Hale’s Whitewater Testimony Falls Flat

In late 1993, David Hale, then an unknown municipal judge, fueled the burgeoning Whitewater scandal by going public with a dark tale of financial intrigue involving President Clinton.

He then succeeded in galvanizing national interest in the story by suggesting that he had reserved the juiciest details for government investigators.

His allegations--that, while governor of Arkansas, Clinton had conspired to benefit from an illegal loan to his real estate development investment partners--eventually became the centerpiece of the Whitewater independent counsel’s investigation.

But in two weeks on the witness stand in the trial of the president’s alleged co-conspirators, Hale’s long-awaited evidence against Clinton was--by his own admission--inconclusive.

Furthermore, the prosecution has acknowledged that lawyers for the defendants--Gov. Jim Guy Tucker and James B. and Susan McDougal--Clinton’s investment partners in the Whitewater development--succeeded in undermining Hale’s testimony by branding him “a liar, a thief and a con man.”

Independent counsel Kenneth W. Starr and his staff insist that they have not become discouraged in their efforts to build a criminal case against the president. But it is clear that failure to get a conviction in this trial would seriously damage that effort.

Indeed, W. Hickman Ewing Jr., Starr’s chief deputy, acknowledged that the independent counsel’s office sees this trial primarily as a way to obtain more evidence against the president.

According to Ewing, Starr hopes that, by winning the conviction of Tucker and the McDougals, he can persuade the three to give incriminating evidence against Clinton.

As Ewing put it: “It’s the people on trial that have the information, and the people on trial haven’t shared that with us yet.”

Using the same logic, defense lawyers noted that acquittals would be good news for the Clintons. Bobby McDaniel, Susan McDougal’s attorney, observed that Tucker and the McDougals are not likely to cooperate with Starr if they win.

On the witness stand, Hale has testified that he, Clinton, Tucker and James McDougal conspired in the mid-1980s to devise a complex financial scheme that succeeded in defrauding both McDougal’s federally backed Madison Guaranty Savings & Loan and Hale’s Capital Management Services Inc., a government-supported small business investment corporation.

His testimony against the president was based primarily on his recollection of a meeting in early 1986 in which he said Clinton encouraged him to make an illegal $300,000 loan to Susan McDougal. Clinton, who will testify as a defense witness later this month, has denied the allegation.

But if the testimony offered at this trial so far is any measure of the evidence Starr has collected against Clinton, it is clear why the president has not been charged and why the independent counsel says that Clinton played only a “peripheral” role in the alleged conspiracy.

To the dismay of the prosecution, Hale’s story often proved to be based on conjecture.

For example, Hale asserted confidently at the start of his testimony that some of the $300,000 loan money went into a bank account of the Whitewater Development Corp., which the Clintons jointly owned with the McDougals. But he later admitted under questioning that his information was based on an article in the Washington Post.

Evidence presented so far at the trial shows that the loan was used by the McDougals to make improvements at another real estate development and to purchase more property in the vicinity of Little Rock. Although the new property was held briefly by McDougal in the name of Whitewater, no evidence has been presented to show that the Clintons enjoyed any income benefit from it.

Hale eventually admitted that he had no idea how Clinton could have benefited from the loan in question. Nor could he offer any plausible reason why Clinton might have gotten involved in seeking money to be used by the McDougals.

James McDougal’s attorney, Sam Heuer, told Hale at the conclusion of his testimony: “You cannot look this jury in the eye and tell them Bill Clinton had a need for this money and where he was going to put it.”

Nor has the prosecution offered any evidence to corroborate Hale’s story about the president. Questioned by reporters after Hale left the stand, Ewing refused to say whether the independent counsel’s office has any witness who can bolster Hale’s account.

Hale’s trial testimony marked the first time he has appeared in public since he began cooperating with the independent counsel more than two years ago. Until now, he has been living in seclusion on a state pension and receiving financial assistance from the independent counsel.

His testimony completed, he will report to jail in the next few weeks to begin serving a 28-month sentence for his conviction in defrauding the government. He also must pay a $10,000 fine and make restitution to the government in excess of $2 million.

In exchange for his testimony, Hale, who has already received some leniency from the government, hopes to win a further reduction of his sentence.