‘86 Clinton-McDougal Meeting Described

A former secretary at a Little Rock, Ark., savings and loan testified Thursday that President Clinton, while governor of Arkansas, visited a controversial real estate project in 1986 to see S&L; owner James B. McDougal and tour “some of the industrial sites.”

Sue Strayhorn, the ex-employee, said that Clinton visited McDougal, his Whitewater investment partner, in a sales-office trailer at a planned development known as Castle Grande, which federal authorities have described as a massive real estate scam engineered by McDougal.

Clinton, in a written statement last year to federal investigators, said that he knew nothing about the Castle Grande project.

Strayhorn, while claiming her memory now is hazy on details, said that she stood by a statement she gave to the Resolution Trust Corp. two years ago that Clinton and McDougal also had lunch after the visit.

“It was no really big affair,” she told members of the Senate Whitewater Committee. “He [Clinton] was looking at some of the industrial sites” adjacent to the planned Castle Grande residential development.

Democrats on the panel suggested that it was not unusual at the time for Clinton to pay visits to home-state businesses in the vicinity of Little Rock, the state capital.

Federal bank regulators have charged that Castle Grande was “a pyramid scheme” in which McDougal, the head of Madison Guaranty Savings & Loan, chose six “straw parties” to buy parcels of land with “loans” from Madison Guaranty that were never intended to be repaid. These parties then deeded the land back to Madison Guaranty, receiving large commissions and bonuses totaling $1.8 million to help the thrift evade a state law limiting the amount of money it could invest directly in real estate.

Castle Grande, a 1,050-acre project created by these parcels, failed as a development as did Madison Guaranty. The savings and loan’s failure cost U.S. taxpayers $60 million. Copies of a Little Rock law firm’s billing records recently discovered at the White House showed that Hillary Rodham Clinton had done some legal work on Castle Grande, although Mrs. Clinton has denied she knew of any improprieties.

Strayhorn’s appearance followed committee testimony Wednesday from Bob Nash, a White House official and a Clinton friend from Arkansas, who said that he also attended a short Clinton-McDougal meeting at Castle Grande in 1986. It was not clear whether Nash and Strayhorn were describing the same meeting but Strayhorn made no mention of Nash’s presence.

Questioned by Michael Chertoff, the committee’s chief Republican counsel, Strayhorn said that she did not know if Mrs. Clinton, while a senior partner at the Rose Law Firm, had prepared a key document involving the acquisition of a Castle Grande parcel by Seth Ward, an Arkansas businessman who was one of the “straw parties.”

But Chertoff said the panel has evidence that the allegedly back-dated 1985 letter was drafted by Mrs. Clinton to allow Ward to realize a $300,000 commission. Billing records show that Mrs. Clinton had more than two dozen phone conversations with Ward.

“I have no knowledge of it but why didn’t Mr. Ward have Webster [L.] Hubbell prepare it?” Strayhorn said, referring to Ward’s son-in-law who then was a senior partner at Rose along with Mrs. Clinton. Hubbell, who became a high-ranking Justice Department official in the Clinton administration, was imprisoned last year after pleading guilty to overbilling Arkansas clients and defrauding his law partners.