Whitewater's Political Lessons

The uncertain ethics of fund-raising

TO Republicans, the Whitewater hearings show that Bill Clinton peddled his influence as governor of Arkansas and then tried to cover his tracks once he became president. To Democrats, they're a senseless political smear job.

But beyond the partisanship that has colored these hearings over the last four weeks, the Whitewater case has at times provided some valuable insights.

If nothing else, Whitewater demonstrates the lengths that a budding politician, in this case Mr. Clinton, has to go to raise money - and how difficult it can be to walk the fund-raising trail without tripping any ethical land mines.

As much as President Clinton is on trial here, says Ellen Miller, president of the Center for Responsive Politics in Washington, so should be the current freewheeling system of campaign finance in American politics.

"I've always said that from the beginning, Whitewater was all about money," Ms. Miller says. The current system of private campaign finance, she adds, "can corrupt even the candidates who swear they will never be corrupted."

The Whitewater affair began 17 years ago when then-governor Clinton and his wife, Hillary, joined forces with Arkansas businessman James McDougal to buy a tract of land on the White River in the Ozarks. The partners paid for the property with $200,000 in bank loans and began advertising the site as an ideal place to build a home.

Republicans contend that in the following years, Mr. McDougal illegally transferred funds from Madison Guaranty - a savings and loan he owned until the government closed it in 1989 - in a futile attempt to keep the Whitewater venture afloat. They also suggest that the Clintons' knew about these shady dealings, and engaged in some of their own: particularly doing political favors for McDougal and other business associates, who, in turn, helped pay off some of their campaign debts.

"In a nutshell," says Iowa Rep. Jim Leach (R) who chairs the House hearings, "Whitewater is about the arrogance of power: conflicts of interest that are self-evidently unseemly."

Indeed, the possibility of conflicts of interest in the Whitewater case are not hard to imagine. For years, McDougal served as an economic development advisor to Governor Clinton and used his name as a reference in business deals. Meanwhile, there are several records of McDougal paying off large chunks of Clinton's debt.

FOR sure, Miller says, the Clintons were involved in complicated financial dealings with McDougal and others in which their political influence may have played a role. Yet even if it did, she argues, the blame lies equally with the current system of campaign finance: a system that requires candidates in all offices to take money from people, including industry lobbyists, with their own political agendas.

Before this week, the hearings had taken place solely in the Senate with the purpose of determining whether White House officials tried to hide files relating to the Whitewater deal in the days following the suicide of White House lawyer Vincent Foster. But this week, a House panel began its investigation into the Clintons' role in the actual Whitewater deal itself.

Early this week, a series of federal bank examiners testified that McDougal was involved in a fraud scheme in which he pocketed money from his savings and loan by accepting fictitious profits from a series of land deals that either failed or never got off the ground, including Whitewater.

On Tuesday, Republicans called their star witness, L. Jean Lewis, a federal investigator for the Resolution Trust Company, who testified that during her investigation of McDougal's Madison Guaranty, high-ranking Clinton administration officials tried to "obstruct, hamper, and manipulate," her investigation.

But beyond the questions of a coverup, the House inquiry has also revealed some telling reasons why the Clintons were eager to enter into the Whitewater deal in 1978. Records show that they were deep in personal debt following the gubernatorial campaign, and that during their tenure in Little Rock, they often dug into their own pockets to pay for advertising campaigns supporting legislative initiatives they had introduced - like education reform.

During the 1980s alone, the Clintons took out more than $400,000 in personal loans from the Bank of Cherry Valley, which was owned by a close friend, W. Maurice Smith. Republicans allege that this and other debts were paid off in part by McDougal and other supporters who may have received favors from the governor.

According to Miller, few politicians in major offices could stand up to such rigorous scrutiny of their financial dealings.

"If you want to run for office, money is the name of the game," she says. "No matter how high your standards or how low your ethics ... private financing of elections leads to unhealthy relationships between politicians and special interests."

Fund-raising Lessons From Whitewater

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