Inside Track Leads to outside Travesty

Article excerpt

For the moment, the spotlight shines on Hallary Rodham Clinton, who seems to be feeling the effects of the drip-by-drip revelations squeezed by the Senate Whitewater committee. At the end of January, the first lady occupied the hot seat in front of a federal grand jury investigating the mysterious reappearance of her Rose Law Firm billing records and other matters relating to her legal work for the Madison Guaranty Savings and Loan Association. Clinton, however, displayed her customary cool - even took time out to sign a copy of her new book, It Takes a Village and Other Lessons Children Teach Us, for a starstruck member of the grand jury.

It should be understood, however, that while Clinton faced the grand jury alone last week, she was really in the dock for collaborative activity involving her husband. It was only through their collective efforts that the Clintons succeeded so well before, during and after the 1992 campaign in forestalling, complicating, delaying and perhaps even obstructing the investigation of their business dealings in Arkansas. But nowhere is their masterful teamwork more evident than in the roles they played actively in delaying the inevitable demise of Madison Guaranty, which was owned and operated by James McDougal, the Clintons' partner in the failing Whitewater real-estate development venture.

To appreciate fury the statewide omnipotence of the eighties power-couple tag team of Arkansas Gov. Bill Clinton and superlawyer Hillary Rodham Clinton, you have to go back 50 years to the fabled Army football teams featuring the legendary backfield duo of fullback Doc Blanchard and halfback Glenn Davis, known as Mr. Inside and Mr. Outside, respectively.

With Bill Clinton (Mr. Inside) working the levers of government from within the statehouse, earning the less-than-princely annual salary of $35,000, his wife (Ms. Outside) was free to dabble in family-income-enhancing projects, including cattle futures, real-estate development projects, a Rose Law Firm partnership, boards-of-directors appointments, etc.

And even though Blanchard (1945) and Davis (1946) each won a Heisman Trophy honoring them as college football's best player, Mr. Inside and Mr. Outside worked most effectively together, achieving their greatest collective feats by winning back-to-back national championships in 1944 and 1945. So, too, with the Arkansas duet. Though individually powerful, their collaborative efforts could overwhelm any opposition.

The Federal Home Loan Bank Board, or FHLBB, first audited Madison's books in late 1983, film its official report in January 1984. Concluding that Madison was in an "insolvent position," the FHLBB report warned, "The viability of the institution is jeopardized." The federal agency issued wide-ranging cease-and-desist orders and instructed McDougal to raise more capital. The FHLBB told McDougal that it would be returning in two years. In the meantime Madison would be under the jurisdiction of state regulatory agencies, which would be responsible for monitoring its condition and overseeing its recapitalization efforts.

Trying desperately to save his failing S&L, McDougal went into overdrive. He immediately hired the FHLBB examiner, Sarah Worsham, as a Bentley-driving vice president and board member earning $65,000 a year.

McDougal says he then implored his Whitewater business partner, Bill Clinton, to appoint 31-year-old, well-connected attorney Beverly Bassett Schaffer to head the Arkansas Securities Commission, the regulatory body that would be responsible for approving Madison's FHLBB-mandated recapitalization plan. Schaffer once worked on the Madison account for a law firm in which current Arkansas Gov. Jim Guy Tucker (now under indictment) was a partner. Schaffer is also the sister of Woody Bassett, a political contributor to Gov. Clinton and his 1984 campaign manager, and the wife of Archie Schaffer, who is an executive at Tyson Foods Inc. …