Whitewater Witness Links Clinton President Denies He Discussed Loan For Arkansas Real Estate

The government’s star witness in the Whitewater trial said Tuesday that Bill Clinton directly benefited from a fraudulent 1986 loan to one of his partners in the ill-fated Whitewater development.

David L. Hale, who was convicted two years ago of defrauding the U.S. Small Business Administration, also said that Clinton, who then was governor, told him during a meeting in early 1986 that his name was not to appear on any of the loan papers.

Hale, who made the loan through his defunct Capital Management Services Inc., was asked whom he expected to repay the $300,000 loan and replied: “I was looking to Jim McDougal and Bill Clinton.”

White House officials said they knew nothing about the loan that Hale discussed on the stand Tuesday.

One official, who did not wish to be identified, noted Clinton’s repeated comments that he never discussed loans with Hale, citing the president’s written responses to questions posed by the Resolution Trust Corp.

“I don’t know what ‘alleged claim’ David Hale has made,” Clinton told the RTC. “I don’t recall any conversation with David Hale about loaning money to Jim McDougal, Susan McDougal, Master Marketing, Madison Guaranty or any entity owned by the McDougals, and I am certain I never ‘pressured’ Hale or any company he owned to make any loan.”

McDougal and defense attorneys also were adamant in denying Hale’s allegations.

McDougal - who was a partner in the Whitewater development with ex-wife Susan, Clinton and Hillary Rodham Clinton - said Hale was trying to “save his skin” by involving Clinton in the loan.

The $300,000 loan was made to Susan McDougal’s Master Marketing advertising and promotion firm, but Hale said that never was intended as its final destination.

McDougal denied that Clinton ever had asked that his name be kept off loan papers, and he maintained that the meeting with Hale never occurred.

“No, that didn’t take place,” he said, adding sarcastically, “Elvis wasn’t there.”

Susan McDougal’s attorney, Bobby McDaniel, said that Hale’s testimony was rife with inconsistencies from his earlier statements and that those would be hammered at later this week during cross-examination by defense lawyers.

“What you’re hearing from David Hale today is new material,” he said. “It is a fabrication that this money was going to Bill Clinton. Period.”

The McDougals and current Arkansas Gov. Jim Guy Tucker are being tried on charges that they fraudulently obtained $3 million from Madison Guaranty and Capital Management Services during the 1980s.

A special prosecutor was appointed after Hale testified at his arraignment in late 1993 that he was pressured by Clinton into making the $300,000 loan.

Most of the testimony Tuesday focused on documents for several loans from Hale to McDougal and Tucker or their various enterprises.

Assistant Whitewater prosecutor W. Ray Jahn repeatedly asked Hale whether the loan recipients were culturally or economically disadvantaged, minorities or Vietnam veterans - the criteria for recipients under the SBA loan subsidy program that provided much of the money that Hale passed on.

“No, sir,” Hale said each time.

He said it made no difference to him that the recipients were not qualified for the loans because they were deals requested by McDougal, and he was going to make them anyway.

Hale said that McDougal and Tucker pressed him on fast action on the loans during a flurry of activity in late 1985 and early 1986 because federal bank regulators were increasingly critical of operations at Madison Guaranty and McDougal needed the money to back his various developments in Arkansas and the Campobello Island project in Canada.

Then Hale testified that he got a call from McDougal in early January 1986 asking him to meet at the house trailer office of McDougal’s Castle Grande housing and commercial development in southeast Little Rock.

When he arrived at the office that day - he could not remember the date - he said he found McDougal and Clinton.

He testified that the conversation soon turned to a $150,000 loan that McDougal wanted to get from Hale’s Capital Management Services to help buy land south of Castle Grande. Hale testified that McDougal told him: “We’re going to have to put this in Susan’s advertising company.”

McDougal was concerned that federal regulators believed that Madison Guaranty already had too much land in its loan portfolio and that the SBA program would not finance raw land, Hale said.

“Security was mentioned, and the governor said they could provide some security on raw land in Marion County,” Hale testified, a reference to the 230 acres the McDougals and Clintons had bought in northern Arkansas for their Whitewater development in 1978.

“Jim said his and Susan’s financials (statements) were strong enough and that we wouldn’t have to use the land in Marion County,” Hale said.

“The governor said, ‘Be sure my name cannot show up in this,”’ Hale testified, “and Jim said, ‘I’ll take care of it.”’

Hale said the loan later was increased to $300,000 by the time it was finally paid to Master Marketing on April 3, 1986.

“Did you believe it would be used for working capital for Master Marketing?” Jahn asked.

“No, sir,” Hale responded.

After the testimony Tuesday, Whitewater prosecutors refused to characterize Clinton as an unindicted co-conspirator. “Mr. Clinton is not on trial,” said chief assistant prosecutor W. Ewing Hickman Jr.