Justice Dept. to Run Arkansas S&L; Probe : Inquiry: Senior trial attorney arrives from Washington to replace Clinton appointee. Criminal case involves President’s former allies.

The Justice Department took charge Tuesday of a criminal investigation into the failure of an Arkansas savings and loan that involves some of President Clinton’s oldest friends and political allies.

A veteran senior attorney in the department’s fraud section arrived here to take over the probe of Madison Guaranty Savings & Loan from the new U.S. attorney, a Clinton appointee who had asked that she be excused from the case.

The action comes on the heels of claims that Clinton and his wife may have benefited improperly from transactions at the defunct savings and loan. Clinton last week dismissed the allegations as an “old story” with no foundation.

However, the Justice Department’s announcement Tuesday provides an acknowledgment that the case remains active and politically sensitive.

In addition, Rep. Henry B. Gonzalez (D-Tex.), the chairman of the House Banking, Finance and Urban Affairs Committee, responded affirmatively Tuesday to a request from Republicans that he open a preliminary inquiry into the 1989 failure of Madison Guaranty, which cost the taxpayers $47 million.

James B. McDougal, the former owner of Madison Guaranty and a longtime business partner of the Clintons, told The Times last week that he hired Hillary Rodham Clinton as a lawyer for the ailing thrift in 1984 after Gov. Clinton said his family needed financial help. Presidential Press Secretary Dee Dee Myers denied that Clinton solicited business for his wife.

After being hired, Hillary Clinton lobbied a state agency on behalf of Madison Guaranty. McDougal also hosted a campaign fund raiser for Clinton at the savings and loan. Federal investigators reportedly are looking into whether some of the contributions were made improperly with S&L; overdrafts.

Another former Clinton political supporter, David Hale, claims that he made a $300,000 loan to McDougal’s wife in 1986 at the urging of Clinton, who had appointed him to the municipal court bench.

Interviews and loan documents indicate that about one-third of that loan ended up going into a land development deal in which the Clintons were 50-50 partners with the McDougals.

Hale, who was forced to resign from his judgeship, is under indictment for loan fraud in connection with other loans he made that were backed by the Small Business Administration.

Hale and his attorney, Randy Coleman, had asked for a special prosecutor to handle the investigation because they claimed the U.S. attorney and her staff were too close to Clinton and other Arkansas political figures with potential involvement in the scandal.

“We’ve got to feel better that our case is not being prosecuted by an appointee and lifelong supporter of the President,” said Coleman. The attorney had complained that Hale’s offers to cooperate with investigators in exchange for leniency had been rebuffed without consideration.

U.S. Atty. Paula Casey declined to comment on her reasons for withdrawing from the case. However, a Justice Department statement said Casey and her staff had withdrawn “because of their familiarity with some of the parties and the need to ensure that there be no misperceptions about the impartiality of the investigation.” She was appointed to the post by Clinton, her brother ran one of Clinton’s gubernatorial campaigns, and her husband is a lawyer for a state agency.

The investigation will now be headed by Donald B. Mackay, a senior trial attorney in the fraud section at the Justice Department in Washington. He will be assisted initially by two other staff lawyers from Washington.

In addition, Rep. Gonzalez said Tuesday his House Banking Committee staff would open an initial inquiry into the failure of Madison Guaranty.

Gonzalez acted on a request from the committee’s Republicans, who said they recognized the inquiry could embarrass the Clinton Administration.

“The issue isn’t politics; it is political example,” the Republicans said in a letter to Gonzalez. “Individuals holding public trust cannot be allowed to abuse power at taxpayer expense without accountability.”

Hale already has volunteered to testify before any congressional committee that examines his loans or the failure of Madison Guaranty.