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Susan McDougal entering federal court in Little Rock on Thursday (AP)

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Related Links
_ Full Coverage: Clinton Accused

_ Susan McDougal Jailed For Refusing to Testify (Sept. 10, 1996)

_ Susan McDougal Gets 2 Years for Fraud Tied to Whitewater (August 21, 1996)

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McDougal Quiet
At Grand Jury

By Lois Romano
Washington Post Staff Writer
Friday, April 24, 1998; Page A01

LITTLE ROCK, April 23—Defiant as ever, Susan McDougal today again refused to testify about her business dealings with President Clinton before the Whitewater grand jury here, setting the stage for a possible criminal contempt indictment by independent counsel Kenneth W. Starr.

"I won't be talking," McDougal said as she entered the federal courthouse this morning, wearing an orange prison jumpsuit and leg and wrist-to-waist shackles.

McDougal, a convicted Whitewater felon, kept true to her word during her brief time before the grand jury, despite a personal plea from an elderly grand juror to trust the panel of Arkansans, according to McDougal's brother Jim Henley. What she did tell the panel, according to sources, was that she would not cooperate because she believed Starr himself should be investigated and that he had a conflict of interest with regard to her case. "I didn't want them to think I was contemptuous of them," she said as she left the courthouse.

McDougal was called before the jury in mid-morning, and by noon, attorneys for both sides were meeting in U.S. District Judge Susan Webber Wright's office over the stalemate. Her lawyer, Mark Geragos, confirmed afterward that prosecutors threatened McDougal with a criminal contempt indictment. If convicted, she could face a sentence of up to five years for each count.

The long-running battle of wills between McDougal and Starr has been one of the more intriguing subplots to have grown out of the independent prosecutor's investigation of the 20-year-old tangled and failed Whitewater land partnership between the Clintons, McDougal and her late ex-husband, James. Both McDougals were convicted of fraud and conspiracy in the Whitewater investigation two years ago.

The saga took yet another dramatic twist today when David Hale, the star witness against the McDougals in 1996, was admitted to the hospital with chest pains on the very day his own state trial on charges of lying to insurance regulators was to begin. The judge delayed the trial a week to give doctors a chance to evaluate Hale's condition.

Hale pleaded guilty in 1994 to two felony counts of mail fraud and conspiracy stemming from the Whitewater probe. His 1996 testimony against the McDougals has come under intense scrutiny in recent weeks amid allegations that he has received payments from a right-wing Clinton foe while he was a cooperating witness for Starr.

Susan McDougal apparently cited the ongoing Hale flap in her refusal to testify today, said sources. Geragos has filed a complaint in federal court here regarding Starr's handling of the investigation into whether Hale was paid off. The attorney maintains that if the Hale allegations prove true, it could lead to a reversal of McDougal's conviction.

McDougal last month finished serving an 18-month civil contempt sentence for refusing to testify in 1996 about whether Clinton testified truthfully at her trial. Criminal law experts said it would be unusual to prosecute someone for criminal contempt who already had served a civil sentence. She has just begun her two-year sentence for -- among other things -- receiving a fraudulent $300,000 federally backed loan, some of which was used toward a land purchase by the Whitewater Development Corp. Clinton has denied under oath knowing about the loan. She has told reporters that she does not know of any crimes committed by the Clintons but has refused to answer any questions about Clinton's knowledge of the $300,000 loan.

With the clock ticking on Starr's grand jury here -- it is set to expire May 7 -- today's effort was seen by McDougal's lawyers as the special prosecutor's last desperate attempt to compel McDougal's testimony about whether Clinton lied about the loan. Prosecutors have also said they have new questions for McDougal.

A Starr spokesman declined to comment on whether McDougal was threatened with criminal contempt but left open the possibility. "Judge Starr believes a witness should have one last clear chance to provide truthful and complete answers," said Charles Bakaly. "If people think they can just wait out the government, what message does that send?"

Meanwhile, at a news conference across from the courthouse, Susan McDougal's family accused Starr of waging a vendetta. "She will never have anything to do with Ken Starr," said her brother Bill Henley.

After James McDougal, who died last month, and then-Arkansas Gov. Jim Guy Tucker were convicted of defrauding federally backed lending institutions, Starr sought their cooperation. Hale, a former Little Rock municipal judge who owned a federally financed lending company, testified at that trial that he made the loan to Susan McDougal at the urging of James McDougal and Clinton.

James McDougal eventually agreed to cooperate with Starr and said that Clinton did know about the loan and the use of its proceeds to buy land for Whitewater. Tucker, who was Hale's business lawyer, became a cooperating witness this year. He has testified several times before the grand jury, but he has not disclosed what he has said.

But Susan McDougal has steadfastly rebuffed Starr. Telegenic and outspoken, McDougal has managed to become a TV celebrity from prison in California. She has portrayed herself as a lone martyr fighting Starr's partisan efforts to destroy Clinton.

McDougal was last before the grand jury in September 1996. She will remain incarcerated in Little Rock and will likely be called before the grand jury again next week, said her lawyer.

Staff writer Susan Schmidt in Washington contributed to this report.


© Copyright 1998 The Washington Post Company

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