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Bush Family's Whitewater Interest

By Robert Parry
March 22, 2002

Two senior aides to President George H.W. Bush gave accounts of their roles spurring on the federal Whitewater probe in 1992 at sharp variance with testimony of other Bush administration officials. But those conflicting stories of political intrigue were glossed over in the final report on the 10-year investigation.

The elder Bush’s White House counsel C. Boyden Gray and Secretary to the Cabinet Edie Holiday spoke with high-ranking law-enforcement officials in the weeks before the 1992 election. Those conversations prompted inquiries from Washington to investigators in Arkansas about pressing ahead with a criminal probe that would have named Bill and Hillary Clinton as potential witnesses.

The pre-election probe was stopped by Charles Banks, a Republican U.S. attorney in Little Rock who concluded that the Bush administration wanted to provoke an investigation so the embarrassing news could be leaked about Clinton and used to reelect George H.W. Bush. The prosecutor refused to go along.

While Banks’ resistance has been known for several years, the formal responses from Gray and Holiday were first disclosed in the final Whitewater report issued by special prosecutor Robert Ray on Wednesday, a day before he declared his candidacy, as a Republican, for the U.S. Senate seat in New Jersey.

Gray and Holiday – two of the senior Bush’s closest aides – told Whitewater investigators that they had no inside knowledge when they asked about the case in the weeks before the election. They said they were not trying to instigate a formal investigation for political purposes.

Although their accounts were contradicted by other senior Bush administration officials, the possibility that the federal Whitewater probe may have started as a political dirty trick aimed at fixing a presidential election was never seriously pursued by Ray or his predecessor Kenneth Starr, who was Bush's solicitor general. They focused instead on whether Banks and others who resisted the investigation had obstructed justice.

The Early Days

The origins of the federal Whitewater investigation date back to summer 1992 when a Resolution Trust Corp. investigator named Jean Lewis drafted a criminal referral on Madison Guaranty Savings & Loan, which was owned by James McDougal, a partner in the Whitewater real estate deal with the Clintons.

Lewis, who considered herself a conservative Republican and privately described Clinton as a "lying bastard," listed the Clintons as prospective witnesses in the Madison case. She soon began pestering the FBI in Little Rock to pursue her referral.

To avoid political manipulation of the case, Banks and local FBI officials decided that no investigation should be started until after the November presidential election. “Banks thought the reason for the push (to investigate) was the high-profile witnesses named – the Clintons in particular – and the RTC was angling for an overt investigation before the imminent presidential election because the inquiry would become public,” the Whitewater report said.

Banks, a Republican who did not consider himself a friend of Bill Clinton and opposed Clinton’s political views, rejected a pre-election probe even after then-President Bush nominated Banks for a federal judgeship in August 1992.

Though Banks kept the Madison referral inside his office in Little Rock, word still spread to Washington. “Not long after the referral arrived in Little Rock – and some weeks before (Banks’ office) officially notified officials at Main Justice of its existence – high-level Bush administration officials heard rumors about the referral from other sources,” the Whitewater report said.

Attorney General Alerted

One of those contacted was Attorney General William P. Barr, who “learned about the possible existence of the referral on Sept. 17, 1992” from Edie Holiday, Bush’s secretary to the Cabinet, the report said. According to Barr’s account, “Holiday said she wanted to ask Barr something, but she was not sure if it would be appropriate. Barr said she could ask, with the understanding that he would not tell her anything if it was not appropriate.

“Holiday asked if Barr would be aware of a pending matter in Justice – she may have said it was a criminal referral – about a presidential candidate or a family member of a presidential candidate,” the Whitewater report said. “Barr said he would if it was pending in the Department of Justice. Holiday said she was talking about a savings and loan matter, and it became clear to Barr she was referring to Governor Clinton. Holiday did not say where she heard the rumor, and Barr did not ask.”

The inquiry from Holiday convinced Barr to begin a discreet search to see if an investigation of Clinton was underway.  “Barr did not want anyone in the Justice Department to know he was inquiring about the matter, to avoid the perception that he was trying to interfere with a sensitive case,” the Whitewater report said. The inquiry soon led Barr to Banks and caused Banks to conclude that he was under pressure from Washington to launch a formal investigation that would mention the Clintons.

Holiday gave the Whitewater prosecutors a starkly different version when she was questioned in 1995. In a deposition, she said she “did not remember knowing about an RTC criminal referral involving the Clintons,” the Whitewater report said. “Holiday did not remember seeking Barr out to ask him questions about the referral; she claimed that she did not know of (the Madison Guaranty referral) when it came out, nor did she know of anyone else who did.”

In a letter to the Whitewater prosecutors, dated Oct. 22, 2001, Holiday’s lawyer gave another account. “Ms. Holiday, who had been accompanying President Bush to an event in Atlanta, was coincidentally seated next to Attorney General Barr – a friend of hers with whom she spoke several times a week in her role as Cabinet Secretary – on Air Force One,” wrote lawyer Jonathan Schiller. “Ms. Holiday had read, and discussed with Mr. Barr in general terms in a casual, social conversation, a published article about then-Gov. Clinton’s relationship with Madison Savings & Loan and with James McDougal. …

“There was no explicit discussion of a criminal referral,” Holiday’s lawyer said. “While asking the Attorney General about a criminal referral would certainly have been within Ms. Holiday’s duties as President Bush’s Cabinet Secretary, her unawareness about any criminal referral relating to then-Gov. Clinton precluded her from making such an inquiry.”

In assessing the credibility of Barr's account versus Holiday's two versions, there is the fact that Barr was so impressed by the seriousness of Holiday's comments that he launched an internal review within the Justice Department searching for a possible criminal case naming Clinton. A reference to a general newspaper story would not have likely prompted that reaction.

`Prosecutorial Misconduct'

Within weeks of the Barr-Holiday conversation and a subsequent flurry of messages from Washington, Banks felt he was under mounting pressure to begin a pre-election investigation. On Oct. 16, Banks fired back a memo refusing to do so.

“There is absolutely no factual basis to suggest criminal activity on the part of any of the individuals listed as witnesses in the referral,” Banks said in a teletype. Banks also wrote a letter saying that “neither I personally nor this office will participate in any phase of such an investigation … prior to Nov. 3, 1992.” He added that he considered the referral an attempt to influence the election and that to do so would be “prosecutorial misconduct.”

Back in Washington, Barr was “upset” with Banks’ reply because Barr felt that he had not suggested that Banks do anything improper, the Whitewater report said.

The Whitewater report noted, too, that another senior Bush aide, White House counsel Gray, appears to have been in the know about the Madison case.

Albert Casey, then chairman of the Resolution Trust Corp. which oversaw failed savings-and-loans, “recalled receiving a call from Gray about the referral’s status,” the report said. “Casey went to William Roelle, executive vice president of the RTC, and asked about the status. Roelle told Casey the Clintons were not named as targets, but simply as potential witnesses.”

While Casey was checking out the referral’s status, he recalled getting another call from Gray. This time, Casey said, Gray “told him to forget about his earlier inquiry,” the Whitewater report said.

When questioned by Whitewater investigators, this Bush aide, too, offered a distinctly different account. “Gray did not remember a telephone conversation with Casey, along the lines discussed above,” the report said. Gray “believed he first learned about the referral from Casey, but he thought it may have been at a dinner party. Gray might also have heard about the referral from a journalist.”

Investigative Focus

While the accounts from Barr and Casey might seem to carry more credibility because they took action based on their understandings of what the Bush aides had told them, the Whitewater prosecutors drew no negative conclusions about the testimony of Holiday and Gray. The lack of skepticism is in contrast to the report’s generally tendentious tone in assessing conflicting testimony involving the Clintons and other witnesses.

A reason for the disinterest in the Holiday-Gray contradictions – beyond the obvious political motives of Starr and Ray – could be that the Republican-dominated three-judge panel that set the parameters for the Whitewater investigation never authorized a look into the possible political origins of the case.

The panel, headed by conservative U.S. Appeals Court Judge David Sentelle, a protégé of Sen. Jesse Helms, R-N.C., did not permit an examination of the possibility that the original Whitewater criminal referral was part of a political dirty trick to ensure the reelection of George H.W. Bush.

In studying the case’s early days, the Whitewater prosecutors were authorized only to investigate “whether before or after the 1992 election of President Clinton, any action that had the effect of delaying or impeding the investigation could raise the question of whether anyone in the Department of Justice unlawfully obstructed the investigation,” the report said.

In other words, the Bush administration was never under investigation for instigating a politically motivated – and potentially illegal – criminal probe of the Clintons, as Banks and the Little Rock FBI officials suspected. Rather, Banks was under investigation for possibly obstructing justice when he refused to play along.

There was also little investigative interest in determining whether Holiday and Gray were lying about their inquiries, conversations which created at least the appearance of high-level interest in Washington.

In the end, however, the prosecutors chose not to pursue Banks and the other Little Rock investigators who had gotten in the way. “The evidence was insufficient to prove that any Department of Justice official obstructed justice by engaging in conduct intended to delay or impede the investigation of the RTC’s criminal referral,” the report said.

By the time the report was finished, the Bush family was ensconced once again in the White House.

In the 1980s, as a correspondent for The Associated Press and Newsweek, Robert Parry broke many of the stories now known as the Iran-contra scandal. His latest book is entitled, Lost History.

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