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McDougal Gets 3-Year Term

By Michael Haddigan
Special to The Washington Post
Tuesday, April 15 1997; Page A01

James B. McDougal, a former partner with the Clintons in the failed Whitewater Arkansas land venture, was sentenced to three years in prison today after the Whitewater independent counsel asked for a reduced sentence because of the assistance McDougal gave prosecutors.

Later, in an interview with NBC's "Dateline Tuesday," McDougal said he had been covering up for the president and "I just got sick and tired of lying for the fellow." When asked directly whether Clinton knew about an illegal loan that the president had testified he knew nothing about, McDougal told NBC: "I'm not at liberty to comment on that. I really, really wish I could."

McDougal, 56, could have been sentenced today to up to 84 years in prison for the 18 fraud and conspiracy charges on which he was convicted last May. But independent counsel Kenneth W. Starr, in asking U.S. District Judge George Howard Jr. for a reduced sentence, said that McDougal offered information on "a wide range of matters, including matters previously unknown to us."

"He has assisted us and continues to assist us in having a fuller, broader, deeper understanding of that evidence," Starr said. McDougal led investigators to new documents and witnesses, Starr said.

The prosecutor said his office had given the judge, under seal, more information on McDougal's cooperation. Howard said it was the information provided under seal that led him to impose a reduced sentence.

Starr would not reveal what that evidence was, saying that to do so could compromise the continuing Whitewater investigation.

Starr is looking into whether the president and first lady Hillary Rodham Clinton were involved in various real estate transactions in Arkansas and whether there were efforts later both in Arkansas and in Washington to cover up those transactions.

An Arkansas jury reached guilty verdicts last May against McDougal, his former wife, Susan, and then-Gov. Jim Guy Tucker (D) on charges that they defrauded McDougal's Madison Guaranty Savings & Loan Association and the federal Small Business Administration. Charges said the three schemed to get $3 million in illegal loans, including a $300,000 loan for Susan McDougal, through a small business investment company owned by David Hale.

During the three-month trial, Hale testified that then-Gov. Bill Clinton pressured him in 1985 to make the loan to Susan McDougal as part of an effort to help the state's Democratic "political family."

In videotaped testimony, Clinton denied he ever discussed the loan with Hale. McDougal had said he knew of no wrongdoing by Clinton.

But in the NBC interview, which will be broadcast tonight, McDougal said he, Hale and the president met and discussed the loan and that Clinton "should be deeply concerned" about what McDougal will say about the meeting.

"You've changed your story?" McDougal was asked.

"Yes. I was trying my best to protect him," McDougal replied.

He was asked why people should believe him now if he admits to lying before; why people should not suspect that he was merely trying to get a more lenient sentence.

"You have every right to be suspicious and to think that perhaps I'm doing that," McDougal responded. But he noted that "you heard the prosecution say more than once in court today that what I had to say was very well documented."

Throughout the trial, McDougal vilified Hale, saying the former judge was lying to save himself from a long prison sentence. McDougal also denounced Starr's prosecutors, calling them "Republican gangsters" who were pursuing a "political prosecution." He vowed then he would never cooperate with Starr.

But after his conviction, McDougal began assisting the independent counsel's investigation. Susan McDOugal refuses to talk to prosecutors.

McDougal told NBC that "a big factor" in his decision to cooperate with the independent counsel was the feeling that Clinton had abandoned Susan McDougal. "I really thought he would pardon her," said McDougal, who said his ex-wife was "totally innocent" and that anything she was convicted of was something McDougal was responsible for.

McDougal said he did not believe he was betraying the Clintons. "I think the Clintons are really sort of like tornadoes moving through people's lives; that I'm just one of the people left in the wake of their passing by. . . . "

In sentencing today, Howard also ordered McDougal to pay more than $4.2 million in restitution and a $10,000 fine. After his prison term, McDougal must serve three years' probation.

A former aide to the late senator J. William Fulbright (D-Ark.), McDougal is a longtime friend of Clinton's. In the freewheeling 1980s, McDougal and his wife were owners of the Little Rock thrift and embarked on a series of ambitious land deals – including Whitewater, the real estate project in which they were partners with Bill and Hillary Clinton. Disclosures about the Whitewater project led to the appointment of an independent counsel and spawned a wide-ranging investigation into other matters.

Financing for some of the McDougals' deals came through Hale's Capital Management Services Inc. A former municipal judge and minor Democratic political figure, Hale received an SBA license in 1979 to make government-backed loans to disadvantaged small business owners. Through a maze of shell companies, Hale lent millions to himself and others in the 1980s. He is serving a 28-month federal sentence after a plea agreement with the independent counsel.

Tucker, who in December received a life-saving liver transplant, is serving 18 months of home detention. Tucker resigned as governor last summer.

At McDougal's sentencing, physician Noland Hagood testified that McDougal suffers from many health problems. He said a prison term would likely hurt McDougal's health.

But Howard later said he would recommend that McDougal be held at a federal prison with medical facilities, such as the prison at Fort Worth, so McDougal could be properly treated. McDougal is to report to prison June 16.

Susan McDougal was convicted on four counts of mail fraud and making false financial entries and statements. Howard has sentenced her to two years in prison. Before she began her sentence, another Arkansas federal judge ordered her jailed for refusing to testify before a Little Rock grand jury investigating Whitewater-related matters. She is in a California jail, awaiting trial on unrelated charges there.

Copyright 1997 The Washington Post Company

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