First Lady’s Role In Land Deal Probed New Whitewater Chapter Asks Whether Parcel Overvalued

Hillary Rodham Clinton helped draft a real estate document that put a $400,000 price tag on vacant land south of Little Rock, Ark. But the 22.5-acre parcel fetched a mere $38,000 when the federal government - in the bailout of the S&L industry - finally unloaded the property six years later.

That’s the picture that emerges from exhibits to a federal regulators’ report on Castle Grande, a failed 1,050-acre development that is now a focus of Whitewater prosecutor Kenneth Starr’s criminal investigation of President Clinton and his wife.

Over the years, the 22.5-acre property called Holman Acres was assigned values between $70,000 and $170,000 - but never anything close to the price tag in the real estate option handled by the first lady as a lawyer in 1986, records show.

Whitewater criminal investigators are looking into whether the land price was inflated as part of a scheme by the S&L, Madison Guaranty, to disguise improper real estate commissions to prominent Little Rock businessman Seth Ward. Ward is the father-in-law of a former law partner of Hillary Clinton, Webster Hubbell. Hubbell, a former associate attorney general, is in prison for bilking clients.

Hillary Clinton said in sworn answers earlier this year that she recalls nothing about her work on Holman Acres, but conceded that word processing codes on the documents indicated at least some of the documents were produced by her.

At the request of Senate Republicans, the Federal Deposit Insurance Corp. reviewed the transaction and concluded last month that Clinton prepared the land option and that it was improperly used by the S&L to hide from regulators improper payments to Ward.

The property remains vacant.

Acting at the behest of Ward and the S&L owned by Whitewater partner James McDougal, Clinton drafted a real estate option on May 1, 1986. It gave a subsidiary of McDougal’s S&L the right to take Holman Acres from Ward for $400,000.

The option was never executed. But the FDIC report said it was important because it established a price for Holman Acres.

While Holman Acres was a money-loser for the government, it proved beneficial to Ward.

Ward had used the land as collateral, taking out a $400,000 loan from McDougal’s S&L on March 31, 1986.

Two months after the loan to Ward, the S&L released Ward from personal liability in the deal, meaning the institution had no right to sue him if he refused to pay back the money. Six months later, Ward turned Holman Acres over to the S&L as payment in full for the $300,000 balance on his loan.

Months before, the S&L had an opportunity to buy Holman Acres from Ward for just $70,000.