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McDougal's Sentence Reduced For Assisting Kenneth Starr

By Michael Haddigan
The Washington Post
LITTLE ROCK, Ark.

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

McDougal, 56, could have received up to 84 years in prison for the 18 fraud and conspiracy convictions.

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.

Starr 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 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 or conceal those transactions.

McDougal said during his trial last year that he believed the president and first lady would be absolved of any wrongdoing. Outside Little Rock's federal courthouse Monday, a reporter reminded McDougal of that statement and asked if it was still correct. "I wouldn't go to the bank on that," McDougal replied.

Asked if he thought the Clintons broke the law in the 1980s, McDougal said, "I wouldn't want to make a judgment on whether any other person has broken the law or not."

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 and 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 had ever discussed the loan with Hale. McDougal said he knew of no wrongdoing by Clinton.

Throughout the trial, McDougal villified 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 he would never cooperate with Starr.

But after his conviction, McDougal began assisting the independent counsel's investigation. Susan McDougal, who refuses to talk to prosecutors, has said her former husband told her he planned to change his story to match Hale's account of Clinton's alleged involvement.

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 of probation.

A former aide to the late senator J. William Fulbright, D-Ark., McDougal is a longtime friend of Clinton.

In the free-wheeling 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.

It was disclosures about the Whitewater project that 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 loaned millions to himself and others in the 1980s. He is serving a 28-month federal sentence after a plea agreement with the independent counsel.