Washington Post Staff Writer
Monday, March 9, 1998; Page A01
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, suffered cardiac arrest yesterday and died, just months before he hoped to be released from prison.
McDougal, 57, was a central figure and a cooperating witness in the continuing Whitewater investigation. It was unclear yesterday what effect 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 then-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 an estimated cost to taxpayers of $60 million. 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 Arkansas 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 81 years to three. He was incarcerated at the Federal Medical Center in Fort Worth, where the Justice Department said he suffered cardiac arrest. He was taken to a nearby hospital, where he was pronounced dead 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 yesterday, would not say how McDougal's death would affect his investigation.
Of the man himself, Reuters quoted Starr as saying, "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, a Daddy Warbucks lookalike given to florid historical allusions and outrageous commentary.
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 then-Arkansas Gov. Clinton and discussed Hale providing a fraudulent 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 $300,000 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 bank fraud charges, was buoyed when his old friend and Whitewater business partner phoned McDougal's ailing mother, Lorene, 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.
McDougal subsequently defended Bill Clinton, although he pointedly stopped short of defending Hillary Clinton's roles in the Whitewater real estate investment and as one of Madison's lawyers. But even his endorsement could cause more harm than good: His gentlemanly testimony about his ex-wife's competence and savvy during their 1996 trial thoroughly undercut her claim to have been his unknowing dupe in receiving the fraudulent $300,000 loan.
Susan McDougal was convicted and sentenced to two years in prison on bank fraud charges.
It was McDougal's reverence for President Franklin D. Roosevelt, whose speeches he could quote at length, that led him to Democratic Party politics. He met every Arkansas politician of consequence during his years as a local staff member for Arkansas Sen. J. William Fulbright, including another most important Fulbright staff member -- Bill Clinton. It was during those years in the 1960s and '70s, driving Fulbright to appearances in hamlets all over Arkansas, that McDougal began making what he called "dirt deals" -- buying and subdividing rural real estate for trailer home communities. In the late '70s, McDougal got the Clintons to join him in the Whitewater venture along the White River in the Ozark mountains.
Soon afterward, newly elected Gov. Clinton appointed McDougal director of economic development in Arkansas, making McDougal a member of his first cabinet.
In his only attempted foray into elective politics during a 1982 race against Republican Rep. John Paul Hammerschmidt, McDougal told voters of Arkansas's Third Congressional District: "My ancestors were over here farming this country when my opponent's ancestors were rutting with the wild hogs in the forests of Silesia."
More recently, on learning of the Monica Lewinsky allegations involving President Clinton, McDougal told a reporter: "Hell's a-burnin'!"
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