Twisting Erskine Bowles
York, Byron
hen Bill Clinton announced the resignation of Leon Panetta, he paid lavish tribute to his departing chief of staff. "He has become my great friend," the president said, "more than my...
...He quickly became a near-legend with his minute-by-minute study of Clinton's work habits...
...I just made a judgment" not to give the warning, he told the Senate committee...
...He also had valuable connections on Capitol Hill, where he served as congressman from California for sixteen years...
...Today, Foren says he is baffled at Bowles's inability to remember the briefing and memo on the Hale case...
...I'm trying to give him the benefit of the doubt," Foren continues...
...At the SBA, Bowles took a leading role in promoting Hillary Rod-ham Clinton's health-care reform plan...
...Jan Meyers, then the ranking Republican on the House Small Business Committee, Bowles wrote, "Capital Management has been treated in the same manner as all such other cases...
...BOWLES: I did not...
...The first thing I did when I looked at it was to look through it to see whether there was a reference to the president or the first lady," he told the Senate...
...Beyond that, Bowles pledged to "reinvent" the SBA...
...If his history in Washington is any indicator, Erskine Bowles is the man for the job...
...I do not recall that...
...Bowles —his memory now clear—says he told Spotila to check with the Justice Department...
...Heads Up One of the few things Bowles did remember during his White-water testimony was an incident in which he claims to have resisted a suggestion to tip off the White House about the Hale investigation...
...A Washington Post profile glossed over the Hale matter, while a Time magazine piece—like many others in the mainstream media — didn't mention it at all...
...I don't remember before that...
...CHERTOFF: Did you shred that document...
...Foren about mentioning the referral to Mr...
...The notes indicate an anxious interest in David Hale...
...Members fawned over Bowles so much that Arkansas Senator Dale Bumpers reportedly told him, "You may feel you've been nominated for sainthood...
...Lindsey denied seeing them, despite the phone messages indicating his interest...
...I said, 'David, why would anybody give you tens of millions of dollars worth of assets...
...Lauch Faircloth, for example, one of the president's most vocal opponents on the Senate Whitewater committee, has gone out of his way to praise his fellow North Carolinian...
...It certainly stood out in my mind...
...If that is the case, the president will need a chief of staff who has proven he can take ethical shortcuts, keep close tabs on investigations, and stonewall Congress...
...I felt close to the president, even though I had not spent a lot of time with him," Bowles told the Senate committee...
...On May 5, 1993, the night before the hearings, Foren phoned Bowles to discuss Hale...
...A technocrat with none of Panetta's public warmth, Bowles stood stiffly at the microphone and pronounced himself a man of "organization, structure and focus" who would bring "clearly-defined goals, objectives, and timelines" to the White House...
...At that time, an assistant U.S...
...According to career SBA officials who spoke to The American Spectator and testified before the Senate Whitewater Committee, Bowles and his hand-picked political appointees kept the White House apprised of the Hale matter, even though the case was supposed to be confidential...
...But when Bowles was called before the committee in November 1995, he claimed to have virtually no memory of the briefings and memos he received about the case...
...You asked me in my deposition...
...he had never met the Arkansas governor before the campaign...
...But when Whitewater committee counsel Michael Chertoff questioned Bowles about the issue, the SBA administrator seemed to draw a blank: CHERTOFF: Mr...
...He can obtain a copy of the documents if it appears necessary...
...The report outlines Bowles's bad memory and the contradictions between his testimony and that of other SBA officials, but it does not specifically criticize Bowles...
...And that means Erskine Bowles might soon be his old forgetful self...
...Bowles, do you recall Mr...
...Bowles, Faircloth said, is a "fine man" who will "bring a well-needed dose of business sense, honor, and personal integrity to the Clinton White House...
...His father, Hargrove "Skipper" Bowles, was a businessman and Democratic activist who ran unsuccessfully for governor of North Carolina in the 197o's...
...But he did leave a legacy, one that had nothing to do with small business: while head of SBA, Bowles played a limited but crucial role in the cover-up of the Whitewater scandal...
...according to Kennedy's notes, the lawyers devoted a substantial amount of time to a discussion of Hale's allegation and the president's denial...
...Doesn't make sense,'" Wayne Foren, a top SBA official, told the Whitewater committee of his February 1993 interview with Hale...
...During the summer Hale tried to make a deal with prosecutors, telling them his story of Clinton pressuring him to make the $300,000 loan...
...At the end of the meeting, the lawyers resolved to "try to find out what's going on in the investigation...
...Foren says he updated his memo—the one Bowles didn't remember reading—sent it back to Bowles, and briefed him again...
...BOWLES: I don't remember any kind of—I don't remember anything that I would have considered—I don't remember anything, to begin with...
...But for all his importance, Panetta never played a major role in one critical White House function: controlling the damage from the array of scandals plaguing the administration...
...Hale had claimed he had access to the president and the governor, so I didn't want Erskine to be blindsided...
...Jesse Helms express full confidence in Bowles as the one Clintonite they can trust...
...I just don't remember receiving it...
...The documents were marked "CONFIDENTIAL" and contained a warning that "utmost discretion should be exercised" with their handling, but Spotila said he thought he was allowed to release them to other government agencies, including the White House...
...Bowles left the White House in 1995 to start a new business in North Carolina, but even then he continued to play an insider role in the administration...
...Bowles did not elaborate on what those "marching orders" were, but he said he did not discuss Capital Management with McLarty, then or at any other time...
...Eggleston, did you make a copy of one of the documents in the file...
...Erskine advised me...that he had briefed the then–chief of staff Mack McLarty on Capital Management, and that his guidance was to proceed with this case as you do any other case...
...Yet Bowles, despite all the briefings and memos and "heads ups" he had received, maintains that from the time he took office all the way through October he did not know that Hale had accused the president of any wrongdoing—or even that there was a link between Hale and Clinton...
...Bowles's SBA had given the Whitewater team what it wanted...
...I said, 'Look, John, I don't know if this is good or bad, right or wrong, up or down, but you'd better check this out with somebody at the Justice Department to see if it's okay,' Bowles told the Senate committee...
...How...
...Erskine has a tremendous capacity for detail...
...it was one of the few questions Starr The American Spectator • January 1997 asked Susan McDougal before her refusal to answer led her to be jailed for contempt of court...
...Clinton paused a moment before bestowing the ultimate compliment: "In the language of his people, he is my paisan...
...Although his memory lapses received less press attention than the impressive forgetfulness of Susan Thomases, Margaret Williams, and Bernard Nussbaum, a look at Bowles's performance at the hearings shows that his testimony—like theirs before him—helped the White House minimize some of the most damaging revelations of the Whitewater scandal...
...Foren decided Bowles needed to see it, so he wrote another briefing memo, which was dated August 9 and marked "PRIVILEGED AND CONFIDENTIAL...
...He also headed the team that prepared Clinton for the debates with Bob Dole...
...Bowles's brother-in-law, Elliott Close, ran a losing race against 93-year-old South Carolina Senator Strom Thurmond last November...
...BOWLES: No, sir, I'm not...
...Since then, Whitewater independent counsel Kenneth Starr has been trying to find out whether the president told the truth...
...When questioned about that statement, Bowles told the White-water committee that while he had been briefed on the case, "I hadn't studied the file, I hadn't spent a long time going over it...
...He apparently found at least one page to be very interesting, as he told Senate investigators: CHERTOFF: Now, Mr...
...Bill's Small Business Man Erskine Bowles belongs to a well-known and politically active Southern family...
...But Foren —who left the government last year— is not ready to say Bowles was lying at the Whitewater hearings...
...Why the praise from a man who had damned so many other Clinton officials...
...He was talking to his boss and doing to McLarty what I did to him, which was to give him a heads up...
...Eggleston called the SBA and got a return call from a man named John Spotila, who was the agency's general counsel...
...CHERTOFF: Now, just to be clear in saying you don't recall it, you're not going so far as to deny that it happened, I take it...
...The other senator from North Carolina apparently feels the same way...
...I don't recall receiving this memorandum," he told the Senate committee...
...Foren, according to Shepperson, "said that Erskine had taken him aside and indicated that he had spoken to Mr...
...The job of chief of staff does not require Senate confirmation, so the president can appoint anyone he wants...
...Erskine was put in a hard position...
...He also spurred a General Accounting Office investigation when he used SBA money to print 200,000 brochures promoting the plan and gave io,000 free copies to the Democratic National Committee...
...Then he delivered what was perhaps an unwitting summation of all his testimony...
...Teckler added that the Office of Government Ethics had examined the issue and found no wrongdoing...
...For his part, Senate Whitewater committee chairman Alfonse D'Amato made no public statement on Bowles...
...In late September Foren gave Bowles another briefing and handed him yet another memo on the Hale case (like Foren's other memos, the document was given to the Whitewater committee...
...BOND: When did you first learn that there might be some connection between Capital Management Services, David Hale and the president and the first lady...
...I think Erskine was the new man on the job," Foren continues, "and McLarty was the one to whom he reported...
...At issue was the agency's investigation of David Hale, the former judge who ran an SBA-backed finance company in Little Rock...
...Foren briefing you the first week of May concerning his intention to refer the Hale matter over to the Office of the Inspector General...
...The SBA then called and asked the White House to give the materials back, and Eggleston drove them back himself on a Sunday morning...
...It's a contention that members of the White-water committee found hard to believe: SEN...
...Teckler told Bowles that it was just a "notification in case they got some inquiries...
...Foren attached the indictment papers and sent the package to Bowles...
...And I guess if I heard something, I didn't think it was credible...
...He had an excellent memory," Foren says...
...The `heads up' was not improper," Teckler said...
...if you make a loan 21 to a guy, you have access to him...
...Of course by that time it didn't matter...
...When Clinton moved to the White House, he BYRON YORK is an investigative writer for TAS...
...In his interview, Foren recalled clearly that he told Bowles about the connection between Hale and Clinton...
...I simply just did not remember reviewing those memorandums or getting them," he testified...
...EGGLESTON: I don't recall...
...Bowles said...
...22 January 1997 • The American Spectator During SBA budget hearings before Congress, Foren recalled, Bowles "was able to go to the witness table and recount the budget without notes...
...He told his deputy, Charles Shepperson, about it shortly afterward...
...In 1992, Bowles volunteered to raise money for Bill Clinton...
...I have never reviewed the Capital Management file...
...columnist Robert Novak reported recently that "North Carolina corporate executives close to Sen...
...He wanted a background briefing," Foren says, "a one-or two-pager" which Foren wrote and gave to him...
...This one told Bowles that the indictment was imminent...
...The $300,000 loan is perhaps the key crime of Whitewater...
...Paperwork stretched the case into May—the same time that Bowles was preparing to take over...
...He got the president to cut back on his schmoozing and later bragged that the reforms he instituted resulted in Clinton devoting 62.5 percent more time to thinking about policy...
...The fact is the two of them are friends...
...For one thing, he was nearly out of cash after having made a number of politically influenced loans that were not paid back...
...He has also served on a variety of boards and civic projects in his home state and is—along with two brothers-in-law — among the owners of the Carolina Panthers NFL football team...
...Bill Clinton may have lost a paisan, but he gained a co-conspirator...
...I knew this was a visible case," Foren says...
...After the heartfelt hug that has become the administration's male-bonding trademark, the president turned to Panetta's successor, Erskine Bowles...
...Bowles said he was on vacation the first week of August and might have just missed it...
...Bowles told the committee he remembered that briefing, although not in much detail, and recalls "believing, based on what I was told, that the matter was being handled properly...
...They ran in the same social and business circles," says a Faircloth spokesman of the senator and Bowles...
...Bowles determined that Clinton wasted hours each day in useless meetings...
...In an interview, Teckler repeated his contention that there would have been nothing wrong about the "heads-up," had Bowles chosen to deliver it...
...23 Eggleston told the committee he did not show the documents to anybody...
...Foren decided that the case warranted a full-scale investigation, to be carried out by the SBA's Office of Inspector General...
...Attorney in Arkansas sent Foren a draft copy of the indictment...
...Foren says Bowles agreed with the decision to turn the Hale case over to the Inspector General—and he also asked for a memo on the subject...
...But he said he never gave the "heads-up" to the White House...
...Bowles testified that he told Teckler, "Fine, I'll take care of it...
...Bowles says it was during this period in November that he decided to recuse himself from the case...
...His friendship with Clinton, Bowles thought, might make it appear that he wasn't handling the Hale case objectively...
...Foren decided that Bowles—then facing Senate confirmation hearings—needed an early warning about the case...
...When Hale told the SBA that he had found a group of investors willing to pour nearly $4 million into Capital Management Services, the announcement raised regulators' eyebrows...
...The story caught the eye of White House counsel Bernard Nussbaum and presidential adviser Bruce Lindsey, who was in charge of Whitewater damage control...
...Associate White House Counsel William Kennedy took notes which became a matter of contention when the administration initially claimed they were covered by attorney-client privilege...
...In Panetta, the president was losing one of his best representatives: the outgoing chief of staff was a skilled speaker who could effectively plead the administration's case on the TV talk shows...
...He's Back Bowles's short term at the SBA ended in 1994 when Clinton asked him to come to the White House as deputy chief of staff...
...EGGLESTON: Well, I put it in my burn bag...
...It's a job that promises to be even more important in a second Clinton term than in the first...
...With scandals old and new facing the Clinton administration, there will inevitably be many questions about how the White House conducts itself in the face of investigations...
...According to Bowles, Martin Teckler, the deputy general counsel (and ethics officer) at the SBA, walked into Bowles's office during the week of September 2.0...
...Bowles said he asked Teckler if the "heads-up" was proper, and Teckler answered that it was...
...There is some mystery about whether Bowles did in fact recuse himself from the oversight of the investigation," says one Capitol Hill investigator...
...BOWLES: The first I remember of it is when these allegations were in the newspaper...
...January /997 • The American Spectator repaid Bowles with a job as head of the Small Business Administration...
...But Bowles didn't stop receiving information about Hale...
...He proposed steps to ease regulatory burdens on small businesses, but was not able to make much progress in the less than 18 months he spent in the job...
...I may have spent some time reviewing it," Bowles said, "or I may not have...
...Not long after, he brought the Hale matter up again in a conversation with Foren...
...I was surprised," Foren says...
...CHERTOFF: Did you mention it to Mr...
...at the trial of the McDougals and Jim Guy Tucker last summer, Clinton denied—under oath and on videotape—that he pressured Hale or even knew about the loan...
...How could Bowles's memory have been so bad...
...And he couldn't remember whether he had answered congressional inquiries truthfully...
...McLarty...
...It certainly didn't hurt that Bowles made a Sioo,000 interest-free loan to Clinton's inaugural committee —to go along with a second Sioo,000 loan made by his wife's company...
...BOND: You did not know at the time that there was potentially some connection between the Clintons and CMS in the spring of '93...
...It's a particularly vexing question given Bowles's reputation as a careful and meticulous administrator...
...The Justice Department immediately said the White House should return the documents...
...I don't remember any kind of----1 don't remember anything that I would have considered—I don't remember anything, to begin with...
...But it is quite understandable in light of the fact that the press barely noticed the issue...
...At the hearings Shepperson supported Foren's version of events...
...Hale—who was supposed to lend money to economically disadvantaged groups but instead funneled government-secured cash to his friends in politics — accused Bill Clinton of pressuring him to make an illegal $300,000 loan to Susan McDougal, Clinton's Whitewater partner...
...1 Do Not Recall" By early 1993, SBA investigators suspected Hale was abusing his license to lend government-backed money to disadvantaged borrowers...
...I knew he had access to Tucker...
...We were standing around waiting for a meeting to begin," Foren testified at the Whitewater hearings...
...Foren included an SBA memo saying that the agency had shut down Capital Management and seized its assets...
...For his part, Erskine Bowles started an investment company that made him a millionaire at a fairly early age...
...There are some pieces of this puzzle that are still missing...
...that was, after all, the reason the case was getting so much attention...
...When we heard what SBA did, we tried to undo the damage," a Justice Department official said in a deposition...
...But it will likely matter again, and soon...
...EGGLESTON: I have some recollection of that...
...On November 5, seven of the president's lawyers held a now-famous meeting in attorney David Kendall's office...
...The first was an apparently social visit on May 6, in which Bowles brought his family fora visit and tour of the West Wing...
...Bowles testified he had never heard that phrase before...
...At last summer's Democratic convention, for example, it was Bowles who drew the job of easing consultant Dick Morris out of his job after the tabloid Star broke the story of Morris's dalliances with a prostitute...
...I asked him what in the world was a heads-up...
...Now he has moved back to the White House, a move that was greeted with overwhelming praise, even from Republicans...
...BOWLES: No, sir...
...McLarty...
...They asked associate counsel Neil Eggleston to find out what materials had been given to the committee...
...44 24 January 1997 • The American Spectator...
...And committee counsel Michael Chertoff—criticized for openly supporting Bob Dole during the campaign—declined to comment, saying only that the committee's report "speaks for itself" on Bowles...
...He was the head of the agency...
...He bragged that he had access to Bill Clinton and Jim Guy Tucker," Foren said in an interview with TAS...
...On the 16th, Lindsey's secretary took the following message: Neil Eggleston said the additional information is at SBA and is approximately a foot high...
...Wayne very well could have sent it to me," he said...
...The second was the next day, when Bowles went to the White House to, in his words, "get my marching orders...
...Bowles was no long-time Friend of Bill...
...If something comes up that could have that kind of an impact, I would remember...
...Meanwhile, in an apparent effort to cover himself, Spotila went to Bowles and told him that he had given the Capital Management material to the White House...
...Spotila —whom Bowles had hired on the specific recommendation of First Lady Hillary Rodham Clinton —told Eggleston the White House could have the papers...
...And Foren says he is absolutely sure Bowles told him about mentioning the Hale matter to McLarty...
...But when he was asked about the documents, Bowles's memory failed him again...
...One reason for the apparent amnesia is that those in a position to speak out have chosen not to...
...Bowles moved to the SBA as the Hale case began to develop...
...That might seem surprising, given the public record of Bowles's role in Whitewater...
...There's no question in my mind concerning that," Foren says...
...And in the case of the SBA, they took action the very next day...
...McLarty's appointment logs show that he met with Bowles twice during his first week in office...
...CHERTOFF: Now let me ask you whether you recall having a conversation with Mr...
...But Bowles raised a lot of money, and by all accounts the two men, Southerners who outwardly seemed to share little except a passion for golf, became fast friends...
...I've got to believe the White House counsel have [sic] done an incredibly stupid thing...
...I didn't know if he had access to the president...I treated it as a sensitive situation because it certainly was not beyond the realm of possibility...
...The appearance of the stories spurred a period of intensive activity in the Whitewater/SBA cover-up...
...He has become my great friend," the president said, "more than my countryman, more than my fellow Democrat, more even than my fellow worker...
...On November 6, the Post ran a story reporting that the House Small Business Committee had asked the SBA to provide a report on its investigation of Capital Management Services...
...I was aware of no actual conflict of interests that required recusal, but I did not want there to be even a perception of impropriety...
...Just a few weeks after Bowles took office, Capital Management Services defaulted on its debts, and the SBA prepared to shut the company down...
...BOND: When—about what time was that...
...And he brought some measure of organization to the chaotic Clinton White House...
...His answer was people...would give him the money because he could do things for them in Arkansas," Foren testified...
...The Hale case came up again before the month was out...
...The next day, Bowles was unanimously approved by the Senate Small Business Committee...
...His wife, Crandall Close Bowles, is heir to a giant South Carolina textile fortune (she was also a classmate of Hillary Rodham Clinton's at Wellesley...
...He has a call in to SBA to find out if it contains reference to either the president or Hillary...
...Eggleston took the documents back to his office...
...He testified before Congress, held town meetings across the country, and appeared at news conferences with the president and other administration officials, all in a largely unsuccessful attempt to persuade the nation's small business owners that ClintonCare would be good for them...
...He didn't put his recusal in writing, although he says he told the SBA general counsel "and others" of his decision to distance himself from the case (Teckler says that Bowles did indeed tell him about the recusal...
...But plea negotiations fell through, and in August prosecutors in the Eastern District of Arkansas prepared to charge Hale with defrauding the SBA...
...When asked about the apparent rush, Spotila said he thought Eggleston "was interested in having the background materials available in the event of press coverage, that it was important that he receive them promptly...
...In a letter to Rep...
...Indeed, it wasn't until March 3, 1994 that Bowles put his recusal in writing, and that was only after a member of Congress asked whether he had formally recused himself...
...BOWLES: I certainly do not...
...Eggleston told Spotila he would come over to SBA in person to pick up the papers...
...The newspaper accounts to which Bowles referred came on the second day of November, when the New York Times and The American Spectator • January 1997 Washington Post published stories outlining the $3oo,000 loan and David Hale's allegation...
...It is clear from the recollections of Teckler and Foren that the top officials at SBA knew Hale was a hot case...
...He told me that we were getting ready to indict Judge Hale down in Arkansas for defrauding the SBA and said that I might want to call the White House and give them a heads-up...
...Again, Bowles drew a blank when asked if he saw Foren's memo...
...BOWLES: I believe that was in November of um...
...SBA rules stipulated he had to find more capital before he could make any more loans...
...Perhaps that accounts for the fact that during the hearings, Fairclothwho had sharply criticized Margaret Williams and Susan Thomases for their memory lapses—did not ask Bowles a single question...
...But there is some question whether Bowles really withdrew from the Hale affair...
...CHERTOFF: What was the [content] of the document you copied...
...Foren wanted to know who gave Hale the money and what they got in return...
...It is tempting to say that at this point, none of this really matters...
...McLarty...
...The contrast was striking...
...He contradicted the testimony of top aides who had clear recollections of events...
...This was not a casual matter to Foren...
...It wasn't okay...
...the GAO concluded Bowles's action was unusual but did not break any laws...
Vol. 30 • January 1997 • No. 1
