Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 20, 1994 TAG: 9403200026
SECTION: NATIONAL/INTERNATIONAL PAGE: A-9 EDITION: METRO
SOURCE: The Washington Post
DATELINE: LITTLE ROCK, ARK. LENGTH: Medium
James McDougal, in an interview, described an angry conversation in December 1986 between Hillary Clinton and McDougal's then-wife Susan, who went to the Arkansas governor's mansion to ask that the Clintons sign documents transferring their interest in the 230-acre Whitewater project to the McDougals. The Clintons owned a half-interest in the venture.
Although then-Gov. Clinton had told the McDougals he was willing to sign the documents, Hillary Clinton refused, saying she hoped to eventually use the Whitewater investment to pay for her daughter Chelsea's college education, McDougal said.
At the time, the McDougals were under federal scrutiny for their involvement in Madison Guaranty Savings & Loan, which failed in 1989 at an estimated taxpayer cost of $60 million.
As controversy over Whitewater has heightened, a key question for the Clintons has been why they remained in the land venture with McDougal long after he came under federal inquiry for unsound business practices. He was tried and acquitted of bank fraud charges in 1989.
McDougal's account is at odds with the Clintons' depiction of themselves as "passive investors" in Whitewater who were unable to divest themselves of their interest in the project until December 1992, when they sold their shares to James McDougal for $1,000. Senior White House adviser Bruce Lindsey said last week that "Mrs. Clinton has no recollection of ever making any such statement to Susan McDougal."
McDougal said he and Susan tried to take over the Clintons' interest in the corporation so they could take advantage of tax losses that had accumulated since 1978, when the two couples bought the Ozarks property for a resort development.
When Hillary Clinton insisted on staying in the project, McDougal said, cautioning that his account of the meeting was obtained secondhand from his wife, "I found it rather laughable," because the land development company never had been profitable.
According to a report on Whitewater's finances issued during the 1992 presidential campaign, the company in 1986 had virtually no operating expenses. It owed between $50,000 and $60,000 on its original mortgage, but was due to receive much more than that - about $100,000 - from lot purchasers who were making monthly payments to the company. Apparently without telling the Clintons, the McDougals a few months earlier had purchased 810 acres of land from the International Paper Co. and put the property and a $440,000 mortgage in Whitewater's name. Soon afterward, the property was transferred to another McDougal corporation, the Great Southern Land Co.
That transaction has come under scrutiny by special counsel Robert B. Fiske Jr., who is investigating Whitewater.
Susan McDougal, through her lawyer, said she wants to make no comment "about what the Clintons did or did not do."
Records show Hillary Clinton sought a power of attorney for Whitewater from the McDougals in 1988, saying she wanted to dispose of remaining properties.
by CNB