Clinton Insists ‘There Was No Impropriety’ in 14-Year-Old Real Estate Transaction : Investment: He and his wife ‘never made a penny’ in the deal in Arkansas, the governor says.

With two blistering days to go before the Super Tuesday states deliver their verdict on his candidacy, Sunday found Arkansas Gov. Bill Clinton’s roller-coaster campaign for the presidency once again alternately preaching to voters and scrambling to defend himself.

This time Clinton--who has weathered unsubstantiated allegations of womanizing and a controversy over his Vietnam-era draft status en route to victories in several states--was under fire for a 14-year-old business deal begun when he was Arkansas’ attorney general.

The New York Times reported in its Sunday editions that Clinton and his wife, Hillary, became partners in 1978 in a real estate investment with a Little Rock developer, who later took control of a state-chartered savings and loan that ultimately failed.

The article said that the Clintons, although apparently making no profit on their investment, had stood to gain far more proportionally than their stake would have suggested had the deal to develop 200 acres in the Ozark Mountains made money.

But Clinton and his campaign released documents in which principals involved in the story contradicted many of its major contentions. The real estate developer, James B. McDougal of Little Rock, also was quoted as disputing some of the story’s assertions, and his attorney declared the story “not only false but probably actionable.”

Clinton, in a hastily arranged news conference at an airport terminal here, acknowledged that for the sake of appearances he probably should have gotten out of the deal after he was elected governor several months after the land was purchased. It has since been sold.

But the governor also insisted that “there was no impropriety” in the real estate transaction, which he described as a “purely private investment.”

“I know we lost over $25,000 in this deal,” Clinton told reporters. “We never made a penny.”

Clinton did not contest the story’s account that he and his wife improperly deducted $5,000 from their 1984-85 income taxes in connection with the land deal. Because of that, the New York Times reported, they saved about $1,000 in taxes.

“If they made a mistake in my favor,” he said, referring to the accountants who prepared his returns, “I will reimburse the government.” According to IRS rules, the couple is not legally required to repay the debt since the error occurred more than three years ago.

The New York Times also said that McDougal, who is repeatedly cited in the story, is a manic depressive who once stood trial and was acquitted on unrelated federal fraud charges. He is a longtime friend and former gubernatorial aide to Clinton.

Questions about the land deal arose just as Clinton sought to translate Saturday’s electoral victories in South Carolina and Wyoming into momentum for Tuesday’s host of primaries and caucuses.

But the dispute did not deter the governor from a full day of boisterous campaigning in Texas, the largest of the Super Tuesday states, where he is holding a commanding lead in the polls.

Before several hundred worshipers at Lyon’s Unity Missionary Baptist Church in a low-income black neighborhood in Houston, Clinton was lauded by city councilwoman Sheila Jackson Lee as “someone who knows both the hills and valleys of our lives.”

Clinton delivered well-received calls for racial understanding at stops in Texas cities.

The land development deal cited by the New York Times was entered into in 1978 by the Clintons and McDougal, who together formed a partnership called Whitewater Development. The partnership bought 200 acres of Ozark property, intending to subdivide it and sell the lots.

But the facts after that point were sharply in dispute:

* The newspaper said that McDougal financed most of the deal and that the Clintons stood to lose little. Had the arrangement been successful, the paper said the Clintons would have cashed in on a 50% interest.

Clinton, however, said that he and his wife were personally liable for $203,000 in loans secured to buy the property. The development corporation’s accountant, Charles E. James, released a statement through the campaign confirming Clinton’s account.

“The article seems to imply that my wife and I had no financial exposure,” Clinton said. “Nothing could be further from the truth. We were jointly and severally liable for more than $200,000 in debt.”

* The headline of the story, at least in early editions, said that the “Clintons Joined S&L; Operator in an Ozark Real-Estate Venture.”

Clinton, McDougal and their corporation’s accountant said in separate statements that McDougal was not, at the time the deal was made, the owner of the Madison Guaranty Savings & Loan. He bought into the savings and loan four years after the land was purchased and severed his ties to the S&L; in 1986.

* The article says that after McDougal’s savings and loan was found to be insolvent, Clinton appointed a new state securities commissioner who had been a lawyer in a firm that represented the same savings and loan.

The securities commissioner, Beverly Bassett Schaffer, and Clinton said that was flatly untrue. Schaffer said in a statement that she was appointed to the job on Jan. 16, 1985. She, McDougal attorney Sam Heuer and the Clinton campaign said that the S&L; did not become insolvent until 1986.

* After federal regulators found the S&L; insolvent, the article said, the commissioner accepted two proposals to keep it afloat “that were offered by Hillary Clinton,” the governor’s wife and a lawyer. “She and her firm had been retained to represent the savings institution,” the article said.

Clinton said that the Rose Law Firm, of which his wife is a partner, did represent the S&L; but that his wife had nothing substantive to do with the matter. Richard Massey, another firm lawyer and a friend of the S&L;’s executive officer, handled the insolvency proceedings, Clinton said.

* The New York Times quoted McDougal as saying that as Clinton was preparing to run for President, he called a third party to ask if McDougal bore the governor any ill will. Clinton also suggested he might be able to find a job for McDougal, the paper quoted McDougal as saying.

But McDougal told the Arkansas Democrat-Gazette, in a story also published Sunday, that he didn’t recall either statement. Clinton said that he last talked to McDougal more than a year ago, after McDougal was acquitted of the unrelated federal fraud charges.

Clinton said he recalled little of their conversation other than McDougal’s request that he call his ailing mother, a Clinton supporter.

At his press conference, Clinton said that as a general rule, he believes that governors should not be involved in financial deals with individuals whose firms fall under government regulatory authority.

Although he was not governor and McDougal was not an S&L; operator at the time they entered the deal, Clinton acknowledged that perhaps he should have gotten out of the deal once those facts changed.