Mystery Woman of Whitewater : Politics: Laura Jean Lewis may very well be the star witness in this summer's congressional hearings. So who is she?

By JAMES RISEN

June 21, 1994 12 AM PT

TIMES STAFF WRITER

KANSAS CITY, Mo. — Somewhere safe, Laura Jean Lewis keeps her most valuable, and perhaps most volatile, possession. It is an audio cassette tape, a recording so important, so politically charged, that she is known to have played it for only one person.

Lewis, a lowly federal bureaucrat who has stumbled into the Whitewater scandal, guards the tape so fiercely because she believes it is her best defense against the mounting attacks on her reputation from Washington.

But the tape, which sources say is a recording of a private conversation between Lewis and April Breslaw, a senior government attorney who denies the conversation ever took place, is like everything else about Jean Lewis and her critical role in the Whitewater scandal: It remains shrouded in intrigue.

With congressional hearings into Whitewater looming as Washington’s summertime spectacle, L. Jean Lewis is emerging, for better or for worse, as Whitewater’s mystery woman. But when the hearings open on Capitol Hill, perhaps as early as next month, Lewis will tell her story--a story that will include allegations of check kiting and other questionable dealings between Bill and Hillary Clinton and their Arkansas business partner, and, even more troubling, explosive allegations of a possible cover-up within the Clinton Administration. All that figures to make her the star witness in what still seems likely to become the biggest Washington scandal since Iran-Contra

“I think Jean Lewis could prove to be more troublesome for Bill Clinton than Paula Jones,” argues Rep. Jim Leach, (R-Iowa), the Republican Party’s point man on Whitewater, and Lewis’ main protector in Congress.

Today, Jean Lewis is struggling to cope with her new-found status as presidential whistle-blower, but clearly life at Whitewater’s vortex isn’t easy.

“I’m just trying to maintain . . . some days are better than others,” says Lewis, in a soft Texas drawl. “I find myself in a very difficult situation. I don’t want any publicity out of this, I really don’t. Any quotes you may have seen from me in the press have all been surprise interviews, where reporters got me outside my house. I hope there comes a time where I can talk more freely, but right now. . . .”

At first blush, Lewis seems an unlikely choice for such a controversial, high-profile role. A 40-year-old Houston native and the daughter of a retired U.S. Army major general, Lewis is a bureaucrat in the field office of an obscure federal regulatory agency here and has never met President Clinton or his wife, First Lady Hillary Rodham Clinton. She’s not a cop, not an FBI agent--she’s not even a lawyer. She would never make it in Bill Clinton’s network of Ivy League friends and associates--she’s a political science graduate of a state college in rural Texas, Sam Houston State. Her $54,000-a-year job at the Resolution Trust Corp., the federal government’s S&L-cleanup; agency, is unglamorous and filled with tedium.

What she does for a living is comb through the mountains of paperwork and documents and the eye-glazing computer files left behind by failed savings and loans after they are seized by federal regulators. As a senior criminal investigator at the RTC regional office here, her job is to search through the documents of dissolved thrifts to reconstruct questionable transactions and look for signs of criminal wrongdoing by S&L; executives and their friends and business partners. If she finds something suspicious, she is supposed to send a recommendation for criminal action to the Justice Department.

It is the regulatory equivalent of looking for a needle in a haystack.

Yet her seemingly mundane job put Lewis in just the right position to play a critical role in Whitewater, a scandal marked by arcane financial deals at a failed S&L.;

“Jean loves digging out facts and details,” observes Van Glover, a former S&L; executive who worked with Lewis at a Dallas thrift before she joined the RTC. Lewis’ job at that ailing S&L; was to act as liaison with the FBI and regulatory agency officials in their criminal investigation of the thrift’s management, and she handled most of the document searches for the investigators. “She was great at the nitty gritty detail work. Investigating makes some people very nervous, especially where you are investigating powerful people. But it never made Jean nervous. She loved it.”

Lewis joined the RTC in 1991 after a government investigator she had worked with at the Dallas S&L; recommended her for an opening in the Tulsa, Okla., office. It was a good time for the move; childless, Lewis was going through a divorce in Dallas from her first husband (she has since remarried).

Soon, she was assigned to investigate the wreckage of Madison Guaranty Savings and Loan, a Little Rock S&L; owned by James McDougal--the Clintons’ partner in Whitewater, a failed land development project in the Ozark Mountains of northern Arkansas.

At first, the case hardly looked promising. By the time Lewis came on the scene, Madison had long since gone belly-up and McDougal had already been tried and acquitted of criminal fraud charges stemming from the S&L;’s failure. But before it closed the books on Madison, the RTC wanted to take one last look.

After an initial probe in 1991 that turned up little out of Madison’s disastrously disorganized records, she and her colleagues set the case aside again. But then, a bombshell struck; in March, 1992, in the midst of the presidential campaign, the New York Times first reported the existence of Whitewater and McDougal’s business ties to the Clintons. That prompted Lewis and the RTC to reopen the case and to search for clues of links between Madison’s failure and Whitewater.

Ultimately, she and other RTC staffers went back through the documents at Madison, which were strewn around a warehouse in downtown Little Rock, and pieced together enough evidence to submit a criminal referral in September, 1992, to the Republican-appointed U.S. Attorney in Little Rock that, while it didn’t accuse the Clintons of any crimes, named Whitewater and the Clintons as possible beneficiaries of criminal acts at Madison.

Then something happened that Lewis couldn’t quite fathom; the criminal referral naming the next President of the United States was swallowed up by the federal bureaucracy.

Her E-mail and internal memos at the RTC, released to the press by Leach, show that Lewis tried unsuccessfully for months to find out what had happened to the Madison referral within the Justice Department. Throughout the spring and summer of 1993, she repeatedly called the U.S. Attorney’s office in Little Rock and the Justice Department’s headquarters in Washington searching for answers. An increasingly suspicious Lewis didn’t receive final word until the fall that the new U.S. Attorney in Little Rock, Paula Casey, a former law student of Bill Clinton, had turned down her recommendation for criminal action.

But in the meantime, Lewis and other investigators in Kansas City had begun work on a new round of criminal referrals in the Madison case. In October, 1993, Lewis issued nine new referrals, including one naming President Clinton’s 1984 gubernatorial campaign, which received campaign contributions from a McDougal fund-raiser, as a beneficiary of criminal acts at Madison. What’s more, Lewis was prepared to show that Whitewater had become a funnel for siphoning money out of Madison; she claimed that as much as $70,000 in Madison funds had gone through Whitewater in one six-month period alone. (The Clintons, to be sure, have denied any wrongdoing in Whitewater.)

This time, the referrals didn’t get buried. In fact, they led quickly to a furious round of high-level meetings in Washington between Treasury and White House officials.

And Jean Lewis was pulled off the Madison case almost immediately. Mike Forshey, a Dallas attorney who now represents Lewis, says that her supervisor in Kansas City, Richard Iorio, was ordered to remove her from the Madison case by RTC attorneys soon after the Madison referrals were issued. Forshey says Iorio never told Lewis the reason she was being reassigned, “because Iorio was never given a reason.”

In fact, Lewis was taken off the case despite the fact that she had received a $1,000 internal cash award in 1993 from RTC management for her part in the Madison criminal investigation. In addition, she has been recommended, along with other investigators who worked on the case, for a second award, in the form of extra paid time off, for work on the Madison civil investigation. That second award has been delayed because RTC attorneys have opposed citing Lewis and the others for their work, Forshey says.

Last fall, Lewis seemed relieved when she was taken off the case.

“The powers that be have decided that I’m better off out of the line of fire (and I ain’t arguing),” a seemingly relieved Lewis wrote in an electronic message to her co-workers on Nov. 10.

But while the case was turned over to Michael Caron, a colleague in Kansas City, Lewis found it hard to simply drop the Madison file and forget about it. While others saw nothing more than typical bureaucratic incompetence behind the long delays and mishandling of the initial referral, Lewis seemed increasingly convinced that a cover-up was in the works.

“It’s beginning to sound like somebody, or multiple somebodies, are trying to carefully control the outcome of any investigation surrounding the RTC referrals, and that the beginnings of a cover-up may have already started months ago,” she wrote in an electronic message to her supervisors on Jan. 6.

So Lewis could not keep her suspicions in check when April Breslaw, a senior attorney at the RTC’s headquarters in Washington, came to Kansas City in early February to check on the Madison case. And when Breslaw came to her office to talk, sources say Lewis secretly taped their conversation.

In notes she wrote after the meeting, Lewis claimed that Breslaw told her that “people at the top” in Washington wanted to be able to say that Whitewater did not cause a loss at Madison; if that were true, that would help extricate the Clintons from the scandal.

“April stated very clearly that the ‘head people’ wanted to be able to say that Whitewater did not cause a loss to Madison, but the problem is that so far no one has been able to say that to them,” Lewis wrote in a memo to herself. “She felt like they wanted to be able to provide an honest answer, but that there were certain answers that they would be happier about because it would get them off the hook.” Breslaw refused to comment for this article, but she has previously denied that she ever made the comments that Lewis has attributed to her. RTC spokesman Steve Katsanos refused to comment on the case and said that RTC management discourages all of its employees from discussing ongoing investigations with the press.

After her meeting with Breslaw, Lewis says she had heard and seen enough. By mid-February, she had made contact with Leach, who she knew was already leading a campaign in the House to begin a congressional investigation into Whitewater.

Still wary, she refused to talk to Leach’s staffers, and would only deal with the Iowa congressman directly. Within days, Leach, the ranking Republican on the House Banking Committee, flew secretly to Kansas City to meet with her. Lewis played the tape of her conversation with Breslaw for Leach, and gave him sheafs of internal RTC documents and memos, including copies of her E-mail. Leach said in an interview that the tape confirms Lewis’ versions of events.

Leach went public with Lewis’ records and allegations in a dramatic presentation on the House floor on March 24; since then, Lewis and her colleagues in Kansas City have been cooperating with Whitewater special counsel Robert Fiske. Forshey says Lewis has not yet been subpoenaed by Fiske and she has not testified before the Whitewater grand jury in Little Rock, however, so it is unclear whether she has provided Fiske’s staff with her tapes, memos and other evidence.

Her celebrity status now seems to give her job security; the RTC just renewed her annual employment contract, even though the agency is rapidly downsizing and is scheduled to go out of existence at the end of 1995.

As Whitewater is set to burst back into the headlines with the start of this summer’s hearings, it is Lewis’ zealous eagerness to provide evidence that has raised many of the most troubling questions about her. Justice Department officials and other critics, who have gone largely unnamed in the press, have suggested that Lewis styles herself as an amateur sleuth obsessed with making a name for herself by making more out of Whitewater and the Clintons’ involvement than is really there.

Even Leach notes that she is a registered Republican.

Her friends and allies, however, argue that what some see as obsessive behavior is really just a stubborn persistence, a trait that has made her a top investigator willing to run down leads in the face of unrelenting pressure to back off.

“While Jean was the lead criminal investigator, the entire criminal investigative team is with her, and supportive of her,” Leach says. “What you have in Jean Lewis and her colleagues is a group of individuals in an obscure agency intent on upholding the law.”