The White House acknowledged yesterday that Arkansas lawyer James B. Blair placed most of the orders for the trades of cattle futures that earned Hillary Rodham Clinton nearly $100,000 profit in the late 1970s.
A White House official continued to maintain that Clinton made her own decisions on how to trade. But he said she would discuss it with Blair, who would then pass an order on to the broker, even though the broker was only supposed to take orders from Clinton. Previously, the White House has described Blair simply as an important adviser but has not explained how Clinton carried out her trading.
During most of the 10 months that Clinton traded cattle futures, Blair was outside counsel for Tyson Foods Co., Arkansas' biggest employer, and she was the governor's wife. Although she made a huge profit on her initial $1,000 investment, she was not a passionate trader who kept up with every move of the market. Blair was.
According to his testimony in three lawsuits against the commodity brokerage firm of Ray E. Friedman & Co., also known as Refco, Blair kept a special computer devoted to analyzing and charting market averages over four-day, nine-day and 18-day periods. He had a "quote" machine in the back of his desk that enabled him to watch the market "tick by tick." He had phones in his car and airplane so he could call in his trades at just the right moment.
Blair also was privy to a daily 2:30 p.m. conference call, broadcast over the speaker phone at Refco's Springdale, Ark., office. On the line were key figures in the cattle business -- buyers, feedlot operators, a Chicago pit trader, Refco brokers and sometimes Refco President Thomas Dittmer. Blair called them "the best cattle market group of traders that was ever put together." While he listened, they shared their predictions of what the market would do the next day, Blair testified.
Blair had good reason to keep up. He risked huge sums, making as much as $515,000 in one day and hoping to clear $2 million the next, he testified. He claimed in a lawsuit against Refco that his family ultimately lost $15 million. Like other customers, Blair claimed that Refco's Dittmer tricked his brokers into making trades that manipulated cattle prices for his own benefit, allegations that Dittmer denied.
According to the White House official, Blair passed on trade orders for about a dozen other people besides Clinton, including members of his family. The fact that he was allowed to do so reflects the loose attitude of the Springdale office and its head broker, Robert L. "Red" Bone, toward adhering to trading rules.
Bone was disciplined for violations three times -- in 1977, 1979 and 1981 -- by the Chicago Mercantile Exchange and the Commodity Futures Trading Commission. In December 1979, about two months after Clinton closed her account, the CME suspended him for three years for violating rules on how records should be kept, how orders should be placed and how much money customers had to keep on deposit -- called margin requirements -- to make certain trades.
Because Clinton was the only one authorized to trade her account, Bone technically violated trading regulations by taking her orders from Blair, according to Leo Melamed, the former chairman of the Chicago Mercantile Exchange. Melamed reviewed Clinton's trading records at the request of the White House.
In one lawsuit against Refco, Blair testified that Bone and the other Springdale brokers cared little who had the actual authority to trade an account. Although Blair was the only one authorized to trade his account, he said, Bone "sometimes did it without consulting me." One Arkansas banker testified he found out Bone had purchased 200 cattle future contracts on his behalf only when Refco mailed him a statement.
Bone also apparently allowed Clinton to get by without as much money in her account as the rules required for the value of the contracts she was trading. But that was a common practice in the office, according to testimony in lawsuits against Refco. Stephen Johns, a broker in the office, testified, "At the time, we let everybody exceed the margins." Another broker testified that he was allowed to keep his own account open even though he was short hundreds of thousands of dollars.
At the end of June 1979, Clinton held 65 cattle contracts, representing $1.8 million worth of cattle. According to officials with the Chicago Mercantile Exchange, she should have had $63,000 in her account at the time as a deposit. She had but $56,466, and her records do not show she put in any cash to increase her account balance.
By July 12, prices had moved against her and she should have been asked to come up with more than $20,000 to keep control of her contracts, records show. That same day, Refco liquidated the account of another customer whose account fell below the required amount, court records show. A week later, prices turned again, and Clinton was able to liquidate her contracts at a profit.
Whether she could have done as well as she did without Blair's help is a matter of debate. Johns, the former Refco broker, said in an interview, "A lot of people started with very small amounts of money and turned it into large sums. Taxi cab drivers. Shoe clerks."
But another former broker in that office, who asked not to be identified, said that if Clinton had been armed with just the Wall Street Journal, she "wouldn't have made a dime." John Damgard, president of the Futures Industry Association, said: "The average Joe who puts up $1,000 has no business in our markets, because he's at such a big disadvantage."
When Blair encouraged his friend Clinton to open an account in October 1978, he was convinced that he was onto a good thing. He had opened his own account seven months earlier after meeting Bone, who he said, "convinced me they knew more about the cattle market than anybody alive and that they had inside information about the cattle market and there was a great fortune to be made in the cattle."
By that October, Blair was a major trader, paying about $50,000 a month to his brokers in commissions. Blair said Refco sent a Lear jet to fly him to Las Vegas for the firm's annual meeting, where Dittmer announced that the firm had made more than $80 million in the previous year for its customers and brokers.
The Springdale office was no exception. Johns, a college student who used to clean Refco's office before Bone made him a broker at the age of 21, within two years had acquired at least four Corvettes, a Ferrari, a Mercedes-Benz, a boat and more than $100,000 worth of jewelry, according to court records. Some brokers said they made between $10,000 and $100,000 a month in commissions.
By October 1979, about nine weeks after Clinton had stopped trading, things had changed dramatically. The market crashed. Johns and others went bankrupt. And three dozen brokers and customers, including Blair, sued Refco, Dittmer and Bone.
Staff researcher Lucy Shackelford contributed to this report.