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  •   'Arkansas Project' Led to Turmoil and Rifts

    Washington Post Staff
    Sunday, May 2, 1999; Page A24

    The "Arkansas Project" that did so much to increase the visibility of Richard Mellon Scaife caused great turmoil at the American Spectator magazine. It skirted close to the tax laws, and failed to learn damaging information about Bill and Hillary Clinton.

    According to R. Emmett Tyrrell Jr., founder and editor of the American Spectator, the idea for investigating the Clintons was born on a fishing trip on the Chesapeake Bay that he took in the fall of 1993.

    Those on board the chartered boat, Tyrrell remembered, included Richard M. Larry, Scaife's senior aide for many years, David Henderson, a conservative activist and public relations adviser close to Larry, and Steven Boynton, a Washington attorney and outdoorsman.

    Henderson and Boynton both had contacts in Arkansas they thought could help them get to the bottom of the Clinton scandals. Through the Junior Chamber of Commerce, Henderson had met David Hale, a Little Rock lawyer and political figure who became prominent in the Whitewater affair after accusing then-Gov. Clinton of pressuring him to make an improper $300,000, federally backed loan that went bad. Among the people Boynton knew in the state was the owner of a bait shop in Hot Springs, Parker Dozhier, a rabid Clinton hater.

    Tyrrell described the Arkansas Project as an attempt by the Spectator, best known for its acerbic and lively commentary, to get into more investigative reporting. Henderson agreed. But other well-placed sources have told The Post that Larry, Scaife's aide, tried to sell the idea of investigating Clinton's activities in his home state to at least two other organizations before the Spectator took on the project. Both turned Larry down, the sources said.

    Several sources at the Spectator, all of whom asked for anonymity, said they thought Tyrrell had agreed to undertake the investigation to please Larry and Scaife, the magazine's most generous supporter since 1970. Scaife had given the magazine at least $3.3 million.

    Under the tax law, Scaife's foundations could not sponsor their own investigation of Clinton. They had to give money to a registered nonprofit organization (a "501[c][3] organization" in the jargon of the IRS), which could use the money for a legitimate nonprofit purpose. The American Spectator Foundation, which publishes the magazine, qualified to receive the money. Investigating a president – provided it wasn't tied to a specific electoral campaign – would fall within the definition of legal activity by a nonprofit, according to Frances Hill, a specialist in the law of tax-exempt organizations who teaches at the University of Miami.

    The law also says that a foundation cannot use a 501[c][3] organization to funnel money to someone the foundation is trying to help directly. Larry's apparent effort to find a home for a project run by Henderson and Boynton might raise questions under this provision, though Spectator officials said the IRS has not said anything about it. (Henderson said he had never heard of Larry trying to persuade other organizations to undertake the Arkansas Project and doubted this was true.)

    A third legal question raised by the project involves payments to Henderson, a member of the Spectator board. Under the federal law on nonprofits, it is illegal for a member of the board of a nonprofit organization to receive excessive payments from the organization – the law calls this "inurement." Over the 3½-year life of the Arkansas Project, Henderson was paid $477,000, according to an accounting drawn up by Boynton in 1997.

    In an interview, Henderson said the Spectator's lawyers and board of directors considered the inurement question and concluded that the payments to him were proper. He also defended the project, saying it produced more information on the Clintons than the Spectator used. "There were a number of big stories that we developed pretty far that met some resistance at the magazine," he said, including stories later confirmed and published elsewhere. He declined to specify what they were.

    Boynton received at least $577,000. Much of the rest of the project money went to private investigators, according to Spectator documents provided by Charles Thompson, an independent television producer.

    One of those employed by Henderson and Boynton was Rex Armistead, now nearly 70, a longtime Mississippi state policeman, undercover operative and, in recent years, private eye. According to the Spectator documents, Armistead was paid at least $353,517 by the Arkansas Project. What he did for that money is far from clear.

    The project was launched late in 1994 and got underway in January 1995. This was the month the Spectator published a piece by staff writer David Brock reporting Arkansas state troopers' accounts of how they had arranged illicit trysts for Clinton when he was governor. In future history books, Brock's piece will probably be remembered for a fleeting reference to "a woman named Paula" – a reference that prompted Paula Jones to file her lawsuit against Clinton.

    Brock said Tyrrell and others at the magazine led him to believe that the Arkansas Project was launched to follow up on the "Troopergate" story. But Brock said he came to realize that in fact, the project was put in motion before the editors knew what his story was going to say and wasn't a result of his work. This "raised the question of whether there could have been some purpose other than journalistic," he said.

    Brock recalled being summoned to a meeting with Armistead in Miami, at an airport hotel. Armistead laid out an elaborate "Vince Foster murder scenario," Brock said – a scenario that he found implausible.

    On other occasions Armistead provided unconfirmable reports about illicit goings-on at the Mena, Ark., airport purportedly involving Clinton when he was governor. Tyrrell himself wrote an article for the Spectator about the airport that several writers and editors on the magazine described as an embarrassment.

    Altogether the journalistic fruits of the project were thin. Wladyslaw Pleszczynski, the Spectator's executive editor, wrote an internal memo recording his impressions of Henderson's and Boynton's efforts in September 1997, after the Arkansas Project had blown up in controversy: "There always seemed to be lots of hush-hush and heavy breathing," he wrote, "but it never amounted to anything concrete enough for a story."

    By mid-1997, Larry was apparently worrying about how Scaife's millions were being spent. At a meeting on July 10, 1997, Tyrrell announced that Larry had accused Ron Burr, the longtime publisher of the Spectator who ran the magazine's business and financial affairs, of misallocating $1 million of Arkansas Project funds. "We are going to have a complete audit of the project," Tyrrell said, according to a letter Burr wrote later.

    Within three months, Tyrrell had fired Burr – who had been Tyrrell's principal associate for nearly 30 years. Many of Burr's supporters quit the Spectator's board in protest. The Arkansas Project ended with a whimper.

    If Scaife personally had any role in the Arkansas Project, it has never been disclosed. He has denied it. Members of the Spectator staff involved in the investigations never saw any sign of him, though they saw Larry around the magazine's offices in Arlington quite often. "We always had the feeling Larry was behind it," said one senior journalist at the Spectator.

    The first public indication of a falling-out between Scaife and the Spectator followed the 1997 publication of "The Strange Death of Vincent Foster: An Investigation." This book, by Christopher Ruddy, a reporter Scaife had hired to write for his Pennsylvania newspaper, sought to poke holes in the official investigations of Foster's death.

    The Spectator's review of the book, by John Corry, a former New York Times reporter, described Ruddy as "a very heavy breather" whose book contained "very few direct quotes, but a great many insinuations."

    Soon after Corry's review was published in late November 1997, Reed Irvine of Accuracy in Media – a conservative critic who has received about $2 million from Scaife since 1977 – reported in his newsletter that Scaife had called Tyrrell to say he was cutting him off.

    Tyrrell confirmed in an interview that the call occurred but said he couldn't remember details of the conversation that ended all support from the man who had been his principal benefactor for nearly 30 years.

    A source close to Scaife said Corry's review really upset Scaife, who thought the magazine should have been kinder to an author backed by its principal benefactor. Others familiar with the episode said Scaife had also been influenced by the Arkansas Project's lack of success and his relations with Tyrrell.

    © Copyright 1999 The Washington Post Company

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