They Are Bringing Up Bill Clinton Again to Take the Attention Off the Big Tax Sham in Washington

Caught in the Whitewater Quagmire

By Marilyn West. Thompson
Washington Postal service Staff Writer
Monday, August 28, 1995; Folio A01

In better days, they were the movers and shakers surrounding Bill Clinton, the vibrant young Autonomous governor of Arkansas. They ran pocket-sized banks and free-spending savings and loan associations, ready upwardly interconnected corporations and embarked on grand business and real manor ventures, often backed by shaky financing.

Now many of Clinton's close associates from the 1980s have fallen victim to the labyrinthine Whitewater scandal, the investigation named for the first couple's Ozarks real manor bomb. The probe has rocked Arkansas' political circles and snared businessmen and lawyers who have not fifty-fifty a vague connection to the Whitewater Development Corp., in which Bill and Hillary Rodham Clinton were partners.

Recent congressional hearings into the failure of a savings and loan run by the Clintons' business partner in Whitewater offered a clearer picture than the public has had before of the kind of documentary evidence available to Whitewater independent counsel Kenneth Due west. Starr – and the directions in which it might be taking him.

What happens next is largely a matter of prosecutorial discretion.

Starr's role always had the mission of looking beyond the Ozarks to go to the bottom of a series of disparate charges swirling around the Clintons, who, except for millions of dollars in legal fees, accept not been touched by the investigation.

Starr recently won a vi-month extension of the Piddling Rock grand jury hearing the Whitewater case, a sign that the Clintons are non yet articulate of the investigation that has delved into their personal finances, Clinton'due south campaign accounts throughout the 1980s and Hillary Clinton's law practice.

But where the extra time will accept Starr – and whether he has adult any apparent show implicating the Clintons in wrongdoing -- remains to exist seen. The Clintons' lawyer, David Kendall, is convinced the worst is over. "Whitewater," he said, "is steadily evaporating."

Starr and his predecessor, special counsel Robert B. Fiske Jr., were given an open up lease to spend as much time and money as it took to expect into possible violations of law related to the Clintons and their dealings with Whitewater and Madison Guaranty Savings & Loan. It was always possible that Starr could end the probe past issuing a report exonerating the Clintons while bringing charges against many of those effectually them.

The investigation has reined in notables similar Gov. Jim Guy Tucker and former associate attorney general Webster 50. Hubbell and obscure characters from rural corners of the country, like a broker who left high finance to run convenience stores and a broke Whitewater resort real estate agent whose fortunes reached rock bottom when he was caught shoplifting cigars.

To date, Starr'due south investigation has taken so many twists and turns that merely the most dedicated Whitewater fanatic can rails it – much less know the implications the various indictments and guilty pleas thus far could take for the Clintons.

Starr clearly has moved to resolve the central questions that dragged the Clintons into this mess. The original allegations made in press accounts and past some of the Clintons' Arkansas foes suggested that the couple had given a imitation accounting of their Whitewater involvement and misrepresented their contributions to the investment on their federal income tax returns. More broadly, their dealings with Whitewater business partner James B. McDougal were questioned as possible conflicts of interest, specially their ties to a land-regulated S&L owned by McDougal that failed.

There were allegations of quid pro quos – that in return for favorable treatment from the land for his enterprises McDougal had carried the Clintons in the Whitewater investment and hired Hillary Clinton's police firm. Pecker Clinton was targeted most directly when a old municipal estimate accused him of participating forth with McDougal and others in a scheme to misuse a small business loan visitor backed by the federal government.

The grand jury's most recent indictment against McDougal and his former married woman Susan shows Starr has found credible some of the charges made in 1993 by primal prosecution witness David Hale, the erstwhile judge who has accused Clinton of wrongdoing.

Unhurt, who has pleaded guilty to fraud, described an declared plot in 1985 and 1986 involving influential members of Arkansas' Democratic "political family" to loot a loan company he ran for disadvantaged borrowers that was backed past the Small Business Administration.

Ane missing component of Hale's story in the 47-folio indictment obtained by Starr was the name of Bill Clinton, whom Hale has accused of participating in the scheme by twice asking him to aid out McDougal. Hale has said Clinton once stopped him most the Country House and asked if he would help James McDougal, and also participated in a meeting at ane of McDougal's developments in which the details of a $300,000 loan were discussed. At the time, McDougal was allegedly scrambling to come up up with coin to cover some of Madison's irregular transactions to proceed federal regulators from questioning them in a scheduled audit.

Hale made the $300,000 loan – the largest amount his visitor was authorized to lend – in the name of Susan McDougal, purportedly to finance a marketing company she owned. Just the money apace filtered out to other dubious McDougal ventures. Part of it was used past the Whitewater Development Corp. to buy a tract of land from the International Paper Co. Clinton has denied any such conversations with Hale, and the Clintons say they had no knowledge of their declining corporation'south last property purchase. James and Susan McDougal each face fraud charges in connexion with the declared scheme.

Where Starr is going with Unhurt's allegations is unknown. The indictment refers repeatedly to "unnamed others" known to the m jury who participated in discussions nigh sham loans, yet Starr's office took pains to indicate out in a press release that the president and Hillary Clinton were accused of no wrongdoing.

The White House and Kendall have dismissed the example – as they have all other Whitewater-related matters – as unconnected to the beginning family or their money-losing Whitewater venture. Starr could be employing a typical prosecutorial strategy, coming downwards hard on other alleged participants – namely the McDougals and Jim Guy Tucker, who is besides charged with fraud in the latest indictment – in hopes of eventually securing corroboration for Hale'due south charge that Clinton was involved.

So far, none of the three defendants has shown any willingness to cooperate. Or Starr could have thoroughly investigated the declared Clinton interest and found it to be either untrue, inconsequential or unprovable earlier a jury.

In their entirety, the charges Starr has brought over the past 18 months accept drawn a film of opportunism and greed in Arkansas, a minor-scale version of the fiscal frauds and real estate scams taking place beyond the state before the Southward&Fifty industry collapsed.

Arkansas had no Charles H. Keating Jr., with millions in S&L proceeds to spend illegally on political wheel-greasing; but it did take McDougal, Clinton'south former economical development adjutant, who bragged that he had handled investments for state Autonomous Party bigwigs since he worked with Clinton in Sen. J. William Fulbright's office.

Many in Arkansas knew of McDougal's closeness to Clinton before Madison Guaranty became a magnet for entrepreneurs with Democratic Party connections. The Whitewater project, launched while Clinton was the state'southward attorney full general and its guardian against consumer fraud, caused a mild ripple when Clinton first disclosed it on his state fiscal forms. McDougal was buying upwards land all over Arkansas and shortly became known for his fast-and-loose evolution style

Whitewater was a typical McDougal venture: Few lots were sold; some that were sold were repossessed; and in a brusque time, with no real property improvements by the developers, the project's estimated value could non secure the amount of the mortgage loan. By 1987, a recently released document shows, trash and rundown mobile homes on the properties would take made lots hard to sell.

In various charges brought by Starr and made more than pointedly by Republican congressional investigators in these contempo hearings, it has also go articulate that government-backed institutions in Arkansas were drained by developers like McDougal. And more directly for Clinton, Republicans have charged that state regulators under his tenure as governor were turning a blind middle to the abuse of institutions like McDougal's that were particularly vulnerable to corruption.

Though the Clintons have tried for years to altitude themselves from their fallen friend, the hearings established that during the 1980s, McDougal not only enjoyed admission to Clinton simply besides traded on it to push his causes. Sewage was a big issue for McDougal as he tried to plough hardscrabble land into subdivisions, and resurrected files from Arkansas agencies prove him "ranting and raving" with health regulators nigh the septic tank systems for 1 of his developments. After Clinton called a meeting on the issue, the troublesome regulators were removed from the case.

The Rose Law Firm, once the preeminent Piddling Rock business firm where Hillary Clinton built her exercise, has been branded by Republicans as a case study in ethical conflicts, and government agencies have forwarded new findings about ethical misconduct by Rose lawyers to Starr for farther scrutiny. Old Rose partner Hubbell, one of Clinton'southward best friends and an appointee to a high-ranking Justice Department mail, has taken most of the rut thus far, earning a prison house term for his access that he defrauded Rose clients, including the federal government.

But in recent weeks, public attending has turned again to Hillary Clinton, who has best-selling working with McDougal's S&L on a 1985 matter nether consideration past state regulators. She has repeatedly insisted that her piece of work for McDougal was minor.

But the House Cyberbanking and Financial Services Commission released hundreds of pages of documents that chosen into question Hillary Clinton's credibility on the issue. They show her working with McDougal on other matters, similar whether he could get a allow to open a beer-tasting parlor at a mobile home and industrial park located in a dry out canton.

For Clinton, the merely obvious benefit of his association with the grouping now tarnished by the Whitewater scandal was loyal political support and hefty donations. That, too, has been a focus of scrutiny by Starr. Earlier this twelvemonth, Starr had targeted Clinton's 1990 campaign treasurer Bruce Lindsey, now a senior White House adjutant, merely backed off from seeking his indictment in connectedness with a big cash withdrawal that he made on the campaign's behalf.

An officer of the tiny Arkansas banking concern that kept Clinton's 1990 campaign accounts and raised large amounts of money for him has pleaded guilty to a technical banking violation, a way for Starr to proceeds firsthand data about activities in Clinton'south business relationship. FBI agents at 1 signal were tracking the cash withdrawals and interviewing some black ministers who received greenbacks payments to assist "get out the vote." Only it is non clear where this tangent of the probe has led.

McDougal raised tens of thousands of dollars for Clinton and, according to federal investigators, held a fund-raiser in which some of the money donated was drawn from federally insured deposits at Madison Guaranty.

Starr also has won cooperation from Stephen Smith, a Academy of Arkansas professor who was once Clinton'south top gubernatorial adjutant. Smith admitted obtaining another phony loan from Hale'southward visitor, this i under the pretense of financing a "disadvantaged" political consulting firm Smith ran in the 1980s. The $65,000 loan actually went to pay off an overdue banking company loan Smith had with Tucker.

Smith was a Clinton intimate, part of a trio of young, hip aides who ran the governor's function when Clinton was freshly elected and who helped him come back from a devastating defeat early in his political career and rise to national prominence.

He, like many others now drawn into the investigation, remained loyal to the Clintons as the Whitewater controversy escalated and said he knew of no wrongdoing by Clinton.

David Hale
Former Arkansas municipal approximate. Pleaded guilty March 22, 1994, to two felony counts of defrauding the Small Business organization Administration. To exist sentenced.

Eugene Fitzhugh
Little Stone attorney. Pleaded guilty June 23, 1994, to one misdemeanor count of trying to bribe Hale afterwards existence charged with defrauding the SBA with co-defendant Charles Matthews. Sentenced to one year in prison house, simply is free while pursuing a lawsuit to withdraw his plea.

Charles Matthews
Broker. Pleaded guilty June 23, 1994, to two misdemeanor counts of bribery after beingness charged with defrauding the SBA with Fitzhugh. Serving a 16-month prison house sentence.

Robert West. Palmer
Real estate appraiser, Madison Guaranty Savings and Loan, the failed thrift owned by James B. McDougal. Pleaded guilty Dec. 5, 1994, to a felony count of conspiracy for filing false appraisals to clean up the books of Madison Guaranty. Sentenced to 1 yr of home detention, three years probation, $5,000 fine.

Webster L. Hubbell
Former associate attorney general and friend of Beak and Hillary Rodham Clinton. Pleaded guilty Dec. 6, 1994, to two felony counts of post fraud and tax evasion later on beingness charged with defrauding clients of near $400,000. Sentenced to 21 months in prison.

Chris Wade
Whitewater real estate agent. Pleaded guilty March 21, 1995, to ii felony counts including bankruptcy fraud. To be sentenced.

Neal Ainley
Old president of an Arkansas depository financial institution. Pleaded guilty May 2, 1995, to two misdemeanor counts after declining to report large cash withdrawals from Clinton'southward 1990 reelection campaign for governor. To be sentenced.

Jim Guy Tucker
Arkansas governor who succeeded Clinton and was reelected last twelvemonth. Charged with three felony counts of lying to Unhurt'south company about the purpose of a loan, using that money as collateral on another loan to purchase a cable TV company, and devaluing avails to reduce tax liability. Pleaded non guilty June 22, 1995. Accused Aug. 17, 1995, of 11 new charges, including conspiracy, wire fraud, bank fraud, mail fraud and misapplying funds.

William J. Marks Sr.
Cable TV developer. Co-defendant in Tucker case, charged with the same three felonies every bit Tucker. Pleaded not guilty June 22, 1995.

John Haley
Tucker's personal lawyer. Accused of one felony count of helping Tucker and Marks hibernate assets to reduce taxation liability. Pleaded non guilty June 22, 1995.

Stephen Smith
Pleaded guilty June viii, 1995, to one misdemeanor count of conspiracy to misapply the funds of a loan from Hale's company. To be sentenced.

Larry Kuca
Pleaded guilty July xiii, 1995, to one misdemeanor count of conspiracy to misapply the funds of a loan from Unhurt's company. To be sentenced.

James B. McDougal
Accused Aug. 17, 1995, of 19 charges, including conspiracy, wire fraud, bank fraud, mail fraud, misapplying funds, and others involving loans by Madison Guaranty Savings & Loan, which he owned, and Capital Management Services Inc., which Hale endemic, in the mid-1980s.

Susan McDougal
Accused Aug. 17, 1995, of eight charges, including conspiracy, wire fraud, bank fraud, mail service fraud and misapplying funds.

SOURCE: Staff and Wire Reports

� Copyright 1997 The Washington Mail Visitor

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