- The Washington Times - Tuesday, July 15, 2003

A federal appeals court panel said yesterday that the federal government is not obligated to pay the legal fees of former President Bill Clinton and his wife, Sen. Hillary Rodham Clinton, for their defense in the seven-year, $70 million Whitewater investigation.

The three-judge panel, sitting as a “special division of the court” that oversaw the appointment of independent counsels, unanimously ruled that a petition by the Clintons for reimbursement of $3.5 million in attorneys fees and costs “is not well taken” and ordered that the request be denied.

In a 14-page ruling, the panel said the Clintons, who escaped criminal charges in the Whitewater probe after investigators found “insufficient evidence” to take the matter to trial, would have been the target of a federal investigation in the matter with or without the appointment of an independent counsel and, as a result, should pay the overwhelming majority of the legal costs.

“We harbor no doubt that in the absence of the independent counsel statute the allegations surrounding the Clintons, Madison Guaranty, and Whitewater would have been similarly investigated and prosecuted by the Department of Justice,” said the panel, which ordered the government to pay only the $85,312 the Clintons’ attorneys charged to review and respond to the independent counsel’s final report.

It was not clear how much the Clintons owe in legal fees. Their petition called for the reimbursement of $3.5 million, although Mrs. Clinton, New York Democrat, listed outstanding legal bills of between $1.7 million and $6.5 million on her most recent financial disclosure forms.

The Clintons were not available yesterday for comment. Their Washington attorney, David Kendall, said in a statement that former President Ronald Reagan had been reimbursed $562,111, or 72 percent, in legal fees in connection with the Iran-Contra case, and his vice president, George H.W. Bush, had received $272,352, or 59 percent, of his legal fees.

“The facts and the numbers speak for themselves,” said the statement, noting that the Clintons have received a reimbursement of only 2 percent. “The good news is that the partisan Whitewater smoke-and-mirrors investigation is finally over.”

The Whitewater probe initially focused on a questionable Arkansas land deal involving the Clintons and their business partners, James and Susan McDougal, but expanded to include a number of concerns — culminating in an investigation into whether Mr. Clinton lied to a federal grand jury and in a court deposition about his affair with White House intern Monica Lewinsky.

The House of Representatives voted to impeach Mr. Clinton, saying he had lied to cover up the liaison. The Senate, after a trial, declined to convict him.

The Whitewater investigation ended in March last year when Robert W. Ray, named in October 1999 to replace independent counsel Kenneth W. Starr, said there was “insufficient evidence” to bring charges in the case. His final report said James McDougal illegally used cash from his failing Little Rock thrift, Madison Guaranty Savings and Loan, to prop up the Arkansas land deal, but prosecutors lacked evidence to bring charges against the Clintons.

But the report also said that “some of the statements given by both the president and the first lady during official investigations were factually inaccurate.”

The McDougals were convicted in 1996 on fraud and conspiracy charges in a $3.1 million scheme involving bogus loans through Madison Guaranty. James McDougal, sentenced to three years, agreed to cooperate as the government’s chief witness but died in prison of a heart attack. Susan McDougal refused to cooperate with prosecutors and went to prison for 19 months. She received a pardon from Mr. Clinton in January 2001.

The Whitewater investigation netted 14 convictions or guilty pleas, including those of the McDougals, Arkansas Gov. Jim Guy Tucker and Associate Attorney General Webster L. Hubbell, who was Mrs. Clinton’s law partner at Little Rock’s Rose Law Firm.

The probe, begun in 1994, focused on accusations that the Clintons knowingly participated in criminal conduct related to Madison, which failed that year at a $73 million cost to taxpayers.

The inquiry found insufficient evidence to prove that Mr. Clinton had lied when he told a jury in the McDougal trial that he had never borrowed any money from Madison, when he told the same jury that he did not know about a $300,000 loan by Little Rock banker David L. Hale to Susan McDougal, and when he denied knowing how Mrs. Clinton’s firm had been hired by Madison to represent the thrift in matters before state regulators.

There also was insufficient evidence to prove that Mrs. Clinton had made false statements to the Resolution Trust Corp. regarding the relationship between Madison and the Rose firm, as well as her work related to the thrift, and that she sought to obstruct the Whitewater probe by withholding information in connection with billing records of her firm.

Mr. Ray’s report said prosecutors could not rule out the possibility that Mrs. Clinton had played a role in the disappearance and later discovery of the billing records. The records vanished after the 1992 election and mysteriously surfaced in the White House living quarters in 1996 — 18 months after the first lady had received a subpoena for the documents.

Mrs. Clinton’s legal representation of Madison Guaranty also was of major concern to prosecutors and federal banking regulators, who focused on an option agreement she and Mr. Hubbell wrote facilitating a $300,000 payment to Hubbell’s father-in-law, Seth Ward.

The option illegally guaranteed Mr. Ward a payoff and negated his liability in an Arkansas land venture known as Castle Grande. The Federal Deposit Insurance Corp. said in September 1996 that Mrs. Clinton and Mr. Hubbell drafted legal papers that Madison used to deceive bank examiners and divert the $300,000 to Mr. Ward.

The FDIC said the papers “facilitated the payment of substantial commissions to Mr. Ward, who acted as a straw buyer” in Castle Grande. A straw buyer is one who owns property in name only, having never put up any money or assumed any risk.

The FDIC said the Ward payment violated federal regulations, although it did not accuse Mrs. Clinton or Hubbell of criminal wrongdoing. But it raised serious questions about their involvement in a real-estate deal that cost taxpayers $3.8 million when Castle Grande failed.

In a sworn statement to the FDIC, Mrs. Clinton denied working on the option, although the Rose firm’s billing records discovered in the White House showed that the word-processing code used by the firm for legal documents prepared by Mrs. Clinton is on four pages of the option.

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