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Central Whitewater Figure Dies James Mcdougal Drew Clintons Into Deal, Later Became Key Witness In Investigation

Mon., March 9, 1998

James B. McDougal, the wily Arkansas banking rogue who drew Bill Clinton and Hillary Rodham Clinton into real estate deals that have come to haunt them, died Sunday of cardiac arrest just months before he hoped to be released from prison. He was 57.

McDougal was a central figure and a cooperating witness in the continuing Whitewater investigation. It was unclear Sunday what impact his death will have on that probe: While McDougal provided substantial grand jury testimony about the Clintons in recent months, his erratic behavior called his veracity into question and made it unlikely he would have been called as a government witness in any public proceedings.

McDougal, his ex-wife, Susan, and Arkansas Gov. Jim Guy Tucker were all convicted in 1996 of fraud charges arising from their manipulation of federally backed savings and loan institutions, principally McDougal’s now defunct Little Rock thrift, Madison Guaranty Savings & Loan. Madison collapsed in 1989 at a cost of more than $60 million to taxpayers. Some of Madison’s dealings involved the Clintons, and the president testified by videotape in McDougal’s defense.

“I am saddened to learn about Jim McDougal’s death today,” President Clinton said in a statement released by the White House. “I have good memories of the years we worked together in Akansas and I extend my condolences to his family.”

Dying in prison was McDougal’s greatest fear, he told friends, and it spurred him to make a deal with independent counsel Kenneth W. Starr after his conviction, cutting his potential prison time from 84 years to three. He was incarcerated at the Federal Medical Center in Fort Worth, where the Justice Department said he died of cardiac arrest at a nearby hospital at a minute after noon.

McDougal had recently completed a memoir with Boston Globe reporter Curtis Wilkie. The book, whose working title was “Arkansas Mischief,” was scheduled to be published later this year, when McDougal was hoping for an early parole.

Starr, meeting in Washington with his staff Sunday, would not say how McDougal’s death would affect his investigation.

Of the man himself, Starr said, “He was a true Southern gentleman who had some ups and downs. But in our dealings with him after the trial, he was a complete and honorable gentleman. It’s a sad day. I’ll always remember he said, after he began cooperating with the United States, that he was not going to lie. That’s something I’ll always remember.”

Unlike her ex-husband, Susan McDougal refused to answer Starr’s questions before a grand jury and has been imprisoned for 18 months for contempt of court.

In addition to cardiovascular ailments, Jim McDougal suffered from bipolar disorder, otherwise known as manic depressive disease. Through much of the Whitewater saga, he was a frail and forlorn figure, subsisting in a well-appointed mobile home on the property of an old friend in Arkadelphia. But at other times, he appeared robust and even grandiose

McDougal once branded Starr “a moral and physical coward”; said of a reporter who got on his bad side, “I have cast her into the outer darkness”; and testified of his co-defendant Tucker, who had to resign the governorship after his conviction, that “like any lawyer, he would steal anything that wasn’t nailed down.”

When he decided to cooperate with Starr, McDougal called himself “Bill Clinton’s Brutus.”

Since then, sources said, McDougal had corroborated the story told by former Little Rock businessman David Hale, who pleaded guilty to fraud early in the Whitewater investigation. Hale testified at the Tucker-McDougal trial that he and McDougal met with Bill Clinton and discussed Hale providing a fraudulent $300,000 government-backed loan to Susan McDougal. Part of that money ultimately benefited the Whitewater Development Corp., an Ozarks land venture jointly owned by the Clintons and the McDougals. The loan was never repaid.

McDougal also had provided prosecutors with additional information about the multimillion dollar Castle Grande development project outside Little Rock, a series of sham real estate transactions that figured in the Tucker-McDougal trial. McDougal gave the grand jury more information about the legal work Hillary Clinton did for his S&L; in connection with the project, sources said.

McDougal’s attitude toward the Clintons showcased his erratic ways. Early in Clinton’s first presidential campaign, McDougal, fresh from an acquittal on brank fraud charges, was buoyed when his old friend and Whitewater business partner phoned McDougal’s ailing mother to say he had a job for Jim. But a year went by, no job appeared, and a bitter McDougal took damaging information about the Clintons to a Republican rival, who passed the material on to the New York Times.


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