Short version from CNN:
In one of its last actions, the now-defunct Resolution Trust Corporation (RTC) issued a $4 million report by the San Francisco-based law firm Pillsbury, Madison & Sutro concluding no grounds existed for suing the Clintons over their Whitewater investment. Released in December 1995, the report also found no reason to sue Madison Guaranty owner Jim McDougal or any Rose Law Firm partners, while supporting the Clintons' longstanding claim they were passive investors in Whitewater.
Long version from the NY Times
Agency Won't Sue Hillary Clinton's Former Law Firm
By NEIL A. LEWIS
March 1, 1996
Officials of the Federal agency charged with investigating fraud in the savings and loan industry said today that they believe there were no grounds for a civil lawsuit against Hillary Rodham Clinton's former law firm in Arkansas for work done on behalf of a savings and loan owned by the Clintons' former business partner in the Whitewater land venture.
The legal deadline for any such litigation is Friday at midnight. But officials of the Federal Deposit Insurance Corporation said they will not bring any action because they have accepted as conclusive an investigative report prepared for them by the San Francisco law firm of Pillsbury, Madison & Sutro.
The report, which is the product of a two-year inquiry, found no persuasive evidence that anyone in the Rose Law Firm in Little Rock, Ark., where Mrs. Clinton was a partner, was aware of a fraudulent land transfer scheme involving Madison Guaranty, a failed Arkansas savings and loan association run by James B. McDougal. Mr. McDougal was the Clintons' partner in the Whitewater Development Corporation.
"The evidence, taken as a whole, does not amount to convincing proof that the Rose Law Firm knowingly aided and abetted a fraud," the Pillsbury report concluded.
The White House immediately seized on the report as ammunition in its fight to close down the special Senate committee investigating Whitewater. "This report blows out of the water the allegations that have been made about the First Lady and the Rose Law Firm," said Mark Fabiani, special associate counsel to the President.
Michael D. McCurry, the President's press secretary, said of the 164-page report, "We're finally now getting to the end of the road, and the President and the First Lady are very delighted that this report ought to make clear to everybody that what they have said about Whitewater is the truth."
The special prosecutor investigating Whitewater, Kenneth W. Starr, is looking into the land deal, which is estimated to have cost Madison nearly $4 million in losses. The Madison collapse ultimately cost taxpayers $60 million.
Federal savings and loan regulators had announced in December that they would not sue Mr. or Mrs. Clinton in connection with the Madison failure. But the inquiry was quickly reopened after the White House produced copies of Rose firm billing records, which had been missing for more than two years. The records outlined Mrs. Clinton's work as a lawyer for Madison.
Two weeks ago, lawyers representing the F.D.I.C. interviewed Mrs. Clinton for more than two hours at the White House. Much of that interview was devoted to the newly discovered billing records, which indicate that Mrs. Clinton had worked on a land deal known as Castle Grande.
According to the transcript, released by the White House today, Mrs. Clinton answered many questions by saying she could not recall details of her work 11 years ago on the real estate deal, which has been deemed by Federal regulators to have been a sham transaction.
But the Pillsbury report said none of the newly discovered evidence suggested that Mrs. Clinton or other Rose firm lawyers were aware of the fraud.
The report focused on the law firm's help in the Castle Grande deal, which was a transfer between Madison Guaranty and Seth Ward, an Arkansas political figure who is also the father-in-law of Webster L. Hubbell. Mr. Hubbell was a senior partner with Mrs. Clinton in the Rose firm and served in the Clinton Administration as the No. 3 official in the Justice Department. He is currently serving a prison term for defrauding his partners at the law firm.
Mrs. Clinton prepared one of the documents involved in the land transfer, according to other records.
The report said that although Mrs. Clinton prepared the May 1986 document, "nothing proves she did so knowing it to be wrong. The circumstances of the work point strongly toward innocent explanations."
The Pillsbury lawyers said Mr. Ward and Mr. McDougal probably worked on the land transfer, without involving others, except perhaps for Mr. Hubbell. And the report portrays Mr. McDougal as an unreliable person who sought to associate himself with the Clintons for prestige. The Clintons, the report said, were not "cronies" of Mr. McDougal but people he wanted to claim as friends. "Sitting on the periphery of politics, McDougal wanted to be known as someone who had friends in high places," the lawyers wrote. "In the Clintons' case, he wanted to say something like this: 'They are friends of mine. We go way back.' "
In a report last year, the Resolution Trust Corporation, the now-defunct agency investigating savings and loan failures, dealt with the more central issue involving the Clintons and Madison: whether any Madison money had been siphoned into the Whitewater land deal to shore up the Clintons' investment. The agency concluded they could not determine if that had happened.
In deciding today that there was no reason to sue the Rose firm, the Pillsbury report said: "Such a conclusion does not necessarily mean that the evidence exonerates anyone; it simply means that, given the applicable legal standards and the statutory mandate under which the F.D.I.C. operates, that no reasonable basis has been found to recommend the filing of a claim."
Pillsbury lawyers have been unable to interview some figures involved with the Castle Grande deal because doing so might interfere with Mr. Starr's investigation.
The report also explores contradictions in accounts of how the Rose firm came to represent Madison. Mr. McDougal has said in interviews that he explicitly remembers then-Governor Clinton's coming into his office one morning in jogging clothes, and asking Madison to retain his wife as a favor, saying she needed the business. Mr. Clinton has denied this assertion; Mrs. Clinton has said she believed the Madison account came into the firm through a young lawyer, Richard Massey.
The report dismisses as highly implausible the notion that Mr. McDougal was importuned to give the Rose firm its business because Mrs. Clinton needed the money. The report estimates that because of the way the firm's revenues were distributed, Mrs. Clinton at best received about $20 a month from the account. Rose was billing Madision $2,000 a month.
Testifying before the Senate Whitewater committee earlier this year, Mr. Massey said he had not brought in Madison as a client.
Later, in a Feb. 14 interview with Pillsbury lawyers, Mrs. Clinton said she still believed that Mr. Massey had made the first contact in bringing in Madison and said, for the first time, that she believed Vincent W. Foster Jr. told her that that was the case. Mr. Foster, also once a Rose firm partner, was the deputy White House counsel who committed suicide in July 1993.
"I was asked as someone who knew McDougal if I could intervene and perhaps set up an opportunity for Mr. Massey to do this work," she told investigators. "I agreed to do that. Obviously now, 10, 11 years later, much to my regret."
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