What Is the Whitewater Scandal? Investigation - Bernie Sanders (1994)

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• published: 06 Feb 2016
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This period featured high interest rates in general, and by the time these lots were surveyed and thus available for sale at the end of 1979, rates had climbed to near 20 percent. Prospective buyers could no longer afford to buy vacation homes. Rather than take a loss on the venture, the four decided to hold on, building a model home and hoping for better economic conditions. During the next several years, Jim McDougal asked the Clintons for checks for various interest payments on the loan or other expenses; the Clintons later claimed to have no knowledge of the uses of these contributions.[8][13] Concurrently, Jim McDougal had lost his job as the governor's economic aide when Bill Clinton failed to win re-election in 1980.[10] McDougal decided to go into banking instead,[10] and then acquired the Bank of Kingston in 1980 and the Woodruff Savings & Loan in 1982[14] renaming them the Madison Bank & Trust and the Madison Guaranty Savings & Loan, respectively.[11] In spring 1985, McDougal held a fundraiser at Madison's office in Little Rock that paid off Clinton's remaining 1984 gubernatorial campaign debt of $50,000. McDougal raised $35,000, and of that Madison cashier's checks accounted for $12,000.[15][16] In 1985, Jim McDougal set his sights on investment into local residential construction, labeling the project Castle Grande. The 1,000 acres (4 km²), located south of Little Rock,[11] were priced at about $1.75 million, more than McDougal could afford on his own: due to financial laws, McDougal could borrow at most $600,000 from his own savings and loan, Madison Guaranty. McDougal subsequently involved several others to produce the additional funds. Among these was Seth Ward, an employee of the bank, who helped funnel the additional $1.15 million required. To avoid potential investigations, the money was moved back and forth among several other investors and intermediaries. Hillary Clinton, then an attorney at Little Rock-based Rose Law Firm, provided legal services to Castle Grande. In 1986, their scheme was unveiled by federal regulators who realized that all of the necessary funds for this real estate venture had come entirely from Madison Guaranty; regulators called Castle Grande a sham. In July of that year, McDougal resigned from Madison Guaranty. Seth Ward fell under investigation, along with the lawyer who helped him draft the agreement. Castle Grande earned $2 million in commissions and fees for McDougal's business associates, as well as an unknown amount of legal fees by Hillary Clinton's law firm, but in 1989 it collapsed, at a cost to the government of $4 million.[17] This in turn helped trigger the 1989 collapse of Madison Guaranty,[17] which federal regulators then had to take over. Taking place in the midst of the nationwide savings and loan crisis, the failure of Madison Guaranty cost the United States $73 million.[18] The Clintons lost between $37,000 and $69,000 on their Whitewater investment,[19] a lesser amount than the McDougals lost, for reasons unclear in the media reports.[13] The President's critics cited the unequal capital contributions by the Clintons and McDougals as evidence that then-Governor Clinton was to contribute in other ways. The White House and the President's supporters claimed that they were exonerated by the Pillsbury Report, a $3 million study done for the Resolution Trust Corporation by the Pillsbury, Madison & Sutro law firm at the time that Madison Guaranty Savings & Loan was dissolved. The report concluded that James McDougal, who had set up the deal, was the managing partner, and Clinton was a passive investor in the venture; the Associated Press characterized it as "generally support[ing] the Clintons' description of their involvement in Whitewater."[20][21] However, Charles Patterson, the attorney who supervised the report, "refused … to call it a vindication" of the Clintons, stating in testimony before the Senate Whitewater Committee that "it was not our purpose to vindicate, castigate, exculpate." https://en.wikipedia.org/wiki/Whitewater_controversy