Whitewater Panel’s Arkansas Phase Opens

An Arkansas businessman testified Tuesday that James B. McDougal, a central figure in the Whitewater investigation, always “felt that he owned Bill Clinton” and was able to demonstrate his influence over the then-governor’s choices for the Arkansas bank board in the 1980s.

The businessman, William T. Lyon, testified to open the so-called Arkansas phase of the Senate Whitewater Committee’s long-running hearings. But Lyon became rattled under sharp questioning by the panel’s minority counsel and could not support some other accusations he made.

Lyon said that McDougal, owner of a failed Arkansas savings and loan and a business partner of the Clintons in the Whitewater real estate development, had the reputation of “a braggart.”

Lyon said he was appointed to the bank board early in Clinton’s first term as governor because of McDougal’s influence but that four years later McDougal wanted him to resign and join a different board as a personal favor.

McDougal wanted him to accept appointment to a savings and loan regulatory board so that Lyon could help win state approval of a preferred stock plan that McDougal’s Madison Guaranty Savings & Loan was then pushing, Lyon said. He said McDougal told him Hillary Rodham Clinton would handle legal matters involving the stock issue.

Lyon said he refused. “I said, ‘Hell no,’ I wouldn’t do his bidding,” Lyon testified. “He said: ‘Well, I’ll have Bill call you.’ And I said that if the governor called me I would do it.”

Two months later, according to Lyon, Clinton called to ask him to resign from the bank board and Lyon said he complied--although he never joined the savings and loan board.

But Lyon’s version of the events broke down under questioning by Richard Ben-Veniste, counsel to the committee’s Democratic minority.

Ben-Veniste showed Lyon documents that indicated that he resigned from the board in February 1984--more than a year before Madison Guaranty first considered any preferred stock plan. Mrs. Clinton’s firm, the Rose Law Firm, did not begin representing Madison until 1985.

Lyon, sounding exasperated, said: “I have told you as best that I recall. These things go back many years.” He then angrily said that he had told his story months ago to “whatever Gestapo you have here.”

Minutes later, under questioning by Sen. Paul S. Sarbanes of Maryland, the panel’s ranking Democrat, Lyon apologized for his “Gestapo” remark. He said he was confusing committee investigators with FBI agents working for Whitewater independent counsel Kenneth W. Starr, who also have questioned him.

Ben-Veniste also showed that Lyon was in error when he stated that he was replaced on the bank board by “a $50,000 campaign contributor to the governor from Augusta, Ark.” His replacement came from elsewhere in the state, the records showed.

Sen. Barbara Boxer (D-Calif.) said that McDougal, who is under indictment in the Whitewater investigation, is a boastful man “who was throwing around Hillary Clinton’s name when the record shows she wasn’t working for him.”

Long-missing legal billing records that recently were obtained by the panel--and made public by the White House--did show that beginning in 1985, Mrs. Clinton performed 60 hours of work for Madison Guaranty over a 15-month period and had 68 contacts with the firm’s executives.

The first lady, who has insisted that her work for the thrift was minimal, has agreed to testify Friday under subpoena to a federal grand jury looking into how billing records for the work were missing for two years after they were subpoenaed by federal authorities.

Committee Chairman Alfonse M. D’Amato (R-N.Y.) said that the Whitewater panel is looking into the same question and has subpoenaed visitors’ logs from the White House to see who had access to the residential section of the executive mansion early last August when the files first were discovered there by an aide to the first lady.