59

© Search capabilities on the automated billing system limited and information can
only be listed by trip.
Press Reimbursement of Trip Costs:

« No formal reconciliation procedure exists to adjust amounts billed to the press
after comparison to actual costs.
Accounts Payable /Cash Disbursements:

© No cash disbursements journal.

* Inadequate or non-existent segregation of duties between individuals with ac-
counting and check writing authorities.

« No payable log exists for air charter invoices.

jective 2: To determine if checks written to cash were recorded as increases
to the petty cash fund, and that selected withdrawals from the petty cash fund were
supported and properly billed.
Procedures:

(a) Selected all checks written to “cash” (total of 17 checks) from the population
of canceled checks on file received from Riggs National Bank from January 1, 1992
to April 30, 1993.

(b) Traced the amount and date on the canceled check to the petty cash book.

(c) Located and summarized the detailed petty cash uses (i.e., expenses incurred)
for each employee of the office. This procedure was done in order to determine if
the detailed information agreed to the summary information.

(d) Traced a non-statistical sample of 10 petty cash disbursements related to 10
trips ax listed in the petty cash book to the charges on the respective trip work-
sheets.

Findings:

(a) On the first day of our fieldwork, we noted and inquired about eight discrep-
ancies between the amounts written to “cash” on the Riggs National Bank account
and the recording of these amounts into the petty cash fund. Each of the eight
checks was made out to “cash” and pigned by the Director of the press travel office,
and endorsed by the same individual. A detailed listing of discrepancies follows:

‘Amount to Increase to
Check Date Chock Ho, “Cash” Petty Cash

January 11, 1993 .. aaa $2,500 None
October 9, 1992 4173 5,000 $2,000
June 17, 1992 .. 3898 None
Apil 10, 1992 3780 None
February 18, 199 3617 None
December 27, 1991 3567 None
December 18, 1991 3557 None
December §, 1991 3533 None

23,000

(b) For three petty cash transactions dated December 27, 1991, December 18, 1991
and December 8, 1991, the page from the petty cash book was thissing for this time
period and the entry therefore is untraceable.

(¢) On the second day of fieldwork, the Director of the press travel office informed
us that he located $2,800 of the $3,000 unaccounted for in the October 9, 1992 petty
cash transaction. He informed us that he found it in an envelope located in a locked
drawer in the office, separate from the rest of the petty cash.

(d) Total of checks written to cash and not recorded on petty cash log or subse-
quently located by the press travel office is $18,200.

(e) For the 10 selected petty cash disbursements ({.e., use of a petty cash draw
by-an individual) chosen, we traced the petty cash disbursement amount. per
Buty cash book o the respective summary tp worksheet Tocated in the tip files

fe noted that the amount of the petty cash disbursement was recorded on the sum:
mary trip sheet aa an actual cost Incurred on thet. particular trip.

Objective 8: To assess whether checks recorded as received in the press travel
office were deposited into the Riggs Nationel Bank account within a reasonable time
and were properly posted to the automated billing system (ie., properly applied to
the outstanding bil).



25

cans, a lot of hard-working elected officials on both sides of the po-
litical aisle, we are going to lose something great in this country.

Mr. CLINGER. The gentleman’s time has expired.

And I am now going to recognize the gentleman from New Mex-
ico, the vice chairman of the committee, Mr. Schiff, for 5 minutes.

Mr. Scuirr. Thank you, Mr. Chairman.

First, I iin with those on both sides who regret your decision to
leave the House of Representatives. You'll be missed.

Mr. Chairman, I want to take advantage of your opportunity to
allow members to use 5 minutes or a portion of their 5 minutes on
an opening statement. I have a couple comments I want to make.
I then, if I have remaining time, do have a question or two for Mr.
Watkins.

I want to address two issues: The first is, the question has been
raised now several times from the other side of the aisle: What is
the purpose of this hearing? And the answer is the purpose of this
hearing is to look at the integrity of the management of Govern-
ment. fe is far more important than the Travel ice itself, which
most Americans probably didn’t have occasion to even know about.

One—it has been submitted on one side that the Travel Office
employees were all fired, as was the legal Tight of the administra-
tion, Because of financial mismanagement that allowed no other
course of action. It has been suggested however as an alternative
that they were really fired as an agenda to get in political allies
into getting White House-based business, that in order to hide the
real motivation, that every effort was made to sully the reputations
of these longstanding White House employees, including the misuse
of law enforcement, and there was an effort made then to cover up
that agenda when it started to become public.

And it seems to me that in the decision of the witness to invoke
kind_of an electronic Fifth Amendment here, that the American
people know better than I could tell them, which side wants the
whole story to come out and which side does not want the whole
story to come out.

e second, Mr. Chairman, is it has been stated that we have
had a number of inquiries already on this subject, and I want to
say that the problem is inquiries previously done, and there were
a number, were done without all of the documents being available.
And I know of no precedent for, under Republican or Democratic
administrations, for documents to appear years after first re-

quested.

And I think that Pius eloquently gave examples of that in your
opening statement, from the documents provided just recently, to
the fact that the late Mr. Vincent Foster’s file on ‘travel ate sat in
the White House Counsel’s office for at least a year without being
turned over to official investigators.

I want to say that holding things to the last minute is going on
up to the last minute. What you received today, Mr. Chairman, a
letter dated today, January 17, from Associate White House Coun-
sel John Quinn. And Mr. Quinn talks about who saw the memo,
the typed memo that Mr. Watkins prepared, that we have been re-
ferring to, before it was turned over to this committee.

Now, here is the list of people in recent times, after Mr. Watkins
wrote it, who saw this memorandum after—before—excuse me, be-


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, JR., Pennsylvania, Chairman

BENJAMIN A. GILMAN, New York

DAN BURTON, Indiana

J. DENNIS HASTERT, Ilinois
CONSTANCE A. MORELLA, Maryland
CHRISTOPHER SHAYS, Connecticut
STEVEN SCHIFF, New Mexico

ILEANA ROS-LEHTINEN, Florida
WILLIAM H. ZELIFF, JR, New Hampshire
JOHN M. McHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

PETER BLUTE, Massachusetts

‘THOMAS M. DAVIS, Virgini
DAVID M. McINTOSH, Indiana
JON D. FOX, Pennsylvania
RANDY TATE, Washington
DICK CHRYSLER, Michigan

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

WILLIAM J. MARTINI, New Jersey

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

MICHAEL PATRICK FLANAGAN, Illinois
CHARLES F. BASS, New Hampshire
STEVEN C. LATOURETTE, Ohio
MARSHALL “MARK” SANFORD, South

Carolina
ROBERT L. EHRLICH, JR., Maryland

‘CARDISS COLLINS, IIincia

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

JOHN M. SPRATT, JR., South Carolina

LOUISE McINTOSH SLAUGHTER, New

a

PAUL E. KANJORSKI, Pennayivania

GARY A. CONDIT, California

COLLIN C. PETERSON, Minnesota

KAREN L. THURMAN, Florida

CAROLYN B. MALONEY, New York

THOMAS M. BARRETT, Wisconsin

GENE TAYLOR, Mississippi

BARBARA-ROSE COLLINS, Michigan

ELEANOR HOLMES NORTON, District of
Columbia

JAMES P. MORAN, Virginia

GENE GREEN, Texas

CARRIE P. MEEK, Florida

CHAKA FATTAH, Pennsylvania

BILL BREWSTER, Oklahoma

TIM HOLDEN, Pennsylvania

BERNARD SANDERS, Vermont
(Independent)

JAMES L. CLARKE, Staff Director
KEVIN SABO, General Counsel
JUDITH McCoy, Chief Clerk

Bup MYERS, Minority Stoff Director

an


68

Mr. WaTKINS, The FBI concluded in their meetings that there
was sufficient observations and evidence to go forward with an in-
vestigation.

Mr. Wise. So at least at that stage in time, the FBI thought
there was something worth looking at?

Mr. WaTKINS. That’s correct.

Mr. Wise. And would you conclude that the FBI was being driv-
en by Pressure from you, from any of the ones above you, including
the First Lady, to make that decision; or do you think that was a
decision that they made at arm’s length?

Mr. WATKINS. Certainly, to the best of my knowledge, it was a
decision that they made as an independent agency.

Mr. Wise. So the First Lady says to you on the phone, I think
we need to get this thing reselved. quickly; the FBI is also during
that same week, perhaps subsequent, is also raising the same ques-
tions and concerns?

Mr. WATKINS. There’s—they raise questions that there’s enough
evidence for—to go forward with an investigation; that’s correct,
sir.

Mr. Wise. Thank you.

Mr. CLINGER. The gentleman’s time has expired. The gentleman
from—oh, Mr. Mica again.

Mr. Mica. Thank you.

I am only going to take 1 minute, and then I will yield to Mr.
Blute. But just to finish up, did I hear you say, Mr. Watkins, that
World Wide Travel didn’t charge for their services?

Mr. WATKINS. In the—in the—

Mr. Mica. In the campaign.

Mr. WarKINs. In the short time that they were at the White
House, they didn’t charge for their services.

Mr. Mica. In the campaign: I have copies—

Mr. Warkins. Oh, no, I did not say that. They of course charged
for their services.

Mr. Mica. And Penny, did she charge for her services?

Mr, Watkins. I’m sure she did; yes, I’m sure she did.

Mr. Wise. If the gentleman would yield so the record is straight,
charge for her services in the campaign.
onTM Mica. I don’t have time right now, but we will get back to

at.

Just a couple things, just to clear up here. You referred to, and
I have taken out of your report from the Podesta report to
Cornelius, the distant cousin, as “self-interested” and had a “tend-
ency to exaggerate.” Those are your words.

‘You also referred to her as a “liability” when she worked in your
office; that was your term. You concluded, Cornelius would come up
with “unworkable’—whatever she would come up with would be
“unworkable.” And you referred to Cornelius also as the “accuser.”
Those are all terms that you used in your Podesta report.

Then who did you put in charge when the White House Travel
Office folks were fired?

Mr. Warkins. Mr. Brian Foucart.

Mr. Mica. And what was Cornelius’ role?

Mr. WarKINS. Ms. Cornelius was the charter coordinator in
working with Penny Sample.


79
Status of Financial Management Criteria Implementation in the White House Travel Office—Continued

CategoryCriteria GAD Acsensment Apri 1994 GAO Assessment August 1995.
Cash management:
Vouchers reviewed and approved before pay- Procedures in place .. Procedures in place
ment.
Procedures to prevent duplicate payments ... Procedures in pace... .. Procedures in place
Payments made timely .... Bocklog eliminated Yune 1994) .. bo mat always comply with proce-
ures
Receipts deposited on the day received or Procedures in place
Text business day.
Small receipts accumulated and deposited Procedures in place
weekly.
‘Adequate intemal controls for security of Procedures in place ..... . Procedures in place
funds.
Periodic bank reconciliations ..... Procedures in place ..... .._ Do not always comply with proce-
dures
Financial reporting:
‘Transactions accurately recorded and dis- Procedures in place ... Procedures in place
closed in financial reports,
General ledger to classify, summarize, and Procedures in place ..... Procedures in place
report financial data
‘Subsidiary ledgers to provide detailed infor- Procedures in place ..... » Procedures in place
mation, end are periodically reconciled.
‘System for reports .. Planned uly 1994) Procedures in place
Report on Financial Position .. Planned (July 1994) Procedures in place
Report on Operations. Planned (uly 1994) Procedures in place
Report on Cash Flows Planned (uly 1994) Procedures in place

ENCLosuRE II—CoMMENTS FROM THE WHITE House

THE Wurre House,
WASHINGTON,
January 11, 1996.
Mr. Gene L. Dodaro,
Assistant Comptroller General,
‘Accounting and Information Management Division,
General Accounting Office,
Washington, DC.

Dear MR. Doparo: We have reviewed the draft of GAO’s proposed letter on the
White House Travel Office. Our only comment relates to the chart that you have
attached to your letter, which evaluates the Travel Office according to the 29 cri-
teria developed by GAO. This chart compares the Travel Office’s performance in
April 1994 and August 1995.

Although the April 1994 and August 1995 comparison certainly demonstrates the
Travel Office’s steady pi ae it lis only part of the story. As you know, in May
1993 the auditing firm of KPMG Peat Marwick conducted a review of the Travel
Office. You summarized KPMG’s conclusions in your May 1994 report, White House:
Travel Office Operations, under the heading IG Found Numerous Weaknesses,”
and prepared a chart identical in format to the chart in Your draft letter (see pp.
31-33). According to your summary, KPMG found that the Travel Office in early
1993 complied o1 We with a small fraction of the 29 criteria. As you stated, “our w
showed that KPMG addressed 25 of the 29 criteria we idenlified,” and that “the
White House Travel Office did not have adequate procedures in place that would
satioly 19 of the 25” (p. 31).

Only by comparing the May 1993 results—6 out of 26 criteria addreased—with the
August 1995 resulte—26 out of 29—can a true picture of the Travel Office's progress
be painted. For that reason, we request that. add a column to your comparison
chart to incorporate the summary of the KPMG observations you presented in your
May 1994 report at pages 32-33. A photocopy of those pages is attached.

ank you for your assistance in this matter.
Very truly yours,
JopiE R. TORKELSON,
Assistant to the President for Management and Administration.


15

agreed with the White House Management Review on whether the
firings of the Travel Office staff were handled with insensitivity.
Could you elaborate?

Mr. Watkins. Yes. The irony of it is that the possibility is that
had we not acted on the report of Peat Marwick, there would prob-
ably have been criticism there for having this type of information
and not acting on it. But I did not think it was insensitive since
the Travel Office employees, as all of us in the White House, served
at the pleasure of the President.

Mr. WAXMAN. An editorial in today’s Wall Street Journal specu-
lates that something other than financial mismanagement must
have been motivating the White House because your memo ex-
presses urgency in resolving this matter.

You were a central player in the White House Travel Office mat-
ter. First, describe for us the reasons that quick action was taken
to fire the staff in the Travel Office, and, second, tell us whether
you have knowledge that the White House’s goal in firing the Trav-
el Office staff was to give business to World Wide Travel and TRM.

Mr. WATKINS. Congressman, the situation with—what I thought
the objectives of the Travel Office was never to give business to
TRM or World Wide Travel service. It was at a time—one of the
objectives or perhaps a primary objective, as I understood it, was
a need for a positive press opportunity, finding mismanagement,
finding financial wrongdoings within the White House Travel Of-
fice, and as it was at a time that there was discussions that this
was a positive thing for the administration. There had not been a
lot of positive press over the previous weeks, and that it was some-
thing that would be a positive opportunity for the White House.
And that was urged by others.

Mr. WAXMAN. You indicate in your memo in light of the First
Lady’s insistence for immediate action and your concurrence, the
abrupt manner of dismissal from my perspective, as you say, was
the only option.

It seems to me all that this hearing is about is the involvement
of the First Lady, whether the First Lady said we ought to get
these people out, whether the First Lady suggested that changes
be made.

You have only come into Washington with this administration,
but I remember when we had a President by the name of Ronald
Reagan. His wife engineered the firing of the Chief of Staff, Donald
Regan. It was well-known. Do you recall whether there were any
congressional hearings on whether Mrs. Reagan had any right, or
whether she should be held accountable for the decision to fire the
President’s Chief of Staff?

Mr. WarKINS. I don’t recall any, Congressman.

Mr. WAXMAN. It seems to me that what we are looking at is
something that is pretty arbitrary. If you are looking for a problem
and there is no problem, then you make it up as maybe there is
credibility involved, maybe there is smoke and therefore there is
fire, maybe there is some scandal there so you hold hearings, you
hold investigations, you keep going on and on and on. But when
yeu get night down to the bottom, there is nothing there, is there?

ecause the President had the legal right to fire these people, even
without cause. There was apparent cause, certainly, to suggest that


14

Mrs, MorELLA. But I don’t think it was voluntarily.

Mr. WATKINS. Yes, it was.

Mrs. MORELLA. He voluntarily——

Mr. WATKINS. He asked if he could retire, and he was granted—
he was retired and the other ——

Mrs. MORELLA. After he was fired. After he was fired, right?

Mr. WATKINS, Well, he requested at the time of the meeting, he
says, will I be allowed to retire and get his full retirement benefits,
and I said yes.

Mrs. MoRELLA. But he was actually—then he was fired, I think,
wasnt he? He was given the opportunity to retire, but after he was

fired?

Mr. WarTKINS. After he—anyway, he—he retired, to my under-
standing.

Mrs. [ORELLA. He was subsequently indicted and we discussed
earlier—

Mr. WATKINS. He has all his retirement benefits. He asked to re-
tire and he said, will I be able to retire, and I said, yes, you will
be able to retire.

Mr. SHays. How could ye justify that?

Mr. WaTKINS. I don’t know that I could. I’m not trying to say,
Congresswoman, that I did a great humane thing on that account.
T’m just saying that he did retire.

irs, MORELLA. We already talked about the Peat Marwick Man-
agement Review, rather than an audit. And earlier in this hearing
I heard Mr. Peterson make a statement and I was going to inter-
rupt and say, would the gentleman yield, but he didn’t have much
time, where he was saying that what they found in terms of the
so-called mismanagement, he said they find it in every agency, and
maybe this committee should begin to look at agencies to see how
they could do better accounting. And he is an accountant. So that
what was found there was not that unique or different and cer-
tainly as Peat Marwick said, not enough to justify firings on the
basis of that. Then I wanted to ask you, if you are now familiar
with what is happening in the Travel Office, I mean are they doing
well? Is the management all in order?

Mr. WATKINS. I can assure you, Congresswoman, that when I left
the White House in July—June 1994, that I did not get back in-
volved. I’m not familiar with what goes on at the Travel Office. I
should inform you that from the reports that I had and documents
that I submitted, there were savings over the period from May
1993 to June 1994 to the press from the operations of the White
House Travel Office, over what previously had been.

Mrs. MORELLA. Well, ou know, I have a report which I don’t
think you have seen, a GAO report, it is a draft actually, looking
at the Travel Office now. And it states, however, from January
1995 through August 1995 Travel Office staff performed no ban
reconciliations because other tasks were given a higher priority.
And immediately prior to our review, the Travel Office reconciled
all outstanding bank statements and found deposits totaling
$200,000 that had not been entered into its checkbook.

So you have gone through six directors there and I guess what
I am saying to you, even though I realize you extricated yourself
from that completely, that, hey, they ain’t doing so well since the


32

Mr. WarkIns. I did.

Mr. Mica. You did. Let me ask you, if you had this relationship
with these folks, and they ran the campaign and the Travel Office
for the campaign, were you aware of how much was paid to them
during the campaign, and how much, say, the net profit was or net
return to Miss Carney?

Mr. Warkins. I don’t, have—I don’t have that precise informa-
tion, no.

Mr. Mica. Did you ever make any statements that one of the rea-
sons that you were successful in the election was that, in fact, that
you used the overbilling of the press, the float from that, to help
finance the Clinton campaign?

Mr. WarKINS. Overbilling of the press?

Mr. Mica. Yes. The press was billed for their participation in the
campaign by World Wide Travel. They were, in fact, paid by the
press. That money went into the Clinton campaign. And did you
ever make a statement that World—that the float from the excess
charged to the press helped World Wide—or World Wide Travel, in
fact, helped you be successful in your campaign?

_Mr. WATKINS. I don’t recall what you’re—into what you're refer-
ring, no, sir.

Mr. Mica. You have no recollection of that. Are you aware of how
much World Wide Travel was paid by the campaign?

Mr. Watkins. As I stated, I am not—I don’t have those records
and I don’t know.

Mr. CLINGER. The gentleman’s time has expired.

1 Mr. Mica. I will get back to this line of questioning a little bit
ater.

Mr. CLINGER. The gentleman’s time has expired, and I now rec-
ognize the gentlelady from New York, Mrs. Maloney, for 5 minutes.

Mrs. MALONEY. Thank you, Mr. Chairman.

We will miss your wisdom and experience in what is truly the
most partisan Congress in history. You worked very hard in a bi-
partisan way on the procurement legislation, and on centralization
of debt collection legislation. But Mr. Chairman, I consider this
hearing today extremely partisan. No one, Mr. Chairman, no one
should mistake what is happening today as a serious congressional

earing.

This is one more shot in the developing 1996 Presidential cam-
paign. If the majority was truly interested in solving the problems
of the White House Travel Office, this hearing would be concentrat-
ing on innovative approaches to travel management in the execu-
tive branch.

At the last hearing, I called for a bipartisan effort to create pri-
vatization of the entire Travel Office and requiring competitive bid-
ding to get the best price for the citizen taxpayer. I would like to
enter into the record, with your approval, Mr. Chairman, an out-
line of activities by the White House to improve management in
the Travel Office, and I'd like to put in the record a report that
came out last month entitled, “Improving Travel Management in
Government.”

Mr. CLINGER. Without objection so ordered.

{The information referred to follows:]


103

when you have a problem, do you have a local policeman or do you
have the Justice Department, and nobody really knew because this
was something new; isn’t that correct?

Mr. WarkIns. That’s correct.

Mr. KANJorsKI. We are sort of trying you in a hard way because
You're 120 days into a new job with a new administration, and the

istory was repeat and particularly if I will refer my friends on the
other side to the indictments and some of the arguments here, this
indictment didn’t go back prior to 1989 not because there weren't
situations prior to 1989, but because the statute of limitations
barred it from going back beside 1989. But the history in the White
House in the Travel Office had highly suggestible problems that
these prosecutors presented to a grand jury for 15 months, and
that grand jury decided they were sufficient in weight to warrant
a criminal trial.

This wasn’t a story that was created, and it was some 15, 18
months into the administration when the grand jury sat and finally
the trial began of this. It wasn’t—certainly in the beginning, it had
no relationship to the willingness to replace—there was no need to
have a criminal prosecution. I am not going to repeat what could
have happened.

Mr. WISE. Could I reclaim my time? I appreciate your correcting
me. I have often found, and maybe Mr. Watkins does too, that the
fifth or sixth hour of a hearing, that I get my dates mixed up. So
we are in the fourth month instead of the sixth.

Mr. Watkins, going back to the GAO draft report, and as I re-
viewed it a little more, I note that the GAO noted—and you would
not have seen this study, so I am not expecting you to comment
on it—that the GAO titles one heading: Travel Office procedures
comply with 26 of 29 criteria; that the Travel Office had developed
policies to address all 29 financial management criteria, and during
the period January through August 1995, it implemented proce-
dures addressing 26 of them, and then they do go into detail on
three.

But it sounds to me like the Travel Office had made some
Progress since the events that we are now describing.

(r, Chairman, I yield back the balance of my time.

Mr. CLINGER. The gentleman yields back the balance of his time.

I yielded to Mr. Shays, and Mrs. Morella did. Mr. Shays has his
own time.

Mr. SHays. Mr. Watkins, did you do business with World Wide
Travel?

Mr. WATKINS. Today?

. Mr. Suays. No. When you had your own business, your advertis-
ing firm.

Mr. WATKINS. Yes, sir, I did.

Mr. Suays. Did World Wide Travel do business with you?

Mr. WATKINS. Yes, sir, they did. I also did business with several
other travel agencies.

Mr. SHays. OK. Now, there is the—what I want to get—I want
to have a clear understanding. I mean my philosophy is, whatever
the truth is, so be it. You tell me the truth, and I just want to un-
derstand, I just don’t want to go around in big circles here.


39

Was this view of FBI its own view, or was this—did this view
of FBI come from others, as far as you know?

Mr. WATKINS. Well, I assume it was their conclusion, the FBI's
conclusion.

Ms. Norton. So in this case, you don’t think the FBI was bein
misused by anyone but had an independent view that a criminal
investigation was warranted based on what it found was going on
in the Travel Office.

Mr. WATKINS. That is my understanding.

Ms. Norton. And as far as you know, the FBI had not talked
to the First Lady or been coached by you or Mr. McLarty or any-
body else in this regard.

ir. WATKINS. Not to my knowledge.

Ms. Norton. Did you consider putting the employees involved on
administrative leave?

Do you understand what administrative leave is?

Mr. Watkins. Refresh my memory of administrative leave.

Ms. NorTON. When an employee of a government agency, State
or local or Federal, is accused of a crime, or is accused of wrong-
doing of any kind, until it is proved, that employee can’t be fired.
However, to safeguard the mission, the procedure that is normall
used is to put that employee on leave without pay—or leave wit
pay.

Mr. WATKINS. Congresswoman, I think the answer to that was
that we felt like it was best to, once the mismanagement was de-
termined and the report from Peat Marwick, that many of the func-
tions were interchangeable within the Travel Office. The seven em-
ployees did a little bit of each other’s work and kind of substituted
off for each other. It was the best management practice to ask
them to leave immediately and be terminated all at one time.

Mr. CLINGER. The gentlelady’s time has expired.

I do want to correct the record to show that the subpoena was
issued to you, Mr. Watkins, and the subpoena for your documents
was issued under my authority, because you are not any longer an
employee of the White House. All of the other subpoenas that were
issued to other members in the White House and for document pro-
duction were issued on a bipartisan basis.

I now recognize the gentleman from——

Mr. KaNJORSKI. Mr. Chairman, if I may ask, just so the record
is very clear, there has been some indication that this hearing
today was held as a result of a subpoena that was issued in a bi-
partisan fashion. Am I understanding from your statement that
that is not correct, the minority did not agree with the majority on
this date or time or this particular witness at this time to appear,
and it was solely done under your discretion under the rules as
chairman of the committee?

Mr. CLINGER. It is correct that I issued the subpoena to Mr. Wat-
kins, based on the fact that he had indicated really an unwilling-
ness to appear voluntarily.

Mr. KANJoRSKI. So today’s choice of date and the issue of sub-
poena was made by the majority of this committee. Is that correct?

Mr. WATKINS. May T speak, please? I do not think that is correct.
I don’t think I ever rejected a request to appear.


64

been characterized earlier today as an audit. With that under-
standing, I will withdraw my objection.

Mr. CLINGER. The gentleman’s time has expired, and I now rec-
ognize the gentleman from Connecticut.

Mr. SHays. Thank you, Mr. Chairman.

I would like to yield my time to my colleague, Mr. Mica. I hope
he will reciprocate.

Mr. Mica. Thank you, and I will yield.

Mr. Watkins, I want to get back to World Wide Travel again. I
had asked some questions before about some of your comments,
and the Washington Times reported on May 21, 1993, and quote:

That World Wide was credited by Mr. Watkins with setting up cash management

practices that obtained advance payments from traveling journalists. This freed
campaign money for advertising in such key States aa Michigan and Mlinois.

And then they have a quote from you, “‘it allowed us to win key
primaries, to have money that otherwise would be tied up in ac-
counts receivable to put into advertising, Mr. Watkins said, in Sep-
tember.”

Is that something that you said?

Mr. WarKINS. I don’t—as I stated this morning, Congressman, I
don’t remember that exact comment or quote.

Mr. Mica. I have another one from Travel Weekly, September 10,
1992, Little Rock dateline:

According to David Watkins, deputy director of operations for the Clinton Presi-
dential campaign, were it not for World Wide Travel here, the Arkansas Governor
may never have been in contention for the highest office in the land.

Is that something you might have said?

Mr. WATKINS. I might have said that.

Mr. Mica. OK. Then I want to take a minute, if I may, and walk
through a couple of things.

In the memo that we saw recently released, the memo—it says
was the—what was the—I want to know what was the situation
between the First Family and the Secret Service you referred to in
that memo? You felt like you were under a tremendous amount of
pressure to act, and you said that you hadn’t acted because of the
situation with the Secret, Service.

Did this involve also firing or removing Secret Service personnel?

Mr. WaTKINS. The reference to—of mine in the memo on the first
page to the Secret Service refers to an instance early in the admin-
istration where there was a press story about the First Lady throw-
ing a lamp at the President, and this press story lasted for 2 or
3 days or even longer. And the feeling we had is that we were
not—we did not protect the First Family enough by taking some
positive public relations actions and coordinating our actions with
the Secret Service.
ant Mica, Well, that press story, as I understand, occurred in

pril.

Mr. WATKINS. Well, early in the administration. I don’t have
the——

Mr. Mica. But I am not interested in that detail. But were you
directed to remove any Secret Service personnel or get them reas-
signed?

Mr. WATKINS. During that, the whole conversation about the
lamp-throwing incident——_


35

Mr. Wise. Thank you.

Mr. Waxman. If the gentleman will yield. I just want to point out
we're 2 hours into this hearing and we have shown no illegality,
no wrongdoing in firing the people who worked for the Travel Of-
fice. It was within the rights of the new administration to make
that decision. Mr. Watkins made that decision, and he also said
very clearly he was not ordered, not directed, not. commanded, not
in any way instructed by the First Lady to make that decision. It
was his decision and he made it.

Mrs. MALONEY. Reclaiming my time, there is no evidence that
anyone from the White House was involved in any way in orches-
trating the criminal investigation. There is no evidence that any
law has been violated. There is not even an allegation of illegal ac-
tivity, as is made clear by five detailed reports conducted on this
matter, Thank you, Mr. Chairman.

Mr. CLINGER. The gentlelady’s time has expired.

Mrs. MALONEY. We will miss you, Mr. Chairman.

Mr. CuinceR. Thank you, Mrs. Maloney.

I would now yield to the gentleman from Massachusetts for 5
minutes. If he would yield back to me for 30 seconds.

Mr. BLUTE. I certainly would, Mr. Chairman.

Mr. CLINGER. The point has been made here that this is a very
partisan exercise. I would point out that these subpoenas that have

een issued in this matter have been done on a bipartisan basis
with the consent of the minority. Second, the reason we're holding
this hearing today, and the reason we're holding any hearings on
this matter now is because we have been systematically denied ac-
cess to the documents that we have only now been able to receive
after having started to request them in June 1993, 2 years ago.
This matter could have been over and done with a long, long time
ago.

The gentleman from Massachusetts.

Mr. BLUTE. Thank you very much, Mr. Chairman. Let me join all

of our colleagues on both sides of the aisle in commending you for
our leadership of this committee and your long career, which has
een marked with integrity and nonpartisanship and bipartisan-

ship, and this hearing is in that tradition. The only reason we're

here is to get the facts out, to get to the bottom line of what hap-

pened in the White House during this travel affair.

When I review all of the documents, some of which are conflict-
ing in this whole affair, it reminds me of my mother saying to my
brothers and sisters as we grew up, a truism, “Oh, what a tangled
web we weave when first we practice to deceive.”

And I don’t think there is any doubt that there were efforts by
some in the White House to practice deception with regard to why
the Travel Office personnel were fired. It is very clear that the de-
cision to fire them was made first and then some rationale was cre-
ated second. It’s very clear that one of the reasons that was true
was that the Travel Office business was—needed to be steered to-
ward a political ally of the President, Mr. Thomason, and I think
we see consistently an effort to deceive the public and others on
what happened with the Travel Office affair.

And beyond that, I think the recent memo that you wrote that
was just revealed, not given to this committee for over 6, 7, 8


67

with Mr. McLarty that we should bring in an independent account-
ing firm; and that’s what we did. We—then we went back to my
office. I went back to my office, we discussed who and where; and
someone, a young staffer in my office, had met someone on the Na-
tional Performance Review from Peat Marwick, and so gave me a
name, and I called him.

Mr. WISE. So they come in. They—I assume they give you a
quick summary of what, their initial review?

Mr. WATKINS. Ongoing summary throughout the day and each
day. I was out of town on the Friday and Ms. Thomasson, who was,
in my absence, was coordinating with Peat Marwick, gave me
many reports throughout the day and Friday of what was transpir-
ing in their review of the Travel Office.

ir. WISE. So now you've got the situation of you have this thing
brewing, you know that there’s going to be a study out eventually
that says things aren’t being operated very well in the Travel Of-
fice. at are going to be the implications of that? What's going
to be the press story? Is that a fair statement? Is that a fair obser-
vation?

Mr. WarKINS, Observation that had we not done something?

Mr. WISE. Yes.

Mr. WATKINS. I think that there would have been—as I've stated
earlier today, there would have been a problem had we not taken
some action.

Mr. WIsE. Was there discussion about what could—what would
happen if you did not take action?

Mr. WATKINS. Well, as evidenced by the thought of my notes, I
Mean some of my notes, what happens if—you know, do we do—
what if there are no criminal or any wrongdoings discovered. The
thought all together was, what happens, we need to take some de-
cisive action.

I think one of the points, Congressman Wise, is that if we had
come in and there had been the—sent in Peat Marwick on Friday
and had taken no action, that there’s a very good possibility that
the members of the Travel Office, knowing, having access to the
press, would have released some kind of information or said some-
thing, and the press would have done a story, extremely negative,
about our coming in and reviewing the Travel Office anyway.

Mr. Wise. Well, in your draft memorandum that was never sent,
you stated about your conversation with the First Lady, and i
quote, I called her that evening and she conveyed to me in clear
terms her desire for swift and clear action to resolve the situation.

Given what you've just said, you’ve got the study in hand at this
time, is that a—is that an erroneous decision or—let me not say
decision. Is that an erroneous conclusion by the First Lady, that
something ought to be done?

Mr. WATKINS. I think the conclusion by the First Lady is appro-
priate, was appropriate for her.

Mr. Wise. And then I also point out, you made a statement, I be-
lieve, or your memo makes a statement following up on the same
thing. So if the First Lady expressed concern about the Peat
Marwick findings, was she not in good company since did not the
FBI, also express concern about criminal activity in the Travel Of-

fice?


104

What I want to know is, what was the—and I won’t call it any-
thing other than a practice of World Wide Travel. They billed the
press up front, and they claimed that this Provided a float to the

‘linton administration. What was that float?

Mr. WATKINS. I don’t remember, and I can’t get into remember-
ing exact details. I will say that early on in the campaign and in
any campaign, and I don’t even recall whose idea it was; it may
have been World Wide’s, it may have been someone else’s; but
there was a tremendous problem about accounts receivable, a lot
of dollars out, and so it was the practice, as I can best recall it now,
Congressman Shays, and the way it worked is that the networks
and the media agreed to pay for their travel on a credit card, I
think—and we can have somebody—on a credit card as they took
the trip, instead of waiting 30 days to be billed on a normal billing
process.

Mr. SHays. So you would collect the money up front, the admin-
istration?

. Mr. Watkins. As I recall, as the trip was taken, as the ticket was
issued.

Mr. SHays. OK. But you didn’t have to pay that for a period of
time.

Mr. WaTKINs. Pay to the—

Mr. SHays. You weren’t billed right away. You did not have to
pay. You got the money up front, and you didn't have to pay it for
a particular period of time. What did you do with that float?

ir, WATKINS. I don’t recall the particulars of that. I do think
that that——

Mr. Suays. Let me just ask you this question. You were basically
the assistant manager of the Clinton campaign operation. You were
the business manager; correct?

Mr. WATKINS, No. I was deputy campaign manager. I ran the
business operation.

Mr. SHays. So in fact you were in charge of the business oper-
ation.

Mr. WaTKINs. That is correct.

Mr. SHays. The question that I have to you: Is it not true that
by charging the press up front, you were able to have a float of
Money that was available to the campaign, because you did not
have to pay the bill when you collected the money?

Mr. WaTKINS. I will characterize—I don’t recall the particulars,
Congressman. I would characterize it this way, that what we did
was, we were able to have money earlier and not to have a huge
receivable out and not be able to collect and have it penalize us.
I don’t recall the advantages we had.

Mr, Says. Isn’t it true that it would be a gigantic advantage if
you charged the people up front but don’t have to pay the bill, that
you have the money up front?

Mr. Watkins. A lot of people—I think it is a common practice
with credit cards, and I don’t recall the specifics of this, but if a
ticket is issued, that you are billed at that time. You do that if you
call in American Airlines or somebody.

Mr. Suays. We are looking for a missing 10-page memo that may
show up some day. It is approximately 10 pages in length, that has
been described by several FBI agents whom Mr. Kennedy talked


45

Mr. WarKINS. That was one of the objectives, as I stated, Con-

ssman.

Mr. Fox. But obviously the First Lady had some influence here,
did she not? .

Mr. WATKINS. There was also the Peat Marwick report which
found financial mismanagement.

Mr. Fox. It wasn’t done at this time though, was it?

Mr. WATKINS. It was done on Friday. It was done before the
firings, Friday through Sunday.

Mr. Fox. It wasn’t the high priority of the First Lady, but Mr.
Thomason?

Mr. WarKINS. Mr. Thomason had an interest in making a very
positive press story. Mr. Thomason indicated that he had talked to
the First Lady.

Mr. CLINGER. The gentleman’s time has expired.

The gentleman from New Jersey, Mr. Martini, is recognized.

Mr. MarTINI. Thank you, Mr. Chairman.

Mr. ScuiFr. I wonder if the gentleman would be kind enough to
yield for 30 seconds.

Mr. MarTINI, I would be happy to yield to my colleague.

Mr. Scuirr. I wanted to ask one fo! low-up question.

One of my colleagues was asking you about your June 2 hand-
written memorandum. You said that you had one personal con-
versation with Mrs. Clinton; is that correct?

Mr. WATKINS. That is correct.

Mr. Scuirr. There is a note about that conversation that says,
Hillary, referring to the First Lady, telephone conversation with
David Watkins—yourself, of course—on Friday, May 14, and it
says—the entry says; it is a quote—“Harry says his people can do
these things better, save money, et cetera, and besides, we need
those people out, we need our people in, we need the slots.”

My question is this. On those lines, we need those people out, we
need our people in, we need the slots, are those your words to Mrs.
Clinton, or are those Mrs. Clinton’s words to you?

Mr. WATKINS. These are notes that I made 2 weeks or so after
my conversation with Mrs. Clinton. I can’t say that they are the
precise words. These are my thoughts and recollections of our—of
the conversation from Mrs. Clinton to me.

Mr. ScuirF. From Mrs. Clinton to you?

Mr. WATKINS. That is correct.

Mr. Scuirr. Thank you. I yield back.

Mr. Martini. Thank you very much.

Mr. Chairman, may I also add my best wishes to you. I have
More extensive remarks in my formal statement which I would like
to put into the record formally,

[The prepared statement of Hon. William J. Martini follows:]

PREPARED STATEMENT OF HON. WILLIAM J. MARTINI, A REPRESENTATIVE IN
CoNnGRESS FROM THE STATE OF NEW JERSEY

,__I want to join in commending Chairman Clinger for holding this important hear-

ing today.

‘Before I begin, I would like to take a minute to recognize our Chairman. Earlier
this week, I learned, with great personal regret that Chairman Clinger will be retir-
ing at the ond of this term:

‘a new member of Congress, I have only had the privilege of serving with
Chairman Clinger for one of his 18 years of service here on Capitol Hill.


87

Mr. MARTINI. Mr. Watkins, your memo, the one that we have
been. addressing all day——

Mr. Watkins. Right.

Mr. Martini [continuing]. Was made in response to a report that
you were uncomfortable with and didn’t agree with in the handling
of this firing, correct; yes or no?

Mr. WATKINS. Yes.

Mr. MartTINI. And you felt you were unjustly singled out and
that the full facts were not part of the original memo on the han-
dling of this issue; correct?

Mr. Warkins. Correct.

Mr. Martini. And this was your attempt to put the responsibility
where it belonged; correct?

Mr. WATKINS. It was an attempt on my part to provide a detailed
response to the internal management review.

Mr. MaRTINI. But it was an attempt to put the responsibility
where it belonged; yes or no?

Mr. WATKINS. To put—yes.

Mr. MARTINI. Do you think you adequately did it with this
memo?

Mr. Warkins. That would be for whatever conclusions of the
reader.

Mr. MARTINI. Well, with the conversation that you did have with
the First Lady when you said—I guess I am troubled by this be-
cause I think we are playing semantics now, and I think part of
the reason the White House is in the predicament they are in right
now and why we are uncomfortable and many people are, is be-
cause of the play on words that is going on here right now.

As recently as yesterday, how do I reconcile in my mind the com-
ment by the First Lady yesterday, that perhaps you misunderstood
her concerns. Now, if you were sitting up here, in view of your
memo and your testimony today, is that a fair characterization of
what your memo reflects?

Mr. WaTKINS. As what?

Mr. MarTINI. You misunderstood her concerns?

Mr. WarKINS. That I misunderstood her concerns?

Mr. MartTINI. That’s what she said yesterday. She said that per-
haps my aides misunderstood my concerns.

If you would like the direct quote, I will read it to you.

Mr. WATKINS. Please.

Mr. MarrINI. It is——

Mr. CLINGER. The gentleman’s time is expiring. If you can come
up with a question——

Mr. Martini. Yes, I can, Mr. Chairman.

dust in a radio interview Hillary Clinton said, “mere expression
of concern could have been taken to mean something more than it
was meant.” I mean, that is her response now to the revelation of
the Watkins memo being public.

Mr. WarkKINS. I think that expression—I don’t know what the
First Lady meant by that.

Mr. CLINGER. The gentleman’s time has expired. The gentleman
from Virginia.

Mr. Davis, Thank you. Thank you very much. You were writing
this memorandum, the one that we have been discussing, basically


8

Mr. WAXMAN. Thank you very much, Mr. Chairman. This hear-

ing follows seven exhaustive reviews into the White House Travel

ice. The 1993 firings have already been investigated by the

White House Management Review, the FBI, the IRS, the House Ju-

diciary Committee, the Department of Justice’s Office of Profes-

sional Responsibility, the Department of Justice’s Public Integrity
Section, and the General Accounting Office.

These reviews share an important common denominator. After
all the time and effort and innuendo, they haven’t produced a sin-
gle shred of evidence indicating illegality or impropriety. I strongly

isagree with many of the characterizations that this committee
has made about the Clinton administration’s actions in this matter.
But even if we stipulated all of them were true, that they were ac-
curate, even though they’re not, there’s still absolutely no evidence
of rongdoing.

T have said before and want to repeat today that I have the
greatest respect for this committee’s chairman. Mr. Chairman,
you're the type of Member we need in this House, and your deci-
sion to retire is a great loss. It’s precisely because I hold you in
such high regard that I find this hearing and the intensity you
bring to this investigation so surprising. We have no evidence of il-
legality or wrongdoing. And there is no question that the Clinton
administration had every right to terminate White House employ-
ees. Even if there had been no fault on their part or no wrongdoin;
on their part or no mismanagement on their part, the Clinton ad-
ministration had the ability and right to fire them.

Whether that’s good judgment or management practice is an-
other matter, but if that’s the issue, then this committee and the
House should also be part of this inquiry.

When the Republicans gained control of the House of Representa-
tives, for the first time in 40 years, more than 10 nonpartisan
clerks were fired by this committee and its Chairman and replaced
by pew staff That happened throughout the House and continues
to this day.

Here’s an article from_a newspaper that says, “The House Clerk
to Hill staffers, Merry Christmas, you're fired.” People were fired
because the Republicans took control and they didn’t want to have
the old 1 people in; they wanted to put their new People in.

Mr. Chairman, you and the Republican majority have every Ti ht
to bring your own people in, even though I might question whether
that was good management practice or fair to the employees in-
volved. In the House of Representatives, we're not talking about
seven employees as we are in the Travel Office, all of whom got
jobs. We're talking about hundreds of people in the House of Rep-
resentatives, many of whom have never gotten jobs. They were
fired summarily, and there are no investigative hearings on their
firings, perhaps because the Republicans control the House and
don’t want to investigate themselves.

I want to be blunt about what we're doing here today. We're wal-
lowing in the Travel Office firings, not because there’s wrongdoing,
but because the First Lady may be involved, and that somehow is
titillating. When one scratches beneath the formal veneer of this
hearing, what really seems to excite people is knowing more about
the Secret Service reference in Mr. Watkins’ memo.


WHITE HOUSE TRAVEL OFFICE—DAY TWO

WEDNESDAY, JANUARY 17, 1996

House OF REPRESENTATIVES,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The committee met, pursuant to notice, at 11:08 a.m., in room
2154, Rayburn House Office Building, Hon. William F. Clinger, Jr.
(chairman of the committee) presiding.

Members present: Representatives Clinger, Morella, Shays,
Schiff, Mica, Blute, Davis, Fox, Martini, Bass, LaTourette, Wax-
man, Wise, Kanjorski, Peterson, Maloney, and Norton.

Staff present: dames Clarke, staff director; Judy Blanchard, dep-
uty s director; Kevin Sabo, general counsel; Barbara Bracher,
chief investigator, Barbara Comstock, special counsel; Joe
Toughran, professional staff/investigator, Judith McCoy, chief
clerk; Cheri Tillett, assistant chief clerk/calendar clerk; Cissy
Mittleman, David Jones, professional staff; David Schooler, minor-
ity chief counsel; Ronald Stroman, minority deputy staff director;
Donald Goldberg, minority assistant to counsel; Cedric Hendricks,
Miles Q. Romney, minority professional staff; Ellen Rayner, minor-
ity chief clerk; and Cecelia Morton, minority office manager.

Mr. CLINGER. The Committee on Government Reform and Over-
sight will come to order.

‘his morning under the authority of House rule 11(k)(1), I will
begin this hearing with an opening statement and recognize Mr.
Waxman or a member of the minority for an opening statement,
and then we will proceed to questions under the 5-minute rule.

Members of the committee who would like to give an opening
statement may insert them in the record at this time or make their
statements during the first round of questioning under the 5-
minute rule.

In July, 1993, Vince Foster said to his brother-in-law, “You
would be shocked our own people would lie to us.” Mr. Foster was
talking about the Travel Office matter, and this conversation oc-
curred within weeks of his death. Perhaps Mr. Foster knew the
truth was not being told in this matter. Now we have learned that
others felt the same way.

What we have learned thus far substantiates the belief of many
that the circumstances surrounding the firing of the Travel Office
employees was a principal cause of the deep depression Mr. Foster
was suffering at that time.

The White House long has claimed and still claims that the
firings of the Travel Office employees were due to mismanagement.
But the firings were discussed in December 1992, a full month be-

(ey)


42

Mr. WarKins. I did not take any action on that. As I said, I do
recall, I think, seeing a memo, but there was no action taken on
my part.

Mr. Davis. You said on May 12 that Thomason told you he had
seen Hillary Clinton in the hallway and said that she had dis-
cussed the situation and said that individuals in the Travel Office
should be fired. Did you think Mr. Thomason was lying to you?

Mr. WarKIns. I did not think he was lying, no.

Mr. Davis. OK. Thank you very much. Do you think Mr.
Thomason was making up something that the First Lady said?

Mr. WarKINS. I can’t conclude what Mr. Thomason was saying.
You know, Mr. Thomason may have—those may not have been the
First Lady’s exact words; and he may have felt a sense of urgency
to act, and he may have said to fire them. I don’t know.

Mr. Davis. The First Lady had said she didn’t say anything to
you directly about firing the Travel Office employees. But did the
First Lady always communicate with you directly or did she some-
times work through her Chief of Staff or counsel’s office?

Mr. WATKINS. I spoke to the First Lady, not on a frequent basis,
but on the issue of the Travel Office, I only spoke to the First Lady
one time.

Mr. Davis. I have a document dated—your notes dated June 2,
1993, and you say, Harry says—this is Hillary’s telephone con-
versation with D. Watkins on Friday, May 14. It says, Harry says
his people can do things better, save money, et cetera; and besides,
we need those people out, we need our people in, we need the slots.

What did that—what were you indicating there?

Mr. WarKINs. As I indicated previously, I had spoken with the
First Lady on one occasion about the firing—about the Travel Of-
fice matter. That date was May 14.

Mr. Davis. That was a direct communication; was it not?

Mr. WarKins, A direct communication; that is correct.

Mr. Davis. And although she didn’t have the legal ability to
order you to do anything or direct you to do anything, she could
certainly suggest; could she not?

Mr. WATKINS. Yes.

Mr. CLINGER. The gentleman’s time has expired.

Mr. Davis. Thank you very much.

Mr. CLINGER. The gentleman from Pennsylvania, Mr. Fox.

Mr. Fox. Thank you, Mr. Chairman. I want to join with my col-
leagues in also congratulating you on your outstanding service in
Congress and the hope that you will reconsider. I would ask a few
questions, if I can, of the witness.

In regard to the missing White House documents, in your Public
Integrity statement, the 302, you say that you were unaware how
the records in petty cash were secured while you were there, but
that it had been the responsibility of Patsy Thomasson.

Did you learn what Patsy Thomasson did with the petty cash
logs?
oor. WarkIns. I don’t recall.

Mr. Fox. Were you aware that some documents were put in the
military office safe?


3

other reputations and really make this a hunt, until November 5,
is it, is that when we have to carry this on to, November 5, is that

e-—

Mr. CLINGER. Will the gentleman yield? I would say this hearing
would not even be held today, had the administration been forth-
coming 2 years ago when we first requested documents.

Mr. jORSKI. Well, Mr. Chairman, that is a great point. Be-
cause I understood the testimony of this witness, that he was al-
ways available to testify before this committee any time, and that
it was very peculiar that in the middle of the break——

Mr. CLINGER. We didn’t have the documents.

Mr. KANJORSKI {continuing With nothing else going on on the
radar screen in Washington, DC, this committee chairman and the
majority of this Congress saw fit that we all had to return from our
districts, because, Mr. Watkins, you are in ill health, aren’t you,
you are about to die?

Mr. WATKINS. Oh, no, not to my knowledge.

Mr. KANJORSKI. Are you losing your ability to testify in the fu-
ture?

Mr. WATKINS. Not to my knowledge.

Mr. KANJorSKI. There has to be some reason on a Wednesday,
2 or 3 days before we return to Washington, that we have to as-
semble from all over the United States, at great expense to the
American Government. For a trip from my district to come here,
it is about $600. I imagine some of my friends are even more ex-
pensive than that. No, I can see that Mr. Davis, he just drove
across the river, But there was no emergency, was there, to have
this hearing? We could have had it next week. We could have all
been in town, had this maybe next week. The emergency really
was, Mr. Watkins, that there is nothing ‘oing on on the Hill in
Washington, DC, on this Wednesday. And this is a great television
news story time.

Mr. CLINGER. The gentleman’s time has expired.

Mr. KaNsorski. And I hope it is the time of the hearing that will
soon expire.

Mr. CLINGER. I will now recognize the gentlelady from Maryland,
Mrs. Morella.

Mrs. MORELLA. Thank you, Mr. Chairman.

I want to pick up on what was stated earlier, too, Mr. Watkins,
because I heard at least four times during the course of this hear-
ing the idea that this—the firing, the change at the Travel Office,
was a result of a press opportunity. It really blows my mind to
think that we have 8 press opportunity, quote, unquote, that would
threaten the livelihoods and the careers of these Federal employees
and their families. How can you justify that?

Mr. WarKINS. Well, again, there was the finding by Peat
Marwick of mismanagement, financial mismanagement in the
Travel Office. Mr. Dale was allowed to retire. The FBI made the
decision that there were sufficient unexplained and sufficient
wrongdoing or allegations of wrongdoing or opportunities for
wrongdoing that they’ would conduct an investigation.

Mrs. MoRELLA. I think we—first of all, Mr. Dale was indicted; he
wasn’t, like, invited to retire.

Mr. WATKINS. No, ma’am, he did retire from the White House.


82

Mr. Scuirr. Mr. Chairman, lar order.

Mr. CLINGER. The gentleman from New Mexico has the time.

Reclaiming his time.

Mr. ScuiFr. I just want to keep it orderly here, and I will yield
again to the gentleman from Pennsylvania.

Mr. Watkins testified in military terms, a chain of command.
And I have been in the military, too. I don’t know what happened
to Vice President Gore in that chain of command, but nevertheless,
there was a chain of command, the President to the First Lady, to
Mr. McLarty, to Mr. Watkins. Anyone who has been in the military
knows that if someone higher than you in your chain of command
says I want to see this happen, it is going to happen. And to say,
well, they didn’t order it may be ‘technical ly true, but they made
it very clear what they wanted done, and if they are in your chain
of command and they sign off on your officer efficiency report, I can
guarantee that is exactly what is going to happen, and it did hap-
pen.

Mr. KANJorSKI. Will the gentleman yield?

Mr. Scuirr. I yield to the gentleman from Pennsylvania.

Mr. KANJoRSKI. That is the point I am trying to make to my
friend from New Mexico, that is the three-prong nature of govern-
ment, not only the Congress, not only the executive but the judici-
ary. And March 25, 1994, a grand jury of the United States, made
up of Private American citizens, were sworn in and convened for
more than 15 months, until October 6, 1995, listened to all the tes-
timony and evidence presented by a U.S. Federal Attorney’s Office.
And at that time, they rendered a two-count indictment against the
director of this office.

This wasn’t done by the executive branch. This was not by the
Congress or by Mr. Watkins. This was done by independent, sworn
American citizens under our system. That 1s the system of the
three branches of government.

h Mr. ScuiFF. If I can reclaim my time because it is almost expired
ere.

It is true there was an indictment against one member of the
Travel Office. It is also true he was found not guilty. Once the pro-
ceedings went from an ex parte government-only presentation to a
full trial with the right to cross-examine witnesses, at that point,
which is the trial, Mr. Dale was found not ity.

Notwithstanding that, the issue before the Congress is the man-
agement of Government and all of the evidence is that anything
that might have been amiss in the management of the Travel Of-
fice was a facade to be used to—to obtain a political result. And
when the press and when the Congress get on to that, there is
damage control aplenty to try to deny that, even though I think it
is become increasingly obvious.

Mr. WAXMAN. Will the gentleman yield?

Mr. Davis. Will the gentleman yield?

Mr. Scurrr. I yield to Mr. Davis.

Mr. Davis. Let me make one point.

I practiced law for many ears, I think the gentleman from Penn-
sylvania practiced law. I think it is a fact a grand jury indicts a
man, and which the prosecuting attorney asks them to do that. It
is also automatic in the grand jury, it is an ex parte proceeding,


WHITE HOUSE TRAVEL OFFICE—DAY TWO

HEARING

BEFORE THE

COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION

JANUARY 17, 1996

Printed for the use of the Committee on Government Reform and Oversight

a

U.S. GOVERNMENT PRINTING OFFICE
23-471 CC WASHINGTON : 1996

For sale by the U.S. Government Printing Office
‘Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-052470-9



108

appointed if that First Lady wouldn't have either talked to her hus-
band, the President, or talked to his chief of staff or someone in
the hierarchy of the White Hous’ to say, “Look, I have had a tele-
phone call from a very good friend of mine, or a person I have a

‘eat deal of respect for, for their integrity and their loyalty, and
they have made me aware of comments or rumors that there is
something wrong within the White House,” and then a series of
memoranda would have started to flow from the chief of staff to the
administration officer to the travel or wherever the comment was
made.

Would we have been in a congressional hearing under those cir-
cumstances?

Mr. CLINGER. You may respond to the request.

Mr. WarKINS. I don’t have any response.

Mr. CLINGER. The gentleman’s time has expired.

The only comment I would note is that the discussion of chang-
ing the personnel of the White House Travel Office occurred long
before there were any Suggestions of misdeeds in the White House
Travel Office. It was really discussed in December, before the ad-
ministration actually came in power, as I understand it, and there
were other discussions in February. So there was a plan to replace
the Travel Office before any question of misdeeds arose.

Mr. Wise. Is that a question of the witness? Because I haven’t
heard that in evidence anywhere. The chairman just made a state-
ment. I would like to know if the witness knows that to be the case.

Mr. CLINGER. Mr. Watkins, were you aware of any statements of
mismanagement before April when I believe——

Mr. Warkins. I don’t recall that I was aware of any statements
of mismanagement prior to April when Mr. Thomason called me.

Mr. CLincER. Thank you.

The ggntleman from Florida is recognized.

Mr. Mica. Mr. Chairman, thank you. I am not an attorney and
I really don’t know the difference, I guess, between perjury and not
telling the truth. But Mr. Watkins, I have a copy of the FBI, I
guess you would call it a 302, your Public Integrity Dale investiga-
tion statements.

On page 3 it says:

During the conversation between Watkins and Thomason in early April,
Thomason stated that Darnell Martens, a partner (that would be a partner with
Thomason in TRM) had successfully attempted to solicit business with the White
House Travel Office through Dale.

Now, you had——

Mr. WATKINS. Unsuccessfully.

Mr. Mica. Yes, I know. But you were asked by —

Mr. WATKINS. I answered Mr. Shays, this is the memo I——

Mr. Mica. If he had any interest

Mr. WarKINS. I specifically answered that and mentioned Mr.
Martens’ memo, if you would check back.

Mr. Mica. So you knew that Mr. Thomason had an interest and
was soliciting business for TRM, and was a partner with Darnell
Martens. It says there was a conversation between Watkins and
Thomason in early April and that he stated these things.

Mr. Watkins. Would you let me answer?

Mr. Mica. Yes. Go ahead.




109

Mr. WATKINS. The point of the conversation with Mr. Thomason
is that Mr. Dale would not entertain the conversation from Mr.
Darnell Martens about petting bids or about getting a contract for
the White House Travel Office business. He said he was perfectly
satisfied with where he was and that he would not entertain a pro-
posal from Mr. Martens.

Mr. Mica. Well, let me ask you now, Cornelius didn’t have her
report done I guess on the 12th or something like that. On the
12th, May 12, “Thomason went’”—I am reading from the FBI re-
port:

Went to Watkins’ office and asked him what had been ascertained about the ac-
tivities in the White House Travel Office. Watkins told Thomason that Cornelius
was due to make a report about the activities in the White House Travel Office by
May 15th and he should speak with her.

Now, that is the 12th. The FBI was brought in on that same day,
before the Peat Marwick report; the FBI was first contacted by the
counsel’s office on the 12th and asked to come in, that there was
mismanagement, and Peat Marwick wasn’t ordered until the 13th,
according to your handwritten memo. Maybe I am incorrect, and
maybe this FBI report is wrong.

Mr. WATKINS. You need to ask the question.

Mr. Mica. Well, where did, where did—OK. Who was—where did
you get bad management information? The FBI hadn’t been—was
contacted on the Tah, so obviously they didn’t have anything, and
ghink they blew you off, or the White House counsel off, on the

The 13th was when you went to Peat Marwick, and you just said
here to another question, you had nothing up to April. You had
asked Cornelius to report; you said her report wasn’t worth beans
anyway, because she was unreliable or exaggerated.

Where is the bad information coming from about the White
House Travel Office?

Mr. WATKINS. The information comes, one, from a telephone con-
versation in April with Mr. Thomason.

Mr. Mica. You just said in April that you didn’t have any bad
information.

Mr. WaTkins. I don’t think that is correct, Mr. Chairman,

Mr. Mica. OK. So in April—

Mr. WATKINS. If I can give you——

Mr. Mica. Where did the bad information come from?

Mr, WATKINS. I got a telephone call from Mr. Thomason in April,
the first time I heard; and I think that is what I answered the
Chairman. I heard in April from Mr. Thomason about Mr. Martens
calling Mr. Dale earlier in the administration and trying to get
some——

Mr. Mica, Business?

Mr. WATKINS. Business, yes. And he said something to the effect,
others in the charter business know that these guys have been tak-
ing kickbacks for years and so on. My response to him was, Harry,
Ms. Cornelius, Catherine Cornelius, is now working in the White
House Travel Office. I will tell Catherine Cornelius of this tele-
phone conversation and ask her to keep her eyes and ears open.
She is doing a report for me that is due May 15th.


30

ida that there were no Federal funds involved in the operations of
the Travel Office other than the salaries that were paid to the em-
ployees of the Travel Office. All of the funds in the Travel Office
accounts were from the media who were serviced by the Travel Of-
fice. I would now recognize the gentleman from——

Mr. ScHIFF. Mr. Chairman, since the gentleman mentioned my
name, although I happen to be from New Mexico, I think the gen-
tleman was referring to me. I wonder if I could ask unanimous con-
sent for 30 seconds to respond.

Mr. CLINGER. Without objection, the gentleman is recognized for
30 seconds.

Mr. Scuirr. First, I appreciate my colleagues on the other aisle
not objecting. I want to say that my exact words were I felt that
law enforcement was misused. Was it misused in the prosecution
itself? That can’t be stated except the fact there was an acquittal
at the end, but there was an indictment.

Mr. KaNnuyorski. Do you-—.

Mr. Scuirr. If I can just finish my statement. I think it has been
acknowledged that bringing in the FBI the way they were brought
into this, that by another associate counsel saying if the FBI won’t
do something, it will be given to the IRS, by the fact that it was
announced publicly that the FBI was investigating these people,
which is against all procedures of law enforcement, by the fact very
recently the plea discussions were made public, which is an inap-
propriate use of law enforcement. I stand y my statement.

Mr. CLINGER. The gentleman’s time has expired. I am now rec-
ognizing the ggntleman from Florida, Mr. Mica, for 5 minutes.

Mr. Mica. Thank you, Mr. Chairman. Since we are on the ques-
tion of the FBI, we have this latest handwritten memo that we re-
ceived and I see your note, it is 007991. Mr. Watkins, you say FBI
would not ordinarily get in but—and you have “in but” underlined
and not also. What did you mean by that comment that you wrote
on May 14th notes?

Mr. WATKINS. This was a long time ago, Congressman, and I
don’t recall specifically. It was dated 5-14-93. But my best inter-
pretation of what I meant there is that when we were discussing

iow do you look into this—on the day of, I guess, May 13, how do
you look into investigating something that shows financial wrong-
doing or allegations and such? Where do you go? Well, we had no
audit cape——

Mr. Mica. Did you go to the White House counsel to ask wheth-
er—

Mr. WarKINS. This was in the counsel.

Mr. Mica. Yes.

Mr. WaTKINS. This was.

Mr. Mica. Did you ask Mr. Foster?

Mr. Watkins. This was in a meeting with Mr. Foster and Mr.
Kennedy.

Mr. Mica. I think he advised against—did he advise against hav-
ing the FBI called in?

ir. WATKINS. No, I think the proper sequence was that we were
discussing the situation, who—who does do this type of thing, and
we didn’t know. We had no internal audit mechanism, and no one
really knew where you went to go. There was this general discus-


89

that—but I thought that the best thing, the best way to do it was
to fire them and for them to leave immediately rather than hang
around and do something.

Mr. Davis. Mr. Watkins, in point of fact, if you had had your way
without the pressures from above you would have taken a little
more time and given these people other opportunities to serve in
Government; wouldn’t you?

Mr. WATKINS. I think given the—and certainly in hindsight, and
we all have 20/20 in hindsight, but it would have been to let it go,
make a determination, complete a review of the office, see how it
could operate more efficient] ly and make the reduction from seven
to three or four and outsource. My original idea was to outsource
some of the commercial travel aspects of it.

Mr. Davis. Do you know who decided to bring the FBI in?

Mr. WarKINS. As I stated earlier today, my recollection is there
was a conversation one day, look, there have been these allegations
by Mr. Thomason and Miss Cornelius primarily of funny things
happening in the Travel Office, how do you conduct an investiga-
tion of this kind? Where do you go? The White House did not have,
in my office we certainly didn’t, did not have an audit ca ability,
and it was suggested that perhaps the FBI could be called to as!
them how to do it.

Mr. Davis. I got two comments in your notes, one that I am sure
you are familiar with. One is, you asked the question what are the
negative political consequences if no criminal violations? And an-
other is, FBI would not ordinarily get in but—could you try to ex-
plain those?

Mr. WarkKINS. I have answered the FBI thing a couple of times.
You want me to do it again?

Mr. Davis. What about the—what are the negative political con-
sequences if no criminal violations?

Mr. WATKINS. Well, I think if you bring in and do a manage-
ment—I mean do a financial review and when the allegations have
been such and you’re—that there are wrongdoings in the—financial
wrongdoings in the Travel Office and then there is nothing found
and the closeness of the people in the Travel Office with the press,
there would be a very negative story. That is, as I recall, was my
thinking at the time.

Mr. Davis. Let me ask, you note his were being vague and pro-
tective in this memorandum about this and the First Lady has said
she has had no role in the decision to terminate the employees.
What were you being vague and protective about? Was it perhaps
her role and the role of higher ups?

Mr. Warkins. I think basically it was the feeling, the intense
feeling of pressure to act and do something that had not been. And,
again, this related to the questions asked me by the White House
internal review people and they really didn’t follow up and ask any
questions about the First Lady’s involvement.

Mr. Davis. Thank you very much. And finally, the First Lady
said she has a general recollection of having conversations with Mr.
Foster and Mr. McLarty about the Travel Office but she had a
number of conversations pressing them for action. Didn’t she have
concern on this?


84

nal travel management review, that I did not do anything to de-
serve a reprimand.

Mr. CLINGER. And there was nothing in the White House, the
final investigation, that would have in any way suggested that, the
First Lady had any role in this or needed to be reprimanded for
precipitating this action, was there, no mention of her?

Mr. WATKINS. In the Management Review?

Mr. CLINGER. Yes.

Mr. WaTKINs, No.

Mr. BLUTE. Thank you, Mr. Chairman.

We also have a situation where the White House staff was not
forthcoming to various investigato agencies, like the GAO. We
have testimony from Nancy Kingsbury who said this about the
White House:

As a practical matter, we depend on and usually receive candor and cooperation
of agency officials and other involved parties and access to appropriate records. In
the case of this review, we experienced adequate or even excellent access and co-
operation in some areas, such as from the Internal Revenue Service. However, if the
constraints and limitations on access and cooperation we experienced with the
White House were commonplace in our work, it would be difficult indeed for us to
provide the Congress in a timely manner with the information it needs to carry out
ita authorization, appropriation and oversight roles under our Constitution.

It seems to me that that is a very serious issue that we are deal-
ing with here, the lack of honesty and candor from the White
House.

I would like to ask Mr. Watkins about Todd Stern’s memo again,
because this really, I think, gets to the heart of the matter. He
said:

The problem is that if we do any kind of report and fail to address these ques-

tions, prose jumps on you wanting to know answers, while if you give answers that
aren’t fully honest, that is, in reference to Hillary Rodham Clinton, you risk hugely
compounding the problem by getting caught in half truths. You run risk of turning
this into a cover-up.

And I would ask Mr. Watkins, what is Mr. Stern referring to?
He obviously had some concern that White House officials were
going to not be forthcoming, were not going to address the right
questions, were not going to be fully honest, and perhaps would
even give half truths and perhaps would even risk a cover-up. That
is serious stuff as far as this Congressman is concerned, and I
would wonder if you would respond to that.

What was Mr. Stern concerned about White House officials fail-
ing to address, what questions?

Mr. WATKINS. Congressman, I have no firsthand knowledge. The
first I had ever seen with that was in a press—excuse me, was in
a press thing this week.

ir, BLUTE. This is consistent with what is in your memo. You
were very strongly indicating the role of the First Lady in the pres-
sure that you felt, that there would be hell to pay if you didn’t act
on her beliefs that the White House Travel Office should be fired.
This is consistent, this is almost a description of what your memo
said I am not going to do. I am going to come clean, I am going
to vent my soul, or whatever reference you said.

You clearly indicate time and time again in your memo that the
pressure you felt emanated from the First Lady’s office, either
through Vinee Foster, through Harry Thomason or even directly to


12

Mr. Davis. But the other media will not, the visual media will
not?

Mr. CLINGER. That is correct. Under the Rule of the House, as
interpreted by the Parliameritarian, the witness may request and
has requested that he not be required to give testimony before live
cameras and live microphones.

Mr. Davis. So that would apply to radio as well?

Mr. CLINGER. But they can stay, it is gust that the lenses must
be covered and the microphones turned off. And we will wait.

Do we have all cameras covered? I see a camera over here. And
I think the—can we cover that lens? Or turn it around? All right.
I think we are ready to proceed, Mr. Watkins.

Again, we will go directly to the questions of you and there will
be probably several rounds of questions from the members of the
committee. But I will start out under the 5-minute rule, and if
somebody will turn that clock on. There we go.

Mr. Watkins, we have just received the most recent document
from you, which is a copy of handwritten notes dated May 31, 1993,
which was shortly after the May 19th firing of the employees. This
was the first time we have seen these notes and therefore I have
some questions about your recollection of what surrounded the
Preparation of those notes.

The White House finally produced a copy of your May 14th notes
last October, and your June 2, 1993 notes in August, and your un-
dated memo just a few weeks ago. Do you recognize all these notes
that have been referred —.

Mr. Warkins. Are these what's in this?

Mr. CLINGER. That is correct. We are talking about the hand-
written notes of May 31——

Mr. WATKINS. Yes, sir, I do recognize that.

Mr. CLINGER [continuing]. And the other notes, June 14, June 2.

Mr. Watkins, And June 2, yes, I do.

Mr. CLINGER. So isn’t it true that you wrote these notes shortly
after the firings and immediately after Mr. McLarty announced
that the White House was going to conduct a management review
of the Travel Office firings?

Mr. WATKINS. Some were before. There’s one, Mr. Chairman, 5/
14, which was prior to the firings. But the rest were after.

Mr. CLINGER. Were after that—

Mr. Warkins. That’s correct.

Mr. CLINGER [continuing]. Notice of the Management Review?

Mr. SHays. Excuse me, Mr. Chairman, could the witness speak
in the mike, please?

Mr. CLINGER. Yes, we need to ask you to get. a little closer to the
microphone.

Mr. SHAYS. It’s the silver one that does it.

Mr. WaTKIns. The silver one, OK.

Mr. KANJORSKI. We didn’t turn those mikes off.

Mr. CLINGER. Mr. Watkins, in those notes you state that on May
12, Harry Thomason met with you in the morning and again in the
afternoon. And in the afternoon Harry Thomason said that he ac-
cording to your note, that he “bumped into Hillary and she’s ready
to fire them all that day.” That is in your handwriting; is that true?

Mr. WATKINS. That is my handwriting.


54

job if you hadn’t made that decision. I mean there was a lot of in-
fluence—a lot of —

Mr. WATKINS. | felt there was a lot of internal pressure on me,
yes, sir,

Mr. CuNcer. All right. That is what I wanted to get at. So the
suggestion in the memo was that there were those above you and
those above you, who would you—who would you—I mean obvi-
ously —

Mr. WaTKINS. Characterize above me? The President, First Lady,
and Mack McLarty:

Mr. CLINcER. OK. You have indicated and, I think the White
House review suggested there was gross mismanagement in the
operation of the Travel Office. That is not what Peat Marwick indi-
cated though, was it? I mean didn’t the Peat Marwick review indi-
cate there were some irregularities, sloppy bookkeeping? But I
don’t believe they characterized that was gross mismanagement.

Mr. WATKINS. I don’t have that document in front of me, Mr.
Chairman. It was lengthy. They found a lot of financial irregular-
ities. I don’t know if that phraseology was precisely as you stated.

Mr. CLINGER. OK. But it is true, is it not, as you have indicated
previously, that—I would only ask you this. Were you involved in
any discussions prior to May about the Travel Office and about the
interest in seeing that the Travel Office be turned over and that
your own eaple, that is the administration, would have an oppor-
tunity to do t] at?

Your memo seems to suggest that there was a process under
way, a routine review of the administration on many parts of the
Government, and that you were—of the White House, and that you
were involved in a sort of orderly review. And your memo does sug-
gest that you had concern about the precipitous nature of the sug-
gestion to be fired.

Mr. WATKINS. There was—as I’ve stated, Mr. Chairman, there
was a planned review for the White House Travel Office as well as
reviews of the operations of other offices within the White House
that was under my purview. A lot of that was to analyze—I had
three or four members of my staff that went into these offices, did
interviews, took notes. That was the process, and a lot of it was in
light of the President’s 25 percent staff reduction, and then a lot
of it was in just what is the best and how can we make these of-
fices more efficient.

Mr. CLINGER. But there was a time that this was undertaken,
and I think there is evidence that there were discussions about the
Travel Office in January and February of the initial thing. At the
time of those discussions, it was just going to be part of an ongoing
review of all the things; there was no suggestion at that point of
mismanagement or irregularities?

Mr. WATKINS. Not that I was aware of, no, sir.

Mr. CLINGER. OK, thank you.

Mr. Waxman.

Mr. WaxMaN. Thank you, Mr. Chairman.

Mr. Watkins, let's just review where things stand. There was no
illegality in firing these people who worked at the Press Office.
There was no wrongdoing in firing these people who worked at the
Press Office. You have testified that you were not ordered by the


96

with my involvement in it, would not have gotten the business. I
don’t think——

Mr. Suays. That is not what I asked.

Mr. WATKINS. Let me finish.

Mr. Suays. But then I want an answer to my question.

Mr. WATKINS. Because of Mr. Thomason’s involvement—I think
he’s made—I think he’s stated this before, did not have a precise
interest in getting the business for his company or for himself.

Mr. Suays. I went a yes or no answer to this question. Do you
have, any knowledge of Mr. Thomason wanting this travel busi-
ness?

Mr. WATKINS. There was a memo that Mr. Martens said that he
had asked—what I am aware of—Billy Dale about the Travel Office
charters and could he, his company, which Mr. Thomason has an
interest in, could they bid on that, those charters. Mr. Dale said
no, not interested, have no interest in—we—we like the way we are
doing business. So yes, there was an inquiry by Darnell Martens,
who has a company that Mr. Thom—that Mr. Thomason has an in-
terest in that—that did inquire about the business.

Mr. SHays. So the answer to the question is—I just want to
know what the —

Mr. WaxMAN. Regular order. Regular order.

Mr. Suays. Answer is, does he have knowledge——

Mr. WAXMAN. Mr. Chairman, regular order.

Mr. CLINGER. The time has expired.

Mr. Suays. But I just want an answer to the question.

Mr. WAXMAN. Regular order, Mr. Chairman.

Mr. SHays. Mr. Waxman, may I have an answer to the question?

Mr. Waxman. I object.

Mr. SHays. Why do you want to hide it? Why don’t you want him
to answer the question?

Mr. CLINGER. The gentleman’s time has expired. The gentleman
from California.

Mr. WAXMAN. Mr. Chairman and Mr. Shays, I am willing to have
an investigation when there is something to investigate. I am will-
ing to be tough when there is something to be tough about. I am
willing to do it no matter what the partisan implications may be.
We have taken one man and subjected him to 5 hours of people try-
ing to get him to say something other than what he has said con-
sistently throughout this whole period of time. He has not said,
even though you would like him to, that the First Lady ordered
him to fire those people who worked at the Travel Office. He has
not said that. You have tried, the Republicans over and over and
over again, to badger him into saying it. He hasn’t said it. We
know of no illegality. We know of no wrongdoing in firing those
people. The suggestion was that perhaps their reputations were

sing sullied.

Mr. Watkins, did you sully their reputations? Let me strike that.
Their reputations were sullied by your investigation and where you
found that there were some mismanagement activities. You fad
that verified by Peat Marwick doing their review, if not an audit.
The IRS did a review as well and they seemed to find—was it the
TRS that did some review and found that there were some prob-

lems?


1%

firings for so-called mismanagement. Would you not agree on the
basis that I read to you?

Mr. WATKINS. I would think I would disagree, Congresswoman.
As I recall, and I can’t give you the precise number, but there was
a GAO report I believe that said out of 20 some odd things they
looked at, and all but 3 or 4 had been performed, and, you know,
it was operating well. I think that—I think that was a 1994—May
or June 1994, GAO report.

Mrs. MORELLA. My understanding is that GAO has stated that
they could not substantiate any information from May 1993 to Jan-
uary 1994,

ir. WATKINS. I’m not aware of what you're referring to.

Mrs. MorELLA, And I think one of the recommendations they
have is this concept of putting aside some money such as what
Billy Dale did, whether you want to call it a slush fund or not. So
all of this gets back to my point that this was not honestly done.
If these people were to be fired to make way for somebody else, so
be it. But to say it was done on the basis of gross abysmal mis-
management, is just not accurate.

Mr. Wise. Mr. Chairman? Mr. Chairman? Parliamentary—I
guess it is a parliamentary inquiry of the Chair.

I don’t want to in any way restrict what the gentlelady is t1 ing
to get out and all facts should be out here. She did refer to a dra’
report by the GAO. It is my understanding if it is a draft report
that it has not been—the final issue, issuance has not been made,
it is not a public report.

However, given the fact that at least part of it has been at least
introduced, brought up, I would just assume at this point, ask
unanimous consent to introduce the whole part, in which as Mr.
Watkins notes, or maybe he was referring to an earlier report, it
notes that the Travel Office had developed policies and imple-
mented procedures during the period of January 1995 through Au-
gust 1995 to address all but three of the criteria. And then goes
on to discuss those three. But I think that if we are going to get
into the GAO report, we ought to get into it in its entirety.

Mr. CLINGER. The GAO that is referred to, has been at the White
House for their comment for now 30 days. And they have yet to re-
spond with their comments. And the reason that it has not been
issued was to await their comments, at which time the final draft—
the final report is issued.

Mr. Wise. As I recall, obviously I am not in the majority any
more, but as I recall what is the normal, I thought it was a 30-
day comment period. Or is it 15 days?

Mr. CLINGER. It is 10 days, would be normal; extraordinary
would be up to 30 days. It has been 30 days.

Mr. WIsE. That is the quickest I could get one out of the Bush
administration.

But at any rate, having noted that, but as long as we put this
thing out here, I would assume and I would ask consent that not
only the report, but ultimately whatever reaction the White House
does be made a part of the record. Otherwise we don’t have the full
text before us and it is hard for the committee to reach decisions.

Mr. CLINGER. Without objection, so ordered.


36

months, again shows an effort to deceive exactly what happened in
this Travel Office affair. And I would disagree with my distin-
guished colleagues on the mindrity side that these aren’t important
issues, that these aren’t serious issues, and I would commend to
them the memo of Mr. Todd Stern, a former Special Assistant to
the President and one of the authors of the White House Manage-
ment Review.

He said:

The problem is that if we do any kind of report and fail to address these ques-
tions, press jumps on you wanting to know answers. While if you give answers that
aren’t fully honest, that is in reference to Hillary Rodham Clinton, risk hugely
compounding the problem by getting caught in half truths. You run the risk of tern.
ing this into a cover-up.

Now, if that isn’t a very accurate description of what has hap-
pened here, I don’t know what is. And I believe that a cover-up

atched by White House officials is very serious indeed, and mis-
leading the Congress, misleading the GAO, misleading the Office of
Professional Responsibility and many other agencies that have
looked into this, I think, is very serious indeed. I'd like to ask Mr.
Watkins about Mr. Thomason because I think he is a somewhat
mysterious figure in all of this affair. And we know his political
connections to the President, his help in the campaign. But I won-
dered how did he become so much a part of the White House inner
circle culture during this period? For example, where was Mr.
Thomason’s office in the White House?

Mr. Warkins. He had an office or occupied an office in the East
Wing of the White House.

Mr. BLuTe. And he was an unpaid advisor?

Mr. Warkins, Yes.

Mr. BuuTE. And did he have staff with him that was paid for by
the taxpayers or did he have volunteer staff?

Mr. WATKINS. No, he had—he brought someone, I believe, from
California with him, that worked for him.

Mr. BLUTE, Was that a woman named Bobbie Ferguson? Are you
aware of her, who worked with Mr. Thomason?

Mr. WarKINs. I do not recall that name.

Mr. BLUTE. Who in the White House organized Mr. Thomason’s
entry in the White House and got him the office and established
his presence there?

Mr. WarkINS. I am sure that it came through my office. I mean
the Office of Management Administration.

Mr. BLUTE. In your GAO interview you said it had been Patsy
Thomasson at the behest of the First Lady's office.

Mr. WATKINS. Well, Patsy Thomasson worked in my office.

Mr. BLUTE. Was it your recollection, as the GAO interview indi-
cated, that the request for an office for him emanated in the First
Lady’s office?

Mr. WaTKINS. To the best of my recollection, yes, that came from
the First Lady’s office.

Mr. BLUTE. And did he have his own line and his own computer
within the White House?

Mr. WaTKINS. Own telephone line and computer? I am not aware
of what kind of computer capacity he had, and I do not recall how
his phone came in, no, sir.


48

Mr. MARTINI. Well, I am going to ask you a question. These are
my opening remarks. But I think it is important, because we could
spend hours on this line-by-line, but the American people probably
want some response as to what is going on here. It doesn’t take
much by anyone reading this as to what really is going on.

You wrote a memo saying you wanted to soul-search and you
wanted to avoid vagueness and protectiveness, and yet you come in
here and you testify moments ago that the First Lady did not di-
rect, order, or command me to fire them. Yet if you read your
memo, the one that you were trying to do the soul-searching in set-
ting the record straight, it is directly opposite from what you have
just testified to, in my opinion.

So I am deeply troubled. I didn’t come here with this attitude
but frankly, having listened to you, having read your notes and
having seen this memorandum and seeing the words you chose to
use in the memorandum, I am troubled, and I hope I will have an-
other opportunity to ask some specific questions, because I don’t
think they are that necessary, but I will ask them.

Mr. CLINGER. The gentleman’s time has expired, but I do want
to give Mr. Watkins a chance to respond to that.

Mr. WATKINS. Yes, Mr. Chairman. My response is that I have
served in the military, and my response would be, it is in the chain
of command. I was—in the chain of command, it is the President
and the First Lady, then Mack McLarty, and then me, and it was
my—I am accountable, I am responsible for the firings of the White
House Travel Office people. That is what I mean, that they did not
direct me to fire them. Was there pressure? Did I feel pressure of
the desires and wishes of others? Yes, I did.

Mr. CLINGER. The gentleman’s time has expired. I would now
recognize the gentleman from New Hampshire, Mr. Bass, for 5
minutes.

Mr. Bass. Thank you very much, Mr. Chairman. I would be re-
miss and perhaps in trouble if I didn’t join all the rest of my col-
leagues in wishing ou well, and making it very brief, tell you a
little bit about a fellow who held the seat I held by the name of
Norris Cotton. After he announced his retirement after many years
in the Senate, everybody congratulated him, and in a later testi-
monial he scratched. his head and he said, “My goodness, if all of
these people had liked me before I announced my retirement, I
would have won unanimously.”

I certainly have appreciated the manner in which you have run
this committee. It has been an honor to work with you, and I look
forward to working with you for the rest of 1996.

Mr. Watkins, I am going to ask one question that some may con-
sider to be—may not be on subject here, but I noticed in your 6-
16-93 memo, I noticed all sorts of references to New Hampshire;
three, to be specific. One: No contribution to campaign, New Hamp-
shire trip on May 22nd. Another reference on 5-22. What was the
context of this memo, the 6-2-93 memo and your comments with
respect to a trip to New Hampshire, political involvement, in a fold-
er? Do you have that memo?

Mr. Watkins. I am looking for it, Congressman. I think they
gave me everything.

Mr. Bass. you want me to give you my copy?


53

Mr. CLINGER. There has been some suggestion here by the First
Lady and others, actually, that the—her comments could have been
misconstrued, her suggestions were really in no way intended to
mean anything other than expressing her concern.

But it would seem to me that, given your long connection with
the First Lady, long association and knowing her as well as you
did, it would have been very hard for you to have misconstrued or
misunderstood her intent. Is that—would that be a fair statement?

Mr. WATKINS. Mr. Chairman, I think a fair statement is that I
have known the First Lady for a long time, and from the comments
to me from others, I obviously believed that she was interested in
what was happening in the Travel Office.

Mr. CLINGER. Do you know her as being a person of a pretty
strong will? I mean she has very strong opinions?

Mr. WATKINS. Yes, sir.

Mr. CLINGER. Really is not hesitant to express these opinions?

Mr. WATKINS. That's correct.

Mr. CLINGER. And so that was—in other words, I can see where
somebody who might not have known the First ‘Lady might have
been in a position to misconstrue or misunderstand or give them
a greater weight than you, but I think given your association, you
could pretty well interpret what was intended here.

I guess the question I would have is, in your memo you indicate
that there would be—hell would have to be paid if these people
weren't fired.

And I think in a further—in the conclusion of your memo, you
indicated—of the undated memo of September 1993, you said:

I think all this makes clear the Travel Office incident was driven by pressures
for action originating outside my office. If I thought I could have resisted those
sures, undertaken more considered action, and remained in the White House, f cer-
tainly would have done so.

I gather, Mr. Watkins, that you were concerned that if this ac-
tion was not taken, that you would not likely be able to retain your
position in the White House. Is that——

Mr. Warkins. I think——

Mr. CLINGER. Is that your view?

Mr. Watkins. I think my: conclusion was, I felt intense pressure
to act very forcefully and directly.

Mr. CLINGER. So that doesn’t really—I mean could you—do you
think ‘vou could have kept your job if the action that was being sug-
gested was not taken? Because you did indicate in that memo that
you really were concerned that you would not be able to remain in
the White House if that action was not taken.

Mr. WaTKINS. I think any time that you're in a position in the
chain of command and you don’t do something that you believe
those above you desire, you have hell to pay.

Mr. CLINGER. So this—what I’m getting at is, it seems to me that
we are getting into a very subtle sort of semantic argument about
the decision, about who made the decision. I mean you did make
the decision; I mean you were the one to do it.

Mr. Watkins. I did make the decision.

Mr. CLINGER. But in fact there was enormous pressure on you,
even to the point of being concerned about being able to retain your


49

Mr. WATKINS. 6-2, did you say?

Mr. Bass. 6-1 and 6-2.

Mr. WATKINS, 6-1. That has—the first word is “Penny Sample”?

Mr. Bass. That is affirmative.

Mr. WATKINS. Yes, I have that.

Mr. Bass. What is the overall context of this memo? Is it a chro-
nology? And the second question is, what is the references here to
this trip that was being taken: Account was frozen, no contribution
to the campaign, so on and so forth?

Mr. WATKINS. My recollection will be vague, but it has to do with
Penny Sample, who was brought in as a volunteer for 2 or 3 weeks
to coordinate charter travel, and it had reference to Air Advantage,
that was the name of her company. Again, I did not recall any of
the details.

There was something about Miss Sample, while she was here as
a volunteer, had placed this charter through her company because
the White House had no contact with them, hadn’t dealt with them
previously, but she did not earn a commission. There was no com-
mission on that, and that is about all I recall on it.

Mr. Bass. Mr. Watkins, when x read or heard that Mrs. Clin-
ton had originally said to the GAO and others that she “had no role
in the firings,” what did you—what was your immediate response
to that? What went through your mind? What would you have said
had we discussed that? I just want to know what you thought.

Mr. WATKINS. I guess my actual thought is I have tried to put
this Travel Office thing behind me and get on with my life for 2
years now, or 18 months. I don’t recall any specific thought about.

at.

Mr. Bass. Returning to the memo of—not returning, but discuss-
ing the memo of May 14, 1993, you actually outlined some rather
interesting points here, and I was wondering if you could address
two of them that you make in the memo. On page 2 you say, “why
the rush?”

I would just like to ask you, why the rush? Well, let’s begin by
just saying this: What is the context of this memo?

Mr. WATKINS. I think that these are notes to myself, probably on
an airplane. This is the day that Peat Marwick is coming in to do
the review, either on an airplane, or when I am in Little Rock.

Mr. Bass. So you were asking yourself, how am I going to re-
spond to questions?

Mr. WATKINS. Well, just overall. This is going on and—yes, just
thoughts that I was thinking. I was putting my thoughts on paper.

Mr. Bass. Well, why was the rush? Why do you think there was
such a rush here?

Mr. WarkKIns. As I have stated, one of the primary objectives was
that we could have a positive press story by finding wrongdoing in
the White House Travel Office, and that we would come in and
point that out and clean it out.

Mr. Bass, I see.

Mr. WATKINS. We had been through a period of several weeks;
Mrs. Clinton’s health care operation had been delayed. We had not
had any positive press for some time, and that was one of the ob-
jectives.


78

OTHER OBSERVATIONS

While performing our work, we identified three areas in which the Travel Office
would benefit from changes in its operations. At the conclusion of our work, we
shared our observations with Travel Office staff who indicated their intention to ad-
dress these areas.

First, the Travel Office’s accounting system does not automatically link its cost
collection and allocation activities to its general ledger. Currently, Travel Office staff
must manually reenter data from a spreadsheet program into the general ledger
a process that takes time, increases the opportunity for errors, and delays billings

customers.

Second, the Travel Office maintains two press funds, one for trips taken before
1994 and one for trips taken in 1994 and later. The Travel Office nerounting system,
however, does not readily segregate the two funds and Travel Office st must
therefore expend significant to prepare financial statements and other reports
that accurately reflect the separate funds.

Third, the vel Office Press Fund financial statements do not provide a detailed
breakout of the types of revenues collected and expenses incu for example, air
transportation, ind transportation, catering, and phone service. Also, the state-
ment notes would be more informative if they included a more detailed discussion
of the Fund-related activities and costs not reported in the financial statements. For
example, Travel Office staff, office space, and utilities directly support the Press
Fund but are not charged to the Fund or discussed in the notes to the financial
statements. Further, the financial statement audit would be more informative if it
as conducted in acoordance with generally accepted government, auditing stand-
ards rather than commercial standards, which were used on the 1994 audit. Govern-
ment standards provide for additional ‘reports on internal controls and compliance
with laws and regulations.

Please contact me at (202) 512-9489 if you or your staff have any questions about
our work.

Sincerely yours,
Davin L. CLARK,
Director, Audit Oversight and Liaison

ENCLOSURE I
Status of Financial Management Criteria Implementation in the White House Travel Office

CategoryCriteria GAO Assessment April 1994 GAO Assessment August 1995
Administrative guidelines:
Written policies and procedures Revised and expanded (May Procedures in place
1994),
‘Segregated duties; lines of authority clearly Revised and expanded (May Procedures in place
‘communicated. 1994).
Periodic audits Procedures in place
Oversight and guidance - Procedures in place

Customers’ needs determined
Goods and services acquired comy
Documented agreements or witen contracts
Accurwiation and allecation of casts:
‘System to identify and record all casts...
‘System to determine costs to be recovered ...

Procedures in place
Procedures in place
Procedures in place

Procedures in place
Procedures in place

‘System to provide accurate data for billing . Procedures in place Procedures in place
‘Wiking practices:
Billings prepared timely .. Backlog eliminated (May 1994)... Do not always comply with proce-

dures

Poyment due date identitied Procedures in place Procedures in place

‘system to maintain history Procedures in place Procedures in place
receipts.

System to epply receipts to appropriate out- Procedures in place Procedures in place
standing bil.

System to track money owed and produce Procedures in place
collection letters for overdue accounts.

Procedures in place


88

as an answer to a reprimand you and three other employees had
received, and I understand that.

Do you believe—well, the First Lady said in her GAO responses
that she did not know the origin of the decision to remove the
White House Travel Office employees. Is this credible to you?

Mr. WaTKINs. Her—

Mr. Davis. She did not know the origin of the decision to remove
the White House Travel Office employees. She had been talking to
Mr. Thomason, there had been numerous discussions with many of
your superiors and with you directly?

Mr. Watkins. I don’t—I don’t know what she meant by that.

Mr. Davis. I don't, either. The—you had noted a minute ago in
your conversation with Mr. Martini that there was pressure to get
rid of slots because there was a pressure to downsize. But you also
note in here we need these people out, we need the slots, that she
quoted or your recollection is that we need our people in. That

loesn’t square with the kind of the slots. Could you explain how
that goes? It goes we need these people out, we need our people in
and then we need the slots. Can you——

Mr. WATKINS. I think it does.

Mr. Davis. OK.

Mr. WATKINS. If you have seven people in the office, you reduce
it to three or four more efficient and you could pet people that you
wanted to put in in those slots. But there would be a reduction of
slots.

‘ Mr. Davis. How many people do they have there today? Do you
now?

Mr. WaTkins. I’m not sure what it is today.

Mr. Davis. I think it is five plus three?

Mr. WaTKINS. When I left—I do not know what it is today.

Mr. Davis. I understand it is nine, five slots and four detailees,
where you had seven before. That is today and that was then and
I understand. Why—now, were Harry Thomason’s rumors also a
part of the origin of your decision to remove the employees?

Mr. WATKINS. No, sir.

Mr. Davis. You don’t think so?

Mr. WarKins. I don’t think so.

Mr. Davis. All right.

Mr. WaTKINS. No. I mean Harry—Harry made a telephone call
to me in April, talked about this. I—I told him at that time that
Catherine Cornelius was in the Travel Office, that I would call her
and make her aware of the telephone call from him and for her to
keep her eyes and ears open.

Mr. Davis. OK. Why did you remove all seven employees?
Weren't only two of the employees handling the money?

Mr. WATKINS. We had been—I had been told by others that most
of the assignments in the Travel Office were interchangeable, the:
all did, sort of covered for each other, excuse me. And some too!
trips, some stayed in, some did this, some did that, but pretty
much the roles within the Travel Office were interchangeable.

Mr. Davis. So kind of guilt by association.

Mr. WATKINS. No, sir. That the whole operation was a pretty
sloppy operation, and I told them that when I fired them that I
had—you know, it was not—it was not a thing of pleasure for me,


43

Mr. WaTKINS. As I recall, that was the determined to be—by peo-
le doing an investigation that that was a good place for them to
e, because it was a safe.

Mr. Fox. Did you know what those documents were?

Mr. WATKINS. I don’t recall any knowledge of that, no.

Mr. Fox. In light of the unaccounted-for cash, didn’t you think

the petty cash logs were important?

Should I repeat that?

Mr. WATKINS. Please.

Mr. Fox. In light of the unaccounted-for cash, didn’t you think
that the petty cash logs were important?

Mr. WarKINS. Yes.

Mr. Fox. Were you aware that Lee Johnson of the White House
Records Management Office was concerned with how the Travel Of-
fice records were cleared out after the firings?

Mr. WarTKINS, I don’t recall any comments from Mr. Johnson, no.

Mr. Fox. What securing measures did you put in place?

Mr. WaTKINS. We had the security officer for the White House,
Mr. Livingstone, and Mr. Foucart would work out an arrangement
of how to secure the office.

Mr. Fox. What role did Craig Livingstone play during the firing?

Mr. Watkins. He played no role during the firings. I think he se-
cured the office afterwards.

Mr. Fox. Were you familiar with his previous job, his previous
employment?

Mr. Watkins. I am not, no, not to my recollection.

Mr. Fox. Were you familiar that he was a bouncer at a George-
town bar?

Mr. WATKINS. No, I was not aware of that.

Mr. Fox. Did you know he was meeting with Harry Thomason
and Susan Thomases?

Mr. WaTKINS. Pardon me?

Mr. Fox. Did you know Craig Livingstone was meeting with
Harry Thomason and Susan Thomases?

Mr. Watkins. I did not know that.

Mr. Fox. In your GAO interview, you said that you didn’t know
what happened to the documents that Ms. Cornelius took with her
from the Travel Office. Weren’t you at all concerned with the integ-
rity of the records, or didn’t you know about record requirements
at the White House, talking about Ms. Cornelius?

Mr. WATKINS. I am not sure I understand the question.

Mr. Fox. It is on page 8 in your White House statement.

Mr. Watkins. GAO?

Mr. Fox. It is on page 8 of the December—the GAO statement,

page 8.

fa our interview with them, you said you didn’t know what hap-
ened to the documents that Ms. Cornelius took home with her
rom the Travel Office. Weren’t you at all concerned with the integ-
rity of the records, or didn’t you know about the records require-
ments?

Mr. WATKINS. Ms. Cornelius brought back the records that she
took home and gave them to the Counsel's office.

Mr. Fox. Were you concerned with them being taken at all; I
mean, the fact that they should not have been taken?


113

Mr. Davis. What day was that? Do you have any knowledge of
Susan Thomases’ knowledge of this?

Mr. WATKINS. No, not at all.

Mr. Davis. Finally—I just have a minute—I gave you a copy of
the talking points on changes in the White House Travel ice, I
think we just gave that to your counsel. I wanted to ask, have you
ever seen these talking joints before?

Mr. WaTKins. I don’t believe I have ever seen this before.

Mr. Davis. So you don’t know who prepared them?

Mr. Watkins. I do not.

Mr. Davis. Looking at them, it looks to me like there was prepa-
ration to fire these employees before any investigation or anything
else was done, is my reading of it, but since you haven't read that,
I don’t think it would be fair to ask you to react and give a reading
at this time.

I just want to thank you for your time; it has been a long time.
I appreciate the position you are in, and I thank you.

Mr. CLINGER. The gentleman’s time has nearly expired, and I
think probably this hearing has nearly expired.

I do want to clarify the record and ask you one question.

Did Mr. Larsen ever hold your Position, which was that you had
jurisdiction over the Travel Office?

Mr. WATKINS. Not to my knowledge, but I don’t know. I remem-
ber he was in the Office of Administration when I asked him to
stay, to continue to stay. He stayed about a month or 6 weeks and
then resigned.

Mr. CLINGER. It is my understanding that he was the Director
of Personnel of the Management Division.

Mr. WATKINS. That is what he was when he was—when the Clin-
ton administration took office in January,

Mr. CLINGER. That would not have had jurisdiction over the
Travel Office; is that correct?

Mr. WATKINS. No, it had nothing to do with the Travel Office.

Mr. KaNJorsKI. If I were allowed to put the testimony in, the de-
scription of the White House staff at that time, the Personnel Di-
rector was responsible for all of the records of travel, in fact, for
the White House. I mean, I don’t ask you to take my word for that.
I ask you to refer to the official transcript and a description of the
Bush ‘ite House time; that was the description of Mr. Larsen’s
position.

Mr. CLINGER. Mr. Watkins, we thank you for the long day that
you spent with us.

Mr. WATKINS. May I have one word, sir.

I, too, like your co! leagues, would like to say that I wish you well.
I am sorry that you are leaving. Thank you.

Mr. CLINGER. Thank you. We will adjourn on that.

[Whereupon, at 5:10 p.m., the committee was adjourned.]

ce)


CONTENTS

Hearing held on January 17, 1996 «0
Letters, statements, etc., submitted for the record:
avid L., Director, Audit Oversight and Liason, GAO, letter dated

Janua’ 23, 1996, to Hon. William F. linger, Jr 16
Clinger, Hon: William F., Jr., a Representative in Congresa from the
State of Penney naylvania, , prepared statement of 5
Improving Travel Management in Government—December 1996 33
Kai joreke Hon. Paul E., a Representative in Congress from the State
of Penneylvania, pre prepared statement of oe a
Marti ie Wiliam [, a Representative in Congress from the State
of New Jersey, prepared statement of ... seonsenseratenstinssnneee — 45

am


106

Mr. Suays. I yielded my time the first time. I passed.

Mr. Waxman. I know. So he had 15 minutes to ask questions.
How much more time does he want?

Mr. KaNJorskI. This is on my time. Start that watch going
again.

I didn’t follow everything that Mr. Shays was talking about—
Mr. WaTKINS. If I could have about 2 minutes.

Mr. CLINGER. The witness is excused for necessities. We will re-
cess for 2 minutes.

[Recess.]

Mr. CLINGER. Mr. Kanjorski is recognized for 5 minutes.

Mr. KANJORSKI. Mr. Watkins, I would like to take my 5 minutes.
How much on that side is left?

Mr. CLINGER. We have, I believe, 2 more, 10 minutes.

Mr. KaNsorski. And that is going to be the conclusion? Are we
coming back tomorrow?

Mr. CLINGER. That is the conclusion of this hearing. There may
be questions that we may want to address to Mr. Watkins at some
later time, but that would conclude this hearing.

I am not going to get into quibbling here. We have two more peo-
ple on our side; you have one person on your side. When we com-
plete that round of questioning, this will be the end of the hearing.

Mr. KANJORSKI. Thank you very much, Mr. Chairman. I appre-
ciate that.

Now, Mr. Shays was making some inquiry about float, and 1 am
a little bit of an expert on float, because I handled about 15 months
of the investigation of the Bush White House, and they really had
an ideal float in the Bush White House, except it didn’t inure the
benefit of the Bush White House, it inured the benefit of the Re-
publican National Committee.

What they used to do is put Mr. Bush on the campaign trail and
charge their candidates’ campaigns, sometimes anywhere from
$50,000 to $120,000. It was paid to the Republican National Com-
mittee, and then the expenses to the U.S. Government to cover that
transportation was determined at first class rate for one passenger,
the President of the United States, anywhere in the country, and
they usually amounted to somewhere between $1,000 and $3,000,
thus putting a profit on each one of those occasions into the Repub-
lican National Committee or their campaign committee of well over
$100,000, $200,000, and ran into the millions of dollars.

During my tenure as committee chairman investigating the trav-
el expenses of the White House, we tried to go into that in great
depth. Someone in the White House who later left there and be-
came a superconsultant and expert for this committee, although
now he is not available to us anymore, because he has since re-
tired, Mr. Larsen. Do you recall that individual, Mr. Watkins?

Mr. Warkins. Yes.

Mr. KANJoRSKI. What role did he play at the White House before
he became a consultant to this committee?

Mr. Watkins. He worked in the Office of Administration for a
brief period of about a month and retired.

Mr. CLINGER. Will the gentleman yield on that question?

Mr. KANugorskI. Sure, Mr. Chairman.


66

Dale. Mr. Dale, Ms. Cornelius and I met, and we discussed that
Ms. Cornelius would go to the Travel Office. There had been some
problems with staff travel, and she was assigned to assist in that.

id when she—when I sent her over there, I asked her to—after
I received the call from Mr. Thomason in April, I said, Catherine,
please keep your eyes and ears open; Harry Thomason reported
this, you know, all these things about the Travel Office.

Mr. CLINGER. The gentleman’s time has expired.

Mr. Mica. Thank you, Mr. Chairman.

Mr. CLINGER. The gentleman from West Virginia, Mr. Wise.

Mr. WisE. Thank you, Mr. Chairman.

Mr. Watkins, I'll try to get some questions in very quickly. Mr.
Thomason, I happen to think that it was not a ood idea for him
to have had the access to the White House that he did. Mr. Wax-
man has pointed out that that’s not unique to the White House; in-
deed the Speaker had a fellow volunteer, telecommunications exec-
utive volunteering his time. It would have been better had Mr.
Thomason not had that access.

My question, though, to you, is to your knowledge did Mr.
Thomason benefit from this, from the Travel Office?

Mr. WATKINS. To my knowledge, he did not, no, sir.

Mr. Wise, And did—I believe her name is Ms. Sample?

Mr. WATKINS. Penny Sample.

Mr. WIsE. She actually volunteered some time?

Mr. WarKINs. For about 3 weeks.

Mr. Wise. OK. To your knowledge, did she benefit directly from
the Travel Office?

Mr. WATKINS. No, sir.

Mr. Wise. And in fact did she not decline any commission for
placing, for chartering or whatever it was she did?

Mr. WATKINS. That’s correct, she received no commissions.

Mr. WISE. So she received no benefit. And indeed, later, none of
them, I believe, had a contract with the Travel Office.

Mr. WATKINS. No, it was never the intent, or at least it was
never my intent for Mr. Thomason to receive or Mr. Martens to re-
ceive a contract for the Travel Office.

Mr. WIsE. Mr. Watkins, an earlier statement by one of the mem-
bers of the other side stated something about the Peat Marwick
study being commissioned or directed in order to justify the deci-
sion to fire employees. Had the decision been made to terminate
those employees prior to the —

Mr. WATKINS. No, sir.

Mr. Wise. —Peat Marwick’s statement?

The—I’'m trying to get a sense of the picture of what existed in
that period in May, Let me ask you if this is a fair representation.

We've heard—we've done the Monday morning quarterbacking on
your actions. What would have been the opposite, though? There is
a story brewing that there are problems possibly, or irregularities,
in the Travel Office. Apparently, allegations are beginning to sur-
face, so much so that xen feel compelled to say, don’t bring in the
FBI yet, let’s get Peat Marwick in here. Is that correct?

Mr. WATKINS. I would—I suggested that we bring, and I didn’t
know the name of the accounting firm at the time, I suggested to
Mr. McLarty and Mr. Foster and Patsy Thomasson in a meeting


52

Mr. LaToureTTE. OK. And are they the only two individuals that
exerted or made their feelings known to you?

Mr. WATKINS, I think Mr. McLarty, as I stated in my memo, felt
relieved when I reported to him on Monday, May 17th, that I had
made a decision, as a result of the Peat Marwick findings, to termi-
nate the Travel Office employees.

Mr. LATouRETTE. Let me ask Sie this as directly as I can so that
we can free the First Lady. Did you feel any pressure from First
Lady Hillary Clinton, the First Lady of the United States? Did she
express to you her desire, her pleasure, or did she apply any pres-
sure?

Mr. WATKINS. I feel that in my conversation, my one and only
conversation with the First Lady, it was very cordial, businesslike,
very much a review of what it was after the first day of the Peat
Marwick investigation or review, and I reported to her very—just
findings of Peat Marwick. She understood them, indicated to me
that Harry had said we could save money, we needed our people
in, and those people out, we needed the slots.

Mr. CLINGER. The gentleman’s time has expired.

Mr. LaToureTrTe. Could I beg the committee’s indulgence and
ask unanimous consent to just get an answer to the question that
I asked?

Mr. CLINGER. The question you asked was?

Mr. LaToureTTE. Did he feel any pressure from the First Lady
to reach the conclusion?

Mr. Watkins. I think the answer, on that conversation, Con-
gressman LaTourette, is I did not feel any pressure from the First

ir, LATOURETTE. Thank you.

Mr. WaTKINS. During our conversation, my conversation with the
First Lady.

Mr. LaTourerre, Thank you very much.

Mr. CLINGER. The gentleman’s time has expired, and since we
seem to have run out of people to commend me on my chairman-
ship, we will take a recess for 40 minutes.

{Whereupon, at 1:45 p.m., the committee recessed, to be recon-
vened at 2:25 p.m., this same day.]

Mr. CLINGER. The committee will resume sitting, and we will
commence a second round of questioning, Mr. Watkins.

Just to lead off, you have ma friend of the First Family for
some time, I believe. Is that correct?

Mr. WATKINS. That’s correct. That’s correct, sir.

Mr. CLINGER. You were, I think, born in the same town, Hope,
Arkansas, as the President and known him since childhood?

Mr. WaTKINs. Yes, I knew who he was. He moved from Hope, Ar-
kansas shortly—I mean when he was about 4 or 5 years old.

Mr. CLINGER. And how long have you known the First Lady?

Mr. WATKINS. Met the First Lady sometime in the late seventy—
mid to late 1970's.

Mr. CLINGER. And so you had a friendship——

Mr. WATKINS. Yes, I have.

Mr. CLINGER [continuing]. And associated with the President and
First Lady for a long period of time?

Mr. WATKINS. Yes, sir.


101

Mr. Suays. And you hired World Wide Travel?

Mr. WarKINs. I hired World Wide Travel.

Mr. SHays. Now, World Wide Travel had a very interesting proc-
ess. They, in fact, issued a press release saying how they helped
the Clinton administration. How did they help the Clinton adminis-
tration?

Mr. WaTKINS. When Mr.—when Congressman Mica first asked
that, I said I didn’t recall and then I was thinking about it later.
As I—my best recollection is for the first time ever in a Presi-
dential campaign, what had happened before—and it was a serious
cash-flow drain—the press would travel, they would get a bill for
that travel, and I don’t remember—again, I apologize, but I don’t
remember the particulars. And then it would go through their ac-
counts.

Mr. SHays. They basically would bill them up front. You would
have a float. You would have money before you were actually
billed, correct?

Mr. WATKINS. Well, may I answer?

Mr. Suays, Sure.

Mr. KaNsorskI. Mr. Chairman, regular order. May he answer
the question?

Mr. Suays. I have to ask the question. The question is——

Mr. WATKINS. I heard your first question.

What had always happened before is you would take a trip, they
would be billed, it would go through accounts payable and unfair
to the campaign, to any campaign, it would be 30, 60—60, 90 days
before the press paid for their travel. We got an agreement, or
World Wide did, got an agreement and was negotiated with the
networks primarily and the others fell through that they would bill

any——

Rr. Suays, Is the bottom line though, sir-——

Mr. WaxMaN. Regular order.

Mr. KANJorskI. Regular order.

Mr. Suays, I want an answer to the question.

Mr. CLINGER. Time has expired. The gentleman from Pennsylva-
nia—the gentleman from West Virginia.

Mr. Wise. Mr. Watkins, I am ng to give you a momentary rest.
just because I think that in light of the questions by Mr. Shays,

think, to see whether you disagree with these statements that are
in—lI read first in the memo of May 17, 1993, from David Watkins
to Mack McLarty in which on the second page you're talking about
our interim plan, interim, I presume meaning temporary, and you
note, you talk about how you're going to reorganize the ‘ite
House administrative office to include a travel section. It will be
handled by a to-be-hired, experienced financial manager who would
oversee administrative personnel, and I quote the third paragraph
from the bottom, “Temporarily World Wide Travel will take over
travel services as we examine the permanent outsourcing this func-
tion to a travel agency. We will develop procedures to request bids
for this business.

Mr. WATKINS. Thank you very much, Congressman, for bringing
that to my attention.

Mr. Wise. If I continue to quote from your memo, the undated
memo, the memo that you wrote that’s been the subject of so much


26

fore it was turned over to our committee. Patsy Thomasson of the
White House; Doug Matties of the White House; Nellie Doering of
the White House; Bruce Overton of the White House; Nelson
Cunningham of the White House; Natalie Williams of the White
House, Counsel’s Office; Jonathan Yarowsky of the White House
Counsel’s Office; Jane Sherburne of the White House Counsel's Of-
fice; Harold Ickes of the White House; Kim Holliday of the White
House; Miriam Nemetz of the White House Counsel's Office; Mark
Fabiani of the White House Counsel’s Office; Rochester Johnson of
the White Counsel’s Office; Michael Massey of the White House
Counsel’s Office; Mr. Quinn himself, Kathleen Wallman of the
White House Counsel’s Office.

He then goes on to state, on about the 2nd or 3rd of January,
Ms. Sherburne, who is of the White House Counsel’s Office, also
provided a copy of the memorandum, Mr. Watkins’ memorandum,
to Ty Cobb, then counsel to Mr. David Watkins; David Kendall,
counsel to the President and Mrs. Clinton; David Williams, counsel
to Mrs. Patsy Thomasson; and Amy Sabrin, counsel to Mr. Harry
Thomason.

In addition, Ms. Sherburne showed a copy of the draft memoran-
dum to Mrs. Clinton on January 3, 1996—this is before we were
shown it—in connection with her preparation for an interview with
“Newsweek” scheduled for the following day.

Mr. Quinn then adds after that as follows: After the document
was provided to the committee, it was made available to interested
parties, including members of the press.

It sounds to me, Mr. Chairman, like there were a whole bunch
of interested parties before it ever got to this committee, much less
making it available to interested parties after it got to the commit-
tee. I don’t know who was left, who was an interested party after
they showed it to everyone in the White House, before they would
show it to us, despite our request. So I hope that sets straight not
only who wants all the facts to come out about this situation and
sets straight who is willing to be up front about providing docu-
ments and who isn’t.

Mr. Watkins, thank you for being patient through that.

For the time I have left, I want to go to one specific issue: Mrs.
Clinton, our First Lady, has been quoted recently in the news
media as saying that her interest in the Travel Office might have
been misinterpreted to mean that she intended specifically to see
that the Travel Office employees were fired.

And I’m looking at page 2 of your typewritten memorandum, and
you make several references to Mrs. Clinton. In the second full
paragraph, you refer to Vincent Foster, and say Foster regularly in-
formed me that the First Lady was concerned and desired action.
The action desired was the firing of the Travel Office staff. Is that
your understanding of Mr. Foster’s understanding of the First
Lady’s intent?

Mr. WATKINS. Yes, it is, Congressman.

Mr. ScuiFr. And a little bit further down in the paragraph you
have your own conversation with Mrs. Clinton, and you say, “she,”
referring to our First Lady, mentioned that Thomason had ex-
plained how the Travel Office could be run after removing the cur-


22

there, relating to their questions of me about Mrs. Clinton’s in-
volvement.

Mr. SHays. Were you ever protective and vague when it came to
describing the First Lady’s involvement in the firing of the Travel
Office employees? Isn’t that true that you were protective and
vague about it?

Mr. WATKINS. As I stated, I was protective and vague in answer-
ing the question of the White House Travel Office—I mean the in-
ternal review team when they asked me if there was—when—one
of the concluding questions of their interview: Was there something
more you would like to comment on about the First Lady?

Mr. SHays. Mr. Watkins, you are under oath and I want to take
this very slowly, but I have a specific question and if the answer
is not true, you are more than welcome to say it isn’t. Were you
protective and vague whenever it came to describing the First
Lady’s involvement in the firing of the Travel Office employees?

I have no problem with your attorney sitting up with you if he
would like to.

Mr. WaTkns. I don’t—I don’t—that’s not necessary. I was not—
my reference to protective and vague in this memorandum refers
to the questions of the investigators, Podesta, Stearn, et al, in their
two investigations of me related to the White House Management
Review. My whole memo refers and relates to that White House
Management Review document.

Mr. Suays. Did you ever lie to your own people about any of this
incident?

Mr. Watkins. I did not.

Mr. Says. Do you think that Vince Foster was referring to you
when he said in his notes: Our people lied?

Mr. WATKINS. I do not.

Mr. Suays. Yield back my time.

Mr. CLINGER. I thank the gentleman.

And I now recognize the fellow gentleman from Pennsylvania,
Mr. Kanjorski, for 5 minutes.

Mr. KaNJorskI. Thank you very much, Mr. Chairman.

Mr. Chairman, maybe I could direct this inquiry to the Chair.

I have to say that I received, in fact, notice that we were having
a special hearing on this special witness and had to travel back
through the iced highways of Pennsylvania last night around mid-
night, and witnessed at least 40 collisions, where I realized that I
was putting my life in jeopardy to return here today, and I’m—I’m
curious why we are here.

Mr. CLINGER. I commend you for your perseverance in getting
here, Mr. Kanjorski.

Mr. KANJoRSKI. I wouldn’t miss it for the world.

Mr. CLINGER. That is why we are here.

Mr. KANJorRSKI. Is this the only day that you can testify out of
this entire year?

Mr. Watkins. Pardon me, sir?

Mr. KANJORSKI. Is this the only day you were available to this
committee for the rest of the year?

Mr. WATKINS. No.


105

with on May 13. We are interested to know if you had any—if you
worked on this memo or if you are aware of this missing memo?
Do you have any knowl of that missing memo?

ir, WATKINS. I don’t know—from your description, I have no
knowledge.

Mr. SHays. She states—this is Catherine Cornelius—she states
in her FBI 302 that you called her into your office on May 12 to
ask if it was completed, and she said no. You then told her to get
her work together and work on it with Harry Thomason. Mr. Fos-
ter says in his notes that he received a H: Thomason memo.

Did Mr. Thomason do a memo with Ms. Cornelius or vice versa,
or did you work on this memo?

Mr. Watkins. I didn’t work on a memo.

Mr. SHays. Are you aware of asking Cornelius——

Mr. WarKIns. I have not seen her 302.

Mr. SHays. Are you aware of asking her for a memo?

Mr. Watkins. Yes. I asked Ms. Cornelius for a report when she
went to the Travel Office, and I think I can clarify those dates. I
asked Ms. Cornelius to prepare a report for me due May 15th on
her observations in the Travel Office. I asked her—I asked Harry
when he came, Harry Thomason, when he came in, and suggested
that there had been these wrongdoings, to talk to Ms.
Cornelius——

Mr. SHays, On a—

Mr. WATKINS [continuing]. And said that she was doing a memo
for me which was due—a report for me, which was due on May

Mr. SHays. Did you ever direct members of your staff to call
Catherine Cornelius and suggest that she resign?

Mr. WATKINS. Not characterized that way. I told Patsy
Thomasson of my office that the—sometime, and I don’t remember,
after the firing of the Travel Office, that it would probably be best
for everyone if Catherine resigned from the Travel Office and be
placed in another position.

Mr. SHays. Why would that be best?

Mr. Watkins. Because of all of the publicity that she was get-
ting, and that the press was giving her a very rough time, and that
was the reason for that.

There were—she was getting press every day about being the
President’s cousin, and it was just something that we thought, if
she left the Travel Office, like World Wide had left and Penny
Sample was leaving, that it would be completed.

The Travel Office was then at the time under GSA—I mean
American Express, the contract by GSA. So I thought it would be
best that Ms. Cornelius be reassigned.

Mr. Suays. Mr. Watkins, thank you for answering my questions.

Mr. CLINGER. The gentleman from Pennsylvania.

Mr. KANJoRSKI. Mr. Chairman, do we have any room for negotia-
tion here? If I surrender some of mine, will you surrender some of
yours on your side, and we can let these folks go home?

No, they want to go on. OK. Is that the case? Is that the deter-
mination?

Mr. WAXMAN. The gentleman from Florida has already had 15
minutes, as I understand it.


34

Mrs. MALONEY. So the First Lady did not make the decision to
terminate the employees, correct?

Mr. WaTKINS. The First Lady did not direct me to terminate the
Travel Office employees, that’s correct.

Mrs. MALONEY, And she did not direct you to fire them?

Mr. WATKINS. She did not direct me to fire them.

Mrs. MALONEY. She did not order you to fire them when youo——

Mr. Warkins. She did not order me to fire them.

Mrs. MALONEY. When you spoke with her on May 14?

Now, you told her that—that after Peat Marwick completed its
review you would take appropriate action, correct?

Mr. WATKINS. I did.

Mrs. MALONEY. And she did not direct, order or command you to
do otherwise, did she?

Mr. WATKINS. She did not direct, order, or command me to do
otherwise. That is correct.

Mrs. MALONEY. Could you describe for us in some detail exactly
what you found in the Peat Marwick management report.

Mr. WarKins. I don’t have a copy in front of me, but as Congress-
man Peterson reviewed some, there—there was inadequate record-
keeping, petty cash discrepancies, poor—poor financial controls.
Just really bad financial management, no ledgers, no general ledg-
er, just very poor financial processes.

Mrs. MALONEY. Mr. Chairman, this hearing is an investigation
in search of an issue. The White House admits to mishandling this
affair, and has taken action to improve it. Can it be that we are
really here just to embarrass the First. Lady?

Again, I want to follow up on what Mr. Waxman stated. Why are
we here? I yield back the balance of my time to Mr. Waxman. [ like
your line of questionin , Mr. Waxman.

Mr. WAXMAN. Thank you for yielding to me. And I think Mr.
Wise had a question. But when he is through, I might have some
others.

Mr. Wise. I would like to follow up on Mrs. Maloney’s line of

juestioning about the Peat Marwick study. ’m—Mr. Peterson said
that he was not a lawyer and wondered whether that was a good
thing, it probably is. I’m not a CPA, but let me just read to you
from observations and findings from the Peat Marwick study dated
May 17, 1993.

Lack of accountability, there was a lack of Federal control con-
sciousness, there was no formal financial reporting process, there
is no documented system of checks and balances on transactions
and accounting decisions within the office, lack of accounting con-
trols and systems, there were no systems or procedures documenta-
tion. There was no general ledger or cash receipts disbursements
journal, lack of contractual support. There is no formal contract
with the primary domestic press charter, air carrier, inadequate
billing processes, differences between estimated trip costs, which
are the primary basis for billings, and actual costs incurred are not
documented.

That was just a summary, Mr. Watkins. Based upon your experi-
ence as a business person, did that cause you some concern and
think that action needed to be taken?

Mr. WATKINS. Yes, it did.


58

There is no apparent oversight or higher level review process of financial activi-
ties or transactions of the office.

Lack of Accounting Controls and Systems
Accounting policies and procedures are informal or poorly communicated.
‘There is no systems or procedures documentation.
‘There is no general ledger, or cash receipts/disbursements journals.
‘There appears to be a lack of accounting expertise.

Lack of Documentation

Several disbursements have missing or inadequate documentation.
Documentation for bills submitted to the. press is either inadequate or missing.
No copies of bills to customers/press are on file.

Lack of Contractual Support
There is no formal contract with the primary domestic 88 charter air carrier.

There is no evidence or documentation of competitive bids or purchase orders for
press charter service.

Inadequate Billing Process

Billing practices are informal and inconsistent.

Differences between estimated trip costs, which are the primary basis for billings
and actual costs incurred, are not documented.

This section of our report details the observations and findings of our study. For
each area of our study we identify the study objective, the procedures we performed,
and our findings.

Objective 1: To gain an understanding of the accounting system, specifically the
cash receipts and cash disbursements cycles.

Procedures:

We interviewed the Director of the press travel office to gain an overall under-
standing of the financial management practices and policies of the office.
Finding:

Our inquiries related to the major financial management practices and policies of
the office indicated a number of potential significant internal control weaknesses,
including the following:

General:
Ne general ledger or other form of double entry bookkeeping.

lo

financial statement preparation.
No external review mechanism.

Cash Receipts:
No cash receipts journal.
« Improper segregation of duties with respect to access to accounting function and
access to cash receipts.
‘¢ Incoming checks not restrictively endorsed on a timely basis.
* Incoming checks not deposited on a daily basis.
. Inadequate reconciliation of total cash receipts to deposits in the bank due to
lack of daily cash receipts log.
* Inability to determine if cash received was properly or accurately applied to the
related receivable (customer/press account balance).
Air Charter:
‘+ No overall contract with the primary domestic charter company.
No contracts issued for each individual trip.
¢ No documentation of competitive bids.
* No purchase orders for press charter service.
* No detailed service information provided in charter bil
what is being paid for and if the charges are reasonable.
Trip Billing System:
Billing invoices not prenumbered or multi-part. Access to the stationary not
controlled.
* Trip records can be deleted from the automated billing system when open re-
ceivables still exist.
The system provides no summary of daily cash applied to the receivables.
« Remittances provided by the customers/press discarded after the receipts are re-
corded in the system.

ings to document exactly


112

Mr. Davis. OK. Mr. Kennedy also called Mr. Hubbell that morn-
ing. Do you know if Kennedy and Hubbell discussed the matter at
that time, on May 15th?

Mr. Watkins. I have no knowledge of that.

Mr. Davis. On the afternoon of May 14, Martens faxed a memo
to Harry Thomason saying he was ready to run the Travel Office.
Do you know who gave Harry Thomason the authority to get the
ball rolling at that point? Are you familiar with that fax?

Mr. WaTkins. I am not familiar with that fax.

Mr. Davis. Now, at 3 p.m. on May 13, the First Lady met with
Mack McLarty and then later met with you. This was clearly get-
ting high-level attention on May 13, long before Peat Marwick
came in, wasn’t it?

Mr. WATKINS. We met with Mr. McLarty to brief him on the situ-
ation on May 13th. He informed me that—when we were talking
about it, he said yes, I had heard about it from the First Lady an
hour earlier; we had a conversation an hour earlier.

During that meeting on May the 13th, we discussed how to pro-
ceed. Mr. Foster discussed that Mr, Kennedy had contacted the FBI
and so forth. That is when we made comment and discussion about
bringing in an outside, an independent accounting firm to do some
kind of audit, review, financial investigation. Mr. McLarty agreed
that that was a wise course of action, Mr. Foster agreed that that
was a wise course of action, and Ms. Thomasson agreed with that.

We went back to my office. I called my immediate staff in, some
people that I dealt with. Ms. O’Connor, a staffer for me, suggested
a name, I told them what was going on and she suggested the
name of someone she had met during her liaison with the National
Performance Review, an accounting person from Peat Marwick;
and I called him there in the office, described to him the situation,
and he said, well—I said, the way I see this, it looks like the way
you conduct a bank audit. You go in one morning—unannounced,
you go in and you start looking through records. He said, that is
exactly the way I see it. He said, I will bring four or five people
in; we will be there by 8:30 or 8 o'clock the next morning, and we
will do that. And we asked how long it would take; he thought he
could do an initial review in about 3 days, and that is what hap-
pened.

Mr. Davis. Now, were you aware that Harry Thomason had din-
ner with the First Lady on the evening of May 13th?

Mr. WATKINS. May 13th, no, I am not aware of that.

Mr. Davis. During that time did you know that Mr. Foster called
the First Lady that evening?

Mr, WaTKINS. I am not aware of that.

Mr. Davis. Did you know that Harry Thomason was calling the
First Lady and George Stephanopoulos and others on this day
about this issue?

Mr. Watkins. I am not aware of that.

Mr. Davis. So you don’t have any knowledge that any of these
calls would have had anything to do with the firing?

Mr. WATKINS. One day I had a meeting with Mr. Eller and Mr,
Thomason, and Mr. Eller urged the quick firing—I mean, quick
press announcement of the firings.


76

Mrs. MORELLA. There is also, though, as I mentioned, the black
hole period of time, Congressman, where GAO could not substan-
tiate any information from May 1993 to January 1994.

Mr. Wise. Well, that black hole is fine. I am just dealing with
this black hole, which is not as yet published.

Mrs. MorELLA. I think we could put it in the record.

Mr. Wise. I would also ask at the same time, and I would as-
sume the Chair would do this anyhow, that the White House’s com-
ments ultimately, when coming, ultimately be made a part of the
record.

Mr. CLINGER. Be part of the record, without objection.
(The information referred to follows:]

UNITED STATES GENERAL ACCOUNTING OFFICE,
WasHINcToNn, DC,
January 23, 1996.
The Honorable William F. Clinger, Jr.,
Chairman, Committee on Government Reform and Oversight,
House of Representatives.

Dear MR. CHAIRMAN: In May 1994, we reported to the Congress on issues related
to the White House Travel Office.! We identified and used 29 specific criteria to
evaluate the financial management and procurement operations of the Travel Office
and stated that as of April 1994, the Travel Office had developed policies and imple-
mented procedures consistent with 20 of the criteria and had begun, or agreed to
take, action on the remaining 9.

In September 1995, you requested that we (1) follow up with the Travel Office
on the status of the 29 financial management criteria and (2) review the financial
statement audit of the White House vel Office Press Fund for calendar year
1994, which was performed by an in dent public accounting firm. This letter
summarizes our follow-up work st the Travel Office and our review of the 1994 fi-
nancial statement audit. We earlier briefed you and your staff on our work, and we
also testified on this matter before your committee in October 1996.2

We found that the Travel Office had developed policies and implemented proce-
dures during the period January 1996 through August 1996 to address all but 3 of
the 29 criteria. For those three, we found that the Travel Office had not within its
stated 16-day requirement, (2)'paid vendors within its stated 46-day requirement,
and (3) bank reconciliations regularly. The 29 financial management cri-
teria and the Travel Office’s related compliance status as of Apri] 1994 and August
1996, are listed in enclosure 1. On January 18, 1996, the White House provided a
response to a draft of this letter. The response, which is enclosure 2, refers to an
excerpt from our May 1994 report, which we have included as enclosure 3. Enclo-
sure 3 lists the Travel Office’s compliance with the financial management criteria
in May 1993 as observed by KPMG Peat Marwick, a public accounting firm. KPMG
addressed 26 of the 29 criteria, and concluded that the Travel Office did not have
adequate procedures in place for 19 of the 25.

Tichenor & Associates, the independent accounting firm responsible for the 1994
financial audit of the Travel Office Press Fund, found that the Fund's financial
statements were reliable in all material respects. Our review of that audit disclosed
no instances in which the firm did not comply, in all material respects, with gen-
erally accepted auditing standards.

SCOPE AND METHODOLOGY

In performing our work, we interviewed White House officials, Travel Office staff,
representatives of news organizations, and the public accounting firm officials re~
sponsible for the 1994 audit. We also reviewed written documentation of Travel Of-
ice policies and procedures; observed administrative and recordkeeping activities;

rformed a detailed review of the trip files for 7 of the 33 trips between January

995 and August 1995 (6 of which were selected randomly and 1 of which was cho-
sen because of ite complexity); analyzed receivable and payable aging reports, gen-
eral ledger reporte, and other internal accounting records; reviewed two drafts of a
1996 internal oversight study performed by staff in the White House’s Office of Ad-

3 White House: Travel Office Operations (GAO/GGD94-132, May 2, 1994).
4White House Travel Office Review (GAO/T-GGD-96-33, Gctober 24, 1995).


28

I agree there are a lot of dumb things that were done, a lot of
dumb advice given, and the criticism of the First Lady and the
President is that they followed some of that advice sometimes. But
in this report, it was not an audit as Mr. Watkins asserted, and
what they did is trace through some things, and as near as I can
tell, when they checked things specifically, they basically checked
out.

What they were criticizing was internal controls and the whole
process, and I see we have some of our friends from the national
media here. You know, we have tried to bring something to light
that we cannot ever get anybody to pay attention to, and maybe
this is an opportunity to do that.

It says in here that there are no general ledgers or other form
of double entry bookkeeping, no financial statement presentation
and no external review mechanism. Well, it might surprise people
to find out—and I think I am still right about this, that that exists
in all 13 agencies of the Federal Government. We have no financial
accounting system. We have no financial statements, and we have
no audits of the agencies here in Washington.

And I will bet if you look into how some of these other agencies
operate in these same regards, for example the State Department
when they run CODEL’s, and I might be opening a can of worms
here, but I would guess that you are going to find the same kind
of process that went on in this Travel Office.

Last night by accident I happened to watch Larry King Live and
saw some of the seven people who were on this program, and I
think everybody on this committee ought to get a copy or get that
tape and look at that. But one of the things that surprised me, I
guess maybe should not have surprised me, is here we have Gov-
ernment employees that were basically running this fund of their
own money. And as I understand it, at least with part of these re-
ceipts, this—this Billy Dale is the one that would have been ac-
countable for the loss of money or the—anything that slipped
thro here because this was not Government money. This was
some fund that he controlled. And if the money disappeared, appar-
ently he would be responsible, as it was explained last night.

This is a crazy way to do business. But I will bet you if you
looked into a lot of these agencies, you would find that we have
similar kinds of situations going on all through the Government.
And for my friends in the national media, I really think you folks
ought to start looking into this because we do not have an account-
ing system for most of the Government. We have a budget system
that nobody can understand except the budgeteers, and they frank-
ly want to keep it that way.

We have been pushing tor this Chief Financial Officers Act since
1989, which the agencies have fought. I will give this administra-
tion credit that they have been finally putting CPA’s into these po-
sitions, and they are trying to do something. But they fought this,
you know, the AICPA and other groups in this country have been
trying to get this done. We cannot get anybody to pay attention to
this. So maybe this hearing will give us some impetus—impetus
and give some people who have the clout to look at this so we can
move this up to the top burner.


94

all this makes clear that the Travel Office incident was driven
pressures for action originating outside my office. Now that is di-
Tect pressure and so on. If I thought I could have resisted those
Pressures, undertaken more considered action and remained in the

‘ite House, I certainly would have done so. Now, is that a true
statement?

Mr. WaTKINS. I—I believe that to be true, yes.

Mr. SHays. Now, if you believe that to be true, you are saying
to us that if you didn’t fire the White House staff, you might have
lost your job, correct?

Mr. WATKINS. This was a draft version of —

Mr. Suays. I don’t care about the draft version. I just want to
know if it is correct or not.

Mr. WaTKINS. I think—I would not say that I fully expected to
lose my eb, and let me—let me see what it says because I don’t
have it. There—yes, would I be criticized, yes; did I think there
would be hell to pay, I think that’s——

Mr. SHays. No, no. I just want to know if you want to retract
what is in the memo. I just want to pin you down to the truth,
whatever that is.

Mr. WATKINS. I have answered totally the truth, Congressman,
and I continue.

Mr. Snays. On both sides.

Mr. Watkins. I don’t think so.

Mr. SHays. No, Mr. Watkins, you have.

Mr. WarkINS. { don’t think so.

Mr. SHays. I want to know if this is the truth. You said, “If I
thought I could have resisted those pressures, undertaken more
considered action and remained in the White House, I certainly
would have done so.” Is that a true statement? Do you want to re-
tract it or keep it?

Mr. WATKINS. Congressman, I think that my statement here, ob-
viously with the pressure that I felt from outside my office on the
White House—on the firings of these individuals, that there would
have been a great price to pay and perhaps my removal from the
White House.

Mr. SHays. Thank you. But after the Secret Service incident, it
was made clear that I must forcefully and immediately follow the
direction of the First Family. Is the First Family Mrs. Clinton and
Mr. Clinton?

Mr. WarTKINS. The First Family is Mr. Clinton and Mrs. Clinton.

Mr. SHays. OK. I want to know what that statement means.
After the Secret Service incident, it was made clear that I must
forcefully and immediately follow the direction of the First Family.
What was their direction?

Mr. WATKINS. I think their—their—it was not as much direction
as disappointment that we had not been—that we were too nice
and too naive.

Mr. SHays. I want to know what “follow the direction” means. It
is your statement, it is not mine. Follow the direction of the First
Family. What was the direction of the First Family? And you are
under oath. What was their direction?

Mr. WaTKINS. In what instance, Congressman?

Mr. SHays. In the instance of this memo.


9

Mr. Chairman, I direct this to the press as much as I do to you.
Why do you all care? What does that innuendo have to do with se-
rious public policy questions? What does it have to do with this
committee’s jurisdiction? Absolutely nothing.

Tl tell you what it is. It’s gossip. It’s cheap thrills, Is that what
we've sunk to here? If so, forget Geraldo and Sally Jessy Raphael.
We can eliminate the talk shows and let this committee have juris-
diction over salacious, intellectually empty issues that have noth-
ing do with the real problems facing our Nation.

t me remind everybody again, we passed important, radical
changes in Medicare and Medicaid, and our committee, which has
jurisdiction, did not hold a single day’s hearing. This week alone
we have seen every day with a hearing on the Whitewater issue
and now on the travel issue, and they conveniently didn’t hold a
hearing on Whitewater so we could be the main issue on tonight’s
news. And we've held exhaustive hearings on Ruby Ri and
Waco, but not a single day’s hearing on Medicare or Medicaid.

The entire hearing can be summarized in few words: So what?
If the worst that this committee charges were somehow true, so
what? My view would be dramatically different if the committee
could show any wrongdoing. But it can’t, just as the seven previous
inguiries produced nothing because there were no illegal actions.

it seems that this committee is lighting a match and lighting an-
other match, hoping a fire will start. But there is no fire, and
there’s no issue of Public importance here.

Mr. Chairman, I’m truly sorry that you've decided to retire.
We're going to miss you. The Congress needs more Bill Clingers.
But this hearing, this assault on Mrs. Clinton’s character, is not
worthy of you, and it’s not worthy of this committee. And it’s not
worth the time that all of us are taking in today’s hearing to pur-
sue it as we did in previous hearings and as we've done in previous
investigations.

Thank you for this opportunity.

Mr. CLINGER. I thank the gentleman from California for his
opening statement.

As I indicated, others that may have opening statements they
wish to submit can submit them for the record, or can use their ini-
tial 5 minutes on the first round to make their opening statement.

[The prepared statement of Hon. Paul E. Kanjorski follows:]

PREPARED STATEMENT OF Hon. PauL E. KANJORSKI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA

We are here today because a draft memorandum was discovered by the White
House and ly turned over to this Committee. This memo suggests that Hillary
Clinton had a greater role in the firing of the Travel Office employees than pre-
viously belie So what?

If Committee is exercising its oversight function to call this he: when
most members are out of town to discover that the First Lady has some influence
in the White House, then they do not remember events in recent American history
such as Nancy Reagan’s role in the firing of the President’s Chief of Staff, Donald

Regan.

Phere is nothing wrong with the First Lady getting involved in this matter or any
matter which suggests re has been mismanagement or wrongdoing in the White
House, She would not be serving her husband's beat interests, or the public's, if she
id not, From any objective permpacive there were troubling allegations of wrong.
doing at the Travel fice. Mr. Watkins called in Peat Marwick, an independent
auditor, to determine whether, in fact, wrongdoing, was occurring.


77

ministration, Office of Management and Administration, and Office of the Chief of
Staff; reviewed the financial statement auditors’ working papers, including plan-
ning, testing, and reporting documents; and reviewed the 1994 financial statements,
related notes, and management letter. The Travel Office had not prepared auditable
financial statements covering the period May through December 1993, and we did
not review any transactions from that period. As we stated in our May 1994 report,
the Travel Office had made improvements in its day-to-day operations between June
and October 1993, but stringent internal control procedures to assure sound finan-
Gial. management had not been fully implemented when we finished our work in
A .

re conducted our review from September 26 through October 17, 1996, in accord-
ance with generally accepted government auditing standards.

TRAVEL OFFICE PROCEDURES COMPLY WITH 26 CRITERIA

We found that the Travel Office had developed policies to address all 29 financial
management criteria and, during the period January through August 1995, it had
implemented procedures addressing 26 of them. For example, we found that the
Travel Office continued to identify and record all trip related costs, correctly allocate
those costs to its customers, maintain a system of billings and receipts, and apply
receipts to the appropriate outstanding bills. In addition, the Travel Office had com-
pleted actions that had been planned or were underway at the time of our orginal
review. For example, the Travel Office’s financial statements for calendar year 1994
were audited and future annual audits are planned. The Travel Office also ex-
panded ita written policies, procedures and manuals; developed written position de-
scriptions that establish clear lines of authority and provide for a segregation of du-
ties; and began production of required financial reports, including reports on the
Travel Office's financial position, operations, and cash flows.

TRAVEL OFFICE PROCEDURES DO NOT COMPLY WITH 3 CRITERIA

The Travel Office had not implemented its procedures related to three criteria
First, although customers were to be billed within 16 days of trip completion, both
our original and recent reviews indicated that the Travel Office generally fell’ short
of that goal. Of the seven trips we reviewed, only one was billed within 15 days.
The remaining trips were billed within 18 to 90 days, with the average being billed
within 38 days. Timely billings are particularly critical for the Travel Office because
it does not have working capital with which to cover travel related costs—the Travel
Office must bill its customers and collect amounts due before it can pay its vendors.
The Travel Office has stated ite commitment to improving its billing practices; how-
ever, if faces several obstacles, including w lengthy process for accumulating rel-
evant costs and manually allocating those costs to all customers.

Second, while the Travel Office's stated policy is to pay its vendors within 45 da
of the invoice date, both our original and recent reviews showed that the Travel Of-
fice rarely followed its policy, particularly for large bills such a8 airline charter and

shone service costs, We selected 14 vendors from the trip files we reviewed and
found that only 2 had been paid within the requisite period—7 had been paid be-
tween 67 and 106 days after the invoice date, and 6 bills were still outstanding from
trips made in April, May, June, or July of 1995, Because the Travel Office lacks
working capital, late billings to customers or late remittances from customers result
in late payments to vendors. White House officials recognize that the Travel Office
needs to have working capital so that it can pay its vendors promptly. Officials are
currently considering several options for obtaining working capital, including seek-
ing an appropriation, adding a surcharge to customer bills, or requiring customers
to prepay certain travel costs. We believe that without working capital, the Travel
Office will continue to pay some of it bills Inte

Third, the Travel Office had a policy requiring monthly reconciliations of its
checkbook balance with the cash balance reported by its bank. As of April 1994, we
found that staff were performing the reconciliations as required. However, from Jan-
uary 1995 through August 1996, Travel Office staff performed no bank reconcili-
ations because other tasks were given a higher priority. Immediately prior to our
review, the Travel Office reconciled all outstanding bank statements and found de-
posits totaling $200,000 that had not been entered into its checkbook. These funds
were all owed to vendors who had previously furnished goods and services for press
trips. White House officials informed us that future monthly reconciliations will be
performed as required.


83

as the gentleman recognized, and once it went to a jury it took less
than 2 hours to acquit. This——

Mr. WAXMAN. I ask unanimous consent the gentleman be given
one additional minute.

Mr. SHAys. I object.

Mr. CLINGER. The objection is heard.

I now recognize the gentleman from Massachusetts, Mr. Blute.

Mr. WAXMAN. Will the gentleman from Massachusetts yield to
me for 30 seconds?

Mr. BLUTE. For one comment.

Mr. WAXMAN. My question is where does all this lead?

If all this were true, and I don’t agree it was true, what do the
Republicans want to do?

Do you want to indict these people for crimes? There are no
crimes committed. You want to scold them? Scold them. But why
do you have to have hearing after hearing and make them have to
pay money for lawyers’ fees?

Mr. BLUTE. Reclaiming my time, and I'll touch on that.

The fact is that the Congress has an independent responsibility
to provide oversight over the executive branch in its activities and
that is what this Congress is doing. And as we look at these docu-
ments, you know, I think you come to the conclusion, who is kid-
ding who?

Mr. Watkins, any reading of your memo, or memos, clearly leads
one who is honest and straightforward to say, well, it looks like Mr.
Watkins was pressured from above up to and including the First
Lady to fire the White House Travel Office employees. There is no
other indication there.

And I think—I am somewhat surprised that my colleagues in the
Minority are seeming to indicate there aren’t serious questions
here. There are serious questions, with the inappropriate use of the
FBI, for example, by White House officials to try to frame up a
Travel Office.

Mr. CLINGER. Will the gentleman yield?

Mr. BLUTE. I yield to the Chairman.

Mr. CLINGER. I just want to make a point here.

Mr. Watkins, were you reprimanded as a result of this activity?

Mr. Watkins. Yes, I was.

Mr. CLINGER. Were there other members of the White House
staff that were?

Mr. WarKINS. Yes, there were.

Mr. CLINGER. That were reprimanded?

Mr. WaTkins. Yes, sir.

Mr. CLINGER. How many others?

Mr. Warkins. Four in total, I believe.

Mr. CLINGER. Did you feel that reprimand was justified?

Mr. WATKINS. No, sir.

Mr. CLINGER. And why didn’t you feel it was justified? Because
you were acting—were really acting as a result of strong sugges-
tions that you take the action that you did.

Mr. WaTKINS. I would say that I felt that my actions in the
White House Travel Office, as I report in this memo, to the criti-
cism of the travel—of the office—I mean, of the White House inter-


5

Travel Office. When those who alr were in charge of the Travel
Office rebuffed the interests of the President’s friends, allegations
and accusations of wrongdoing began to fly, and a scenario was de-
velo] to justify the wholesale replacement of the Travel Office
staff by victimizing—victimizing—Billy Dale and the other Travel
Office employees,

I have pursued this matter for over 2 years because I was con-
cerned with the outrageous conduct, in my view, conduct by the
White House in sacking the career Travel Office staff to make room
for Hollywood cronies while siccing the FBI on these people in
order to divert attention from this sloppy patronage grab. Seven
people had their lives turned upside down and are still being as-
sailed by the White House attack machine.

Given that upon Billy Dale’s acquittal the President wished Mr.
Dale well and said he was sorry for everything he had been
through, I have written a letter to the President calling upon him
to direct the cessation of White House attacks on Mr. Dale and his
associates. Billy Dale’s time as the White House’s designated scape-
goat should now cease.

Today, we will hear from the former Director of Management and
Administration at the White House, Mr. David Watkins, the person
who did fire the Travel Office employees. It is Mr. Watkins whose
memo just surfaced several weeks . We still frankly do not
know how this memo was found, and the White House has told us
it will take another week or so before it can provide any expla-
nation—all in all, another chapter in this very strange saga.

At every step along the way, this committee, frankly, has been
thwarted in its investigation a White House that denied the
facts, denied that now-revealed documents even existed, and denied
there were serious questions of misconduct involving numerous
high-ranking White House officials. The Clinton White House in
my view has really brought this debacle on itself. Enough is
enough.

[The prepared statement of Hon. William F. Clinger, Jr. follows:]

PREPARED STATEMENT OF HON. WILLIAM F. CLINGER, JR., A REPRESENTATIVE IN
CoNGRESS FROM THE STATE OF PENNSYLVANIA

A “VAGUE AND PROTECTIVE” WHITE HOUSE

In July 1993, Vince Foster said to his brother-in-law, “You would be shocked our
own people would lie to us.” Mr. Foster was talking about the Travel Office matter
and this conversation occurred within weeks of his death. Perhaps Mr. Foster knew
the truth was not being told in this matter. Now we have learned that others felt
the same way. What we have learned thus far substantiates the belief of many that
the circumstances surrounding the firing of the Travel Office employees was a prin-
cipal cause ofthe deep depression Mr. Foster was auffering at that ‘ume.

White House long hes claimed and still claims that the firings of the Travel
Office employees were due to mismanagement. But the firings were discussed in De-
cember 1992 a full month before the new Administration took office. The firings
were decided upon long before any wrongdoing or mismanagement was alleged. And
it now appears—from review of never before released documenta and documents
only recently provided to the investigators—that even those asked to execute the
firings had misgivings.

before Harry Thomason peddled baseless rumors of wrongdoing in the Trav-
¢] Office, he, was seeking government business, including Travel Office business,
along with his partner in TRM. In January 1993, Mr. Thomason received a memo
from his partner Darnell Martens outlining how they would take advantage of
“Washington opportunities.” This is a new document only recently provided by Mr.


111

Mr. Watkins, I did not.

Mr. Davis. Did Mr. Thomason ever mention his conversations
with the President about the Travel Office to you?

Mr. WATKINS. I do not recall any conversations——

Mr. Davis. Any mention of —

Mr. WATKINS [continuing]. Any mention by Mr. Thomason of any
conversation.

Mr. Davis. So you don’t have any knowl , general or specific,
about Henry Thomason talking to the President about ousting the
Travel Office; is that correct?

Mr. WATKINS, That is correct.

Mr. Davis. I note that on May 12th at 8:30 am., Harry
Thomason meets with the President. Shortly after this, Mr. Wat-
kins, you and Mr. Foster were meeting, and Mr. Foster told you the
First, Lady had interest in this matter, and you just, I think, noted
that for the record, is that correct, on May 12th?

Mr. WATKINS. No. We met in the afternoon of May 12th.

Mr. Davis. Following this conversation with you, I would note
that the record shows that Foster called Webb Hubbell. Next, on
May 12, Foster was meeting with Harry Thomason and Catherine
Cornelius on the plan for the new operations of the Travel Office.

Mr. Warkins. On what day, sir?

Mr. Davis. May 12.

Mr. Warkins. Yes.

Mr. Davis. Mr. Watkins, this is the same day that the First Lady
told you that she wanted the Travel Office fired that same day, cor-
rect?

Mr. WATKINS. That was on May 12.

Mr. Davis. Then on May 13 Harry Thomason began the morning
with the President. Were you aware of that?

Mr. WATKINS. I was not.

4 Mr. Davis. You had no knowledge of him meeting with the Presi-
lent?

Mr. WarKINS. No knowledge, correct.

Mr. Davis. Right after this meeting is when, I understand, Mr.
Kennedy calls the FBI and says that he needs a quick response be-
cause the matter is being directed at the highest level.

Have you ever discussed this matter with Bill Kennedy? Did you
ever discuss this matter with Bill Kennedy?

Mr. WATKINS. What is the question, please?

Mr. Davis. Bringing the FBI into this at the highest level.

Mr. WarTKINS. As I have stated many times, the matter of discus-
sion with Bill Kennedy was in Mr. Foster’s office on the afternoon
of May 12 about how—if there is wrongdoing, how do you go about
having an investigation or a review of this. That is my conversa-
tion.

Mr. Davis. Did Mr. Kennedy talk to you about any pressure he
was under about how to get the FBI

Mr. WarKINs. I don’t recall talking with Mr. Kennedy after that
May 12th meeting, the rest of that week.

Mr. Davis. When is the last time you talked to Bill Kennedy; do
you remember?

Mr. WATKINS. Not recently.


81

which has certain writings in these memos, which I certainly be-
lieve are truthful on the part of Mr. Watkins, which appear to con-
tradict current statements made by people in the administration.

We simply aren’t inventing this. It 1s here and it is before us and
it is before the American people, and they will read about it, even
if they can’t necessarily see and hear it contemporaneously, and I
think that point had to be made.

Mr. WAXMAN. Will the gentleman yield to me?

Mr. Scuirr. I yield to the gentleman from California.

Mr. WAXMAN. Even if we concede that point, which I don’t, but
let’s say they didn’t tell the truth, they wanted to fire people in the
Travel Office for a different purpose, what’s wrong with that? What
is the wrongdoin ?

What is the illegality? What is the reason we are all here that
would cause him to spend $100,000 on attorneys! fees, this commit-
tee /° spend untold thousands of dollars? at is—where is the

Mr. Scuirr. If I can reclaim my time?
It is in a couple of places. The first is the administration has no
right to sully. the reputation of people in order to accomplish a po-

litical goal. If they want to change the political complexion of their
own office, they have a right to do so and they should just say that
is what——

Mr. KANJorsKI. Will the gentleman yield?

Mr. Scutrr. I would like to finish my statement, if I could.

Second of all, they have no right to, in my judgment, misuse the
role of law enforcement, in a number of instances, in order to fur-
ther accomplish that goal. Further and finally, then I will be glad
to yield, I feel that when the media and the Congress start looking
into this, we get statements that contradict each other. It is my un-
derstanding that our First Lady—and politics aside, all Americans
want to have a great deal of personal respect and pride in our First
Family, I share that, whether the First Families are Democrats or
Republicans or Independents.

jut unfortunately, the First Lady’s current statement that she
may have been misinterpreted as wanting to see the Travel Office
employees fired, is contradicted in about half a dozen different
places in these different memoranda that we now have from Mr.
atkins.

Mr. KANJORSKI. Will the gentleman yield?

Mr. ScuiFr. And I want to say that is what is keeping this going
and that is what is wrong here.

To the gentleman from Pennsylvania, I yield.

Mr. KANJORSKI. I thank you.

For the record, if I may, I think Mr. Watkins, if I may ask a
question of Mr. Watkins; didn't you testify that you did not receive
any instructions to fire from the First Lady?

ir. WATKINS. The First Lady did not instruct me, did not direct
me to fire the Travel Office pec le.

Mr. KANJORSKI. He said she didn’t instruct.

1s there another witness that I missed over lunch that was here?

Mr. SHays. You should read his own memos.

Mr. WAXMAN. Will the gentleman yield?

Mr. KaNngorski. If I may now——


107

Mr. CLINGER. Is it correct to say, Mr. Watkins, that you re-
quested that Mr. Larsen stay on?

Mr. WATKINS. I did request him to stay on, yes, sir.

Mr. KANJORSKI. That he stay on at the White House during the
Clinton tenure.

Prior to that, what did he do at the White House? And what role
did he play?

Mr. WATKINS. You mean what did he do—

Mr. KaNJorsKI. He was in charge of administration, wasn’t he?

Mr. WATKINS. Yes.

Mr. KANJoRSKI. During the Bush administration, from the period
of 1987 or 1988 on.

Mr. WarKINS. As I recall, yes, sir.

Mr. KANJORSKI. And he was the one individual that was respon-
sible for knowing all of the records and providing all of the records
and the information for the travel of the White House.

Not to belabor the point, I would actually like to make a request
by unanimous consent that the full transcript of the full hearings
of the Post Office and Civil Service Subcommittee on travel of the
Executive Office of the President held under my chairmanship for
a Reriod of 2 years be incorporated into this record——

ir. SHAYS. I object.

Mr. KaNJorskI [continuing]. So that we may have——

Mr. Suays. I object.

Mr. KANJORSKI. I thought, Mr. Shays, you wanted to get to the
truth.

Mr. Suays. The reason I object, if the gentleman would like to
know, is this is just simply your continued cover-up of this issue,
and I object.

Mr. CLINGER. The objection is heard.

Mr. KANJorsKI. Mr. Shays, the evidence that I am asking be put
in the record is testimony by the Republican Bush administration
people. That certainly would not be my cover-up.

Mr. CLInceER. If the gentleman would yield, I would indicate to
the gentleman that Mr. Larsen had nothing to do, had no respon-
sibility, as I understand it, for the White House Travel Office. This
hearing is——

Mr. KaANJorsKI. Well, I can tell you that the—reclaiming my
time, you are incorrect, Mr. Chairman. He was in charge of the
records and refused to produce those records and spent 18 months
stonewalling that investigation.

Now, I guess I am going to leave—we don’t have a lot of time
here, but I am going to say, let us move back 4 years prior to this
occasion, and we would have been in a White House but didn’t
have Socks, but had a dog, and I forget the name of the dog, but
it doesn’t matter; everybody had these little things around.

We had a very popular First Lady whom I have a great deal of
respect for, and her husband, whom I have a great deal of respect.
for.

If she had wandered down and met somebody at a party or a

‘ood friend of hers called her on the telephone and said, “Mrs.
jush, I think you have some serious problems in some area of the
White House where a great deal of money may be missing, mis-
used, or improper activity occurring,” I would have been very dis-


92

Mr. LaToureTTE. Right. That goes—again that goes back to Mr.
Mica’s observations. You in your memo indicated that I put no
stock in most of what Cornelius told me except to the degree it was
factual. And you also made an observation that in light of her self-
interest and her tendency to exaggerate—did you have that opinion
of Miss Cornelius back in 1993?

Mr. WATKINS. Well, there were comments by Miss Cornelius
about lake homes and race horses and lavish living and I didn’t
take great stock in that. I didn’t know. Those were just observa-
tions and I didn’t consider them founded.

Mr. LATOURETTE. OK.

Going to the Management Review, you said in response to the
last question by the last member that they didn’t—they being Mr.
Podesta and I believe the other gentleman who was involved in
that, Todd—

Mr. WATKINS. Stern.

Mr. LATOURETTE. —Stern. That they didn’t follow up with you
about the First Lady’s involvement; is that correct?

Mr. WaTKINS. That is correct.

Mr. LaTourETTE. OK. I would like to ask you a couple other
questions on that. Did they talk to you at all and did they mention
to you whether or not you had contact with Mr. Thomason on this
issue, the Management Review team?

Mr. WarkIns. What issue?

Mr. LaTourerTE. On the issue of the dismissal of the Travel Of-
fice staff.

Mr. WarTKINS. I don’t recall specifically those specific questions
on that, Mr.—Congressman LaTourette.

Mr. LATourETTE. Did they ask you about Patsy Thomasson?

Mr. WATKINS. I’m sure Patsy had a role in lieu of my—in lieu
of me and my being absent on that Friday, Patsy coordinated the
review by Peat Marwick.

Mr. LATourETTE. And how about Vince Foster, did they ask you
about conversations you might have had with Vince Foster relative
to this issue?

Mr. WarKINS. I don’t recall specifically the people they ques-
tioned me about, no, sir, at this time.

Mr. LaToureTTE. Did you feel any compulsion to volunteer any
of the information that is now contained in this memo that has
brought you here today?

Mr. WATKINS. I felt no compulsion to comment more than I did
in the Management Review.

Mr. LaTouretTe. And would that be sort of the civilian version
of don’t ask, don’t tell? Is that where we were with this investiga-
tion?

Mr. WATKINS. It could be if you don’t ask the question, I’m not
going to help you with the answers.

Mr. LaToureTTe. And is that what you defined in your memo as
being vague and protective?

Mr. WATKINS. That's correct.

Mr. LaToureTreE. Thank you very much. I yield back the balance
of my time.

Mr. CLINGER. Thank you for yielding back.


60

Procedures:

(a) Selected a non-statistical sample of 25 items from the “Checks Received Log”
for the time period January 1, 1992 to May 14, 1993.
‘Traced each sample item to the respective time period’s deposit slip.
‘Traced the deposit slip noted above to the bank statement.
Traced each sample item to the automated billing system.
Findings:
(a) Au items selected agreed to the deposit slip amounts and to the bank state-
ments,
(b) All checks in our non-statistical sample were deposited into the bank within
one week's time period.
(c) Due to limitations in the press travel office documentation, we were unable to
determine whether 23 of the cash receipts were properly posted to their respective
account balances.
jective 4: To determine that written checks are the only disbursements from
the Riggs National Bank account.
Procedures:
(a) Reviewed bank statements for the period January 1, 1992 to April 30, 1993
looking for non-check disbursements.
(b) Counted the number of canceled checks returned with each bank statement
and compared them to the number of checks clearing the bank that month.

Findings:
(a) We found no non-check type (e.g., no wire transfers, etc.) disbursements from
the Riggs National Bank account.

(b) In all cases, the number of canceled checks returned with the bank statement
was the same as the number of checks disbursed that month per the bank state-

ment.

‘Objective 5: To assess the quality of documentation supporting selected cash dis-
bursements.
Procedures:

(a) Chose a non-statistical sample of 76 canceled checks form the period January
1, 1992 to April 30, 1993, noting the date, check number, amount and payee. The
non-statistical sample included 17 checks made out to “cash” which were reviewed
as part of the procedures for Objective 2.

‘) Compared each check to available vendor invoices, with the exception of the
checks written to cash.

(c) Reviewed each canceled check for apparent propriety of endorsement.

Findings:

(a) Of the non-pelty cash check disbursements, 12 disbursements (canceled
checks) appear to have no supporting invoice. Nine of the 12 disbursements were
for baggage handling charges at hotels. The total amount of these nine disburse-
ments was $4,690.07.

(b) Two disbursements represented refunds for overpayment by customers/press.
There is no supporting documentation for these refunds. The two disbursements
amounted to $374.75.

(c) One disbursement to Pan Am Express on December 20, 1991 did not have a
related invoice. The Director of the press travel office informed us that the payment
was based on an oral price quote from the charter company. The dollar amount of
this disbursement was 12,841.56.

(d) We noted differences in the check disbursement amount and the invoice
amount for charges related to press charter service. This difference, in all cases, was
indicated by the press travel office to be Government Travel Requests (GTR's).
GTRs wore forwarded, slong with the check amount, to the charter service: ‘The
total of the two (check and GTR) equaled the invoice ‘amount. Both the check and
GTR are negotiable instruments.

Objective 6: To assess the quality of the documentation supporting a selected
trip’s costs (as indicated on the trip worksheet).

(a) Chose one trip from the total trip files from January 1, 1992 to the present.
(b) Traced each check that was disbursed in payment of the total trip chat il
dicated on the trip worksheet to the related vendor invoices (i.e., original docu-

mentation requesting payment for services).
(c) Reviewed each canceled check for apparent propriety of endorsement.



56

was every legality in favor of firing them, plus there seemed to be
some cause.

Now some people said, oh, but wasn’t the cause of firing these
people brought about as a reason to fire them and wasn’t the White
House looking for a reason to fire them?

You didn’t need a reason to fire them. You maybe were lookin;
for a reason, but then you had Peat Marwick do an evaluation, an
they gave you a reason to fire these people. I don’t see what that’s
all about.

Now, you were just asked about whether anybody said that you
might be fired, or if you felt you might be fired, Mr. Watkins, if
you didn’t fire those people at the Travel Office. Did you feel that
your job was on the line if you didn’t fire them?

Mr. WaTKINS. Congressman Waxman, I felt, as I stated in my
memo, that there would be hell to pay. To what extent that meant,
you know, I don’t know.

f Mr. WAXMAN. Higher-ups wanted you to fire them, is what you
felt?

Mr. WATKINS. I felt there was pressure on to take decisive and
swift action, yes, sir.

Mr. Waxman. OK. Now, I have to ask my Republican colleagues,
if he was under pressure and if all the things you said are true,
that even if the First Lady called on him to fire those people, we
want our employees in there, so what? So what? What was wrong
with that?

What is the offense for which we are spending, I think, the sec-
ond day of hearings in this committee, where we have asked wit-
nesses to come before us, that we have made in effect a Federal
case out of what is a firing that this administration had every right
to undertake and seems to me that—I am not—I am not finished;
I will in a second.

It seems to me if this committee really cared about integrity and
honesty and unfairness to employees, why should we allow House
employees to be summarily fired and treated so poorly, cavalierly,
and have a guy sit in the Speaker’s office who had a financial con-
flict of interest? That seems to me to point out the partisanship of
this whole hearing.

I yield to the chairman.

Mr. CLINGER. Will the gentleman yield?

T think it needs to be said here that we are looking at a role, a
potential role, of the First Lady. If in fact there was—if in fact the
supposition is made here that in fact there was a story created or
invented to justify the firing, when no such justification was really
warranted, then we have—the offense it seems to me is that you
put Billy Dale and others through an unbelievable wringer for a

long period of time, which was totally unjustified and totally un-
warranted.

Mr. WAXMAN. Well, even if that is true, and it is unfortunate
that these people were fired, although all of them except Mr. Dale
got a new job, it is also unfortunate the House employees were

ired and for no reason at all, and many of them didn’t get their
jobs back. What is the offense?

Mr. CLINGER. The gentleman’s time has expired.


18

Mrs, MoRELLA. You had several previous conversations with in-
vestigators before you wrote the memorandum, right?

Mr. WarkIns. [Nods.] Yes.

Mrs. MORELLA. You were interviewed on June 3, 1993, for the
White House Travel Office Management Review, right?

Mr. WarKINS. That's correct.

Mrs. MorELLa. And you were reinterviewed for the White House
Management Review on June 15, 1993, right?

Mr. WATKINS. I think that’s the correct date, yes.

Mrs. MorELLA. You had previous conversations with two FBI
agents on August 10, 1993, concerning the Justice Department
criminal investigation, right?

T’'m just giving the chronology, as can you see.

Mr. WaTKINS. I don’t have specific dates in front of me, but I was
interviewed by the——

Mrs. MorELLa. I have.

Mr. Warkins. If that’s what you have, that _—.

Mrs. MorELLA. And my time is expired.

I guess I'll have just one more yes or no answer.

You were interviewed by the investigators on December 3, 1993,
from the General Accounting Office, correct?

Mr. WarTKINs. If your records show that.

Mrs. MORELLA. They do indeed.

Mr. WATKINS. I know that I was interviewed by the GAO, yes.

Mrs. MorELLA. Thank you.

Then I will yield back the time I don’t have.

Mr. CLINGER. I understand the gentleman from West Virginia,
Mr. Wise, is to be recognized.

Mr. Wise. Thank you.

Mr. Watkins, let me just state I understand and I have the
greatest respect for the relationship between attorney and client
and sometimes there are decisions that have to be made that con-
flict with what perhaps the public needs are. I do regret the deci-
sion to close the cameras for this reason, that I think that 2 hours
on C-SPAN and the networks would probably put this whole thin;
to rest because I happen to believe that there’s a lot of fire and
fury, or a lot of smoke and fury and very little fire here, but be that
as it may.

It seems to me, Mr. Watkins, there are two issues here. One is
whether or not there was undue—whether there was pressure put
upon you, some allege undue, by personnel in the White House, in-
cluding the First Lady—that’s the allegation that’s made—and the
second is whether the management of the Travel Office was up to
snuff, and indeed if the management of the Travel Office wasn’t up
to snuff, then were actions taken which are perfectly justifiable.

The interesting thing is, and what I gleaned from your 9-page—
I believe it’s a 9-page memo, is while some seize upon the para-
graph saying that you felt that there may have been—that people
were taking interest, and the First Lady took interest, according to
your language, you also, throughout your memorandum, seem to
suggest that there were problems in the Travel Office and that you
were going to have to take certain steps.

Now, my first question is was there an already ongoing or was
there going to be a review of the Travel Office and its operations?


47

all get rid of the protective vagueness that you have; and yet today
we see that the media was here and the American people, who
could have heard your full testimony, at your request are not here

VA

The issue is not whether or not the White House had the right
to terminate. None of us, frankly, dispute that. But the issue is
whether or not in that right to terminate they have the right to un-
justly malign and exaggerate the circumstances under which people
are terminated; and I take that very seriously.

I think frankly when we try to find out why this occurred, we
have the right to terminate people with cause, and you have to
right to terminate them without cause; and I think in this situa-
tion, had you terminated these people without cause, there was the
fear of backlash in the press of political patronage. So an option,
I think, from hearing now more of your testimony, reading your
memos, I believe that the option was to find some cause on which
to base this decision.

But let me just say, in my prior life before coming to Congress
having been a litigator, I found how difficult it was in courts to fin
the search for the truth. I am finding out here that the search for
the truth in Congress is maybe even more difficult. Yet in this in-
stance, quite frankly, as we have heard a line of questioning, the
plain reading of this memo which I spent many, many hours on,
reading it again and again, because when I got this Monday night
for the first time and your notes, and you read your comments in
there, there is absolutely little question in my mind.

And I think in the ordinary American’s mind, who can read, that
the clear impression and the clear indication from your very words
in trying to set this record straight is that the directive was from
the First Lady to make this decision. Yet, I am troubled by a com-
ment or testimony you made just moments ago, which I think,
quite frankly, is an effort. now to go back to your protective vague-
ness stage, when you said, she did not direct, order or command
me to fire them, I think. Did you testify to that?

Mr. WATKINS. Yes, I did, and I still do.

Mr. MarTINI. Well, I would suggest you reflect on that again in
view of this memorandum and your notes, because if you start to
look at your very words, when you say things like “would be hell
to pay,” these are your quotes, intense pressures, direction of the
First Family is in your conclusion, the very words, direction of the
First Family was in your conclusion in that memorandum, and
pressures for actions were irresistible, and if you like I could pick
out even three or more references of your own words, which cer-
tainly doesn’t suggest that this was a casual decision on which you
had much discretion. It clearly implies in the plain reading of this
memorandum that you had in your mind little option but to do the
action of terminating these people.

We could sit here all day and pick apart the lines of this memo-
randum, but I think in fairness to the American people as to why
we are here, it seems to me that there is an inordinate attempt by
yourself and the First Lady now you are trying to take full credit
for the decision to fire these people.

Mr. WATKINS. May I respond?


51

Again, altho I don’t share the same political philosophy as
the current residents of the White House, I do respect the institu-
tion and I respect the institution of the First Lady, and I think it
is important that especially children in this country are able to
look up to the First Lady, and it is unfortunate when her character
and integrity are called into question, and I was hoping that this
hearing could resolve some of that, but apparently we are not going
to get there from here.

do want to—my curiosity has the best of me—ask, are you here
because you were invited to be here and you wanted to be here, or
have you been subpoenaed to appear, and are you only here subject
to the subpoena issued by the Chair of this committee?

Mr. WATKINS. I am not sure I know the answer to that. Perhaps
my counsel does. I can say that to my knowledge, I was not subpoe-
naed until—I mean I was subpoenaed, I was invited to be inter-
viewed, and had I been asked—there was some confusion about at-
torneys. My one attorney had a conflict that he had with independ-
ent counsel, and then the second attorney had a conflict—that I
have used in this—had a conflict with the independent counsel. I
got my current attorney late in the day on Friday a couple of weeks
ago when Ms. Bracher calls and gives her—tries to find out where
to serve the subpoena. That is all I knew about a subpoena, the
first time I knew about a subpoena.

Mr. LaToureETTE. The reason I asked the question is the rule
that you have invoked only applies to people who appear before the
committee by a subpoena, and if you are not here by subpoena,
then the rule doesn’t apply to you, and I would ask the chairman
to revisit his thinking. But maybe we will talk to your lawyer. I
notice you are represented by a fellow named Ty Cobb, and he is
off doing a movie and that is why you probably got a new lawyer.

1 wanted to finish up where Mr. Martini ended and where you
indicated that you had been in the military, that there was a chain
of command in the White House and it was interesting that the
chain of command didn’t quite follow the Constitution of the United
States. You said the President and the First Lady and then Mack
McLarty, but that the decision was yours and as a good soldier you
said you made the decision. And I commend you for being a stand-
up guy and saying that. But you ended with the comment, did I
feel the pressure and desire of others; of course I did. From what
source did you feel the pressure and desire of others that the White
House Travel Office officials should be terminated?

Mr. Watkins. I had heard from others, Harry Thomason and
Vince Foster in particular, comments that the White House Travel
Office employees should be terminated.

Mr. LaToureTTE. Is that the extent, is that the—Mr. Thomason
and who else? I am sorry.

Mr. Warkins. Mr. Thomason and Mr. Foster, Vince Foster.

Mr. LaTourETTE. Did you feel pressure or the desire of anyone
within the White House that was being exerted on you suddenly
or not & suddenly that there was a desire that these people should

e reds

Mr. Warkins. I felt that there was great pressure to take some
decisive action, and reference from Mr. Thomason and Mr. Foster
was that they should be fired.


80

ENccosure III
KPMG Observations Related to Criteria GAO Identified

PNG Observations May 1983

fone
‘None
None
None

Procurement of goods and
Customers needs determined ..
Goods and services acquired competitively .
Documented agreements or written contracts

‘Accumulation and allecation of costs:
‘System to identity and record all costs
‘System to determine costs to be recovered
‘System to provide accurate data for billing

Billg practices:

Billings prepared timely .....

Payment due date identified .

‘System to maintain history of billings and receipt

‘System to apply receipts to appropriate outstandin

Some procedures in place
Not tested

None

‘Some procedures in place

Some procedures in place

‘System to track money owed and produce collection letter

Cath management:
Vouchers reviewed and approved before payment
Procedures to prevent duplicate payments
Payments made timely ....
Receipts deposited on the day received or next business day ...
Small receipts accumulated and deposited weekly
‘Adequate internal controls tor security of funds
Periodic bank reconciliations...

Financial reporting:

None

‘Some procedures in place
‘Some procedures in place
‘Some procedures in place

Transactions accurately recorded and disclosed in financial reports fone
General ledger to classify, summarize, and report financial reports None
Subsidiary ledgers to provide deteiled information, which are per None
onciled.
System for reports _ None
Report on Financial None
Report on Operations None
Report on Cash Flows None

Source: GAO analysis of KPMG data

Mr. CLINGER. I now would recognize the gentleman from New
Mexico, Mr. Schiff.

Mr. Scuirr. Thank you, Mr. Chairman.

Mr. Chairman, I first again have to, even though it is, I know,
becoming very repetitious here, just have to again address the
question of why we are here, and I think under other cir-
cumstances, we wouldn’t be here. If the—if it was a fact that the
Clinton administration discharged these workers either on the stat-
ed reason that they had a legal right to do so, and no reason to
justify it to anyone else, I think this would be over.

If they did it on—truly on the reason that mismanagement was
of such a high level that they had to discharge all the employees,
I don’t think we would be here. But I think it is becoming more
and more clear that the real agenda was to substitute political
friends for people who are not political friends, to use any device
necessary to make that be the public case, and then not to be forth-
coming when the Congress begins to examine this matter, when
the media examines the matter. It is not the Congress that pro-
duced some of these memos years later. It is not the Congress


13

Mr. CLINGER. Does that reflect your——

Mr. WaATKins. That reflects my recollection.

Mr. CLINGER. What Mr. Thomason said to you?

Mr. WATKINS. That is correct.

Mr. CLINGER. And on your notes you underline fire them and all
that day. Isn’t that correct?

Mr. WarTKins. That is underlined.

Mr. CLINGER. Mr. Watkins, this was 2 days, was it not, before
Peat Marwick ever came to the White House?

Mr. WATKINS. Peat Marwick came on May 14, that’s correct.

Mr. CLINGER. So it was 2 days before that, on the 12th of May,
that this conversation with Mr. Thomason took place?

Mr. WATKINS. That’s correct.

Mr. CLINGER. Are you aware of anyone briefing Mrs. Clinton on
the financial condition of the Travel Office prior to May 12, the day
she wants them fired? Do you know of anybody who might have
briefed her on the situation at the Travel Office or raised any ques-
tions about the Travel Office prior to the May 12th?

_Mr. WATKINS. To my specific knowledge, I know of no one, no,
sir.

Mr. CLINGER. Are you aware of anyone briefing the President
prior to May 12th on this matter, of your own personal knowledge?

Mr. Warkins, Of my own personal knowledge, no, sir.

Mr. CLINGER. Mr. Watkins, you didn’t have any auditors or fi-
nancial consultants review the Travel Office prior to May 12th, did
you?

Mr. WATKINS. No, sir, I did not.

Mr. CLINGER. Mr. Watkins, so then what we are talking about
are rumors, suggestions of kickbacks and bribes that were raised
by others, including Mr. Thomason; is that correct? In other words,

ere is no documented evidence.

Mr. WATKINS. No documented evidence, no, sir.

Mr. CLINGER. There were suggestions by Mr. Thomason and oth-
ers that there were problems?

Mr. WATKINS. Yes, sir.

Mr. CLINGER. Mr, Watkins, both the President and First Lady
have said they had heard rumors everywhere, right from the start
of the administration. Did you hear such rumors?

Mr. Warkins. I heard rumors for the first time as I recall in
April. Mr. Thomason called me by phone.

Mr. CuINceR. In April?

Mr. WATKINS. In April.

Mr. CLINGER. I want to now move to your 9-page undated draft
memorandum that we received from the White House just last
week. That is the—Mr. Watkins, you have before you a copy, I be-
lieve, of that?

Mr. Watkins. I do.

Mr. CLINGER. On this draft memorandum at the very top, the
words “privileged and confidential” appear, and below that it is
typed “memorandum for,” with a blank space in the copy which
was given out by the White House where the name would normally

appear.
Mr. Watkins, did you write this draft memorandum?


55

First Lady to fire the pe le that worked at the Press Office. So
what is this issue and this hearing all about?

My Republican colleagues have said, well, what this is, is an
issue of credibility and integrity. And we are looking at the credi-
bility and integrity of firing these people at the Press Office, for
whom there was an independent Peat Marwick review that indi-
cated there was mismanagement and failure to account for all the
money, and they were fired.

Now, I just want to bring to everybody's attention the fact that—
the other issue was—wel , the fact that these people were fired
seems to me, if this committee just cares about people unjustly
being fired, that there were staffers working for the House of Rep-
resentatives, and the month before the Congressional Accountabil-
ity Act was supposed to take effect, January 1 of this year, at least
10 employees who worked for the Clerk of the House were abruptly
fired and told to leave. That’s it, they were fired; no reason for it;
no accountability to anybody.

And one of the—the person who—well, my colleague just said no
cover-up. Well, what have you covered up? What is a cover-up? If
there is no cover-up of this because it was just done shamelessly,
they just fired them, put some people in who were members of the
Republican National Committee, firing people who are not partisan
employees, they are gone. That is not covered up, it is done in pub-
lic view.

But have you—is there any cover-up of what went on at the
White House? You might have handled it clumsily. The internal re-
view said it was done insensitively. That is not a crime. That is not
a wrongdoing. oo.

So what—if that is being covered up, what is being covered up?

And in fact from the very first of the fring, you got a lot of public
criticism that perhaps it wasn’t the right thing to do. But after all
this time, is there anything here that would justify the Congress
spending as much time on it?

Now, I heard about Harry Thomason, that he—I never met the
man. He may even be a constituent of mine, because I represent
Hollywood. But he evidently had some influence with the President
and hung around the White House. Is that any different from the
Gingrich backer, according to the Wall Street Journal, November
10, 1995, named Donald Jones, who is a wealthy backer of House
Speaker Newt Gingrich. He was called a checkbook citizen because
he fave $125,000 to the Republican Party, about $25,000 to

He is a telecommunications entrepreneur, and he sat in the
Speaker's office and advised the Speaker. As he said, the content
of the House bill—on the telecommunications legislation, he said
the content of the House bill is the subject of daily negotiations in-
volving the Speaker, committee chairmen, and a constant parade
of telco CEO’s. He participated as an observer and interpreted and
analyzed the subtleties of the meeting for the Speaker.

Well, he is a volunteer staffer for the Speaker who has got a fi-
nancial interest in this issue, and he is giving a lot of money to the
Republican Party. Why aren’t we investigating that?

It is hard for me to see this as not a partisan hearing if we are
only looking at firing the people at the White House, where there


2

fore the new administration took office. The firings were decided
upon long before any wrongdoing or mismanagement was alleged.

And it now appears, from review of never before released docu-
ments and documents only recently provided to the investigators
for the committee, that even those asked to execute the firings had
some misgivings about the procedures being employed.

Long before Harry Thomason really began to talk about his base-
less rumors of wrongdoing in the Travel ice, he was seeking gov-
ernment business, including Travel Office business, along with his
partner in his firm called TRM.

In January 1993, Mr. Thomason received a memo from his part-
ner, Darnell Martens, outlining how they would take advantage of
“Washington opportunities.” This was a new document only re-
cently provided by Mr. Thomason under threat of subpoena. The
White House had told us this document did not exist.

Thomason used his access to the White House to speak with the
President in February, and the President forwarded his business
proposal to then Chief of Staff Mack McLarty, Mr. Mark Gearan,
an Mr. David Watkins, after writing on the memo “these guys are
sharp.”

When Thomason’s partner, Darnell Martens, attempted to seek
Travel Office business from the former Travel Office director, Billy
Ray Dale, Martens was rebuffed. There perhaps Mr. Dale's fate
was sealed. He made the mistake of not giving business to the
President's friend, even though to do so would have disrupted a
long-standing arrangement preferred by the customers of the Trav-
el Office, the customers being the members of the White House
press corps.

But in order to get rid of the Travel Office employees, which the
Hollywood producer told White House officials he felt would be a
“good story,” the new administration needed a better plot line than
simple patronage and contract steering to friends who extended
many favors during the campaign. “These guys are crooks,” Harry
Thomason roared through the White House, “they have been rip-
Ping us off for years.” With these words, the lives of seven men
changed forever. Mr. Thomason’s Kafkaesque drama had begun.

Harry Thomason met with the First Lady when he came to the
White House in May. He talked to the First Lady on a number of
occasions about the Travel Office, according to Mr. Watkins’ memo.
He briefed the First Lady on the matter, according to Mr. Watkins
as well as others.

Thomason told the First Lady about kickbacks and of the evi-
dence that he had gathered, all of which turned out, frankly, to be
nonexistent when the company that Thomason said that Mr. Dale
had solicited kickbacks from denied any such thing to numerous in-
vestigators.

The White House Management Review team was provided this
information, but this fact was conveniently edited out of the draft
White House Management Review.

According to memos and notes provided by our witness today,
when Mr. Thomason shared his story line with the First Lady, the
First Lady pushed for really prime time attention and told Mr.
Watkins to get our people in there and use Harry’s plan to do it.


12

these People had to be participants in the conspiracy to abuse jus-
tice in order to bring this indictment against this individual. ‘they
had to be taking some direction for political purposes from some-
body higher up than Mr. Watkins in the White House. And if that
is the suspicion, then these men—the reputations are on the line.
It seems to me they are the People that should be down here telling
us. And you better get them here. They have a right to protect
their integrity as members of the bar and members of a very pro-
fessional ision of the Department of Justice.

Mr. Watkins, how much has this cost you, besides your return
to private life?

Mr. WATKINS. It’s been my you want a precise figure for my
legal terms? Legal bills that I’ve been involved in the Travel Office
and other inquiries by Congress, it’s been approaching a hundred
thousand dollars.

Mr. KaNJoRSKI. A hundred thousand dollars. I hope you are a
person of great personal wealth.

Mr. WaTKmns. I’m not.

Mr. KANJORSKI. Because that is an exceptional amount of money.
That is probably most of the net worth or equity that the average
American could hope to put aside in a lifetime. So that is what
your public service and friendship has cost you.

Do you have any idea what it’s cost this committee or the other
agencies?

Mr. WATKINS. I have no idea, no, sir.

Mr. KANJORSKL Are you aware, Mr. Watkins, of some of the prior
uses of travel in the ite House in other prior administrations?
Were you aware of some of the hearings, the $54,000 dental trip
by John Sununu during the Bush administration; another $50,000
trip to get a stamp collection in New York City?

Mr. WATKINS. I'm not aware of any particulars, no, sir. I mean,
| recall some of the press around that time, but I don’t first-

and—

Mr. KANJORSKI. The only thing I am curious about in this whole
matter, because I dealt with the press and in particular travel, this
is one of their favorite stories, Thanksgiving, Christmas, Easter,
this city gets inundated with things we just read, but matter of fact
now it is fortunately not mostly on my side of the aisle, it is now
on the majority side of the aisle, junkets, getting sports figures in
China and other nations of the world to play squash with Members
of the other body or our body. It is a habit in Washington. But has
anybody inquired into whether some of the problem in the Travel
Office was maybe some of the press corps was paying a lesser
amount than the actual cost, or that they were—I noticed in read-
ing some of this matter, the checks were generally made by the re-
porters to the employees out of their own accounts, but then obvi-
ously were reimbursed by their newspapers or by their broadcast-
ing companies, whoever paid their expense accounts. Has anybody
made an examination to see whether or not what was actually
billed to the press media is what they billed on their expense ac-
counts, to see whether or not——

Mr. WATKINS. I’m not aware of any, no, sir.

Mr. KANJoRSKI. Do you think we ought to—we ought to spend
hundreds of thousands of dollars more money and maybe ruin



27

rent staff. So in your conversation with Mrs. Clinton, there was a
specific reference to removing the current staff?

Mr. WaTKINS. In my conversation with Mrs. Clinton ——

Mr. SCHIFF. Yes.

Mr. WATKINS. As I recall, we discussed the fact that if the cur-
rent staff were removed that there could be in place a staff that
could perform the duties very well.

Mr. Scuirr. But first the current staff had to be removed.

Mr. WarkINs, That’s correct.

Mr. Scuirr. And that was discussed with Mrs. Clinton.

Mr. WATKINS. It was—it was, yes.
an Scuirr. And I see my time has expired. Thank you, Mr. Wat-

‘ins.

Mr. WAXMAN. Mr. Chairman, I ask unanimous consent the gen-
tleman from New Mexico be given 1 additional minute.

Mr. CLINGER. Without objection, so ordered.

Mr. WAXMAN. I would like to ask him to yield to me. I indicated
that there were legislative employees that were nonpolitical that
were summarily fired, some right before Christmas. They were
nonlegislative, nonpolitical. They were fired. Do you think we ought
to have an inquiry about how they were treated with the integrity
of the legislative process?

Mr. ScuirF. Reclaiming my time that the gentleman got for me.

Mr. WaxMaN. Sure.

Mr. Scuirr. The gentleman raises an interesting point. I think
the difference is this: The Republican majority in this particular
case, whether I think it was wise or not, through our leadership
made a decision to replace certain employees on the basis that they
had the legal right to do so. That is the major reason given by the
Republican leadership in making those choices. They wanted to
make changes in how the Congress operated.

In the situation before us, we have a situation, although very
clearly the White House, the Clinton administration, had the legal
power to remove all the White House employees, it did not have
the legal power to misuse law enforcement, to sully their reputa-
tions. It did not, in order to cover up an agenda of rewarding his
political allies——

Mr. KANJoRSKI. Will the gentleman yield? I ask unanimous con-
sent for the gentleman to have an additional minute.

Mr. ScHirF. Well—

Mr. CLINGER. The gentleman controls the time.

Mr. Scuer. If I could just finish my statement. The White House
did not have the legal prerogative of misusing law enforcement or
otherwise using tactics to tarnish the reputation of employees——

Mr. CLINGER. The gentleman’s time has expired.

Mr. ScuiFF [continuing]. To hide the fact that they wanted a po-
litical agenda.

Mr. CLINGER. I would now recognize the gentleman from Min-
nesota, Mr. Peterson, for 5 minutes.

Mr. PETERSON. Thank you, Mr. Chairman. And I am reluctant to
wade into this, being one of the few nonlawyers and not under-
standing a lot of this process, but I am a CPA, and I just got done
reading the Peat Marwick report, and it struck me that maybe
something useful can come out of this hearing.


70

Mr. Mica. Let me ask you then, if you are aware of the cam-
paign—again let’s shift back to the campaign for a second. You
were involved in the campaign; and there was an FEC audit. I un-
derstand it was critical of World Wide Travel. Were you aware of
that?

Mr. Watkins. I don’t recall that, no, sir.

Mr. Mica. And their handling of some funds. Could it be inter-
preted that this—there was, I guess, an overbilling? That the Press
were charged, and other folks were charged over a million dollars,
$1.2 million was refunded at the end of the campaign, and you said
that some of this cash that was on hand was used to benefit the
campaign, and they ——

Mr. WATKINS. I can’t recall those particulars at all. I would—I
would make you aware that the FEC spent two-and-a-half years or
so reviewing the campaign. They always do. There are always mon-
eys exchanged, there are always fines.

Mr. Mica. But there were no questions then in your mind about
giving World Wide Travel this business?

Mr. Watkins. I don’t—at the time, I don’t know that that part
of the—if you're referring to the FEC reports, I don’t know that
they were concluded by the time we made the decision on bring-

ine
ir, Mica, Did you know if Mr. Thomason had any interest in ei-
ther World Wide Travel, or in the consulting firm that was trying
to get the travel consulting business with Mr.—what’s his name,
Daryl] Martin?

(ir, WATKINS. Darnell Martens.

As I recall, Mr. Thomason had—again, I don’t know if I had first-
hand knowledge or knowledge from either press or memorandum
that I had seen from others, that Mr. Thomason had a minority in-
terest in Mr. Martens’ firm.

Mr. CLINGER. The gentleman’s time has expired.

Let me just clear the record up here. Is it your testimony, Mr.
Watkins, that Penny Sample did not take any commission for work
that she did in the White House?

Mr. WATKINS. My—my answer, and it related to a note, one of
these on one of my notes, Ms. Sample got a commission throu;
her firm, Air Advantage, on one of the early charters, because she
billed the—the charter company billed it through Air Advantage.

There was a commission earned by Ms. Sample initially. Accord-
ing to my best understanding and what I was told by Ms. Sample,
that she returned that commission because we did never—we never
intended that she would receive any financial benefits from coming
in as a volunteer. It was our understanding and Ms. Sample was
a volunteer, she would be a volunteer.

Mr. CLINGER. All right.

Mr. Wise. Would the gentleman yield on that? This follows up
on your question. Just as I—that is the way that I read your notes.
But is it similar to in advertising, I know that a media firm will
automatically include the commission or—when you buy, you auto-
matically include the commission, and in this case it was automati-
cally included and then Ms. Sample said, no, I am not supposed to
get it.


63

Findings:
‘The approximate net assets of the press travel fund at May 15, 1993 were com-
puted as follows:

‘Cash balance per April 30, 1993 bank statement reconciliation $369,976
Less: Checks written from May 1 to May 15, 1993 ..... (318,880)
Less: Estimated unpaid invoices (i.e., accounts payable) at May 15, 1993 (521,602)
‘Add: Estimated eccounts receivable at May 15, 1993 (See NOTE below) 366,793
‘Add: Deposits to bank account from May 1 to May 15, 1993 76,489
‘Add: Checks on hand not yet deposited to bank but already af 92,025
‘Add: Unbilled expensed incurred by the press travel office but not yet billed to the press

in the estimated accounts receivable amoust ..... bc
Estimated net assets at May 15, 1993 ... 65,635

(NOTE: The data in the avtomated biling systom. was at ‘tip fila showed dia-
aromas fo te tip toabng spgraimatey $113.00. We wor ‘hed bean baled, and, if ot, why @ had not
‘boon billed. This amount is wot incleded in the accounts receivable balanca of $366,]

Objective 12: To review the policies and procedures used to calculate amounts
billed to the press for press travel, and to compare the actual cost of the trips to
the amounts billed to the press.

Procedures:

(a) Interviewed individuals reapoosible for preparing bills to the press review the
procedures used to prepare the bills.

(b) Gained a general understanding of the automated billing system used to gen-
erate invoices.

(¢) Compared the amount billed to the press by the press travel office per reports
generated by the automated billing system to the actual cost incurred for the trip

Uhe trip worksheets for 28 conseeuive tripa between August 23, 1992 and Octo-

r 12, 1992,

performing this procedure, we selected the most recent trip for which substan-
tally’ all conta fncurred (per the trip workheet) had been lnvoleed and paid, which
was the trip departi ber 11, 1992 and returning October 12, 1992. We then
examined each preceding trip in conseentive order, completing through August, 23,
1992 in the time provi

(d) Compared the amount billed to the press per the trip spreadsheet generated
by the automated billing system in the trip files for 5 trips to another report pro-
duced from the same automated billing.

Findings:

(a) No written policies or procedures documenting the billing process exist.

(b) We were informed that amounts billed to the press were based on estimates
of trip costs, not on actual costs, because of the time delay in receiving invoices for
certaln trip expenses (much as long-distance telephone lines). No subsequent formal
Feconeiliation of estimated to actual coste was made,

(@) The Director stated that differences between the amount billed and actual cost
for trips were recovered or refunded through adjustment or billings on subsequent
trips. No formal documentation of these adjustments was maintai

(&) We were uneble to determine actual amounts billed to the press because the
original source documentation was unavailable, and other sources of the billed
amounts were inconsistent, Per the Director, copies of the original invoices sent to
the press were not maintained on file in the office. For three of five trips reviewed,
the daar amounts contained on a summary report generated from the automated
billing system and used by the office aa the record of amounts billed differed from
corresponding amounts on another report generated from the same system.

‘This report relates only to the items specified above and reflects events and cir-
cumstances as they were documented or conveyed orally to us from May 14, 1993
through May 16, 1803,

ery truly yours,

KPMG Peat Marwick.

Mr. WAXMAN. That report gave a lot of indications of mismanage-
ment by the people who were running the Travel Office, loss of

nds.

Mr. Davis. Reserving the right to object, Mr. Chairman, I just
want to point out, this was not an audit, this was a report. It had


20

Mr. Watkins. The motivation, a lot of the motivation in the
areas of management and administration of the White House, of
which I was responsible, was for the reduction of—the 25 percent
reduction of the White House staff that the President had prom-
ised.

Mr. Wise. And when there began to be discussion in the spring,
April and May, I presume, when there began to be discussion of
possible problems in the Travel Office and you brought in Peat
Marwick, if you had not taken immediate action, do you think that
you would have been subject to criticism?

Mr. WarTKwns. I think there’s the possibility, of course, that we
would have been subject to criticism. I stated that earlier that, yes,
you're sort of in, you know, a no-win situation.

Mr. Wiss. According to your memo as Director of Management
and Administration for the White House, you intended to review
the Travel Office in order to create a “leaner” your word, operation
before the start of the fiscal year.

Tm just curious, was this the result of—for the record, was this
the result of pressure and cronyism and undue influence from the
very top of the White House or was it sound management prac-
tices?

Mr. WATKINS. It was management practices and the fact that we
were trying to reduce the White House staff by 25 percent and the
Travel Office came under the White House staff.

Mr. Wise. And that was a goal that was set long before this blew
up?

Mr. WATKINS. It was set in the President's campaign.

Mr. Wise. Thank you very much.

Mr. CLINGER. I am prepared to recognize the gentleman from
Connecticut, Mr. Shays, for 5 minutes and ask him to yield just 30
seconds——

Mr. Suays. Happy to yield.

Mr. CLINGER [continuing]. To make the point that the question
surrounding the release of the plea bargain with regard to Billy
Dale is being investigated. It was very unorthodox and very ques-
tionable how that came to pass.

Clearly, Mr. Dale indicated in that plea bargain that he would
agree that he had intentionally placed Travel Office money in his
own account but he gave a reason for why he had to do that, not—
he also indicated he would not in any way admit to trying to de-
fraud the United States or the person who entrusted those funds
to him, nor would he admit that he had an intent to permanently
deprive the United States.

He was looking at what ultimately ended up costing him
$500,000. He was hoping to be able to not have to spend that much
money. But the release of that plea bargain was absolutely uncon-
scionable, in my view, and we're going to investigate that.

And I yield to—I yield back to the gentleman.

Mr. Says. I thank my chairman.

Mr. Watkins, it is the privil of a witness to invoke the Fifth
Amendment. It’s also the privilege of a witness to ask that the
cameras be shut off and the radio. For the life of me, I can’t imag-
ine why you would have made that request.


37

Mr. BLUTE. Did you attend a meeting in which you were at, Mr.
Thomason was at, in which it was finally decided that the auditit
firm of Peat Marwick would come in and do a review of the Travel
Office?

Mr. WATKINS. I attended a meeting which the firm of Peat—not
the firm of Peat Marwick, but an accounting firm, be brought in,
but Mr. Thomason was not there.

Mr. BLUTE. I would like to make this point about Peat Marwick.
Wasn’t it true that this was not an audit?

Mr. Watkins. That is correct.

Mr. BLUTE. One of the frustrations that many people have, I
think, is that many White House officials have consistently said
that Peat Marwick conducted an audit of the Travel Office, but it
was not an audit, that it was a very cursory review of management
practices, and, as we now know, it was done after the decision was
made to fire the White House travel staff. Isn’t that true?

Mr. Watkins. I would not characterize it that way, no, Congress-
man.

Mr. BLUTE. Would you say this was a thorough review of the
Travel Office?

Mr. WATKINS. I think the reason that it was not an audit, when
we were discussing initially with Peat Marwick, they didn’t know
what they would find, obviously. When they came in, they found
few records and they determined that there were not enough
records to do an audit.

As I recall, it was our request that an audit be conducted.

Mr. BLUTE. Well, in a July 8, 1993, entry in Vince Foster’s Travel
Office notebook, he indicates that he was—“he got a call from audit
strongly disagreeing with the White House Management Review
conclusion.”

Does that indicate that perhaps this Peat Marwick analysis or
study, which was not an audit, not a formal audit, was somehow
flawed?

Mr. Warkins, I am not aware of that phone call, Congressman.

Mr. BLUTE. Thank you, Mr. Chairman.

Mr. CLINGER. I now recognize the gentlelady from the District of
Columbia, Ms. Norton, for 5 minutes.

Ms. Norton. Thank you, Mr. Chairman.

Mr. Chairman, may I add my own words about your excellent
stewardship of this committee. At a time when this Congress has
been characterized as partisan and reciprocal charges of unfair-
ness, you will be remembered for the opposite traits and for con-
summate professionalism. Even now, when the hearing is looking
for its own raison d'etre, it is, Mr. Chairman, being conducted with
fairness, and I thank you for that.

I would like to ask Mr. Watkins whether you believed that you
were proceeding speedily enough so that no one higher than your-
self in the White House need have been concerned that these mat-
ters might spill over before your own actions were completed.

Mr. WATKINS. I am sorry, please repeat the question.

Ms. Norton. Did you believe you were proceeding speedily, such
that any pressure you may have been receiving from others was
unnecessary?


57

The difference, of course, is that there was no story created to
justify those firings. They were fired. You said they had the right
do it, and they did it. In this case, clearly the administration had
the right to do that. What they didn’t have the right to do was to
sort of create a story to justify that when that was not a legiti-
mate—

Mr. WaxMaNn. The Peat Marwick report—and I ask unanimous
consent that that Peat Marwick report be made part of the record
of this session.

Mr. CLINGER. Without objection.

{The information refer to follows:]

KPMG Peat MaRWICK MANAGEMENT CONSULTANTS,
WASHINGTON DC,
May 17, 1993.

Mr. William H. Kennedy II,
Associate Counsel to the President,
Office of the Counsel, Room 136,

the Counsel, Room 136,
Old Executive Office Building,
Washington, DC.

Dear MR. KENNEDY: KPMG Peat Marwick is pleased to provide you with this re-
port summarizing the observations and findings resulting from our procedures relat-
ing to the White House Office of Travel and elegraph's (referred to in this report
aa the press travel office) management, systems, policies, and procedures,

purpose of our work was to assist you in assessing present accounting poli-

cies, practices and procedures. Our on-site work, which consumed spproximately 300

houts of professional time, was conducted at the press travel office from May 14,
to May 16, 1993.

The following paragraphs describe the specific objectives, procedures and findi:
of cur work The preccdeires we performed were Peeated tnt aetare end tent et
were agreed to by the Office of Management and Administration. As you know, the
procedures were revised throughout our on-site work to reflect the time-frame and
the limited availability of data, information, and documented policies and proce-
dures. As such, this report may not ily disclose all si t matters about
the press travel office or reveal errors or irregularities, if any, in the underlying in-
formation. Our procedures do not constitute an audit, examination, or review in ac-
cordance with standards established by the American Institute of Certified Public
Accountants and, therefore, we do not express an gpinion or any other form of assur-
ance on the information presented in our report. Furthermore, we do not make any
representations regarding the sufficiency of the procedures we performed for your
information needs.

Page two summarizes our major observations and findings relating to the account-
ing aystem. In particular, we observed several significant weaknesses in the existin
internal control systems of the press travel office. The specific procedures performe:
and our findings are described in more detail in the sections that follow.

In addition to the weaknesses summarized on page two, we noted certain other
discrepancies. For example, with regard to petty cash transactions, eight checks
written to cash on the Riggs National Bank account were either not accounted for
as an increase to the petty cash fund, were incorrectly recorded in the petty cash
fund, or were missing from the pett cash fund documentation. The total amount
of such discrepancies was $18,200. This and other discrepancies are described in
more detail in the pages that follow.

OBSERVATIONS AND FINDINGS.

Summary of Significant Accounting System Weaknesses

Lock of Accountability

There is a lack of financial control consciousness.

There is no formal financial reporting process.

re are no reconciliations of financial information other than reconciliations of

bank statements.

There is no documented system of checks and balances on transactions and ac-
counting decisions within the office.



23

Mr. KANJORSKI, Were you available any other day, perhaps next
week when the Congress is in session and the House would nor-
mally be here?

Mr. WATKINS. Yes, sir.

Mr. KANJorsKI. Why—did you ask to come here today?

Mr. WATKINS. I didn’t ask to come any day, no.

Mr. KANJORSKI. You didn’t ask the committee for anything, did

ou?
¥ Mr. WATKINS. No, sir.

Mr. KaNngorsx. Did they ask you for anything?

Mr. Watkins, A lot of documents.

Mr. KaNgorskI, Did they ask you to be here today by subpoena?

Mr. WarTKINS. I—yes. I don’t know if it was by subpoena. I was
invited to be here today. I think I was initially invited to be here
last. week and then today.

Mr. KANJoRSKI. Wasn't it a fact that the committee wanted to ex-
amine you and that you were perfectly willing to be examined by
the counsel, the si of the committee, except that the minority
staff was supposed to be present at the same time, and that was
denied, and that is the reason that you wouldn’t sit under an inter-
view before this committee, and that you subsequently, therefore,
were called to testify in public because you said that is the only
way you are going to do it? Is that a fact?

Mr. WATKINS. State the question again. I’m not sure I under-
stand that.

Mr. KANJORSKI. Well, you did refuse to be interrogated by the
staff of the—

Mr. WATKINS. My attorney,

Mr. KANJORSKI. Majority; didn’t you?

Mr. WATKINS. I believe—and this was sort of his decision, it was
decided not—that I should not be interviewed by the staff but—

Mr. KANJoRSKI. Did he tell you the reason for that? Was his rea-
son the fact that the minority side staff was excluded from that
interview?

Mr. WarKINs. I don’t know the reason. The reason given to me
was that I was certainly—and I indicated to him, I’m certainly will-
ing to be here today or any day and cooperate fully and answer
questions of the entire committee.

Mr. KANJORSKI. You know, I heard your testimony earlier, I
think to Mr. Waxman, that you felt this was a press opportunity,
@ positive press opportunity and that that was the motivation of
the White House?

Mr. WATKINS. That was one of the objectives, that’s correct, sir.

Mr. KANJorskt. Now that is dumb. Now——

Mr. WaTKINS. I'm not a press person.

Mr. KANJORSKI. There is a movie that went out, and I didn’t
bother to see it because I don’t particularly think we should par-
ticularly appeal to this side of the American culture, but this movie
is “Dumb and Dumber.” The committee now is dumber than even
the White House because they are inquiring into, as I see it, some-
thing that happened down there that is no crime, no involvement
of anyone.

Anyone could have walked in the White House the first day after
the inauguration and sent everybody home, and there was no ille-


90

Mr. WarTKwns. I’m—I’m not aware of the number of conversations
she had, Congressman.

Mr. Davis. Well, they were relayed to you, were they not, from
Mr. McLarty and Mr. Foster?

Mr. WAXMAN. Point of order, Mr. Chairman. This man has been
here for over 5 hours answering a lot of the same questions over
and over again. I think he has done it in a very forthright way, but
it seems to me at some point this is getting to be a little ridiculous.

Mr. CLINGER. The gentleman’s time has expired.

Mr. Suays. Mr. Chairman, I would like to—

Mr. Davis. Could I just get an answer? I noted that in your own
memorandum you noted Mr. Foster and Mr. McLarty had both rep-
resented to you that they had had conversations with the First
Lady and that she had urged you to go ahead and resolve this
issue.

Mr. WATKINS. Decisive action, yes.

Mr. Davis. All I am saying is she says she has a general recollec-
tion. But I asked you, weren’t there in fact from what you could
ascertain through your conversations with others that she in point
of fact had quite a number of conversations pressing them for ac-
tion?

Mr, WarTKIns. I think she had more than one conversation, yes.

Mr. WAXMAN. Mr. Chairman, I would like the gentlemen, Mr.
Shays, to note that none of us objected to the extended-beyond-the-
time questioning.

Mr. CLINGER. The gentleman from Ohio, Mr. LaTourette, is rec-
ognized for 5 minutes.

Mr. LaToureTTE. Thank you, Mr. Chairman.

Mr. Watkins, just a little cleanup in this round. In response to
earlier questions you indicated the question as, was the decision
made to terminate prior to Peat Marwick; no. Asked if the First
Lady’s action was reasonable in light of Peat Marwick; you said
yes. Do you remember those series of questions?

Mr. WATKINS, Reasonable in light.

Mr. LaToureETTE. Of the Peat Marwick report.

Mr. WarKIns. In light of the Peat Marwick—

Mr. LaTouretre. In light of the Peat Marwick report.

Mr. WaTKINS. Yes.

Mr. LaTOuRETTE. The question I have, and it goes back to your
handwritten notes of May 31st, it would appear to me anyway, and
one of the reasons I continue to have trouble is the pressure or the
perceived pressure from the First Lady or the higher ups or who-
ever is in this chain of command, started before Peat Marwick was
even in the picture. And by that I reference the notes that are in
the left-hand margin of the May 31st notes that indicate that you
had a meeting with Thomason and Cornelius. You talked about it.

You then make the observation, and I know you have talked
about this before, that Mr. Thomason comes back into your office,
says he bumped into the First Lady and she says that she is ready
to fire them all that day, and that day is May 12, 1993; is that not
right?

ir, WATKINS. Uh-huh.

Mr. LATOURETTE. The Peat Marwick, the decision according to

your same notes and previous testimony that we have had from


44

Mr. WATKINS. I didn’t know that they were taken.

Mr, Fox. You said Patsy Thomasson would have had the petty
cash logs. Do you know what happened to them?

Mr. WarKIns, Again, that was all worked out with Peat Marwick
and the FBI.

Mr. Fox, The GAO review began in July 1993. Can you explain
why it took so Jong for you to have your interview?

Mr. WATKINS. I have no idea.
eet Fox. Were there discussions with Counsel’s office prior to

at?

Mr. WATKINS. For me?

Mr. Fox. Yes.

Mr. WartKIns. I don’t recall specific discussions by me.

Mr. Fox. Whom did you speak with in preparing for this inter-
view:

Mr. WATKINS, My counsel.

Mr. Fox. I mean the GAO interview.

Mr. WATKINS. My counsel.

Mr. Fox. Why was Neil Eggleston present in addition to your
own lawyer?

Mr. Watkins. As I recall, I think I was advised that he was
present at all White House staff members’ interviews. It was con-
ducted in his office.

Mr. Fox. Did you have any choice in this matter?

Mr. WATKINS. It was not even a condition to discuss. It didn’t
bother me where it was.

Mr. Fox. Do you know if he reported back to McLarty?

Mr. WATKINS. If he reported to McLarty, I have no idea.

Mr. Fox. In this interview, you said, until mid-May you didn’t ex-
ercise oversight over the Travel Office. Who did, if you did not?

Mr. WarKINS. Until when?

Mr. Fox. Mid-May.

Mr. WATKINS. Yes, yes, yes.

Mr. Fox. Who did exercise oversight?

Mr. WATKINS, Well, it was my responsibility for overall oversight.
There was a time in the beginning of the administration that the
priority of a lot of other things was greater than the Travel Office.
It appeared there were no complaints specifically from the press
about that operation and how it was run, and it was just not on
my immediate agenda. It was something we were going to get to
in the normal course of review of various White House operations
and the offices that were beneath me.

Mr. Fox. You said it wasn’t a high priority prior to May 1993.
What made it a high priority?

Mr. WarkINS. A lot of the interest in, as I said earlier, the irony
of the objective of a good press story.

Mr. Fox. Wasn't it the First Lady and Harry Thomason that
made it a high Priority?

Mr. WarTKINS. The high
there was a potential goo
involved, yes.

Mr. Fox. You didn’t fire seven people to have a good press story,
did you?

Priority was the initiation by many that
press story; and Harry Thomason was


85

‘ou in person. And today we seem to hear you moving around a
‘ittle bit and not saying that that was true.

I want to ask you one last question: Did you feel as your memo
states over and over and over again, that the pressure on you to
fire the White House Travel staff through Harry Thomason,
through Vincent Foster and directly from the First Lady was ema-
nating from the First Lady?

Mr. WATKINS. Congressman, as I stated earlier, I felt that there
was pressure that—from above from the First Lady about taking
swift and prompt action, decisive action. There were comments that
I received from the two—two of the gentlemen that you mention
that the Travel Office should be fired; Travel Office staff.

Mr. BLUTE. As someone who is obviously very intelligent when—
when Members of Congress and investigators start to see little ele-
ments from a number of sources who independently write that that
was where the pressure was coming from, aren’t we—shouldn’t we,
if we are fairly intelligent, come to the conclusion that that is ex-
actly where the pressure was coming from?

ir, WATKINS. Congressman, I am not—I’'m not positive that the
First Lady knew the pitched pressure that was coming. It’s like
you—you tell a story today and you tell it to someone else and it’s
translated differently as it goes on from person to Person. The pres-
sure I felt, I heard was coming from the First Lady, was conveyed
to me primarily through Harry Thomason and Vince Foster, that’s
correct.

Mr. CLINGER. The gentleman’s time has expired.

The gentleman from Virginia.

Mr. Davis. Mr. Martini has a plane to catch. If you would recog-
nize him first and then me, I will be next.

Mr. CLINGER. I’m sorry.

Mr. MarTINI. Thank you, Mr. Chairman.

And I thank my colleague for yielding.

Mr. Watkins, I think Ria had some idea of my impressions in
terms of your memorandum, but let me tell you how I get there,
and we have all been touching on it, but I would like to go through
this very quickly, each one of these lines.

First of all, is there anything in this memorandum that you
would want to change Tight now? In other words, that is not factu-
ally accurate or truthful?

Mr. WATKINS. I’m not aware of anything in here that’s not truth-
ful or factual.

Mr. MarTINI. And you have referred just a moment ago, once
again you said that you did not receive instructions from Hillary
Clinton to fire anyone. I think your exact quotes a moment ago in
the testimony was you did not—she did not instruct you to fire
anyone. That was in response—that was your testimony.
fi ir. WATKINS. She is—that is correct, she did not instruct me to

fire.

Mr. MarrTINI. If you would, you refer to actions taken, to take ac-
tions in your memorandum, but yet nowhere in this memorandum
does it Suggest any action but termination of these employees; is
that correct?

Mr. WarKINs. I’m sorry.


62

were any discrepancies between the amount disbursed to the charter company and
the amount indicated as the “actual” cost on the trip worksheet.

(c) Noted whether there were other types of trip charges (e.g., hotel, truck rental,
telephone) on the same trip worksheet for the trip numbers beng reviewed.
Findings:

(a) All checks disbursed to Ultrair, Inc. or Airline of the Americas were included
on trip worksheet(s).

(b) We noted that these trip worksheets did contain other trip costs (i.e., there
were other charges in addition to the charter service such as phone charges, hotel,
truck rental, ground transportation, etc.).

(c) We noted that the check amount disbursed to Ultrair, Inc. or Airline of the
Americas was different than the amount noted as actual cost of “press charter.” The
difference was due to GTR’s. The GTR’s were remitted along with the net check to
the charter company. Both the check and the GTR are negotiable instruments and
together totaled the invoice amount.

Objective 10: To analyze, in more detail, the receipta and disbursements activity
of the press travel fund for the month of February 1993.

Procedures:

(a) Obtained the February 1993 Riggs National bank statement and the canceled
checks on file.

(b) Listed each canceled check that made up the total disbursement amount for
February 1993.

(c) Discussed the reasonableness of the level of cash receipts in the month of Feb-
ruary 1993 with the Director of the press travel office.

Findings:

(a) The total amount of checks returned with the February bank statement
($1,030,835 (cents omitted)) agreed to the total amount disbursed per the bank
statement. Significant disbursements making up this total include the following
(cents omitted):

Treasurer of the U.S. (for Air Force One charges—August, 1992-lanuary, 1993) ... $525,037
Airline of the Americas ....... ae 79,456
ATAT (phone charges—September 5, 1992—October 25, 1992 or 13 tnps) 327.891

Total significant disbursements .... “ ve 923,384

(b) According to our interview with the Director of the press travel office, low re-
ceipts in February 1993 were due to a decrease in press travel after the November
election and the lack of travel early on by the new Administration which took over
on January 20, 1993.

Objective 11: To approximate the net assets of the press travel fund at May 15,
1993.

Procedures:

(a) Obtained the cash balance of the press travel fund at Riggs National Bank at
April 30, 1993 from the April 30, 1993 bank statement reconciliation.

(b) Subtracted from the April 30, 1993 cash balance the following amounts:

* Amount of checka written on the cash account from May 1, 1993 to May 15,
1993 that were identified in the press travel fund check book.

© Amount of unpaid vendor invoices at May 15, 1993 that were identified from
the trip worksheets or actual hard copy vendor invoices in the open invoice file.

() Added to the April 30, 1993 cash balance the following amounts:

« Amount of deposits made to the cash account from May 1, 1993 to May 15, 1993
that were identified from copies of deposit slips.

‘« Amount of checks received by the press travel office in payment of bills which
had not yet been deposited that were located in a locked drawer in the press travel
office.

« Amount of outstanding accounts receivable at May 15, 1993 that were identified
from the automated billing system.

© Amount of unbilled expenses which had been paid by the press travel office but
had not yet been billed to the customer/press. This amount was estimated by re-
viewing the paid invoices for these expenses and noting that the amount had not
been set up as an accounts receivable.


86

Mr. MARTINI. When you referred to actions, swift and immediate
action being taken here in your memorandum, nowhere is a sug-
gestion of any other action but the termination of employees.

Mr. WATKINS. Swift and decisive action to make a determination
to do something—and yes, I think the conclusion would be is to get
tid of the—or terminate or fire the White House Travel Office em-
ployees.

Mr. Martini. If you would just bear with me.

Mr. WATKINS. May I correct one statement?

Mr. Martini. Sure.

Mr. WATKINS. You asked me about some factual things. This is
a draft. There are two or three points, like I was in Little Rock,
not Memphis, and those kinds of things. Substantively, this memo
is correct.

Mr. MarmINI. And let me tell you how I get to the impression and
maybe I have been a little more direct than some of my colleagues,
but after reading this memorandum and hearing you today, f ¢ am
absolutely of the opinion that clearly the pressure came from the
First Lady, yet you seem to try to be vague on that, although you
are getting a little clearer as we ask you more questions.

But it would seem to me the pressure came from the First Lady
and then to Mr. McLarty and went obviously down to you. And as
the Chairman elicited from you before, you have had experience
with her, and I don’t get a sense in your drafting of this memo that
you felt you had any choice but to fulfill the wish of the First Lady;
is that correct?

Mr. WATKINS. My response in this memo is to basically address
the points of the management review, the criticism of me and—and
my office and others and the fact—that to point out that there was
extreme pressure to take action and to fire the White House Travel
Office employees. That pressure I felt was from the First Lady.

Again, I did not, in my conversation with the First Lady on the
14th of May, feel direct pressure from her. It was imposed upon me
by others, as I’m saying. In our conversation, I did not feel that.

Mr. MARTINI. In that one conversation, did you feel pressure,
when according to your own notes, and you put it in quotes, Harry
says his people can—let me see.

r. WATKINS. You can’t read my writing. I think that says “save
money.

Mr. MarTINI. “Do things better, save money, et cetera. And be-
sides, we need those people out, we need our people in, we need
the slots.”

Now, if you were sitting up here as I am, how else would you
interpret that but direct pressure from Hillary Clinton to fill—to
get those slots——

Mr. WATKINS. In that conversation she did not direct me to fire
them. There was a—Congressman, we have been many, many
times, there was a decision to reduce the White House staff, the
entire White House by 25 percent. Part of that reduction would
have come from the White House Travel Office. That’s what Mrs.
Clinton referred to when she said we need the slots, and what we
were talking about is that we need to make it—to—to remove some
people and make it a more efficient operation, we need the slots.


31

sion about well, where do you go in Government? Where do you go
to find this type of thing?

As I recall, the discussion got around to Mr. Kennedy had fre-
quent contacts with the FBI there at the White House because he
was involved in security clearances and that he would make a call
to determine and ask that question.

Mr. Mica, So he was the first one. But later on I think when you
were reporting to the press, and there was a memorandum dealin;
with reporting to the press about the firings, didn’t Mr. Foster ad-
vise against revealing that the FBI had been contacted?

Mr. Watkins. I—I think the specific reference, Congressman,
was in a draft memorandum that my office prepared ——

Mr. Mica. Right.

Mr. WATKINS. That it said it mentioned something about FBI in-
vestigations. And Mr. Foster and Mr. Kennedy got a draft copy,

ey suggested that that reference be deleted.

Mr. Mica. And did you not try to get that reference deleted from
various copies that were distributed?

Mr. WATKINS. Yes, I did.

Mr. Mica. And wasn’t it also a fact that Miss Myers, who was
press secretary, had already talked to someone, had received a copy
of that, so the cat was sort of out of the bag, and that is how the
FBI involvement got released; is that correct?

Mr. WaTKINS. The fact of an FBI investigation, that is correct.

Mr. Mica. Let me ask you a question. You're from Little Rock?

Mr. WATKINS. I am.

Mr. Mica. And what did you do before you came to the White
House? Did you have a travel—I’m sorry, an advertising agency?

Mr. WaTKINS. I had an advertising agency from—yes, from about
1975 until—very active until about 1986.

Mr. Mica. And was one of your clients World Wide Travel?

Mr. WATKINS. At one time I was in a holding company owned by
a bank, and during that time, World Wide Travel Service was a cli-
ent of mine, yes.

Mr. Mica. And they paid you, say, how much over the time?

Mr. WATKINS. Oh gosh, I couldn't recall. They were not a big ac-
count.

Mr. Mica. They weren't. What was your relationship with—is it
Betta Carney?

Mr. WATKINS. Betta Carney. She was an acquaintance, not a
friend—not a close friend.

Mr. Mica. And she ran World Wide Travel?

Mr. WarKINS. She was the president of World Wide Travel.

Mr. Mica. And I guess you were involved in the Clinton cam-

rae
ir. WATKINS. The Presidential campaign?

Mr. Mica. Yes.

Mr. WATKINS. Yes, I was.

Mr. Mica. Was World Wide Travel selected by anyone in particu-
lar as the Clintons?

Mr. WarkKINS. World Wide Travel Service came and made a pro-
posal and they were selected, yes.

Mr. Mica. They made a proposal. But who made the decision to
hire them?


7

that the men and women in this White House have played fast and loose with the
truth and with the lives of innocent people. Today we will see new documents also
withheld for more than two and a half years from Investigators. They were only pro-
vided when we personally subpoenaed documents from Mr. Watkins. We have sent
additional subpoenas to Harry Thomason, Mack McLarty, Bruce Lindsey, Patsy
Thomasson, and others at the White House.

We intend to subpoena other former White House officials as well as Justice De-
partment documents. This is because the volume of withheld documents has been
astounding in this matter. Mr. Shaheen of the Office of Professional Responsibility
at the Justice Department testified before our committee that he was “stunned” that
the Vince Foster Travel Office file was withheld from his investigation and other
investigators for almost two years. Documents relating to Harry Thomason’s at-
tempts to o get GSA contracts were withheld from GAO when they investigated the
Travel Office and related matters. Now we have the Watkins memo. And just two
days ago, Mr. Watkins provided us with notes never before provided to any inves-
tigators as far as we know.

. Watkins’ documents, as well as other Focently rovided documents, dem-
onstrate that both the President and the First dy were aware of Harry
Thomason’s allegations and that he sought government business for TRM. Docu-
mentary evidence also suggests more involvement by the President and First Lady
in key events leading to the firings. Even with many documents still outstanding,
a vague and fuzzy picture is becoming clearer.

Let me say at the outset, this investigation is not about politics. It is about people.
Despite what some at the White House may say, this investigation ia precisely about
finding the truth. Frankly I had seriously hoped this investigation would have been
completed months, even years ago. But when documents are withheld for years after
investigations have begun, it is difficult to reach closure. We still haven’t been able
to get an explanation as to why this Watkins memo as well as other documents
were not found for over two years. The White House tells us it needs another week
or so to figure out where this memo has been all this time. Why are such simple

westions so complicated for the White House to answer? The White House fired the

‘ravel Office based in part on “sloppy recordkeeping.” If it applied that standard
to its own employees who have been gathering records for various investigations,
there would be nothing left of the White House Counsel’s office.

From the very beginning of this whole debacle back in May 1993, the Clinton Ad-
ministration has engaged in foot dragging, half truths and d dissembling. What the
documents we have finally received to date suggest is that TRAVELGATE is first,
about a friend of the President's who sought out a wide array of government busi-
ness, including business in the Travel Office. When those who already were in
charge of the Travel Office rebuffed the interests of the President’s friends, allega-
tions and accusations of wrongdoing began to fly and a scenario developed to justify
the wholesale replacement oft the Travel Office staff by victimizing Billy Dale and
the other Travel Office employees.

I have pursued this matter for over two years because I was concerned with the
outrageous conduct by the White House in sacking the career travel office staff to
make room for Hollywood cronies while siccing the FBI on these people in order to
divert attention from this sloppy patronage rab; Seven people had their lives
turned upside down and are still being assailed by the White House attack machine.
Given that upon Billy Dale’s acquittal, the President wished Mr. Dale well and said
he was worry for everything he had been through, I have written a letter to the
President calling upon him to direct the cessation of White House attacks on Mr.
Dale and his associates. Billy Dale’s time as the White House’s designated scapegoat
should cease.

Todey, we will hear from the former Director of Management and Administration,
David Watkins—the person who fired the Travel Office employees. It is Mr. Watkins
whose memo just surfaced several weeks ago. We still do not know how this memo
was found and the White House has told us it will take another week or so before
it can provide any explanation. All in all, another chapter in this strange saga.

At every step along the way, this Committee has been thwarted in its investiga-
tion by a White House that denied the facts, denied that now revealed documents
even existed and denied there were serious questions of misconduct involving nu-
merous high ranking White House officials. The Clinton White House has brought
this debacle on itself.

Enough is enough.

Mr. CLINGER. The Chair now recognizes Mr. Waxman for an
opening statement.



46

Chairman Clingers’ tireless work on behalf of this Committee and his reputation
for fairnesa will be sorely missed by this Member of Congress.

T wish the Chairman well in hie future endeavors aad conclude by saying that
it has boon a pleamure and an honor to aerve.on this Coramatice under your Weader-
Mr, Chairman, during the 103rd Congress, the Republican Leadership repeated!
celled for'a Congrensiondl inquiry ints the Whity Hevme Toned Other meal

Many argued that this was a clear case of partisan gameemanship even though
the Washington Post, the New York Times, and the Wall Street Journal had all ren

editorials demanding Congressional Hearings.

Mr. Chairman, hearings like this one today will finally allow the Congress and
the American people to better examine the actions and eventa surrounding the
White House Travel Office incident.

In previous statements, the White House has continually asserted that the First

, Hillary Rodham Clinton, did not play a significant role in this matter.
lowever, after nearly two and half years and countless document Fequests by
Chairman Clinger, the White House finally provided the Government Reform and
Committee with a memorandum by former White House aide David Wat-
kins which clearly demonstrates the First Lady's involvement in the White House
Travel Office firings of May 19, 1993,

As a new Member of Congress, I am very troubled that the White House would
deliberately mislead this Committee and the American people about the role of the
First Lady and other high level White House officials.

In my opinion, the Watkins memorandum has placed a cloud of suspicion over the
Administration.

Only public hearings will allow us to get to the bottom of this incident and restore
the les faith in their President and the Federal Government.

Me. airman, | am attending today’s hearing with an open mind and without
any predetermined views on the eventa surrounding the White House Travel Office
incident.

I believe it is critical that this Committee should closely examine that facts and
review all the evidence before reaching any conclusions of misconduct or criminality
in this matter.

However, I will say that on the surface, the Watkins memorandum seems to con-
firm many ‘of the suspicions and questions that have been raised over the past two
ant years.

Former White House Aide David Watkins, has given three different accounts of
bee events | surrounding this incident. This committee needs to know which account

is the tru

If in fact the memorandum in question is accurate, it would seem to indicate that
a calculated effort was undertaken by high level officials at the White House to
knowingly mislead and withhold information from the FBI and the GAO investiga-

o

Over th

tions e White House Travel Office.
e next few weeks, this Committee is going to try and answer this question.

I believe that these hearings should be carried out in a fair and non-partisan
manner. The White House should have every opportunity to respond to these new
alley .

Tom hopeful that we will be able to finally resolve this matter in the coming
weeks 20 that we may focus this Committee's attention on critical issues of the day
such as balancing the budget and reforming welfare.

Today’s testimony by Mr. Watkin’s should provide the Committee with some much
needed answers to the questions surrounding the White House Travel Office affair.

Mr. MaRTINI. But in the interest of Betting on with the subject
matter, I too was one of the members of this panel today who came
here with some casual impressions up until the last few days, to
be quite candid with you. My interest was significantly piqued once
I saw your memorandum and your notes; and then it was piqued
further in view of yesterday’s responses in the press by our First
Lady, which once again suggest that perhaps you misunderstood
some of the nature of the conversations that you had—or the con-
versation that you had with her.

And then even today, further, you have said in your memo, Mr.
Watkins, your desire back then when you wrote this memo was to
do some soul-searching, put the record straight, and to once and for


6

‘Thomason under threat of subpoena. The White House had told us this document
exist.

Thomason used his access to the White House to speak with the President in Feb-
ruary and the President forwarded his business proposal on to Mack McLarty, Mark
Gearan, and David Watkins after writing “these guys are sharp.” When Thomason’s

artner, Darnell Martens attempted to seek Travel Office business from the former

‘ravel Office Director, Billy Dale, Martens was rebuffed. There, perhaps Mr. Dale's
fate was sealed. He made the mistake of not Fiving business to the President’s
friend even though to do so would have disrupted a long-standing arrangement pre-
ferred by the customers of the Travel Office—the customers being the members of
the White House press corps.

But in order to Reid of the Travel Office employees, which the Hollywood pro-
ducer told White ise officials would be a “good story”—the new Administration
needed a better plotline than simple patronage and contract steering to rich friends
who extended many favors durin; campaign. “These guys are crooks,” Hi
Thomason roared through the ‘ite House, have been ripping us off for
gare” With these words, the lives of seven men changed forever. Mr: Thomason's

fafkaesque drama had begun.

Hany jomason met with the First Lady when he came to the White House in
May. He talked with the First Lady on a number of occasions about the Travel Of-
fice according to Mr. Watkins’ memo. He briefed the First Lady on the matter ac-
cording to Mr. Watkins as well as others. Thomason told the Lady of “kick-
backs” and of the “evidence” that he had gathered, all of which turned out to be
nonexistent when the company that Thomason said Dale had solicited kickbacks
from denied any such thing to numerous investigators.

The i louse Management Review team was provided this information but
this fact was conveniently edited out of the Draft White House Management Review.

rding to memos and notes provided by our witness lay, when Mr.
Thomason shared his storyling with the First Lady, the First Lady pushed for
“prime time” attention and told Mr. Watkins to “get our people” in there and use
arpys plan. According to Mr. Watkins new notes just_provided to this Committee,
Mr. Thomason told him on May 12—two days before Peat Marwick was anywhere
near the White House—that “he bumped into Hillary and she’s ready to fire them
all that day.” Thomason worked with Catherine Cornelius and David Watkins on
setting up a new Travel Office. By the time this agenda item was assigned to Mr.
Watkins, the outcome had already been decided. Mr. Watkins was only the execu-
tioner, complying with the directives from above.

In fact when the FBI was called in to investigate—a full day before any Peat
Marwick people even crossed the threshold of the White House—they were told by
Bill Kennedy that those at “the highest levels” of the White House were poshia
this investigation. The morning that Kennedy relayed this message to the FBI.
Harry Thomason had met with the President. Harry Thomason had been in touch
with Mack McLarty and the First Lady prior to his meeting with the President.
Susan Thomases even came to the White House to mect with Harry Thomason.
Kennedy told FBI officials that a friend of the President’s was trying to get business
and wasn't able to. Mr. Kennedy pulled out a memo that detailed alleged wrong-
doing by Travel Office employees—kickbacks, lavish life-styles, and the like. This
memo was shown to FBI officials but they were told that they couldn't keep it. The
White House tells us this document doesn't exist—no one knows anything about it.
Another mystery document that perhaps will turn up at some point in the future.

And what about Billy Dale’s missing records? The White House and the Justice
Department say those don’t exist either. But even without these potentially excul-
patory documents and the trial judge’s refusal to allow any discussion of the politi-
cal aspects of this firing, a Jory somuitted Mr, Dale in less than two hours. That
was because during the trial, the jury learned that the FBI took nearly a month
before it made any effort to secure any records at the Travel Office. This allowed
Patsy Thomasson, in the meantime, to change the locks, ransack the office and go
through the entire computer system. Furthermore, the head of the White House
Records Office testified to the lack of any security in the Travel Office at the time
of the firings. Mr. Watkins, our witness today, told GAO he didn’t know what hap-
Pened to the petty cash logs but that Patsy Thomasson would have been in charge
of them,

Two weeks ago, the White House produced a startling document which allegedly
was found in Patsy Thomasson’s documents. It was over two and a half years after
the Committee first requested relevant documents related to the Travel Office and

ears after numerous civil and criminal investigators had requested the same. This
Watkina memo” combined with the cumulative weight of documents that we have
been gathering in this investigation lead more and more to the disturbing reality


40

Mr. CLINGER. Well, we do have a letter from the lawyer, from
your previous attorney, I think, indicating——

Mr. WarKins. I think that was for an interview, Mr. Chairman,
not to testify before the committee.

Mr. CLINGER. All right.

I would now recognize the gentleman from Virginia, Mr. Davis.

Could I ask you to yield to me for a moment?

Mr. Davis. I would be happy to yield to my chairman for as
much time as you need.

Mr. CLINGER. Putting things in perspective, you talked about
$69,000 of possible problems in the Management Review. I would
like to just put that in some sort of context.

In 1995, the General Accounting Office did a number of reviews
for which they issued a series of reports which they called a high-
risk list. This high-risk list identifies mismanagement in the execu-
tive branch, a potential saving of $1.25 trillion in revenues, hun-
dreds of billions of dollars of expenditures at risk, and I just want-
ed to point out that I haven’t seen the same eagerness to pursue
massive amounts of potential problems here, as we have seen with
the Travel Office. I would just put that in context.

I now yield back.

Mr. Davis. Thank you, Mr. Chairman.

Let me just join the accolades from members of both sides, in
fact, that you are going to be missed. I will put a further statement
in the record.

I want to get right to my point. Mr. Watkins, I would like to turn
to your 302 statement from the FBI, if I could. It is in front of you.

On page 3 of your statement, you said in early April Mr.
Thomason stated Darnell Martens, his partner in TRM, had unsuc-
cessfully attempted to solicit business with the White House Travel
Office through Dale,

In other words—I just want to understand—Mr. Thomason and
Mr. Dale were trying to get White House business. I mean Mr.
Thomason was trying to get business for his company. Is that a fair
reading of that?

Mr. WATKINS. Where are you, sir?

Mr. Davis. Page 3 of your 302 statement.

Mr. WATKINS. ere in page 3?

Mr. Davis. It is right at the top. It says Thomason stated during
the conversation between Watkins and Thomason in early April—
Thomason stated—Darnell Martens, a partner, had unsuccessfully
attempted to solicit business with the White House Travel Office
through Dale.

Mr. WATKINS. That is my understanding.

Mr. Davis. Thomason further stated he had heard from others in
the air charter business. Dale was not interested in accepting new
business,

Now, just to translate that and make sure, Mr. Thomason and
Mr. Martens were trying to get White House business for their
company. Is that a fair reading of that?

Mr. WATKINS. It is my understanding that Mr. Martens inquired
of the White House Travel Office about charter business for his
company, yes.


19

Mr. WarKINS. Yes, Congressman.

Mr. Wise. Could I suggest to you that perhaps parts of the rea-
son for that was the very name of the Travel ice. I note with
interest the name the ‘ite House Telegraph and Travel Office.
Did you send a lot of telegraphs from that office?

Mr. WATKINS. No, Congressman.

Mr. Wise. Then that perhaps suggests a need for streamline and
review; does it not?

Mr. WATKINS. Yes, Congressman.

Mr. Wise. And I notice that Mr. Dale, who was employed at the
Travel Office and was eventually acquitted, the fact that he was ac-
quitted, does that mean, in your mind, that there were no problems
in the Travel Office?

Mr. WATKINS. No, Congressman.

Mr. Wise. And I also note that public record states, the media
have stated that Mr. Dale was offer—agreed to accept a 4-month—
agreed to plead guilty to a lesser charge and to accept 4 months
in jail. That was declined by the Justice Department and, of course,
later he was acquitted. But he was prepared to accept some time
apparently, in which would suggest a recognition that there were
problems in the Travel Office.

T note with interest you stated that when Peat Marwick went to
the Travel Office at your request, there were “not enough records
for an audit.” Does that Suggest some problems?

Mr. WarKINS. That was their comment, yes, Congressman.

Mr. Wise. I note that regardless, you used the adjective “abys-
mal.” I note that in your memo to Mr. McLarty, dated May the
17th, as well as your memo that is being used by this committee
that you refer to the—and specifically refer to abysmal practice—
used the word “abysmal.” On page 2, at the bottom of your memo,
undated: I concurred in Peat Marwick’s analysis and conclusions.
Management of the Travel Office was abysmal.

Is that a fair statement of your observations and conclusions at
the time?

Mr. WATKINS. That—that is what I said. Yes, that is a fair state-
ment.

Mr. WISE. So then part of this gets to, Mr. Watkins, if you had
been permitted—if you had run the course, as your memo says that
you had originally intended to do, which is to have a review that
would take place over a longer period of time, and I believe October
1 was the closure date on it, is it very likely that you would have
taken the same actions?

Mr. WATKINS. It is likely that the—and very probable after we
reviewed the Travel Office in due course, that there would have
been a significant reduction in Travel Office personnel, yes.

Mr. Wise. Is it likely that you would have changed the operating
practices of the Travel Office either in recordkeeping or perhaps in
travel arrangements?

Mr. WarKINS. I’m sure we would have, yes.

Mr. Wise. And in terms—in terms of reduction of personnel, you
went from 7 to 3, although all 7 of the original people there were
dismissed. In terms of reduction of personnel, you probably would
have been to that level regardless, 3 people.


14

Mr. WaTKINS. I dictated this memorandum, Mr. Chairman.
There was a—I had a scribe to actually write it.

Mr. CLINGER. But actually write it, but it was your——

Mr. WaTKIns. It was my initiation, yes, sir.

Mr. CLINGER. We have heard in the past year from the adminis-
tration officials claiming that they lied to themselves in their
diary—I mean there has been that in other matters. In this in-
stance, Mr. Watkins, were you truthful in the information that you
included in the memorandum?

Mr. WATKINS. The information I included was as accurate as I’m
aware of,

Mr. CLINGER. So you didn’t lie to yourself or anybody else?

Mr. Warxins. I did not lie to myself, I did not lie.

Mr. CLINGER. Mr. Watkins, I wonder if you would please read
the first sentence of the text of that memorandum.

Mr. Warkins. In an effort to respond to the internal Travel Of-
fice review, I have prepared this memorandum which details my
response to the various conclusions of that report.

Mr. CLINGER. What report are you responding to in this memo-
randum?

Mr. Watkins. I'm—in this memorandum I’m referring specifi-
cally to the internal Management Review by the White House.

ir, CLINGER. And wasn’t that report, the White House—it was
the Travel Office Management Review which was authored by Mr.
John Podesta; is that correct?

Mr. WarKIns, That is correct.

Mr. CLINGER. Who was then-staff secretary to the President, and
by Mr. Todd Stern, I believe, who was then-deputy staff director
and the current staff secretary; is that correct?

Mr. WATKINS. Mr. Stern worked on it, I’m aware of that.

Mr. CLINGER. And the White House Travel Office Management
Review was issued on July 2, 1993; isn’t that true?

Mr. WartkIns. That is true.

Mr. CLINGER. I will now recognize Mr. Waxman.

Mr. WaxMAN. Thank you, Mr. Chairman.

Mr. Watkins, is it against the law for a new President and a new
administration to fire people at the Travel Office and put new peo-
ple in?

Mr. WarTKINS. Absolutely not. Everyone in the White House
serves at the pleasure of the President.

Mr. WaxMaN. And before you actually fired the people at the
Travel Office, did you receive a management report from the Peat
Marwick accounting firm?

Mr. WaTKINs. Yes, I did.

Mr. Waxman. And what did that management report indicate?

Mr. WATKINS. The management report was pretty extensive
about abysmal mismanagement, improper accounting procedures,
sloppy recordkeeping, petty cash inconsistencies, et cetera.

Mr. WaXMAN. So you felt that you had some cause, even though
you didn’t need cause, to change these employees?

Mr. WarTKINS. That’s correct.

Mr. WAXMAN. In your memo, you talk about your actions and
that you moved quickly to fire these People, but for which you were

later—for which you were criticized. You indicate, though, you dis-


3

According to Mr. Watkins’ new notes just provided to this com-
mittee, Mr. Thomason told him on May 12, 2 days before Peat
Marwick, which conducted the review of the Travel ice, was any-
where near the White House. And he told him on May 12 that he
“bumped into Hillary and she’s ready to fire them all that day.”

Thomason worked with Catherine Cornelius and David Watkins
on setting up a new Travel Office. By the time this agenda item
was assigned to Mr. Watkins, the outcome had already clearly been
decided. Mr. Watkins was only the executioner, complying with the
directives from above.

In fact, when the FBI was called in to investigate—again, a full
day before any Peat Marwick people even crossed the threshold of
the White House—its agents were told by Bill Kennedy that those
at “the highest levels” of the White House, were pushing this inves-
tigation.

The morning that Kennedy relayed this message to the FBI
Harry Thomason had met with the President. Harry Thomason ha
been in touch with Mack McLarty and the First Lady prior to his
meeting with the President. Susan Thomases even came to the
White House to meet with Harry Thomason.

Kennedy told FBI officials that a friend of the President’s was
trying to fet business and wasn’t able to. Mr. Kennedy pulled out
a memo that detailed alleged wrongdoing by Travel Office employ-
ees, kickbacks, lavish life-styles, and the like. This memo was
shown to FBI officials, but they were told that they could not keep
it. The White House tells us this document doesn’t exist. No one
knows anything about it. Another mystery document that perhaps
will turn up at some point in the future.

And what about Billy Dale’s missing records? The White House
and the Justice Department say those don’t exist either. But even
without these potentially exculpatory documents and the trial
judge’s refusal to allow any discussion of the political aspects of
this firing, a jury acquitted Mr. Dale in less than 2 hours. That
was because ring the trial the jury learned that the FBI took
nearly a month before it made any effort to secure any records at
the Travel Office. This allowed Patsy Thomasson in the meantime
to change the locks, ransack the office, and go through the entire
computer system.

Furthermore, the head of the White House Records Office testi-
fied to the lack of any security in the Travel Office at the time of
the firings. Mr. Watkins, our witness today, told GAO he didn’t
know what happened to the petty cash logs but that Patsy
Thomasson would have been in charge of them.

Two weeks ago, the White House produced a startling document
which allegedly was found in Patsy Thomasson’s documents. It was
over 2¥2 years after this committee first requested relevant docu-
ments related to the Travel Office and years after numerous civil
and criminal investigators had requested the same.

The so-called Watkins memo, combined with the cumulative
weight of documents that we have been gathering in this investiga-
tion, lead more and more to the disturbing reality that the men
and women in this White House have played fast and loose with
the truth and with the lives of innocent people.


110

Mr. Mica. But you didn’t have any information on the 12th, and
the FBI is called in on the 12th by the White House counsel; and
on the 13th you still didn’t have the report, and you said she would
have been unreliable. So you went on the word of Mr. Thomason
back in April when he was soliciting business from Mr. Dale?

Mr. WATKINS. No, no.

Mr. Mica. And you were involved in the conversation when he
disclosed he was a Partner in TRM; is that correct?

Mr. WATKINS. ie process—I got a phone call from Mr.
Thomason in April.

Mr. Mica. Well, Thomason also stated—in his report to the FBI,
he said—‘he further stated, by terminating the individuals from
employment, the result would be favorable news stories showing
wrongdoing had been discovered and handled.” Did he pitch that
to you, or is this a lie in his report? It is in your report, but I guess
he must have said this. I am not sure, I am just trying to find out
the facts.

Mr. WATKINS. I have been trying to answer.

Mr. Mica. Go ahead.

Mr. WATKINS. Mr. Thomason called me in April and told me of
Mr. Martens’ call to Mr. Dale earlier, I think February or some-
time. Early in the week, sometime in the week of May 10, Mr.
Thomason brought me the memo, a memo from Darnell Martens,
saying, discussing, describing his call to Mr. Dale about business
for the travel—charter business. Then I said—I told Harry to talk
to Catherine Cornelius. She was doing a report for me still.

He comes in, Catherine Cornelius and Mr. Thomason come to my
office on Wednesday, May the 12th, and talk about these things
that Catherine Cornelius has found about bad bookkeeping, petty
cash, all of these things. Harry comes back in the afternoon,
Wednesday afternoon, says he has bumped into Mrs. Clinton. Mrs.
Clinton says we should fire them that day.

I said—we go back, I call Vince Foster; we go have a meetin;
with Vince Foster. Ms. Cornelius says she has some records an
canceled checks and things at home; Mr. Foster asks Ms. Cornelius
to go get them. She brings them back to Mr. Foster’s office. The
are reviewed there, and that is when the FBI is called in, is called,
made a call to them.

Mr. Mica. Do you know where those records are?

Mr. WaTKINS. I have no idea where those records are.

Mr. CLINGER. The gentleman from Virginia is recognized for 5
minutes.

Mr. Davis. Thank you, Mr. Chairman. I am going to try to go
quickly.

It has been a long day for you, Mr. Watkins. I would like to di-
rect the committee’s attention to the chronology prepared by the
staff which outlines the contacts at the highest levels. Harry
Thomason was meeting and talking with the President and the
First Lady throughout the week leading up to the firings.

Mr. Watkins, did you know Harry Thomason was meeting with
the President during the timeframe he was pressing you for action
on the firings?

Mr. Watkins. I did not.

Mr. Davis. Excuse me? No?


69

Mr. Mica. So she was the charter coordinator.

Now, did World Wide—did World Wide Travel handle the—did
they handle the White House?

Mr. Watkins. World Wide Travel_—

Mr. Mica. They had the White House office and got this business
without a bid; is that correct?

Mr. WATKINS. World Wide Travel was asked to come in and take
over as the commercial travel arm of the White House Travel Of-
fice on Wednesday of—May 19th. And they, as well as the White
House, agreed, they dropped out of consideration or they decided
not to participate in the White House Travel Office on Friday, the
21st, I believe.

Mr. Mica. Had there been any problems related to your—had
you heard of any problems about the conduct of World Wide Trav-
e

Mr. WATKINS. None, none.

Mr. Mica. At any point?

Mr. WATKINS. No, sir.

Mr. Mica. And after they were put in charge, did you hear any
comments?

Mr. WATKINS. No, sir.

Mr. MIca. Were you aware of the comments that were made to—
by the press to Dee Dee Myers, when Dee Dee Myers was informed
by the press—let me give you a couple of these quotes here.

This is to George Stephanopoulos:

Speaking of sloppy recordkeeping, I don’t know anyone on the cam lane
whe ever Bot a detailed sevounting’ of the charges. T think most of res peor got
a charge on our American Express bill saying, signature on file, and then had to
call up and hound World Wide ‘travel to get some sort of detailed bill.

Were you aware of that, those kinds of charges?

And I have a whole page of them that the press made when they
were put in charge of—you put them in charge of the White House
Travel Office. Are you aware of those?

Mr. WATKINS. I may have seen some of those; and those were all
after the fact, Congressman, I would remind you.

Mr. Mica. Let me ask you a question. en you called these
folks in, the White House Travel folks in, to fire them or terminate
them, you said it was going to be a surgical procedure. You wanted
to do it pretty quickly. You referred that—and they have said pub-
licly that you said that this was also part of the National Perform-
ance Review; is that correct?

Mr. WarKins. I don’t recall my exact words to them, Congress-
man, but I—I have always contended in my mind that my whole
operation in reviewing the various offices of the White House was
part of the National Performance Review.

Mr. Mica. And were you aware that this was also an excuse
given by Dee Dee Myers in a press conference to the press, that
it was part of the National Performance Review?

Mr. WarKins. I am aware of that, yes, sir.

Mr. Mica. And was the Vice President also in on this; was he
aware of——

Mr. WATKINS. The Vice President was not aware of the termi-
nation of the Travel Office.


24

gality in it, no wrong activity. We did probably have a sensitive
First Lady who was smart enough to remember the examination of
TMmy committee of the Bush White House and travel and how cor-
rupt it was and wanted to make sure that her husband and his
presidency wasn’t stained, and heard the rumors and knew what
we had investigated in the prior administration and probably said
let’s clean out that rat’s nest, if there is a rat’s nest, or let’s find
out what's there. Is that relatively what happened?

Mr. WATKINS. You’re—you’re referring to Mrs. Clinton’s interest?

Mr. KANJorSKI. Yes. It was a normal interest a protective
wife—

Mr. WaTKINS. I only had one conversation with Mrs. Clinton, but
I think that the assumption that there was reasons for—and again,
that these people in the Travel Office served at the pleasure of the
President.

Mr. KANJORSKI. Now, you know what, Mr. Watkins?

I think you probably were trying to do a good job. You probably
came with management-consulti experience but terrible press
and public relations experience. They think the White House still
has terrible press and public relations experience, and probably
that is the price they are paying for hearings like this.

But I said dumb and dumber. Your assertion of that right not to
be televised or on the radio, to tell this story once and for all to
the American people, to put it to end, is the dumbest thing I have
run across. If that is your judgment, your attorney's judgment, if
it is—if it is your judgment based on his advice, you probably are
wise in taking his advice. If it is his advice to give you that, I have
to wonder whether or not he is looking for a potted palm. That
made another lawyer in this town very famous at one time.

But what you have succeeded in doing by closing this hearing to
the American public and to the electronic press, is to do exactly
what Mr. Shays suggested; you have created an aura now that
there is something here that should really be looked into. It means
that I am going to have to waste a lot of my time as a member
of this committee and a Member of this Congress, listening to folks
like you and reading your memos, or reading the staff preparation
of your memos ad infinitum, and not have the opportunity to look
into what we are doing to Medicare, Medicaid, education, environ-
ment, and all the other important issues before this Congress and
before this Government.

And I think it is a good reason why, when I woke up this morn-
ing, I understood why Bill Cohen is leaving the Senate and why my
friend here is leaving the House. I think this is abominable that
we have dumb, dumber, and dumbest controlling this Government

y, and we not smart enough to know we better shed light on
what we are doing.

And you know what my opinion is? I don’t know whether you are
a friend of the Clintons or an enemy of the Clintons now.

I know you made a mistake playing golf or something, and that
got you to go back to Arkansas. But I am telling you, if we don’t
start opening up and letting the American people know that there
isn’t serious things wrong with this Government, that in fact there
is a lot of hard-working bureaucrats, a lot of hard-working Ameri-



10

This independent audit turned up ample evidence of probable wrongdoing includ-
ing numerous checks made out to cash, outlays for which no corresponding receipt
exists, and $3000 in missing cash which was supposed to be in the Travel Office
during the audit, but which was not present. After the Travel Office employees were
apprised of the matter they produced an envelope with $2800 in cash which they
claimed was somehow overlooked by the team of & auditors who spent an entire
weekend in the Travel Office conducting an audit.

‘After all this evidence came to light, the Travel Office employees were fired. It
was the right thing to do. Any businessman confronted with a similar situation in
his business would have done the exact same thing. No smart businessman would
wait until the outcome of a trial before taking action against employees who were
apparently using funds improperly.

airman Clinger admitted that there was nothing wrong with this sequence of
events. When asked whether there was anything wrong with Mrs. Clinton’s involve-
ment with the firing, he replied, “No, but it—except that there was a cover-up here
. __, Acrime committed? No. I don’t think so.”

Chairman Clinger was right about there being no. crime, but he ia dead wron
about any cover-up. THERE CAN NOT BE A COVER-UP ‘WITHOUT A CRIME. Tt
is a legal impossibility. Now I have often been critical of this administration for tak-
ing actions which seemed foolish to me, but no one is so stupid as to release a docu-
ment like this Watkins memo when they were actually trying to cover-up some-

thing.

In the 102nd Congress I was the Chairman of a subcommittee with jurisdiction
over travel issues. I was stonewalled by the White House in the Bush administra-
tion. The Clinton administration has n far more forthcoming and cooperative
with the Congress than the Bush administration ever was.

If the Chairman thinks there is some grand conspiracy out to “get” Mr. Dale and
the travel office employees, then show the American people your allegations. Do you
believe that the F.B.I. had no basis on which to pursue the referral? Do you believe
that the career bureaucrats in the Justice Department acted improperly when they
decided to pursue an indictment against Mr. Dale? Do you believe that a federal
grand jury made up of ordinary Americans was derelict in their duty when the

rought an indictment against Mr. Dale? Do you believe that the U.S. Attorne
office ected wrongfully when they prosecuted the indictment? If so, let's call them
to testify.

Most importantly, if the Committee has any charges against the First Lady, by
all means put them on the table and let her respond to them. You seek to have the
American people believe that there is some grand conspiracy. If it is there, then
prove it, But stop the campaign of innuendo which leads the American people to

lieve that some wroi loing has occurred or is occurring.

Finally, I know that Mr. Watkins has the right under the rules of the House of
Representatives to have all the cameras and microphones in this room shut off. I
ask him not to exercise that right. It is important for the American people to know
exactly what transpired here.

Mr. CLINGER. I would just say before we begin the questioning
of Mr. Watkins this morning that this “you are absolutely right,
Mr. Waxman, this is not about an illegal act. It does, however, I
think rise to the level of credibility. And I think that is a very sig-
nificant issue. If, in fact, there has been any dissembling in this
matter, it. Suggests that there may have been dissembling in other
matters. So I think there is an issue here of credibility that tran-
scends legalities, transcends those kind of issues.

Mr. WAXMAN. Mr. Chairman, will you just yield to me another
second?

Mr. CLINGER. I'd be happy to.

Mr. WAXMAN. There was an interesting article in the newspaper
about scandals, and the author said we've gotten ourselves into a
terrible habit: We originally focus our scandals on truth-telling, al-
most without regard to the gravity of the matter that the truth-tell-
ing is all about. And this is a lot different than Watergate, because
Watergate was about the constitutionally grave problems with the
administration of Richard Nixon doing things that were so im-
proper.


29

But you know, I do not know how in the world anybody can
think that they got a positive spin out of the fact that there might
have been some mismanagement in here other than reading this
report. It looked to me like it was tied into this 25 percent staff
reduction that they got themselves committed to and that somehow
or another this ite House Travel Office would play into that.
Maybe that’s how they thought this would be positive.

I guess it would be conjecture on your part to understand what
it would be. But in reading your document, it looked like that
might have been part of it. I don’t know if we should even get into
that because that is, as I said, a dumb strategy. I agree with Mr.
Kanjorski on that. .

But I just hope that people will, I don’t know if we are going to
get a chance to hear from these folks in this committee that were
part of—that were laid off, but I think that they ought to have a
chance to tell their side of the story if we are going to have these

hearings. And I ho)

Mr. LINGER. Will the gentleman yield just on that point? We
have scheduled a hearing for this coming Monday to give the Trav-
el Office employees an opportunity to tell their side of the story,
which has never really been told.

Mr. PETERSON. And Mr. Chairman, if we could, maybe the staff
has this, but I would be interested in finding out more about how
this operation audit—operated, what portion of the moneys that
was in there were actually in this—was almost like a—I don’t want
to call it a slush fund, but it was in this fund that—where they
came in and out and how much of it might have been government
money, and I don’t know if we have that information but—and
maybe Mr. Kanjorski knows some more about this. But-—

Mr. KANJorskt. Will the gentleman yield?

Mr. PETERSON, Yes.

Mr. KANJORSKI. If I could suggest something, I think you have
an excellent idea. Since we are all here, and we are going to be
spending time on these things over the next several months until
the November general election, I suspect, and by that time it will
probably be moot, can I suggest, Mr. Chairman, I heard the gen-
tleman from Arizona suggest, and it was a serious thing and I have
read it in the paper, that the First Lady or the President used the
Justice Department to persecute and prosecute. I have heard that
said several times.

Now, I am wondering, from everything I have read and all the
reports that I get, I had understood that there was a Federal grand
jury convened, heard testimony, and then a Professional prosecutor
from the Department of Justice presented evidence before that
grand jury, an indictment by private American citizens was made
and a trial was held in the District Court of the District of Colum-
bia and there was an acquittal. But there’s a suggestion here that
there was no merit to proceed to indictment or tral.

May I ask that this committee call the prosecuting attorney and
the appropriate officials of the Justice Department —

Mr. CLINGER, The gentleman’s time has expired.

Mr. KANJorskI [continuing]. To find out if there has been abuse?

Mr. CLINGER. We will take the gentleman’s request under advise-
ment. I will point out before recognizing the gentleman from Flor-


98

time to ask some questions? Is there more to ask? Is there more
that hasn’t been said? If not, then I—

Mr. CLINGER. If the gentleman would yield.

Mr. Waxman. I ‘eld

Mr. CLINGER. First of all, just to make the point that this Chair-
man has never said that this was going to be the bombshell hear-
ing We are trying to get at the truth. at we're trying to get is
a final closure for this investigation, which I would remind the gen-
tleman from California I have been trying to do every since this ad-
ministration came to power.

I was blocked from that for 2 years when I did not have the sub-
poena Rower. I now have the subpoena power, and now we're trying
to get the answers that we could have had 2 years ago.

My question to Mr. Watkins is did you turn your notes of May
31st over to the White House for any—any reason or any investiga-
tion? Did the notes of the 5~31—

Mr. WATKINS. To the best of my knowledge, my notes were
turned over.

Mr. CLINGER. To——

Mr. WaTKINS. To the White House, yes, to my files, to Podesta
at the time of the—at the time of —

Mr. CLINGER. They were turned over.

Mr. WATKINS. Yes, sir.

Mr. KANJORSKI. Will the gentleman yield?

Mr. WAXMAN. Please.

Mr. KaNJorsKI. Mr. Chairman, since we're wrapping up and I
was pretty harsh on Mr. Watkins when I started this, and I still
am harsh, and I think you made a terrible error, Mr. Watkins. It
is certainly your right under the rules of the House not to be photo-

aphed and on television. I have listened to you for 5 hours. I
think you’ve been a hurt soldier in the field. A lot of stuff fell on
your back, and I appreciate that and $100,000 legal fees to try and
clear your reputation and name is not something easy to take un-
Jess you’re quite independently wealthy, and I assume you're not.

I think you made a bad judgment. Today your testimony would
have been very helpful for you and this whole problem, if C-SPAN
and CNN and all the national networks could have shown that this
stupid, dumb hearing in the middle of a silent week should never
have been held. And maybe it would have been the best reason in
the world why another stupid, dumb hearing on this subject won’t
be held in the future.

But probably because of not having that opportunity, we're going
to be back here next week, the following week and months into the
future, as I said, till the drop-dead date of some time in November
of this year. But I want to withdraw any insults that I may have
made to you; I feel bad about it.

Mr. WarTKINS. Thank you.

Mr. KANJORSKI. You have been a very forthright witness. I hope
that anyone in the future that has called, you would recommend
that they do testify openly with the television running so that
forthrightness can be witnessed in the body language of the wit-
nesses. Thank you.

Mr. CLINGER. The gentleman’s time has expired. The gentlelady
from Maryland have any questions?


91

Mr. Podesta was the decision to engage and Peat Marwick wasn’t
until May 13.

Mr. WATKINS. Thursday.

Mr. LaTOuRETTE. The next day.

Mr. WATKINS. That's correct.

Mr. LaToureTTe. The day after this conversation took place with
Mr. Thomason. And my question to you is again the First Lady is
sort of one removed in all of this, but being under oath, is it your
recollection today as we sit here in this conference room after you
have been here for 5 hours that in fact Mr. Thomason came into
your office on May the 12th and did he utter those words to you
relative to his understanding?

Mr. WATKINS. That is my recollection.

Mr. LaTourETTE. OK. So obviously we need to get Mr. Thomason
here to ask him. We need to go up the food chain eventually. But
as far as you are concerned, that is true, that Mr. Thomason said
to you that according to him the hearsay was the First Lady wants
them done that day, the 12th, before, the day before Peat Marwick
was engaged, is that——

Mr. WAXMAN. Will the gentleman yield? What difference would
it make if you had him here and he said he did it? He doesn’t say
he did it, but. what so if he did?

Mr. LATourETTE. I won't yield because that question has been
addressed to the gentleman three or four times.

Mr. WaxMaN. Your questions have been addressed to the witness
three or four times.

Mr. CLINGER. The gentleman’s time is in the hands of Mr.
LaTourette.

Mr. LaToureTTE. I thank the Chair.

The other question I have has to do with questions that Mr. Mica
was asking you and that is the predication issue of the FBI and
you are aware, I assume, from the report prepared by Mr. Podesta
that there were some discussions about the issue of predication.
The FBI said we just can’t come in and investigate something un-
less it is a Federal problem, such as missing Federal money. They
need predication.

Mr. WarkKINS. Mr. LaTourette, my involvement with the FBI ac-
tually was little or no involvement. My—I stepped out of the pic-
ture after the decision was made to contact the FBI on Thursday
to find out how that—what kind of investigation we should have.
That was done by counsel's office and I stepped out of that picture.
So I’m very unaware of any specifics of it.

Mr. LaToureTTE. I understand. But you are aware from—I as-
sume you reviewed the Management Review report because you
had some difficulties with it which caused you to write the memo
that has you here today.

Mr. WaTKINS. Yes. Correct.

Mr. LATOURETTE. You are aware that predication was required
before the FBI got involved; you knew that. You are also aware, are

ou not, that that predication was based upon the observations of

t. Thomason and Miss Cornelius, were you not? That was the ex-
tent of the allegations to that point on May the 12th and 13th.

Mr. WATKINS. Mr. Thomason, Ms. Cornelius and Mr. Marten’s
memo, I believe.


11

What we have here is an inquiry about credibility, but if you look
at—when you boil it all down to what’s at stake, I really come back
to, so what? Even if all the things you said were true, so what?
There’s nothing that’s illegal and there’s nothing improper in re-
moving people from office, especially when there was an auditor's
report that indicated clear mismanagement in the Travel Office in-
volved.

Thank you for this chance to say a few words.

Mr. CLiNGER. I thank the gentleman.

Mr. Fox. Mr. Chairman.

Mr. CLINGER. We're going to go right to questioning, Mr. Fox, no
opening statements. If you have an opening, statement——

Mr. Fox. Point of clarification; I'll give it in my opening state-
ment then.

Mr. CLINGER. All right, thank you.

Mr, Watkins, we thank you very much for coming today. If you
would not mind, we have a practice in this committee of Swearing
all witnesses so that no witnesses are prejudiced and if you woul
not mind doing that.

[Witness sworn.]

Mr. CLINGER. Thank you. Let the record show that the witness
answered in the affirmative.

Mr. Martuias, Mr. Chairman, before Mr. Watkins gives his testi-
mony, we would like to invoke House Rule III(f)(2) of the rules pro-
cedure of this committee, and ask that Mr. Watkins not be required
to give any testimony with any cameras or photography.

Mr. CLINGER. Weill defer for a moment while we-the committee
will stand in recess for 5 minutes.

[Recess.]

Mr. CLINGER. The committee will resume its sitting, and we have
been in touch with the House Parliamentarian to get a ruling on
at least his interpretations of the rules that you raised; an
will, in fact, accede to that request. But the request must be per-
sonal, as we're informed by the House Parliamentarian.

So I would ask you, Mr. Watkins, are you in fact asserting this
privilege?

Mr. WATKINS. Yes, Mr. Clinger, on advice—.

Mr. CLINGeR. Can we turn on the mike somewhere?

Mr. Warkins. Yes, Mr. Chairman, on advice of counsel.

Mr. CLINGER. Are you asserting the privilege personally?

Mr. WATKINS. I am asserting the privilege.

Mr. CLINGER. Therefore, pursuant to rule—well, you're asserting
the privilege under the rule that was cited?

Mr. WarKINS. I’m asserting the privilege under Rule III(f)(2).

Mr. CLINGER. I understand. Therefore pursuant to Rule III(f)(2),
I will now instruct that all lenses on television cameras be covered.
and other cameras be covered, and that all microphones be turned
oft.

Mr. Davis. Mr. Chairman.

Mr. CLINGER. The gentleman from Virginia.

Mr. Davis. May I make a parliamentary inquiry? Does this mean
the print media will be allowed to cover the proceedings?

Mr. CLINGER. That is correct.


97

Mr. WATKINS. I’m not aware of that.

Mr. WAXMAN. You found problems in the review of the Travel Of-
fice operations. You therefore had, what, if anybody thought there
was a reason to fire them, a cause to fire them, they were fired.

Now, if you—somebody on the Republican side is saying there
wasn’t sufficient cause, you didn’t need cause. You found cause.
Now they are saying it wasn’t sufficient cause. If you didn’t fire
them, you would be criticized because there was cause to fire them.
You fired them and now you are criticized for having fired them.
You are in an absolutely no-win situation and you are here for 5
hours being badgered into saying something that the Republicans
want you to say, and it strikes me as not for the purposes of the
proper activities of this committee to investigate an oversight over
proper Government functions but simply for partisan purposes.

low in terms of oversight, Mr. Podesta from the White House
decided to do some review of the procedures that led to the firing
of the White House Travel Office staff, didn’t he?

Mr. Warkins. That’s correct, yes, sir.

Mr. Waxman. And he was critical of the administration, in fact
critical of you in a way that you felt was unfair; isn’t that correct?

Mr. WaTKINS. That’s the reason for this memorandum, yes, sir.

Mr. WAXMAN. So the memorandum was written after you were
criticized.

Mr. WATKINS. Yes.

Mr. WaxmaN. In fact, even reprimanded by the White House.

Mr. WATKINS. Yes, sir.

Mr. WAXMAN. Looks like the White House is tougher on their
own people than I hear Republicans in the House being on their
side of the aisle when it comes to firing people that had done noth-
ing wrong, worked diligently for many years for the House of Rep-
resentatives. It looks like the White House was a lot more con-
cerned about conflict of interest if there was no potential of it than
I hear from my Republican friends when we had some guy admit-
tedly sitting in the office of Newt Gingrich who had a financial in-
terest in the telecommunications bill, and who was a big financial
giver to the campaigns of the Republicans.

I just am aghast at the way this whole thing has been played out
today. We were told this was going to be the smokin; ge. This
was the big bombshell hearing. We were going to nail Hil lary Clin-
ton. That is the purpose of this hearing today. And the Republicans
have failed to do it. But even if they had, I still come back to, and
what have they accomplished?

Can we order her to be indicted? Can we order her to be di-
vorced? Can we order anybody in the White House who the Repub-
licans think didn’t do fairly to admit their guilt? Is that what all
this is about? If there is wrongdoing, let’s deal with it. But to have
hearing, after hearing, after hearing seems to me an abuse of the
powers of this committee, and to subject you to all these hours of

adgering of the same question over and over again seems to me
an abuse of our powers as well.

I have time and I would like to yield to people who might want
to ask some questions on my time, Democrat or Republican. We
ought to wrap up this hearing at some point. ‘Anybody want some


102

discussion, which is not a clear designee who it goes to, on the bot-
tom of Pree 5, these, as I understand it, are your thoughts, most
direct thoughts to yourself as well as anyone else: “We had recent
experience with World Wide and based on that experience I knew
we would rely on them for confidentiality in handling and prepar-
ing to handle the Travel Office business until the business could
be subject to full and open competition.” Is there anything in your
memory that disputes what you apparently wrote in these memos?

Mr. Watkins. No. Thank you.

Mr. Wise. World Wide Travel was to be a temporary means to
et over this and then put it to full and open competition which

ad there been full and open competition prior to your arrival?

Mr. WATKINS. There had not been, no, sir.

Mr. WIsE. The second point I would like to make, Mr. Watkins,
actually not directly dealing with you, but Mr. Shays talked about
the HUD investigation in which incidentally Mr. Shays and Mr.
Lantos, I think, conducted themselves in a bipartisan manner
about as well in an oversight proceeding as I have ever seen. I par-
ticipated in a few of those hearings. They were in them at depth.

I think the significant difference between the HUD hearings and
here, one being that the HUD hearings involved millions of dollars
of taxpayers’ dollars and bad practices and all sorts of—all sorts of
problems. And also the HUD hearings resulted in numerous indict-
ments, convictions as I recall, and so I just don’t see the similarity
whatsoever.

My third question is a more direct question, and we’re going back
over the same thing, Mr. Watkins. But the statement has been
made about the Pressure ‘ou felt. In the context of pressure, is part
of the pressure that you felt the fact that you're sitting in 6 months
into an administration in a very sensitive situation where you've
got allegations about to come out about the Travel Office oper-
ations, you've got a study, an initial study that suggests to you all
kinds of financial problems that you describe in the memo as abys-
mal, and finally you've got the FBI suggesting that at least there’s
grounds to go forward with a criminal investigation. Is that creat-
ng pressure for you? _

ir, WATKINS. Yes, sir.

Mr. WISE. Thank you very much. I would yield to the gentleman
from Pennsylvania who may get his own time later, but if he has
additional questions.

Mr. KaNJorsKI. If I may correct the record of my friend from
West Virginia, it was 4 months into the administration, wasn’t it,
when all this happened, just 120 days?

Mr. WATKINS. It was May, yes, sir.

Mr. KaNsorski. Not 6 months in. This is a new administration.
This was an administration that had been out of office, a party that
had been out of office in the executive branch for 12 years. You
didn’t have many experienced hands on board.

Mr. WATKINS. Well, I used to describe it as a business with no
business plan and no inventory.

Mr. KaANJorSKI. That’s right.

Mr. WatKINS. We had to create them both.

Mr. KANJoRSKI. The fact of the matter is when you sat around
the office with some of the leading staff to decide who do you call


65

Mr. Mica. You don’t have to get into the titillating part. I just
want to—I am chairman of the House Civil Service Committee—
Subcommittee, and I just wondering about the personnel aspects.

Mr. WATKINS. Yes, if you’ll—I will answer that, Congressman.
There was discussion and conversation about the President’s pro-
tection detail, the people that served in the protective detail for the
President.

Mr. Mica. Discussion among whom, the President and First
Lady?

r. WATKINS. President, First Lady——

Mr. Mica. And they wanted people removed or reassigned?

Mr. WATKINS. More not removed, more that maybe some others
brought in that had served on the protective detail during the cam-

paign.

Mr. Mica. Well, OK. Let me ask you a question. You had also
made some comments in here about the President's distant cousin,
Ms. Cornelius; and you termed her as one who tended to oxagge’ -
ate; you didn’t put much credit in her, She was also assigned, I
guess, with coming up with some sort of a plan by May 15 for reor-
ganizing the office or —

Mr. WarKINS. That’s—I would not characterize it that way.
That’s incorrect.

Mr. Mica. All right. Well, you did characterize her in the memo
that we got as having a tendency to exaggerate, and you didn’t
think she was capable of coming up with a plan to reorganize,

Mr. WATKINS. I would have to review that precisely. I don’t—
her—what she was to provide me by May 15—she was assigned to
the Travel Office in early April, late March, early April, and she
was to provide me a report on the operational procedures of the
Travel Office.

Mr. Mica. Did she work for your office before?

Mr. Watkins. She did.

Mr. Mica. Did you term her, what you provided us with, this
new document, as a liability? You termed her as a liability and you
were going to move her someplace else?

Mr. WATKINS. She always—Ms. Cornelius always wanted, the
way she got to the White House—.

Mr. Mica. Was she working with Harry Thomason?

Mr. Watkins, When?

Mr. Mica. Either before or after she was assigned this—to do
this report by the 15th.

Mr. WarkIns. I’m not—with all respect, due respect, to try to an-
swer the question precisely —

Mr. Mica. And then—well, OK.

Mr. WATKINS. The correct answer is, she was not working with
Harry Thomason during when Harry ——

Mr. Mica, At either time, before or after she worked for you, or
she was assigned?

Mr. WATKINS. She was not assigned to Harry Thomason, is the
short answer.

Mr. Mica. She was assigned to the Travel Office to come up with
this report by the 15th?

Mr. Watkins. She was assigned to the Travel Office for specific
duties of helping with staff travel. This had been explained to Mr.


71

Mr. WATKINS. I can’t—I can’t say that absolutely. I don’t know
exactly how the billings are for those. I do know that at first it
went into—that she, from the charter company, was to get a—I
mean from the airplane company, the charter group, she was—ei-
ther received or was to have received a commission. We learned of
that, and I don’t remember the particulars about that, talked to
Ms. Sample; she agreed that that was a mistake, she should never
have gotten the commission and she either refunded the money or
never ever really got it deposited with her.

Mr. CLINGER. That wasn’t the reason you had her leave the Trav-
el Office?

Mr. WATKINS. No, sir, she came in initially to serve 2 to 3 weeks.
That was her initial understanding.

Mr. CLINGER. OK. The gentleman from Pennsylvania.

Mr. KaNvorski. Thank you very much, Mr. Chairman.

Mr. Watkins, have you ever testified before any other body in re-
gard to this matter?

Mr. WaTKINS. Well, I had questions—

Mr. KANJORSKI. Were you called before the grand jury that in-
dicted Mr. Dale?

Mr. WATKINS. Again?

Mr. KANJORSKI. Were you called before the grand jury that in-
dicted the director of the Travel Office?

Mr. WATKINS. No, no, sir, I was not.

Mr. KaNngorski. Did you—do you know whether or not you pro-
vided any information that was used in his indictment and the
prosecution?

Mr. WarKINS. Not to my—not to my knowledge.

Mr. KANJORSKI. Do you know whether or not anyone above you
in rank in the White House—.

Mr. WATKINS. Not aware of that.

Mr. KANJORSKI. Certainly you have never heard of Mrs. Clinton
being called before a grand jury or-——

Mr. WATKINS. No, sir.

Mr. Kanvorski [continuing]. The trial or prosecution.

Do you know who brought the prosecution of this supposedly

Mr. Warkins. I know very little about that side of the—

Mr. KANJoRSKI. You ever heard the name of Stewart Goldberg,
senior litigation counsel, and Raymond Hulser, trial attorney for
the Public Integrity Section of the Criminal Division of the U.S.
Department of Justice?

Mr. Warkins, I never heard that name.

Mr. KaNJorsKI. I hope that some of the members of the majority
side of the committee have heard those names, because I have met
some of those men. They are long-term professionals. And for us to
be hearing a perpetuation of this idea that a story was concocted
and persecution in the nature of a prosecution was made by men
ef this integrity, is insulting to their professional position at the

ar.

If you know any of these gentlemen and their service in Govern-
ment, you know that they have been in the strongest way providin,
for professional integrity of the U.S. Government for a number 0}

ears. And you are now in my estimation by all this suggestion

ere that there was persecution by nature of the prosecution, that


16

this mismanagement of the Travel Office required new people to be
in charge. The First Lady said something or other to the effect that
the administration ought to Pet its own people in or ought to make
some change, presumably. What is wrong with that? What is the
scandal there, Mr. Watkins?

Mr. WATKINS. Well, I can assure you, Congressman Waxman, I
was not involved in calling this hearing or consulted about calling
this hearing. And I don’t know of anything wrong with that.

Mr. WaxMan. Is it illegal?

Mr. WATKINS. Not to my knowledge.

Mr. WAXMAN. Does it seem to you in any way improper?

Mr. WaTKIns. Not to my knowledge.

Mr. WAXMAN. It doesn’t seem to me, either. It just seems to me
that we are looking for something to titillate the press and the
press is looking for something to be titillated about. That is what
this hearing is all about.

Mr. Chairman, I yield back the balance of my time.

Mr. CLINGER, I thank the * fentleman. I am now prepared to rec-
ognize the gentlelady from land, Mrs. Morella, for 5 minutes.

Mrs. More.ia. Thank you, Mr. Chairman. And, again, I echo
what Mr. Waxman said early on, we regret deeply your decision
that you will not seek another term, Mr. Chairman, in this Con-

gress.

Mr. Watkins, to me, the question is, and again I pick up on what
Mr. Waxman said, I do not believe that this is a titillating event.
I do not believe it is to titillate the press, because quite frankly my
concern is that the reputations of career Government employees
were ruined to justify their termination. And I think this is one of
our problems that we are confronting here. I am concerned about
the scope and the time line of the KPMG Peat Marwick investiga-
tion and the National Performance Review study. I hope you will
shed more light on that. I am also interested in whether or not,
with Peat Marwick, that actually that it was an auditing team that
did it or was it a management team that rendered a report?

I guess you will be answering that for me. And my concern is the
human effect of all of this.

The Travel Office staff members were career Government em-
ployees, They had between 9 and 32 years experience in the Travel

ice. They served both Democratic and Republican Presidents.
They reported to work one day and they were told they were fired
as a result of poor performance and mismanagement.

Further, a ‘ite House spokesperson told the media that their
termination was also due in part to findings of an FBI investiga
tion, including potential criminal conduct, told to clear out their be-
longings and after about 32 years of service, escorted from the
White House grounds in a cargo van by the Secret Service.

I think this is what this hearing is about is why did that hap-
pen? How did it happen? What went wrong?

My understanding also, Mr. Watkins, is that the—when Peat
Marwick heard about the firings, they said that they did not be-
lieve that there were grounds for firing on the basis of their report.
Perhaps I'll ask you if you will comment on those two points: Was
it an auditing part of Peat Marwick, and did they respond and say
these firings should not be justified on the basis of the report?


99

Mrs. MorELLA. Mr. Chairman, I would yield my 5 minutes of
time to the gentleman from Connecticut, Mr. Shays.

Mr. Suays. Mr. Watkins, I would like to repeat my question to
you. I'd like to know if you had any knowledge of Mr. Thomason
wanting the White House travel business?

Mr. WATKINS. I have to answer it again this way, Congressman
Shays. Part of the report from Peat Marwick was the fact that
there was no competitive bidding on the charters. That was one of
the things that we obviously implemented immediately. If Mr.
Thomason had expressed any—and I’m—he would have gone
through a competitive bidding process.

Mr. SHays. But that doesn’t answer the question. Mr. Watkins,
it is a very fair question. You either know of it or you don’t know
of it.

Mr. Watkins, I—

Mr. SHays. You have the right to tell me you simply refuse to
answer the question.

Mr. Watkins. Mr. Sha: s— Congressman Shays, I told you I’m
aware of a memo from Darnell lartens which obviously he—he
said later, I’m told, not first hand to me, but I understand that Mr.
Martens said that he really wasn’t interested in the travel business
for himself, but wanted to see how others of his friends in the in-
dustry might proceed toward getting the Travel Office business.

Mr. Says. I’m foing to ask you the question. Do you have any
knowledge of Mr. Thomason having an interest in the White House
travel business?

Mr. WarKIns. Mr. Thomason did not tell me, I am not aware——

Mr. Suays. We know one thing: He hasn’t told you. Did he tell
anyone else and did anyone else share information? I have a right
to ask this question. Did anyone else tell you that Mr. Thomason
had an interest in the White House business?

Mr. Warkins. I don’t recall any specifics, Congressman Shays,
about that. I—I have spoken——

Mr. Suays. I am not asking you for specifics. I’m asking if you
have any—

Mr. WATKINS. You're really not being fair.

Mr. Suays. I am being very fair.

Mr. WATKINS. No, you're not.

Mr. Suays. You are avoiding the question.

Mr. Watkins. No, I do not recall. I told you about the Martens
memo. There was a memo that I got a copy of that said something
about Harry Thomason some time in March talking about some
kind of government business. I don’t recall, I do not recall the spe-
cifics,

Mr. Suays. But your testimony —

Mr. CLINGER. will the gentleman yield to me?

Mr. Suays. Yes, but I want the time back.

Mr. CLINGER. The question I have is weren’t you aware, however,
that because the First Lady had imparted that Mr. Thomason had
indicated he could do this cheaper and more efficiently and there-
fore he could——

Mr. WarKINS. I am totally confident the reference to that is that
Mr. Thomason knew people, which he said he did. Penny Sample
was a person that Mr. Thomason recommended that he could bring


21

And my colleagues on the other side of the aisle have basically
talked about this as a pointless hearing, and I have to tell you, I
was somewhat ambivalent, but you have raised my interest 100-
fold. This committee looks at waste, it looks at fraud and it looks
at abuse, and I am beginning to sense that there was a hell of a
lot of abuse at this White House. Is it against the law for the White
House to misuse the FBI and the IRS to harass public people?

Mr. WarKmns. I had no con—I had—

Mr. SHays. I asked, is it against the law?
eat Warkins. To my knowledge, it is. To the best of my knowl-

e, it is.

Mr. SHays. You had previous conversations with two FBI agents
on August 10, 1993, concerning the Justice Department’s criminal
investigations; isn’t that correct?

Mr. WATKINS. I don’t have the precise date, but I—I assume that
is correct, yes, sir.

Mr. SHays. You met with two FBI agents?

Mr. Watkins. I did meet with the FBI agents in that summer.

Mr. SHays. You were interviewed by investigators on December
3rd, from the General Accounting Office; isn’t that true?

Mr. WarKins, I did, was interviewed by the GAO.

Mr. Suays. And were you interviewed in the House by the Inde-
pendent Counsel Fiske, by the FBI and an attorney with the Inde-
pendent Counsel on June 22nd; is that correct?

Mr. WarKINS. I’m not sure about that date.

Mr. SHays. Were you interviewed by these individuals?

Mr. WATKINS. By the Independent Counsel?

Mr. Suays. Yes.

Mr. Warkins. On what subject?

I’ve had many interviews, Congressman, and I’m try—I’m trying
to answer you precisely.

Mr. Says. I won't pin you down to the date. I want to know if
you were interviewed by the Independent Counsel?

Mr. WATKINS. I have been interviewed by the Independent Coun-
sel.

Mr. Suays. About Travelgate?

Mr. WaTKINsS. I just don’t recall that date and what that inter-
view was about from—at this time.

Mr. Suays. About Bob Foster’s death as well?

Mr. WATKINS. Vince Foster’s death?

I was interviewed by Independent Counsel about Vince Foster’s

death; yes, sir.

Mr. Suave. Was there any connection between Vince Foster and
Travelgate?

Mr. WATKINS. Any connection about Vince Foster’s death and
Travelgate? Not—not to my knowledge.

Mr. Grays, Mr. Watkins, in your memorandum, you state that
you had been as protective and vague as possible. You were refer-
ring to protecting information concerning the First Lady’s involve-
ment in the firing of the White House Travel employees and the
role of Harry Thomason; isn’t that true?

Mr. WaTKins. I’m specifically referring to the investigation by
the White House Management Review Team, the investigators


50

Mr. Bass. Last, on the last page of that memo, the last point
says, FBI would not ordinarily get in, but. Can you give us
some—.

Mr. WATKINS. I think I answered that previously. What, as I re-
call, what I meant by that is that this was the type of—we didn’t
know who would do this, who would normally do the kind of inves-
tigation when we discovered that the allegations of financial
wrongdoings and things, the allegations that Harry Thomason was
talking about, where did we go to get the investigations? And I
think I was told the FBI normally doesn’t do this type of thing, but
no one knew where else to go, and so they were asked how to pro-
ceed, and they said they felt there was enough indication of wrong-
doing that they would come in and investigate.

Mr. Bass. Thank you very much, Mr. Chairman.

Mr. CLINGER. Now I yield to the gentleman from Ohio, Mr.
LaTourette, for 5 minutes.

Mr. LaToureTTE. Thank you, Mr. Chairman.

Mr. CLINGER. Let me announce that we will be recessing at the
conclusion of this round for 40 minutes.

Mr. LaToureTTE. Just a brief observation, Mr. Chairman, to
echo all of my other colleagues, upon meeting the chairman, my
wife of 13 years said she thought that Chairman Clinger would
make a good grandfather for her children. I don’t know whether
she was seeking to replace my father or her father, so you are cer-
tainly held in high regard.

Speaking of my wife, I didn’t have the courage to do what Mr.
Kanjorski did, and that is come through the Pennsylvania Turn-
pike from Ohio. I flew back, and my wife asked me, why are you
going back? Some of the comments I heard from the other side, I

lon’t think it would surprise her at all to come back and do some-
thing dumb in Washington because she thinks there are a lot of
things dumb in Washington. But it could come as a surprise to her
that we are wasting our time in a hearing.

The reason I bring that up, Mr. Watkins, your memo that sort
of came to us like dentists going into a barnyard to extract teeth
out of a chicken caused some concern, and the concern was, we had
a version given to the GAO by the First Lady, the plain words
going back to my colleague, Mr. Martini’s observations, the plain
words of your memorandum seem to put those at odds, and as a
result, I don’t happen to be a Republican who delights in the de-

ading of the First Lady’s reputation, but we now have the Presi-
dent threatening to punch people in the nose. We have editorials
castigating the First Lady’s reputation, and I want to join my col-
leagues in regretting the decision that you made through counsel,
and 1 am a lawyer and I understand legal advice, but Rule III of
the House rules, the purpose of Rule No. III that we have in this
House, and the reason that we provide for broadcast of these hear-
ings is for the education, enlightenment, and information of the
general public. You are certainly within your rights to indicate that
you don’t want this hearing broadcast for the education, enlighten-
ment, or information of the general public, but it is that kind of
news blackout that is going to exist that will continue these ques-
tions I think needlessly.


95

. Mr. WATKINS. But after the Secret Service incident, it was made
clear that I must more forcefully and immediately follow the direc-
tion of the First Family.

Mr. Suays. And what was that, fire them?

Mr. WATKINS. The direction of the First Family was to take swift
and responsive action. That was—that was the —

Mr. Suays. That wasn’t all of it; was it? What were the specific
requirements that you had from more than one person——

Mr. WATKINS. According to the best of my notes and then my re-
view, it was that we should reduce the travel—we should get our
people in and get those people out. That and——

Mr. SHays. What does that mean? It means fire them. If you get
them out, it doesn’t mean—what do you do? It means get rid of
them; doesn’t it?

Mr. WATKINS. That is what it means.

Mr. Suays. Now, you didn’t just have one discussion with the
First Lady with this. You also had a telephone conversation.

Mr. WATKINS. No, sir.

Mr. Suays. No telephone conversation with the First——

Mr. WATKINS. You're not allowing me. I had a telephone con-
versation with the First Lady. I never had a face-to-face conversa-
tion with the First Lady about this incident.

Mr. Suays. Did she want you to keep the travel staff?

Mr. WATKINS. Her—her comment was—and let me explain to you
the progression of the telephone conversation. I gave her a report,
a verbal report, on the findings of Peat Marwick and she—she re-
sponded to that and she said, well, Harry tells me that we can save
money and that we can—and we need to get our people in
there—

Mr. Suays. Who is Harry?

Mr. WarKINS [continuing]. And get those people out.

Harry Thomason.

Mr. SHays. OK, Harry Thomason wanted the business, correct?

Mr. WarkIns. No.

Mr. Suays. No, he didn’t want the business?

Mr. Watkins. I don’t think so, Congressman. I don’t think it was
ever—I think his partner inquired one time and he—.

Mr. Says. Excuse me, I just want to remind you you are under
oath.

Mr. WaTKINS. I understand that I am under oath.

Mr. Suays. You are saying you do not have any knowledge of his
wanting the business.

Mr. WATKINS. I think that Harry Thomason in my opinion——

Mr. Suays. I don’t want your opinion. I want to know what
you——

Mr. WaxMaN. Point of order, Mr. Chairman.

Mr. WATKINS. How else can I answer?

Mr. Suays. I want to clarify my question. My question is, do you
have any knowledge of Mr. Thomason wanting this business? I
want to be very clear because other people have been indicted by
a question like this. I want to know the answer to that question.

Mr. WarTKINS. I am going to answer it the way I want to answer
it, Congressman. I am confident that Mr. Thomason, and certainly


33

IMPROVING TRAVEL MANAGEMENT IN GOVERNMENT—DECEMBER 1995
IssUE
Use Travel Management Centers (TMCs)
BACKGROUND

The General Services Administration (GSA) Travel Management Center (TMC)
Program consists of contracts with private sector travel agents to provide commer-
cial travel services at no cost to the government, The travel agents are paid commis-
pions from other travel service Prov ders (airlines, hotels, etc.) ier lly, TMCs

ave provided one- or passenger trans) 1, q rent
vehicles for federal travelers, Some large professional travel egent companies offer
a broad range of travel services. Expanding the use of TMC services to include trav-
el policy compliance, pre-determined travel cost estimation, and detailed travel ex-
pense reporting may result in the government being charged for services. However,
these services, currently being performed by government agencies, could be
outsourced to streamline governmental operations, and significantly reduce the ad-
ministrative costs associated with federal travel.

RECOMMENDATION
The Project Team recommends federal agencies outsource to TMC’s all travel ar-
rangements and travel cost estimations and expense reports. The General Services

‘Administration and federal agencies should partner to identify requirements to de-
velop a range of expanded standard services. TMCs can use management informa-
tion to integrate agency defined cost limit controls and compliance checks to ensure
bookings and itinerary changes comply with federal and/or agency's travel policy
guidelines. Linking TMC pre-determined cost estimates and expense Teports, and
agency accounting data will improve government financial management. These links
will provide data to (a) better manage trip planning and travel funds, (b) implement
lower cost payment options such as Electronic Funds Transfer (EFT) and split dis-
bursement (to the traveler and to the government charge card company), and (c) re-
duce account reconciliation costs, and travel information retention costs. In addition
to the savings identified in the matrix (Appendix A), this proposal will reduce ad-
ministrative expenses which cannot be quantified at this time.

IMPLEMENTATION

Implementation of this proposal requires development of standardized contractual
pecifications to include the recommended services. GSA should develop general
standards specifications and consult with agencies to develop additional agency re-
quirements.

Mrs. MALONEY. I really believe that we should be working today
on improving management, rather than pointing fingers and throw-
ing darts at the President’s wife. After all, Mr. Chairman, the
name of this committee is the Government Reform and Oversight
Committee.

Now, Mr. Watkins, I would like to follow up on some of the ques-
tioning of my colleagues here. Much has been made of the charge
that you implicated the First Lady as the person who terminated
the Travel ice employees. I want to be clear that I understand
who exactly was responsible for the decision to terminate the Trav-
el Office employees.

Is it your testimony today that you made the decision to termi-
nate the employees after the Peat Marwick review found serious fi-
nancial management problems in the Travel Office, abysmal mis-
management that they found?

Mr. WATKINS. Congresswoman, it was my decision to terminate
the Travel Office employees.

Mrs. MALONEY. And then Chief of Staff, Mack McLarty, approved
your decision, correct?

Mr. WATKINS. That is correct.


17

Mr. WATKINS. Congresswoman, I don’t know the exact practice,
what practice each of the members of the Peat Marwick team was
on. When I was given the name of Peat Marwick, of a gentleman
from Peat Marwick, I called him, described what we wanted, a fi-
nancial—a review of the White House Travel Office. He, in fact,
said that he would get a team together and be there the next day.
So to my knowledge, it was someone that was familiar and did fi-
nancial reviews.

The Peat Marwick investigation was not an audit. They felt there
were not enough records there to audit, that they’d call it a review.

Mrs. MORELLA. Right.

My understanding is that indeed it was a management team
they put together to review, as you say, but not their auditing
team. So there is a significant difference.

I also understand that Peat Marwick never used the words
“abysmal mismanagement,” which came from that Management
Review. Would you agree with that?

Mr. WATKINS. I’m not—I cannot concur or disagree.

Mrs. MoreELLa. I think that is indeed true from what we have
heard from the Peat Marwick report.

Picking up on your memorandum, sir, will you read the second
sentence of your memorandum?

Mr. WarTKINS. This is a soul cleansing, carefully detailing the
surrounding circumstances and the pressure that demanded that
action be taken immediately.

Mrs. MORELLA. Now, you were telling the truth, I assume, when
you stated in this memorandum that it was meant to be soul
cleansing; right?

Mr. WATKINS. That's correct.

Mrs. MORELLA. You state in the memorandum that you were
carefully detailing the circumstances and the pressures that de-
manded that action be taken. Isn’t it true that the action to be
taken was the firing of the seven White House Travel employees?

Mr. WATKINS. That's correct.

Mrs. MoRELLA. Right.

The memorandum is your account of the circumstances and the
pressure that caused you to fire these seven Travel Office employ-
ees; isn’t that correct?

Mr. WATKINS. Basically, Congresswoman, it is my reaction to the
accounts of and report of the White House Travel, internal memo-
randum, internal review, and where they were critical of actions
taken, it was my—basically my response to those criticisms.

Mrs. MoRELLA. The memorandum is your truthful account of the
circumstances and pressures that caused you to require that all the
Travel Office employees leave the White House and, as I mentioned
earlier, after being given only hours to gather up all of their be-
longings, vacate their office, an office that a number of them had
had for over 25 years; isn’t that true?

Mr. WATKINS. They were asked to leave that day, that is correct.

Mrs. MoRELLA. That day, right.

You were truthful in your memorandum when you stated that it
was important to set the record straight on the Travel Office occur-
rences, right?

Mr. WATKINS. That’s correct.


61

Findings:
(a) All checks written in payment of charges related to this one trip (President
Clinton’s trip to Detroit, Michigan on February 10, 1993) appear to be properly sup-

ported.

(b) All checks appear to be properly endorsed.

Objective 7: To analyze ‘the. volume of cash activity flowing through the press
travel fund bank account from the period January 1, 1992 through April 30, 1993.
Procedures:

(a) Obtained bank statements since January 1, 1992.

(b) Collected the following information about the press travel fund cash account.
Beginning and ending bank balances of the press travel fund cash account.
Average daily ¥
Total Teceipta (for the month).

Current balance on hand as of April 30, 1993.

We noted the following information (cents omitte:

Beginning belence at January 1, 1992 .... $636,813
‘Total receipts, January 1, 1992-April 30, 1993 10,446,951
‘Total disbursements, January 2, 1992-April 30, 1993 -10,709,680
Ending balance at April 30, 1993 374,084
—<«

Range of average daily balance:
High in January, 1993 1,080,247
‘Low in March, 1993 245,195.

Objective 8: To gain an understanding of the volume of air charter service fees
for the period January 1, 1992 through May 15, 1993 and to determine the recipient
of the fees.

Procedures:

(a) Obtained the check books from January 1, 1992 through May 15, 1993 and
noted checks disbursed in payment of either commercial or chartered air service.

(b) Summarized the detailed information gathered in (a) above by individual car-
rier/airline.

Findings:

In summary, the following airlines or charter services were disbursed funds from
the press travel fund from January 1, 1992 through May 15, 1993 (cents omitted):
Domestic Travel:

Utrair, Ine .. $428,733
Airline of the Americas, 2,123,939
Pan Am World Airwoys 100,815
Miami Air Intemational 343,024
2,996,511

International Travel:
1479,247
(892,064
154,579
2,525,890
<=
Grond Total. 5,822,401
Objective 9: To determine that all disbursements made to Ultrair, Inc. or Airline

of the Americas since September 1992 were included in the overall trip charges on
the trip worksheet for a specific trip.
Procedures:

(a) Assembled, from the check book stubs, a listing of all disbursements made to
Ultrair, Inc. or Airline of the Americas since September 1992.

(b) Traced the check amount to the respective trip worksheet, or trip worksheets
in the case of one check paying for more than one trip. We noted whether there


4

Today we will see new documents, also withheld for more than
2¥2 years from investigators. They were only provided when we
personally subpoenaed documents from Mr. Watkins.

We have sent additional subpoenas to Mr. Harry Thomason, Mr.
Mack McLarty, Mr. Bruce Lindsey, Patsy Thomasson, and others
at the White House. We do intend to subpoena other former White
House officials as well as Justice Department documents. This is
because the volume of withheld documents has been astounding in
this matter.

Mr. Shaheen, of the Office of Professional Responsibility at the
Justice Department, testified before our committee that he was
“stunned that the Vince Foster Travel Office file was withheld from
his investigation and other investigators for almost 2 years.”

Documents relating to Harry Thomason’s attempts to get GSA
contracts were withheld from GAO when they investigated the
Travel Office and related matters. Now we have the Watkins
memo, the memo from Mr. Watkins, and just 2 days ago Mr. Wat-
kins provided us with notes never before provided to any investiga-
tors as far as we know.

Mr. Watkins’ documents, as well as other recently provided docu-
ments, demonstrate that both the President and the First Lady
were aware of Harry Thomason’s allegations and that he sought
government business for TRM.

Documentary evidence also suggests more involvement with the
President and the First Lady in key events leading to the firings.
Even with many documents still outstanding, a vague and fuzzy
picture is becoming ever clearer.

Let me say at the outset, this investigation is not about politics.
I know that has been the charge, that this is a totally political
witch-hunt during an election year. It is instead about people.

Despite what some at the ‘ite House may say, this investiga-
tion is precisely about finding the truth, after six investigations,
none of which were thorough, and none of which had access to
many of the documents that have come about as a result of our in-
vestigation.

Frankly, I had seriously hoped this investigation could have,
should have, been completed months, even years ago. But when
documents are withheld for years after investigations have begun,
it is difficult to reach closure.

We still haven’t been able to get an explanation as to why this
Watkins memo as well as other documents were not found for over
2 years. The White House tells us it needs another week or so to
figure out where this memo has been all this time. Why are such
simple questions so complicated for this White House to answer?

e White House fired the Travel Office based in part on “sloppy
recordkeeping.” If it applied that standard to its own employees,
who have been gathering records for various investigations, frank-
ly, they would also, I think, have to be relieved of their duties.

‘om the very beginning of this whole sorry situation, back in May
1993, the Clinton administration has engaged in foot dragging, half
truths and dissembling.

But the documents we have finally received to date suggest that
Travelgate is first about a friend of the President’s who sought out
a wide array of government business, including business in the


93

We have now completed two full rounds. I am appreciative of the
fact that Mr. Watkins has been here for some time. I am reluctant
to start a third round. On the other hand, I am also reluctant to
muzzle anybody who has additional questions. I would like to have
some indication if there is interest in going another full round or
if there are one or two members who do have additional questions
we could yield to them.

Mr. Shays, Mr. Kanjorski. You all want three, everybody?

Mr. WAXMAN. Mr. Chairman, may I—

Mr. CLINGER. I was going to hopefully—

Mr. WAXMAN. May I suggest that this man has been here all
these hours. This was supposed to have been a bombshell hearing
and we have put him through 5 hours and haven't gotten a cap gun
in terms of anything out of this hearing. I just think it is—we
ought to be reimbursing him for his attorneys’ fees just to ge
through this whole long hearing today. Two rounds seems to
adequate,

Mr. CLINGER. I just suggested if there were members—I did not
want to in any way shut off anybody who had questions. I asked
if there were—any of them had questions, Mr. Shays, and only
three of you did.

Mr. SHays. With the Chairman’s permission, I would like to ad-
dress the comments that were just made.

Mr. CLINGER. The gentleman from Connecticut.

Mr. SHays. I have listened all day to you gentlemen on that side
of the aisle complaining about process and not asking intelligent

juestions, And I remember that when I was on the HUD hearing

was very willing to go after, for the sake of uncovering informa-
tion, Republicans. I would like the same courtesy from that side of
the aisle.

It is an absurdity to suggest that a hearing that started at 11,
that is 15 after 4, with a half hour break, when we had HUD inves-
tigations that lasted 8 hours with the same witness being on—Mr.

‘'axman, I have attended hearings you have conducted. You have
been merciless——

Mr. KaNJorsKI. Will the gentleman yield?

Mr, Suays. I want to say I respectfully request we have a third
round.

Mr, KANJORSKI. Mr. Chairman, I have a request. I think we
should have a hearing tomorrow. I think we ought to give this law-
yer an opportunity to have at least another $10,000 fee.

Mr. CLINGER. Mr. Watkins just fell off his chair.

The committee will come to order. I will recognize the gentleman
from Connecticut for 5 minutes.

Mr. Suays. Thank you.

Mr. Watkins.

Mr. WaTKINS. Yes.

Mr. Suays. With all due respect, I don’t know if you are a bad
guy or good guy. I don’t know if you are taking the hit or if you
are trying to get rid of the hit and put it on someone else, because
I read your memos and your memos say not my fault, someone
else’s fault. And I hear your testimony today, and not their fault,
maybe I took it. I just want to know. I want to know ultimatel
whether you told the truth in this memo when you said, I thin!


38

Mr. WaTKINS. There was a concern for swift and decisive action,
yes.

Ms. Norton. I am asking you if your own view of your own ac-
tions in taking care of this situation is that you were proceeding
speedily enough?

Mr. WaTKINS, I believe I was proceeding speedily enough; that is
correct.

Ms. Norton. Let me cite to you from your own memo of May 17.
I note that that memo is dated, even though the memo that you
dictated was not. In your memo you cite from the Peat Marwick in-
vestigation the following: billing to the press corps, this is your
quote, from the Peat Marwick report:

Billing to the press corps is informal, undocumented, and based on personal judg-
ments. The press is built on estimates, not on actual costs, and these estimates are
made by the airector in his head. If the director believes he has been overcharging
on one trip, he will just undercharge on the next.

Did that make you nervous, Mr. Watkins?

Mr. WATKINS. Yes, it does. It did.

Ms. Norton. Everyone is concerned that there was an indict-
ment that was followed by an acquittal. Let me just say for the
record that I hope we are not casting aspersions on the judge that
sat, because if there was an indictment, that indictment could have
been thrown out. If there was no cause to precede, you would have
not needed this committee; that would have been done by the judge
involved.

In light of what I just read you and in light of what you appar-
ently saw was pressure to fire the director, do you believe you
could have found another job in the Federal service for someone
who had—who Peat Marwick had said was handling billing in this
way?

T am asking you what was the alternative to firing the person
who had, in fact, engaged in these actions.

Mr. Watkins. I think it would have—with that, it would have
been difficult probably to replace—to find another position.

Ms. Norton. Let me read to you another excerpt from your own
memo to Mr. McLarty of May 17.

Unaconunted for funds. Large checks have been written to eash for the intended

vers an 8. In the 17- rio
Studied, 17 checks were wrtion Ef tosh, However, in'8. of these 17 coaca? Post
Marwick found discrepancies in the cash leaving the bank and the amount fogged
into the petty cash fund. The unaccounted for cash totaled $18,000.

What alternative do you believe you had—leave aside the First
Lady; leave aside Mr. McLarty—when you found that people who
reported to you were engaging in practices such as the one I have
just read of?

Mr. WaTKINS. As I stated before, Congresswoman, that I felt that
had we not taken some action, there would have been criticism
based on the finding of KPMG Peat Marwick.

Ms. Norton, Indeed, in that same memo under a heading “fol-
low-up actions”—and I am quoting:

Late Saturday, we briefed the FBI on these findings and began planning a new
system to replace the old one. FBI agents suggested they believed there was suffi-

cient cause for them to conduct a criminal investigation, for the SS to have Peat
Marwick before the FBI would begin further work.



100

in People to do this in a better manner and save money. That—that
reference to what the First Lady was talking about, I’m sure, Mr.
Chairman, was—that was the reference, that is what was meant.

Mr. CLINGER. You didn’t imply that that meant that Mr.
Thomason was trying, to get the business.

Mr. Watkins. Absolutely not.

Mr. Suays. So Mr. Thomason said he could find some people that
could run this business better.

Mr. WarTkins. And he did. He brought Miss Sample in. That’s—
that’s—.

Mr. Says. Was she connected in any way to World Wide Travel?

Mr. WaTKINs. Not to my knowledge.

Mr. Suays. Did World Wide Travel have to take a bid on the
White House business?

Mr. WATKINS. No, sir. Because the reason no one took a bid is
because had we gone out before the firings and gotten bids over a
process, we didn’t know how fast anyone could work. We knew
World Wide had done a good job in the campaign -—

Mr. Suays. The answer is, no, they didn’t bid. Why did World
Wide Travel not have to bid? Why did you say Mr. Thomason
would have had to bid, why the double standard?

Mr. WATKINS. For charters. Every charter was later bid, every
charter. Every charter was later bid. World Wide Travel.

Mr. Suays. Did World Wide Travel

Mr. WATKINS. May I answer?

Mr. Suays. Sure.

Mr. WATKINS. World Wide Travel was done in an on-interim
basis. It was explained to them that way that within 90 to 120
days there would be a bidding process and they could compete and
they could submit a bid if they chose. And that is what was com-
municated to World Wide. They were—they were going to have to
help us out an interim period of time——

Mr. SHays. Have you submitted that document? Is there any doc-
ument that says that they would have to do that?

Mr. WATKINS. I think it’s very common knowledge among—I
think Miss Thomason would know—. .

Mr. SHays. With all due respect, is there anything in writing
that would say that? You know, these are basic kinds of questions.

Mr. WATKINS. I don’t know. I cannot address and give you a spe-
cific memo or anything. But it was certainly my intent to do that.

Mr. SHAYs. So it was your intention to do it though there may
not be nothing in writing that says that.

Mr. WaTKINS. The whole purpose, though, I would have been
foolish not to do that. I would have been an idiot not to do it when
the findings of Peat Marwick and one of the great criticisms was
that there was no bidding.

al Suays. Did you have any connection with World Wide Trav-
el?

Mr WartKINs. I do not have a connection with World Wide Trav-
el.

Mr. SHays. When you were running it as the deputy campaign
manager—was that your position? Were you in charge of—the busi-
ness manager, was that your position?

Mr. WATKINS. I was the deputy campaign manager, yes.


41

Mr. Davis. Well, they were trying to get White House business
for their company; isn’t that correct?

Mr. WATKINS. White House travel business.

Mr. Davis. At that time Mr. Thomason told you that many peo-
ple in the industry knew individuals in the White House Travel Of-
fice had been on the take for years.

Mr. WATKINS. That is as I recall that, yes.

Mr. Davis. I am not trying to—

Mr. Watkins. I don’t know the specific words.

Mr. Davis. Exactly, I am not trying to do a——

Mr. WATKINS. In context, yes.

Mr. Davis. Did he supply any documents? Did he tell you who
he was talking to in the industry? Did this perk you up as some-
body who had oversight on that, gee, people on the take; who are

they?

This was early in the process. How did you react on that, and
were there any supporting documents given to you?

Mr. WATKINS. No, and, as I recall, my reaction was again to—
I informed him that Ms. Cornelius was working in the White
House Travel Office and that she was making a report to me on
May 15, and if there was any—you know, any kind of indication
of that in her report, then I would acknowledge it. It did not—it
was not on the front burner of my head.

Mr. Davis. Now, Catherine Cornelius says that you were reading
from a binder when you relayed to her information that “these guys
are crooks,” and that she learned it was information from Harry
Thomason. Did Harry Thomason give you any information?

Mr. WATKINS. I don’t recall.

Mr. Davis. Independently?

Mr. WATKINS. I don’t recall any, no.

Mr. Davis. OK. Did Mr. Thomason ever five you any briefing pa-
pers or background information on these allegations?

Mr. WaTKINS. No, sir.

Mr. Davis. In your statement to Public Integrity, you said in
April that Thomason said that individuals working in the Travel
Office should be fired, and that the result would be good news sto-
ries. What was the basis for his saying they should be fired; do you
remember?

Mr. WaTKINS. Well, I think it referred to the rumor that you
were talking about, that they had been on the take for years and
there was financial mismanagement.

Mr. Davis. OK. But in fact, you received a memo from the Presi-
dent at one point telling you to help Harry Thomason with govern-
ment contracts or saying something, that these eye are sharp?

Mr. Watkins. I don’t think the memo was directed to me. As I
recall it, I don’t have a copy. I think that——

Mr. Davis. Mr. McLarty, maybe.

Mr. WATKINS. I think so.

Mr. Davis. Do you remember seeing it?

Mr. Warkins. I may have seen a copy, but I didn’t take any ac-
tion on it, and it was not directed to me.

Mr. Davis. OK. Our copy for the record shows it was from Mack,
Mark and Watkins is where it was directed to, but I can under-
stand——