Clinton's records vanished after warning of 'very serious' problems

Sen. Hillary Rodham Clinton greets supporters and signs autographs during a campaign event in Clear Fork, W. Va., today in anticipation of the state's primary election tomorrow.

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Hillary Rodham Clinton's Rose Law Firm billing records, found in the White House residence in January 1996 two years after they had been subpoenaed by government regulators, disappeared shortly after the first lady was warned that the firm's billing problems were "very serious" and the then-ongoing Whitewater investigation could result in criminal charges, newly obtained records show.

More than 1,100 pages of grand jury testimony, investigative reports, memos, charging documents, chronologies, narratives and draft indictments, previously undisclosed but now being "processed" at the Library of Congress, say Mrs. Clinton knew considerably more about the firm's billing problems and their potential ramifications than she publicly acknowledged at the time.

According to the documents, given to the Library of Congress by the estate of Sam Dash, former ethics adviser to Whitewater Independent Counsel Kenneth W. Starr, Mrs. Clinton also knew that her former Rose partner Webster L. Hubbell was both the focus of the firm's billing concerns and a federal conflict-of-interest investigation, in which he was suspected of lying in a sworn statement to regulators about the firm's representation of a failed Arkansas savings and loan.

While Mrs. Clinton told the public at the time that Mr. Hubbell's March 14, 1994, resignation as associate attorney general involved an "internal billing dispute" with his Rose partners that "likely would be resolved," three months earlier she had been advised by another Rose partner, Allen Bird, that the "billing problems were very serious," according to the newly disclosed records.

The records also said Mrs. Clinton was aware that the Federal Deposit Insurance Corp. (FDIC) and the Resolution Trust Corp. (RTC) had begun an investigation in December 1993 into a suspected conflict of interest involving a $400,000 payment to the Rose firm to defend the business practices of Little Rock's Madison Guaranty Savings and Loan Association. At the time, Mrs. Clinton was publicly dismissing the seriousness of accusations against Mr. Hubbell, which were being widely reported by the media.

Madison was at the heart of the Whitewater investigation, which persisted through most of the eight years of the Clinton administration but eventually was shut down without charges against either President Clinton or Mrs. Clinton. Fourteen other persons pleaded guilty or were convicted.

Mrs. Clinton is now the junior senator from New York and a Democratic presidential-primary candidate. Her campaign has dismissed the new documents.

"This is a baseless accusation which was looked into over a decade ago in an investigation that took $71.5 million and eight years to determine there was no case," said spokesman Jay Carson.
A Feb. 28, 1994, memo by White House Associate Counsel W. Neil Eggleston described Mr. Hubbell's extensive role in the Rose firm's legal representation of Madison, contradicting his sworn testimony to the RTC.The memo, forwarded to Mrs. Clinton on March 1, 1994, by White House Deputy Chief of Staff Harold Ickes, noted concerns by the FDIC and the RTC as to whether the Rose firm had disclosed its prior legal representation of Madison in an FDIC lawsuit against the thrift's former auditors.

That same month, the RTC issued its first subpoena for Rose firm documents, including billing records for various Madison projects. The documents show that both Mr. Hubbell and Mrs. Clinton were involved in doing legal work for the failing thrift despite Mrs. Clinton's public denials.

The Eggleston memo said an "ultimate finding" of nondisclosure would mean that "Mr. Hubbell was not truthful in his recollection." It also said that while it was "not clear" whether the FDIC or the RTC would review the accusations under an actual conflict standard, there was the possibility of sanctions in the case, including "criminal liability."

On Jan. 5, 1996, the White House released copies of the billing records showing Mrs. Clinton's work for Madison and its projects while a partner at the Rose firm after they were discovered in the White House by Carolyn Huber, special assistant to the president.

Until that time, the White House had said they never existed, since Mrs. Clinton did little, if any, legal work for Madison.

Mrs. Huber, former office manager at the Rose firm who moved to Washington in 1992 with the Clintons, later told the Special Senate Whitewater Committee she initially and unexpectedly found the long-lost copies in August 1995 on a table in the White House residence's "book room," whose access was limited to the president, Mrs. Clinton and "selected houseguests."

"They just appeared there," Mrs. Huber said, noting that she visited the room regularly in the course of her White House duties every two or three days. "I thought they had been left there for me to take down to put in the file."

She said she left them where she found them until their rediscovery five months later.

The committee had sought the records after hearing testimony in December 1995 from Clinton confidante Susan Thomases, a New York lawyer, who said Mrs. Clinton — contrary to her public statements of "little or no" involvement in the Madison case — had numerous conferences with Madison officials, reviewed documents, made calls to discuss a preferred stock plan aimed at keeping the failing thrift afloat, and "did all the billing."

Mrs. Huber said she did not realize until she looked at the records again on Jan. 4, 1996, that they were the same documents that had originally been sought by the RTC in February 1994 and by the Whitewater committee under subpoena since October 1995. She said she was sure the records were not in the room "two or three days" earlier.

"I don't think I could have missed them," she said, adding that she had "no idea" who might have left them sitting on books on the corner of a table in the center of the room.

The Rose firm's original billings for Madison have never been found, but the new documents show the Whitewater investigators thought that White House Deputy Counsel Vincent W. Foster Jr. had collected copies of them during the 1992 presidential campaign. Notes in red ink and in Mr. Foster's handwriting are on the copies and appeared to be addressed to Mrs. Clinton.

Mr. Foster, whose July 1993 death at Fort Marcy Park in Virginia has been ruled a suicide, also served at the time as the Clintons' personal attorney. He had expressed concern over the Clintons' involvement in Whitewater Development Corp., an Arkansas real estate venture that also involved Madison's owners, James and Susan McDougal, and he is thought to have been involved in removing records from the Rose firm in 1992 that later turned up at the Clinton campaign headquarters.The Clinton administration never explained how Rose billing records got to the White House nor why they were not produced in response to separate subpoenas by the RTC, Mr. Starr's office and the Whitewater committee.Ronald M. Clark, managing partner at the Rose firm, told the Select Senate Whitewater Committee that the billing records showed Mrs. Clinton was involved with Madison and a project known as Castle Grande that federal regulators later described as a "sham." He said the records showed that she charged more than her usual $125-an-hour rate for the work.

Mr. Clark also said he had not found the original billing records despite an extensive search, that he did not know how they got to the 1992 Clinton presidential campaign, and that Mrs. Clinton never told her law partners about her business dealings with Mr. McDougal or the Whitewater venture.

Mr. Hubbell pleaded guilty on Dec. 6, 1994, to defrauding his Rose firm partners and clients of $482,410 in overbillings and of failing to pay $143,747 in federal income taxes. He was sentenced to 21 months in prison under a plea bargain and released after serving 16 months. In the agreement, he promised to cooperate in the Whitewater investigation, although federal authorities have described that cooperation as less than expected.

Court records said some of the overbilled funds were used by Mr. Hubbell for questionable personal expenses, including purchases at a lingerie shop.

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