Ray: Insufficient evidence to prosecute Clintons in Whitewater probe

WASHINGTON (CNN) -- Independent Counsel Robert Ray, in his final report reviewing the 1970s-era Whitewater real estate partnership, said Wednesday that there was insufficient evidence that either President Clinton or first lady Hillary Rodham Clinton had engaged in criminal wrongdoing.

"This office has determined that the evidence was insufficient to prove to a jury beyond a reasonable doubt that either President or Mrs. Clinton knowingly participated in any criminal conduct ... or knew of such conduct," Ray said in a news release issued by the Office of the Independent Counsel after his report on the Whitewater matter went to a federal three-judge panel Wednesday morning.

The White House responded to the report's filing with a brief, one-sentence statement, saying, "Robert Ray is now the latest investigator to complete an examination into the transactions related to the Whitewater Development Co., and conclude that there are no grounds for legal action."

The long-anticipated report will remain under seal for at least several weeks.

Hillary Rodham Clinton's role in the failed land venture -- launched in the late 1970s in northern Arkansas in a cooperative effort between then-state Attorney General Bill Clinton, Mrs. Clinton, financier James McDougal and McDougal's former wife, Susan -- was at the center of the longtime investigation.

Whitewater was to be a vacation community dominated by time-share homes, but the project collapsed when a key local bank owned by McDougal failed. According to financial documents drawn up at the time of the development's failure, the Clintons swallowed a significant financial loss and later backed out of the construction project.

The project was maintained through the 1980s, while Clinton was governor of Arkansas.

The release of the Ray statement and the transmittal of the report comes as Mrs. Clinton battles Rep. Rick Lazio, R-New York, for the New York Senate seat being vacated by Democrat Daniel Patrick Moynihan. Appearing Wednesday afternoon at the New York State Associated Press Association fall meeting, Mrs. Clinton would only say, "I am just glad that this is finally over."

Earlier, she said she was confident Ray wouldn't turn up anything new.

The president sidestepped a reporter's Tuesday question about whether politics is playing a role in the timing of the report. Ray consistently has said this year that he expected to release the Whitewater report in the fall. But the president invoked the name of former Independent Counsel Kenneth Starr, whom Ray replaced, insisting that Starr himself suggested almost two years ago "that there was nothing in any of that stuff..."

White House spokesman Joe Lockhart said Wednesday afternoon of the president, "I don't think he's breathed an outward sigh of relief."

"We've had these conclusions going back to 1996," Lockhart added.

From failed business deal to political albatross

The Whitewater investigation began in 1994 amid questions about possible criminal wrongdoing between the McDougals and Clintons over Whitewater. Attorney General Janet Reno appointed a special counsel, Robert Fiske, to investigate the partnership, and Starr eventually took over the case.

RESOURCES Independent Counsel Robert Ray's statement on Whitewater    TRANSCRIPT CNN's Bob Franken on the Whitewater report   VIDEO CNN's Bob Franken provides background to the investigation Play video (QuickTime, Real or Windows Media)     AUDIO Hillary Rodham Clinton is glad the Whitewater probe is 'finally over' 244K/20 sec. AIFF or WAV sound

The independent counsel's original task was to determine whether the Clintons had done anything improper in connection with Madison Guaranty Savings and Loan, a Little Rock, Arkansas, lender owned by McDougal.

Madison Guaranty failed in the late 1980s at a cost to taxpayers of more than $65 million. Sales in the Whitewater development were poor, and in 1992, the Clintons sold their remaining interest in it to McDougal for $1,000.

Allegations arose that the McDougals and the Clintons violated the law as they sought to prop up the ailing venture.

"We all lost money," Susan McDougal said on CNN's "Burden of Proof" on Wednesday. "There was never anything criminal about it. It should never have been investigated."

One aspect of the probe involved allegations that in 1986 Mr. Clinton pressured David Hale -- who was highly visible during the early stages of the inquiry -- to make a $300,000 loan to Susan McDougal. That loan would have broken a number of federal statutes. Ray said Wednesday that the evidence was not sufficient to prove that Clinton knew anything about the loan, or that his "testimony regarding the loan was knowingly false."

Clinton had testified in 1996 that he never borrowed any money from the bank, nor had he caused anyone to borrow money on his behalf. During Susan McDougal's criminal contempt trial in 1999, the government introduced a Madison cashier's check written out to Mr. Clinton in the amount of $27,600. That check was not endorsed, and lab work could not identify the fingerprints found on the document.

The report concluded that sufficient evidence refuting Clinton's 1996 testimony could not be uncovered.

Questions also surfaced about Hillary Clinton's work as a lawyer in Little Rock's Rose Law Firm -- along with Webster Hubbell, who was appointed to the number three slot at the Justice Department by President Clinton in 1992 -- on behalf of Madison Guaranty.

An early indictment accused Hubbell of concealing his and Mrs. Clinton's legal work on the Whitewater land project. Mrs. Clinton's role was disclosed in 1996 when her law firm billing records mysteriously turned up in the White House family residence under circumstances that have never been adequately explained.

In his statement, Ray said the evidence was not sufficient to prove that Mrs. Clinton has in any way obstructed justice by arranging for those records to disappear.

Whitewater prosecutors, led by Starr but based in Little Rock, had subpoenaed those billing records some two years earlier. Hubbell pleaded guilty to a felony in the case a year ago, but maintains that Mrs. Clinton engaged in no wrongdoing.

Hillary Rodham Clinton

The billing records indicated that Mrs. Clinton prepared a real estate document valuing a parcel of the Whitewater property at $400,000. The federal government got just $38,000 for that parcel six years later following the failure of McDougal's bank. Federal regulators concluded the S&L used the document prepared by Mrs. Clinton to deceive bank examiners about hundreds of thousands of dollars in commissions paid to Seth Ward -- Hubbell's father-in-law and a well-known Arkansas businessman.

Questioned in 1996 about her work for Madison, Mrs. Clinton said on 99 occasions that she was unable to recall what she might have done.

The billing records revealed Mrs. Clinton and Ward spoke at least 15 times from mid-November 1985 to June 1986 about a portion of the Whitewater development known as Castle Grande, as well as other business related to McDougal's S&L. Mrs. Clinton and Ward insisted they didn't recall the conversations.

Ward died earlier this year.

As he proceeded with the Whitewater review, Starr began examining other issues involving the Clintons and their associates, including the sudden death in 1993 of lawyer and Clinton friend Vincent Foster and the dismissal of White House travel office personnel early in Clinton's first term as president.

The Whitewater investigation grew to encompass all these issues as well as the president's sexual encounters with a young White House assistant by the name of Monica Lewinsky. Wednesday's report is among the last remaining aspects of the vast probe, which has cost taxpayers some $60 million. Ray told Congress earlier this year he will keep the Lewinsky case open until after Clinton leaves office in January.

Investigative office closed last month

While the land deal phase of the probe is ostensibly over, Ray nonetheless criticized the White House in his Wednesday statement, saying delays in the production of evidence and "unmeritorious litigation" by the president's lawyers severely impeded the investigation's progress.

Ray signaled the Whitewater era was coming to an end August 31, when he announced his investigative team was closing its Little Rock office. At its peak, the team counted more than three dozen lawyers, FBI agents and others: When the office shut its doors last month, only two people were still on staff.

All records gathered in the Whitewater review have been moved to Washington.

In a news release posted on the independent counsel's Web site, Ray thanked the people of Clinton's native state.

"We are grateful to the citizens of Arkansas for their service on juries and grand juries in matters related to this office's jurisdictional mandates," he said. "We especially thank the Federal Bureau of Investigation for its contributions to the work of this office."

CNN's Bob Franken, Phil Hirschkorn, Ian Christopher McCaleb, and The Associated Press contributed to this report.