Searching for the Missing Pieces

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Iowa Republican Jim Leach, ranking minority member of the House Banking Committee, makes this charge explicitly. Says he: "The effect is that the money that flowed into the Clinton campaign to pay back a personal loan of the Clintons' ends up being deferred public financing of a campaign, and not by choice. That is, the money in effect came from an insolvent thrift ((institution)), paid back later by the federal taxpayer" in the form of reimbursements to money-losing depositors. Nothing has been proved, however, and Clinton has denied any knowledge of money improperly diverted into his campaigns.

DID THE CLINTONS GET SWEETHEART DEALS IN WHITEWATER AND OTHER VENTURES? Quite the opposite, say the President and First Lady; they put $69,000 into Whitewater and lost virtually all that money. But Bill Clinton once put the loss at "at least $25,000," and the Clintons never wrote off any loss at all on their tax returns. A Clinton aide contends that the documentation is too poor to enable them to do so.

Other aspects of the Whitewater venture are somewhat odd. To begin with, the Clintons got a half share, although they invested much less than the McDougals (who put in $92,000). The Clintons have claimed to be only "passive" investors who let the McDougals run the show, but that hardly squares with Hillary's known activities. In her 1988 letter requesting power of attorney, she mentions having been actively involved in selling lots. Also, she built, sold and then bought back a model home. It now turns out that Hillary built the house in 1981 with a $30,000 loan from the tiny Bank of Kingston, which was controlled by McDougal and Steve Smith, a former top aide to Governor Clinton. (Another shareholder was Jim Guy Tucker, who has succeeded Clinton as Arkansas Governor.) Marlin Jackson, who was then Arkansas banking commissioner, has told TIME that the loan violated state regulations because the home and borrower's residence were outside the area in which the bank was permitted to lend.

Then there was an incident in which McDougal in effect swapped 20 Whitewater building lots, almost half the project's total, for little more than a twin- engine Piper Seminole airplane that was later sold for a loss of $13,000. That loss was absorbed by Madison Guaranty's depositors, but federal taxpayers eventually had to pick up the tab through the RTC. Another intriguing factor is that the plane was at one point owned by Seth Ward, the father-in-law of Webster Hubbell, then a law partner of Hillary's and now Reno's top deputy at the Justice Department. McDougal sold Ward the plane, and his S&L loaned him the money for the purchase, Ward told TIME, in order to keep the aircraft off Madison's books, where it might have aroused suspicion among regulators. Hubbell acted as counsel to his father-in-law in the deal, one of several connections with the thrift that have had the effect of forcing Hubbell to dissociate himself from any investigations involving Whitewater or Madison. All in all, Whitewater's finances were tangled enough to make the traditional can of worms look simple.