Bank Violations Called Request of Top Clinton Aide

A former Arkansas bank president testified Thursday that he violated federal banking laws at the request of Bruce Lindsey, one of President Clinton’s closest advisors, by concealing two cash withdrawals totaling $52,500 by the 1990 Clinton gubernatorial campaign.

Neal T. Ainley, the government’s star witness in the Whitewater-related trial of two prominent Clinton contributors, said that he failed to report the withdrawals to the Internal Revenue Service, as required by law, because Lindsey did not want a report to be submitted.

Ainley, a former employee of the Perry County Bank, also testified that he and the defendants, Herby Branscum Jr. and Robert M. Hill, who own the bank, were routinely reimbursed illegally from bank funds for contributions that they made to Clinton’s gubernatorial and presidential campaigns.

Branscum and Hill, both loyal Clinton supporters, are being tried for misapplication of bank funds and conspiring to violate banking laws. Ainley has pleaded guilty to similar charges.

Although Lindsey was not charged in the case, Ainley’s allegations have succeeded in implicating a trusted presidential advisor in what the government alleges was an unsavory plot by Branscum and Hill to trade their contributions to Clinton for state government appointments.

Alan Snyder, Lindsey’s attorney, who sat in the courtroom throughout Ainley’s testimony, accused the witness of lying to win leniency from Whitewater independent counsel Kenneth W. Starr. This is the second jury trial to result from Starr’s investigation.

“It is simply a malicious fantasy invented by someone desperate to make a deal with Mr. Starr,” Snyder told reporters outside court.

In January, as part of a plea agreement with Starr, Ainley was sentenced to probation, community service and a $1,000 fine for his role in the alleged conspiracy. In exchange, he agreed to testify against Branscum and Hill.

Ainley, 38, who currently makes his living running convenience stores, showed no emotion and carefully avoided the gaze of his former employers as he recounted his story of financial misdeeds under questioning by Starr’s deputy, W. Hickman Ewing.

When Clinton was seeking his fifth term as governor of Arkansas, he chose to use the Perry County Bank, situated in the remote village of Perrysville, instead of banking in Little Rock. In exchange for the business, the bank granted Clinton a total of $250,000 in unsecured loans--all of which were eventually repaid.

Ainley said that he received a telephone call from Lindsey, then the campaign treasurer, on May 25, 1990--just two days after the campaign had received a $60,000 loan from the bank and a few days before the primary election.

During their telephone conversation, Ainley recalled, Lindsey said that he needed to withdraw $30,000 in cash from the bank’s campaign account and asked whether the transaction had to be reported to the IRS. Under federal law, all bank transactions in excess of $10,000 must be reported.

Ewing did not ask Ainley directly why Lindsey did not want the withdrawal reported to the IRS. Ainley indicated that Lindsey expressed the desire to conceal the transaction but did not insist on it.

Although Ainley initially told Lindsey that he would be forced to make a report to the IRS, he said, Hill and Branscum later convinced him that he could forgo that formality because the bank’s compliance officer was out of town.

A short time later, he said, Lindsey arrived at the bank with four separate checks drawn on the Clinton campaign account, each one for $7,500. Lindsey took the money in cash--$20,000 in $100 bills, and $10,000 in $50 bills, Ainley said.

Lindsey has said that he used the money, most of it in $100 bills, for so-called get-out-the-vote activities on election day. It is traditional in many parts of the country for campaign officials to make cash payments on election day to drivers, poll watchers and other loyalists.

Likewise, on Nov. 2, 1990--shortly before the general election--the Clinton campaign came to the Perry County Bank for another cash withdrawal, this one totaling $22,500, according to Ainley. The money was withdrawn just four days after the campaign had been granted a loan of $75,000.

Once again, Ainley said, he was told by Hill that Lindsey did not want the transaction to be reported to the IRS. In this case, Ainley said, he retrieved the report, which had already been filled out by the bank’s compliance officer, from the bank mail room.

A few days later, he said, he gave the purloined report to Hill, who slipped it into his coat pocket without comment. Asked to describe Hill’s reaction, Ainley said that his boss “just looked back and smiled.”

For his part, Lindsey, who will testify later in the trial as a defense witness, has insisted that he had no motive to conceal the withdrawal from the IRS and has said that he reported it to state election officials just a few days later.

The government contends that Branscum and Hill went along with the scheme because they were anxious to please Lindsey. At the time, Ainley recalled, Branscum was seeking appointment by Clinton to the position of state highway commissioner, which he eventually received.

Hill was a Clinton appointee to the state banking board.

Ainley went on to describe how he made contributions ranging from $100 to $1,000 to Clinton and other political candidates, always at the request of Branscum and Hill. In all but one instance, he said, he received a bank expense check to reimburse him for the contributions.