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Press Briefing by Chief of Staff Mack McLarty

July 02, 1993

The Briefing Room

12:45 P.M. EDT

MR. GEARAN: Good afternoon, and welcome. (Laughter.) Thank you for having us here.

On May 25th, the White House announced that the Chief of Staff Mack McLarty would be conducting a review. It's an internal management review of the White House Travel Office and the decisions that were accompanying and the events around the dismissal of the seven White House Travel employees. He would be assisted in that project with the Director of the Office of Management and Budget Leon Panetta.

The report that you were provided today is the result of that internal management review. It is based on the interviews that were conducted with more than 40 persons inside and outside the White House, as well as a review of all of the relevant documents produced by those persons. I think you will find the report that's given to you is both thorough and complete. And the Chief of Staff is here, as well as the Director of the Office of Management and Budget, to give you their statements and to answer your questions. We also have John Podesta, the Staff Secretary, who was assisted by his deputy, Todd Stern, in the preparation of this report.

Mr. McLarty.

MR. MCLARTY: As Mark noted, today Director Panetta and I are releasing a management review of the actions by the White House staff regarding the White House Travel Office. The review ascertained what happened in the Travel Office matter, and as a result, we are implementing improvements in procedures.

The management review, as Mark also noted, was prepared and submitted to us by John Podesta and Todd Stern. Mr. Podesta, as many of you know, is the White House Staff Secretary, and Mr. Stern, as Mark said, is his deputy.

Neither of these lawyers had any direct involvement with the White House Travel Office prior to this report. The report, as Mark suggested, is thorough and, we believe, candid. And I certainly personally appreciate John and Todd's work, as does Leon.

The report details that mistakes were made and identifies some ill-advised actions. It does point out that the Travel Office had significant management problems and those are detailed in the Peat Marwick review, which has previously been released and which is included in your packet of materials.

The key findings about the Travel Office from the Peat Marwick report include unaccounted-for funds, a lack of financial accountability, billings by estimate, a poor cash management system, and a clear lack of documentation. This is established not only by this review, but is also confirmed with the savings we have already achieved from different management practices and competitive bidding.

It is also important, I think, to remember that the Travel Office, like all other White House staff, serves at the pleasure of the President. There was good business and good government justification to implement some prompt changes in the Travel Office.

But to our regret, we erred in implementing these needed changes. From a management standpoint, in other words, we did the right thing but we clearly did it in the wrong way. The management review report describes and acknowledges mistakes and sets forth, as I noted earlier, the actions we have taken and are taking to correct them.

I would like to specifically address some of these issues. The report notes that there had been rumors of problems in the Travel Office circulating for some time. At the White House Correspondents Dinner a couple of months ago it was noted that the cost of press travel was becoming increasingly expensive.

The report addresses Harry Thomason's involvement in this matter also. Though it may have been appropriate for Mr. Thomason to suggest potential areas for improvement and savings, his persistence led to the perception that he was intervening. The White House Office of Management and Administration and the Chief of Staff's Office should have thanked Mr. Thomason for his information, looked into the matter seriously, but certainly more deliberately and carefully. Based on what we now know, Mr. Thomason's belief that savings and efficiencies could be achieved seems to have been borne out. But we certainly wish the implementation had been free from any intervention.

The report submitted to Director Panetta and to me also criticizes aspects of the White House dealings with the FBI. One is the initial involvement. Upon being advised of potential allegations of problems in the Travel Office, an associate White House counsel called the FBI to seek guidance as to how to look into an internal matter or internal security matter. That call did not violate any stated procedure or policy. However, when the FBI did not respond as quickly as the associate counsel had hoped, he erred in using language which could have been interpreted as pressing the FBI, and in mentioning the possibility of seeking guidance from other agencies such as the Internal Revenue Service.

I would note that the FBI, with the concurrence of Justice Department officials, determined on its own to commence an investigation. Also, the Internal Revenue Service was never contacted.

In any event, the Counsel to the President has instituted a new policy in which the Attorney General had concurred that any future calls regarding the White House in internal security matters will be first routed through the Department of Justice.

The second matter concerning the FBI was the disclosure by the White House of the FBI investigation to the Travel Office. This absolutely should not have happened. And why it did is addressed in very specific detail in the report. Those who serve at the pleasure of the President know that they may be dismissed. But no one should expect his or her dismissal would be publicly connected by the White House with an FBI inquiry.

On behalf of the entire White House staff, I personally and professionally apologize for the disclosure to the employees who were working in the Travel Office and to their families and friends.

The third concern deals with the FBI press release andor press responses, and the meeting which took place at the White House with the FBI information official. Those attending the meeting were acting in good faith. But inviting an FBI representative to a communications meeting was insensitive to the appearance of White House influence. This, too, is specifically detailed in the review.

In addition to apologizing for the disclosure of the FBI investigation, I would now like to briefly address the treatment of the Travel Office employees. This action clearly should have been handled in a more sensitive manner, in retrospect. At my direction, action was taken later to extend indefinitely the paid administrative leave of the five employees who had no financial authority. The five employees will be reassigned to comparable governmental positions, but no final decision on their permanent status will be made until the Travel Office inquiry has been completed.

I am disappointed with some of the actions taken by various members of the White House staff upon whose recommendations and judgments I must rely. But as Chief of Staff, I accept responsibility for those mistakes. I am particularly and I personally regret that I did not review the staff recommendation to me for dismissal with more caution, more thoughtfulness, and more scrutiny.

The mistakes call for some corrective actions, and these are also outlined in the report. They include: The Counsel to the President has issued a revised guidance to all White House personnel clarifying that initial White House contacts concerning ongoing FBI investigations or criminal activity will occur only between the Counsel's Office and the Attorney General, Deputy Attorney General, or Associate Attorney General.

Secondly, the Counsel to the President has issued a revised guidance to all White House personnel clarifying that it is never appropriate to contact the IRS to institute an audit.

Thirdly, the White House Press Office will not disclose ongoing investigations except in extraordinary circumstances and only with the approval of the White House Counsel and Chief of Staff or Deputy Chief of Staff.

The Director of Communications has issued guidance to all White House Communications Department personnel which clarifies the procedures for contacts between the FBI Public Affairs Office and the White House Press Office.

The White House has selected through competitive bid and experienced travel agent to manage the commercial travel, which already has and will result in savings to the government. The White House has instituted a competitive bid process to select press charters, which will result in savings to the traveling press corps.

The White House Travel Office is implementing a new accounting system developed by the Office of Management and Budget and has stringent internal control procedures in place to assure sound financial management.

The White House Office of Management and Administration has requested GSA, in consultation with OMB's Office of Financial Management and the White House Correspondents Association, to assess the current interim systems in place for the Travel Office and make appropriate recommendations for the final structure of the White House Travel Office during the month of August 1993.

The Chief of Staff's Office, with the assistance of the Counsel's Office, will issue appropriate rules for access to the White House by persons who are not in full-time government positions and whose access is not already controlled by other procedures.

In addition, Leon and I have fully reviewed the criticisms in the report with the staff members involved. We've had some very frank and direct discussions, and I have made it clear that I will not tolerate any repetition of the conduct which has been criticized. I expect my instruction to be strictly obeyed, and I expect there will be no repetition of the conduct in the future.

I have issued reprimands to David Watkins, William Kennedy, Jeff Eller and Catherine Cornelius. And Ms. Cornelius will be reassigned to another position which has not yet been determined.

Finally, this management review is being referred to the Attorney General and the Justice Department for her full review.

That concludes my comments. At this time, Director Panetta has a few comments, and then we'd be glad to take questions.

MR. PANETTA: Mr. McLarty's statement I think represents a pretty complete summary of the management review report, its conclusions and its recommendations. And, obviously, I recommend that you look at the report itself because I think it is a very accurate and candid assessment of what took place.

I was asked to assist in this review because I was a senior White House official who was not involved with the events relating to the Travel Office, but because OMB does have a financial management section. We were responsible for looking at the operations of the Travel Office, but also responsible for overall management issues within the federal government. My role was to examine the work of Mr. Podesta, Mr. Stern, and to participate in key interviews and discussions associated with this review.

In addition, as I mentioned, the Office of Management and Budget has developed a new accounting procedure and also developed new financial management systems that were clearly needed in the Travel Office. I think it's important to point out the problems that were discovered at the Travel Office because the fact is that this was an operation that was very poorly managed. And however the circumstances that led us to dealing with it, I can assure you that what we found there was a situation that required urgent action.

This was an area where they had unaccounted-for funds almost totally $18,000. There was no formal financial reporting process, no reconciliation of financial information, no documented system of checks and balances on transactions and accounting decisions within the office, no apparent oversight of financial activities, no general ledger or cash receipts disbursement journal, no aging reports, no reports of outstanding accounts receivable, no apparent rebilling when receivables had remained outstanding for a given period of time, no segregation of authority between those who could sign and those who could endorse checks, very little documentation in terms of billing, and no written contract between the Travel Office and the primary domestic charter company that it used.

Obviously, it was necessary that we move quickly and try to improve the management of that office.

I think it's also important to point out here that this was an internal review, conducted within the White House for the purpose of determining what exactly happened in the situation, what went wrong from a management point of view, and what steps are necessary to try to improve controls and procedures within the White House to ensure that nothing like this happens again. The report we are issuing today is an accurate, candid reaccounting of the events related to the Travel Office. It is also, I believe, a very blunt assessment of the actions of a number of White House staff members. And I recommend that you read the report and the accompanying documents.

The report clearly states that in an effort to deal with what, as I pointed out, was a very real management problem within the Travel Office, mistakes were made -- mistakes of judgment, mistakes of inexperience that included inappropriate actions with respect to the FBI, allowing the appearance that personal interest and favoritism could play a role in management decisions and unfair treatment of White House employees.

As difficult as this review has been for the White House staff involved, as well as Mr. Podesta and Mr. Stern, Mr. McLarty and myself, I truly believe that in the end it will help ensure that some good comes from these events and that important lessons are learned, and that everyone here at the White House continues striving to do a better job for what we came here for, which is to better serve the President of the United States and the American people.

Q: Mr. McLarty, the people that you've identified misused government institutions and trampled on the constitutional principle of presumption of innocence, thereby blackening the reputations of people. The question is, sir, why are they still on the government payroll?

MR. MCLARTY: Well, I don't think that's quite a fair characterization. I think the report, as you review it carefully, will suggest that the initial call to the FBI was in accordance with policy and was proper to ask for guidance about what to do about this matter. I think at that time, after several other calls to get to the proper people, as I understand the facts, the FBI did review this matter -- I believe they interviewed Ms. Cornelius -- made an independent determination to go forward with a review. And I think, Gene, in fairness, Mr. Foster, Deputy Counsel, after this period, said, no, would you wait because we now have an audit by an outside audit firm that we believe we should do first.

Let me also say as background there is no internal audit in the White House, per se, so that was being looked into. The FBI, as I understand it, rather -- I won't say reluctantly. I don't want to speak for them -- but said, okay, we will wait. But that was at the clear suggestion of Mr. Foster that we slow this process down, which I certainly supported.

After the Peat Marwick audit and review, which I have spoken to, as has Director Panetta, the FBI reviewed that, as I understand it, and determined that they should go forward with an investigation, again, on their own, as I noted in my comments. Where the mistake was made was in any way our disclosing that review from the White House.

In terms of the actions taken, this is an internal management review and I, frankly, relied on Mr. Panetta for his thoughts and counsel about what was the proper action here because I felt like he was one step removed from this, although it is ultimately my responsibility to the President in that regard. And he felt after our discussion I think independently -- and Leon can speak to that -- that the actions we have taken are appropriate, under the circumstances, all things considered, particularly given a full report.

Q: With all due respect, sir, in exchanges with members of the press corps, there were allegations made based on hearsay, based on no evidence whatsoever. In addition to that, the FBI matter was pursued even after some of us suggested that that wasn't the appropriate course because it was -- your office was using a -- loaded term -- using buzzwords to impugn the integrity of people who had not been proved guilty of any crime.

MR. MCLARTY: Well, I don't know about those specific conversations and discussions, but I would say that, again, the decision, as I understand the facts, to pursue the review was made totally independently by the FBI after having been requested or recommended by the Counsel's Office not to proceed with that investigation or review until the audit had been completed. Now, the FBI could have proceeded, but that was our --

Q: Mr. McLarty --

MR. MCLARTY: Just let me finish, Terry, if I may. I think that there had been a number of rumors, if you want to call them that. But I understand your point. Since I was not in on those discussions, Gene, I don't know how to directly respond to that.

Q: Could you explain the practical impact of these reprimands that you've issued? Are they identical? Is there any loss of pay involved in this? Just tell us about that.

MR. MCLARTY: No, there's no loss of pay. I think the practical impact -- I think I'm experiencing some of it right now in this briefing. But, obviously, this has been a difficult period, as Leon just suggested.

Q: Are there letters in files, sir, or anything like that?

MR. MCLARTY: Leon, do you want to address some of the specifics? The answer is no, Brit, there's not. But let Leon address some of that.

MR. PANETTA: We've just announced reprimands for the people involved here. I think that's more than sufficient in terms of what's involved here. There was no criminal action here. There were no criminal violations involved here, as best as we can determine. These were --

Q: What were the reprimands for?

MR. PANETTA: Just a minute. Let me answer the question. These were mistakes of judgment and mistakes related to inexperience in many instances. And our feeling was that we needed to point that out. We've had a serious discussion with each of the people involved as to the mistakes that were made. We made very clear that these mistakes are not to be repeated again. We also made clear that we would make public the fact that these reprimands have been made with regards to each of these individuals. And I think, considering the situation, that that is sufficient in terms of dealing with this.

Q: Was Mr. Kennedy on the list of those reprimanded?

MR. MCLARTY: He was.

Q: For what specific action? What was he reprimanded for?

MR. MCLARTY: In terms of the judgment and decision to leave any appearance of pressure or whatever on the FBI for timeliness or a more prompt review of this matter.

Q: What were the reprimands for the others?

MR. MCLARTY: I had already acknowledged Helen, but we'll get to you next.

Q: Is the President going to apologize personally to the real victims of this whose names and reputations were blackened? Are you going to pick up their legal fees? Is the FBI investigation still going on? Since you addressed it, you guys addressed it -- I know you can't talk about FBI -- but are they in purgatory, or will they know when it's over?

MR. MCLARTY: Well, there's been no -- first, the FBI review is ongoing and we should not and will not comment about that. That's number one. Number two, there's been no discussion of fees. That does not seem appropriate at the time. The President has been briefed on this, but not specifically in the matter that you raise in terms of apology.

Q: You're taking the responsibility and the President is not?

MR. MCLARTY: I've already accepted the responsibility. I think the President has spoken about overall responsibility, not on this matter, but in general before. But certainly as Chief of Staff, I have responsibility. I've already spoken about staff responsibility.

Q: Did the President know about it while it was going on?

MR. MCLARTY: Helen, let me say one other thing, if I may. I think in terms of communication with the seven people involved, I think, John, we have a letter or a clarification that we are prohibited from doing that or --

MR. PANETTA: Yes. The Attorney General or the Justice Department made clear that we ought not to interview any of the individuals involved here as long as there is this pending investigation. And I think in answer to the question, really, it would really be inappropriate to proceed with any additional action involving those employees until we see what the results of that investigation are.

Q: But your investigation against them has cleared them basically, hasn't it?

MR. PANETTA: Well, we have apologized for the actions that were taken because we do feel that they were not done with appropriate sensitivity or care. But we also have to be careful that we do have an ongoing investigation here, and we ought to await the results of that before we draw any final conclusions.

Q: Sir, last week --

MR. MCLARTY: I think I promised right here. And when I've nodded at several of you as you've raised your hand, that's just acknowledging, not that you'll be next. But we'll get to -- try to get to all of you.

Q: Can you explain the reason why Miss Cornelius and the others were reprimanded? What were the specific reasons for those reprimands?

MR. MCLARTY: I don't know that there were specific reasons in a way that you expressed the question. I think there frankly needs to be some limit into discussion of personnel matters. I think the reprimands are very clear. And I think as you review the report, it really will become apparent in terms of the misjudgments or mistakes that were made.

Q: Can you give us some idea on Miss Cornelius, since that's where much of the interest is? Just generally speaking, why was she reprimanded? What mistakes did she make?

MR. MCLARTY: I think the involvement of the Travel Office suggested that maybe some judgment there was not as good as it could have been. In hindsight, I think she was placed, frankly, in what proved to be a difficult situation. And I think, again, hindsight always has some wisdom.

Q: There are several, throughout this, certainly errors of judgment , as you say, and inexperience. But on page 11 on the top of the page, the first graph refers to Watkins telling Dee Dee Myers that of all of this, which behind the scenes was clearly stimulated by him and Cornelius and others, was personal and professional interests in the fate of the Travel Office -- he told her to tell us that all of this was just conducted as a routine part of the Vice President's national performance review. Where I'm from in Minnesota, that's not an error of judgment. That's called lying.

MR. MCLARTY: Tom, I think -- I don't think I would quite characterize it that way -- (laughter) -- in Arkansas. (Laughter.) But the national -- there was -- as you know, the Vice President has the NPR review. And all of the departments in the White House were on that. I think the facts or the concern about the management practices there, which are outlined, prompted more quick action than otherwise would be the case. The review was done in the same general format as NPR. The Peat Marwick aspect was additional, Tom, you're correct in that. So I see your point, but I don't agree with your assessment.

Q: Let me follow up on Tom's question. Dee Dee Myers also told us specifically that Catherine Cornelius was not put into the Travel Office to assess what was going on in the Travel Office or to spy, if you will. And yet this report in the summary indicates that she quite clearly was. Was she misinformed or was she --

MR. MCLARTY: I think there was a lack of communication in that regard. I don't know that spying is used in this report. I think that's your characterization.

Q: If you want me to go to the summary that --

MR. MCLARTY: No, there was clearly lack of communication. More importantly, I think, than even that point was the FBI review, which I've already addressed. That was the most serious gap in communication and clearly the most serious consequences.

Let's go here and then I'll get back over there.

Q: Last week in the Congressional Record in open session at the Senate of the United States Congress this was brought up. And they're very concerned because they worked with these people for many, many generations and many years and they feel that these men were not treated right.

MR. MCLARTY: I think I've already acknowledged that. I think that's a correct assessment.

Q: I notice that American Express was awarded the new contract. Now, was this made under the -- of Jim Robinson or under the new CEO, Mr. Goler? And has Mr. Goler himself reviewed this contract, or has he left this up to lower-level employees?

MR. MCLARTY: The answer to the second part is I don't know.

Q: I can find out.

MR. MCLARTY: I think it was a competitive bid. John, do you want to address how the bids were --

MR. PODESTA: Yes. They conducted a bid.

MR. MCLARTY: John, you'd better speak up a little bit.

MR. PODESTA: I doubt the talked to Mr. Goler, but I'm not sure who at American Express they talked to, but it was -- they assessed three vendors who could do the business, given the international aspects of it and took bids over the phone over the weekend and selected American Express.

MR. MCLARTY: I think I'd already acknowledged Ann. We'll go to you next.

Q: Two questions, Mack. The first is, what was the First Lady's role in this? I see her noted as having contacts with Mr. Thomason. And also --

MR. MCLARTY: I don't believe Mr. Thomason, but go ahead.

Q: Well, okay, sorry. What was the First Lady's role in this?

MR. MCLARTY: Hillary, in a meeting with me -- it was a stand-up meeting of about five minutes -- asked about this. She was aware of it. I don't know whether it was from Mr. Thomason, Ann, or another way. That's the reason I -- when you said Mr. Thomason I reacted as I did. And just simply suggested from what she had understood we could certainly improve efficiency here, it appeared to be mismanagement, had heard some of the rumors that have been alluded to earlier. That was about the extent of the conversation with me. As I recall it, we also covered a couple of other matters in that conversation. And I think she also asked me about it one other time as to the status after the Peat Marwick review.

Q: Did she review this report and ask for changes in an earlier draft?

MR. MCLARTY: No, she didn't.

Q: She had no review of this other --

MR. MCLARTY: No, not to my knowledge.

Q: Could I follow up that?

MR. MCLARTY: Wolf, I think you're next. I'm trying to be reasonably orderly here and fair.

Q: Catherine Cornelius, what will her job now be?

MR. MCLARTY: I think, Wolf, I said that had not been determined in my comments. But she would be reassigned, and I don't think I gave quite as precise an answer as I would have liked in the fact -- to an earlier question -- that I think to the best of my knowledge Miss Cornelius has been very professional and capable in her duties. And I wanted to make that clear.

Q: What about -- the five people will be reassigned to other government agencies, but not necessarily in the White House -- the five who are going to be reassigned to other government agencies but not necessarily in the White House -- do you have specific jobs in mind for them? Will you help them find jobs?

MR. PANETTA: The Office of Management and Budget is now in the process of looking for those opportunities. We also, again, before we take that action, though, want to ensure that we have a complete report from the Justice Department with regards to the issue.

Q: They complain they were never interviewed either.

MR. PANETTA: The reason they were not interviewed is because we specifically, and I think it's included there, had a letter from the Justice Department saying that we ought not to interview them as long as there is this pending investigation.

MR. MCLARTY: Ann had a follow-up which I had acknowledged.

Q: Your report shows a memorandum to you dated May 17th with copies to her, to the First Lady.

MR. MCLARTY: That's correct. That's included in the report, that's right.

Q: So did she get routine updates on --

MR. MCLARTY: No, she did not. I think Mr. Foster suggested, I believe, to Mr. Watkins since she had made an inquiry either of me or him that he might keep her apprised and that's why she was carbon-copied on that memoranda.

Q: Let me just parenthetically say, Mack, this briefing would have been I think more productive for all of us if we could have seen this report before -- we are now in the process of reading it while we ask you questions which seems --

MR. MCLARTY: Your points well-made. It had been our hope that we could give it to you earlier. It's a thorough report and John and Todd have spent a lot of hours on it and we wish we could have gotten it to you earlier. That was our original intent. Your point's well-made.

Q: Has Harry Thomason's pass been pulled? You talk about access to the White House --

MR. MCLARTY: John, we have talked about passes and so forth on going forward. We've talked about it, John, I don't know whether not just Mr. Thomason's, but others. I'm not sure of the precise status, that's the reason I --

Q: I'm specifically interested in Mr. Thomason -- does he still have free run of the White House?

MR. PODESTA: Mr. Thomason's not in town.

Q: That's not the question.

MR. MCLARTY: I think it's a fair question. I think in my comments, John, I tried to outline, and we talked about this at some length and it goes in a small way to Ann's point, that -- no, I'm going to try and answer your question very specifically -- that access had to be very precisely defined and tightened up and the answer is not just Mr. Thomason, but others that are not formally associated with the White House in some way will not have hard passes.

Every administration has had this, at least that's our understanding, this dilemma of how do you control access. And I tried to leave a very clear impression that we intend to implement a very definitive policy and we would have liked to have done that today, John. Frankly, we just didn't have quite enough time to fully think it through, because you don't want to do it so in a way that doesn't work. Obviously, the point is one of the problems here was too much access not just from a physical standpoint, but in terms of involvement in White House activities, as well-intentioned as they may be. And I accepted responsibility for that, as I should.

And that matter is going to be addressed in a very specific way and I think you -- I hope I have made it clear what the conclusion will be. We just want to do it in a thoughtful way where you don't have people who do have a regular association with the White House, perfectly appropriate, have cumbersome or ineffectual ways of dealing with their ordinary business.

I've tried to be precise and, John, we owe you a better follow-up and we will. We tried to talk it through and get it resolved in an orderly way, but we didn't.

MR. PODESTA: When we looked into it, there are a number of people who have access to the complex and we, frankly, took on the review within this week and we just didn't get through it.

Q: How many, John?

MR. PODESTA: There's a recommendation in the report that Council, in consultation with Mack, will issue -- that Mack will issue rules after being --

Q: Do you have any idea how many people this is outside of the volunteers?

MR. PODESTA: There are volunteers, there are contractors, there are other government employees, non-government employees, and we just weren't able to close the loop by today.

Q: You just don't even know, there might be thousands?

MR. PANETTA: There's not. The problem here, I think as Mack has pointed out, is we clearly -- there is a need to restrict access but we have to do it in a way that we're careful about security requirements, we're careful about the people that do maintain access. But I can assure you that our approach here, and I think Mack has made that clear, is that we are going to review those policies and limit access.

Q: When Harry Thomason does have access here in the future, will he have access to phone and message service as he has in the past here in the White House offices of Mr. Watkins?

MR. MCLARTY: No, I don't think that will be the case.

MR. PANETTA: He does not have an office in the White House.

Q: No, but he did have -- if you asked for him you got Mr. Watkins office.

MR. MCLARTY: He had a project and an assignment here and I think, not just given these circumstances, but in a careful way that does not need to be the case with him or any other person.

Q: When the original announcement was made, reference was made to the fact that the press had been overcharged; there were allegations of overcharge. Again, as Ann noted, we haven't had an opportunity to read this whole thing. Was that ever substantiated?

MR. MCLARTY: Well, I think the data that Leon and I have reviewed suggests two things. First of all, on the commercial -- let's take the charter because that deals directly with the press. With the competitive bidding the charters appear to be running -- I think there's been four charters -- about 20 percent less than prior to competitive bidding practices. And it is certainly the intent of the travel operation and the White House for the service and safety and quality, and that's addressed in the report, to be the same.

So it appears that competitive bidding has resulted in significant or measurable savings from a press standpoint, which is very important to a number of, and probably very important to all of you, but maybe more important to some than others.

On the commercial side, I think it is very clear that there will be at least $100,000 savings a year of the White House personnel that travel through the reorganization of the White House -- of the Travel Office, which is at taxpayers' expense. So it certainly suggests that there will be measurable savings from the reorganization or practices.

Q: We'll probably have to wait for a couple of more trips to see a pattern, but the West Point trip was considerably higher in cost than the same trip just two years ago.

MR. MCLARTY: Well, we both need to review carefully the data to see if it supports what I just suggested. I believe it will based on the analysis I've done.

Q: Mack, since the media is often criticized for blowing things out of proportion, how big a deal do you feel, how big a transgression do you feel the American people should think of this? Not the management of the office itself, but how you handled it. Not the mismanagement of the Travel Office.

MR. MCLARTY: Well, I think, certainly, any time that people are not handled properly it's a big deal. And I think from that aspect I've already spoken to that rather specifically.

Q: Mack, the report speaks of the appearance of favoritism and then goes into very detailed examples of these appearances. How did you come to the conclusion that there was no favoritism involved here given all the details and the people involved, the intricacy of this cronyism network?

MR. MCLARTY: I think John and Todd can probably speak to that with a little more specificity since they did some of the actual interviews. But I think, Jim, it is logical to walk through that Mr. Thomason's, for example, primary business is certainly not air charter, he's not active in that. I think he felt there was a more efficient way to run this operation, and I think his intentions were to suggest that. That's just fine. What should have happened is we should have thanked him for his thoughts and then deliberately and carefully reviewed the matter. That's where the mistake was made.

Q: But given the details of this report, how can anyone draw any other conclusion except that people who went into that office then attempted to get their friends, turn the business their way?

MR. MCLARTY: Jim, I don't think that's a fair conclusion. I think in terms of the World Wide situation, for example, and are probably alluding to that, that's I think a longtime travel agency if I understand it. They just simply wanted the ability to bid competitively on the commercial side of the business. I don't think you draw that conclusion. I think the report tried to be very direct and cover all the facts and you could draw that conclusion. But that's not, upon review, the conclusion I reached.

Q: Mack, getting back to the FBI --

Q: How did you determine the IRS was not involved? How did they get sicced onto UltrAir if nobody called them and why did you put such a strong prohibition in the report?

MR. MCLARTY: Well, the prohibition in the report, I think, really speaks for itself. Since the IRS had been brought up here we wanted to cover that aspect and I believe should have.

Q: How do you know that they weren't called from here? How were they called?

MR. MCLARTY: I think the Attorney General and others confirmed that.

MR. PANETTA: The IRS has confirmed that those contacts were not made. But, obviously, when the IRS was raised during one of the courses of the conversations, we wanted to make very clear in terms of White House policy that that cannot happen in the future. And that's why --

QQ: How did they get on the case?pen i

Q: How much was the Peat Marwick study?

MR. MCLARTY: I don't know the answer to that question.

Q: Could you find out for us?

MR. MCLARTY: We can. I don't know the answer --

Q: Are you guys at all concerned about the possibility of lawsuits? Have you given any thought to that, about maybe having to defend against lawsuits?

MR. MCLARTY: That has not been discussed with me.

Q: I mean, you have accused or at least sort of left hanging in the air the idea that a criminal investigation --

MR. MCLARTY: I think you an always have litigation on this or any other matter.

Q: Was the President aware that the Travel Office was being dismissed before it was dismissed? Was he aware that Mr. Collingwood was coming here before it happened? And was he interviewed --

MR. MCLARTY: He was interviewed, Mr. Podesta interviewed him. He was not aware of the other --

Q: Neither one?

MR. MCLARTY: I don't believe he was, not to my knowledge. And I think in terms of perhaps his being aware of some of this perhaps he was illy served in that regard.

Q: So Mrs. Clinton was and he wasn't? The May 17th letter said I'm going to fire them tomorrow.

Q: I'm going to fire them, so she knew but he didn't?

MR. MCLARTY: I think he was aware of -- I think it's outlined in the report -- I think Mr. Thomason may have mentioned something to the President about the Travel Office, and I don't recall my briefing him on this situation specifically. Frankly, did not think that was on the daily briefing sheet, which may have been a mistake on my part.

Q? How many people are working in the Travel Office now? How many are in there right now?

MR. MCLARTY: Let's do this. I think we've taken a number of questions as well as provided a thorough report, which I do wish we could have provided earlier. John and Todd will be available later today for more thorough background briefing. And they do have a very good understanding of the fact.

To answer Wolf, I think there are two full-time employees, two detailees. That's four total people in the Travel Office. The American Express on a contract basis -- that's totally at their expense and that's included in the savings. So, there's four versus seven in the past. I think there's a net savings of three.

Q: Was Mrs. Clinton interviewed for this?

MR. MCLARTY: She was, she was interviewed.

Q: Could we have the staff briefing now instead of later today?

MR. MCLARTY: Let's let Mr. Gearan, Communications Director, make that judgment.

Q: When the White House dealt with the reporters, the media office, two people, Myers and Stephanopoulos, took whole-hog what was given to them and came out here. You also have some sort of a cutoff line now where they don't just accept everything that's handed to them and come out and --

MR. MCLARTY: That's addressed, Helen, in some detail in the report. But I think I underscored in my comments -- and I think my comments gave really a pretty thorough review of the report --that the communication was not as it should have been between certain parts of the White House and the Communications people that briefed the press. And that led to some serious mistakes that we've acknowledged.

Thank you very much.

MR. GEARAN: We'd be happy to have John Podesta and Todd Stern exhaust with further questions.

Q: Is there any way to portray the actions taken here as anything other than a slap on the wrist? Is there anything -- given there's no loss of pay and no loss of status.

MR. GEARAN: I think Mack spoke to it as the Chief of Staff speaking to it as a complete report, a thorough report, with exhaustive details and a reprimand both personally and publicly to the persons involved with this.

Q: If I can just -- the report, the summary and the comments by Mr. McLarty and Mr. Panetta talk about the problem being an appearance problem -- the appearance of insensitivity and so forth -- but I don't see anywhere here where it says there was an actual mistake made, say, in firing these employees. If it wasn't a mistake to fire them, then why are you reassigning them?

MR. GEARAN: I think we should get John and Todd up. No, I mean, I'm happy to -- but they did the report.

Q: Can I ask you a communication question before you do that? The Watkins' statement to Dee Dee didn't seem to be quite right in this --

Q: Watkins lied to everybody.

Q: a recent thing that Dee Dee had with the FBI report -- are you at all concerned about a problem that still may exist in terms of getting information from within the White House to a spokesman and -- of the press? And is anything being done to, for want of a better term, get Dee Dee back further into the loop?

MR. GEARAN: The answer is, yes, we're concerned.

Q: Mark, can --

Q: He's answering a question.

Q: Hold it, he's answering a question.

MR. GEARAN: Your colleagues have a few thoughts on the matter.

Q: You weren't here every day and this matters to us.

Q: Will you let Mark answer please?

Q: It's very important.

MR. GEARAN: Let me just answer. The answer is, yes, we're concerned if that is the perception of anyone in this press room. We'll make every effort, and are making affirmative efforts within the White House to ensure that anyone speaking from this podium has the requisite information to give you the kind of information you need to do your jobs. There are internal matters that we're doing to ensure that in meetings and briefings.

Q: And not to desecrate people without evidence.

Q: The issue here is not --

MR. GEARAN: I think what we might do is to conduct the background here with John and Todd on the Travel Office report, and I'd be happy to visit with you about communications issues.

Q: This is a related communications question that goes back to Tom's question. David Watkins lied to Dee Dee, right? And as a result, Dee Dee came out here and lied to us. She wasn't aware of it; she lied to the American people. Why is Watkins only getting a reprimand?

MR. GEARAN: I want to have John explain how the National Performance Review came into that paragraph, because I think they need some explanation of why that was cited, because that is what -- when persons went into the Travel Office. Let me have John and then I can follow up on the communications link to it, because there's a background that I think would be instructive.

MR. PODESTA: Well, let me start with the National Performance Review. Watkins' shop, specifically Jennifer O'Connor and several other people, were in the process of going through the Office of Administration and indeed had completed going through the Office of Administration on an office-by-office basis as part of their management review, which was linked to the National Performance Review. The linkage is -- the National Performance Review itself is sort of a superstructure for activities going on in every agency.

At the time that the decision was made to have Peat Marwick go in, a decision was also made to send in the performance review team to look overall at the management of the Travel Office. That happened on Thursday, the 13th of May. The group that went in -- O'Connor and company had been going through office by office. The Travel Office employees were told that was part of the regular review process and that Peat Marwick was there because the financial management that they had was unique. They had a bank account that was not an audited government bank account and, therefore, outside auditors needed to be brought in.

That effort was conducted over the weekend within the context of that review. People were informed that it was part of that review. Talking points were prepared by Watkins' shop. In the context of that, the firings were carried out in the context of that overall sort of view. I think the better judgment probably would have been not to have brought the National Performance Review into the picture. We considered that. Todd and I were given a pretty free range, I think that you can see, to make specific criticisms of people and conduct. And I think we ultimately concluded, after kind of writing it one way and writing it another way, that there was enough linkage to this review process that it was fair.

Q: John, though, you will contrast Watkins' memo to Mrs. Clinton in which he says this was stimulated by Harry Thomason's rumors of criminal activity and Catherine Cornelius' observations in that office, and the top paragraph on page 11 in which he tells Dee Dee, the talking points are that this is just a routine review conducted by the National Performance. Those are pretty striking in their --

MR. PODESTA: I think that --

Q: And had Dee Dee told us Harry Thomason and Cathy Cornelius were involved from the first day, it certainly would have put a different cast on this story.

MR. PODESTA: The characterization here was that the review was accelerated by Cornelius and by --

Q: What characterization?

MR. PODESTA: I'm sorry --

Q: Whose characterizations was accelerated? We never heard anybody say accelerated. We heard that -- she came in here and --

MR. PODESTA: I'm just reading from the memo.

Q: I know. But she came in here and baldly stated that this was pursuant to the National Performance Review, which was a hot one. Was it not? I mean, that's --

MR. PODESTA: Excuse me?

Q: She came in here and stood where you're standing and said that this whole thing had been carried out pursuant to the National Performance Review. And I hear what you say about it having achieved some connection to it, but to say that it was done pursuant to that is a whopper, isn't it?

MR. PODESTA: Well --

Q: You can use the word, lie.

Q: Well, it's not correct.

MR. PODESTA: I think there was linkage between the performance review and this process.

Q: We're stipulating that, but there was also linkage between Harry Thomason and Cornelius as well.

Q: also linkage to Harry Thomason, too, but that was not stated.

MR. PODESTA: That is correct.

Q: You would concede, would you not, that that was a bit of an exercise in spin control by Mr. Watkins?

MR. PODESTA: I think there's a difference between that and lying, which is what someone back there accused her of. And I don't think -- I don't think she lied.

Q: On the UltrAir IRS, we've been told that the White House did not contact the IRS. Did, in your research, did you find out why it was, the very week that this all was coming forward that IRS officials appeared in this company that had never even filed an IRS form?

MR. PODESTA: We thought under the circumstances that it was better that IRS review internally the matters at the IRS and that having a White House review of what happened at the IRS was not appropriate.

Q: So do you not know why --

MR. PODESTA: The IRS conducted that review, and that's been -- the results of that review are made public. We found no --

Q: At your request?

MR. PODESTA: We found no indication -- we found no indication -- and we interviewed everyone -- we found no indication of anyone contacting the IRS. There was no hint of it. Kennedy -- excuse me -- the FBI agents involved did say that Kennedy raised the IRS in his conversation. "Where should I go? Should I go to the FBI? Should I go to the IRS? I'm looking for guidance." And he got the guidance that they would come and visit with him. After they did, he left the meeting. Cornelius came in. By the time he came back, they said they had sufficient predication to go forward. At that point, sort of simultaneously, Peat Marwick is being interviewed by Watkins. That's all happening on Thursday afternoon.

Watkins decides to go forward with Peat Marwick. Again, this is sort of all laid out. And Kennedy and Foster hold the FBI from going in, at which point Kennedy has his answer which is he's got the Peat Marwick review and the findings will be made available to the IRS -- excuse me, will be made available to the FBI, and the FBI is going forward.

Q: Since you say the IRS --

MR. PODESTA: We found nothing to indicate that there was any conversation with the IRS.

Q: So what was the IRS's motivation then?

MR. PODESTA: I think you should talk to the IRS about that.

Q: They won't tell you -- you know that.

Q: No, they won't tell you what -- they won't tell you the details surrounding any of their audits.

Q: I don't think this resolves that question. I think it's still up in the air.

Q: Going back to FBI involvement, the issue is not just disclosure that the FBI was looking into this. The Communications Office here proactively ballyhooed the fact of FBI involvement. They did so apparently with White House lawyers sitting in on the meetings at which the strategy was developed. And I still -- didn't Bernie Nussbaum sit in on the meeting on Thursday -- on Friday afternoon, the day the Cornelius memo came out and the White House put out FBI guidance?

MR. PODESTA: I think if -- Todd reminds me that there's -- there are two incidents involving counsel and the Communications department that deal with the IRS. One is on Wednesday --

Q: The FBI --

Q: Freudian slip. (Laughter.)

MR. PODESTA: That's why I know I don't want his job. (Laughter.)

And the FBI -- two experiences. One in which counsel attempts in good faith to get the reference to the FBI out of the talking points on Wednesday morning. They acted promptly as soon as they saw it. I think they thought they had taken care of the problem. As it turned out, they hadn't taken care of the problem and there's sort of a series of events which leads to Dee Dee talking to Terry prior to her getting knowledge of -- I dropped the dime, I guess.

Q: I have a question about Exhibit G, I think it is.

MR. PODESTA: Excuse me. Okay. That's issue one.

Issue two is Collingwood coming on Friday to the meeting in the Communications department which we think was inappropriate. But the counsel had been called for a different purpose. They didn't -- they were not consulted as to the appropriateness of Collingwood coming to that meeting. Collingwood was called. Our counsel were called. They came to the meeting. Collingwood walked in. They didn't know Collingwood was coming to that meeting. George said we need to know what you're saying. We want to be -- we want to -- we don't want to go beyond what we can say. Collingwood -- and Collingwood confirms this to us -- said in that meeting what he had already said to reporters that morning, which is that there was an investigation -- a criminal investigation going on. And he went back to the FBI headquarters, did the response. Again, that's laid out in fair detail -- and faxed it back. Our press office released it as an FBI release. I think that was a mistake.

MR. GEARAN: Secretary Christopher's briefing will be at 2:45 p.m.

Q: In this room?

MR. GEARAN: In this room.

Q: That means we only have an hour to go.

Q: Only an hour to go.

MR. GEARAN: No, we don't mean to -- we'd be happy to bore you further here, but I just wanted to make sure people knew the schedule.

Q: Will you use just one airline in the future or is it going to be several airlines that are going to have the contract for the --

MR. PODESTA: Competitive bids.

Q: Who authored Exhibit G, which is a confidential memo?

MR. PODESTA: That's the Darnell Marten memo. That is referred to in the report.

Q: One other question about the memo --

MR. PODESTA: The Darnell Marten memo was essentially a memo to the file that he was creating on a lap-top.

Q: One more question about the National Performance Review -- and I realize that's outside the scope of this report. Have any other federal government employees been fired as a result of the National Performance Review? Does it move that quickly?

MR. PODESTA: Other than this particular incident, I have no knowledge or awareness of what's going on in the national --

Q: IRS did an internal review and that review was made public. I don't see any reflection of that in --

MR. PODESTA: There was a public statement made by the IRS Commissioner.

Q: Why is there no -- how do you document it? I mean, do you just accept that? Do you accept it? And do you know what the source of their -- were they following on a newspaper clipping? What was their finding?

Q: What did they say? That they did it on their own?

MR. PODESTA: It seemed to us -- that is, this us --that pursuing an internal investigation of the IRS at this moment didn't make sense for the management review of the White House.

Q: I understand that, but you say they've made the results public. What were they? We're not aware of this public --

Q: John, don't you think maybe there should be a special prosecutor, because then they could look at the IRS, the FBI, the White House and --

MR. PODESTA: Not given the thorough review and the thorough job that's done in this report.

Q: John, excuse me -- John, getting back to my question, you're aware of a public review that I'm not aware of. What does it say? How did they find out about it?

MR. PODESTA: It says there was no contact between the White House and the IRS.

Q: They don't give you any indication of how they got onto UltrAir?

MR. PODESTA: They did a review of the audit and --

Q: Out of the blue?

MR. PODESTA: Was the audit out of the blue? I refer you to the IRS.

Q: No, don't give me that. You know they won't answer it.

Q: Did they indicate to you how they learned that UltrAir was out there and that they should go look at their books? Was there any indication --

MR. PODESTA: No one indicated anything to us.

Q: Mack said that he was disappointed in a number of White House staff people. He said four were reprimanded. Is he disappointed in people who were not reprimanded, and who and why?

MR. PODESTA: I think that's a question for Mack. I think you can read the report, but that's a question for Mack.

Q: Was there ever contemplation that any other White House official -- contemplated or discussed that any other White House official would be reprimanded or punished in some way?

MR. PODESTA: I would refer that question to Mack and Leon.

Q: What airlines are getting the new contract --

Q: Can we go to people who haven't asked questions yet?

MR. PODESTA: Ma'am, you've asked several questions. You've asked several questions. I don't think Ann's had a question.

Q: I have not had several, I only had one.

Q: I want to talk a minute here about the IRS issue. I understand that you cannot investigate the IRS. And I understand what you say, that they've issued a report, which I have read. In fact, that IRS statement is heavily redacted in that it is nothing but black lines with a conclusion. Is there any White House concern, considering the IRS's privacy regulations and their refusal to waive privacy in this issue, even though UltrAir has issued statements allowing it, that you will never know exactly what happened in this question, and nor will the public, and your statements have no teeth; that is, who in this White House is going to say, oh, John, I admit it, I did the worst thing I could have done, I called the IRS and sicced them on you?

MR. PODESTA: I think beyond who would call up and come down to our office and admit it, there was a course of conduct, and the conduct was at the FBI, it wasn't at the IRS. There was no -- there was no pursuit of the matter, and I think, from our perspective, that adds weight to the fact that they concluded that there was no call from here. There was no pursuit of the matter that would have taken it off to the IRS.

Q: Two days after the firing, IRS people showed up at UltrAir's office without the standard papers and without UltrAir having ever filed a tax return on which they could base an audit. That is conduct, John, that occurred within 48 hours of the White House suggesting bribery and kickbacks. Now, how can you say that's not conduct?

MR. PODESTA: It's conduct by the IRS, but it's not conduct by the White House.

Q: You think there's no linkage?

MR. PODESTA: Do I think there's no linkage between the -- I know no facts about the IRS audit of UltrAir.

Q: John, what was the behavior that was found in your investigation -- what was the behavior you found regarding passholders who were not government employees that requires a change in the policy?

MR. PODESTA: Well, I think that there is an issue of when someone's here in a capacity that -- where you're not an employee and you're dealing with employees and talking to employees, and it's unclear what status you're in the room with them on, that under -- upon reflection, requires some guidelines as to who ought to get passes and who shouldn't.

Q: Is it a legal problem or an appearance problem?

MR. PODESTA: No, I don't think it's a legal problem.

Q: Do you think it's some problem in the functioning of the White House?

MR. PODESTA: I think there is an appearance problem and I think there's a problem vis a vis the employees themselves knowing who they're dealing with -- who is an employee, who is not an employee.

Q: Was Harry throwing his weight around and intimidating full-time employees?

MR. PODESTA: I don't think he was intimidating fulltime employees. I wouldn't characterize that.

Q: You said behavior regarding employees --

Q: You left the first part kind of out.

MR. PODESTA: I didn't hear what he said.

Q: Was he throwing his weight around.

MR. PODESTA: No, I don't think he was throwing his weight around.

Q: Did Mrs. Clinton see this in draft form?


Q: In retrospect, was it a mistake to fire these five employees of the Travel Office who didn't have any financial involvement? Was it a policy mistake, not just an appearance problem?

MR. PODESTA: I think that given the fact that -- I think the fact that they were reinstated with pay and now they are being reemployed pending the outcome of the investigation answers that question.

Q: Your answer would be yes, then? Would that answer be, yes, it was a mistake to fire them? Because the beginning of the report talks about it being a problem of appearance and appearing to be insensitive.

MR. PODESTA: Everyone here works at the pleasure of the President. There needs to be no cause to fire somebody.

Q: Then why are you rehiring them?

MR. PODESTA: Under the circumstances, given the fact that these people were fired for cause and given the facts surrounding the disclosure of the FBI investigation, we think the course of conduct we're taking is reasonable.

Q: If they were fired for cause -- I'm sorry.

MR. PODESTA: If they could have been fired --

Q: But they were fired for cause?

MR. PODESTA: They were -- not in a formal sense the way people are in other positions where they have status. But there was cause associated with the Peat Marwick deal. We were -- I must say -- I want to clarify one point, which is somebody at the beginning of the conference said, this review vindicates their activity. I don't believe that it does. We did not investigate what they were doing in the Travel Office given the fact that when we asked to interview the employees we were informed by Justice and advised by Justice that we shouldn't do that.

Q: In answer to her question, that this -- it may not vindicate their activities, but it vindicates them in the sense you hired them back here and said they are worthy to work in the government. So how are we supposed to take that? I mean, are you saying they may be crooks, they may be sleazeballs, they may be liars, they may be whatever, but we weren't able to check it out but we want them in our government again?

MR. PODESTA: I think what we're saying is we didn't investigate that. We didn't check it out. We couldn't check it out --

Q: You knew they had no financial authority or management authority.

MR. PODESTA: We concluded they had no financial authority or management authority.

Q: What is it that --

MR. PODESTA: But whether they were employees that were unneeded, needed, what the organization of the White House was, whether they were good employees, bad employees, what their duties were was basically impossible for us to look into.

Q: Why?

MR. PODESTA: Because we couldn't interview them.

Q: Well, why are they being rehired if they were fired for cause?

MR. PODESTA: They are being reassigned. I'm not drawing any conclusions that they were --

Q: You're not vindicating them either.

MR. PODESTA: I'm not drawing any conclusion that they should have been fired for cause, I'm not drawing any conclusion at all. And therefore, under the circumstances, they're being reemployed.

Q: Can I just get a clarification on Thomason? Would it be fair to say --

MR. PODESTA: I don't think we know, quite frankly. We just don't know.

Q: You don't know what?

Q: I want a clarification on Thomason. Has he had his pass pulled, or is it that you're trying -- that you're going to reprimand him somehow but you're still trying to figure out how?

MR. PODESTA: We're going to issue guidelines on the issuance of passes to nongovernment employees.

Q: He still has a pass? He can still come and go as he pleases?

MR. GEARAN: Mack spoke to that and what he said was the guidelines are not issued as of today. He is going to take a look at it with the Counsel's Office and issue guidelines for nonemployee passholders.

Q: What airlines have been chosen --

MR. GEARAN: I don't know, but they are done competitively.

Q: But is it one airline or several?

MR. GEARAN: It's a competitive process.

Can we get any more questions on this? We'd like to -- we've successfully bored everyone? Thank you very much.

END1:55 P.M. EDT

William J. Clinton, Press Briefing by Chief of Staff Mack McLarty Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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