Republicans Press Arkansas Lease Scenario

Republicans on the Senate Whitewater Committee sought to show Wednesday that President Clinton had used his powers as Arkansas governor in the 1980s to award state office leases to James B. McDougal, his partner in the Whitewater land venture.

As Whitewater hearings resumed after a lapse of seven weeks, Sen. Alfonse M. D’Amato (R-N.Y.), the committee chairman, said there is evidence that “lucrative contracts” to lease office space were given to McDougal in 1984 in return for campaign contributions that McDougal, the owner of Madison Guaranty Savings & Loan, arranged for Clinton.

But Democrats ridiculed the theory when Paul Mallard, a former Arkansas state official, claimed responsibility for awarding more than $300,000 in leases to McDougal and insisted Clinton never mentioned McDougal to him.

Richard Ben-Veniste, the panel’s Democratic counsel, said “another fallacy” in D’Amato’s charge was the timing of events. McDougal’s principal fund-raising event to help pay off Clinton’s campaign debt occurred in April 1985, a full year after the leases were awarded, Ben-Veniste noted.

Also Wednesday, the Justice Department closed the final portion of its investigation into whether Clinton’s friend, Harry Thomason, a Hollywood producer, had violated conflict-of-interest laws involving the White House travel office, or if he, along with a business partner, had impeded the department’s conflict-of-interest probe.

The department had focused on whether Thomason used a White House pass and office to lobby for an aviation firm he co-owned to take over some travel office duties.

That aspect of the investigation ended when department attorneys concluded that Thomason’s White House ties did not make him a federal employee subject to government conflict-of-interest laws.

But investigators then reviewed whether the conflict inquiry had been impeded by erroneous information given to them by Darnell Martens, Thomason’s partner in the aviation consulting firm, TRM, sources familiar with the case said.

“This supports what we have known all along: Harry Thomason did nothing wrong in the travel office matter,” said Robert S. Bennett, Thomason’s attorney.

A Justice Department spokesman confirmed the case was closed but said “no words of exoneration” were offered.

The travel office case remains alive, however, in the office of Whitewater independent counsel Kenneth W. Starr. Starr’s office would say only that the travel office portion of its investigation is at a preliminary stage.

Bennett said he had been advised by Starr’s office, however, that Thomason is viewed only as a witness and is neither a target nor subject of that probe.

Starr’s inquiry appears limited to whether former White House aide David Watkins made false statements to congressional investigators to cover up the role of First Lady Hillary Rodham Clinton in the 1993 firings.

At Wednesday’s Senate hearing, as often has happened, the recollections of leading witnesses conflicted as the panel probed events of a dozen years ago.

Helen Herr, a former supervisor who worked for Mallard, said the leases had been given to McDougal over the objections of Wooten Epes, then head of the Arkansas Housing Development Finance Authority, who said his employees objected to moving to a low-income section of Little Rock where Madison Guaranty was located.

Herr said Mallard explained that McDougal and Clinton “were friends” and that the then-governor wanted to help revitalize that part of the state capital.

Mallard, however, disputed he ever told Herr that McDougal’s friendship with Clinton was a factor in the lease arrangement.

D’Amato exhibited a 1987 law firm memo that stated that in return for loan proceeds from Madison Guaranty to Clinton’s 1984 campaign, “Bill Clinton assured Jim McDougal that a state agency would lease space from Madison.”

But Little Rock lawyer Greg Hopkins, to whom the statement in the memo was attributed, testified he had “no specific recollection” of making it.