Are the Clintons Under Fire - or Smoke?


THE complex of affairs known as ``Whitewater'' involves a string of unanswered questions about a set of business dealings by the Clintons and how they have dealt with those questions from the White House.

No criminal conduct or ethical violations by the Clintons have emerged, although some observers believe some known actions amount to ethical lapses.

The basics: In the late 1970s, Arkansas Attorney General Bill Clinton and his wife entered a partnership in Whitewater Development Company with James and Susan McDougal, who put up all the money.

Mr. Clinton became governor. Mr. McDougal started Madison Guaranty Savings and Loan. Hillary Rodham Clinton became Madison's attorney. The institution failed, costing the federal government at least $47 million. The development company failed too.

Many records are missing or nonexistent, and it is unclear what the Clintons themselves put in or took out of Whitewater. Business ties that bind

THE Clintons became 50-percent partners in the Whitewater Development Company without apparently putting up any money, although they may have put money into it in later stages. Bill Clinton was state attorney general at the time.

Congressional investigators are exploring whether Mr. McDougal ever got something in return from Clinton after he became governor in the form of undue influence on or special treatment from state regulators. If the McDougals only wanted the credibility that Clinton's name would lend to the project, is this for Clinton a form of selling one's office?

Federal investigators are probing whether Madison money was improperly diverted to either Whitewater, the Clintons, or Clinton campaign funds. If so, did the Clintons know it?

McDougal helped Bill Clinton pay off his 1984 campaign debt, and interest payments deducted from the Clintons' taxes may have been paid by Whitewater.

One of the potential conflict-of-interest questions surrounds Hillary Clinton's work as an attorney. Unrelated to Whitewater, she represented a federal S&L agency, the FSLIC, in a lawsuit against Dan Lasater, an Arkansas businessman who was a Clinton friend and campaign contributor. The key ethical questions here: How close a friend was Mr. Lasater, and did Mrs. Clinton disclose any possible conflict to the FSLIC for its consent?

When Mrs. Clinton represented clients, such as Madison Guaranty, before regulators appointed by her husband, was she indirectly exerting undue influence? Some states prevent lawmakers from filing court suits before agencies whose budgets or personnel they influence. Should this also extend to spouses of governors? Reporting to federal agencies

THE Clintons never claimed the $69,000 they say they lost on Whitewater as a tax deduction. No harm there, although it raised a suspicious contrast to the deduction President Clinton claimed for donating his underwear to charity last year.

Representative Leach argues that the Clintons drew more money from the sale of Whitewater land alone than they ever put into the project.

The Clintons' private lawyer, David Kendall, recently suggested that they may end up owing more taxes as a result of Whitewater investigations, implying they may have taken too many deductions.

Former municipal judge David Hale, who also was also government-investment contractor, claims that Bill Clinton pressured him to obtain a Small Business Administration loan intended for minority-owned businesses for Susan McDougal, white and affluent. Most of the money ended up in Whitewater. In the White House

LAST summer, White House counsel Bernard Nussbaum quietly removed Whitewater files from the White House office of lawyer Vince Foster, who presumably committed suicide. He packed them off to the Clintons' private lawyer. Some lawyers question this as ``private lawyering'' by White House counsel.

Last month, the White House acknowledged a series of meetings between White House officials and federal investigators on the status of the investigation of Madison Guaranty.

Such meetings are probably not illegal, but are a breach of government ethics in the view of many Washington lawyers. Private attorneys can discuss investigations that may involve their clients, but the White House has a conflict because it has tremendous power over federal agencies.

Independent prosecutor Robert Fiske, who was reluctantly appointed by the White House in January under Republican pressure, immediately subpoenaed the officials involved. Conflict of Interest

The public interest: Conflict of interest arises when an official who represents a public interest also has a private interest potentially at odds with the public interest. When state regulators, appointed by Gov. Bill Clinton, made rulings concerning Madison Guaranty, owned by a business partner of the Clintons and legally represented by Bill Clinton's spouse, did they feel an extra pressure to favor Madison? No clear evidence has surfaced that they did.

Appearances: Yet most ethicists regard even the appearance of a conflict of interest in government to be tantamount to an ethical lapse. This is not so much a matter of appearance being treated as fact, but of situations where the public cannot know whether power is being exerted fairly. The Clinton case raises the especially difficult question of when the professional spouses of public officials create conflicts of interest as their work deals with government.

Private practice: Private attorneys too can have conflicts of interest. Legal ethics do not permit a law firm to represent both sides in a lawsuit, for example. A firm might represent both parties in different cases, but only with full disclosure to clients and the clients' consent.

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