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Walter Kaye/AP
Walter Kaye, a Democratic donor, went before the Whitewater grand jury in December. (AP)

Clinton Friend Referred Lewinsky for Internship

By Charles R. Babcock
Washington Post Staff Writer
Thursday, January 29, 1998; Page A12

In 1995, retired New York insurance executive Walter Kaye, a major Democratic contributor who is close to first lady Hillary Rodham Clinton, made two gestures that have had major repercussions for the Clinton White House.

Kaye concluded that personal liability insurance policies the Clintons carried would cover the legal expenses of the Paula Jones sexual harassment suit, according to sources, a finding that proved to be a $1 million windfall for the first family. And he recommended a young woman named Monica Lewinsky for a job as a White House intern.

Kaye's acquaintances and veteran Democratic fund-raisers say they are struck by Kaye's improbable role in the unfolding story that has convulsed Washington for the past week. They say the avuncular Kaye, who is in his seventies, never wanted anything for his business in return for the hefty donations -- about $350,000 -- he began making to the party in 1993. "He gave for all the right reasons," said one fund-raiser.

Rep. Nita M. Lowey (D-N.Y.) said yesterday, "Politics has given him a new life and he loves it. . . . He's so thrilled when he tells me he takes Hillary's staff out to dinner, sends them flowers. He's very close to Hillary and her staff."

Kaye was questioned by a Whitewater grand jury in Little Rock last month, but that was before independent counsel Kenneth W. Starr's prosecutors were aware of Lewinsky, according to press accounts. Richard Holiman, Kaye's Little Rock attorney, said he had "no comment" on that appearance or on whether Kaye will be called again by Starr. Kaye didn't return a reporter's calls.

Kaye built his insurance brokerage company into one of the nation's largest by the early 1990s, according to trade press rankings, and then sold a large chunk of it. He donated $1,000 to the Clinton-Gore campaign in 1992, but didn't make his first major donation to the Democratic National Committee until the fall of 1993. DNC fund-raisers said he and his wife, Selma, became active in the party's Women's Leadership Forum, which often featured Hillary Clinton at fund-raising events. He also has been an overnight guest at the White House, according to a list released by the administration.

Kaye's importance to the Clintons politically was apparent in the fall of 1995 when he was one of a handful of top donors invited to an Oct. 6 luncheon with the president at the Hay-Adams Hotel. The event marked the kickoff of an effort to raise millions of dollars for the DNC's "media fund" to pay for television commercials that Clinton and his media adviser Dick Morris later credited as key to winning reelection.

Kaye made a $100,000 donation to the DNC in December 1995. He also donated to the president's legal defense fund and to a fund set up to aid Susan McDougal, the Clintons' former Whitewater business partner who was jailed for failing to cooperate with Starr's probe.

Kaye's closeness to the first lady was on display in October 1996 when he joined her at a campaign stop in Tucson. He told a local reporter he was close to the Clintons.

It is not clear how Kaye discovered that the Clintons' liability insurance policies covered their legal expenses in the Jones lawsuit, or how he conveyed his opinion to the White House. The case was filed in 1994, and Robert S. Bennett, the president's lawyer, did not file his first claim for payment under the policies until June 1995.

That was the same month that Lewinsky started working as an unpaid intern at the White House, based on Kaye's recommendation, according to sources familiar with her hiring. Kaye was acquainted with Lewinsky's mother, Marcia Lewis, a New York writer and socialite.

Kaye's advice on the Clinton insurance policies has drawn fire. Judicial Watch, a Washington legal group, challenged the payments one insurance company made to Clinton's lawyers in the Jones case on grounds that they were unjustified and "constitute a waste of company assets."

The suit was dismissed but Judicial Watch president Larry Klayman this week released a letter from State Farm Insurance Co. saying its board had "directed a special litigation committee to investigate" the company's payments of Clinton's legal bills.

© Copyright 1998 The Washington Post Company

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