The Second Time Around   

Why didn't Whitewater become a big story during the 1992 presidential campaign?

On a Saturday night in March two years ago, editors at the Washington Post got the front page of the Sunday New York Times faxed to them as usual. It was in the heat of the presidential primaries and they anxiously scanned the competition for stories the Post may have missed. What they saw on the night of March 7 kept them at the office until early the next morning.

Jeff Gerth, a top Times investigative reporter, had a complicated front page story raising conflict of interest questions about then-Arkansas Gov. Bill Clinton and his wife Hillary. The Clintons were business partners with James McDougal in a money-losing Ozarks real estate venture that was repeatedly given financial transfusions from a troubled savings and loan under Clinton's regulation. The S&L majority owner was McDougal.

In the fourth paragraph of Gerth's story was the first mention of a name that would become synonymous with presidential scandal: Whitewater. "The first I heard of that name Whitewater was that night," recalls the Post's national editor, Fred Barbash. "I remember that night well. We were here until 1 a.m. trying to parse the story and figure it out."

?oday one would be hard-pressed to find anyone who hasn't heard the name Whitewater. Called everything from a "cheap dime store novel transformed into a Washington page turner" to an overhyped nonstory to a controversy that could bring down a president, it evolved into a major news event.

From January through March alone, ABC, CBS and NBC together had devoted 284 minutes to Whitewater in weekday newscasts. At the story's peak in March, the Washington Post published 27 front

page Whitewater stories, the New York Times devoted 24 stories to its front section and the Boston Globe put 29 stories on page one. The Arkansas Democrat-Gazette has run over 300 stories since the first of the year. The Wall }treet Journal has run an editorial on the subject almost every week since December 15, according to Editor Robert Bartley.

Whitewater has become a media obsession. But that wasn't always the case. After Gerth's story appeared, top editors at the major news outlets fretted over it, trying to determine what it meant, whether they should follow it and, if so, how. Judging by the dearth of stories in the days and months after Gerth's piece, it seemed as if editors and reporters had given up on Whitewater.

ût wasn't until the Washington Post reported on October 31, 1993, that McDougal's savings and loan was being investigated for criminal violations, and that the president might be connected, that Whitewater became major news. Prior to that, it had been mentioned after the mysterious suicide last July of White House Counsel Vincent Foster, who had handled the sale of the real estate project in 1992 and filed the corporation's delinquent tax returns.

?t's too soon to know whether Whitewater is a serious scandal that portends dire consequences for the Clinton administration, or an overblown saga driven by a zealous press chasing the next Watergate and fueled by Republicans trying to score political points. An emotional debate over that issue rages while special counsel Robert B. Fiske Jr. investigates the sometimes murky allegations.

But a key question remains: Why didn't Whitewater become a big story in March 1992? Why did it take 19 months to heat up, grab front page headlines and become a household word?

The answer is multifaceted and says a lot about the way members of the media do their jobs. It involves the shortcomings of the profession that are as petty (and human) as not wanting to chase someone else's story. It's in part because in the middle of a campaign, with several candidates requiring scrutiny and limited resources, some issues simply fall by the wayside.

In hindsight, most reporters covering Whitewater agree the media missed the story in 1992. The reasons include the complexity of the allegations and the way the first story was written; the sudden emergence of Ross Perot; the Clinton campaign's aggressive and effective response; and the failure of the Bush campaign to exploit ithe charges. Some even believe the reason is as sinister as the press wanting anybody but George Bush in the White House.

At the center of the story is Jeff Gerth, a 49-year-old reporter who later disclosed that Hillary Clinton had parlayed a small amount of cash into $100,000 in the commodities market. Gerth doesn't shy away from intricate financial stories that require days poring over documents and wrestling with mind-numbing financial information.

On January 1992, he traveled to Little Rock to check out candidate Clinton's finances. After the 1988 presidential campaign and the subsequent savings and loan scandal, the reporter had vowed that if any S&L issues arose during the 1992 campaign, he wou?d investigate them. He initially contacted the only two people he knew in Arkansas, Sheffield Nelson, head of the state Republican party, and Bill Bowen, Clinton's chief of staff, and began sifting through financial documents. He wrote his first story on Clinton's finances in February.

"I found the name Whitewater on some of Clinton's financial disclosure reports," Gerth recalls. "But I didn't have any idea of what it was."

Gerth checked into Whitewater, a real estate project in the Ozarks, that turned out to be the Clintons' only business holding. Clips from the local paper indicated the Clintons were in business with James McDougal and his wife Susan. The two couples had entered into a partnership when Clinton was attorney general. McDougal, Gerth learned, had purchased a savings and loan in 1982 and had been acquitted of bank fraud charges in 1990.

"That piqued my interest," Gerth says. He tracked McDougal down and spent more than eight hours grilling him in several interviews. That, coupled with other interviews and an exhaustive search of related local, state and federal records, gave Gerth enough information to go with the story.

In the piece, Gerth pointed out the conflict of a sitting governor being in business with the owner of a troubled savings and loan in the same state. He also reported that McDougal and his thrift had subsidized the Clintons' Whitewater investment, and while the couples were equal partners, the Clintons had put up little cash. And he reported that in 1985 Hillary Clinton, a lawyer, had represented McDougal's S&L before a state regulator, seeking permission for the distressed bank to proceed with a scheme to raise much-needed funds.

"I've never raised in my stories the suggestion that there's any criminal wrongdoing," Gerth says. "Certainly, the first story doesn't say it. It doesn't even suggest it. It basically raises the question of how does this look, which is a legitimate question. It's a character issue. Should [Clinton] have a business relationship with this kind of person?"

The story appeared two days before Super Tuesday, when primaries and caucuses in 11 states would help determine the Democratic presidential candidate. But instead of exploding, Whitewater fizzled. The Associated Press picked it up and the Washington Post and Los Angeles Times ran staff-written versions the day after Gerth's story appeared, offering Clinton's reaction to the piece and crediting the New York Times. Other papers didn't do much with it until the debate March 15 among Clinton, Paul Tsongas and Jerry Brown, when Brown brought it up.

The day Gerth's story broke, Clinton, campaigning manically, slowed down long enough at the Austin airport to dismiss the piece as a "non-story," asserting that he and his wife had lost over $25,000 on the investment. If Gerth had discovered the Clintons reaped huge profits, perhaps the haggard campaign press corps would have been more excited. As one reporter said, "If they didn't make any money, where's the story?"

Reporters and editors apparently were satisfied by Clinton's response and documentation provided by the campaign two weeks later, and the story withered. The Post, the Los Angeles Times and other outlets sent more reporters to Little Rock to explore Clinton's finances, but only a few stories directly related to Whitewater were published.

"I did a Lexis-Nexis search of all the stories that ran on Whitewater from March 1992 until Vince Foster's death," says John Camp, CNN's senior investigative reporter. "It was like a dozen or something. A couple of weeks after the Gerth article, there was virtually nothing."

Yet reporters were working on the story. "We had at least three reporters on it most of that time, sometimes more," says the Post's Barbash, "digging, looking, searching, asking about everything but with a special focus on Whitewater. There were no stories because there appeared to be no story."

Gerth says the Whitewater saga, had it been pursued more aggressively, might have provided valuable information to the public on Clinton's character before the election. "You could argue convincingly," he says, "that the story is more relevant during a campaign when people are assessing character than when somebody has already become president."

Chief among the reasons Whitewater disappeared was the saga's complexity. Gerth's article involved real estate transactions, tax losses, complicated financial dealings, possible conflicts of interest, Arkansas politics, missing records and a shaky savings and loan institution.

"For reporters, usually any accounting stuff is anathema," says John Hanchette, who covered the Clinton campaign for Gannett News Service.

Few reporters understood the ramifications of Gerth's initial story. After he read the piece, recalls Harrison Rainie, national editor of U.S. News & World Report, he wasn't sure exactly what to ask his reporters to pursue.

ühe controversy also could not be concisely articulated, and with today's push for keeping stories short and simple, Whitewater was a problem. "For a charge to catch on," says Newsweek's Washington bureau chief, Evan Thomas, "there has to be a short version... If there is a story, it's not one that lends itself to a bumper sticker or a sound bite or anything you can get your arms around."

Whitewater lacked something else. It wasn't sexy enough for the Bush campaign to rouse reporter interest.

"We just couldn't explain it in a way that made it a good juicy story," says Mary Matalin, who at that time was Bush's deputy campaign manager. "We thought upon reading it that it was devastating. But we could not get another press guy to bite despite going round and round saying this really needs to be pursued further... It's a hard story to tell... I think it's not something that anybody ran to their editors and said, 'This story really gases me up. I want to work on it.' "

Complexity is not an acceptable excuse for U.S. News & World Report's Edward Pound, an investigative reporter and close friend of Gerth's. "That's malarkey," he says. "Our job is to make things that are complicated understandable."

While there's agreement that Whitewater is a tough story, many reporters and editors at newspapers, news magazines and the networks blame the way the original story was written for its failure to have an immediate impact. No one disputes that Gerth did a first-class job of reporting. It's the writing that is criticized.

"I read the story 17 times trying to understand it," says one reporter who chased it.

"Gerth is so impenetrable that nobody could understand what the hell the story was," says Newsweek's Thomas. "It's a dense story and it was written densely... I don't mean to put him down, he's a great reporter. His editors ought to have rewritten his story or made him translate it into English."

What was needed, many agree, was a nut paragraph explaining why the story was important. Instead, Gerth's piece spelled out the facts without drawing any conclusions, so readers and reporters were left wondering just what the crime or infraction was, if any.

"It needed a clear sense of what was at stake," says Rainie of U.S. News. "What was potentially at issue or what the potential crimes or misdemeanors or ethical lapses might have been." Asks Washington Post reporter Michael Isikoff, "Was it the conflict of interest? Was it the investments to begin with? I don't think he or his editors were clear what the story was. Nobody quite knew what to make of it other than it was complicated and something sort of smelled."

In retrospect, Gerth admits he wishes the story had been more cogently written. But he had spent a month in Arkansas poking around and he feared someone else was onto the story. He wanted to get Whitewater into the paper.

"Sometimes you wish you could have more time or write things in a way that makes them more coherent," Gerth says. "But you don't always have that luxury in daily journalism, especially in the heat of the presidential campaign."

The Times' Joel Brinkley, who edited the piece, says the story "was not nearly as simple as some of the other problems dogging Clinton at the time... I'm certain it could have been clearer than it was. We did the best we could at the time."

As hard to follow as the writing may have been, Gerth's original reporting still appears solid. Isikoff estimates that 80 percent – maybe even 90 percent – of what the press knows about Whitewater today was in the 1992 article. Says Washington Times reporter Jerry Seper, "If you read it again, it still stands up. The boy had it nailed... It's an amazing piece of work that he did. He has all the checks. He has the tax losses. He has the connections. It's all there."

Not everyone agrees. CNN investigative reporter John Camp says Gerth's story incorrectly suggests there was almost no financial risk for the Clintons in Whitewater, "when in fact they were individually on mortgage notes with a bank for $183,000."

Gerth's story also said the state regulator before whom Hillary Clinton appeared on behalf of Madison had approved a money-raising plan for the S&L. In fact, the plan was never approved. In a later article, Gerth changed his wording to say the state regulator, Beverly Bassett Schaffer, had given preliminary approval, which is more accurate.

The hectic campaign was another ?ajor reason the Whitewater story lay dormant until the Post resuscitated it last October. Reporters were chasing after Clinton, Paul Tsongas, Bob Kerrey, Jerry Brown and Tom Harkin. Resources were stretched and no one wanted to pursue an arcane real estate deal when there were so many other stories swirling around Clinton in particular.

During the primary season, allegations that Clinton had evaded the draft, engaged in extra-marital affairs and smoked marijuana were making headlines. Whitewater was just one of many issues confronting the press.

"At that time, we were just so swamped we probably didn't have the people to put on it to figure it out," says Paul Friedman, vice president of ABC News. "I know this sounds like a horrible thing but it's true. Everybody during the period of March, April, May and June is just overstretched during a campaign."

Says the Washington Times' Seper, who was in Little Rock when Gerth's story ran, "It seemed to me that his draft stuff, his ROTC stuff and the health care crisis ongoing in Arkansas in which they were millions of dollars in the red, seemed not easier to do but more important at the time."

William C. Rempel, an investigative reporter for the Los Angeles Times who also was there, says, "We were also looking at so many things. We had absolutely a full plate working 18 hours a day."

But there was another reason. In early 1992, few questions had been raised at the national level about Bill Clinton's credibility. The press believed Clinton when he downplayed the story's importance because it had no reason not to. "He'd answered the questions. We took it at face value," says Rempel. "The skepticism wasn't as severe as it came to be in later months when we knew he had lied about the draft and about the womanizing and about the marijuana."

Rempel and Seper agree that the Clinton campaign – Betsey Wright in particular – was masterful at deflecting the Gerth story and at neutralizing potentially damaging stories in general. Wright, who had previously served as Gov. Clinton's chief of staff, set up a "rapid response unit" to deal aggressively with allegations against the candidate.

Rempel tells of the time a Los Angeles Times colleague, Pat McDonnell, was sitting in an Arkansas state trooper's house in the summer of 1992 when the telephone rang. It was Wright instructing the trooper not to talk to the Times. "We challenged her," recalls Rempel, "and she agreed she was out of line but by that time she had had a chilling effect on our investigation."

Both Rempel and Gerth say the campaign also attempted to silence James McDougal, who had been Gerth's main source. But even without the pressure from Clinton's team, McDougal was shaky. His marriage had fallen apart and he'd lost his S&L and much of his personal wealth. He had talked willingly with Gerth, but the day after Gerth's story was published, McDougal's attorney hinted he might file a libel suit against the Times reporter. He also became unavailable.

"One of the problems with another reporter trying to come in and do more with it is that the primary source for a lot of that information was McDougal," Rempel says. "McDougal isn't that available usually. He was trying to keep low because of all the flak he was getting."

Another way the campaign successfully deflected Whitewater was by quickly hiring a Denver lawyer, James Lyons, to put together a report on it. Two weeks after the story came out, Clinton aide Wright gave reporters the Lyons report, which concluded the Clintons had lost nearly $70,000 on the project and had done nothing improper.

Many reporters concede that the Lyons report provided another excuse to drop the story. "Clinton's whole defense on Whitewater was that they lost at least $25,000 on this," says Suneel Ratan, a Time magazine correspondent who has been working on Whitewater since December. "Then the report said they lost $68,900 on this. So how could this have been a sweetheart deal or a quid pro quo for favors later rendered?"

Lyons' report was difficult to decipher. "All of these spreadsheets came out with all this little tiny print on it that looked like a bank statement for a complicated business," says Gannett's John Hanchette. "People sort of looked at it and said, 'What the heck is that?' "

It may have been confusing, but it worked. "For better or worse, [the Lyons report] stoppered the story," says Rainie of U.S. News. "You have a relatively credible [lawyer] putting out a document that basically says as far as he can tell everything is kosher."

The Washington Post, however, wasn't convinced. "Nobody took that very seriously because it was so incomplete," says National Editor Barbash. "There was great frustration here because it was inadequately documented and supported. That's one of the reasons we kept a team on the story."

In any event, the focus of the campaign was about to change. Ross Perot's independent candidacy was attracting interest, and many reporters, Gerth among them, went to Texas to scrutinize his past. By the time of the Democratic National Convention in July, recalls Hanchette, everyone had forgotten about Whitewater. Even the New York Times didn't follow up its own story.

"In all of 1992, we who started this particular string going, we had one story on Whitewater," Times Executive Editor Max Frankel said in April on ABC's "Nightline." "We were confronted by a massive blockade, detectives, public relations experts, lawyers, no more answers, no more documents. We met a stone door, and for us this became unfinished business."

Sources say Gerth wrote another Whitewater story but the Times didn't publish it. Joel Brinkley, who edited the original piece, says he doesn't recall and Gerth won't talk about it. "There was no decision to drop the [overall Whitewater] story," says Brinkley. "But just as other events pushed that out of the way, other events occupied our time as well."

Without McDougal's cooperation, without more documents, without new disclosures, without a Bush campaign attack over the issue, without other reporters following the story, it was inevitable that Whitewater would fade. "Stories need fresh fuel," says Newsweek's Evan Thomas. "They need either other people on the story or fresh revelations."

Fresh revelations there would be, but not for a year and a half. On October 31, 1993, Susan Schmidt reported on page one of the Washington Post that the Resolution Trust Corp., which oversees failed savings and loans, had asked the Justice Department to open a criminal investigation of McDougal's Madison Guaranty Savings & Loan.

Schmidt reported that some of Madison's money may have been funneled to Arkansas politicians, including then-Gov. Clinton's reelection campaign. Whitewater wasn't mentioned until the 20th paragraph of the 29-paragraph story. "The president is named in a criminal referral," says Schmidt. "It just goes without saying that is a story."

At that point, some editors began putting reporters back on Whitewater and the story returned to prominence. Two days after Schmidt's story, Michael Isikoff and Howard Schneider of the Post reported the accusations of former Arkansas municipal judge David Hale, then under indictment for defrauding the Small Business Administration. Hale owned an investment firm that made loans to disadvantaged entrepreneurs such as women and minorities who owned small businesses. The loans were matched by the SBA.

Hale told the Post that McDougal and Clinton repeatedly pressured him into loaning $300,000 to a public relations company owned by McDougal's wife. Hale, according to the Post, said he was told by McDougal the loan could help with "cleaning up" problems at Madison. About $110,000 of the loan, provided under a program designed to aid socially or economically disadvantaged borrowers, was allegedly used by Whitewater Development Corp. to buy property.

"One of the things that unleashed the dams more than the suicide of Vince Foster was the David Hale decision to go public," says Rempel. "It provided a corroborative element that was missing... Hale establishes, if you believe him, that Bill Clinton actually took action as governor to try to help bail out McDougal."

Betsey Wright, a fierce Clinton loyalist, is livid about the Whitewater coverage. Although she doesn't work for the administration, she still finds herself defending the Clintons. She's baffled by the press attention to Hale, who, she reminds everyone, only spoke out after he was indicted on federal fraud charges.

"I think this thing reached the point it has because credibility was given to a man whose reputation is very questionable," says Wright, who now works for the Wexler Group, a government relations firm in Washington, D.C. "You go back and look at what got this thing to be fanned and fanned and fanned and it's David Hale."

Hale's charges enlarged the roster of Whitewater reporters. But when the Washington Times' Jerry Seper reported December 20, 1993, that White House officials had removed Whitewater records from Vincent Foster's office hours after his death, Whitewater became a full-fledged Washington mega-story.

"I don't think Sue Schmidt's story had the impact that the Washington Times story had," says Gannett's Hanchette. "The whiff of cover-up really got this thing going again. That odor came wafting out of the White House around Christmas time."

And while the Clinton camp had buried Whitewater the first time around, this time it gave the coverage momentum. In the face of a media full court press, the Clintons resisted answering questions and providing documents. "One reason it's become a story again is that Bill Clinton has behaved guiltily," says Tom Rosenstiel, who writes about media and politics for the Los Angeles Times. "He has behaved as if there is something wrong."

Some venture that attention shifted to Whitewater in part because the press was uncomfortable with Troopergate, the allegations by Arkansas state troopers that they helped arrange dalliances for Clinton when he was governor (see Free Press, March).

"I think they're pounding this to death because people don't want to do sex," says Newsweek's Thomas. "In December, the sex thing started to hove into view and reporters and editors – more editors – really didn't want to mess with it. They just deflected their attention to Whitewater. It's crude but that's the way it works."

(But eventually, whether they liked it or not, the media were "doing" sex again after Paula Corbin Jones filed her graphic sexual harassment suit against the president on May 6.)

And just as the Democrats jumped all over the Iran-contra allegations, Republicans have done their best to exploit Whitewater. Iowa Rep. Jim Leach and Senate Minority Leader Robert Dole of Kansas emerged as the most aggressive critics, and their efforts helped lead to the appointment of special counsel Robert Fiske to investigate the affair.

With all the attention paid to Whitewater – the Post's Barbash says he can't think of another story the paper has spent so much time on recently other than a political campaign – reporters and editors still debate whether it really is a story.

It's not to James Carville, mastermind of the Clinton campaign. "It was a chickenshit piddlin' ass little story then ," he says, "and it's a chickenshit piddlin' ass little story now."

The Clinton camp says the contretemps has been overplayed, that the story is being pursued by an excessively zealous press hungry for another Watergate and by Republican opportunists trying to derail the Clinton presidency. Some commentators fear the press is gripped by a scandal mentality and has lost its sense of proportion.

But it is a story to Carville's wife, Mary Matalin, Bush campaign official and now host of CNBC's "Equal Time." "I can't imagine any rationale for it not being a news story," Matalin says. "It's the story of potential diversion of funds to a campaign. It's the story of cronyism. It's the story of taxpayers picking up an S&L mess. How could anyone say it's not a story?"

Barbash isn't sure. "We think that it's worth a fairly significant amount of digging which is why we have so many people working on it," he says. "But keep in mind we still don't know the seriousness of this. It certainly has caused a ruckus, but where it goes from here remains to be seen." l