Richard Scaife Paid for Dirt on Clinton in ‘Arkansas Project’

President Bill Clinton’s most implacable and wealthiest critic, Pittsburgh billionaire Richard Mellon Scaife, has funneled as much as $600,000 a year from his tax-exempt foundations to the American Spectator for a secretive operation known as the “Arkansas Project” over the past four years, according to sources at the conservative magazine.

Theodore Olson, a prominent Washington attorney who represents the Spectator and sits on its board of directors, told The Observer that the magazine’s board is now conducting its own “internal analysis” of the funds spent on the Arkansas Project.

The project, whose targets were the President, his wife and associates, was run by Stephen S. Boynton, a Virginia lawyer with close ties to the president of one of Mr. Scaife’s foundations, as well as to David Hale, the former Arkansas judge and convicted Whitewater felon who is independent counsel Kenneth Starr’s main witness against the President.

The expenditure of tax-exempt funds on the Arkansas Project, and the role played by Mr. Scaife’s associates and Mr. Boynton, became so controversial within the Spectator last year that the magazine’s founding publisher, Ronald E. Burr, demanded a “fraud audit” by an independent accounting firm, according to Spectator sources. Instead, Mr. Burr was abruptly fired in mid-October by R. Emmett Tyrrell, the Spectator ‘s editor in chief, and, according to his friends, was paid a settlement on the condition that he remain silent about the reasons for his departure.

According to sources familiar with the Spectator ‘s operations, it was Mr. Burr who signed the checks to Mr. Boynton. A person close to Mr. Burr said that the publisher had “acted as he was instructed to,” but became concerned about how the money paid to Mr. Boynton was being used and sought an audit by Arthur Andersen, a major accounting firm. Mr. Burr refused to make any comment for this article.

When Hillary Rodham Clinton referred recently to a “vast right-wing conspiracy” against her husband and herself, many observers believed she was referring to Mr. Scaife, who has funded a wide variety of anti-Clinton legal and media efforts.

Mr. Boynton confirmed to The Observer that he worked on the Arkansas Project from sometime in late 1993 until last year, although he could give no specific dates. He refused to describe with any specificity what services he performed for the Spectator , which is itself owned by a tax-exempt foundation. But he did say generally that during that period there was “some work that I did for them on a legal basis, looking into various aspects of certain laws.” He refused to discuss how much he was paid on retainer by the Spectator for the project, which other sources at the magazine have said amount to as much as $50,000 per month.

Mr. Boynton also said that he “retained some consultants for work and legal research,” although he denied that any of them were private investigators. As to whether he would term his work for the Spectator “investigatory,” Mr. Boynton replied, “No, I would not, although some of my activity was involved in that.”

Other sources within the Spectator told The Observer that money from the project was used to pay former F.B.I. agents and private detectives to unearth negative material on the Clintons and their associates.

Mr. Boynton did say that he had met with a former Arkansas state trooper, L.D. Brown, who has made a wide variety of charges against the President in the pages of the Spectator and elsewhere, ranging from adultery to knowledge of drug-running from a small airport in rural Mena, Ark. “I have talked to L.D. Brown and I have met with L.D. Brown,” said Mr. Boynton, adding that he had never paid any money to the former trooper. But James Ring Adams, a writer for the Spectator who has authored numerous stories suggesting illegal activities by the Clintons and their associates, told The Observer that the Spectator had paid money to Mr. Brown “as a researcher” in recent years.

Daniel Wattenberg, a former Spectator writer who did a cover story based on Mr. Brown’s early allegations about sexual misconduct by Mr. Clinton, said he “was not aware of any fees or moneys” that had ever been paid to Mr. Brown. “Had I known, I would have resigned.”

Perhaps the strangest aspect of Mr. Boynton’s role at the Spectator , however, is his relationship with Mr. Hale, the former Little Rock judge who has testified that Mr. Clinton, as Governor of Arkansas, pressured him to make an illegal $300,000 loan to the Whitewater Development Company. Mr. Boynton said that he became “a friend” of Mr. Hale sometime in the late summer or early fall of 1993-around the time that Mr. Hale was under investigation for fraud by the Justice Department involving his theft of $1.5 million in Small Business Administration funds.

It was as a result of that investigation that Mr. Hale, seeking a plea bargain, began to make allegations about “pressure” from Mr. Clinton about the illegal and fraudulent $300,000 loan to Clinton business partner Susan McDougal. Indeed, it was Mr. Hale’s sensational allegations, widely publicized in November 1993, that led to the appointment of the Whitewater independent counsel the following January. The Spectator has boasted on more than one occasion of its special access to Mr. Hale, who gave the magazine “an extended series of exclusive interviews over a year ago,” according to an article that appeared in its March 1995 edition.

Later, when Mr. Hale was facing the prospect of a subpoena from the Senate Whitewater Committee, he hired as his Washington attorney Theodore Olson, who also represents the Spectator and sits on its board. Completing the web of associations, Mr. Olson is also a former law partner and close personal friend of Mr. Starr, the independent counsel. Sources close to Mr. Burr said that Mr. Olson played a role in negotiating the settlement that led to his departure.

As for Mr. Boynton, he said he became acquainted with Mr. Hale through David Henderson, a vice president of the American Spectator Educational Foundation Inc. and a longtime associate of Mr. Scaife. Mr. Henderson, according to Mr. Boynton, “is an old friend of Mr. Hale’s.” Mr. Boynton is also connected with the Scaife foundations through Richard Larry, president of the Sarah Mellon Scaife Foundation, who is widely regarded as Mr. Scaife’s top adviser and is also a friend of Mr. Henderson. He said, without apparent irony, “We’ve fished together. Mr. Larry and I have fished together many times.”

A former Spectator employee said that in 1994, “Henderson and Boynton would spend hours hanging around the office and would boast that they were ‘onto big leads’ that would end in the downfall or ‘impeachment’ of the President.” The same ex-staff member said, “There was lots of mystery about what they were doing. It was fairly well known that they never delivered” anything that could be published.

Said Mr. Boynton, “I have extensive files detailing everything I did for the Spectator . I can document it.”

Actually, the ties between Mr. Scaife, Mr. Larry and Mr. Henderson date back at least as far as 1985, when the conservative billionaire financed Gen. William Westmoreland’s libel suit against CBS, and Mr. Henderson served as the general’s spokesman.

Mr. Henderson, reached at the Spectator office, declined to be interviewed over the telephone, except to say that he has known Mr. Hale for more than 25 years. Mr. Tyrrell did not return calls seeking comment.

According to Mr. Boynton, he has met with Mr. Hale on several occasions during the past four years, both in Washington and in Arkansas. The reason for those meetings, which he described as “social,” he said, was “renewing friendship, general discussion.” Asked whether his encounters with Mr. Hale had anything to do with the Arkansas Project or his work for the Spectator , Mr. Boynton replied, “Not really, no. Not really, in the sense of, that I was paid to go see him or anything of that nature, no.”

He said he had never discussed Mr. Hale’s Whitewater testimony with the former judge. He declined to say to whom he had paid money from the Arkansas Project funds, but denied having given any money to Mr. Hale. Questions have arisen about how Mr. Hale has paid his enormous legal bills-including those to Mr. Olson, whose fees are estimated to be in the range of several hundred dollars an hour.

Whatever Mr. Boynton’s work for the Spectator may have involved, he seems at first glance to be an odd choice for investigative endeavors. An avid outdoorsman, he is a sole practitioner who has specialized in conservation law, usually on the side of hunting interests. At one time he was a registered lobbyist for the Government of Iceland, which was seeking to overturn a ban on whaling, and he has written several pro-whaling articles for various periodicals. Although his practice is based in Virginia, he has done previous legal work in Arkansas, representing victims of a 1991 flood in Hot Springs against a local utility in a case that he lost.

The existence of the Arkansas Project and Mr. Scaife’s role in financing it first began to emerge last October, when Mr. Burr was ousted from the Spectator . His firing, after having served as the magazine’s publisher for 30 years, outraged many members of the staff and led to resignations by a few prominent writers, including the humorist P.J. O’Rourke. At the time, Mr. Tyrrell denied that Mr. Burr’s insistence on an audit of the Scaife funding had caused his firing, but The Washington Post reported that Mr. Tyrrell had told a staff meeting that Mr. Burr’s actions had “jeopardized the editor’s relationship with Richard Larry.”

Mr. Olson, the Spectator ‘s attorney and a member of its board of directors, would not comment on the Burr firing or the Arkansas Project, although he confirmed that “Steve Boynton was involved in it in some way.” He said it was “not consistent with my memory or understanding” that Mr. Burr had demanded a fraud audit. But Mr. Olson told The Observer that the magazine’s board has been conducting its own “internal analysis” of the Arkansas Project for several months now.

“We’re moving at the proper speed, as far as I’m concerned,” Mr. Olson said.