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Susan McDougal after her release (AP)

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Related Links
_ Full Text of Susan McDougal Indictment

_ McDougal Ready to Talk About Clinton Testimony (Washington Post, May 15)

_ McDougal Indicted for Silence on Whitewater (Washington Post, May 5)

_ McDougal Quiet at Grand Jury (Washington Post, April 24)

_ Full Coverage: Clinton Accused

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Judge Frees
Susan McDougal

By Susan Schmidt
Washington Post Staff Writer
Friday, June 26, 1998; Page A11

A federal judge in Little Rock yesterday ordered Susan McDougal -- the former Whitewater business partner of President Clinton who has refused to testify about his financial dealings -- released from prison for medical reasons just four months into a two-year sentence for bank fraud.

U.S. District Judge George Howard said he was leaning toward "compassion and mercy rather than strictness" in agreeing to release McDougal to her parents' custody for three months of home detention.

"I am a much better person today than the one you sentenced," said an emotional McDougal as she hugged family members in Howard's courtroom. "I promise you, you won't be sorry." Later, she left the courthouse in her orange prison jumpsuit, telling reporters she was looking forward to a bath and some new clothes.

McDougal, 43, spent 18 months behind bars for civil contempt after she refused to testify about the Clintons before a grand jury investigating Whitewater. As soon as she completed her jail term for contempt in March, she began serving the two-year sentence that Howard handed down after her 1996 bank fraud conviction. She still faces unrelated embezzlement charges next month in a California state court and a federal trial on criminal contempt charges in Arkansas slated for September.

Howard decided to release McDougal after hearing the testimony of a clinical neurologist from the University of California at Los Angeles, who said that curvature of the spine McDougal has suffered all her life has become more severe in prison and may require surgery.

Howard presided at the trial and sentencing of both Susan McDougal and her ex-husband James B. McDougal, who died of artery disease in prison four months ago. The McDougals were convicted, along with then-Arkansas Gov. Jim Guy Tucker (D), of fraud related to real estate deals financed by the now-defunct savings and loan they operated, and they were partners in the Whitewater land development with the Clintons.

"We have great respect for the judge, and he made a compassioned decision based on medical testimony," said Charles Bakaly, a spokesman for independent counsel Kenneth W. Starr. "We respect the judge's decision."

McDougal was immediately released to the custody of her parents, who live in Camden, about 60 miles south of Little Rock. Howard ordered her to wear an electronic monitoring device while she completes her home detention sentence.

It was unclear yesterday what impact McDougal's medical condition will have on the two court trials she faces in the coming months.

McDougal has been incarcerated in California, where she is scheduled to go on trial July 13 on charges that she embezzled more than $150,000 while working as a bookkeeper for Nancy Mehta, wife of orchestra conductor Zubin Mehta. She earlier spent 18 months in prison in Texas, Arkansas and California for refusing to testify in Starr's investigation.

The independent counsel sought to question her in September 1996 about whether Clinton, while governor of Arkansas, urged local businessman David Hale to lend Susan McDougal $300,000 in federally backed funds on fraudulent terms.

Portions of the $300,000 loan ultimately ended up in various McDougal land projects, and some of the money was used to purchase a tract of land in the name of the Whitewater Development Corp. jointly owned by the Clintons and the McDougals. James McDougal, before his death, told investigators that Clinton was aware of the land purchase, but Clinton has denied under oath knowing anything about it.

When Susan McDougal appeared before the grand jury for questioning about those transactions, she refused, contending she would never cooperate because Starr wants her to falsely implicate the Clintons. But the federal judge overseeing the grand jury held her in contempt of court because, as a result of her conviction on the bank fraud charges two months earlier, she no longer had a Fifth Amendment right to refuse to testify.

Last month, Starr tried again to secure McDougal's grand jury testimony. And when she again refused, he proceeded with the criminal contempt indictment against her. In that indictment, Starr contended the president "has made public comments that could reasonably have had the effect of bolstering Ms. McDougal's obstinacy, thereby impeding this federal investigation." The White House denied any such signal by Clinton.

In China today, the president said of McDougal: "I'm concerned about her health, and I hope she gets better now. I hope that the judge's decision puts her in a position where she can get over her pain and difficulty."


© Copyright 1998 The Washington Post Company

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