Witness Says Clinton Was In On Deal President Denies He Discussed Loan For Arkansas Real Estate
The star prosecution witness in the Whitewater case laid out under oath Tuesday a story he has told repeatedly before, that then-Gov. Bill Clinton pressured him to make a fraudulent $300,000 loan and specifically asked that his name be kept out of the transaction.
David Hale, former owner of a government-funded lending company who has pleaded guilty to two felonies, testified in U.S. District Court here that he met with Clinton and his Whitewater business partner, James B. McDougal, in early 1985 in a sales trailer at a real estate project south of Little Rock. The meeting, one of two direct contacts Hale claims to have had with Clinton about the matter, was to discuss the structuring of a loan through Hale’s company, which was supposed to lend money only to small or disadvantaged businesses.
Hale said that in discussing the loan, Clinton insisted, “My name cannot show up on this.” The loan, backed by the federal Small Business Administration, was made out to Master Marketing, a company owned by Susan McDougal. But Hale said he expected the proceeds to go to James McDougal and Clinton and that they would be responsible for paying it back. The loan never was repaid.
Hale said Clinton at one point offered “raw land” in Marion County, Ark., as security for the loan. The Whitewater property owned by Clinton and his wife Hillary in partnership with McDougal and his former wife, Susan, was in that county.
Hale’s testimony, which continues today, offered a dramatic public airing of charges that the former municipal judge and state Democratic Party insider first brought forth two years ago. His charges are the only direct allegation of wrongdoing by Clinton in the Whitewater affair, and they have been denied adamantly by the president, who has said he never discussed the loan with Hale.
Hale told the court that the $300,000 loan discussed at the meeting was part of a larger loan-swapping scheme he arranged with current Arkansas Gov. Jim Guy Tucker and McDougal, the former owner of Madison Guaranty Savings and Loan, the now-defunct institution at the heart of the Whitewater scandal. The two men, along with Susan McDougal, are on trial accused of bilking Hale’s firm and McDougal’s S&L of more than $3 million.
Clinton told federal S&L investigators in a sworn deposition last year that he never pressured Hale for loan money. He has said publicly that Hale’s story is “a bunch of bull” fabricated to help him engineer a plea bargain with Whitewater Independent Counsel Kenneth W. Starr.
Hale last week was sentenced to 28 months in prison for defrauding the Small Business Administration, the federal agency that provided him company funds that were supposed to be lent out to disadvantaged small business owners.
Tuesday, in his second full day of testimony that is expected to last a week, a weary-looking Hale testified that McDougal told him that money was needed to “clean up some members of the political family.”
He said that he, McDougal and Tucker hatched a plan over Tucker’s kitchen table whereby they would sell real estate owned by Hale for an inflated price to a straw buyer, with Madison providing the mortgage.
The half-million profit from the sale was injected into Hale’s company, allowing it to obtain $1.5 million in matching funds from the SBA.
Some of that money went into the Master Marketing loan and other loans to Tucker and McDougal.
Describing the Master Marketing loan, Hale said he got a call from McDougal asking him to come out one evening to meet him and Clinton at the sales trailer at Castle Grande, a 1,050-acre commercial and residential project McDougal was developing in a swampy area southeast of the city.
Hale said they chatted a while about politics and then he quoted McDougal saying, “we ought to get our business done. What we’re gonna do is put this in Susan’s advertising company.”
They were seeking $150,000, but McDougal later got Hale to increase the loan to $300,000.
Clinton, said Hale, offered to put up land as security, but McDougal said “his and Susan’s financial statement was strong enough to handle it and they didn’t need additional security.”
Hale also said when Clinton expressed concern that his name not appear on the loan, McDougal said “I’ve already taken care of that.”
Hale said they put the loan in the name of Susan McDougal’s company because that would look better to the SBA, which requires that borrowers be “socially or economically disadvantaged.”
Hale was not asked whether he knew what the loan proceeds were actually used for.