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Mcdougal Denies He Misused Funds Whitewater Figure Also Denies Alleged Scheme Helped Clinton

Wed., May 8, 1996

Playing the role of his own best witness, James McDougal took the stand in his federal criminal trial Tuesday and offered earnest and lucid testimony, denying Whitewater prosecutors’ allegations that he conspired to misuse $3 million in federally backed loans in the mid-1980s.

Under questioning from his attorney, Sam Heuer, McDougal also point-blank denied claims by lead prosecution witness David Hale that President Clinton benefited from the alleged scheme.

In court and outside on the sidewalk with the media in the muggy spring air, Clinton’s one-time political mentor - who suffers serious health and psychological problems and appeared as a witness against his cardiologist’s advice - dismissed Hale’s story as an out-and-out lie. “I am doing the best I know how,” McDougal testified when asked by Heuer if he was telling the jurors the truth.

Today or Thursday, McDougal said, the jury will watch and listen to “very exciting” videotaped testimony offered by the president at the White House April 28 that will be “highly supportive” of the defense case.

A special grand jury indicted McDougal, his ex-wife Susan, and current Arkansas Gov. Jim Guy Tucker in August on 21 counts of plotting to obtain illegal loans from the Small Business Administration through Hale’s Capital Management Services investment company.

Hale cooperated with authorities and obtained a reduced sentence by turning state’s evidence, giving rise to defense arguments during the prosecution phase of the trial that he was simply telling prosecutors what they wanted to hear.

Hale testified that he and the defendants orchestrated illegal deals to benefit themselves and members of the “Arkansas political family,” including then-Arkansas Gov. Bill Clinton and his wife, Hillary Rodham Clinton.

Specifically, Hale said he joined McDougal and Tucker at Tucker’s house and hatched a plot to rip off the SBA. Hale also said he met with Clinton and McDougal in a trailer at the Castle Grande real estate development and created a scam whereby Hale would make an illegal loan to Susan McDougal, who would transfer the proceeds to the Clintons.

Out of court, Hale said Clinton pressured him to make that $300,000 loan. The final prosecution witness also said $50,000 of the proceeds were eventually used for two Whitewater Development Corp. purchases. The Clintons and the McDougals were partners in the ill-fated 1978 Whitewater land deal.

Led by Heuer and watched closely by attentive, note-taking jurors, McDougal steadfastly denied each allegation.

But in cross-examining McDougal, lead prosecutor Ray Jahn chipped away at the defendant, introducing a slew of documents showing McDougal, as president of Madison Guaranty Savings & Loan, played a decision-making role in granting controversial loans.


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