Clintons, Thrift Owner Tied to Real Estate Deal

Arkansas Gov. Bill Clinton and his wife had a one-half interest in a real estate corporation that apparently was heavily subsidized by a former Clinton aide, the owner of a failed savings and loan association, a published report said today.

Available records appear to show that the Clintons invested little money in the partnership with former S&L; operator James B. McDougal, even though they had a 50% interest in it, the New York Times said.

The real estate company, Whitewater Development, was started in 1978 and at times money from McDougal’s S&L;, Madison Guaranty, was used to subsidize it, the newspaper said. Whitewater Development purchased 200 acres of Ozark Mountain land with the intention of reselling it in smaller lots. Clinton brought McDougal into his Administration 12 years ago as an aide for economic development. The two have been friends since the 1960s.

The newspaper reported that the Clintons improperly deducted at least $5,000 in interest payments on their personal tax returns in 1984 and 1985 in a transaction involving the partnership. The deductions saved them about $1,000 in taxes.

Hillary Clinton borrowed $30,000 from McDougal’s financial institution and the Clintons took interest deductions for interest payments. But it was Whitewater that actually made the payments.

A lawyer for the couple told the paper that the deduction “clearly is an error.” But since the filing error occurred more than three years ago, the Clintons under federal tax regulations are no longer liable for the taxes.

The newspaper also reported that:

--Clinton as governor in 1985 appointed a state securities commissioner who approved two proposals to help keep McDougal’s savings and loan alive. The proposals were made by Hillary Clinton, a lawyer whose firm had been retained to represent the S&L.;

--McDougal says he urged Clinton to appoint the securities commissioner, Beverly Bassett Schaffer, who denies giving the S&L; any special treatment. Madison was never able to raise additional capital and was taken over by federal regulators in 1986.

Clinton said Saturday that McDougal has “been under a lot of mental stress over the last few years . . . under medication” and the governor declined to comment on the story, saying he had not read it yet.