Ah, remember this Hillary scandal?
Hillary Clinton Turned $1,000 Into $99,540, White House Says
By STEPHEN LABATON,
Published: March 30, 1994
WASHINGTON, March 29— The White House said today that in 1978 Hillary Rodham Clinton invested $1,000 in commodities futures and that the investment grew in 10 months of trading in the notoriously volatile market into a gain of nearly $100,000.
Seeking to dispel suggestions that the trades were risk-free and improperly arranged by an Arkansas lawyer who represents one of the state's most powerful companies, the White House issued a statement this afternoon that said the First Lady had put up her own money and that she bore all of the financial risks in a marketplace where three out of four investors lose money.
The officials also released a year's worth of brokerage statements from one of Mrs. Clinton's two accounts. They show winnings outrunning losses about three-to-one. 'Too Nerve-Racking'
Senior advisers to President Clinton and his wife said in a briefing this afternoon at the White House that Mrs. Clinton based her trades on information in The Wall Street Journal, and that she stopped trading by 1980, despite her success, because, as one senior aide put it, "she did not have the stomach for it any more and found it to be too nerve-racking."
The string of winning trades began in October 1978, as Mr. Clinton, then the state's Attorney General, was leading in polls in the race for Governor.
The White House insisted today that Mrs. Clinton received no improper financial assistance on the trades from the lawyer, James B. Blair, a close friend who at the time was the top lawyer for Tyson Foods of Springdale, Ark., the nation's biggest poultry company. Mr. Blair has said that he had suggested that she get into the commodities market, and that he used his knowledge of trading to guide her along the way.
During Mr. Clinton's tenure as Governor, Tyson benefited from several state decisions, including favorable environmental rulings, $9 million in state loans, and the placement of company executives on important state boards.
Mr. Blair and the Clintons denied any favoritism or conflict of interest when the trades were first reported earlier this month.
The commodities trades were the most successful investment the Clintons ever made. The nearly $100,000 profit enabled them to buy a house, invest in securities and real estate and provide a nest egg for their daughter, Chelsea.
In its statement, the White House said Mrs. Clinton accumulated trading profits of $49,069 in 1978 and losses of $22,548, for a net gain of $26,541. In 1979, the White House said, she had trading profits of $109,600 and losses of $36,600, for a net gain of about $73,000.
Mrs. Clinton did a small amount of commodities trading in a second account through her stockbroker at Stephens Inc. in Little Rock, Ark. In that account, according to officials, she had a net trading loss of about $1,000; she closed the account in March 1980, shortly after Chelsea was born.
The release of the trading documents today and tax returns made public on Friday show that in 1978 and 1979 the Clintons took on two high-risk investments with little money down but with Arkansas business figures as advisers or partners. One was the commodities trades.
The other was the Whitewater development. The tax returns released on Friday show the Clintons making a $500 investment as their total capital contribution to the Whitewater Development Company, a real estate venture in the Ozarks.
Their partner in the venture was a close friend, James B. McDougal, who later became a banker whose savings and loan was subject to broad state regulation. Critics of the Clintons have asserted that Mr. McDougal, who guaranteed a $200,000 loan taken out by the partnership, carried the brunt of the risk on the Whitewater venture.
The Clintons say that they ultimately lost about $42,000, mostly from interest payments, in Whitewater. But their relationship with Mr. McDougal is now being investigated by the independent counsel, Robert B. Fiske Jr., who is examining whether Mr. McDougal's savings and loan improperly diverted money into Whitewater or into Mr. Clinton's 1984 campaign for government.
Mr. Fiske said today that he could not comment on whether he would look into the commodities trades. But his charter is written broadly enough to enable him to examine the trades if he decided they were relevant. 'Bull Market' in Cattle
Brokers and commodities officials differed today in their assessment of the account given by the White House.
Jack F. Sandner, chairman of the Chicago Mercantile Exchange, a hub of commodities trading, said that such profits were not unusual during the cattle futures market of the late 1970's, which he described as one of the most booming ever.
"At the time the First Lady was trading, it happened to coincide with the biggest bull market in the history of cattle," he said. "When you are lucky enough to catch a dramatic market, you can take $1,000 and scale up and you can make a million. If somebody said they made a million dollars, I wouldn't be surprised at all."
But Bill Biederman, vice president of research at Allendale Inc., a research and brokerage firm in suburban Chicago, said such huge winnings are very unusual in the risky commodities market. "It is possible but it is rare," he said. "This has happened just a few times in my career, where I've made millions on a small amount of money." He said it was also unusual for a customer to abandon the markets after such a profitable run.
In commodities trading, a speculator essentially bets on whether the future price of a commodity will rise or decline, and the White House said today that Mrs. Clinton's investments were in cattle, soybeans, sugar, hogs, copper and lumber. Brokers in the Refco office have said that most of her profits were in cattle futures.
Many of her trades were done on margin, a common practice of investing by using borrowed funds. But regulators and traders said today that most brokers required customers trading on margin to put up additional collateral in case there are sudden losses.
"They would want some kind of a minimum until such time as a customer establishes a track record," said David Gary, a spokesman for the Commodity Futures Trading Commission.
Joseph Collins, a lawyer for Refco, said that with the passage of time it is difficult to determine whether the Springdale office had such a rule. But he said that generally the decision whether or not to take on a customer with limited resources would be up to the individual broker. Consulting Blair
White House officials acknowledged today that Mr. Blair was consulted on many of the commodities trades and was viewed as an important financial adviser, but they said other people, who they could not identify, were also consulted. A senior aide to Mrs. Clinton also said today that she occasionally spoke to her broker about the trades.
But brokers in the Springdale office of Refco where Mrs. Clinton executed the trades, including the one she describes as her personal broker, said in interviews in recent weeks that they have no recollection of ever talking with her about the trades.
Mrs. Clinton and Mr. Blair have said that they used Robert L. (Red) Bone, the broker who founded the Springdale office of Refco, a Chicago commodities firm, to execute the trades. But Mr. Bone, who worked at Tyson for 13 years until 1973, insisted in several interviews this month that he has no recollection of ever trading for Mrs. Clinton or talking to her about commodities trades.
"I can't recall ever dealing with the Clintons," Mr. Bone said in an interview on March 9. After Mr. Blair suggested that Mr. Bone was trying to protect the Clintons' privacy and recommended that a reporter try to talk to the broker again, Mr. Bone again insisted that he had no recollection of ever trading for the Clintons. Mr. Bone could not be reached for comment tonight.
During the 1970's, Mr. Bone had been disciplined by regulators and settled charges that he tried to corner the egg market and that he had failed to keep proper records. Those accusations did not involve Mrs. Clinton's account. Mr. Bone's lawyer in both the regulatory proceedings and other legal disputes over the last 15 years has been Mr. Blair.
According to the White House, Mrs. Clinton's commodity account was a type in which the client must personally approve each trade.
Thomas A. Russo, a New York lawyer who was the Commodity Futures Trading Commission's first director of trading and markets, said the only possible exception to this rule arises when a client grants power of attorney to a third party and allows them to order trades.
The rules in effect at the time, Mr. Russo said, otherwise required clients to specify the commodity, the price range and the amount. The only matter that could be left to the broker in such a circumstance is the precise timing of the order, he said.
Mr. Blair earlier this month said that he and Mrs. Clinton discussed potential trades; he said he gave her advice on whether to bet on prices rising or falling and she decided on the size of the trades. Omitted Details
Tax returns disclosed last Friday show that the Clintons claimed about $100,000 in capital gains from the trades. The returns, which the Clintons had declined to disclose during the campaign, were made public only after a New York Times article on March 18 revealed that the Clintons had made the commodities profits. But in the tax returns the Clintons ignored Internal Revenue Service instructions to detail how much money was invested, how much was earned and on what dates the trades occurred.
Today the White House released brokerage statements that show many of the trades. The statements appear on an account that spells Mrs. Clinton's first name wrong and begin with an entry for cash for $1,000 on Oct. 11, 1978.
The White House said today that it released the information on Mrs. Clinton's stake in response to a Newsweek article published on Monday that quoted a Columbia University law professor as saying that Mrs. Clinton's investments were financially supported by Mr. Blair and could be considered to be a gift. The professor, Marvin A. Chirelstein, denied making such a statement.
Evan Thomas, Washington bureau chief of Newsweek, said today that the report had been the result of "an honest mistake and we regret that."
Correction: April 1, 1994, Friday An article on Wednesday about Hillary Rodham Clinton's profits from commodity trading in the 1970's misstated the nature of margin trades in commodities. Trading on the margin in commodities means putting down a small percentage of the value of the contract as a deposit on the contract, not buying the contract with borrowed money.
http://www.nytimes.com/1994/03/30/us/hillary-clinton-turned-1000-into-99540-white-house-says.html?pagewanted=all