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:
...Arkansas. Recently, in Washington, D.C., the people there on
the hill have been consumed with this matter that has come to be
called "Whitewater". But their investigations are largely limited
to what has happened in Washington, after the Clintons came
to Washington. What it sort of leaves out, and a big hole, we
think, in the story, is getting a sort of a better understanding
about how things worked in Arkansas before President Clinton
became President.
We'll be talking with a guy, his name is L.J. Davis, who is a contributing editor to Harpers magazine, about politics in Arkansas, and some serious issues that are raised by an article that he wrote for The New Republic.
So that'll be in hour number 1. And in hour number 2 we'll be talking about a book entitled Who Owns Information? Our guest is Ann Branscom, a scholar in residence at Harvard University. That'll be in hour 2 [CN -- not covered here], after news. Stay with us.
[...]
Good morning, and welcome to this first hour of "Focus 580". This is our telephone talk program. My name's David Inge. Glad to have you listening.
In this part of "Focus 580", we will be talking about Arkansas politics, and about the matter that has come to be called "Whitewater". Last week and this, in Washington, members of Congress have been holding hearings into the Whitewater matter. What they are doing in their hearings is trying to determine whether or not the White House tried to influence the investigation of the failure of a savings and loan in Arkansas, Madison Guaranty. It went "belly up" in 1989.
The former owner of Madison was a man named James McDougal, who was a partner with the Clintons in the Whitewater development, an unsuccessful vacation home development in Arkansas, in northern Arkansas, along the White River.
And the focus of the hearings, and a lot of the discussion in Washington, has been: what happened after the Clintons came to Washington. And whether they, and people in the White House, tried to influence this investigation. There has not, so far, been very much discussion about what happened back in Arkansas -- either surrounding Whitewater or, in a more general sense, what politics are like in Arkansas. And knowing that may, indeed, shed some light into the conduct of the administration and some people who worked in the White House.
So, we have been casting around to find someone to talk a little bit about, to get this whole business with, and to get some more background on, Whitewater and Arkansas. And based on a suggestion from a listener, we set up the interview that we're doing this morning. And we're going to be talking with a journalist named L.J. Davis. He's a contributing editor to Harpers magazine. And much of our conversation this morning, here, will be based on an article that he wrote, that was published this past spring, in April [1994], in The New Republic, which takes a look at the influence of one particular, prominent, wealthy family in Arkansas, their connection with the Rose Law Firm (for which Hillary Clinton worked). And then, also, their ability of, the ability of a number of people, to influence policy to their benefit... largely to their financial benefit.
As we talk, you certainly should feel free to call in and be part of this conversation. Our number here in Champaign-Urbana: 333- 9455. We also have a toll free line (it's good anywhere you can hear us), and that is: 800-222-9455. 333-WILL and 800-222-WILL. Those are the numbers.
Mr. Davis, hello!
L.J. DAVIS:
Hey! Glad to be here.
Anyway, I appreciate your being here.
Um, in many ways this is obvious why this is a good story. Because it is a good story. And because it involves the President and it involves power and money and so forth. And at the same time, it seems that there hasn't been very much, very good, in-depth coverage, really, of the whole business. As much coverage as it's gotten, it's been rather superficial. Uh, aside from things... There has been some stuff written by reporters from the L.A. Times, from the New York Times [CN -- also Wall Street Journal and Washington Times]. You did this piece for New Republic.
How is it that you got interested in writing about this whole business?
-+- "Colleagues" Avoid Arkansas -+-
And so I went to Arkansas, in part, to discover what kind of a Governor Bill Clinton had been. And what kind of politics the state was dominated by.
Now there are also some serious issues involved here. And so we wouldn't want to belittle that. But as one is trying to puzzle out just what happened and how serious it all is, and one seems to sort of be leaning in the direction of thinking that, well, relatively speaking it's not terribly serious -- the question that does come up (and you raise it and I think other people have raised it) is: If, indeed, it's not such a big deal, why is it that the Clinton administration has worked so hard to try to keep the lid screwed on so tightly?
-+- A "Flexible Attitude" -+-
Arkansas is a rather peculiar place, but you're right to put this into some kind of perspective. Let's have a brief look at, or try to do a brief overview here: Look who's investigating this um, "small mess". (I again choose my words carefully.)
-+- Honor Among Thieves -+-
Whitewater appears to me to be, after a long study of the situation, a fairly minor -- yeah, highly questionable -- but a fairly typical S&L deal from the rogue years of the 1980s. If you shift your sights across the country to Arizona, Governor Fife Symington(sp?) was involved in a highly questionable S&L deal that netted him millions of dollars. And then, amongst the inquisitors of course, we forget that Senator Riegle was one of the "Keating 5"! The people outside New York may not be aware that Senator D'Amato is widely known as one of the greatest practitioners of "pecksniffery" in the United States Senate. And Senator Gramm got himself messed up in a sweetheart deal with a cratered S&L in his own state of Texas, where he ended up with -- oh, let's see -- Bill Clinton claims to have lost $60,000 in Whitewater. Senator Gramm got himself $50,000 worth of free cabinet work out of a cratering S&L owned by a former political associate friend of his. {1}.
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.
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 -+-
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.
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.
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.
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?
-+- "Follow the Bouncing Ball" -+-
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!
DAVID INGE:
And that's... It's interesting also, because it [Worthen Bank]
very narrowly went under. And...
L.J. DAVIS:
Very nearly. And if the Stephenses hadn't written a rather large
check, it would've gone under.
-+- The Great Non Reaction -+-
And furthermore, Jimmy Carter's former ambassador to Switzerland, Marvin Warner, who was deeply involved in it, went to the "pokey" [i.e., prison]. Lengthy prison sentences were doled out in Ohio to the people that had caused this. No such thing occurred in Arkansas, as a matter of fact. In part, well, as somebody said when I was asking that question about "Why wasn't there any reaction?" (and Arkansas is the place of "the great non reaction" to a bunch of stuff, as I documented in my article). And the answer was, "Well, maybe there was no reaction because the Stephens family wrote that check." In other words, Worthen [Bank] didn't go down.
What would happen, locally, in Champaign-Urbana, if Pakistanis and Indonesians with a lot of money began getting off of the planes at the local airport? Wouldn't somebody notice?
-+- A Teeny Bit Unusual -+-
And similarly, Illinois is a sophisticated, large and populous state. And you're quite right: everybody in Little Rock knows everybody else. Why wasn't there a heck of a lot of commentary on the fact that they were getting off the plane at Little Rock? As a matter of fact, one standing joke in Arkansas is, "Just who would have to get off a plane at Adams Field before the attorney general and long-time Governor would notice that something a teeny bit unusual was going on?"
-+- Yet Another Strange Person Shows Up -+-
But yet again, another strange person shows up, effecting the introductions between the Riady's and the Stephenses -- and that's Robert Anderson, President Eisenhower's former secretary of the treasury.
Well nobody seems to have done a thing called "due diligence", that is to say, find out just who everybody is now, not who they were or who they say they are. Mr. Anderson was later sentenced by a compassionate judge to not very long in prison for running an illegal offshore bank in the Caribbean, that catered to money launderers and tax evaders, that he nonetheless managed to crater. And he also had some interesting, if not highly questionable (the judge seemed to feel that they were highly questionable), relations with Reverend Moon's Unification Church. Is this really the guy you want introducing an Indonesian of doubtful provenance to the largest investment bank in the state? And then allowing him to begin to use it as a major investment vehicle?
I mean, forgive me, but I think this is a rather strange sequence of events. And I find the lack of investigation on the part of the Arkansas banking authorities to be yet another one of those omissions that characterizes the state.
And questions are welcome, and we'll get to them in just a moment.
[...tape break...]
DAVID INGE:
Again, our guest is L.J. Davis. He's a contributing editor to
Harpers magazine.
We'll go to the phones here, starting with a local caller, in Urbana, on line 1. Hello.
CALLER #1:
Hello. The rhetorical question you posed about Indonesians and
Pakistanis arriving in Urbana-Champaign probably didn't take a
good location. It probably wouldn't create much excitement here
because if Pakistanis and Indonesians aren't arriving every day,
they are, very, very frequently, along with Taiwanese, Koreans,
and mainland Chinese. So...
L.J. DAVIS:
Carrying bags of money, of course.
CALLER #1:
Uh, sometimes a fair amount, I should expect. At least the
Saudis.
But anyway... The question was good. I think, perhaps, the location wasn't.
But it seems to me, the case you're making is that there are a lot of muddy feet and not simply in the Clinton administration. There's more in the previous two administrations and that it's going to be very difficult to get Congress to come to pointing fingers.
CALLER #1:
Um-hmm. Yes, they have.
-+- A Fat Man in a Fez -+-
We haven't talked about the involvement of many of these same people, including Hillary Clinton's boss, in the first, billion dollar S&L failure in the country, which happened to occur in Pine Bluff, Arkansas, where all the world seemed to come together! You had the corrupt Prudential-Bache branch in Dallas involved. You had Bob Straus's law firm involved. You had the son of the mayor of Dallas involved. It was an incredible mess.
CALLER #1:
It still sounds to me as though this is a very pervasive
condition which doesn't affect a single administration but,
regrettably, sounds as though it affects everything during the
last 25 years!
-+- For a Long Time to Come -+-
One of the examples that I frequently use is that, before the regulations were hauled off to the knackers' yards -- starting in the Carter administration -- from the crash of '29 until the 1980s, there has been precisely one major stock scandal (that everybody forgets), the salad oil scandal, in the 1960s. Afterwards, everything went haywire.
Your point is an excellent one. We're gonna be recovering from this for a long time to come.
CALLER #1:
I agree with you, very much so.
How do we get back to the position of considering regulation not to be a dirty word?
CALLER #1:
This never happens, of course.
-+- A "Miraculous" Reappearance -+-
CALLER #1:
I really think we need to re-read the history of the period of
Teddy Roosevelt, and just preceding that, to see what we're
headed back for.
CALLER #1:
Yes.
CALLER #1:
Of course that's what set up the conditions that led to the
reforms of the liberal Republicans at the end of the century and
the beginning of this century.
CALLER #1:
Yeah. And in my home state, the LaFollettes...
CALLER #1:
...ultimately migrated to the Democrats.
Very good points! Thank you.
CALLER #2:
Yeah. The wider context: I'm wondering whether you're familiar
with the Houston reporter, Peter Brouton's(sp?) book, is that?
CALLER #2:
Right. And you've seen some of his clippings and some of his
articles and that sort of stuff?
His book, unfortunately, is, shall we say, "dense"?
CALLER #2:
Yeah. Yeah, I guess that's... I have not read it. I do know that
it has a title, and in the foreward, he says that he could easily
have put Lloyd Bentsen's name at the end of it, instead of George
Bush's, 'cause he's basically looking at underworld ties to S&L
failures in Texas. And both of those gentlemen are implicated
fairly well, I understand.
-+- "America's Switzerland" -+-
CALLER #2:
Well he [Brouton] does talk about CIA connections. It is in the
title. I forget...
L.J. DAVIS:
He does talk about CIA connections, and about... (sighs) I didn't
want to get on to this, but he too discovered some airports
that the CIA was apparently using -- one at Iron Mountain.
CALLER #2:
That's what I wanted to get to, was the Mena situation...
CALLER #2:
Yeah. Um-hmm [affirmative]. The under-reported story, I think, as
well as some of these details, is the... and one that annoys me
most about this "new Democrat" we have, is his willingness to aid
in the Contra war and wink at a lot of stuff that was going on.
Apparently the Gennifer Flowers revelation came from a guy who was disgruntled because he was "cut loose" and "left to twist in the wind" because he was in charge of the National Guard liaison with Oliver North's operation. {3}. Is that your understanding?
-+- Larry Nichols -+-
-+- Another "Good 'Ol Boy" -+-
Now what was goin' on at Mena, basically, was a cocaine operation being run by a guy, by a fat guy, named Barry Seal. Not the Black Panther [i.e. Bobby Seale] but another "good 'ol boy" who had once been one of the most talented pilots in TWA and the youngest man ever to certify to fly a 747.
And he was operating out of Mena under very considerable surveillance, interestingly, by the Arkansas State Police and the County Sheriff! The question we have to ask there is, whatever was going on at Mena (and we know that drugs were), once again -- How could the Governor of the state allow something like this to occur on his watch?? We've been talking about these complicated financial peccadillos and suspicious circumstances. They're a little hard to follow, but that's what I happen to specialize in. Here's a fairly simple and straightforward situation with C-123 cargo planes flying out at all hours of the night and bringing in all sorts of strange cargo!
CALLER #2:
And going down with arms, too. Right?
CALLER #2:
Flew out of Mena, right?
CALLER #2:
[Unclear] is it my recollection that you were roughed up? Who do
you attribute that to, if that's the case?
-+- Man Gets Lump On Head -+-
Now we did not report this because (1) we haven't got anything to report. Uh, "Man Gets Lump On Head. Cannot Remember How It Happened." That's not news. Somehow it got out anyway, and the whole situation was complicated when the Wall Street Journal mis-reported that four pages from my notebook were missing. Four pages from my notebook were not, and are not, missing.
CALLER #2:
At least you don't remember they were.
CALLER #2:
[Chuckles] Well, if you had amnesia it's hard to say, I suppose
though!
CALLER #2:
Well, I appreciate your work. And do be careful and...
-+- A Base Calumny -+-
I do, I'd like to go on record here in Illinois, however, as saying that I consider a base calumny has been uttered against me: it's been suggested that I can possibly get drunk on 4 drinks. That is to say, so drunk that I would go upstairs and hit myself over the head!
DAVID INGE:
And you want to deny that, categorically.
And we have 2 other people here we'll try to get to in the time that we have remaining. 333-WILL. 800-222-WILL.
Our next caller is on line number 2, in Eureka. Hello.
CALLER #3:
Good morning. Given the fact that politics seems to be an inter-
related web of mutual self-interests and that the media often
times emphasizes such "specks" and small little items -- Could it
be that there is more legitimate corruption that Mr. Clinton
(as you were just talking about in that story about Mena) has
engaged in that's not even come to the fore or will never even
get reported?
CALLER #3:
Well you were talking... Or say, the Stephens family and some of
the other shennanigans going on there.
All of this has been goin' on under everybody's nose, in Arkansas, and everywhere else, and there's a whole lot of culpability all over the place -- including culpability on the part of my colleagues and myself for not having caught it!
CALLER #3:
Uh-huh [understands]. Is that issue not even being addressed in
the medical, the proposed medical health care reform?
-+- All People Are Good -+-
L.J. DAVIS:
Um, it... The proposed medical health care reform, despite the
interest of the Justice Department in stamping out medical fraud
-- attorney general Reno's number 2 priority, and rightly so...
But the legislation appears to be being written (hasn't been
written yet, so we don't know) as though, once again, "All people
are good". That... No investigator, federal or local, that I have
talked to (and I've been talkin' to a lot of them) thinks that
this health care bill is gonna be anything but an invitation to
keep right on looting.
By the way, this goes on to such an extent that on a yearly basis, according to the most conservative estimates that I've got from the officials, we could fight between 8 and 13 Gulf Wars every year!
CALLER #3:
Well the Gulf War cost what? $50 or $60 billion?
CALLER #3:
What specific amount are you talking about then?
CALLER #3:
I mean, how much would the amount be? For the medical insurance
fraud.
CALLER #3:
And the total national health care bill is estimated at what?
$900 billion?
CALLER #3:
So you're talking maybe anywhere between 10 and 20 percent...
CALLER #3:
...of all health insurance costs are in the area of fraud?
CALLER #3:
They're doing relatively nothing about it.
CALLER #3:
Uh-huh [understands]. Thank you very much.
DAVID INGE:
One more caller here. Line number 3. This is in Urbana. Hello?
CALLER #4:
Hello!
CALLER #4:
Yes. I am Pakistani! And I am a doctor. And you can get drunk
on 4 drinks. And...
-+- A Racist Alcoholic -+-
CALLER #4:
...To continue: I think that you're probably an alcoholic! And if
anybody notices me when I get off the plane here -- all of the
people who get off the plane, we... some of us... my dear
colleague, Dr. Singh, wears a turban. I hope we don't, don't
cause some kind of a "whatever it is"!! I think you are... I
think your whole racism is absolutely disgusting!!! And I...
CALLER #4:
...think absolutely ridiculous!
-+- A Call From A Scotsman -+-
As for the Indonesians getting off, they are not just any Indonesians. They are known associates of the dictator of the country.
We're not talking ordinary people. I mean, if a Scotsman who happened to own a, or be associated with, an immense, corrupt, or questionable financial institution got off the plane, I suppose we'd have a call from somebody named "Mr. McLaren" accusing me of not liking Scotsmen!
I'm talking about a very specific kind of guy!
Um. How does... You know, what do you come away with? Maybe I can just ask you, you know, personally, as you think about President Clinton and the Clinton administration... I mean, as a result of what you have done, what (and other people, they can read what you've written and they can make their own judgement) -- What do you come away with?
-+- Very Serious Questions -+-
And this has been a pattern, throughout the political history of now-President Clinton. Yes, I'm disturbed and I have questions! I can't draw conclusions, because, as I say, we do not know the man's mind. (And the Congress is certainly not helping us work out his thought processes.)
--------------------------<< Notes >>---------------------------- {1} Note that all headings (e.g. "Honor Among Thieves") have been added by me and were not part of the actual broadcast.
{2} "They don't remember that it was ever different." Exactly. For many, having an obviously corrupt Presidency is normal. They have no memory of what it was like to have a President that (at least in theory) you could look up to. For those growing up today, what can they aspire to? To be like George Bush? To be like Bill Clinton?
{3} Caller #2 seems to have a composite of Larry Nichols and Terry Reed (and possibly other(s)) in mind when he makes this statement. The person he attempts to describe has aspects of Reed ("liaison with Oliver North's operation") and Nichols ("the Gennifer Flowers revelation"). No blame to caller #2 for being confused, given the shoddy news coverage of Mena, etc. The fact that he even knows "the 'M' word" speaks well of him.
{4} Regarding Larry Nichols: I personally find him to be quite credible and have found nothing to make me think otherwise.
{5} With all respect to Mr. Davis, I think he is wrong here when he doubts the significance of the mortality rate (a.k.a. "body count") around Clinton. I think, at the least, it is statistically significant. You may recall a movie called "Executive Action". That movie, with a similar situation, hired an actuary to examine the statistical significance of so many deaths of potential witnesses related to the JFK assassination.
Note also that Mr. Davis does not tell us why he considers it a false line of inquiry. Is it perhaps because it is an area that gets a bit scarey to consider? With all respect to Mr. Davis, is he perhaps afraid to really look at it?
"Justice" = "Just us" = "History is written by the assassins."