The Hunting of Hillary

Drawn from the pages of the national bestseller, The Hunting of the President: The Ten-Year Campaign to Destroy Bill and Hillary Clinton, this new FREE e-book reveals her story and ultimate vindication.
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Clinton McDougal HILLARY Little Rock Madison Guaranty Whitewater time
About Jack Berlin

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Clinton McDougal HILLARY Little Rock Madison Guaranty Whitewater time
<p>JOE CONASON & GENE LYONS
THE 
HUNTING 
—  of —
HILLARY
Adapted and updated from   
The Hunting of the President: The   
Ten-Year Campaign to Destroy Bill and  
Hillary Clinton 
With a new introduction
The hunTing of hillary. Copyright © 2015 by Joe Conason and 
Gene Lyons. All rights reserved. No part of  this e-book may be 
used or reproduced in any manner whatsoever without written per-
mission except in the case of  brief  quotations embodied in critical 
articles or reviews. 
Published by Eastern Harbor Media, LLC. 37 West 17th Street, New 
York, N.Y. 10011. Designed by Sam Reisman. Cover design by Jillian 
Burr.
ISBN: 978-0-692-43696-7
First edition published 2000 by Thomas Dunn Books, an imprint of  
St. Martin’s Press, as The Hunting of  the President: The Ten-Year Cam-
paign to Destroy Bill and Hillary Clinton.
www.nationalmemo.com
– of –
the
hUNtING
hILLARY
JOe CONASON & GeNe LYONS
ADAPteD AND UPDAteD FROM
The Hunting of  the President: The Ten-Year 
Campaign to Destroy Bill and Hillary Clinton
JOE CONASON is editor-in-chief  of  The National Memo, the 
online newsletter and website that he co-founded with his wife, 
Elizabeth Wagley, in 2011.  He also serves as editor-at-large of  
The Investigative Fund at The Nation Institute, where he oversees 
award-winning reporting projects that appear on a wide variety of  
print, online, and broadcast platforms.
Conason has covered every U.S. presidential election since 1980 
(and nearly every presidential scandal as well). During the Clinton 
presidency, his reporting on the Whitewater investigation brought 
his work to national media attention.  His articles have appeared 
in Esquire, The Nation, The New Republic, The Guardian (London), 
Harpers, and The New Yorker,  among dozens of  other periodicals and 
newspapers. He appears frequently as a commentator on television 
and radio and his columns are distributed nationally by Creators 
Syndicate.
From 1992 to 2010, he wrote a popular political column for 
The New York Observer. He also served as the Manhattan weekly’s 
executive editor from 1992 to 1997. He wrote weekly columns and a 
blog for Salon.com, the Internet magazine, from 1998 to 2010. 
Conason was previously a national correspondent and columnist 
for The Village Voice, where he covered stories from City Hall and 
Capitol Hill to Tiananmen Square. While reporting for the Voice 
he won the New York Press Club’s Byline Award for breaking 
news coverage. In 1985, his exposé of  Ferdinand Marcos’ hidden 
Manhattan real estate holdings caused an international sensation, 
leading to congressional hearings and the election that preceded the 
Philippine dictator’s overthrow, which he reported from Manila. 
He is the author of  Big Lies: The Right-Wing Propaganda Machine 
and How It Distorts the Truth (St. Martin’s Press, 2003), and (with 
co-author Gene Lyons) The Hunting of  the President: The Ten-Year 
Campaign to Destroy Bill Clinton (St. Martin’s Press, 2000). Both books 
About the Authors
  The Hunting of Hillary    |    v
were New York Times bestsellers. He is currently working on a book 
about Bill Clinton’s post-presidency for Simon & Schuster, slated for 
publication in 2016.
Joe Conason graduated from Brandeis University in 1975 with 
honors in history. He was born in New York City, where he still lives 
with his wife and their two children.
GENE LYONS has written a column for the Arkansas Times 
since 1994. He previously spent five years as general editor at 
Newsweek, and was associate editor at Texas Monthly for a year. In 
1980, he won the National Magazine Award for Public Service for 
the Texas Monthly article “Why Teachers Can’t Teach.” A prolific 
author, Lyons has written hundreds of  articles, essays, and reviews 
for such magazines as Harper’s, The New York Times Magazine, The 
New York Review of  Books, Entertainment Weekly, Washington Monthly, 
The Nation, Esquire, Slate, and Salon. 
Lyons graduated from Rutgers University in 1965, and earned a 
Ph.D. in English from the University of  Virginia in 1969. He taught 
at the Universities of  Massachusetts, Arkansas, and Texas before 
becoming a full-time writer in 1976. A native of  New Jersey, Lyons 
has lived in Arkansas with his wife Diane since 1972. Their two adult 
sons live in the Little Rock area. The Lyons live on a cattle farm near 
Houston, Ark., with a half-dozen dogs, several cats, three horses, 
and a growing herd of  Fleckvieh Simmental cows. 
Books: The Higher Illiteracy (University of  Arkansas, 1988), 
Widow’s Web (Simon & Schuster, 1993), Fools for Scandal (Franklin 
Square, 1996) and, with Joe Conason, The Hunting of  the President: 
The Ten Year Campaign to Destroy Bill and Hillary Clinton (St. Martin’s, 
2000). In 2004, Mozark Productions released a movie version of  The 
Hunting of  the President.
vi    |     
Contents
About the Authors 
iv
Contents 
vi
Introduction 
vii
From Trivial Things, A National ‘Scandal’ Rises 
1
Swindling (And Smearing) The Clintons 
11
U.S. Attorney Blocks Partisan Political Probe 
18
The Lonely Death Of  Vince Foster 
22
A Tainted Accuser – And His Far-Right Friends  
27
An Old Enemy From ‘White Haven’ 
33
A ‘Totally Inappropriate’ Call To The FBI 
37
Another Watergate? Media Dreams And Frenzies 
41
The Strange Secrets of  Richard Mellon Scaife 
45
Praising Robert Fiske – Only To Bury Him 
50
Appointing A Not-So-Independent Counsel 
58
Stirring Paranoia With False Prophets (And Real Profits) 
66
A $100,000 Windfall – And A $9 Million Myth 
77
Newt Gingrich’s Contract – On The Clintons 
81
Alfonse D’Amato’s Ethical Crusade 
87
Star Witness Faints At Hearing – And Nobody Notices 
95
As National Media Turn Away, A Moment Of  Truth 
102
Billing Records, Lost And Found – And Exculpatory 
109
A Pulitzer Winner’s Bloody Blunders 
115
How Starr Fumbled – And Fled 
122
After Five Years, Nothing ‘Substantial And Credible’ 
135
The Clintons, Their Enemies, And The American Public 
137
Appendix: Where Are They Now? 
144
      |    vii
For Republicans, the strong likelihood that their presidential 
nominee will face a Democrat named Clinton is not a happy pros-
pect—especially when that Democratic candidate could make histo-
ry as America’s first female president. Which must be why they have 
been at work for many months already, seeking every possible means 
to denigrate, demean, and discredit Hillary Rodham Clinton.
It is important for voters, perhaps younger voters in particular, 
to understand that we have seen this movie before—too many times. 
When journalists warn that Hillary Clinton is ���polarizing,” a 
favorite media cliché, what they mean is that we can expect a steady, 
increasingly vituperative barrage of  insults, gossip, and sensational 
headlines directed toward her, with or without substance. The Re-
publican opposition research specialists are experimenting daily to 
discover which topics and themes resonate most powerfully against 
Clinton, one of  the best-known and most durably popular political 
figures in the country. 
But the partisan operatives, eager and unscrupulous as they are, 
know very well that Hillary Clinton too has seen all of  this before. 
With the exception of  her husband, there is no living public figure in 
this country who has survived such harsh scrutiny for so long. 
She has endured far worse attacks than those she is likely to 
encounter in 2016. When Bill Clinton was still president, she became 
a primary target of  independent counsel Kenneth Starr, his hard-
shelled deputy prosecutors and scores of  FBI agents, who spent five 
years and over $50 million attempting to prove, among other things, 
that the then-First Lady had not testified with perfect accuracy about 
Introduction
viii    |    Introduction 
 
a minor Arkansas real-estate transaction—a deal that had occurred 
years before her husband’s inauguration. 
Having created the ballyhooed Whitewater “scandal,” most of  
the nation’s news organizations, including three or four television 
networks and the two most important daily newspapers, cheered 
Starr on, spending millions more in their own zeal to get Hillary. 
There was no accusation too obscure or dubious to make headlines, 
in publications that routinely anticipated her imminent criminal in-
dictment. Editors of  The New York Times, America’s newspaper of  
record, employed not one but two op-ed columnists, William Sa-
fire and Maureen Dowd, whose only seeming purpose in life was 
to bring her down. Safire warned repeatedly that she would go to 
prison, promising to “eat crow” if  his direst predictions proved 
wrong. (While the old Nixon hand has since passed away, Dowd still 
pursues the same old obsession in the same space, as she devolves 
into self-parody.)  
When she ran for the United States Senate in 2000, the ugliness 
only intensified, with Rupert Murdoch’s New York Post publishing 
false accusations of  anti-Semitism against Hillary, articulated by a 
pair of  Arkansas con artists and that ultimate hustler, Dick Morris. 
What Morris said had as little credibility as any of  his statements—
he had published a book only two years earlier, declaring that he 
would never forget Hillary’s kindness to his elderly Jewish parents, 
with no mention of  any alleged anti-Semitic remarks by her. But as 
with any “Clinton scandal,” credibility and facts mattered little. 
Eight years later, campaigning for the Democratic presidential 
nomination, Clinton waded through a barrage of  biased, sexist me-
dia coverage that left even the most jaded political journalists shak-
ing their heads. In the aftermath, Mark Halperin, the peripatetic Time 
magazine, ABC News and now Bloomberg News pundit—who has 
showed little sympathy toward her over the years—offered a confes-
sion on behalf  of  his profession. Admitting that the ordinary flaws 
in campaign coverage, “wild swings, accentuating the negative—are 
magnified 50 times when it comes to her,” Halperin said, “It’s not a 
level playing field.” Washington Post columnist Dana Milbank agreed 
that the political press “will savage her no matter what, pretty much. 
There’s no question they have their knives out for her.” Many have 
Introduction    |    ix
drawn their knives again, as she attempts once more in 2016 to make 
presidential history. 
The promotion of  scandal narratives will remain a favored 
weapon. As Jeet Heer noted recently in The New Republic, the ghosts 
of  old scandals, mostly imaginary and even paranoid, “are likely to 
re-emerge in the conservative and even mainstream press.” 
Certainly there is little doubt that right-wing propaganda op-
erations, from Fox to the SuperPACs, will aim to reinforce the old 
negative memes about Hillary’s candor. But so far, her angry crit-
ics on the right have been unable to revive the scandal stories that 
dogged the White House and dominated media coverage during her 
Bill Clinton’s presidency. Although critics often complain of  “Clin-
ton fatigue” and snark continuously about her “baggage,” rarely do 
they refer directly to the Nineties sensations that became famous as 
Whitewater, Travelgate, Filegate, and so on. 
Her opponents don’t usually mention those moldy tales because 
despite tens of  millions of  taxpayer dollars spent by congressional 
committees and special prosecutors investigating them, they were all 
proved bogus. And despite constant projections that Hillary Clinton 
would be disgraced or even indicted in the Whitewater probe, she 
was ultimately cleared of  every accusation—and the same was true 
of  Travelgate and Filegate, whose media monikers indicate the level 
of  premature excitement that those stories once encouraged.
Unable to refresh such material, Clinton’s determined antago-
nists have instead sought to capitalize on Benghazi, where Libyan 
terrorists killed four Americans, including U.S. Ambassador Chris 
Stevens. After numerous investigations, however—including an 
official probe that led to disciplinary action against several State 
Department officials and many changes in diplomatic security pro-
cedures—the notion that Clinton had personally done wrong, or 
misled investigators, proved baseless. 
Yet the Republicans haven’t quite given up on Benghazi—even 
after the Republican-led House Permanent Select Committee on In-
telligence definitively dismissed the charges against Clinton last year. 
The recent furor over her State Department emails arose from 
efforts by Rep. Trey Gowdy (R-SC) to restore the Benghazi issue as 
x    |    Introduction 
 
a political weapon. According to the evidence that has emerged so 
far, however, Clinton appears to have done nothing more egregious 
with her emails than her predecessors. Until the appointment of  
Secretary John Kerry to succeed Clinton, no Secretary of  State had 
ever used a government email address exclusively. While she has 
turned over tens of  thousands of  emails to the State Department, 
former Secretary of  State Colin Powell admits that he destroyed all 
the electronic records of  his tenure. 
Nevertheless, the double standard of  the political media re-
mains intact. Journalists and commentators who never noticed the 
Bush White House destruction of  millions of  government emails 
now bitterly protest Clinton’s alleged electronic misdemeanors. The 
Republican National Committee—which helped Karl Rove conceal 
and destroy hundreds of  thousands of  emails while he served as 
George W. Bush’s top political advisor—complains loudly about 
Clinton, “the Secretary of  Secrecy.” 
When Clinton’s pursuers pause from talking about emails and 
Benghazi, they invariably turn to the Bill, Hillary and Chelsea Clin-
ton Foundation, which has raised hundreds of  millions of  dollars to 
pursue health, environmental, educational, and civil society projects 
in America and around the world. A significant portion of  that mon-
ey was raised abroad from governments and other donors that have 
endorsed the foundation’s work for very good reason. Supported by 
that funding, for instance, the foundation’s crusade against HIV/
AIDS, tuberculosis and malaria in poor countries has improved and 
even saved millions of  lives. 
Much like other charities, from Oxfam to the World Food Pro-
gramme, the Clinton Foundation has received money from autocrat-
ic governments in the Middle East, including Saudi Arabia. A Saudi 
billionaire, not connected to the ruling family in Riyadh, donated 
millions to provide anti-retroviral drugs to AIDS-afflicted Ethiopi-
ans, and this too fed the “scandal” narrative. Yet it seems morally 
dubious to argue that the Clinton Foundation ought to have refused 
the Saudi funding, letting tens of  thousands of  women and children 
die miserably instead.
Still Hillary Clinton’s opponents will sow suspicion of  her fam-
ily’s charitable endeavors, using xenophobia and anti-Arab bigotry 
Introduction    |    xi
to reinforce such fears. Scarcely a week after Clinton announced her 
candidacy, her adversaries on the right commenced a series of  at-
tacks on the foundation, with pre-release publicity for a tendentious 
book titled Clinton Cash: The Untold Story of  How and Why Foreign Gov-
ernments and Businesses Helped Make Bill and Hillary Clinton Rich. 
Underwritten by a “dark money” trust created by the ultra-right 
Koch brothers and their network, this volume, published by Rupert 
Murdoch’s HarperCollins, purports to show nefarious connections 
between the Clintons, their foundation’s supporters, and Hillary 
Clinton’s tenure as Secretary of  State. The flow of  millions of  dol-
lars from the billionaire Clinton adversaries to researchers bent on 
ruining her with media attacks bears a striking resemblance to the 
infamous anti-Clinton conspiracy known as the Arkansas Project, 
financed between 1993 and 1997 by the late Pittsburgh magnate 
Richard Mellon Scaife.
Yet what startled some observers (although not anyone who 
followed Whitewater) was a deal hatched by author Peter Schweizer 
with the New York Times and Washington Post to share in his research 
before publication—affording mainstream legitimacy to a writer 
whose previous, highly inaccurate works have been debunked by the 
Post’s own “fact checker” columnist, among many others. 
On April 23, the Times published a front-page story that in-
sinuated but failed to prove a complicated quid pro quo between 
a major Clinton foundation donor and a decision by the Obama 
administration to permit a Russian firm to buy American uranium 
interests. But the story almost immediately began to fall apart, as 
news outlets picked apart its details to show that Hillary Clinton had 
nothing to do with the uranium decision, which had largely been 
controlled by other agencies of  government. As NBC News con-
ceded the next day—after promoting the Clinton Cash book and the 
Times story—“upon reflection, that Times article doesn’t hold up that 
well 24 hours after its publication.”
Should those charges utterly disintegrate, more are certain to 
follow from the same networks and financiers—which is why the 
story told in The Hunting of  Hillary is salient in the current media and 
political atmosphere. Excerpted from The Hunting of  the President: The 
Ten Year-Campaign to Destroy Bill and Hillary Clinton, this e-book offers 
xii    |    Introduction 
 
readers and voters a fresh opportunity to review the original effort to 
ruin the former First Lady. As the 2016 campaign unfolds, nobody 
should be too surprised to see and hear the same themes, tactics, and 
canards—perhaps even some of  the very same accusations—bubble 
up into our septic political discourse once more. 
We believe the story of  the Nineties Clinton “scandals” remains 
relevant today because it documents the techniques and attitudes 
used to popularize false charges against Hillary Clinton two decades 
ago—and because the same methods continue to be employed by 
her partisan adversaries. The long, expensive, and ultimately fruit-
less investigations that proceeded under the rubric of  Whitewater 
demonstrated how easily a tantalizing falsehood can gather strength 
and authority, without any substance whatsoever.
It is a lesson that the nation paid dearly to learn when Bill Clin-
ton was president—and that we will only forget at even greater cost. 
      |    1
From Trivial Things, A 
National ‘Scandal’ Rises
ONE
Investigative reporter Jeff  Gerth’s initial Whitewater story ap-
peared on the front page of  the New York Times on Sunday, March 
8,1992—two days before the “Super Tuesday” primaries in six 
southern states and just weeks before the crucial Democratic con-
tests in New York and California. For Sheffield Nelson, the Arkan-
sas Republican millionaire and longtime Clinton antagonist who had 
delivered the story to Gerth, its timing couldn’t have been better. 
"What mighty contests,” wrote Alexander Pope, “rise from triv-
ial things.” The Whitewater property was not vast: it spread across 
roughly 230 wooded acres, at the confluence of  two of  the best 
fishing streams in the Ozarks—Crooked Creek and the White Riv-
er. The sums involved were also comparatively small. In buying the 
property back in 1978, Bill and Hillary Clinton and Jim and Susan 
McDougal altogether had put a bit more than $200,000 in borrowed 
money at risk. Had the project succeeded as planned, each couple 
hoped to realize a profit of  roughly $45,000. 
As it happened, the Clintons ended up losing a bit less than 
that, the McDougals somewhat more—although Jim McDougal’s 
habit of  commingling funds among his many real estate entities 
would make a precise accounting impossible. Even the washboard 
gravel roads bulldozed and graded by the Whitewater Development 
Corporation remained unpaved 14 years after Bill Clinton was first 
elected governor.
Far from trivial, however, was the depth of  McDougal’s resent-
ment toward the Clintons. 
In time, McDougal would portray his former partners as a coolly 
2    |    Joe Conason and Gene Lyons 
 
cynical couple, “takers rather than givers . . . unwilling to jeopardize 
their political position for the sake of  friends.” Hadn’t they turned 
their backs on him after the catastrophic events of  the 1980s—
when McDougal had ruined his marriage; suffered a stroke and 
succumbed to manic-depressive illness; lost a bank he had bought 
as well as his insolvent thrift, Madison Guaranty Savings and Loan; 
forfeited his overleveraged, ramshackle real estate empire; and finally 
found himself  facing a four-count federal bank fraud indictment in 
1990? Undoubtedly they had. But he had given them plenty of  good 
reasons for shunning him, not the least of  which was his inept and 
self-serving management of  Whitewater itself. 
McDougal’s colorful and increasingly erratic career–as old-time 
agrarian populist, campaign organizer, failed politician, college pro-
fessor, real estate developer, banker, entrepreneur, promoter, sales-
man, savings and loan mogul, recovering alcoholic, mental patient, 
criminal defendant, raconteur, and sometime confidence man—had 
made him a familiar if  rather untrustworthy figure to many Arkan-
sas journalists. A largely self-educated country boy from Woodruff  
County, McDougal had grown up on the geological and historical 
boundary between the Arkansas cultures of  hill country and Delta. 
He could recite Bible verses and quote lengthy passages from Shake-
speare and James Madison from memory. 
After a well-publicized trial, McDougal had been acquitted of  
the original fraud charges in Little Rock’s federal district court. At 
the time, he had blamed the bias of  Bush administration Republi-
can prosecutors for his plight, but few observers took that charge 
seriously. Reporters who covered the trial attributed the verdict to 
a poorly organized prosecution and the spellbinding effect of  Mc-
Dougal’s own testimony on the jury. 
Sick, bankrupt, and living on Social Security disability payments 
in a borrowed mobile home on somebody else’s land near the little 
town of  Arkadelphia, McDougal had then petitioned the governor’s 
office for a job. Wary Clinton aides made an inquiry to Arkansas se-
curities commissioner Beverly Bassett Schaffer, a Clinton appointee 
who had quietly urged the FBI to investigate him in the first place. 
No way, Bassett Schaffer told them. In her view, McDougal was no 
innocent victim of  the national savings and loan meltdown, but a 
  The Hunting of Hillary    |    3
reckless and devious man who should not be trusted. 
This rejection maddened the desperate McDougal. Oddly, how-
ever, it was a grudge against Clinton’s Democratic rival Jim Guy 
Tucker, more than his brewing feud with Clinton, that first prompt-
ed McDougal to seek out Sheffield Nelson—the wealthy Republican 
businessman who had lost a bitter gubernatorial race against Clinton 
two years earlier. It was Nelson who eventually led McDougal to 
Gerth—who had used Nelson as a background source on earlier 
Arkansas stories. 
Like Nelson, Tucker also had lost a bruising political race to 
Clinton. A handsome, Harvard-educated ex-Marine and former 
prosecutor, Tucker had given up a seat in Congress to challenge 
Clinton for the governorship in 1982. He had emerged from the 
Democratic primary a loser, deeply in debt, and feeling angry. 
Nelson, Tucker, and Clinton had been mutually antagonistic 
for years, but McDougal had entered into separate business deal-
ings with all three during the real estate boom of  the late seventies 
and early eighties. Only Nelson had profited from his dealings with 
McDougal, and then only by threatening a lawsuit against Madison 
Guaranty Savings and Loan—which made it all the more strange that 
McDougal came to him seeking revenge against Tucker and Clinton. 
Another irony was that Madison Guaranty’s collapse had been 
triggered not by Whitewater but, according to bank examiners, by 
the failure of  a major resort development on Campobello Island 
in New Brunswick, Canada. McDougal’s chief  investors in that 
doomed $3.73 million enterprise happened to be Sheffield Nelson 
and Nelson’s friend Jerry Jones, the oil-and-gas magnate and Dallas 
Cowboys owner. It had been the nostalgic McDougal’s conceit that 
wealthy New England vacationers and retirees would be moved by 
memories of  Franklin Delano Roosevelt’s summer retreat (location 
of  the 1960 film Sunrise at Campobello, starring Ralph Bellamy as 
FDR) to purchase lots on the cold, foggy island north of  Maine. 
Unlike Whitewater, which placed none of  Madison Guaran-
ty’s assets at risk, Campobello Properties Ventures was mentioned 
repeatedly in Madison audits as a costly boondoggle. Eventually 
the U.S. Treasury Department, which inherited the property after 
4    |    Joe Conason and Gene Lyons 
 
Madison went under, entered negotiations to sell it to the Canadian 
government for use as a national park. Nelson and Jones had invest-
ed a reported $225,000 each to purchase a 12.5 percent share in the 
enterprise. In 1988, the Federal Home Loan Bank Board (FHLBB), 
then supervising Madison Guaranty’s assets, had bought their share 
for $725,000—a profit of  $275,000. 
"I can’t believe it. It’s an extraordinary event. It smells,” said 
William Seidman, who supervised the savings and loan bailout for 
the Bush administration, to the Fort Worth Star-Telegram. “It could be 
legit, but I doubt it.” 
Jim Guy Tucker’s ties to McDougal were similarly extensive. At 
one time, the two men had shared ownership of  a small bank in tiny 
Kingston, Arkansas. Although Tucker had grown wealthy investing 
in cable TV properties after his 1982 election defeat, his real estate 
dealings with McDougal had ended in mutual recrimination. Not 
long before McDougal’s 1990 trial, Tucker learned that McDougal 
had collected loan payments from buyers on a parcel the two had 
subdivided, but had failed to pay off  the bank debt. McDougal nev-
ertheless sent worthless deeds to their customers, bearing Tucker’s 
forged signature. 
Tucker had had no choice but to make restitution. But when 
McDougal subsequently asked him to serve as a character witness, 
Tucker did have a choice and said no. Despite his acquittal, McDou-
gal never forgave Tucker. 
McDougal’s ostensible purpose when he contacted Nelson in 
February 1992 was to find a Republican lawyer willing to sue Tucker. 
McDougal wanted Tucker to return $59,000 worth of  promisso-
ry notes which Tucker had, in fact, bought from him some years 
earlier, but which McDougal claimed he had stolen. After Tucker 
was elected lieutenant governor of  Arkansas in 1990, putting him in 
line to succeed Bill Clinton, McDougal may have imagined that the 
politician would settle rather than risk bad publicity. In the end, no 
lawsuit was filed. 
None of  this complicated history was reflected in the Times’s 
Whitewater reporting, which also omitted any mention of  Nel-
son’s role as its source. Exactly how Whitewater came to bear the 
  The Hunting of Hillary    |    5
imprimatur of  the newspaper of  record always remained murky. 
Early on, Gerth said he had noticed a reference to the project in 
Clinton’s state financial disclosure forms, and telephoned the only 
Arkansan he knew for an explanation. Times editors insisted that 
Nelson had supplied nothing more than McDougal’s phone number. 
Nelson, however, always proudly took full credit for putting 
the Times onto Whitewater. In his posthumously published memoir, 
Arkansas Mischief, McDougal confirmed that boast. “It was Nelson 
who passed the information on to Jeff  Gerth,” he wrote. “Nelson 
was gleeful. He wanted me to talk with Gerth, the New York Times 
reporter who had written a long investigative article about the Ste-
phenses’ extensive connections in Arkansas a few years earlier.” 
On two previous occasions, Sheffield Nelson and Stephens, Inc., 
a Little Rock-based conglomerate with vast financial interests, had 
each used the Times as a weapon in their ongoing feud. Gerth’s 1978 
story about allegedly predatory natural gas pricing in Fort Smith was 
credited by Arkansas political observers with influencing enough 
votes to knock Witt and Jack Stephens’s nephew out of  a three-way 
Senate primary race. Several years later, Stephens, Inc., had retaliated 
by talking to Times reporter Wendell Rawls, Jr., who wrote a critical 
examination of  Nelson’s Arkla-Arkoma gas deal, which indirectly 
helped Clinton put an end to his political career. 
After Nelson made the initial contact, McDougal recalled, 
Gerth drove down to his home town of  Arkadelphia to visit him. 
McDougal plied the reporter with documents and canceled checks, 
allegedly showing that the Clintons had taken improper tax deduc-
tions and had failed to pay their fair share of  Whitewater expenses. 
According to McDougal, he subsequently came up to Nelson’s Little 
Rock office and gave him damaging information about Tucker. Nel-
son, he claimed, was delighted. Within weeks, Jeff  Gerth was sharing 
piles of  documents he believed might implicate Tucker with Little 
Rock journalists. The Times, he explained, was only interested in Bill 
Clinton. 
Gerth’s original article won praise from the American Journalism 
Review for containing “80 to 90 percent” of  what the press ultimately 
learned about Whitewater. Even some Clinton loyalists acknowl-
edged that the story examined legitimate issues concerning the 
6    |    Joe Conason and Gene Lyons 
 
Clintons’ finances and Hillary Clinton’s law practice. Unfortunately, 
its mistakes began with the headline: “CLINTONS JOINED S & L 
OPERATOR IN AN OZARK REAL ESTATE VENTURE.”  
Actually, when the Whitewater partnership was formed in 1978, 
McDougal hadn’t been involved in the banking or thrift businesses 
at all. He was a political science teacher at Ouachita Baptist Univer-
sity, who had done well investing in real estate. McDougal didn’t 
acquire a controlling share in the small thrift institution he renamed 
Madison Guaranty until five years later—by which time the White-
water project was virtually defunct. 
Judging by subsequent stern editorials in the New York Times, the 
rest of  the story could be summarized more or less as follows: When 
he was governor, Clinton and his wife entered into a sweetheart 
deal with a crooked financier at no risk to themselves. When their 
benefactor got into trouble, Clinton dumped the sitting Arkansas 
securities commissioner and appointed a political ally named Bever-
ly Bassett Schaffer. He and Hillary then pressured Bassett Schaffer 
to grant special favors to Madison, until vigilant federal regulators 
cracked down and thwarted their scheme. When exposed by Gerth, 
Bassett Schaffer claimed a convenient memory loss, denying com-
plicity in events she had supposedly forgotten.
"In interviews,” Gerth had written, “Mrs. Schaffer . . . said she 
did not remember the Federal examination of  Madison, but added 
that in her view, the findings were not ‘definitive proof  of  insolven-
cy’... ‘I never gave anybody special treatment,’ she said.”  
The problem, as Bassett Schaffer had pointed out in 20 pages of  
memoranda she had provided to Gerth via fax, was that this version 
of  events was mostly false.
First, the Clintons and McDougals were jointly and severally 
responsible for the Whitewater loan. Moreover, federal regulators 
did not determine that Madison Guaranty was insolvent between 
1984 and 1986, the years Gerth’s story covered. The Federal Home 
Loan Bank Board had formally accepted Madison’s debt-restruc-
turing plan in a letter dated September 11,1984—a full six months 
before Bassett Schaffer’s appointment. Nor was her appointment 
connected to Madison’s troubles. She had filled a vacancy created 
  The Hunting of Hillary    |    7
when her Republican-appointed predecessor—who later described 
Gerth’s Whitewater story as “unmitigated horseshit”—resigned to 
enter private legal practice. 
More important, Arkansas had no authority to close state-reg-
ulated S&Ls without the concurrence of  the federal agencies that 
held the real power. “It may be important for you to know,” Bassett 
Schaffer had written to Gerth, “that state law grants the savings and 
loan supervisor no emergency acquisition authority similar to that 
of  the FHLBB and FSLIC (the Federal Savings and Loan Insurance 
Corporation).”  
Subsequent Senate hearings would establish that not one of  the 
746 institutions that failed during the S&L crisis of  the ‘80s was shut 
down by state officials anywhere in the country. But Bassett Schaffer 
had been an active participant in a July 1986 decision to remove Jim 
and Susan McDougal from control of  Madison Guaranty S&L, after 
auditors discovered his insider trading and other abuses.
She had also directed the Times reporter’s attention to her certi-
fied letter, dated December 10, 1987, all but begging federal regula-
tors to shut down Madison and two much larger Arkansas S&Ls. She 
had gotten no answer until the feds finally closed Madison’s doors in 
February 1989, roughly a month after President George H.W. Bush’s 
inauguration. According to Walter Faulk, then director of  supervi-
sion for the FHLBB in Dallas, “I never saw [Bassett Schaffer] take 
any action that was out of  the ordinary.... To my knowledge, there 
is nothing that she or the governor of  Arkansas did or could have 
done that would have delayed the action on this institution.” 
When the Times story appeared, Bassett Schaffer briefly con-
sidered filing a libel suit. “I provided you with a detailed account 
in writing of  the facts,” she wrote Gerth bitterly. “This information 
was ignored and, instead, you based your story on the word of  a 
mentally ill man [McDougal] I have never met and documents which 
you admitted to me on the telephone on February 26, 1992, were 
incomplete.” He never wrote back to her.
"I subsequently had conversations with her in which I tried to 
explain the situation. I sought to come down and meet her,” Gerth 
said later. “I had hoped to explain what happened with the editing 
8    |    Joe Conason and Gene Lyons 
 
of  the first piece. She never would agree to see me.” Because his 
errors and inferences had appeared on the front page of  the New 
York Times, they would be repeated as gospel by other reporters for 
years to come. 
Jim McDougal was likewise stunned by Gerth’s initial foray into 
Whitewater. The Times article suggested that McDougal had crim-
inally misused Madison deposits to subsidize the Ozark develop-
ment. Having set out to hurt Tucker and Clinton, McDougal had 
inflicted the worst injuries on himself. Sam Heuer, the Little Rock 
attorney who had successfully defended McDougal during his 1990 
bank fraud trial, issued a statement: “I am appalled and affronted by 
the allegations and reckless disregard of  the facts by the New York 
Times and its reporter Jeff  Gerth.” 
The Clinton campaign dispatched attorney Jim Blair, an old 
friend of  McDougal and the Clintons, to remind their former 
partner that further unguarded comments to reporters could have 
consequences more harmful to him than to anybody else. When an 
Associated Press reporter contacted McDougal a couple of  days 
later, he sounded chastened. “I’ve never done anything illegal,” he 
said, “and as far as I know Bill Clinton has never done anything 
illegal or unethical.” He would later claim that Blair had threatened 
him with a lawsuit. 
But McDougal’s retraction meant little. Weeks earlier, according 
to McDougal, Sheffield Nelson had secretly taped him making sev-
eral rash allegations, and Nelson proceeded to copy and distribute 
the tape to every journalist who would listen. To Nelson, McDougal 
had asserted that the Clintons never lost money on Whitewater. “I 
could sink [that] quicker than they could lie about it if  I could get in 
a position so I wouldn’t have my head beaten off,” McDougal had 
said. 
Meanwhile, confronted by Clinton campaign aide and longtime 
Hillary friend Susan Thomases about the shortcomings in his work, 
Jeff  Gerth was initially somewhat apologetic, she recalled. He had 
planned a more extensive, three-part series on the Clintons’ finances, 
she said Gerth had told her, only to have his piece chopped down 
to 1500 words by his editors. Thomases also remembered Gerth 
mentioning that his Washington bureau chief, a southerner named 
  The Hunting of Hillary    |    9
Howell Raines, disliked Clinton and was largely responsible for the 
story’s tone.
Later Gerth denied blaming Raines, although he said he “was 
upset” by the way his original Whitewater copy was edited and did 
request changes after the paper’s first edition appeared (including the 
addition of  a quote from Bassett Schaffer denying she had favored 
McDougal). There had been no plan for a “series,” he added, and he 
thought it was “highly unlikely” that the Whitewater story actually 
had been edited by Raines. 
Campaigning in the New York Democratic presidential primary, 
former California governor Jerry Brown frequently denounced the 
“sleazy” appearance of  Hillary Clinton’s law practice. In response, 
the Clinton campaign commissioned an accounting of  Whitewater, 
overseen by a Denver attorney and Clinton friend named James 
Lyons (no relation to the author). Hillary also asked Webster Hub-
bell and Vincent Foster, her two closest associates at the Rose Law 
Firm, to help explain her work for Madison. A more ill-starred pair 
of  defenders could hardly be imagined, although she had no way 
of  knowing that. In the process of  gathering information, Foster 
obtained a computer printout from the Rose Law Firm of  Hillary’s 
Madison Guaranty billing records. 
The Lyons report, released by the campaign in late March, con-
cluded that the Clintons had lost about $65,000 on the project. Due 
to insufficient information given them by McDougal, the Clintons 
had improperly deducted a handful of  interest payments from their 
income taxes, amounting to a tax savings of  less than $2,000. Al-
though the five-year limit on IRS action had long passed, the couple 
made a point of  paying the back taxes. But at least for the time being, 
the Clinton campaign’s swift response had put the Whitewater issue 
to rest. How much scandal could there be in a gravel-road real-estate 
development in which the Clintons had ultimately lost money? 
One aspect of  the story that would never receive much attention 
was Jim McDougal’s psychiatric history. In his initial 1992 article, 
Jeff  Gerth noted that McDougal suffered from manic-depressive 
disorder, but described him as “stable, careful and calm.” Aside 
from that reassuring reference, McDougal’s affliction and its effect 
on his turbulent business and personal life were rarely mentioned. 
10    |    Joe Conason and Gene Lyons 
 
McDougal’s illness had much to do with his problems. Among 
the symptoms psychiatric manuals list for a manic episode are the 
following: “inflated self-esteem (grandiosity, which may be delusion-
al)” and “excessive involvement in activities that have a high poten-
tial for painful consequences which is not recognized, e.g. buying 
sprees . . . foolish business investments.” It’s common for manic 
individuals to succumb to “grandiose delusions involving a special 
relationship to God, or some well-known figure from the political, 
religious or entertainment world.” 
McDougal’s attorney had gone so far as to file, and later with-
draw, an insanity plea during his 1990 bank fraud trial. Given his 
financial situation during the 1980s—his heavily mortgaged real 
estate investments, his ownership of  a small, unprofitable bank and 
floundering S&L—and the fact that McDougal suffered from man-
ic-depressive illness, serious trouble was inevitable. 
      |    11
Swindling (And 
Smearing) The Clintons
TWO
While Jeff  Gerth’s Sunday article may have left little impression 
on most Times readers, it was thrilling to L. Jean Lewis in Tulsa, 
Oklahoma. She was not, as it turned out, alone in her excitement. 
Lewis was an investigator for the Resolution Trust Corporation 
(RTC), the temporary federal agency created during the Bush ad-
ministration to bail out savings and loan depositors and liquidate 
the assets of  institutions seized by the government. A 38 year-old 
former executive secretary in a failed Dallas thrift, Lewis was neither 
a lawyer nor a CPA. When she joined the RTC, she had no previous 
law enforcement experience. Having grown up in a military family in 
Texas, Lewis proudly identified herself  as a conservative Republican. 
(In a contemporaneous letter to a friend, she described Bill Clinton 
as a “lying bastard.") 
She worked out of  the RTC’s Tulsa office, until she was later 
transferred to Kansas City, and her job was mostly routine: to sift 
through the records of  failed Arkansas thrifts for evidence of  fishy 
transactions. Consulting closely with the FBI’s Little Rock office, 
Lewis had compiled a prioritized list of  Arkansas institutions to be 
looked into. At the top, as of  December 1991, she had placed the 
two largest failed thrifts in the state, Saver’s Savings and First Feder-
al, both headquartered in Little Rock. Saver’s had collapsed at a cost 
of  $650 million, First Federal at a cost of  $950 million—both amid 
strong FBI suspicions of  criminal fraud. First Federal alone had 
squandered roughly 20 times the amount lost by Jim McDougal’s 
Madison Guaranty, which stood, sensibly enough, near the bottom 
of  Lewis’s list. 
12    |    Joe Conason and Gene Lyons 
 
All that changed, however, with the publication of  Gerth’s story 
three months later.
The following morning, on March 9, the RTC’s Tulsa field of-
fice got two calls from senior RTC officials in Washington inquiring 
about the accuracy of  Gerth’s allegations. The acting head of  in-
vestigations looked over the Madison Guaranty file and responded 
with a memo stating that “the Whitewater Development loan was 
not specifically classified by Federal Examiners, and . . . [the record] 
does not show any [bank] losses related to the Clintons or White-
water development.... Bill and Hillary Clinton are not named in any 
of  the documents contained in our criminal referral files.” In fact, 
neither Whitewater nor the Clintons had ever borrowed from Mad-
ison Guaranty. 
Nevertheless, Lewis and her supervisor, Richard Iorio, moved 
Madison Guaranty to the top of  their investigative list. Lewis quickly 
headed to Little Rock to search out more documents stored in a 
downtown warehouse. 
Did Hillary Rodham Clinton know about or suspect problems 
with Whitewater that she didn’t want the press to discover? Certainly 
what she had learned when she took over the tangled affairs of  the 
Whitewater Development Corporation in 1988—after McDougal 
had left the hospital and moved to California— had given cause for 
concern. Piecing together the company’s jumbled records had been 
almost impossible, and many documents were missing. Property 
taxes, in some instances, hadn’t been paid for years. The owner of  
a lot financed personally by Hillary had gone into bankruptcy. (She 
had never been notified, and McDougal had made no payments on 
the note.) The corporation’s state franchise fees hadn’t been paid for 
several years, a potential embarrassment had Bill Clinton’s political 
rivals ever uncovered it. 
Given the depressed real estate market during the mid-‘80s, 
Whitewater probably would have lost money anyway. The site, 
though picturesque, had been badly chosen. The nearest towns with 
gas stations, grocery stores, a hospital, or a golf  course were more 
than a 45-minute drive away over narrow, steep, curvy roads. And 
Marion County, where Whitewater was situated, is also dry—no al-
coholic beverages.
  The Hunting of Hillary    |    13
Years later, when an objective accounting of  the Whitewater 
project became available, it was clear that as its managing partner, 
McDougal turned a poor investment into something much worse. 
He had treated the Clintons’ investment as if  it belonged to him 
personally, abused their trust, sold the company’s assets at a steep 
discount to the realtor who was supposed to be its agent, deceived 
his partners about its condition over a period of  several years, and 
arguably committed several crimes in the process. 
In 1985, without telling the Clintons, McDougal had liquidated 
Whitewater’s real estate assets for pennies on the dollar. He sold 
all of  Whitewater’s remaining lots (24 of  the original 44) to one 
Chris Wade, the realtor charged with marketing and selling the de-
velopment. The asking price for 23 of  those 24 lots, according to 
a “Whitewater Estates” inventory list dated November 1984, had 
been $191,550.
In return for the land, however, Wade put down no cash. He 
agreed to assume $35,000 of  the $96,000 still owed by the Clin-
tons and McDougals on the original 1978 loan that had financed 
the project. (Wade was so slow to pay his share that the bank was 
still charging the Whitewater Development Company interest on the 
money until 1992.) As payment McDougal also accepted from Wade 
a 1979 Piper Seminole airplane, worth $35,000, which he promptly 
pressed into service as Madison Guaranty’s official corporate air-
craft. Eventually he sold the airplane and kept the money himself. 
Whitewater’s real estate assets were gone, but the Clintons didn’t 
know it. They wouldn’t learn many of  these details until years after 
the fact. Outwardly flush, in May 1985, Madison Guaranty put the 
Rose Law Firm on a $2,000-a-month retainer, and McDougal hosted 
a political fund-raiser for the governor in the lobby of  the thrift’s 
newly refurbished downtown Little Rock headquarters. 
It wasn’t until Hillary took over the company’s records that she 
and her accountants learned that the company had been all but for-
mally defunct for over four years. Although more than $134,000 had 
been deposited in the Whitewater account between 1984 and 1986 
from other McDougal-owned companies, roughly the same amount 
had been paid out, much of  it to individuals and companies having 
nothing to do with Whitewater. 
14    |    Joe Conason and Gene Lyons 
 
In November 1986, McDougal had written the Clintons of-
fering a deal. The letter arrived several months after the Rose Law 
Firm had dropped Madison Guaranty as a client, and regulators had 
forced his removal from the S&L. McDougal had also recently suf-
fered a stroke, and he was hospitalized for manic-depressive illness.
To spare them any public embarrassment, he proposed that they 
simply hand over their share of  Whitewater. In essence, he was of-
fering to buy their share of  the corporation for half  the amount of  
the $90,000 losses, which he planned to claim on his federal taxes. 
The problem was that the company still owed almost $90,000 to 
Citizens Bank, which refused to release the Clintons from liability. In 
effect, they were being asked to give up their share of  what they mis-
takenly believed was an asset in return for assuming a $90,000 debt. 
Not surprisingly, Hillary Clinton balked and demanded to see 
Whitewater’s books, infuriating McDougal. In December 1986, he 
wrote to the Clintons again. Despite current cash-flow problems, 
he claimed, Citizens Bank had agreed to reduced payments, and the 
Clintons didn’t owe him any money. But there was no such agree-
ment with the bank. By 1988, after both McDougals had left Arkan-
sas for California, Hillary was forced to take over the management 
of  Whitewater—finding an empty shell, its assets stripped, its debts 
and taxes unpaid, its records disordered and incomplete. 
The Madison ledgers Jean Lewis pulled from the dusty Little 
Rock warehouse were as chaotic as the Whitewater documents that 
Hillary had obtained four years earlier. Worst of  all were the records 
of  the checking accounts of  McDougal’s dozen real estate compa-
nies. What Lewis uncovered would have confirmed Hillary’s worst 
fears. 
Madison Guaranty had drifted into deep financial distress for 
the same basic reason that hundreds of  other thrifts faltered during 
the 1980s. Forced by the Federal Reserve to pay ruinously high in-
terest rates on deposits, their income was restricted by the long-term 
low-interest mortgages they held. Hemorrhaging money, they were 
encouraged by Congress and the Reagan administration to make up 
the difference by speculating in real estate. Those regulatory “re-
forms” had lured McDougal into the thrift business, but no sooner 
had he taken over Madison Guaranty than the same ruinously high 
  The Hunting of Hillary    |    15
interest rates sent the real estate market into a tailspin. 
Faced with cash-flow problems, Lewis found, McDougal had 
begun a frantic fiscal juggling act, commingling funds and moving 
money back and forth among the corporations and partnerships he 
controlled. The Clintons and Jim Guy Tucker were by no means the 
only business partners whose trust he had abused. 
Following Gerth’s lead, Lewis focused her attention on the last 
six months of  1985, when Beverly Bassett Schaffer had supposedly 
done favors for Madison Guaranty’s owner. Finding evidence of  
McDougal’s fiscal shenanigans everywhere she looked, Lewis leaped 
to a conclusion well beyond the New York Times reporter’s imagining: 
Everyone in Arkansas who had ever done business with Madison 
Guaranty, including the Clintons, was part of  a huge conspiracy, she 
seemed to surmise in her criminal referrals. Every transaction that 
appeared to benefit McDougal must also have benefited his partners, 
according to her theory. 
By August 1992, the Little Rock FBI agents assigned to inves-
tigate financial crime were growing impatient with Lewis and the 
RTC. Her agency, having seized the records of  bankrupt institutions 
across the country, controlled all the paperwork in thrift investiga-
tions. Without referrals from the RTC, law enforcement officials 
could not move forward on potential fraud cases. Lewis’s months of  
work on Madison Guaranty struck the agents as a waste of  time and 
money, and her motives seemed suspiciously political. On August 
26, FBI special agent Steven Irons spoke with Lewis by phone. He 
took notes of  the conversation. 
According to his notes, Lewis informed Irons that she had been 
given a deadline of  August 31 to file a referral on Madison Guar-
anty, and that there were “big names involved.” Lewis claimed that 
she “gave up a job opportunity in D.C. just to do referral. She or it 
could alter history—very dramatic.”  
Irons would later testify he had no doubt that Lewis’s motive 
was to disrupt the 1992 presidential election in favor of  George H.W. 
Bush. Later that day, his Little Rock supervisor, Special Agent in 
Charge Don Pettus, sent a telex to FBI Headquarters in Washington, 
expressing his professional frustration. Pettus sought permission to 
16    |    Joe Conason and Gene Lyons 
 
press ahead on the First Federal and Saver’s Savings cases, without 
the RTC’s help. 
On August 31, Lewis delivered as promised. She filed a criminal 
referral with the FBI and the U.S. attorney in Little Rock, naming not 
only James and Susan McDougal as felony suspects, but also each 
and every contributor to the 1985 Clinton fund-raising event held at 
Madison Guaranty. As “possible witnesses” she listed both Bill and 
Hillary Clinton, Arkansas lieutenant governor Jim Guy Tucker, and 
retired U. S. Senator J. William Fulbright, another Arkansas Demo-
crat who had invested with his former aide McDougal. She named 
none of  the Republicans who had done business with McDougal or 
Madison. 
Normally, criminal referrals from the RTC took months to be 
processed. But within days, Lewis started pestering FBI agent Irons 
and the U.S. Attorney’s staff  in Little Rock with demands for im-
mediate action. After Irons stopped returning her calls, she left a 
taunting message with the office receptionist.
"Have I turned into a local pariah,” Lewis demanded, “just be-
cause I wrote one referral with high profile names, or do you plan 
on calling me back before Christmas, Steven?????” (She specifically 
dictated the five question marks.) Irons returned her call only to tell 
her to back off. 
Word of  Lewis’s efforts filtered back to the Clinton campaign 
sometime between mid-September and early October, when long-
time aide Betsey Wright got a phone call from a supporter in Cali-
fornia. On a recent business trip to Kansas City, the man said, he had 
attended a cocktail party where a female RTC staffer boasted that 
she had “just sent a criminal referral up to the prosecutor in Little 
Rock... which would implicate the Clintons.” (Three months earlier, 
the RTC had closed its Tulsa office and transferred Jean Lewis to 
Kansas City.) And although Wright had no way of  knowing it, there 
were signs around the same time that the White House, the Justice 
Department, and the Bush campaign were taking a direct interest in 
Lewis’s machinations. 
William Barr, then serving as Bush’s attorney general, later 
testified that White House cabinet secretary Edith Holiday asked 
him about the Lewis referral during a flight on Air Force One on 
  The Hunting of Hillary    |    17
September 17, 1992. At the time, Holiday was “chief  liaison” be-
tween the White House and the 1992 Bush- Quayle campaign. 
Previously she had served as operations director of  the 1988 Bush-
Quayle campaign, and then as general counsel to the Treasury De-
partment. That week, Barr asked his aides to contact the FBI, which 
informed them it had no record of  such a case. He reported back to 
Holiday, who seemed surprised. Her demeanor made him wonder 
whether “she had better information” than he did, he recalled. (Un-
der oath, Holiday later said she did not remember any conversations 
with Barr about Madison Guaranty and the Clintons.) 
On September 18, Lewis turned up in Irons’s Little Rock office 
after a meeting he did not attend. The agent told her that due to its 
sensitivity, no action would be taken on her referral until after the 
November election. She warned him that RTC officials in Wash-
ington expected action. Much to Lewis’s eventual chagrin, Irons 
once again made contemporaneous notes of  their conversation. At 
the same time, Lewis made repeated calls to career prosecutors on 
the staff  of  U.S. Attorney Charles Banks in Little Rock. They too 
questioned both her motives and her referral’s substance. Assistant 
U.S. Attorney Fletcher Jackson saw no point in pursuing McDougal 
again. “The prior acquittal,” he told Banks, “would be used against 
you to make this look like a vindictive prosecution.” 
What Lewis described as illegal “check-kiting” at Madison, Jack-
son regarded as a slightly different kind of  scam, though he didn’t 
quarrel with her terminology. Check-kiting usually involves writing 
bad checks among several banks to create illusory balances. Instead, 
McDougal was shifting money back and forth among several ac-
counts within his own bank. 
“From appearances,” he would later testify, “it’s just McDougal 
taking care of  McDougal and McDougal’s corporations. What it ap-
peared to be was that most of  the manipulation Mr. McDougal was 
doing was to make the debt carry. In other words, he was doing all of  
these fraudulent transactions, in a sense, in order to make his interest 
payments and principal payments on debts that he had.” If  McDou-
gal’s actions were in fact crimes—and Jackson had his doubts—the 
Clintons and his other business partners appeared to be his victims, 
not his accomplices. 
18    |     
U.S. Attorney Blocks 
Partisan Political Probe
THREE
Around the end of  September or the beginning of  October, 
the Bush White House also displayed a discreet interest in the Mad-
ison matter. Sometime during that period, White House counsel C. 
Boyden Gray called Albert Casey, the chief  executive of  the RTC 
in Washington. Casey later testified that Gray asked him what he 
knew about an RTC matter involving the Clintons. He knew noth-
ing, Casey said he replied, but he promised to look into it and call 
Gray back. Casey then called RTC vice president William Roelle, 
who confirmed the existence of  Lewis’s referral, and showed him 
a copy. Roelle later testified that he told Casey that he should not 
provide any information to the White House. 
Before Casey could reach Boyden Gray, however, the White 
House counsel phoned him again. “Al, forget my request,” Casey 
remembered Gray saying. “I don’t want you to tell me a thing.” Gray 
himself  would later deny any memory of  those conversations with 
Casey. Any such call, he said, would have come from the Bush cam-
paign, not the White House. Campaign officials echoed Gray’s denial, 
saying they had no idea that Madison was being investigated in 1992, 
and that the campaign had a strict rule that “nobody... was to talk 
to anybody in the government about Clinton.” Only a “third-level, 
junior person” would have done something like that, they insisted. 
Attorney General William Barr was considerably less cautious. 
After his conversation with Edith Holiday, Barr insisted that his 
aides check once again whether Madison was the subject of  a Justice 
Department probe. When a second inquiry to the Executive Office 
of  U.S. Attorneys brought confirmation of  the RTC referral, Barr 
became angry because he felt that Chuck Banks had “deliberately 
  The Hunting of Hillary    |    19
withheld information about the referral from me.” 
On October 7, the Little Rock office of  the FBI responded with 
a lengthy telex to its superiors in Washington, expressing extreme 
skepticism about the validity of  Lewis’s referral. After summarizing 
Jim McDougal’s 1990 trial and shaky psychological state, it added 
that despite “the referral’s stated supposition that the activity was 
for the benefit of  the McDougals, the further supposition that other 
people benefitted does not appear to be factually supported by the 
details that follow. 
“It is the opinion of  Little Rock FBI and the United States 
Attorney... that there is indeed insufficient evidence to suggest the 
Clintons had knowledge of  the check-kiting activity conducted 
by McDougal... [who] was in charge of  [Whitewater] records, just 
as he was with the records of  other companies involved in the 
check-kiting, and does not suggest the Clintons had access to check-
ing account statements that would have reflected the questionable 
transactions.... It was also the opinion of  [Banks that] the alleged 
involvement of  the Clintons in wrongdoing was implausible, and he 
was not inclined to authorize an investigation or render a positive 
prosecutive opinion.” 
On October 8,1992, Barr sent one of  his assistants to a top-level 
meeting attended by Robert Mueller, then head of  the Justice De-
partment’s Criminal Division, FBI assistant director Larry Potts, and 
several senior FBI officials. At that point, the Madison Guaranty 
referral was definitely a matter of  active interest at main Justice. The 
next day, FBI Headquarters sent a telex to its Little Rock field office, 
ordering agents there to review Jean Lewis’s criminal referral and 
report in writing by October 16—less than three weeks before the 
1992 presidential election. 
As far as Banks was concerned, that order sealed his decision. A 
native Arkansan, he had been a Republican congressional nominee 
in 1982 and had also served as general counsel of  the state par-
ty. As such, he had once brought a lawsuit against Bill Clinton for 
what he considered the politically motivated firing of  a Republican 
labor commissioner. Appointed by Ronald Reagan in 1988, Banks 
had been nominated to a federal judgeship in August 1992 by Pres-
ident Bush. His nomination was still pending in the U.S. Senate. If  
20    |    Joe Conason and Gene Lyons 
 
anybody in Arkansas had a personal interest in seeing Bush reelected 
in 1992, it was Chuck Banks. 
But Banks also had his limits. He would not be used political-
ly. He had come to distrust Jean Lewis’s motives, and believed that 
charging Jim McDougal again would be a cruel and unnecessary 
waste of  his office’s resources. Further, based on the documents 
Lewis had produced, he saw no persuasive evidence against the Clin-
tons or Jim Guy Tucker. More than once, Banks discussed the case 
with Don Pettus, the special agent in charge of  the FBI’s Little Rock 
office, who shared his misgivings. 
As the October 16 deadline approached, Banks decided to put 
his objections in writing. Dictating a letter to Pettus, he began by 
repeating all the reasons he had turned down the RTC’s criminal 
referral in the first place. Then he staked out an uncompromising 
position: “I am now advised that you have been ordered to do an 
immediate review to determine if  an investigation is warranted. As 
part of  same, you are required to send a prospective proposal for 
such an investigation by Friday, October 16, 1992. Such an order 
does not apply to this office. 
“However, I do believe it might be helpful to reiterate what I 
have told you previously. Neither I personally nor this office will par-
ticipate in any phase of  such an investigation . . . prior to November 
3, 1992. You may communicate this orally to officials of  the FBI or 
you should feel free to make this part of  your report. 
“While I do not intend to denigrate the work of  RTC,” Banks 
added, “I must opine that after such a lapse of  time the insistence 
of  urgency in this case appears to suggest an intentional or uninten-
tional attempt to intervene into the political process of  the upcom-
ing presidential election. You and I know in investigations of  this 
type, the first steps, such as issuance of  grand jury subpoenas for 
records, will lead to media and public inquiries [about] matters that 
are subject to absolute privacy. Even media questions about such an 
investigation in today’s modern political climate all too often publicly 
purport to ‘legitimize what can’t be proven.’ 
“For me personally to participate in an investigation that I 
know will or could easily lead to the above scenario . . . amounts to 
  The Hunting of Hillary    |    21
prosecutorial misconduct and violates the most basic fundamental 
rule of  Department of  Justice policy. I cannot be a party to such 
actions.” 
Banks closed by promising to direct “any press inquiry from 
any source whatsoever” to the Attorney General or the head of  the 
RTC. Such a statement from Banks would, of  course, have been 
devastating to the Bush campaign. Whoever won the November 
election, Chuck Banks’ government career was probably over. 
The FBI’s Little Rock office dispatched its report to Washing-
ton on October 16 as ordered, stating that there was “absolutely no 
factual basis to suggest criminal activity on the part of  any of  the 
individuals listed as witnesses in the referral.” The telex went on to 
complain again about the RTC’s failure to provide criminal referrals 
on the two much larger thrifts, Savers’ Savings and First Federal Sav-
ings, whose combined losses of  $1.5 billion offered “much greater 
prosecutive potential” than Madison Guaranty. 
Aside from the daunting complexities of  Whitewater, Boyden 
Gray’s sudden loss of  interest may have reflected worries that were 
closer to home for the Bush family. Certainly neither the White 
House nor the Bush campaign would have wanted to risk drawing 
attention to the business dealings of  the president’s sons—in par-
ticular, Neil Bush’s role as director of  a corrupt Colorado savings 
and loan whose bankruptcy cost taxpayers a billion dollars. That was 
a story several reporters were pursuing around the time of  Gray’s 
phone calls to Albert Casey. It was more prudent to forget about al-
leged financial misdeeds and focus instead on Clinton’s draft evasion. 
So there would be no “October sur</p>