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Susan McDougal Gets Two-Year Prison Term for Whitewater Role

By Sara Fritz
Los Angeles Times
LITTLE ROCK, Ark.

One of President Clinton's long-time friends and investment partners, Susan McDougal, was sentenced Tuesday to serve two years in prison and repay about $600,000 to the government for her conviction on fraud charges stemming from the Whitewater investigation.

Even though McDougal played a relatively small part in the Whitewater saga, she received one of the toughest sentences meted out in the case so far - only four months less than the central figure in the conspiracy, David Hale.

Her attorney, Bobby McDaniel, said Tuesday that McDougal received a harsh sentence because, unlike many other defendants, McDougal, 42, has refused all entreaties to cooperate with Whitewater Independent Counsel Kenneth Starr.

The sentencing of co-defendant James McDougal, her ex-husband, has been delayed until Nov. 18 because he is now cooperating with the prosecution in exchange for leniency. A third defendant in the case, former Arkansas Gov. Jim Guy Tucker, received four years probation on Monday after convincing the judge that he would die from a life-threatening illness if confined to prison.

McDaniel said Starr's staff recently offered to get Susan McDougal's sentence reduced to probation if she would "provide information that she might have against Bill and Hillary Clinton."

He said she refused to cooperate because she has no information of wrongdoing by the Clintons. Starr, a Republican, has repeatedly insisted that his intention is to uncover the truth about Whitewater, not to build a case against the Clintons.

As a result of McDougal's refusal to cooperate with what she believes is a politically motivated investigation of the Clintons, McDaniel said, "she feels like what she is is a political prisoner in the United States."

Although McDougal intends to appeal, U.S. District Judge George Howard Jr. ordered her to begin serving her sentence on Sept. 30. In addition to a fine of $5,000, she was instructed to reimburse the government for the $300,000 loan she failed to repay to a federally-backed institution, plus about the same amount in interest.

McDougal, who has no source of income, was convicted on three counts of fraud in connection with a $300,000 loan she received in the mid-1980s from a small business investment owned by Hale and funded by the government.

The $300,000 loan at issue in the trial was one of a number of transactions that were reputedly part of a larger financial conspiracy by the McDougals, Hale and Tucker to defraud Hale's investment firm and Madison Guaranty Savings & Loan, which was owned by the McDougals.

Hale maintains he made the loan, which was never repaid, to Susan McDougal under pressure from her then-husband and then-Gov. Clinton. He said Clinton later told him Susan McDougal had squandered the money.

Although her loan application concealed the real purpose of her loan, McDougal claims she borrowed $300,000 from Hale to develop a real estate venture known as Lorrance Heights. About $25,000 went toward acquiring the property from International Paper Co., she said, and another $105,000 for the construction of roads and drainage.

At one point shortly after Lorrance Heights was acquired, the property was held briefly by the Whitewater venture.