2 Arkansans Defend First Lady’s Role in Deal Linked to Whitewater

Two Arkansans involved in a questionable land transaction linked to the Whitewater inquiry Wednesday defended First Lady Hillary Rodham Clinton against suggestions that she knew the 1985 deal was fraudulent.

Alston Jennings, a lawyer more involved than Mrs. Clinton in the so-called Castle Grande transaction, told the Senate Whitewater Committee he did not know until recently that the deal was riddled with problems. He said that the first lady was “not at all” connected with questionable parts of the transaction.

Mrs. Clinton’s role is at issue because she drafted a legal document in the sale and had more than a dozen talks with one of the principals in the transaction--Little Rock businessman Seth Ward.

Federal bank regulators have termed the deal, arranged by Madison Guaranty Savings & Loan, “a sham real estate transaction.”

Bank examiners told the committee last month that Castle Grande was the name of a cluster of “sham” purchases by Ward and other Madison Guaranty “insiders.”

These inside buyers were secretly financed by Madison in deals structured to evade an Arkansas law limiting direct purchases by thrifts, the examiners testified.

In a sworn statement released by the committee Wednesday, a second Arkansan--Ward--said he did not know at the time that the transactions were fraudulent and does not recall ever speaking with Mrs. Clinton.

Newly discovered billing records show that Mrs. Clinton billed Madison Guaranty for more than a dozen phone calls and conferences with Ward.

“I do not recall discussing it with her,” Ward said in the statement. He acknowledged that “in retrospect, I’d say that I assume the deals weren’t on the up-and-up.”

Ward surrendered more than $300,000 in commissions he had received for his part in the Castle Grande deal after being sued by the federal government, which had assumed Madison’s assets after its collapse cost taxpayers $60 million. Jennings, a former lawyer for Ward, said that Ward was in ill health and wanted to avoid a protracted legal battle with the government.

Mrs. Clinton’s involvement with Madison Guaranty is of interest to investigators because the owners of the thrift--James B. McDougal and his wife, Susan--were investment partners with the Clintons in a real estate development in the Ozark Mountains known as Whitewater.

Independent counsel Kenneth W. Starr is trying to determine if any funds from the corruptly managed thrift were used to benefit the Clintons.

Mrs. Clinton, who was a partner in the Rose Law Firm in Little Rock, Ark., at the time, has said that she recalls very little about the Castle Grande residential-industrial project and has denied knowing of any improprieties.

Jennings, who later helped Ward obtain his commissions from Madison, told the committee that “if I had thought it [Castle Grande] was a sham deal, I would have had nothing to do with it. I had a piece of paper showing Ward was entitled to commissions. I had no reason to wonder why the deal came into existence.”

Jennings, asked about Secret Service logs showing that he had visited Mrs. Clinton in the White House last Aug. 9, said that they did not discuss Whitewater-related events.