
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, November 10, 1993                   TAG: 9311100126
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-2   EDITION: METRO 
SOURCE: The New York Times
DATELINE: WASHINGTON                                LENGTH: Medium

HOUSE PANEL TO PROBE S&L WITH CLINTON TIES

House Banking Committee Chairman Henry Gonzalez said Tuesday that his panel would investigate the failure of an Arkansas savings and loan owned by James McDougal, a former business partner and political patron of President Clinton.

The announcement, along with a development in a separate criminal investigation, makes it more likely that the relationship between Clinton and the owner of the savings and loan will be under review well into next year.

Responding to a request Tuesday by Republicans on the panel for hearings into the management of the Madison Guaranty Savings & Loan, Gonzalez said he would designate staff members to collect information about it.

Madison already is the subject of a criminal investigation by the Justice Department, which Tuesday announced a change of prosecutors in the case. The U.S. attorney in Little Rock, Paula Casey, said she and her staff had stepped aside because of concerns about their impartiality. Casey worked as a volunteer on six of Clinton's campaigns for governor in Arkansas.

The case will be supervised by Donald B. Mackay, a Justice Department trial lawyer in Washington.

McDougal was one of Clinton's closest associates in Arkansas, and was, at various times, his business partner, political fund-raiser, family banker and senior aide.

McDougal has denied any wrongdoing, blaming regulators and prosecutors for his problems. Clinton is neither the subject nor a target of the investigation.

Under McDougal, Madison, a state-chartered savings and loan, started as a tiny institution in a small town, then grew rapidly.

Even after it was criticized by federal examiners, Madison continued to make questionable loans, many of them involving prominent figures in Arkansas Democratic politics, according to court and banking records. Some of those loans are the subject of the criminal investigation.

The Republican caucus of the banking committee asked Gonzalez to seek testimony from federal and state regulators, Madison officials and members of the Rose law firm in Little Rock. In 1985, Hillary Rodham Clinton and other lawyers in the firm represented Madison in matters involving state regulators.

The Republican letter suggested several lines of inquiry, including possible lending abuses and "the timeliness of the actions of state and federal regulators."

McDougal was removed from Madison's affairs in 1986 by federal and state regulators. In 1989, the government took over the thrift.

by CNB