Susan McDougal Takes Different Tack in Whitewater Case

In her bid to avoid a two-year jail sentence for Whitewater-related offenses, Susan McDougal, a former business partner of President Clinton and First Lady Hillary Rodham Clinton, has adopted a hardball strategy that other Clinton friends--including her ex-husband, James B. McDougal--rejected as too risky.

Instead of cooperating with independent counsel Kenneth W. Starr in exchange for leniency, Susan McDougal, 41, chose to remain silent when called before a federal grand jury. As a result, she remains imprisoned in a county jail near Little Rock, Ark., for contempt of court.

She is the first person to be held in contempt for refusing to cooperate with the independent counsel, who since early 1994 has been investigating alleged wrongdoing by the Clintons stemming from their 1970s joint investment with the McDougals in an Ozarks real estate venture known as Whitewater.

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All other Whitewater figures--even her former husband, who had vowed never to submit to questioning by Starr--have agreed to cooperate with the prosecutor because they saw it as the only way to escape harsher charges or longer jail time.

But Susan McDougal’s goal in refusing to testify before the grand jury, according to her lawyers, friends and relatives, is to put Starr on the defensive and challenge the integrity of the Whitewater investigation that led to her conviction.

For that reason, she told acquaintances, she was pleased by a widely distributed photo of her being taken to jail in handcuffs and leg irons--a vivid image she hopes will engender sympathy for her and criticism of Starr.

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In essence, McDougal has decided to align herself with a growing number of legal and political scholars who believe that independent-counsel investigations of sitting presidents have become a destructive force.

Former Arkansas Gov. Jim Guy Tucker, who was tried and convicted along with McDougal and her ex-husband, is also challenging the independent counsel’s jurisdiction in an appeal pending before the Supreme Court.

Susan McDougal’s brother, Bill Henley, said, however, his sister’s choice of jail over testimony was based more on emotion than on legal calculation. During the past two years, he said, she has expressed a strong personal aversion to Starr and his staff, whom she accuses of conducting a political witch hunt.

“She doesn’t trust them,” Henley said in a telephone interview. “She wouldn’t talk to Starr, no matter what kind of a deal he offered her.”

Friends said McDougal also is very angry with her former husband, who recently began cooperating with Starr and who strongly urged her to do the same.

During their last conversation, sources said, James McDougal told his ex-wife he did not want to talk to her again until she started cooperating with Starr. It was an unusually nasty turn in what has been a close relationship between the two, even after their divorce in the late 1980s.

Meanwhile, Susan McDougal is said to recognize that her actions may be hurting herself as well as the president.

Not only is she creating the impression that she is hiding something about the Clintons’ involvement in Whitewater, but she may wind up spending more time in jail than the two years she has been sentenced to serve for her Whitewater-related fraud conviction earlier this year.

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Yet she and her supporters admit that they still hold out hope her stance will prompt Starr to help arrange a reduced sentence or--at minimum--will create a more favorable climate for her appeal.

Starr is plainly eager to interview McDougal. According to sources close to the case, the independent counsel sees her testimony as important if he were to pursue perjury charges against Clinton.

Starr is investigating whether the president was truthful when he said he was unaware of a fraudulent $300,000 loan Susan McDougal obtained from a government-backed small-business investment firm run by the government’s chief witness, David Hale, sources said. If Clinton knew of the fraud, Starr believes, McDougal might be able to help prove it.

She also might be able to help Starr corroborate or discount information from her ex-husband.

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For her part, McDougal has said she knows nothing to substantiate allegations of criminal wrongdoing by the Clintons. She has insisted that the president knew nothing about her loan, even though it was used to purchase land that was held briefly by the Whitewater venture in which the Clintons and the McDougals were equal partners.

One of her lawyers, Bobby McDaniel, said that before McDougal’s sentencing hearing on Aug. 20, she was offered leniency by Starr if she would say the president helped her obtain the loan from Hale. Starr hotly denied this allegation.

Some of McDougal’s friends and relatives, all of whom declined to be identified by name, said she still might voluntarily testify before the grand jury if Starr would agree in advance not to charge her with perjury if her version of events differed from others’.

She also could seek a reduction in her sentence and protection from prosecution in other matters, including a possible tax evasion charge and an unrelated case pending in Los Angeles.

Although she has been offered immunity from future prosecution by Starr in exchange for her testimony, this does not apply to the Los Angeles or tax cases. Nor does it guarantee that she will not be tried for perjury if Starr thinks her testimony is false.

In the Los Angeles case, she is charged with making purchases with credit cards belonging to her former employer, Nancy Mehta, wife of orchestra conductor Zubin Mehta, without permission.

In being hauled off to jail, McDougal has managed to raise the impression of minor Whitewater figures receiving tough treatment while larger ones get off easy.

The two-year sentence she received--on Starr’s recommendation--from U.S. District Judge George Howard is the second harshest for any defendant. It is only four months shorter than the term given Hale, the admitted mastermind of a loan fraud conspiracy. Tucker received four years’ probation because of a serious health problem that will require him to have a liver transplant.