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Whitewater Accuser Testifies on Financial Conspiracy

Courts: David Hale says scheme was intended to aid Arkansas Democratic 'political family,' which he understood to include then-Gov. Clinton.

April 02, 1996|SARA FRITZ | TIMES STAFF WRITER

LITTLE ROCK, Ark. — David L. Hale, President Clinton's chief accuser in the Whitewater scandal, began telling his story publicly Monday for the first time, recounting how in 1985 he was recruited into an illegal financial conspiracy designed to help the Arkansas Democratic "political family," including then-Gov. Bill Clinton.

Taking the witness stand in an important Whitewater-related trial, Hale described a meeting around a kitchen table in which he plotted the conspiracy with Jim Guy Tucker, who succeeded Clinton as governor in 1993, and James B. McDougal, Clinton's investment partner in the Whitewater land deal.

Although Clinton did not attend the meeting, Hale said, McDougal told him that the scheme was intended to assist their "political family," which he understood to include Clinton as well as Tucker and others.

Hale, who owned a government-backed small business investment corporation at the time, is expected to testify later in the week that Clinton asked him directly to make at least one of the loans involved in the deal--a loan to McDougal's wife, Susan.

The defense will allege that Hale, who is facing 28 months in prison for his part in the scheme, concocted his story about the "political family" to curry favor with Whitewater independent counsel Kenneth W. Starr and to receive a lighter prison term. Starr is investigating whether Clinton and his wife, Hillary Rodham Clinton, benefited improperly from their investment in Whitewater.

Although Hale's allegations against Clinton are not a central element in the government's case against Tucker and the McDougals, they have become a major political issue for the president. Clinton strongly denies involvement in this alleged conspiracy.

Hale originally leaked his tale of political intrigue to the news media about two years ago--just as government prosecutors were bearing down on him for allegedly making illegal loans from his investment corporation. Since then, he has been living in seclusion and cooperating with Starr.

The president as well as the defense repeatedly have tried to portray Hale as a liar and a con man. But on Monday, even defense attorneys admitted that Hale's soft-spoken sincerity on the stand tended to undermine the evil portrait of him that they have tried to craft for the benefit of the jury.

Leaving the courtroom after Hale's first day on the witness stand, McDougal denied that there was a meeting around the kitchen table. He also insisted that he never used the term "political family" to describe his group of Democratic friends.

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"It's a lie . . . " McDougal told reporters. "I always thought of David as a recreational liar. He enjoys lying."

Hickman Ewing, Starr's assistant, said that Hale was simply "laying the groundwork in terms of relationships" that will be important in the case. He noted that Clinton has not been charged as a co-conspirator but said testimony will demonstrate that the president was "peripherally involved."

Tucker and the McDougals have been charged with conspiring to make illegal loans from Hale's small business investment corporation as well as Madison Guaranty Savings & Loan, the now-defunct Arkansas thrift that McDougal owned until 1986.

Hale, who is testifying under a plea agreement with Starr, recalled how he had gotten to know Tucker, the McDougals and Clinton through Democratic politics during the 1960s and 1970s. To underscore his close friendship with Tucker, the prosecution presented a photo of the two men standing side-by-side, drinking beer at a party celebrating Hale's 40th birthday.

Hale recalled that Tucker had borrowed money at least twice from his investment company, known as Capital Management Services, before the day in late 1985 in which the three men hatched their scheme at Tucker's kitchen table.

He said that the purpose of the conspiracy was to enable him to loan money from his investment corporation to help McDougal "clean up" the Madison books shortly before the arrival of federal regulators.

As he described it, McDougal agreed to find a straw buyer to purchase a piece of property owned by Hale with a loan from Madison and, in turn, Hale would use the money to capitalize a loan to McDougal from Capital Management Services. Tucker allegedly served as Hale's lawyer in the transaction.

Hale said McDougal explained that the money was needed to "clean up [financial activities of] the political family." Asked by the prosecutor to whom McDougal was referring, Hale first replied: "I don't know what he meant."

But, at the urging of the prosecution, Hale quickly added: "I knew what he meant. . . . It involved Bill Clinton and maybe some of his aides and some of Jim's political associates and Jim Guy Tucker."

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The president, who will be called to testify by videotape later in the month, is expected to dispute Hale's testimony on a number of key points. In the past, Clinton has described Hale's story as "a bunch of bull."

Some of the money that Hale loaned to Susan McDougal was later funneled through the bank account of the Whitewater resort development, which the McDougals and the Clintons held jointly. McDougal insists that Clinton was unaware of the transaction.

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