McDougal bought Madison Guaranty Savings & Loan in 1981. Four years later Governor Bill jogged into McDougal's office one morning and implored him to send some action HRC's way. She was under pressure at Rose for not bringing in enough business. McDougal duly put HRC on a $2,000-per-month retainer as adviser to his S&L. By the mid-1980s Madison Guaranty was in poor shape and under pressure from federal regulators to tighten up and increase its cash reserves. McDougal had run out of banks to borrow money from, and so HRC came up with the idea--unprecedented in Arkansas--of a preferred stock issue. Permission was duly obtained for this unusual financing from the relevant state regulator, Beverly Bassett, a friend of the governor's who had--before preferment as Arkansas Securities Commissioner--been a lawyer in Jim Guy Tucker's firm. There she had worked on matters involving Madison Guaranty, thus making everything as cozy as could be.

One of the Clintons' constant refrains from 1992 onward has been that in her capacity as partner in the Rose law firm, HRC stood at arm's length from any dealings with state agencies. In fact, HRC was doing something much more lucrative, namely representing corporations on matters pending before state regulators. Having worked as a lawyer on Madison Guaranty business, Bassett knew very well the S&L was on the rocks. It was only because HRC made the call to her that Bassett gave the official thumbs-up for a preferred stock issue. Fortunately for any possible investors, Madison Guaranty was taken over by the feds, and McDougal kicked out, before the offering was made.

In 1994 HRC swore in a deposition to government investigators at the RTC that she A) never solicited any work from McDougal, B) had no role in the prospective preferred stock matter, and C) did not attempt to influence Beverly Bassett. Though her testimony has not been published, she presumably swore the same thing in her recent grand jury appearance and in her deposition to Starr. If the independent counsel persuades the grand jurors that perjury or obstruction of justice occurred, the preferred stock offering is one source of a possible indictment of HRC.

A similar indictment could stem from HRC's work on the Castle Grande deal. To the fretful gaze of McDougal in 1985, Castle Grande seemed like salvation for his beleaguered bank. The Castle Grande property was a tract of several hundred acres just south of Little Rock; the development plan involved a mix of industry, a shopping center, and mobile homes. There was a problem. Under state law the Madison subsidiary planning to handle the property could not be its sole owner. In the scam that apparently transpired, there were four principals: McDougal, Jim Guy Tucker, HRC, and Seth Ward, the father-in-law of Web Hubbell, the man in charge of the litigation shop at Rose law.

According to both Stewart and the Pillsbury, Madison & Sutro report, Ward was set up as a fake partner. As described in the report on the RTC's investigation into Madison, the deals that ensued represented "a series of flips and fictitious sales." Madison gave Ward an interest-free $1.15 million loan, for which he had no liability. The loan was used to buy a share in the Castle Grande property, thus enabling the whole transaction that was intended as Madison's salvation (along with the preferred stock issue). Ward was handsomely compensated for his role as ghost dancer, getting a 10 percent commission on all the sales from that property--in the end totaling $300,000. In addition, Madison magnanimously paid Ward $400,000 for a 22-acre parcel in the property, twice its market value.

For his part in this insider dealing, Jim Guy Tucker--lieutenant governor in Clinton's last gubernatorial term and then governor--has been reindicted. (The first indictment was thrown out by a Clinton-appointed judge.) For their role in Castle Grande and other matters, the McDougals are currently on trial. HRC has professed complete ignorance. "I don't believe I knew anything about any of these real estate parcels and projects," she proclaimed in her deposition to the RTC. The RTC and the independent counsel asked Rose for billing records to buttress HRC's assertions. Both the firm and the White House claimed they could not be located. Two days after the statute of limitations expired on the Castle Grande dealings, the records were discovered on a table in an office used by HRC to store papers in their private White House residence. The records show she billed Madison for 60 hours of work on the Castle Grande deal.

Not far from the Castle Grande property was a 500-acre parcel owned by International Paper, a timber company and the largest landowner in Arkansas. If Castle Grande was to help bail out Madison Guaranty, this property of International Paper was to be the salvation of the endlessly hemorrhaging Whitewater Development Corporation (WDC), still co-owned by the McDougals and the Clintons.

Ten miles southwest of Little Rock, the IP parcel had been high-graded (i.e., the most valuable timber taken out) and it was scheduled for tiny subdivisions for low-income folk and senior citizens. International Paper was offering the property to WDC for the very attractive price of $1,000 per acre. Casting about for a loan to finance the purchase, McDougal lit upon David Hale, a player in Democratic circles in Little Rock who was appointed municipal court judge by Clinton--and, by a fortunate concatenation of circumstances, the owner of Capital Management Services, a company licensed by the Small Business Administration to dispose of low-interest loans.

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