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Susan McDougal Gets 2 Years for Fraud Tied to Whitewater

By Michael Haddigan
Special to The Washington Post
Wednesday, August 21, 1996; Page A14

Sobbing that her role in the Whitewater scandal has ruined her life, Susan McDougal was sentenced today to two years in prison for her part in a scheme to obtain a fraudulent $300,000 small business loan in 1986.

McDougal, a former partner in the Ozarks land venture with then-Gov. Bill Clinton and Hillary Rodham Clinton, pleaded for leniency before U.S. District Judge George Howard Jr. "If not for Whitewater, I would be married and have children," she said. "I just ask you please for your mercy and tell you how sorry I am."

While her attorney portrayed her as the dupe of her former husband, James B. McDougal, a flamboyant real estate developer and owner of a failed savings and loan, prosecutors argued that her involvement in the loan scheme was part of "a pattern of deceit."

Prosecutor W. Ray Jahn said. McDougal had cheated on her husband and deceived the now-defunct Madison Guaranty S&L and the federal Small Business Administration. He said she recently lied to the court officer preparing her presentencing report.

"I submit to you, your honor, she is sorry she got caught," Jahn said.

Howard also sentenced her to three years of probation and ordered her to pay a $5,000 fine and $300,000 in restitution plus interest. McDougal, 41, also must perform 300 hours of community service while on probation.

The McDougals and former governor Jim Guy Tucker (D) were convicted May 28 after a three-month fraud and conspiracy trial brought by the office of independent counsel Kenneth W. Starr. Prosecutors charged the three conspired with former Little Rock municipal judge David Hale to obtain $3 million in illegal loans from Hale's investment company. The loans were backed by the SBA.

On Monday, Tucker escaped a prison sentence after doctors gave extensive testimony about his poor health. Tucker is on a waiting list for a liver transplant. Howard gave Tucker a suspended four-year jail sentence and four years' probation, including 18 months on home detention. Tucker also must pay a $25,000 fine and $294,000 in restitution and interest.

Susan McDougal emerged long ago as one of the most colorful characters in the dense Whitewater saga. In Arkansas during the mid-1980s, she was the young pretty face on television commercials promoting her husband's ambitious land developments. The most memorable spot featured her on horseback, her long hair streaming as she rode.

On paper, she owned a marketing firm that did promotions for the trailer parks and subdivisions backed by her husband's S&L; But during the trial, prosecutors described the company as a sham.

Hale testified that then-Gov. Clinton and others asked him to make a phony loan in the name of McDougal's marketing company. The president, who testified on videotape for the defense, denied the allegation. Hale, who agreed to cooperate with Starr's investigation, is serving a 28-month prison term on his guilty pleas to conspiracy and mail fraud charges.

Proceeds of the $300,000 loan ultimately ended up in other McDougal land projects, and a portion was used to purchase a tract of land in the name of Whitewater Development Corp.

Defense attorney Bobby McDaniel blasted Starr's prosecutors, saying they made McDougal a "political prisoner" because she refused to help with their investigation of the Clintons. "She is a pawn of a political agenda," he said. McDaniel said McDougal will appeal her conviction.

Susan McDougal was convicted in May on four counts, including mail fraud, misapplication of funds, making false statements and false entries. Howard sentenced her to two-year concurrent terms for each of the first three counts. He suspended sentence on the fourth count but gave her probation, the fine and community service.

James McDougal's sentencing was set for Monday, but Howard ordered a 90-day delay. McDougal, who has acidly criticized Starr's office, has said he is now cooperating with prosecutors in their probe.

Susan McDougal's fiance, Pat Harris of Los Angeles, testified that they began their relationship 12 years ago while the McDougals were still married and Harris worked at Madison. Speaking through tears as he sat on the witness stand, Harris said the pressures of the case have prevented the couple from starting a family. "We would like to pick up the pieces. There are hopes and dreams," he said.

But Jahn argued for a stiff prison term and fine. Despite promises she would not have to incriminate herself, her former husband or her family, she refused to cooperate with authorities.

McDaniel told reporters after court that Jahn told him in a recent telephone call that prosecutors wanted Susan McDougal to provide information on the Clintons. Starr in a statement tonight said no deal had been offered to her.

Copyright 1997 The Washington Post Company

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