Governor of Arkansas Faces Fraud Charges

Arkansas Gov. Jim Guy Tucker was indicted on felony fraud and conspiracy charges Wednesday along with two others in a case that grew out of the government’s investigation of the controversial Ozark land deal known as Whitewater.

Tucker, a Democrat, becomes the highest-ranking incumbent government official to be charged in the investigation led by independent counsel Kenneth W. Starr. Indicted at the same time were John Haley, and William J. Marks Sr., both partners of Tucker in a cable television venture.

Although Tucker served as lieutenant governor when President Clinton was governor of the state, his indictment has little--if any--political fallout for the President since the two men were never close allies. The charges also have nothing to do with Clinton, his wife, Hillary, or the real estate deal that lies at the heart of the probe.

According to the indictment, Tucker, as a private attorney in the late 1980s, conspired with his associates to obtain a loan of $300,000 backed by the Small Business Administration under false pretenses and to hide millions of dollars in profits from the Internal Revenue Service.

After the Tucker indictment was announced by Starr, the White House issued a statement saying that Clinton still views Tucker as “an outstanding public servant.” At the same time, White House officials were quick to emphasize the case did not involve the President in any way.

Still, the President’s lawyers are sure to view the Tucker indictment as an important development because the governor’s chief accuser, former Municipal Judge David Hale, has also leveled serious allegations at Clinton.

Hale claims Clinton urged him to make an illegal, federally insured loan that went--in part--into an account belonging to the Whitewater real estate development. According to knowledgeable sources, Hale’s account of Clinton’s involvement was never fully corroborated by any other witness.

The closest Clinton confidant to have been caught in Starr’s net is former Associate Atty. Gen. Webster L. Hubbell, who pleaded guilty to falsely charging his former law firm for $400,000 in personal expenses. Just two weeks ago, Starr dropped efforts aimed at charging White House Deputy Counsel Bruce Lindsey in an unrelated matter.

For more than six months, since it first became public knowledge that Starr was contemplating seeking an indictment against the governor, Tucker has confidently denied that he was under investigation and has insisted that there was no evidence to support criminal charges.

“I look forward to an aggressive presentation of the facts of my business transactions in a public forum,” Tucker said in a statement released by his office after the indictment. “I am confident I will be vindicated.”

From Denver, where he was vacationing with his wife and two teen-age daughters before a Democratic governors’ meeting this weekend, Tucker said the loans had been repaid in full.

His attorney, George Collins of Chicago, said the governor has “absolutely done nothing wrong.” He added that Tucker would plead innocent at his arraignment, which will probably be held next week in Little Rock, Ark.

The allegations against Tucker do not involve his actions as an officeholder and likely would have gone unprosecuted had the President’s Whitewater land deal not drawn the attention of political critics, causing an independent counsel to be appointed more than a year ago.

Tucker, a lawyer, was drawn into the Whitewater investigation initially because he, like Clinton, did business with former savings and loan owner James B. McDougal, who was the President’s partner in the Whitewater deal. At the heart of the investigation are still-unsubstantiated charges that McDougal used the deal as a vehicle to provide secret financial assistance to Clinton.

If convicted on the felony charges, the 51-year-old governor could get up to 12 years in prison and $750,000 in fines and would have to resign. He would be replaced by Republican Lt. Gov. Mike Huckabee.

The loan in question was made to Tucker by Capital Management Services Inc., a small business investment corporation owned by Hale. On his application, Tucker allegedly swore that the money would be used by a company that was not a party to the transaction. He then is said to have used the money as collateral to obtain a $8.5-million line of credit from a bank to finance a Florida cable venture.

Times staff writer Robert L. Jackson also contributed to this story.