Saudi funding, letting tens of thousands of women and children
die miserably instead.
Still Hillary Clinton’s opponents will sow suspicion of her fam-
ily’s charitable endeavors, using xenophobia and anti-Arab bigotry
Introduction | xi
to reinforce such fears. Scarcely a week after Clinton announced her
candidacy, her adversaries on the right commenced a series of at-
tacks on the foundation, with pre-release publicity for a tendentious
book titled Clinton Cash: The Untold Story of How and Why Foreign Gov-
ernments and Businesses Helped Make Bill and Hillary Clinton Rich.
Underwritten by a “dark money” trust created by the ultra-right
Koch brothers and their network, this volume, published by Rupert
Murdoch’s HarperCollins, purports to show nefarious connections
between the Clintons, their foundation’s supporters, and Hillary
Clinton’s tenure as Secretary of State. The flow of millions of dol-
lars from the billionaire Clinton adversaries to researchers bent on
ruining her with media attacks bears a striking resemblance to the
infamous anti-Clinton conspiracy known as the Arkansas Project,
financed between 1993 and 1997 by the late Pittsburgh magnate
Richard Mellon Scaife.
Yet what startled some observers (although not anyone who
followed Whitewater) was a deal hatched by author Peter Schweizer
with the New York Times and Washington Post to share in his research
before publication—affording mainstream legitimacy to a writer
whose previous, highly inaccurate works have been debunked by the
Post’s own “fact checker” columnist, among many others.
On April 23, the Times published a front-page story that in-
sinuated but failed to prove a complicated quid pro quo between
a major Clinton foundation donor and a decision by the Obama
administration to permit a Russian firm to buy American uranium
interests. But the story almost immediately began to fall apart, as
news outlets picked apart its details to show that Hillary Clinton had
nothing to do with the uranium decision, which had largely been
controlled by other agencies of government. As NBC News con-
ceded the next day—after promoting the Clinton Cash book and the
Times story—“upon reflection, that Times article doesn’t hold up that
well 24 hours after its publication.”
Should those charges utterly disintegrate, more are certain to
follow from the same networks and financiers—which is why the
story told in The Hunting of Hillary is salient in the current media and
political atmosphere. Excerpted from The Hunting of the President: The
Ten Year-Campaign to Destroy Bill and Hillary Clinton, this e-book offers
xii | Introduction

readers and voters a fresh opportunity to review the original effort to
ruin the former First Lady. As the 2016 campaign unfolds, nobody
should be too surprised to see and hear the same themes, tactics, and
canards—perhaps even some of the very same accusations—bubble
up into our septic political discourse once more.
We believe the story of the Nineties Clinton “scandals” remains
relevant today because it documents the techniques and attitudes
used to popularize false charges against Hillary Clinton two decades
ago—and because the same methods continue to be employed by
her partisan adversaries. The long, expensive, and ultimately fruit-
less investigations that proceeded under the rubric of Whitewater
demonstrated how easily a tantalizing falsehood can gather strength
and authority, without any substance whatsoever.
It is a lesson that the nation paid dearly to learn when Bill Clin-
ton was president—and that we will only forget at even greater cost.
| 1
From Trivial Things, A
National ‘Scandal’ Rises
ONE
Investigative reporter Jeff Gerth’s initial Whitewater story ap-
peared on the front page of the New York Times on Sunday, March
8,1992—two days before the “Super Tuesday” primaries in six
southern states and just weeks before the crucial Democratic con-
tests in New York and California. For Sheffield Nelson, the Arkan-
sas Republican millionaire and longtime Clinton antagonist who had
delivered the story to Gerth, its timing couldn’t have been better.
"What mighty contests,” wrote Alexander Pope, “rise from triv-
ial things.” The Whitewater property was not vast: it spread across
roughly 230 wooded acres, at the confluence of two of the best
fishing streams in the Ozarks—Crooked Creek and the White Riv-
er. The sums involved were also comparatively small. In buying the
property back in 1978, Bill and Hillary Clinton and Jim and Susan
McDougal altogether had put a bit more than $200,000 in borrowed
money at risk. Had the project succeeded as planned, each couple
hoped to realize a profit of roughly $45,000.
As it happened, the Clintons ended up losing a bit less than
that, the McDougals somewhat more—although Jim McDougal’s
habit of commingling funds among his many real estate entities
would make a precise accounting impossible. Even the washboard
gravel roads bulldozed and graded by the Whitewater Development
Corporation remained unpaved 14 years after Bill Clinton was first
elected governor.
Far from trivial, however, was the depth of McDougal’s resent-
ment toward the Clintons.
In time, McDougal would portray his former partners as a coolly
2 | Joe Conason and Gene Lyons

cynical couple, “takers rather than givers . . . unwilling to jeopardize
their political position for the sake of friends.” Hadn’t they turned
their backs on him after the catastrophic events of the 1980s—
when McDougal had ruined his marriage; suffered a stroke and
succumbed to manic-depressive illness; lost a bank he had bought
as well as his insolvent thrift, Madison Guaranty Savings and Loan;
forfeited his overleveraged, ramshackle real estate empire; and finally
found himself facing a four-count federal bank fraud indictment in
1990? Undoubtedly they had. But he had given them plenty of good
reasons for shunning him, not the least of which was his inept and
self-serving management of Whitewater itself.
McDougal’s colorful and increasingly erratic career–as old-time
agrarian populist, campaign organizer, failed politician, college pro-
fessor, real estate developer, banker, entrepreneur, promoter, sales-
man, savings and loan mogul, recovering alcoholic, mental patient,
criminal defendant, raconteur, and sometime confidence man—had
made him a familiar if rather untrustworthy figure to many Arkan-
sas journalists. A largely self-educated country boy from Woodruff
County, McDougal had grown up on the geological and historical
boundary between the Arkansas cultures of hill country and Delta.
He could recite Bible verses and quote lengthy passages from Shake-
speare and James Madison from memory.
After a well-publicized trial, McDougal had been acquitted of
the original fraud charges in Little Rock’s federal district court. At
the time, he had blamed the bias of Bush administration Republi-
can prosecutors for his plight, but few observers took that charge
seriously. Reporters who covered the trial attributed the verdict to
a poorly organized prosecution and the spellbinding effect of Mc-
Dougal’s own testimony on the jury.
Sick, bankrupt, and living on Social Security disability payments
in a borrowed mobile home on somebody else’s land near the little
town of Arkadelphia, McDougal had then petitioned the governor’s
office for a job. Wary Clinton aides made an inquiry to Arkansas se-
curities commissioner Beverly Bassett Schaffer, a Clinton appointee
who had quietly urged the FBI to investigate him in the first place.
No way, Bassett Schaffer told them. In her view, McDougal was no
innocent victim of the national savings and loan meltdown, but a
The Hunting of Hillary | 3
reckless and devious man who should not be trusted.
This rejection maddened the desperate McDougal. Oddly, how-
ever, it was a grudge against Clinton’s Democratic rival Jim Guy
Tucker, more than his brewing feud with Clinton, that first prompt-
ed McDougal to seek out Sheffield Nelson—the wealthy Republican
businessman who had lost a bitter gubernatorial race against Clinton
two years earlier. It was Nelson who eventually led McDougal to
Gerth—who had used Nelson as a background source on earlier
Arkansas stories.
Like Nelson, Tucker also had lost a bruising political race to
Clinton. A handsome, Harvard-educated ex-Marine and former
prosecutor, Tucker had given up a seat in Congress to challenge
Clinton for the governorship in 1982. He had emerged from the
Democratic primary a loser, deeply in debt, and feeling angry.
Nelson, Tucker, and Clinton had been mutually antagonistic
for years, but McDougal had entered into separate business deal-
ings with all three during the real estate boom of the late seventies
and early eighties. Only Nelson had profited from his dealings with
McDougal, and then only by threatening a lawsuit against Madison
Guaranty Savings and Loan—which made it all the more strange that
McDougal came to him seeking revenge against Tucker and Clinton.
Another irony was that Madison Guaranty’s collapse had been
triggered not by Whitewater but, according to bank examiners, by
the failure of a major resort development on Campobello Island
in New Brunswick, Canada. McDougal’s chief investors in that
doomed $3.73 million enterprise happened to be Sheffield Nelson
and Nelson’s friend Jerry Jones, the oil-and-gas magnate and Dallas
Cowboys owner. It had been the nostalgic McDougal’s conceit that
wealthy New England vacationers and retirees would be moved by
memories of Franklin Delano Roosevelt’s summer retreat (location
of the 1960 film Sunrise at Campobello, starring Ralph Bellamy as
FDR) to purchase lots on the cold, foggy island north of Maine.
Unlike Whitewater, which placed none of Madison Guaran-
ty’s assets at risk, Campobello Properties Ventures was mentioned
repeatedly in Madison audits as a costly boondoggle. Eventually
the U.S. Treasury Department, which inherited the property after
4 | Joe Conason and Gene Lyons

Madison went under, entered negotiations to sell it to the Canadian
government for use as a national park. Nelson and Jones had invest-
ed a reported $225,000 each to purchase a 12.5 percent share in the
enterprise. In 1988, the Federal Home Loan Bank Board (FHLBB),
then supervising Madison Guaranty’s assets, had bought their share
for $725,000—a profit of $275,000.
"I can’t believe it. It’s an extraordinary event. It smells,” said
William Seidman, who supervised the savings and loan bailout for
the Bush administration, to the Fort Worth Star-Telegram. “It could be
legit, but I doubt it.”
Jim Guy Tucker’s ties to McDougal were similarly extensive. At
one time, the two men had shared ownership of a small bank in tiny
Kingston, Arkansas. Although Tucker had grown wealthy investing
in cable TV properties after his 1982 election defeat, his real estate
dealings with McDougal had ended in mutual recrimination. Not
long before McDougal’s 1990 trial, Tucker learned that McDougal
had collected loan payments from buyers on a parcel the two had
subdivided, but had failed to pay off the bank debt. McDougal nev-
ertheless sent worthless deeds to their customers, bearing Tucker’s
forged signature.
Tucker had had no choice but to make restitution. But when
McDougal subsequently asked him to serve as a character witness,
Tucker did have a choice and said no. Despite his acquittal, McDou-
gal never forgave Tucker.
McDougal’s ostensible purpose when he contacted Nelson in
February 1992 was to find a Republican lawyer willing to sue Tucker.
McDougal wanted Tucker to return $59,000 worth of promisso-
ry notes which Tucker had, in fact, bought from him some years
earlier, but which McDougal claimed he had stolen. After Tucker
was elected lieutenant governor of Arkansas in 1990, putting him in
line to succeed Bill Clinton, McDougal may have imagined that the
politician would settle rather than risk bad publicity. In the end, no
lawsuit was filed.
None of this complicated history was reflected in the Times’s
Whitewater reporting, which also omitted any mention of Nel-
son’s role as its source. Exactly how Whitewater came to bear the
The Hunting of Hillary | 5
imprimatur of the newspaper of record always remained murky.
Early on, Gerth said he had noticed a reference to the project in
Clinton’s state financial disclosure forms, and telephoned the only
Arkansan he knew for an explanation. Times editors insisted that
Nelson had supplied nothing more than McDougal’s phone number.
Nelson, however, always proudly took full credit for putting
the Times onto Whitewater. In his posthumously published memoir,
Arkansas Mischief, McDougal confirmed that boast. “It was Nelson
who passed the information on to Jeff Gerth,” he wrote. “Nelson
was gleeful. He wanted me to talk with Gerth, the New York Times
reporter who had written a long investigative article about the Ste-
phenses’ extensive connections in Arkansas a few years earlier.”
On two previous occasions, Sheffield Nelson and Stephens, Inc.,
a Little Rock-based conglomerate with vast financial interests, had
each used the Times as a weapon in their ongoing feud. Gerth’s 1978
story about allegedly predatory natural gas pricing in Fort Smith was
credited by Arkansas political observers with influencing enough
votes to knock Witt and Jack Stephens’s nephew out of a three-way
Senate primary race. Several years later, Stephens, Inc., had retaliated
by talking to Times reporter Wendell Rawls, Jr., who wrote a critical
examination of Nelson’s Arkla-Arkoma gas deal, which indirectly
helped Clinton put an end to his political career.
After Nelson made the initial contact, McDougal recalled,
Gerth drove down to his home town of Arkadelphia to visit him.
McDougal plied the reporter with documents and canceled checks,
allegedly showing that the Clintons had taken improper tax deduc-
tions and had failed to pay their fair share of Whitewater expenses.
According to McDougal, he subsequently came up to Nelson’s Little
Rock office and gave him damaging information about Tucker. Nel-
son, he claimed, was delighted. Within weeks, Jeff Gerth was sharing
piles of documents he believed might implicate Tucker with Little
Rock journalists. The Times, he explained, was only interested in Bill
Clinton.
Gerth’s original article won praise from the American Journalism
Review for containing “80 to 90 percent” of what the press ultimately
learned about Whitewater. Even some Clinton loyalists acknowl-
edged that the story examined legitimate issues concerning the
6 | Joe Conason and Gene Lyons

Clintons’ finances and Hillary Clinton’s law practice. Unfortunately,
its mistakes began with the headline: “CLINTONS JOINED S & L
OPERATOR IN AN OZARK REAL ESTATE VENTURE.”
Actually, when the Whitewater partnership was formed in 1978,
McDougal hadn’t been involved in the banking or thrift businesses
at all. He was a political science teacher at Ouachita Baptist Univer-
sity, who had done well investing in real estate. McDougal didn’t
acquire a controlling share in the small thrift institution he renamed
Madison Guaranty until five years later—by which time the White-
water project was virtually defunct.
Judging by subsequent stern editorials in the New York Times, the
rest of the story could be summarized more or less as follows: When
he was governor, Clinton and his wife entered into a sweetheart
deal with a crooked financier at no risk to themselves. When their
benefactor got into trouble, Clinton dumped the sitting Arkansas
securities commissioner and appointed a political ally named Bever-
ly Bassett Schaffer. He and Hillary then pressured Bassett Schaffer
to grant special favors to Madison, until vigilant federal regulators
cracked down and thwarted their scheme. When exposed by Gerth,
Bassett Schaffer claimed a convenient memory loss, denying com-
plicity in events she had supposedly forgotten.
"In interviews,” Gerth had written, “Mrs. Schaffer . . . said she
did not remember the Federal examination of Madison, but added
that in her view, the findings were not ‘definitive proof of insolven-
cy’... ‘I never gave anybody special treatment,’ she said.”
The problem, as Bassett Schaffer had pointed out in 20 pages of
memoranda she had provided to Gerth via fax, was that this version
of events was mostly false.
First, the Clintons and McDougals were jointly and severally
responsible for the Whitewater loan. Moreover, federal regulators
did not determine that Madison Guaranty was insolvent between
1984 and 1986, the years Gerth’s story covered. The Federal Home
Loan Bank Board had formally accepted Madison’s debt-restruc-
turing plan in a letter dated September 11,1984—a full six months
before Bassett Schaffer’s appointment. Nor was her appointment
connected to Madison’s troubles. She had filled a vacancy created
The Hunting of Hillary | 7
when her Republican-appointed predecessor—who later described
Gerth’s Whitewater story as “unmitigated horseshit”—resigned to
enter private legal practice.
More important, Arkansas had no authority to close state-reg-
ulated S&Ls without the concurrence of the federal agencies that
held the real power. “It may be important for you to know,” Bassett
Schaffer had written to Gerth, “that state law grants the savings and
loan supervisor no emergency acquisition authority similar to that
of the FHLBB and FSLIC (the Federal Savings and Loan Insurance
Corporation).”
Subsequent Senate hearings would establish that not one of the
746 institutions that failed during the S&L crisis of the ‘80s was shut
down by state officials anywhere in the country. But Bassett Schaffer
had been an active participant in a July 1986 decision to remove Jim
and Susan McDougal from control of Madison Guaranty S&L, after
auditors discovered his insider trading and other abuses.
She had also directed the Times reporter’s attention to her certi-
fied letter, dated December 10, 1987, all but begging federal regula-
tors to shut down Madison and two much larger Arkansas S&Ls. She
had gotten no answer until the feds finally closed Madison’s doors in
February 1989, roughly a month after President George H.W. Bush’s
inauguration. According to Walter Faulk, then director of supervi-
sion for the FHLBB in Dallas, “I never saw [Bassett Schaffer] take
any action that was out of the ordinary.... To my knowledge, there
is nothing that she or the governor of Arkansas did or could have
done that would have delayed the action on this institution.”
When the Times story appeared, Bassett Schaffer briefly con-
sidered filing a libel suit. “I provided you with a detailed account
in writing of the facts,” she wrote Gerth bitterly. “This information
was ignored and, instead, you based your story on the word of a
mentally ill man [McDougal] I have never met and documents which
you admitted to me on the telephone on February 26, 1992, were
incomplete.” He never wrote back to her.
"I subsequently had conversations with her in which I tried to
explain the situation. I sought to come down and meet her,” Gerth
said later. “I had hoped to explain what happened with the editing
8 | Joe Conason and Gene Lyons

of the first piece. She never would agree to see me.” Because his
errors and inferences had appeared on the front page of the New
York Times, they would be repeated as gospel by other reporters for
years to come.
Jim McDougal was likewise stunned by Gerth’s initial foray into
Whitewater. The Times article suggested that McDougal had crim-
inally misused Madison deposits to subsidize the Ozark develop-
ment. Having set out to hurt Tucker and Clinton, McDougal had
inflicted the worst injuries on himself. Sam Heuer, the Little Rock
attorney who had successfully defended McDougal during his 1990
bank fraud trial, issued a statement: “I am appalled and affronted by
the allegations and reckless disregard of the facts by the New York
Times and its reporter Jeff Gerth.”
The Clinton campaign dispatched attorney Jim Blair, an old
friend of McDougal and the Clintons, to remind their former
partner that further unguarded comments to reporters could have
consequences more harmful to him than to anybody else. When an
Associated Press reporter contacted McDougal a couple of days
later, he sounded chastened. “I’ve never done anything illegal,” he
said, “and as far as I know Bill Clinton has never done anything
illegal or unethical.” He would later claim that Blair had threatened
him with a lawsuit.
But McDougal’s retraction meant little. Weeks earlier, according
to McDougal, Sheffield Nelson had secretly taped him making sev-
eral rash allegations, and Nelson proceeded to copy and distribute
the tape to every journalist who would listen. To Nelson, McDougal
had asserted that the Clintons never lost money on Whitewater. “I
could sink [that] quicker than they could lie about it if I could get in
a position so I wouldn’t have my head beaten off,” McDougal had
said.
Meanwhile, confronted by Clinton campaign aide and longtime
Hillary friend Susan Thomases about the shortcomings in his work,
Jeff Gerth was initially somewhat apologetic, she recalled. He had
planned a more extensive, three-part series on the Clintons’ finances,
she said Gerth had told her, only to have his piece chopped down
to 1500 words by his editors. Thomases also remembered Gerth
mentioning that his Washington bureau chief, a southerner named
The Hunting of Hillary | 9
Howell Raines, disliked Clinton and was largely responsible for the
story’s tone.
Later Gerth denied blaming Raines, although he said he “was
upset” by the way his original Whitewater copy was edited and did
request changes after the paper’s first edition appeared (including the
addition of a quote from Bassett Schaffer denying she had favored
McDougal). There had been no plan for a “series,” he added, and he
thought it was “highly unlikely” that the Whitewater story actually
had been edited by Raines.
Campaigning in the New York Democratic presidential primary,
former California governor Jerry Brown frequently denounced the
“sleazy” appearance of Hillary Clinton’s law practice. In response,
the Clinton campaign commissioned an accounting of Whitewater,
overseen by a Denver attorney and Clinton friend named James
Lyons (no relation to the author). Hillary also asked Webster Hub-
bell and Vincent Foster, her two closest associates at the Rose Law
Firm, to help explain her work for Madison. A more ill-starred pair
of defenders could hardly be imagined, although she had no way
of knowing that. In the process of gathering information, Foster
obtained a computer printout from the Rose Law Firm of Hillary’s
Madison Guaranty billing records.
The Lyons report, released by the campaign in late March, con-
cluded that the Clintons had lost about $65,000 on the project. Due
to insufficient information given them by McDougal, the Clintons
had improperly deducted a handful of interest payments from their
income taxes, amounting to a tax savings of less than $2,000. Al-
though the five-year limit on IRS action had long passed, the couple
made a point of paying the back taxes. But at least for the time being,
the Clinton campaign’s swift response had put the Whitewater issue
to rest. How much scandal could there be in a gravel-road real-estate
development in which the Clintons had ultimately lost money?
One aspect of the story that would never receive much attention
was Jim McDougal’s psychiatric history. In his initial 1992 article,
Jeff Gerth noted that McDougal suffered from manic-depressive
disorder, but described him as “stable, careful and calm.” Aside
from that reassuring reference, McDougal’s affliction and its effect
on his turbulent business and personal life were rarely mentioned.
10 | Joe Conason and Gene Lyons

McDougal’s illness had much to do with his problems. Among
the symptoms psychiatric manuals list for a manic episode are the
following: “inflated self-esteem (grandiosity, which may be delusion-
al)” and “excessive involvement in activities that have a high poten-
tial for painful consequences which is not recognized, e.g. buying
sprees . . . foolish business investments.” It’s common for manic
individuals to succumb to “grandiose delusions involving a special
relationship to God, or some well-known figure from the political,
religious or entertainment world.”
McDougal’s attorney had gone so far as to file, and later with-
draw, an insanity plea during his 1990 bank fraud trial. Given his
financial situation during the 1980s—his heavily mortgaged real
estate investments, his ownership of a small, unprofitable bank and
floundering S&L—and the fact that McDougal suffered from man-
ic-depressive illness, serious trouble was inevitable.
| 11
Swindling (And
Smearing) The Clintons
TWO
While Jeff Gerth’s Sunday article may have left little impression
on most Times readers, it was thrilling to L. Jean Lewis in Tulsa,
Oklahoma. She was not, as it turned out, alone in her excitement.
Lewis was an investigator for the Resolution Trust Corporation
(RTC), the temporary federal agency created during the Bush ad-
ministration to bail out savings and loan depositors and liquidate
the assets of institutions seized by the government. A 38 year-old
former executive secretary in a failed Dallas thrift, Lewis was neither
a lawyer nor a CPA. When she joined the RTC, she had no previous
law enforcement experience. Having grown up in a military family in
Texas, Lewis proudly identified herself as a conservative Republican.
(In a contemporaneous letter to a friend, she described Bill Clinton
as a “lying bastard.")
She worked out of the RTC’s Tulsa office, until she was later
transferred to Kansas City, and her job was mostly routine: to sift
through the records of failed Arkansas thrifts for evidence of fishy
transactions. Consulting closely with the FBI’s Little Rock office,
Lewis had compiled a prioritized list of Arkansas institutions to be
looked into. At the top, as of December 1991, she had placed the
two largest failed thrifts in the state, Saver’s Savings and First Feder-
al, both headquartered in Little Rock. Saver’s had collapsed at a cost
of $650 million, First Federal at a cost of $950 million—both amid
strong FBI suspicions of criminal fraud. First Federal alone had
squandered roughly 20 times the amount lost by Jim McDougal’s
Madison Guaranty, which stood, sensibly enough, near the bottom
of Lewis’s list.
12 | Joe Conason and Gene Lyons

All that changed, however, with the publication of Gerth’s story
three months later.
The following morning, on March 9, the RTC’s Tulsa field of-
fice got two calls from senior RTC officials in Washington inquiring
about the accuracy of Gerth’s allegations. The acting head of in-
vestigations looked over the Madison Guaranty file and responded
with a memo stating that “the Whitewater Development loan was
not specifically classified by Federal Examiners, and . . . [the record]
does not show any [bank] losses related to the Clintons or White-
water development.... Bill and Hillary Clinton are not named in any
of the documents contained in our criminal referral files.” In fact,
neither Whitewater nor the Clintons had ever borrowed from Mad-
ison Guaranty.
Nevertheless, Lewis and her supervisor, Richard Iorio, moved
Madison Guaranty to the top of their investigative list. Lewis quickly
headed to Little Rock to search out more documents stored in a
downtown warehouse.
Did Hillary Rodham Clinton know about or suspect problems
with Whitewater that she didn’t want the press to discover? Certainly
what she had learned when she took over the tangled affairs of the
Whitewater Development Corporation in 1988—after McDougal
had left the hospital and moved to California— had given cause for
concern. Piecing together the company’s jumbled records had been
almost impossible, and many documents were missing. Property
taxes, in some instances, hadn’t been paid for years. The owner of
a lot financed personally by Hillary had gone into bankruptcy. (She
had never been notified, and McDougal had made no payments on
the note.) The corporation’s state franchise fees hadn’t been paid for
several years, a potential embarrassment had Bill Clinton’s political
rivals ever uncovered it.
Given the depressed real estate market during the mid-‘80s,
Whitewater probably would have lost money anyway. The site,
though picturesque, had been badly chosen. The nearest towns with
gas stations, grocery stores, a hospital, or a golf course were more
than a 45-minute drive away over narrow, steep, curvy roads. And
Marion County, where Whitewater was situated, is also dry—no al-
coholic beverages.
The Hunting of Hillary | 13
Years later, when an objective accounting of the Whitewater
project became available, it was clear that as its managing partner,
McDougal turned a poor investment into something much worse.
He had treated the Clintons’ investment as if it belonged to him
personally, abused their trust, sold the company’s assets at a steep
discount to the realtor who was supposed to be its agent, deceived
his partners about its condition over a period of several years, and
arguably committed several crimes in the process.
In 1985, without telling the Clintons, McDougal had liquidated
Whitewater’s real estate assets for pennies on the dollar. He sold
all of Whitewater’s remaining lots (24 of the original 44) to one
Chris Wade, the realtor charged with marketing and selling the de-
velopment. The asking price for 23 of those 24 lots, according to
a “Whitewater Estates” inventory list dated November 1984, had
been $191,550.
In return for the land, however, Wade put down no cash. He
agreed to assume $35,000 of the $96,000 still owed by the Clin-
tons and McDougals on the original 1978 loan that had financed
the project. (Wade was so slow to pay his share that the bank was
still charging the Whitewater Development Company interest on the
money until 1992.) As payment McDougal also accepted from Wade
a 1979 Piper Seminole airplane, worth $35,000, which he promptly
pressed into service as Madison Guaranty’s official corporate air-
craft. Eventually he sold the airplane and kept the money himself.
Whitewater’s real estate assets were gone, but the Clintons didn’t
know it. They wouldn’t learn many of these details until years after
the fact. Outwardly flush, in May 1985, Madison Guaranty put the
Rose Law Firm on a $2,000-a-month retainer, and McDougal hosted
a political fund-raiser for the governor in the lobby of the thrift’s
newly refurbished downtown Little Rock headquarters.
It wasn’t until Hillary took over the company’s records that she
and her accountants learned that the company had been all but for-
mally defunct for over four years. Although more than $134,000 had
been deposited in the Whitewater account between 1984 and 1986
from other McDougal-owned companies, roughly the same amount
had been paid out, much of it to individuals and companies having
nothing to do with Whitewater.
14 | Joe Conason and Gene Lyons

In November 1986, McDougal had written the Clintons of-
fering a deal. The letter arrived several months after the Rose Law
Firm had dropped Madison Guaranty as a client, and regulators had
forced his removal from the S&L. McDougal had also recently suf-
fered a stroke, and he was hospitalized for manic-depressive illness.
To spare them any public embarrassment, he proposed that they
simply hand over their share of Whitewater. In essence, he was of-
fering to buy their share of the corporation for half the amount of
the $90,000 losses, which he planned to claim on his federal taxes.
The problem was that the company still owed almost $90,000 to
Citizens Bank, which refused to release the Clintons from liability. In
effect, they were being asked to give up their share of what they mis-
takenly believed was an asset in return for assuming a $90,000 debt.
Not surprisingly, Hillary Clinton balked and demanded to see
Whitewater’s books, infuriating McDougal. In December 1986, he
wrote to the Clintons again. Despite current cash-flow problems,
he claimed, Citizens Bank had agreed to reduced payments, and the
Clintons didn’t owe him any money. But there was no such agree-
ment with the bank. By 1988, after both McDougals had left Arkan-
sas for California, Hillary was forced to take over the management
of Whitewater—finding an empty shell, its assets stripped, its debts
and taxes unpaid, its records disordered and incomplete.
The Madison ledgers Jean Lewis pulled from the dusty Little
Rock warehouse were as chaotic as the Whitewater documents that
Hillary had obtained four years earlier. Worst of all were the records
of the checking accounts of McDougal’s dozen real estate compa-
nies. What Lewis uncovered would have confirmed Hillary’s worst
fears.
Madison Guaranty had drifted into deep financial distress for
the same basic reason that hundreds of other thrifts faltered during
the 1980s. Forced by the Federal Reserve to pay ruinously high in-
terest rates on deposits, their income was restricted by the long-term
low-interest mortgages they held. Hemorrhaging money, they were
encouraged by Congress and the Reagan administration to make up
the difference by speculating in real estate. Those regulatory “re-
forms” had lured McDougal into the thrift business, but no sooner
had he taken over Madison Guaranty than the same ruinously high
The Hunting of Hillary | 15
interest rates sent the real estate market into a tailspin.
Faced with cash-flow problems, Lewis found, McDougal had
begun a frantic fiscal juggling act, commingling funds and moving
money back and forth among the corporations and partnerships he
controlled. The Clintons and Jim Guy Tucker were by no means the
only business partners whose trust he had abused.
Following Gerth’s lead, Lewis focused her attention on the last
six months of 1985, when Beverly Bassett Schaffer had supposedly
done favors for Madison Guaranty’s owner. Finding evidence of
McDougal’s fiscal shenanigans everywhere she looked, Lewis leaped
to a conclusion well beyond the New York Times reporter’s imagining:
Everyone in Arkansas who had ever done business with Madison
Guaranty, including the Clintons, was part of a huge conspiracy, she
seemed to surmise in her criminal referrals. Every transaction that
appeared to benefit McDougal must also have benefited his partners,
according to her theory.
By August 1992, the Little Rock FBI agents assigned to inves-
tigate financial crime were growing impatient with Lewis and the
RTC. Her agency, having seized the records of bankrupt institutions
across the country, controlled all the paperwork in thrift investiga-
tions. Without referrals from the RTC, law enforcement officials
could not move forward on potential fraud cases. Lewis’s months of
work on Madison Guaranty struck the agents as a waste of time and
money, and her motives seemed suspiciously political. On August
26, FBI special agent Steven Irons spoke with Lewis by phone. He
took notes of the conversation.
According to his notes, Lewis informed Irons that she had been
given a deadline of August 31 to file a referral on Madison Guar-
anty, and that there were “big names involved.” Lewis claimed that
she “gave up a job opportunity in D.C. just to do referral. She or it
could alter history—very dramatic.”
Irons would later testify he had no doubt that Lewis’s motive
was to disrupt the 1992 presidential election in favor of George H.W.
Bush. Later that day, his Little Rock supervisor, Special Agent in
Charge Don Pettus, sent a telex to FBI Headquarters in Washington,
expressing his professional frustration. Pettus sought permission to
16 | Joe Conason and Gene Lyons

press ahead on the First Federal and Saver’s Savings cases, without
the RTC’s help.
On August 31, Lewis delivered as promised. She filed a criminal
referral with the FBI and the U.S. attorney in Little Rock, naming not
only James and Susan McDougal as felony suspects, but also each
and every contributor to the 1985 Clinton fund-raising event held at
Madison Guaranty. As “possible witnesses” she listed both Bill and
Hillary Clinton, Arkansas lieutenant governor Jim Guy Tucker, and
retired U. S. Senator J. William Fulbright, another Arkansas Demo-
crat who had invested with his former aide McDougal. She named
none of the Republicans who had done business with McDougal or
Madison.
Normally, criminal referrals from the RTC took months to be
processed. But within days, Lewis started pestering FBI agent Irons
and the U.S. Attorney’s staff in Little Rock with demands for im-
mediate action. After Irons stopped returning her calls, she left a
taunting message with the office receptionist.
"Have I turned into a local pariah,” Lewis demanded, “just be-
cause I wrote one referral with high profile names, or do you plan
on calling me back before Christmas, Steven?????” (She specifically
dictated the five question marks.) Irons returned her call only to tell
her to back off.
Word of Lewis’s efforts filtered back to the Clinton campaign
sometime between mid-September and early October, when long-
time aide Betsey Wright got a phone call from a supporter in Cali-
fornia. On a recent business trip to Kansas City, the man said, he had
attended a cocktail party where a female RTC staffer boasted that
she had “just sent a criminal referral up to the prosecutor in Little
Rock... which would implicate the Clintons.” (Three months earlier,
the RTC had closed its Tulsa office and transferred Jean Lewis to
Kansas City.) And although Wright had no way of knowing it, there
were signs around the same time that the White House, the Justice
Department, and the Bush campaign were taking a direct interest in
Lewis’s machinations.
William Barr, then serving as Bush’s attorney general, later
testified that White House cabinet secretary Edith Holiday asked
him about the Lewis referral during a flight on Air Force One on
The Hunting of Hillary | 17
September 17, 1992. At the time, Holiday was “chief liaison” be-
tween the White House and the 1992 Bush- Quayle campaign.
Previously she had served as operations director of the 1988 Bush-
Quayle campaign, and then as general counsel to the Treasury De-
partment. That week, Barr asked his aides to contact the FBI, which
informed them it had no record of such a case. He reported back to
Holiday, who seemed surprised. Her demeanor made him wonder
whether “she had better information” than he did, he recalled. (Un-
der oath, Holiday later said she did not remember any conversations
with Barr about Madison Guaranty and the Clintons.)
On September 18, Lewis turned up in Irons’s Little Rock office
after a meeting he did not attend. The agent told her that due to its
sensitivity, no action would be taken on her referral until after the
November election. She warned him that RTC officials in Wash-
ington expected action. Much to Lewis’s eventual chagrin, Irons
once again made contemporaneous notes of their conversation. At
the same time, Lewis made repeated calls to career prosecutors on
the staff of U.S. Attorney Charles Banks in Little Rock. They too
questioned both her motives and her referral’s substance. Assistant
U.S. Attorney Fletcher Jackson saw no point in pursuing McDougal
again. “The prior acquittal,” he told Banks, “would be used against
you to make this look like a vindictive prosecution.”
What Lewis described as illegal “check-kiting” at Madison, Jack-
son regarded as a slightly different kind of scam, though he didn’t
quarrel with her terminology. Check-kiting usually involves writing
bad checks among several banks to create illusory balances. Instead,
McDougal was shifting money back and forth among several ac-
counts within his own bank.
“From appearances,” he would later testify, “it’s just McDougal
taking care of McDougal and McDougal’s corporations. What it ap-
peared to be was that most of the manipulation Mr. McDougal was
doing was to make the debt carry. In other words, he was doing all of
these fraudulent transactions, in a sense, in order to make his interest
payments and principal payments on debts that he had.” If McDou-
gal’s actions were in fact crimes—and Jackson had his doubts—the
Clintons and his other business partners appeared to be his victims,
not his accomplices.
18 |
U.S. Attorney Blocks
Partisan Political Probe
THREE
Around the end of September or the beginning of October,
the Bush White House also displayed a discreet interest in the Mad-
ison matter. Sometime during that period, White House counsel C.
Boyden Gray called Albert Casey, the chief executive of the RTC
in Washington. Casey later testified that Gray asked him what he
knew about an RTC matter involving the Clintons. He knew noth-
ing, Casey said he replied, but he promised to look into it and call
Gray back. Casey then called RTC vice president William Roelle,
who confirmed the existence of Lewis’s referral, and showed him
a copy. Roelle later testified that he told Casey that he should not
provide any information to the White House.
Before Casey could reach Boyden Gray, however, the White
House counsel phoned him again. “Al, forget my request,” Casey
remembered Gray saying. “I don’t want you to tell me a thing.” Gray
himself would later deny any memory of those conversations with
Casey. Any such call, he said, would have come from the Bush cam-
paign, not the White House. Campaign officials echoed Gray’s denial,
saying they had no idea that Madison was being investigated in 1992,
and that the campaign had a strict rule that “nobody... was to talk
to anybody in the government about Clinton.” Only a “third-level,
junior person” would have done something like that, they insisted.
Attorney General William Barr was considerably less cautious.
After his conversation with Edith Holiday, Barr insisted that his
aides check once again whether Madison was the subject of a Justice
Department probe. When a second inquiry to the Executive Office
of U.S. Attorneys brought confirmation of the RTC referral, Barr
became angry because he felt that Chuck Banks had “deliberately
The Hunting of Hillary | 19
withheld information about the referral from me.”
On October 7, the Little Rock office of the FBI responded with
a lengthy telex to its superiors in Washington, expressing extreme
skepticism about the validity of Lewis’s referral. After summarizing
Jim McDougal’s 1990 trial and shaky psychological state, it added
that despite “the referral’s stated supposition that the activity was
for the benefit of the McDougals, the further supposition that other
people benefitted does not appear to be factually supported by the
details that follow.
“It is the opinion of Little Rock FBI and the United States
Attorney... that there is indeed insufficient evidence to suggest the
Clintons had knowledge of the check-kiting activity conducted
by McDougal... [who] was in charge of [Whitewater] records, just
as he was with the records of other companies involved in the
check-kiting, and does not suggest the Clintons had access to check-
ing account statements that would have reflected the questionable
transactions.... It was also the opinion of [Banks that] the alleged
involvement of the Clintons in wrongdoing was implausible, and he
was not inclined to authorize an investigation or render a positive
prosecutive opinion.”
On October 8,1992, Barr sent one of his assistants to a top-level
meeting attended by Robert Mueller, then head of the Justice De-
partment’s Criminal Division, FBI assistant director Larry Potts, and
several senior FBI officials. At that point, the Madison Guaranty
referral was definitely a matter of active interest at main Justice. The
next day, FBI Headquarters sent a telex to its Little Rock field office,
ordering agents there to review Jean Lewis’s criminal referral and
report in writing by October 16—less than three weeks before the
1992 presidential election.
As far as Banks was concerned, that order sealed his decision. A
native Arkansan, he had been a Republican congressional nominee
in 1982 and had also served as general counsel of the state par-
ty. As such, he had once brought a lawsuit against Bill Clinton for
what he considered the politically motivated firing of a Republican
labor commissioner. Appointed by Ronald Reagan in 1988, Banks
had been nominated to a federal judgeship in August 1992 by Pres-
ident Bush. His nomination was still pending in the U.S. Senate. If
20 | Joe Conason and Gene Lyons

anybody in Arkansas had a personal interest in seeing Bush reelected
in 1992, it was Chuck Banks.
But Banks also had his limits. He would not be used political-
ly. He had come to distrust Jean Lewis’s motives, and believed that
charging Jim McDougal again would be a cruel and unnecessary
waste of his office’s resources. Further, based on the documents
Lewis had produced, he saw no persuasive evidence against the Clin-
tons or Jim Guy Tucker. More than once, Banks discussed the case
with Don Pettus, the special agent in charge of the FBI’s Little Rock
office, who shared his misgivings.
As the October 16 deadline approached, Banks decided to put
his objections in writing. Dictating a letter to Pettus, he began by
repeating all the reasons he had turned down the RTC’s criminal
referral in the first place. Then he staked out an uncompromising
position: “I am now advised that you have been ordered to do an
immediate review to determine if an investigation is warranted. As
part of same, you are required to send a prospective proposal for
such an investigation by Friday, October 16, 1992. Such an order
does not apply to this office.
“However, I do believe it might be helpful to reiterate what I
have told you previously. Neither I personally nor this office will par-
ticipate in any phase of such an investigation . . . prior to November
3, 1992. You may communicate this orally to officials of the FBI or
you should feel free to make this part of your report.
“While I do not intend to denigrate the work of RTC,” Banks
added, “I must opine that after such a lapse of time the insistence
of urgency in this case appears to suggest an intentional or uninten-
tional attempt to intervene into the political process of the upcom-
ing presidential election. You and I know in investigations of this
type, the first steps, such as issuance of grand jury subpoenas for
records, will lead to media and public inquiries [about] matters that
are subject to absolute privacy. Even media questions about such an
investigation in today’s modern political climate all too often publicly
purport to ‘legitimize what can’t be proven.’
“For me personally to participate in an investigation that I
know will or could easily lead to the above scenario . . . amounts to
The Hunting of Hillary | 21
prosecutorial misconduct and violates the most basic fundamental
rule of Department of Justice policy. I cannot be a party to such
actions.”
Banks closed by promising to direct “any press inquiry from
any source whatsoever” to the Attorney General or the head of the
RTC. Such a statement from Banks would, of course, have been
devastating to the Bush campaign. Whoever won the November
election, Chuck Banks’ government career was probably over.
The FBI’s Little Rock office dispatched its report to Washing-
ton on October 16 as ordered, stating that there was “absolutely no
factual basis to suggest criminal activity on the part of any of the
individuals listed as witnesses in the referral.” The telex went on to
complain again about the RTC’s failure to provide criminal referrals
on the two much larger thrifts, Savers’ Savings and First Federal Sav-
ings, whose combined losses of $1.5 billion offered “much greater
prosecutive potential” than Madison Guaranty.
Aside from the daunting complexities of Whitewater, Boyden
Gray’s sudden loss of interest may have reflected worries that were
closer to home for the Bush family. Certainly neither the White
House nor the Bush campaign would have wanted to risk drawing
attention to the business dealings of the president’s sons—in par-
ticular, Neil Bush’s role as director of a corrupt Colorado savings
and loan whose bankruptcy cost taxpayers a billion dollars. That was
a story several reporters were pursuing around the time of Gray’s
phone calls to Albert Casey. It was more prudent to forget about al-
leged financial misdeeds and focus instead on Clinton’s draft evasion.
So there would be no “October sur