Clintons, in Responses on Whitewater, Cite Role as 'Passive Investors'

Published: August 05, 1995

In their most detailed explanation of the Whitewater affair, the Clintons have insisted in sworn statements that they were passive investors who had no idea that their partner in the real estate venture was paying a disproportionate share of its losses.

The White House today made public written replies by President Clinton and Hillary Rodham Clinton to dozens of detailed questions from Federal investigators examining the collapse of Madison Guaranty, the Arkansas savings and loan owned by James McDougal, the couple's partner in the Whitewater investment.

The release of the documents came three days before the start of House Banking Committee hearings that will examine what political and financial favors Mr. McDougal did for the Clintons and what, if anything, they did for him in return. In recent weeks, the White House has given reporters potentially embarrassing documents before the Republican-controlled committees in the House and Senate could do so themselves.

Separately today, the Resolution Trust Corporation, the Federal agency that deals with failed savings and loans, released a report by its inspector general that was critical of the Little Rock law firm where Mrs. Clinton had been a partner. It said the Rose Law Firm had repeatedly failed to disclose possible and actual conflicts of interest to the Federal regulators that hired it, an accusation that the firm denies. The firm's work for Madison was a primary focus of the report.

When the Whitewater investment was foundering in the mid-1980's, Mr. Clinton was Governor of Arkansas and Mr. McDougal was a banker and real estate developer with a myriad of issues before state regulators. A Federal investigation has found that Mr. McDougal paid $158,000 of Whitewater's nearly $200,000 in losses.

The sworn statements submitted by the Clintons in May are liberally sprinkled with the phrases "I do not know" and "I do not recall." The couple acknowledged that Whitewater began as a 50-50 investment in which the Clintons and Mr. McDougal and his wife, Susan, were equally liable for its debts.

The Clintons said they relied on Mr. McDougal to ask them when additional money was needed. From the Clintons' account, the investment appears to have been handled casually; the couple never visited the property before buying it. The Whitewater corporation was set up with only sketchy documentation of who owned its shares. Loans and a Retainer

Mr. Clinton denied that he pressured a Small Business Administration lending company to make an illegal $300,000 loan, as one witness in the Whitewater inquiry has asserted. And he said he knew little about an April 1985 fund-raising event staged by Mr. McDougal that raised money to pay off some of his campaign debts.

Mr. Clinton acknowledged that he might have discussed Madison's plight with the state's chief regulator for savings and loans, but said that he did not recall such a conversation.

Investigators asked the Clintons about a $5,000 personal loan Mr. Clinton took out from an Arkansas bank in 1979. The Whitewater company provided the money that repaid the loan, whose purpose has never been clear. Mr. Clinton said in his written statement that he could not remember why he had borrowed the money.

Mr. McDougal wrote to Mr. Clinton in 1982 that "you are correct in your belief that the sum of money borrowed was part of your investment in Whitewater." None of the various investigations of the investment have ever been able to substantiate that claim.

On one important issue -- the question of how Madison Guaranty came to pay the Rose Law Firm a $2,000 monthly retainer -- the First Lady's recollection appears to be at odds with previous statements by other participants.