Related Links Coverage of the McDougal Trial Clinton Accused Special Report

By Pete Yost
Associated Press Writer
Tuesday, March 23, 1999; 4:27 p.m. EST

LITTLE ROCK, Ark. (AP) -- Taking the witness stand after defying Kenneth Starr's prosecutors for 2 1/2 years, Susan McDougal said Tuesday she never discussed a fraudulent $300,000 loan with Bill Clinton and ``did not hear anything untruthful'' when the president testified at her 1996 trial.

At times crying, at times speaking animatedly to the jury in her criminal contempt trial, the Clintons' former real estate partner depicted herself as a ``people person'' who mostly left Whitewater financial matters to her husband and is ``notoriously bad with dates.'' She said she couldn't even remember the year Clinton was first elected Arkansas governor -- 1978.

Her testimony opened the way for Starr's prosecutors to get answers from Mrs. McDougal for the first time. They should question her in court later this week.

Mrs. McDougal's lawyer, Mark Geragos, led his client through a series of questions she refused to answer when she appeared before a federal grand jury in September 1996 and again in April 1998.

Was Clinton truthful in his videotaped testimony for her 1996 fraud trial? Geragos asked.

``Nothing he said was untrue to me,'' replied Mrs. McDougal, who was convicted of four felonies in that case. ``As I sat there that day, I did not hear anything untruthful.''

At the 1996 trial of James and Susan McDougal and then-Arkansas Gov. Jim Guy Tucker, all of whom were convicted, the president testified that he knew nothing about a fraudulent $300,000 federally backed loan that went into the McDougals' joint checking account.

``I never discussed the loan with William Jefferson Clinton,'' Mrs. McDougal said.

Ten minutes into her testimony, Mrs. McDougal began crying as she recalled her first real estate project with her former husband. ``Talking about Jim is very hard for me. He died recently,'' she said, wiping away tears. Her ex-husband died in prison in March 1998.

When federal regulators forced the McDougals out of their failing savings and loan in 1986, the estranged couple both were in dire financial straits, including their foundering Whitewater investment with the Clintons. Mrs. McDougal said she struggled to solve the problems herself without letting on how bad things were.

``I didn't want to tell Bill and Hillary Clinton,'' she said, because she was too proud.

Mrs. McDougal has asserted that she has refused to cooperate with Starr's investigation because prosecutors want her to implicate the Clintons falsely in wrongdoing.

When she took the stand, lawyer Geragos reminded jurors that Mrs. McDougal did not have to testify at her own trial. ``You understand better than anybody that you have a right not to testify,'' he told her.

``I understand that, yes,'' answered Mrs. McDougal, who at times appeared nervous and frequently pushed back her long hair as she talked.

If convicted of criminal contempt and obstructing Starr's investigation, Mrs. McDougal could be sentenced to jail and fined up to $750,000. She already has served 18 months in jail for civil contempt in the Whitewater matter, but prosecutors said her testimony was so crucial that her refusal warranted criminal charges.

Mrs. McDougal also was asked whether Clinton knew about another business under scrutiny by prosecutors following the Whitewater paper trail, the McDougals' Lorance Heights real estate development. Both the president and Mrs. Clinton have denied knowledge under oath.

``I might have in a social sense told him I was working out there, but certainly I never discussed any substantial thing about Lorance Heights with Bill Clinton,'' Mrs. McDougal said.

The Lorance Heights project has been an important part of Starr's investigation. Mrs. McDougal said she understood the $300,000 loan, deposited in her joint account with James McDougal, was to have been used for the project. She said she picked up the loan at her husband's instructions and knew nothing else about it.

``I trusted him for everything,'' she said.