Conspiracy Nation -- Vol. 2 Num. 24

("Quid coniuratio est?")

L.J. DAVIS INTERVIEW

L.J. Davis, author of an article offering a good look beneath the surface of Arkansas politics ("The Name of Rose", The New Republic, April 4, 1994), was interviewed by phone by David Inge of the local PBS-connected radio station on August 4, 1994. What follows is my transcription of that interview.

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DAVID INGE:
There is this question -- and perhaps eventually it will be resolved -- about whether or not federal money that was earmarked to help bail out the S&Ls somehow managed to go into the Clinton campaign fund. Is that something that you have any insight on, or you think at some point there will, indeed, be an answer to that question?

L.J. DAVIS:
I think that there probably already exists an answer to that question in the examination reports in the RTC [Resolution Trust Corporation]. In order to find this out, however, the senators and congressmen are going to have to stop posturing and start asking the right sorts of questions.

-+- Charles Keating Did It -+-

Federal money (to the tune of, according to one very reliable estimate) that was poured down the ratholes of the S&Ls in the 1980s, may have eventually cost the country 2 trillion bucks, or approximately the cost of World War II. So remember, they are federally insured funds that we're dealing with.

And then there was also the possibility of a bank like, of an S&L, like Whitewater, drawing upon its regional home loan bank for additional emergency funds to shore itself up. The thing was cratering almost from day one. It had all the signs of an S&L going out of control -- for one thing, it was growing exponentially. Now this might be real good news if we were talking about General Motors, say, or IBM, were growing at this rate. But when a financial institution begins to grow at this rate, it's a sure danger sign.

The question is: Why wasn't it stopped earlier? The answer is: Why weren't all of them stopped earlier? We have hundreds across the country that were doing exactly the same thing.

INGE

Let me re-introduce our guest: We're talking this morning with L.J. Davis. He's a contributing editor to Harpers magazine. He is also the author of an article that appeared this past spring, in April, in The New Republic, about Arkansas politics. And we will get into that in a moment, and also will invite people who are listening -- if you have questions, comments, we will involve as many people as we can. All we ask is that people try to be brief so that we can accomodate as many different callers as possible. But, in any case, your questions are welcome -- 333- WILL; 800-222-WILL.

Well, talking about Arkansas here: In the article you make a point that while Arkansas is one of the poorest states in the country, it has, indeed, some of the richest families in the country. And if you're gonna understand Arkansas politics, you need to know one name -- and that is the name of Stephens. The Stephens family, that has made a lot of money in various kinds of business and has a lot of important friends in politics in Arkansas.

Tell us about the Stephens family.

-+- Real Rich Guys -+-

DAVIS

Well, you know, we've been talking a lot -- not just now, but the country's been talking a lot -- about all the back scratching that seems to go on in Arkansas. It's fairly typical of virtually any state. But Arkansas is unique amongst states, because thanks to the Stephens family it possesses the only major investment bank in the country that is not headquartered on Wall Street, called Stephens, Inc., in downtown Little Rock. In Wall Street terms, it would be a mid-tier to lower-bracket firm, but in a place like Arkansas it has, apparently, enormous economic clout. Thanks to the Stephenses, for example -- or if it hadn't been for the Stephenses, for example -- Sam Walton might be known locally as the "most inventive retailer in Bentonville, Arkansas". But they handled his original stock offering that enabled him to go national and has been instrumental in, of course, the fortunes of Tyson Foods and the other companies that are located in Arkansas. (Which I also pointed out in the article, is a state that has no reason to be poor. It is abundantly endowed with natural resources.)

The story of Stephens, Inc. is in some ways a saga of American capitalism, a true rags to riches story. Witt Stephens, the elder of the two brothers that came to dominate the place, started his career by selling Bibles, belt buckles, and municipal securities out of a buckboard during the Depression. And eventually [he] realized, of course, that municipal securities were going to be a bonanza when their values revived after the Depression was over. And that was the foundation for the fortune. They were heavily into bonds throughout much of their professional career, but then moved on to a whole spectrum of investment banking activities -- underwriting stocks, participating in deals, that sort of thing. In addition to which, the Stephens family itself privately owns a bewildering variety of, or has shares of a bewildering variety of investments.

In other words, they're real rich guys.

INGE

Huh, yeah. Real rich guys.

Let's talk about how Worthen Banking Corporation came to be. This was a bank holding company that was set up by, I guess, Jack, Jack Stephens, who is now the, sort of the head of the family. Witt, the older brother, is dead now. But Jack is the one who is now running things.

DAVIS

Yeah. "Mr. Witt" has now passed on to his reward.

INGE

And so they became involved with an Indonesian investor, apparently a very wealthy man, who wanted to get into American banking. And the Stephenses, Jack Stephens, set up this deal involving this Indonesian man, the Stephens company, and also the man who is the head of the prominent Rose Law Firm, in Little Rock, where (incidentally) also Mrs. Clinton worked as an attorney. And everybody got rich on the deal. And also, another sort of interesting side feature is that, to make this happen, a couple of laws needed to be changed. And that required the signature of the Governor, who happened to be married to this woman who was an important employee of the Rose Law Firm.

And so everybody seemed to get rich on the deal; the laws got changed. And it starts one thinking about, you know, whether there aren't some rather glaring conflicts of interest going on here.

DAVIS

Well it didn't quite work out to the satisfaction of everybody involved. Yes, a good deal of money was made. But they had a lot of trouble with that bank.

Now the fact that the Indonesian, Mochtar Riady, an Indonesian investor named Mochtar Riady, was there, occurred at a very interesting moment in the history of the Stephens investment bank. Bert Lance had come to them with a... Remember him?

INGE

Was director of OMB [Office of Management and Budget] under Jimmy Carter until he got himself into some trouble and, with his bank dealings in Georgia, and then had to resign.

-+- "Follow the Bouncing Ball" -+-

DAVIS

Absolutely beautiful trouble. And as a matter of fact, he was virtually bankrupt and his fortune was facing the [unclear] yard, back in 1979. His principle asset was a bunch of stock in the National Bank of Georgia. But the stock had been hammered in the market and if he sold it he couldn't possibly get himself out of his problem.

So it was to the Stephens family of Little Rock that he turned to solve this problem -- which attracted the attention of both the Indonesians, and a bunch of Pakistanis who ran an institution called BCCI [Bank of Credit and Commerce International].

When the smoke had cleared, the Pakistanis had been effectively, and in defiance of the very clear instructions of the comptroller of the currency, inserted into the American banking system by means of Bert Lance's stock and some other stock the Stephenses were disposing of in a snit, um, in Financial General that later became First American Bank Corporation, with results that we all know.

As for the Indonesians, they went into business with them, in the Worthen Bank Holding Company, which, depending on any, the state of banking in Arkansas at any given moment, is either the largest bank holding company in the state or the second largest bank holding company in the state.

It didn't require the signature of Bill Clinton exactly, but it required his passivity to allow this to come into existence despite the fact that his wife's boss, C. Joseph Giroir, had joined with his clients, the Stephens family -- the Rose Law Firm was one of the principle outside firms for the Stephenses -- in forming this bank holding company. And he [Giroir] is one of the one's, of course, who initially "made out like a bandit". I can't remember the exact figures, but he received several million dollars worth of forgiven debt, stock, and cash. That does look a little like a conflict of interest, if you're goin' into business with your client. And furthermore, your law firm now has a whole new client: a large bank holding company that you happen to own a hunk of.

There really is no such thing as an Indonesian multi-millionaire who is not, in some way, connected with General Suharto and -- the dictator of the country. As I pointed out in the article: As dictators go, General Suharto is a fairly decent chap. He hasn't felt obliged to slaughter too many of his citizens since he came to power in a massacre of 200,000 of them! (With the possible exception of the [unclear] war, that the world is not paying any attention to.)

But didn't anybody bother to question whether this was a real good idea? That the boss of the wife of the -- you know, it's like "The House That Jack Built", you've got to "follow the bouncing ball" here -- of the Governor of the state happens to be in partnership with his own client and an associate of the dictator of Indonesia?

It gets even more interesting when the Worthen Bank Corporation then proceeded -- very early in its career -- to gamble away $52 million of the Arkansas state treasury in a blatantly fraudulent bond scheme!

[...to be continued...]

I encourage distribution of "Conspiracy Nation."

Brian Francis Redman bigxc@prairienet.org "The Big C"

"Justice" = "Just us" = "History is written by the assassins."