A PIG IN A POKE
SOMETIME DURING the late afternoon of July 20, 1993, deputy White House counsel Vincent Foster left his office, drove across the Potomac River to Fort Marcy Park, sat down on a grassy hillside, put an old revolver in his mouth, and pulled the trigger. His body was discovered at 5:45 P.M. by officers from the U.S. Park Service police, who treated the incident from the very first as a routine investigation, made politically sensitive only later by the identity of the victim. Despite the incessant promotion ever since of strange theories about Foster’s death—ranging from a soured affair with Hillary Clinton to a hit by an Israeli spy ring—that initial Park Police report was eventually substantiated by five separate federal investigations, two performed by independent counsels Robert Fiske and Kenneth Starr. All concurred in a finding of suicide caused by clinical depression.
Still, the notion persisted that Foster had died because he “knew too much,” as did speculation about the Little Rock lawyer’s possible reasons for killing himself or being killed by someone else. Foster, a close confidant and former law partner of Hillary Clinton, had certainly endured a series of embarrassing events during the final few months of his life. A shredded note found in Foster’s briefcase, apparently jotted down not long before his death, indicated how worried he felt about his role in the wholesale firing of the White House Travel Office staff two months earlier, and the criticism directed at him and the Clintons in that ugly incident’s wake.
“I made mistakes from ignorance, inexperience and overwork,” he wrote in small, neat longhand on a yellow legal pad. “I did not knowingly violate any law or standard of conduct. No one in the White House, to my knowledge, violated
any law or standard of conduct, including any action in the travel office … . The FBI lied … . The press is covering up the illegal benefits they received from the travel staff. The GOP has lied and misrepresented its knowledge and role and covered up a prior investigation … . The public will never believe the innocence of the Clintons and their loyal staff. The (Wall Street Journal) editors lie without consequence. I was not meant for the job or the spotlight of public life in Washington. Here ruining people is considered sport.”
Foster’s terse, bitter note expressed the anguish of an administration embattled almost from the moment President Clinton took the oath of office. The Clinton White House had enjoyed no postinaugural honeymoon. Clinton and his novice staff suffered one stumble after another, to the grim delight of a Washington press corps perpetually suspicious of newcomers. That the Clintons came from Arkansas, a small state remote from the nation’s centers of power and little known to most Washington journalists, did nothing to lighten the atmosphere.
Undoubtedly, the Washington press corps distorted the Travel Office story, and did so partly out of self-serving bias. They largely failed to report allegations of mismanagement and malfeasance by Travel Office director Billy Dale. His attempt to plea-bargain the criminal charges also received little press coverage, and his subsequent trial was completely ignored until he was acquitted. The prosecution’s case against Dale, which offered evidence that over $50,000 in Travel Office funds had been funneled to his personal bank account, went unreported. As Foster’s note suggested, many in the White House press corps had journalistic conflicts in covering a trial of a defendant from whom they had garnered past favors. A few, notably ABC News correspondent Sam Donaldson, went so far as to volunteer their testimony as character witnesses at Dale’s trial.
Yet the defensive tone of Foster’s note suggests he may have realized that the Travel Office furor was not altogether unjustified. The office’s seven career employees were dismissed with undue haste, unnecessary clumsiness, and an unbecoming disregard for their rights. And while the stated desire of low-level Clinton aides was to “reform” the Travel Office, that hardly concealed their own patently selfish motives. Moreover, White House lawyers and communications officials, led by presidential assistant George Stephanopoulos, had compounded the damage by publicly announcing the FBI investigation of the Travel Office to justify the firings.
As Washington scandals go, however, “Travelgate” was a minor affair, too minor to make Foster take his own life. Not all suicides have rational causes, particularly when the victim suffers from depression. Doubts were nevertheless aroused by the discovery of an odd coincidence: On the same day Vince
Foster shot himself, the Little Rock office of the FBI obtained a search warrant for the premises of one David Hale, a local businessman and part-time municipal judge.
The Hale search warrant became an issue in the Foster investigation only long after the fact because of sensational charges later leveled by Hale against Clinton, whom he accused of having “pressured” him into making an illicit $300,000 loan to James and Susan McDougal in 1986. Those who drew a connection between Whitewater and Foster’s death surmised that the deputy White House counsel, possessing intimate knowledge of the Clintons’ tangled finances, feared whatever might be found in Hale’s office. In sworn testimony before the Senate Whitewater committee, however, FBI officials testified that after investigating the matter, they “could find no reason to believe that there was information leaked with regard to the [Hale] search warrant.” Nor did FBI agents ever find evidence to incriminate the Clintons in Hale’s files.
But that didn’t mean there was no reason to worry about David Hale.
Far from the Washington Beltway, the Foster suicide also aroused the investigative and pecuniary instincts of Larry Nichols and Larry Case. Unsurprisingly, they assumed the case was all about sex, specifically Foster’s long-rumored love affair with Hillary Clinton.
This kind of sniping, explained Webster Hubbell in his memoir Friends in High Places, came with the territory Hillary had staked out for herself in Arkansas. Because Hillary was the first female partner in the upper-crust Rose Law Firm, her close professional and personal relationships with Foster and Hubbell provoked resentment in the tightly knit community surrounding the Little Rock Country Club. The governor’s wife was an inevitable focus of gossip, and everything she did provoked idle chatter. If Hubbell and Foster were sometimes said to be her lovers, at other moments her friendships with other professional women provoked speculation that Hillary was actually a lesbian.
Nobody who knew the painfully reserved Foster well ever gave any credence to his supposed liaison with Hillary. Certainly his widow, Lisa, didn’t believe it. But the skeptics didn’t include detective Larry Case, who saw an opportunity to get back in business. He and Nichols had never acted on their preelection impulse to turn on their Republican sponsors, and their jitters about Clintonian revenge had proved unfounded. With Clinton in the White House, they were still hoping to make their fortunes by ruining his reputation.
Nichols had a theory of his own about Foster’s death. He told Case he had heard it from Michael Isikoff of the Washington Post, who called to ask him whether it was true that two White House officials were trying to muzzle Nichols about a tape recording he had made in 1990 of Rose Law Firm employees gossiping about Foster and Hillary. Even Nichols knew the tape was worthless.
“Whoever you talked to at the Rose Law Firm,” Case asked, “did they name Vince Foster and Hillary?”
“Yeah, they did,” Nichols said. “Named troopers that took them over there. But again, if [Larry] Patterson and those guys [in the Clintons’ former security detail] don’t talk, then it don’t mean nothing … . Isikoff, bless his heart, I was almost rude to him. I don’t mean to be. But today, I just didn’t need that shit. What Isikoff was telling me was that he knows for a fact from a senior White House official that they’re trying to cool me. Now who else are they calling and cooling off? And if so, why?”
A few days later, Nichols was feeling a bit more sanguine. He claimed to have pieced together the inside story from conversations with Isikoff and Jerry Seper, an investigative reporter for the Washington Times. According to Nichols, Foster had taken his life due to a mistaken belief that the Washington Times was about to publish a story about his alleged affair with Hillary Clinton. In truth, the Moonie newspaper had no such story in the works.
“I just feel bad for Vince,” Nichols said. “That was a stupid thing to do when nothing was happening … . Foster killed himself for nothing, and they went into all this damage control for a story that was never going to come.”
Despite having spent a good deal of time with Isikoff during the 1992 campaign, Nichols didn’t trust the Post reporter.
“I’m telling you,” he warned Case, “Isikoff’s a snake.”
“Oh, I know what he can do.”
“Everything Isikoff was telling me,” Nichols said, “I was real guarded, because I figured he was just fishing for Clinton. But I’d sure like to be in the middle of this one. You and I can do shit the media can’t do. We can lie, and get the information, and then give it to the media. I don’t know why the media don’t figure this out. You walk up to somebody and flash your New York Times ID, they’re going to clam up. If you go out and get them drunk, you don’t even have to wire yourself. Just take a little pocket recorder. You can get all you need … .”
At that moment, Larry Case had no way of knowing that the Foster suicide and its aftermath would soon provide his erstwhile partner Nichols with a means of transcending the niggling constraints of the news media and making real money. Isikoff would likewise go on to much greater things. But to his immense frustration, Case and his ever-present tape recorder would be left far behind.
When a squad of FBI agents burst into the offices of Capital Management Services (CMS) in downtown Little Rock on July 21, 1993, and started carrying out boxes of files, their arrival ended several weeks of suspense for the company’s proprietor, David Hale. While sitting as a judge in the city’s municipal court, Hale had continued to operate several enterprises, the most lucrative
being Capital Management Services, a private small business investment company (SBIC) that made loans backed by the U.S. Small Business Administration. With SBA funding and a license obtained in 1979, Capital Management Services was originally chartered to lend to businesses owned by minorities and other “disadvantaged” entrepreneurs. Under the Reagan administration, however, those federal requirements had been loosened to the point where virtually anybody qualified for an SBA loan—a loophole Hale exploited to the fullest advantage.
Hale’s angle was a federally subsidized variation on the classic “bust-out” scheme. In collaboration with prominent political figures and others, he had loaned millions of federal dollars to more than a dozen dummy companies he secretly owned. Having no cash flow and no assets, his companies had then defaulted on the loans after Hale siphoned off all the money The ultimate accounting would show that he had walked away with as much as $3.4 million.
This kind of crude fraud could hardly continue undetected forever. (A rather obvious clue was that the dummy companies all listed the same address as Hale’s office.) By the end of 1992, Capital Management had drawn the scrutiny of SBA officials. Attempting to qualify for increased federal matching funds, Hale had confided to an administrator at the agency’s Washington headquarters that millions in noncash assets had been “donated” to the firm thanks to his political influence. When the SBA proposed an audit, Hale attempted to withdraw his application, which aroused immediate suspicions. As soon as SBA investigators started poring over Hale’s records, they found fraudulent entries everywhere they looked. Of fifty-seven outstanding loans on Capital Management Services’ books, thirteen had gone to dummy corporations controlled by Hale. Altogether, he’d advanced the phony companies about $2.04 million.
Perhaps the most cynical aspect of Hale’s scam was his exploitation of SBA matching funds. For every dollar of operating capital CMS came up with, the taxpayers kicked in three. Hale would finance a loan to one of his dummy companies, default on it, and then use the embezzled funds to generate more operating capital on a three-to-one basis. He repeated this pyramid scheme many times. Hale also ran various real estate and insurance frauds to raise more operating capital. One of the SBA investigators later told Senate staffers that Hale’s embezzlement scheme was the most brazen he’d encountered in his twenty-five years with the agency. The SBA’s inspector general swiftly referred the case to the FBI. No later than May 1993, Hale knew that federal officials were taking a hard look at his operation.
The FBI’s seizure of his records concluded a long and remarkable dual career for David Hale. Publicly, he was a pillar of the community; privately, he was an inveterate con artist. Though his record as a judge was undistinguished, Hale
came from an old hill-country clan with a long history in state politics, and he had established himself in Little Rock at an early age. Friendly and personable, a backslapper and glad-hander, he had pledged the right fraternity at the University of Arkansas; as a young businessman he had joined the Junior Chamber of Commerce, and he was elected national president of the Jaycees in 1974.
Regardless of his family’s strong Democratic background, Hale never allowed partisan loyalties to obstruct his personal interests. He carefully cultivated the powerful, Republicans and Democrats alike. Hale was a longtime associate of Sheffield Nelson, the president’s bitterest GOP rival. Many news reports would identify him as a Clinton appointee, but in fact Hale’s judicial robes were bestowed upon him in 1981 by Governor Frank White, the Republican who had defeated Clinton’s first bid for reelection the previous year. White signed a bill creating the judgeship for Hale, including an unusual provision that permitted him to run for election to the bench after his appointed term expired, a circumstance normally prohibited by the state constitution.
The entire scope of Hale’s crimes, extending well beyond Capital Management, would not be revealed for years after the FBI raid. A few Arkansans had gotten a glimpse of Hale’s true character prior to his well-publicized disgrace. Though he professed to be a devout and happily married Baptist, Hale conducted a long-running illicit affair with his secretary. While romancing her, he managed to swindle her grandparents into signing over their family farm to him. They later sued the judge and won a $486,000 judgment. Years before Hale was caught, at least one business associate later accused of complicity in his crimes had made a trip to Washington at his own expense to warn SBA officials that Hale was corrupt. Unfortunately, those warnings were ignored. Also known as something of an eccentric, Hale was the only judge in Little Rock—his court handled misdemeanors and traffic cases—to have a bulletproof shield installed in front of the bench. Visitors were required to pass through not one but two metal detectors to enter his courtroom.
Hale would eventually proclaim on national television that he had once been a “close political friend” of Bill Clinton, at the same moment he accused the president of joining a felony conspiracy to defraud the United States government. Oddly, however, he had never donated significantly to any of Clinton’s political campaigns. And the clearest indication of Hale’s true loyalties was that in the raid’s aftermath, he immediately turned for help to Clinton’s bitterest adversaries.
To “guide him through the jungle” of federal law enforcement, Hale hired defense attorney Randy Coleman, the partner of Sheffield Nelson’s former campaign finance chairman. His new lawyer quickly ascertained from prosecutors that Hale would soon face several felony counts for a multimillion-dollar fraud against the Small Business Administration. With a federal indictment
only weeks away, Coleman placed a call to William Kennedy, an attorney in the White House counsel’s office whom he had known in Little Rock.
During a brief conversation, Coleman outlined Hale’s sudden legal difficulties and added that this “might pose some problems for our mutual clients.” When Kennedy asked him to be more specific, Coleman mentioned that the Hale investigation was likely to include the president’s Whitewater partners, James and Susan McDougal, who had received loans from Capital Management Services; also likely to be caught up in the case for the same reason was Arkansas governor Jim Guy Tucker. And because of the McDougal connection to Whitewater, Coleman hinted, the Clintons themselves might fall under suspicion.
When Kennedy asked what Coleman wanted him to do, the defense lawyer replied, “Well, I don’t want you to do anything. I’m just trying to figure out where everybody is on this matter.” Two days later, Kennedy called back to learn more details. Coleman read off a list of certain Capital Management transactions that were under investigation, mentioning the $300,000 loan to Susan McDougal. Would Hale allege any “face-to-face meetings”? Kennedy wanted to know. Taking this as a reference to Bill Clinton, Coleman said he would. Kennedy didn’t press any further, and Coleman remarked that if Heidi Fleiss was the “madam to the stars,” then David Hale was the “lender to the political elite in Arkansas.” (There was some truth to this quip, except that Hale loaned much more to elite Republicans, including two former party chairmen, than to Democrats.) Thanking him for the “heads up,” Kennedy said he might get back to Coleman, but never did.
As Coleman eventually admitted in Senate testimony, he hadn’t phoned Bill Kennedy simply to chat about the Hale case. He had hoped to provoke the White House into a foolish overreaction, such as interfering with the investigation in an attempt to keep Hale quiet. “I thought if I just made a provocative phone call, who knows what might transpire? These folks over here’d shown a propensity to make an ill-advised phone call or two in times past in their travel office situation, and I could just hope maybe it might happen again.”
No “ill-advised” action was taken by anyone in the White House, however, and Coleman entered into several weeks of fitful negotiations with the newly appointed U.S. attorney in Little Rock. Paula Casey, an active Democrat and former law student of Bill Clinton’s, had just taken over the office from her Republican predecessor, Charles Banks. Coleman’s bargaining position never changed from their first meeting, and Casey found it unacceptable, not to mention audacious. In exchange for unspecified information about possible crimes by unnamed members of the “political elite of Arkansas,” Coleman said, his client should be allowed to plead guilty to a misdemeanor. That way he could retain his judicial position and law license, and stay out of jail, too.
Casey and her deputy, veteran federal prosecutor Fletcher Jackson, told Coleman that based on the evidence against Hale, they wouldn’t even consider a deal unless he agreed to plead guilty to a felony—and made a written “proffer,” in advance, of any incriminating information he possessed about others. The proffer would then be tested for its veracity before any deal was made. These conditions were simply standard law enforcement procedure in dealing with any criminal defendant, let alone a con man of Hale’s magnitude. As career Justice Department officials later testified, approving a lenient plea bargain without a proffer from Hale would have been the legal equivalent of “buying a pig in a poke.”
As Coleman’s jousting with Casey dragged on, the defense lawyer tried to create a written record that would support Hale’s demand for a special prosecutor. On September 15, he sent a blunt letter to Casey accusing her of withholding a plea agreement because of “the potential political sensitivity and fallout regarding the information which Mr. Hale could provide to the [U.S. attorney’s] office.” He added vaguely that Hale’s information “would be of substantial assistance in investigating the banking and borrowing practices of … the elite political circles of the State of Arkansas, past and present.” He then asked Casey to step aside in favor of a special prosecutor.
Casey answered him by mail the following day. Hale’s veiled assertions posed no problem for her, she wrote, but his crimes were too serious to permit the free ride Coleman was demanding. Her insistence that Hale plead guilty to at least one felony count had been repeatedly rejected by his lawyer. “Therefore, our plea negotiations are at an impasse,” she concluded.
In the absence of a reasonable plea bargain and a proffer of useful testimony, Casey and her associates moved forward. On September 23, the federal grand jury in Little Rock handed up a four-count felony indictment against Hale charging him with fraud against the U.S. government.
The friend whose counsel Hale relied upon most as he faced criminal indictment wasn’t his attorney, but “Justice Jim” Johnson, the diehard segregationist and perennial Clinton nemesis. Although there was no indication that Hale shared Johnson’s extreme political outlook, their relationship went back decades. “I have known his family for three generations,” Johnson once recalled. “His deceased brother John was one of my strongest supporters.” They were so close, in fact, that during the tense summer of 1993, Hale went to live with the retired justice and his wife for a while at their farm, White Haven. From Johnson’s point of view, “David was a young man who was in some trouble, and it was because of things that he did with Bill Clinton. We wanted to see to it that they were not able to cover that up.” Telephone records show that during the months immediately following the FBI raid, Hale called Johnson’s office more than forty times.
It was under Johnson’s tutelage that Hale finally made his “proffer” about Clinton—not to the U.S. attorney, but to right-wing activists in Washington, and then to the news media. “I told him that with the influence the Clinton Administration and their friends had in the Federal court system here in Arkansas, that the only chance he had to help himself and his country was to see that all the facts were made available to the major news outlets throughout the world. I helped him get that project in motion.”
Johnson later tried to suggest that he hadn’t contacted Hale until after he read about Hale’s problems in the Arkansas newspapers, but in fact they had been in touch months earlier. He also spread misinformation about Hale’s supposed relationship with Clinton. “The Hale family,” he told the ultraconservative Washington Weekly, “was a meaningful part of the Clinton Administration when [Clinton] was Governor of Arkansas. Clinton appointed David to a municipal judgeship.” Both assertions were false. In fact, as a close observer of state politics and a Republican himself, Johnson surely knew that Hale was no friend of the Clintons. Not only were most of Hale’s business associates prominent Republicans, but he had helped manage the campaign of Clinton’s opponent, Jim Guy Tucker, in the bitter 1982 Democratic gubernatorial primary. Hard feelings persisted on both sides following that contest, to the point that Clinton and Tucker could scarcely speak of each other without snarling.
Sometime in August, Justice Jim Johnson called David Bossie, his associate from the 1992 presidential campaign, at the Citizens United office in Washington, saying he had “a friend who was in trouble.” He assured Bossie that Hale could implicate Clinton in his own financial misdeeds. Bossie promised Johnson he would call Hale, but he didn’t have to. At Johnson’s urging, Hale called Bossie instead within minutes.
For two hours, Bossie listened with mounting excitement as Hale recounted his tale of woe. He was being set up as “the fall guy” by the Clinton-appointed federal prosecutor, Paula Casey, because she didn’t want to act on his accusations against the McDougals, Tucker, and Clinton. As governor, Hale claimed, Clinton had “pressured” him in early 1986 to make an illicit $300,000 loan from Capital Management to a firm controlled by the McDougals called Master Marketing. The purpose of that loan, said Hale, was to “clean up” the Democratic “political family” in Little Rock, a reference to Clinton, the McDougals, and Tucker. On the deal’s other end, he continued, there was an inflated $825,000 Madison Guaranty real estate loan provided by McDougal, which allowed Hale to pocket hundreds of thousands of dollars.
Later, Hale would embroider his story to include various colorful details of his alleged meetings with Clinton, including one on the steps of the Arkansas capitol and another in a trailer where McDougal kept an office, when they discussed the loan. He never would offer any specific dates, and the files
seized from his office provided no support for his charges against Clinton. Lack of documentation, however, didn’t prevent Hale from telling people that damning evidence had once existed. In several interviews given during the fall of 1993, the former judge claimed that he had formerly possessed documentary evidence proving Bill Clinton’s participation in the bogus Master Marketing loan, but that federal investigators had stolen it.
“The file on the $300,000 loan was three to four inches thick when the FBI took it,” Hale eventually told an Associated Press reporter. “But when my attorney and I asked to see it a month or so later, the U.S. Attorney’s office gave us maybe an inch of stuff.” One of the supposedly purloined documents was a handwritten letter from Jim McDougal to Hale, promising that Bill Clinton would make good on the Master Marketing loan. Not that a letter from McDougal to Hale, both of whom would later be proven to have forged and altered scores of documents for their own benefit, would have established the truth of Hale’s accusations. Interestingly, however, almost none of the reporters or political operatives to whom Hale told this improbable tale chose to share it with the public.
When Assistant U.S. Attorney Fletcher Jackson was deposed on the subject of Hale’s purloined papers, he categorically denied ever seeing what he mocked as “the smoking gun letter,” and expressed doubt that it ever existed. Hale had dispatched his attorney to Little Rock FBI headquarters to fetch a copy of the letter from the file in September 1993. Asked if the lawyer had said why he wanted it, Jackson responded sardonically: “No, but hell, we both knew why he wanted the letter … . It was something that might support the position that [Hale] had been taking. ‘The devil made me do all this. I was a victim of all these high-powered political types who forced me to give away all of the money which left S.B.A. and me holding the bag.’”
Hale’s account was further undermined by at least one more stark contradiction. Back in November 1989, FBI agents investigating the failure of Madison Guaranty had questioned Hale about his dealings with Jim and Susan McDougal, including the $300,000 loan. According to the agents’ official memorandum of that interview, Hale described in some detail his dealings with Jim Guy Tucker (then an attorney in private practice), both McDougals, and several others, but never mentioned Governor Bill Clinton. Nor did Clinton’s name come up when Hale testified at McDougal’s 1990 trial, which ended in an acquittal. Such exculpatory facts were routinely omitted from the news accounts of Hale’s sensational allegations against the president.
Randy Coleman’s defense strategy was to launch his client’s story into print and onto the airwaves, even as he stubbornly rejected any compromise with Paula Casey. It appeared to many as if Coleman and his client—with the help of Brown, Bossie, and Johnson—wanted to create a public uproar concerning
Whitewater, so they might bludgeon Casey into reconsidering a lenient plea bargain or force her off the case entirely.
Drawing national attention to Hale was difficult at first. When his indictment was announced, he dramatically related his story about Clinton and the McDougals to the Arkansas Democrat-Gazette, but the report that appeared in the Little Rock daily wasn’t sufficiently pointed in its accusations to be picked up by any larger media outlets. At Sheffield Nelson’s urging, however, Coleman already had taken his client to the most influential newspaper in the country, hoping that the New York Times would welcome a fresh angle on the Whitewater story it had broken the year before.
About two weeks before Hale’s indictment was handed down, Coleman had contacted Jeff Gerth, the Times investigative reporter whose front-page article had caused a brief stir in March 1992. The lawyer had invited Gerth down to Little Rock to hear Hale’s account in person at his law office. Gerth accepted, and over the course of two days questioning Hale, became sufficiently convinced to ask him to go on the record. After hesitating for a few days, Hale agreed.
Yet when Gerth found and interviewed his old source Jim McDougal, the ailing recluse said he had no memory of talking about the $300,000 loan with Hale and Clinton. Gerth got nothing useful from Casey or the Clinton White House, either. Stymied for the moment, he remained in touch regularly with Hale and Coleman, whose telephone records show almost two dozen calls to the Times reporter between September 19 and December 10. (Those records, of course, do not show the calls placed by Gerth to Hale and Coleman.) During roughly that same period, from September 27 to December 21, Hale also made at least twenty-eight calls to Jim Johnson.
The Times’s national editors at first declined to publish unverified charges against the president by a man under indictment for embezzling federal money. But in a display of solidarity with his new source, Gerth took some unusual steps to assist Hale and Coleman. He contacted an agent at the FBI’s office in Little Rock to report Hale’s story concerning Clinton and the $300,000 loan. He also informed the FBI agent about the impasse Coleman and Casey had reached during their plea bargaining. In that conversation, it would appear that Gerth suggested to the FBI that Casey was unwilling to take testimony from Hale that might implicate Tucker and Clinton. The Times reporter later said, “I don’t remember speaking to the FBI guy, but maybe I did.”
After hanging up with Gerth, the FBI agent immediately posted a teletype from Little Rock to the FBI director’s office in Washington, which said in part: “Gerth alluded that this was why the United States Attorney Casey would not deal with Coleman when he was attempting to work out a suitable deal for his client.”
Later that day, Gerth also called Irv Nathan, associate deputy attorney
general, at the Justice Department’s Washington headquarters. He told Nathan about Hale and Casey, prompting the Justice official to inform his superiors about Gerth’s tip. According to the reporter, who considered Nathan a friend, “I told him what Hale was alleging and asked what he knew, what his reaction was.” Nathan’s concern quickly led to a meeting of top Justice officials to consider whether Casey should recuse herself from the Hale case because of her relationships with Clinton, Tucker, and other Arkansas Democrats.
Among those participating in the Justice Department deliberations over Casey’s potential conflicts were John Keeney, the second-ranking official in the Criminal Division, and Gerald McDowell, the chief of the Frauds Section. Casey and her staff took the position that absent strong and persuasive evidence from Hale, she should not recuse, lest every white-collar criminal in Arkansas force special consideration by claiming that Bill Clinton had made them commit a felony. Under the circumstances, however, Justice Department officials decided that Paula Casey should step aside, as she soon agreed to do. But they also resented what they viewed as underhanded methods used by Hale’s lawyer in attempting to coerce a favorable plea bargain. To McDowell, “it looked like Coleman was using Gerth to send messages to the FBI and the Department of Justice in Washington and telling them, giving them, in effect, proffers, but not in any useable form.” Both he and Keeney regarded this maneuver as “totally inappropriate.”
Even after Hale’s indictment, Coleman continued to insist that his client wouldn’t plead to a single felony count. He remained steadfast after Casey recused herself in early November and was replaced by Donald McKay, a career Washington prosecutor in the Frauds Section. Clearly, Coleman was no longer interested in dealing with the Justice Department, if he ever had been. Hale’s advisers were openly pushing for an independent counsel, and the surest way to achieve that was through the media, not the Justice Department or the courts. During the fall of 1993, Hale’s telephone records show that in addition to his contacts with the Times, he called reporters at the Washington Post, Time, and Newsweek, as well as conservative publications such as the Washington Times, owned by Unification Church leader Sun Myung Moon, and right-wing media magnate Rupert Murdoch’s new magazine, the Weekly Standard.
Although Gerth had a head start, the Post’s Michael Isikoff began chasing down Hale’s allegations not long afterward. Someone aware of Isikoff’s interest in Clinton and Whitewater had faxed the Democrat-Gazette’s September 24 story about Hale’s charges to him. Like Gerth, Isikoff interviewed Hale himself. Then he and his colleague Howard Schneider, assisted by Susan Schmidt, a reporter on the savings and loan beat, spent weeks trying to confirm Clinton’s role in the $300,000 loan. But all they got was a firm denial from Jim McDougal, which for the moment meant no story.
What broke through the earlier editorial misgivings about Hale was a fresh rivulet of leaks from the Resolution Trust Corporation. A new set of criminal referrals regarding Madison had arrived in Washington from L. Jean Lewis, the investigator whose work on the same case in 1992 had been regarded by the FBI and the U.S. attorney as politically motivated and shoddy. Word of the referrals reached Gerth, Isikoff, and other reporters in early October, and they worked to confirm them over the following weeks.
Ignoring the FBI’s repeated attempts to persuade the RTC to investigate Arkansas thrift collapses ten and twenty times larger, Lewis and her boss, Richard Iorio, had worked on almost nothing but Madison Guaranty during the first year of the Clinton presidency. RTC time sheets showed that the Kansas City office devoted 2,608 hours to Madison in 1993; by contrast, it spent only 13 hours on the $950 million First Federal Savings collapse. Lewis became particularly exercised after Paula Casey, citing analyses by Justice Department experts and former U.S. attorney Charles Banks, turned down her original 1992 referral for a second time.
On October 6, Lewis sent a peculiar E-mail message to Iorio. Completely unbidden, she wrote, Washington Post reporter Susan Schmidt had turned up on her doorstep. According to Lewis, she had heard Schmidt out, scolded her, and sent her away empty-handed. Wrote Lewis, “My parting comment was ‘When you contacted me last Thursday I told you that I had no comment, and made every effort to be polite … . What you have done this evening is the most unprecedented breach of professional courtesy that I’ve ever witnessed, so I will say this one more time, and one more time only. Do not contact me again at my office, or my home. I have no comment on your investigation and will not answer any more of your comments. Do not waste any more of my time or yours.”
Lewis added that the reporter had somehow gotten hold of her 1992 referral, and added a list of questions Schmidt had asked, including several about the late Vince Foster’s role in the Whitewater affair. Schmidt had asked if Lewis suspected a cover-up, and warned her that Jeff Gerth was back on the story. “I thanked her for the heads up,” Lewis concluded.
Susan Schmidt’s article revealing the existence of the RTC criminal referrals, involving the president and first lady appeared on page A1 of the Washington Post on October 31. A similar story by Gerth followed in the Times a few days later. Within a week, RTC officials removed Lewis from the Madison probe and gave her another assignment. At most law enforcement agencies, passing out confidential financial documents to reporters would have constituted a firing offense, and could warrant criminal sanctions. Intense bureaucratic warfare over the leaks and related issues broke out inside the Kansas City office, a struggle that would eventually be resolved at the highest possible levels.
Among other things, Lewis’s referrals charged that Madison Guaranty deposits had been illegally diverted to a Clinton campaign fund in 1986. The result was that reporters linked Hale’s allegations to the RTC leaks, producing stories in both the Post and the Times. Schmidt’s page A1 scoop resulted in her immediate transfer from the humdrum savings and loan beat to the paper’s national staff, and then to a Whitewater “special project” team.
The Times and Post articles set off a competitive fray not only between the two major newspapers—reviving the old rivalry of the Watergate era—but at other papers and in the electronic media as well. Almost instantaneously, Hale was transformed from a recalcitrant embezzler into a credible source. Both newspapers downplayed his crimes, and their imitators did likewise. Gerth, having interceded with the Justice Department on Hale’s behalf, now described him as “recently indicted on charges of misleading the Government about the condition of his lending company,” an offense that sounded technical and almost innocuous. What Hale stood accused of misleading the government about, of course, was his conversion of more than $2 million in federal funds to his own uses.
The Times buried Gerth’s first Hale story on an inside page, but Floyd Brown and David Bossie were still sufficiently encouraged to amplify Hale’s voice wherever possible. The indicted judge appeared on Brown’s radio broadcast for an “exclusive newsmaking interview” to air his accusations against the president. He told the same story in the November 1993 issue of Citizens United’s Clintonwatch newsletter, in an article headlined “Clinton Fingered in Loan Coverup.” Then Brown made certain that the newsletter showed up on the assignment desk of every news bureau in Washington.
Controlling access to Hale, plus additional materials provided by Sheffield Nelson and documents retrieved by Bossie, Citizens United suddenly became a central resource for every reporter assigned to Whitewater. In rapid succession, their version of the story was picked up by all of the nation’s major media. Shepherding Hale through this sudden journalistic maelstrom was Bossie, who supervised his interviews and appearances.
On November 4, for example, Bossie arranged an on-camera session with Hale for NBC producer Ira Silverman at Coleman’s office. According to Mike Narisi, the independent Little Rock cameraman hired to shoot the interview for Silverman, “Bossie greeted employees of the office by their first names and appeared to be well acquainted with Hale and Coleman before the taping of the interview began, was present throughout the interview, and prompted Hale during the videotaping.”
The carefully coached Hale told NBC that federal prosecutors had brushed off his accusations against Clinton. “We want you to come over here and plead guilty and shut up,” he claimed they had told him. That was a wholly false
summary of the plea negotiations, but one that well suited the new objective of Hale and his allies: to promote the appointment of a Whitewater special prosecutor to investigate Bill and Hillary Clinton.
That same NBC interview, as Floyd Brown boasted later, demonstrated Citizens United’s influence in an even more dramatic fashion. Broadcast on November 11, 1993, it tied Whitewater to Vince Foster’s suicide for the first time in the national media. “Before his death in July,” said anchor Tom Brokaw, “former White House lawyer Vince Foster also got involved, helping the Clintons sell their share of the [Whitewater] land company … . Now questions are being raised about the growing Arkansas investigation and Foster’s death … . That same day in Little Rock, a judge signed a search warrant for the FBI to raid David Hale’s offices. White House officials insist that Foster could not have been tipped off about the impending raid.”
Hale’s appearance on a network broadcast, with its linkage of Whitewater and the Foster suicide, sent a collective frisson through the Washington press corps. A few weeks later the Washington Times reported that White House counsel Bernard Nussbaum had moved the Clintons’ personal legal files from Foster’s office to their private living quarters a few days after his death, initiating a full-tilt media frenzy.
The transfer of the papers was of little significance. At the time of Foster’s death, there was no Whitewater scandal. Nor had any investigative agency requested to see the files in connection with the probe into his suicide. Protected by lawyer-client privilege, they belonged to the Clintons. Although there had been some differences between Nussbaum and the Justice Department over the exact procedures for searching Foster’s office on July 22, investigators were looking for a suicide note, not Whitewater tax returns. Had there been any reason to do so, examining the files would have required a subpoena from a federal judge. But none of the investigators, subsequent testimony showed, ever sought one.
In a December 26 editorial, the Times depicted the Clintons’ possession of their own private papers, “presumptuously spirited from the office of the deputy White House counsel Vincent Foster, following Mr. Foster’s suicide,” as cause for profound suspicion. Much later, Michael Isikoff recalled the mood among the press corps during the period in an interview with PBS host Charlie Rose. “Whitewater started to take off as an issue in December 1993,” he explained, “[with the news] that Whitewater documents were spirited out of Foster’s office in the hours after his death by White House aides … . No single allegation seemed more troubling than to somehow link Foster’s death to Whitewater. You know, is there any possibility that he was so worried about Whitewater that he killed himself because he was fearful about some damaging
disclosure? Or is it even worse than that? Some people believe that Foster was murdered, even though there’s really no evidence for that.”
As they orchestrated Hale’s media offensive and played up the bogus connection to Foster’s suicide, Citizens United, Brown, and Bossie remained hidden in virtually every news account—often behind the phrase “independent sources.” After a thorough review of the 1993 Whitewater scandal explosion, the Columbia Journalism Review later concluded that the national media had regurgitated Citizens United’s “highly partisan” tips and interpretations “without identifying the group as the source of their information.” Not until months later was the role of Brown and Bossie revealed—and even then nobody noticed their Clinton-hating mentor, Jim Johnson.
For his part, Johnson had no desire for his activities to become public. A shrewd political operative, he understood that given his past leadership of the White Citizens Council and dalliance with the Klan, discretion served him better than notoriety. He continued to make discreet contacts for his friend Hale in the world of Washington conservatism—contacts with power and money who would prove very useful to Hale, and who would in turn find him very useful for their own purposes.