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(Photo: AP)
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The Whitewater scandal began with an investigation into a failed Arkansas real estate deal, and ended with a complicated barrage of fraud, obstruction and abuse of power charges against President Bill Clinton and his wife, Hillary.
Kenneth Starr was appointed to head a probe of the Clintons' Whitewater involvement, and it was an investigation that would eventually lead to the revelation of the Monica Lewinsky affair, as well as President Clinton's impeachment.
In 1978, then-Arkansas Attorney General Bill Clinton and his wife, along with James and Susan McDougal, formed the Whitewater Development Corp. to buy riverfront land and develop the lots into vacation homes. The partnership was a failure and finally ended in 1992, leaving the Clintons with a reported loss of $40,000.
However, there are many accusations of financial wrongdoing that took place in between 1978 and 1992, many of them dealing with James McDougals' Madison Guaranty Savings and Loan, which he purchased in 1982 while Mr. Clinton was governor.
Madison Guaranty issued a series of fraudulent loans and even held a fundraiser to pay off Gov. Clinton's campaign debt, using funds improperly withdrawn from depositors.
In 1985, while under scrutiny from federal investigators, McDougal hired the Rose Law Firm, where Hillary Clinton was a partner, to handle the legal work for Madison Guaranty.
In 1986, McDougal borrowed $300,000 from former Arkansas judge David Hale's company, which dispensed federal funds to small businesses in trouble. Hale alleged that Mr. Clinton pressured him into giving the fraudulent loan, and a later investigation alleged that Hale dispensed $3 million in federal funds to political candidates.
That same year, federal regulators removed McDougal from the head of Madison Guaranty, and the savings and loan finally collapsed in 1989.
The extensive allegations of the Clintons' wrongdoing included charges that Hillary Clinton ordered the destruction of Madison's land contract files and hid her Rose Law Firm billing records in order to conceal the level of her involvement with Madison; that files were removed from Clinton aide Vince Foster's office after his suicide in 1993, a month after Foster filed delinquent Whitewater corporate tax returns; that the Treasury Dept. tipped off the Clintons on several occasions about the investigation by the Federal Resolution Trust Corp.; and widespread preferential treatment by federal employees who had personal connections to Mr. Clinton.
The House and Senate Banking Committees began hearings on Whitewater in 1994. By 1995, 29 Clinton administration officials had testified or been subpoenaed, and all were cleared of any wrongdoing. Both committees found no abuses by the Clintons.
The Senate then formed a Whitewater committee, and conducted 11 months of hearings, subpoenaing 49 agencies and officials. The subpoenas caused bitter Senate battles between Democrats and Republicans, and both the president and the first lady ended up testifying. President Clinton denied any knowledge of the fraudulent $300,000 loan that Hale gave to McDougal.
In 1996, the McDougals were convicted on various fraud and conspiracy charges. James McDougal was sentenced to three years and later died in prison. Susan McDougal was sentenced to two years, and was also jailed in contempt after she refused to testify to a grand jury. President Clinton's successor in Arkansas, Gov. Jim Guy Tucker, was also convicted of fraud, and resigned his post that summer.
The Senate investigation concluded with the parties divided on whether the Clintons committed any unethical practices. Republicans asserted that the Clinton White House stonewalled the investigation, but there was no clear evidence of illegal conduct. Democrats wrote in their report that the Clintons had been unfairly victimized.
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