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The Whitewater controversy (also called the Whitewater scandal or simply Whitewater and sometimes colloquially Whitewatergate) was an American political controversy concerning the real estate dealings of Bill and Hillary Clinton and their associates, James B. McDougal and Susan McDougal in the Whitewater Development Corporation, a failed business venture in the 1970s and 1980s.
A New York Times article published during the 1992 U.S. presidential campaign reported that Clinton and his wife had invested in and lost money in the Whitewater development project.[1] A U.S. Securities and Exchange Commission investigation resulted in criminal charges against the two principals in the Whitewater project, but the Clintons themselves were never charged. Three separate inquiries found that there was insufficient evidence to charge the Clintons with criminal conduct in the land deal.[2]
During 1992 Bill Clinton's first bid for the presidency, reporters from the New York Times asked him about the failure of the Whitewater development, which Bill Clinton and Jim McDougal originally purchased in 1978.[3] After they published an article in March that was critical of the real estate dealings, Vince Foster, White House deputy counsel, who had been a former law partner of Hillary Clinton at the Rose Law Firm in Arkansas, completed and submitted several years' worth of delinquent tax returns for the project.
On July 20, 1993, at Fort Marcy Park in Virginia, Vince Foster was found dead from a bullet wound. His death was ruled a suicide by multiple investigations by the United States Park Police, the United States Congress, and Independent Counsels Robert B. Fiske and Kenneth Starr. After Foster's death, chief White House counsel Bernard Nussbaum removed documents concerning the Whitewater Development Corporation from Foster's office and gave them to Margaret Williams, who placed them in a safe in the White House[4] for five days before being turned over to their personal lawyer.
Because of the allegations made in the New York Times article, the Justice Department opened an investigation into the failed Whitewater deal. At Clinton's request, Attorney General Janet Reno appointed a special prosecutor Robert B. Fiske in 1994 to investigate the legality of the Whitewater transactions. Two allegations surfaced: 1) that Clinton had exerted pressure on an Arkansas businessman to make a loan that would benefit him and the owners of Madison Guaranty; and 2) that an Arkansas bank had concealed transactions involving Clinton's gubernatorial campaign in 1990.
In May of '94, Independent Counsel Robert Fiske issued a grand jury subpoena to President and Hillary Clinton for all documents relating to Madison Guaranty, with a deadline of 30 days. They weren't turned over for eighteen months.
In August 1994, Kenneth Starr was appointed by a three-judge panel to continue the Whitewater investigation, replacing Robert B. Fiske, who had been specially appointed by the Attorney General prior to the re-enactment of the Independent Counsel law. Fiske was replaced due to an apparent conflict of interest, having been chosen and appointed by Janet Reno, Clinton's Attorney General. In February 1997, Starr announced he would leave the investigation to pursue a position at Pepperdine University's law school. However, he "flip flopped" in the face of "intense criticism."[5]
In December 1994, one week after Webb Hubbell pleaded guilty to mail fraud and tax evasion, Associate White House Counsel Jane Sherburne creates a "Task List" which includes a reference to monitoring Hubbell's cooperation with Starr. Hubbell is later recorded in prison saying "I need to roll over one more time" regarding the Rose Law firm lawsuit. In his next court appearance, he pleads the Fifth Amendment against self-incrimination.
The Clintons were cleared of all wrongdoing in two reports prepared by the San Francisco law firm of Pillsbury Madison and Sutro for the Resolution Trust Corporation, which was overseeing the liquidation of Madison Guaranty.
On January 26, 1996, Hillary Clinton testified before a grand jury concerning her investments in Whitewater. She noted they "never borrowed any money from the bank, nor had they caused anyone to borrow money on their behalf." Over the course of the investigation, fifteen individuals — including Clinton friends Jim McDougal and Susan McDougal, White House counsel Webster Hubbell and Arkansas Governor Jim Guy Tucker — were convicted of federal charges unrelated to Whitewater. Clinton pardoned four of them in the final hours of his presidency (see list of people pardoned by Bill Clinton).
There was much acrimony from critics of the Clintons after release of the Starr report on the Whitewater matter. The apparent suicide of White House aide Vincent Foster has been the source of many conspiracy theories. Christopher Ruddy, a reporter for Clinton critic Richard Scaife's Pittsburgh Tribune-Review helped fuel much of this speculation with claims that Starr had not pursued this line of inquiry far enough.[6]
Ultimately the Clintons were never charged, but 14 other persons were convicted of more than 40 crimes, including a sitting Governor who was forced to resign.
In March 1992, during his presidential campaign, the Clintons acknowledged that on their 1984 and 1985 tax returns, they had claimed improper tax deductions for interest payments made by the Whitewater Development Company and not them personally.[7] Due to the age of mistake, the Clintons were not obligated to make good the error, but Bill Clinton announced that they would.[7]
Almost two years then passed before, on December 28, 1993, the Clintons did make this reimbursement payment, for $4,900, to the Internal Revenue Service. This was done just before Justice Department investigators started seeking the Clintons' Whitewater files. The payment was made without filing an amended return (possibly because the three-year period for amended return filing had passed), but did include full interest on the amount in error, including the additional two-year delay.[7] The Whitewater files in question, publically released in August 1995, cast some doubt on the Clintons' assertions in the matter, as they showed that the couple were aware that the interest payments in question were by the Whitewater corporation and not them personally.[7]
Kenneth Starr's successor, Robert Ray, released a report in September 2000 that stated "This office determined that the evidence was insufficient to prove to a jury beyond a reasonable doubt that either President or Mrs. Clinton knowingly participated in any criminal conduct."[3] Ray nonetheless criticized the White House in a statement regarding the release of the report, saying delays in the production of evidence and "unmeritorious litigation" by the president's lawyers severely impeded the investigation's progress. Ray's report effectively ended the Whitewater investigation, with a total cost to American taxpayers of nearly $60 million.[2]
Throughout the affair, the White House repeated alleged various forms of "privilege" in order to avoid turning over evidence sought by the Office of Independent Counsel. At the same time, Clinton's private lawyer, David Kendall, often claimed that the OIC was engaged in illegal acts or various forms of misconduct. In each case, the OIC went to court and won. These blockade attempts dramatically increased the duration and expense of the investigation, an ironic point considering that one of the major accusations leveled at the OIC was that its investigation was overly long and expensive.