Strange Bedfellows

THE MEMO WAS CRISP, ITS LANGUAGE CLEAR, writer's bona fides unassailable. The author was Abner Mikva, former congressman, former federal judge and, at the time, Clinton White House counsel. On April 27, 1995, NEWSWEEK has learned, Mikva issued a legal admonition similar to those his predecessors, Republican and Democrat, had given over the years to the White House staff. "Campaign activities of any kind are prohibited in or from Government buildings," he wrote. "This means fundraising events may not be held in the White House; also, no fundraising phone calls or mail may emanate from the White House."

But in the spring of 1995, Bill Clinton and his aides were busy turning the White House into the biggest fund-raising attraction this side of the Jerry Lewis telethon. There had already been six "coffees" on the premises (one was scheduled for the day after the memo was distributed). There would be 92 more by Election Day. Plans were also underway to turn the Lincoln Bedroom, where the gregarious Clintons were already housing celebrities and old friends, into a door prize for big donors (chart).

By that fall, NEWSWEEK has learned, the Democratic National Committee had begun assembling detailed budgets for "fund-raising events"-including the White House coffees. They methodically listed the amount "projected" to be raised from each event, and the cash each eventually took in. It is the clearest proof yet of how the White House was viewed from the inside: as the best cash cow in politics.

The legal custodians of "ethics" in the White House insist they had no idea of what was going on down the hall or in the private quarters upstairs. Mikva, who left his job in late 1995, told NEWSWEEK he never knew about the coffees, let alone the DNC budgets that show their purpose. Had he known, he says, he "sure as hell would have been upset about it- and we would have put a stop to it. Any Philadelphia lawyer knows you don't raise money in a government building. And if they were budgeting money for them, that's raising money." Cheryl Mills, the deputy counsel responsible for vetting political activity, said she didn't know about the DNC budgets either--and would have "raised a concern" if she had.

She never got the chance. A NEWSWEEK reconstruction of the Clinton money machine shows that, from the start, officials in Asked about three ways to 'energize' major fund raisers, including White House coffees, the president replied: 'Yes, pursue all 3 and promptly. And Set other names at 100,000 or more, 50,000 or more. cc: H. Ickes, L. Panetta, B. Webster. Ready to start overnights right away. Give me the top 10 list back, along w/the 100, 50,000.' the White House and the DNC ignored legal qualms not to mention ethics and simple taste--in their rush to amass as much cash as possible. As a nation, we barely managed to suffer through the 1996 election. Now we're watching it all over again in film-noir replay. the underside of politics reduced to its greedy essence.

One bottom line was known months ago. The Clinton-Gore campaign and the DNC indeed raised record amounts, nearly $200 million. Now the rest of the balance sheet is being figured. The Money Machine, it turns out, invited a Chinese arms merchant and a convicted drug dealer to "the People's House." It gobbled up more than it could safely digest, and the DNC has had to spit back a record $3 million in "questionable" donations, returning $1.5 million just last week. The machine generated questions about whether a foreign government--China-has been funneling money into American politics. It's spawned a Justice Department probe, three congressional investigations and a chorus of calls for the appointment of a special prosecutor. For voters, campaign-finance stories are usually eye-glazing. But here was something all too vivid: the president as luxury hotelier.

Appropriately enough, the foundation for the effort was laid in the White House itself-and by Bill Clinton himself. It was Christmas 1994. Hillary and Chelsea were in New York on a holiday jaunt. The president was home alone, feeling blue. The Democrats had lost badly, and were blaming him. Newt Gingrich and his "revolution" were all the talk. There was even vague talk that someone might challenge him for the Democratic nomination.

But then the president's top political aide, Harold Ickes, had an idea for cheering up the Boss. He arranged for Clinton to have breakfast with an eerily ebullient young fund raiser named Terry McAuliffe. Then 37, McAuliffe at the time was the national-finance chair of the DNC. His trade was real estate, his style carnival barker. Wearing their Christmas sweaters, munching toast and sipping coffee in the residence's upstairs study, the two men talked shop.

McAuliffe propounded what amounted to the fund raiser's theory of predestination: if you raise the most, you deserve to win. The best route to a comeback, he argued, lay in collecting more cash faster than any other presidential candidate in history. All Clinton had to do was make himself available. The president eagerly agreed. "It was the first positive news he'd had," McAuliffe recounted to NEWSWEEK. "Mr. President," McAuliffe said as the breakfast came to an upbeat end, "this is the last discussion you'll ever have to have about money." A tough operative, Ickes supervised the campaign from the West Wing

Hardly. It was just the beginning. Nine days later McAuliffe forwarded to the president a memo laying out a busy schedule of breakfasts, lunches and coffees for his key "supporters." The president's scribbled reply has already found its way into the annals of political excess. "Yes, pursue all $ and promptly," he wrote. "And get other names at 100,000 or more, 50,000 or more." Clinton's use of such big dollar numbers is significant. It shows that from the start, he wasn't just thinking of raising "hard" money for the Clinton-Gore effort. He also had his eyes on raising unlimited gobs of "soft" money-ostensibly for DNC use, but in fact primarily for attacking Republicans as part of the re-election campaign. And to start building excitement among donors, Clinton went McAuliffe one better. "Ready to start the overnights right away," the president wrote.

It's not surprising that Clinton was so enthusiastic: he always has been about fund raising. When he first ran for Congress in 1974, he solicited money from his friends from Oxford and New Haven. The very first name on his first FEC report was that of

Strobe Talbott, a fellow Rhodes scholar and now the deputy secretary of state. In 1991 some longtime participants in Renaissance Weekend became annoyed when they received calls from Clinton's top fund raiser at the time, Bob Farmer. He evidently used phone numbers from the event's private lists.

But where did the idea of the White House "overnights" come from? From Clinton alone, aides say, but perhaps also from an April 1994 memo written by an unidentified DNC staffer. It's one of thousands of pages of documents Ickes has turned over to House investigators. In it the staffer suggests the use of White House perks-including seats on Air Force One and overnights. Not surprisingly, no one (including McAuliffe) now remembers the memo. But David Wilhelm, who was DNC chairman at the time, told NEWSWEEK that it was "presumably from someone in the finance department," which in 1994 was run by McAuliffe.

The memo's specifics weren't put into action, but its spirit soon was. The DNC was about to be transformed from a quaint grass-roots endeavor into a money pump attached to TV ads. By the time Clinton met with McAuliffe, the president had been sold on the re-election strategy advocated by Dick Morris. A comeback could be achieved, he told the president, with a massive, pre-emptive wave of ads vilifying the GOP and portraying Clinton as a defender of the sensible center.

What's more, the ads wouldn't have to be paid for by Clinton's campaign itself, but out of the soft money the DNC could gather from fat cats. The only legal restriction: the ads couldn't literally say "re-elect Clinton" or "defeat the Republican nominee." But Wilhelm was not the man to run the new machine. A Chicago organizer by training, he believed in building the party through local spadework and direct mail. "It does nothing to strengthen the party," Wilhelm told NEWSWEEK, "when it's simply a conduit for TV advertising and large donations from millionaires."

CLINTON EVIDENTLY didn't agree. Wilhelm left. To appease party traditionalists, Clinton named South Carolina operative Don Fowler as DNC chair. But to put the heavy hitters at ease he named Sen. Chris Dodd of Connecticut as "general-chairman." The son of a senator, a member of the banking committee with close ties to corporate America, Dodd was comfortable working the crowd Clinton needed. Ickes became the behind-the-scenes campaign chief, the common link among the White House, the Clinton-Gore campaign and the DNC. Visitors to the White House sensed the change in atmosphere. Dick Lamm, the former governor of Colorado, attended a dinner in March 1995. "It was a very interesting group of people" in the Blue Room, he recalled. But he couldn't help but notice the generous sprinkling of big donors. "It was kind of obvious," he said.

Dinners for donors were not new. Even sending government cars to fetch guests at the airport--a perk for important visitors--wasn't unusual. Renting out the upstairs was. Early in Clinton's first term, the guests tended to be Arkansas friends and other longtime acquaintances. Dr. Nancy Bekavac, a Yale Law School chum who is now president of Scripps College in California, stayed in the Lincoln Bedroom in 1998, proudly calling her morn in Clairton, Pa., from the hallowed chamber. "I'm no big donor," she said. "My claim to fame is that I gave Bill Clinton my class notes at Yale."

But by mid-1995 things were changing. Hillary was still official hostess of "the residence," and her guest list became more campaign-oriented. At times it must have resembled the lobby of a Ritz-Carlton. On the night of July 26, for example, investment banker Steve Rattner and his wife, Maureen White, stayed in the Lincoln Bedroom, whose treasures include a framed copy of the Gettysburg Address in Lincoln's own hand. Across the hall in the Queen's Room was Boston developer Alan Leventhal and his wife. A Philadelphia lawyer named Leonard Barrack and his wife would occupy "the Lincoln" the next night. Such treats create or reward good will: the three men and their firms contributed $$50,000 in soft money.

By late 1995 the Money Machine was humming, but it still had another gear. After Clinton-Gore had raised the maximum allowable amounts of hard money, most of it in $1,000 increments at vast big-city "galas," the sole focus became soft money. Demand for cash rose as Morris's admen bought huge chunks of TV time.

The Clinton team found a man to keep the cash coming, a Miami bond lawyer named Marvin Rosen. A Philadelphia native, Rosen had grown up worshiping the Kennedys. As a law student he'd been able to get close to the clan only by working for a catering service one summer in Hyannis Port. As a Florida fat cat, he became a fund raiser for Ted Kennedy and used his influence to get the DNC finance-chair job.

Under Rosen, insiders say, the chase became more manic. The compilation of budgets began on his watch. "Marvin always wanted the money in before the coffees," a DNC official told NEWSWEEK. Rosen's own calls became increasingly brazen, sources say. "He said to me, 'Why don't you get a group together to come to a coffee at the White House--and I want $50,000 apiece'," said one fund raiser. "You can't get more explicit than that." He could, and reportedly did at a Manhattan law firm last summer. A DNC staffer who was there claims Rosen told a group of donors that "we have opportunities to invite big contributors to coffee at the White House." Said the DNC official, "It made many of the staff cringe" because the pitch was so unvarnished-public. Through his attorney, Rosen denied any wrongdoing.

Far more problematic is the possibility that the White House and the DNC were giving away more than coffee and nights in the Lincoln Bedroom. Was policy for sale, too? After all, the roster of coffee sippers, pajama-party guests and soft-money big shots is chockablock with companies that have a major stake in administration decisions.

As he watches the replay of the last campaign, the president oscillates between resignation and anger. He's convinced that the press and the Congress are out to get him, but aides say he's used to that. What drives him nuts is the idea that a special prosecutor will be appointed to investigate possible violations of federal law: the ban on foreign contributions, for example. For now, Attorney General Janet Reno agrees that there's no call for an independent counsel.

Up late in the residence one night last week, Clinton called Democratic senators to testily make his case. The president and his allies point out-- rightly--that the GOP Congress is every bit as addicted to campaign cash. Their other defenses are as correct, but no more ennobling: that it's better to play golf with a fat cat than change a regulation for him, that they were just doing what was necessary to win. The problem, as always, is with "the system." "If people don't like the system, then they should change it," said Ickes.

Meanwhile, Clintonites adopt the classic lawyer's defense to charges of ethical laxity. "It may well be that the outer edge of the envelope was pushed," Ickes said. "But we never broke any laws." Indeed, Clintonites have begun citing a 1979 Justice Department ruling that said President Carter had been within his rights to meet with a group of 20 fund raisers in the Family Dining Room of the White House the year before. But they weren't citing the ruling too loudly. Even in the Clinton White House, "I am not a crook" is not a defense you want to use.

Dirk Ziff $412,000 Cochairman of Ziff Investments and son of former publishing magnate William Ziff

Steven Spielberg $201,000 Oscar-winning director, founder of Amblin Entertainment and cofounder of DreamWorks

William Rollnick $256,000 Retired president of Genstar Rental Electronics Inc. of Pale Alto, Calif.

David Geffen $201,006 Chairman of Geffen Records and cofounder of DreamWorks

Lewis Rudin $51,000 New York City real-estate developer, Rudin Management Co.

Lillian Vernon $115,000 CEO of Lillian Vernon Corp., a New York-based mail-order company

Brian Greenspun $44,000 President and editor of the Las Vegas Sun Newspaper Inc.

Eli Broad $128,500 Cofounder of investment company SunAmerica

Peter W. May $204,250 President and chief operating officer of New York-based Trian Group L.P.

Ronald Burkle S151,000 Chairman of California-based Food 4 Less Supermarket chain

Alan Leventhal $141,250 New England real-estate developer, president and CEO of Beacon Properties

Steven Grossman $136,000 Head of Massachusetts Envelope Co. and a DNC official

Steven Rattner $134,000 Investment banker: managing director of Lazard Freres & Co.

Lew Wasserman $292,000 83-year-old Hollywood legend, he's chairman emeritus of entertainment giant MCA Inc. and a prominent trustee of the capital's Kennedy Center

Sidney Sheinberg $104,000 Partner in The Bubble Factory, a Los Angeles movie-production company

Ronald Dozoretz $82,840 Health-care-company executive; runs nation's largest public-sector mental-health-care manager

Carl Spielvogel $128,000 Chairman and CEO of United Auto Group, a New York-based retailer. Lincoln Center trustee.

Olan Mills II $63,000 Chairman of Olan Mills, a Chattanooga, Tenn.-based portrait company

Merv Adelson $87,000 Vice chairman of Warner Communications, chairman of East-West Capital Associates

Paul Montrone $67,000 President of New Hampshire-based Fisher Scientific International Inc.

Paul Cejas $204,400 Chairman of CareFlorida Health Systems, nation's largest Hispanic-owned health-care company

Steven Jobs $100,000 A cofounder of Apple Computer Inc. and founder of NeXT Software, Inc.

Alan Solomont $157,300 Massachusetts nursing-home mogul and Democratic fund raiser

Barbra Streisand $61,000 Show-business FOB, actress, director and Clinton envoy to Hollywood

Roy Furman $113,000 Investment banker: president and director of Furman Selz Inc.

Leonard Barrack $107,000 Philadelphia lawyer; Jewish communal and Democratic activist

Kate Capshaw $1,000 Actress, wife of Steven Spielberg

Alan Bergman $1,000 Lyricist and composer for movies, television

Chevy Chase $250 Comedian and "SNL" Gerald Ford impersonator; star of National Lampoon's "Vacation" movies

Judy Collins $7,499 Folk singer and songwriter whose "Chelsea Morning" provided the Clintons with their daughter's name

Kathleen Battle America's best-known and sometimes most difficult soprano

Candice Bergen Film actress who became TV's Murphy Brown, Sprint spokeswoman and wife of the late director Louis Malle

Paul Glaser Starsky of TV's police drama "Starsky and Hutch," director and AIDS activist

Mary Catherine Bateson The Harvard-trained anthropologist writes about learning from experience

Adele Chatfield-Taylor President of American Academy in Rome, wife of playwright John Guare

Ted Danson $1,000 Sam Malone of "Cheers," stars with wife Mary Steenburgen on sitcom "Ink"

Richard Dreyfuss $1,500 "Mr. Holland's Opus" actor dabbles in liberal Democratic politics. He's a frequent Washington visitor and often a star witness on Capitol Hill.

Jane Fonda Actress, activist, fitness guru and wife of media mogul Ted Turner

Barbara Feinman Hillary's uncredited ghostwriter for "It Takes a Village," she had a falling-out with the First Lady

Patricia Duff $1,000 President of Revlon Fund and associate producer of 1988 Democratic convention

Gary Goldberg Emmy-award-winning producer and writer for films and TV

Peter Guber Movie producer whose credits include "Batman," "The Color Purple" and "An American Werewolf in London," the Academy Award-winning "Rain Man," and "Flashdance"

Rick Kaplan Executive producer in charge of special projects for ABC's news--programming division

James Naughton Television and movie actor, winner of Tony award in 1990

Neil Simon $31,500 Playwright, television writer and patron saint of community theater. Winner of Pulitzer Prize for "Lost in Yonkers" and winner of Tony and Emmy awards.

Doris Kearns Goodwin Presidential historian, biographer and thinking person's talking head on PBS

Christine Lahti Plays Dr. Kathryn Austin on CBS hospital drama "Chicago Hope"

Leslie Moonves $6,000 CBS Entertainment television executive, producer of "Dallas," "Knots Landing"

Tom Hanks Winner of back-to-back best-actor Oscars, bowed out of Clinton role in upcoming Mike Nichols movie "Primary Colors"

Jean Houston A self-described "sacred psychologist," she was for a short time Hillary's "spiritual guru"

Mary Steenburgen The actress and Arkansan is a longtime Clinton supporter

Elizabeth Tilberis Harper's Bazaar editor in chief and former director of Conde Nash publications

John Guare Broadway playwright, wrote screenplay for "Atlantic City"

Ted Turner Founder of Turner Broadcasting and Cable News Network, owner of the Atlanta Braves and husband of Jane Fonda

Marianne Williamson Dubbed the "Mother Teresa of the '90s," she was called to Camp David to advise Clinton in 1994

Rita Wilson Actress and wife of Tom Hanks, appeared with Hanks in "That Thing You Do!"

Billy Graham Evangelical preacher and spiritual guide to presidents since LBJ. He has traveled the globe, in-eluding former U.S.S.R. and China, promoting Christianity.

Robert Schuller Preacher of "possibility thinking" is pastor of "The Hour of Power" TV ministry at the Crystal Cathedral

Woodson Bassett $1,000 Old Clinton politico and brother of ex-S&L regulator Beverly Bassett Schaffer

Richard Arnold U.S. judge and Clinton Supreme Court prospect

Lottie Shackleford Former mayor of Little Rock, came to Washington to work for the Democratic National Committee

Diane Blair $1,000 University of Arkansas at Fayetteville political-science professor and author of two books--one on Arkansas politics

Jim Blair $1,000 Hillary's commodities broker is now Tyson Foods' general counsel and University of Arkansas trustee

Kaki Hockersmith Little Rock native has been the Clintons' personal interior designer since his days as governor

Webb Hubbell Former Rose Law Finn partner and No. 2 at the Justice Department; now facing questions about his ties to the Lippo Group

Henry Woods U.S. district court judge in Little Rock and longtime friend of the Clintons

Michael Schauflee Little Rock accountant and organizer of Webb Hubbell's legal-defense fund

Skip Rutherford $1,000 Member of Clinton's inner circle from early on. Helped in Clinton's first AG run, now runs a Little Rock public-relations firm.

Mark Grobmyer $1,000 Little Rock lawyer and close social friend to both Clinton and Gore; he worked for Lippo Group

Harry Thomason and Linda Bloodworth Thomason $2,600 Husband-and-wife TV-producing team. Responsible for Clinton's "Man From Hope" video at 1992 convention.

Alice Walton $6,000 Daughter of Sam (Wal-Mart) Walton and director and vice president of investments for Walton Enterprises

Richard Mays $3,400 Little Rock lawyer who has been a Clinton supporter since the dawn of his political career

Betsey Wright $1,000 Gov. Clinton's chief of staff who feared "bimbo eruptions" in 1992 campaign.

Buddy Young Former Arkansas state trooper and Clinton friend who went on to FEMA post in Texas

Taylor Branch The prize-winning historian has known Clinton since Mcgovern days in Texas

Bill Daley $2,000 Commerce chief and scion of the Chicago dynasty

Richard Riordan L.A. mayor; rare Republicans with Lincoln Bedroom privileges

Lee Iacocca Former CEO of Chrysler Corp.; Statue of Liberty fund raiser

Evan Bayh Indiana governor and Democratic Party rising star

John Garsmendi California's former insurance commissioner; now with the Department of the Interior

Harold Ickes $2,460 Tough-talking N.Y. lawyer and former White House deputy chief of staff, he ran the day-to-day '96 Clinton-Gore campaign

John Kitzhaber Oregon's governor and an advocate of universal health care

John Kluge Chairman and CEO of Metromedia Inc.

Derek Shearer Former Commerce official; Clinton named him Finland ambassador

Willie Brown The sharp-dressed and witty San Francisco mayor is a familiar face in Washington

Parris Glendening Maryland governor and former ethics-committee chair of the American Society for Public Administrators

Erskine Bowles White House chief of staff, North Carolina banker and Clinton golf partner

John Walhee First native Hawaiian to serve as governor of the state, long-time Clinton friend

George Bush Former White House tenant; his staff wrote strict fund-raising rules

Michael Sullivan $1,000 Lawyer and former governor of Wyoming

Susan Thomases $1,300 N.Y. lawyer and Hillary confidant; in charge of Whitewater damage control

Iris Cantor $16,000 Widow of Gerald Cantor, who founded Cantor Fitzgerald, a Wall Street securities firm

John Y. Brown Former governor of Kentucky once married to former Miss America Phyllis George

Gaston Caperton Former governor of West Virginia, married to conductor Rachel Worby

John Carlin Former Missouri governor; Clinton pick for Archives chief Mel Carnahan Former state treasurer; became Missouri's governor in 1996

Lawton Chiles Florida's governor; championed state's lawsuit against tobacco industry

Thomas Carper Former U.S. congressman, now Delaware governor

Michael Lowry Liberal ex-Washington governor, backed Clinton style health plan

Howard Dean Doctor and Vermont governor; pioneered early health-care reform

Ray Irani $7,000 Occidental Petroleum's chairman and CEO

Stephen Breyer Supreme Court justice appointed by Clinton

Dean Ornish $1,000 Florida lobbyist, Democratic conventioneer, Clinton fund raiser

Geraldine Ferraro $1,000 Former vice presidential candidate; now seen hosting CNN's "Crossfire"

Daniel Dutko $2,700 Lobbyist for energy, health-care and communications interests

David Walters $1,600 Foyer governor of Oklahoma; now president of Walters Power International

Richard Lamm Former Colorado governor and Perot rival for Reform Party's presidential nomination

Terry McAuliffe Democratic fund raiser; White House coffees for campaign contributors were his idea

George Sinner Former North Dakota governor; now vice president of American Crystal Sugar Co.

Clayton Kaelser $1,000 Miami lawyer; was campaign treasurer for Hillary's brother Hugh Rodham's ill-fated Florida Senate bid

Ned McWherter $1,000 Folksy former Tennessee governor is a canny mentor to both Clinton and Gore

Thomas Menino Boston mayor; took over when Clinton tapped Ray Flynn Vatican ambassador

Caroline Kennedy Schlossberg $2,000 JFK's daughter is a N.Y. lawyer and coauthor of the book "The Right to Privacy"

Tony Knowles Former Anchorage mayor; elected Alaska governor in 1994

George Nigh Popular ex-Oklahoma governor; now heads University of Central Oklahoma

Roy Romer $9,750 Former Colorado governor and Clinton '96 co-chair; now heads DNC

Robert Trent Jones Jr. $21,500 Designed a $28,000, three-hole putting green for Clinton on the South Lawn of the White House

Zell Miller Georgia's governor; inspired Clinton's Hope scholarship

James Lyons $2,700 Authored original Whitewater report exonerating the Clintons

Ann Richards governor and Democratic Party doyenne who lost her re-election bid to George Bush Jr.

Benjamin Nelson Prison-building, budget-cutting governor of Nebraska; has a Clinton-like love of policy

The Lincoln Bedroom wasn't the only thing for sale. A menu of the perks the DNC peddled in 1996:

FOR... YOU COULD HAVE GOTTEN... $12,500 Dinner and your picture taken with the president at a fancy Washington hotel. $50,000 Coffee with Clinton and top administration officials at the White House. $250,000 A full day at the White House. Guests could swim in the pool, play on the tennis court, go bowling, barbecue on the lawn, tour the Oval Office and watch "Independence Day" in the presidential theater.