Excerpted from Whitewater: A Journal Briefing (from the editorial pages of the Wall Street Journal).  Edited by Robert L. Bartley. ©1994


First Lady [Hillary Clinton] Turned $1,000 Investment Into a $98,000 Profit, Records Show

(Wall Street Journal, March 30, 1994)


By Michael K. Frisby and Bruce Ingersoll

Staff Reporters of The Wall Street Journal


WASHINGTON-The White House said Hillary Rodham Clinton turned a $1,000 investment into a $98,000 profit on the commodities market in less than a year. But when she became pregnant, she abruptly stopped trading because it was “too nerve-racking.” Providing its most detailed account of Mrs. Clinton’s commodities-trading activities, the White House released trading records showing that she made her profit in a Refco Inc. account between October 1978 and July 1979.

Separately, government investigators fear that Madison Guaranty Savings & Loan records may have been destroyed or discarded after the failed Arkansas thrift was acquired by a major Clinton political  fund-raiser  and  other  Arkansas investors. In a briefing on Mrs. Clinton’s investments, aides acknowl­edged that she got advice from James Blair, then the outside counsel of Tyson Foods Inc., and that his counseling was “important,” although she also talked with others and did her own research.

Lisa Caputo, the press secretary for the first lady, and John Podesta, the White House staff secretary, issued a statement saying, “Mrs. Clinton put up her own money, invested it in her own accounts, and assumed the full risk of loss.”

Hillary Diane Rodham Clinton (October 26, 1947, aged 67)

Hillary Diane Rodham Clinton (b. October 26, 1947)

Aides also said that Mrs. Clinton wasn’t aware that her main bro­ker, Robert L. “Red” Bone, of Refco’s office in Springdale, Ark., had been disciplined by regulators for his trading practices, including allocating trades among investors in his branch office after he had determined whether the trades were winners or losers.

Mrs. Clinton’s trades have generated attention because she was so successful in a such a short amount of time, even though 75% of the people who invest in the commodities market lose money. A month after Mrs. Clinton opened the Refco account in 1978, her husband was elected governor. Her profit has raised questions of whether outsiders helped the couple make money, at a time when they had gained in prominence but were far from wealthy.

According to Mr. Podesta, Mrs. Clinton opened a margin account with Refco in October 1978 with her $1,000 investment. Her first trade resulted in a profit of $5,300, and she reinvested her earnings in sev­eral transactions. For the rest of 1978, her trades resulted in $49,069 in profits, which were offset by losses of $22,548, leaving a net gain for the year of $26,541.

In the first seven months of 1979, her trading profits reached $109,600, while she sustained $36,600 in losses, leaving a net gain of $72,996. It was at that point, aides say, that Mrs. Clinton stopped trad­ing because she had just become pregnant.

Later that year, however, her stockbroker, Stephens Inc. of Little Rock – which trades through ACLI International, Peavey Co. and Clayton Brokerage – opened a commodities account in her name with a $5,000 investment. At one point, her account reached a $26,894 prof­it, but by the time she closed it in early 1980, just after her daughter, Chelsea, was born, it had a net loss of $1,000.

Jack Sandner, chairman of the Chicago Mercantile Exchange, said Mrs. Clinton traded “in the biggest bull market in the history of cat­tle.” He said that from the beginning of 1978 to the first quarter of 1979, the price doubled to 80 cents a pound. “If someone caught that trend and traded it well, they could make an extraordinary amount of money, a lot more than $100,000 on a small investment,” he said.

But one expert was skeptical of Mrs. Clinton’s success. “The idea that Mrs. Clinton could turn $1,000 into $100,000 trading a cross-sec­tion of markets such as cattle, soybeans, sugar, hogs, copper and lumber just isn’t believable,” said Bruce Babcock, editor of Commodity Traders Consumer Report, a Sacramento, Calif., newslet­ter. Mr. Babcock, the author of several books including “The Dow Jones Irwin Guide on Trading Systems,” said: “To make 100 times your money is possible, but it’s difficult to understand how a new­comer could do it. I don’t care who is advising her. It just isn’t very likely.”

White House aides said the majority of Mrs. Clinton’s trades were “long-term” transactions rather than so-called day trades, which take place in a single day and where abuse is more prevalent. Aides did say that a few of Mrs. Clinton’s transactions were day trades. In addi­tion to cattle, Mrs. Clinton also traded in soybeans, sugar, hogs, cop­per and lumber.

Aides emphasized that these were Mrs. Clinton’s transactions and that her husband wasn’t involved, but they acknowledged that they hadn’t asked her if Mr. Clinton was aware of the trading.

The White House decision to release the records comes as part of their new strategy to be more open about the questions regarding their personal finances. It seems to be working. Mr. Clinton’s popu­larity has risen in public opinion polls after his prime time news con­ference Thursday, in which he answered a series of questions about their investment in Whitewater Development Co.

Some commodity traders seemed to be puzzled by the condition of the commodity trading records released to reporters. A number of the records indicate specific numbers of contracts traded but some records merely list a cash balance without backup information describing the commodity and the number of contracts.

The possibility of missing Madison Guaranty records was raised by a chronology of a criminal investigation by the Resolution Trust Corp. An RTC investigator discovered in May 1993 that several boxes of Madison files were missing from a Little Rock warehouse used by the successor institution, Central Bank & Trust, according to the chronol­ogy, which was released last week by Rep. James Leach (R., Iowa). The RTC has been looking into the failure of Madison, once owned by the Clintons’ Whitewater partner, James McDougal.

(In Little Rock yesterday, Mr. McDougal filed to enter a three-way Democratic primary election for the U.S. House of Representatives. He ran for Congress unsuccessfully in 1982.)

Central Bank was headed until April 1993 by Leonard Dunn, finance chairman for Mr. Clinton’s 1990 gubernatorial campaign and a Clinton appointee to the Arkansas Industrial Development Commission. In an interview yesterday, Mr. Dunn said he doesn’t know what became of the Madison files.

“I didn’t shred or dump any records” and didn’t order anybody to do so, he asserted. “What motive would I have to dump records?”

Rep. Spencer Bachus, an Alabama Republican, asked Whitewater Special Counsel Robert Fiske Monday to investigate the matter. “It already has been widely reported that documents were shredded at the Rose Law Firm,” said Mr. Bachus, a member of the House Banking Committee. “The destruction of the warehoused documents could be part of a larger effort to protect the Clintons and to obstruct justice.”

In March 1992, two investigators for the RTC, the savings-and-loan cleanup agency, visited the warehouse and reported finding boxes of Madison records in serious disarray. One of the investigators, Jean Lewis, returned 14 months later and discovered that the records had been organized and “a number of boxes had been cleared out,” according to the RTC chronology. Afterward, Ms. Lewis learned that some records had been moved to a back room at the bank.

The warehouse also was used by the law firm Mitchell, Selig, Jackson, Tucker & White, which handled much of Madison’s legal work until government regulators took over in 1989, according to the chronology.

Earl C.Gottschalk Jr. in Los Angeles contributed to this article.


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