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Clinton Associates Cleared on 4 Counts in Bank Funds Case

By R.H. Melton and Michael Haddigan
Washington Post Staff Writers
Friday, August 2, 1996; Page A01

A federal jury today cleared two Arkansas bankers and longtime supporters of President Clinton of four felony charges involving their bank and Clinton's 1990 statewide campaign. The jurors deadlocked on seven remaining counts.

The verdicts were the first setback for independent counsel Kenneth W. Starr and an instant boost for the president, whose last gubernatorial reelection campaign was central in the case. The outcome was particularly good news for senior Clinton aide Bruce R. Lindsey, who was named by prosecutors as an "unindicted co-conspirator" and now seems unlikely to face criminal charges from Starr's office.

News of the verdicts raced through the White House, where staff members described the atmosphere as gleeful. Clinton was jubilant when he learned of the verdicts on his way back to the White House from a golf game, aides said. Lindsey, one of the president's closest friends, said he was "happy the jury has rejected these baseless allegations."

The six-week trial of Herby Branscum Jr. and Robert M. Hill, bankers from a tiny rural county, focused on their donations to Clinton's tough reelection bid in 1990 and the handling of the Clinton campaign's account at the bank they own. Prosecutors alleged the bankers illegally used funds from their Perry County Bank to cover their campaign contributions and, in two cases, conspired with campaign treasurer Lindsey to hide large cash withdrawals from federal regulators.

Jurors acquitted the defendants of the two charges that related to Lindsey – conspiracy and filing a false statement. They also rejected two other charges that the bankers misused $3,000 in bank funds. The jury described itself as "hopelessly deadlocked" on the seven other counts after five days of sometimes fierce deliberations.

The verdicts, delivered in a stately federal courtroom here before an expectant audience of the defendants' family and friends, could rob Starr of some of the momentum he gained with the convictions two months ago in a far more complicated case against Jim Guy Tucker, a Democrat who has since resigned as Arkansas governor, and the Clintons' former partners in the Whitewater real estate venture. A judge yesterday denied requests by Tucker, James B. McDougal and Susan McDougal for a new trial.

Prosecutors reacted grimly to the jury's decision on Branscum and Hill, but they stressed that the two-year investigation of the bankers was only one strand of their ongoing inquiry into the Clintons and their associates.

Starr, who rarely comments publicly on his investigation, spoke to reporters at length outside the courthouse before the verdicts were delivered. He said the Branscum-Hill trial was an "integral" piece of his overall inquiry, but not the linchpin of what continues to be an election-year distraction for the White House.

In Little Rock, Starr's prosecutors are investigating Hillary Rodham Clinton's legal work for a savings and loan and an allegation that Bill Clinton, as governor, helped obtain an illegal $300,000 loan in the name of his Whitewater business partner. In Washington, investigators are looking into whether White House officials obstructed justice and lied about the firing of some White House staff members and other matters.

Starr said the case against Branscum and Hill, while significant, "is not part of what we would characterize as our core jurisdiction."

W. Hickman Ewing Jr., the silver-haired Tennessean who led Starr's prosecution team, told reporters that while he was chagrined by the verdicts, Starr's work would go forward. "This was one part of the investigation," Ewing said. "This was not necessarily a steppingstone to something else. There are other aspects."

"Obviously, we're disappointed," Ewing added. "On the other hand, we respect the jury system. I'm not totally shocked."

Branscum and Hill were accused of using about $12,000 worth of their bank's funds to reimburse themselves and their relatives for political contributions to Clinton's gubernatorial campaign, as well as his 1991 presidential exploratory committee.

The government contended the two men falsely claimed they were owed the bank funds for legal, accounting and other services they provided.

Prosecutors told the jury that Branscum and Hill hoped the contributions would put them in good stead with Clinton and win them appointments to powerful state boards. Clinton named Branscum to the state Highway Commission and reappointed Hill to the state Banking Board after his reelection.

Prosecutors also maintained that Branscum and Hill, as a favor to Lindsey and the campaign, hid from federal regulators $52,500 in bank withdrawals by the Clinton campaign.

The defense featured President Clinton, who provided his second videotaped testimony in a criminal trial, and White House deputy counsel Lindsey, who insisted that he chopped up cash withdrawals into smaller amounts to hide them from Clinton's political opponents, not from federal regulators.

In interviews, several jurors said they believed the government's charges amounted to nothing more than a governor's political friendships with small-town supporters. Juror Betty I. Sweeden, a retired poultry inspector, said jurors were split 60-40 in favor of acquitting the defendants on all 11 charges. "They were nice people and they didn't mean any harm," she said of the defendants.

Juror Mary M. Zinamon, 41, of Little Rock, said the government never proved to her the bank's payments to Branscum and Hill were improper. "It was not really proven to me that they didn't do the work," she said.

She also said the defense showed the bankers didn't need to curry favor with Clinton because both were already longtime supporters. "It's politics," she said. "You normally appoint people to commissions who are your supporters."

Another juror, Wesley N. Camp, of Conway, said the panel didn't have enough evidence to decide on seven of the charges. "The government fell short," he said. "I personally didn't have enough testimony to decide."

"There was a lot of stuff in there that was really iffy, and I can see how it would draw red flags. But the government accused those guys of a crime and didn't prove it," agreed juror Rick DeGroat, 35. "I can't ruin a guy's life over an assumption."

Sweeden said the jurors had agreed to acquit on two charges by Tuesday, when they first told the judge they were deadlocked. After the judge ordered them to deliberate further, they agreed to acquit on two more. The minority of jurors who thought the defendants were guilty on other counts "wouldn't have changed their minds if we stayed there a month," she said.

Zinamon said the jury argued fiercely at times. "At some points we were ready to tear each other's hair out," she said. "We lost our religion a few times."

Clinton's testimony for the defense was not a major factor in their decision, several jurors said. Some questioned Lindsey's testimony, even though the jurors acquitted the defendants of the alleged conspiracy with Lindsey to hide the campaign's bank withdrawals.

"We actually didn't believe anything he said," said Sweeden. "The whole jury felt that way."

Camp said Lindsey "wasn't very precise or consistent." But DeGroat said he thought Lindsey "was just trying to make common sense out of things."

The jurors largely rejected the testimony of Neil T. Ainley, the former president of Perry County Bank and a key prosecution witness. Ainley pleaded guilty last year to misdemeanor charges that he hid cash withdrawals by Clinton's campaign. Sweeden said the jury did not believe him because "we felt like he was already in trouble and he was just trying to save himself."

Branscum and Hill wept and hugged supporters in the courtroom after the verdicts were announced. "I feel vindicated," Branscum told reporters. "I've been through two years of hell. This was purely political."

Said Hill: "This was a political prosecution. It should never have gotten this far. I'm innocent. I've been innocent all along."

To date, Starr's office has obtained nine guilty pleas, as well as the fraud and conspiracy convictions of Tucker and the McDougals. A second case against Tucker has yet to be tried.

In the aftermath of this defeat, the independent counsel will have to make a series of fairly speedy decisions, according to people familiar with his thinking.

First, he must decide whether to retry Hill and Branscum on the deadlocked charges, a step that Starr may view as too costly and time-consuming for his deputy Ewing's relatively small prosecution team. Still, Starr today echoed a recent comment by Ewing, saying, "There's a certain presumption that you retry."

Starr also must decide whether to pursue Lindsey. Lawyers for Branscum and Hill said tonight they believe the jury's decision put Lindsey in the clear. Starr and Ewing stopped short of that conclusion in their remarks.

"Anything is possible," Ewing said. "Certainly, I think Mr. Lindsey would be encouraged by today's verdict.

"Bruce Lindsey's never been charged, and, contrary to the reports, we didn't make a big deal of his status in the trial," Ewing added. "If they did not convict Mr. Branscum and Mr. Hill, you would presume that if Mr. Lindsey had been there, they would not have convicted Mr. Lindsey."

Starr said it was "premature" to announce any decision on Lindsey, but did point out that mounting a full-scale trial would entail a "much more exacting standard" of evidence than needed to name him an unindicted co-conspirator.

"Obviously, in a criminal case, a different and much more exacting standard is imposed in terms of guilt or innocence," he said. Dan Guthrie, Branscum's lawyer, said the acquittal on one key conspiracy count "can be very fairly read as an exoneration of Bruce Lindsey, an exoneration of Bill Clinton, and exoneration of the 1990 campaign."

Timing also will be vital to Starr. With the political conventions nearing, he may not be eager to launch high-profile prosecutions as the nation turns more attention toward the presidential nominees.

Starr addressed that issue directly today, saying that while the Justice Department had a "common law" rule against mixing prosecutions and politics, there was no "bright line" impeding his progress this summer.

"We would obviously seek to move our investigation forward . . . as rapidly as possible, and we are continuing to do that," Starr said. "We really do not think it's appropriate for us to be saying: Here it is, here is a specific date and beyond that date something may or may not happen."

Staff writers Susan Schmidt and John F. Harris in Washington contributed to this report.

Copyright 1997 The Washington Post Company

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