Susan McDougal’s Day in Court Nears--in Theft Case

Before Susan McDougal became ensnared in the Whitewater land venture and was convicted of bank fraud, before she engaged independent counsel Kenneth W. Starr in a high-stakes battle of the wills, before anyone outside of Little Rock, Ark. had ever heard of McDougal, she was arraigned in Santa Monica on a little-noticed embezzlement case.

For more than four years, the case has been eclipsed by the tangled skein of Whitewater. But today it is finally scheduled to go to trial, and McDougal will face charges that she embezzled about $150,000 while working as a personal assistant and bookkeeper for Nancy Mehta, the wife of Zubin Mehta, former conductor of the Los Angeles Philharmonic orchestra.

Instead of Starr, with his army of lawyers, his sweeping powers and unlimited budget, in the Mehta case McDougal will be prosecuted by Jeffrey Semow, a deputy district attorney who works out of a small, stuffy, windowless office--with his mountain bike tucked in the corner--in the Santa Monica courthouse. Semow contends that this is a simple, straightforward case and has not been affected by politics.

“This case has nothing to do with Whitewater,” Semow said. “It’s about whether Susan McDougal cheated her employer. It’s a fraud case. . . . That’s it.”

But McDougal’s Los Angeles attorney, Mark Geragos, contends that the case is a flimsy one and would never have been filed against his client if she had not been a key figure in the Whitewater investigation. Geragos said a member of Starr’s prosecution team promised McDougal that he could make the embezzlement case “go away,” and promised her immunity if she cooperated, which Starr’s office has denied.

“The Whitewater case goes to the core of what my defense will be,” Geragos said. “The district attorney doesn’t have a case. It was being propped up solely to ratchet up the pressure on Susan so she’d talk.”

McDougal contends that one of Starr’s prosecutors promised her immunity in the Mehta case if she cooperated in the Whitewater investigation. In addition, the ACLU and Geragos alleged in a petition filed last year that, while she was in Los Angeles County Jail, McDougal was being held under “abusive and inhuman conditions” and that her restrictive confinement was a punishment for not cooperating with Starr.

Last month, a federal judge in Arkansas freed McDougal from prison for medical reasons. She had served three months of a two-year sentence for a 1996 conviction on fraud and conspiracy in connection with the Whitewater case. The judge is allowing her to finish her sentence at her parents’ home under electronic surveillance.

Geragos said he will ask today to delay the trial because McDougal is undergoing medical treatment for a back ailment and he recently received numerous pretrial documents from Semow that he has to review.

A New Life in California

When Susan McDougal met the Mehtas in the late 1980s, the Whitewater venture was in financial ruins. She had split up with her husband and moved to Los Angeles with her new boyfriend, Pat Harris.

Through an employment agency, Harris found a job managing some rental property that the Mehtas owned, he said in an interview.

About a year later, when Harris enrolled in law school, McDougal was hired to replace him and paid $38,000 a year. In addition to managing the Mehtas’ property, McDougal eventually replaced their accountant and began handling their bookkeeping. For almost three years she worked for Nancy Mehta, a former actress. They traveled to Europe and Mexico, shopped and lunched together almost every day, McDougal said. Mehta gave her expensive gifts, including jewelry and clothing, McDougal said, and she eventually moved into the Mehtas’ Brentwood home.

But in 1992, McDougal chose to spend the summer with Harris instead of going to Italy with Nancy Mehta, Harris said. Mehta was outraged, and the women’s relationship ended, he said. “That’s when we first started hearing those silly stories about [embezzlement],” Harris said.

McDougal denies that she ever embezzled any money from the Mehtas.

“This whole thing is more hurtful to me than Whitewater ever was,” McDougal said in a telephone interview. “She was so wonderful to me. . . . I feel that I failed her. She needed something from me I couldn’t give.”

Nancy Mehta declined to be interviewed. But Semow contends that documents show McDougal fraudulently obtained a credit card by forging Nancy Mehta’s name on the application, and charged more than $90,000 for personal use, including clothing and hotel stays. She is accused of defrauding the Mehtas out of an additional $60,000 by forging checks and using several credit cards of theirs. McDougal also faces state income tax charges in connection with the case.

“Any case like this is essentially a paper case,” Semow said. “The proof is in the paper. And we have the paper.”

According to McDougal, she and her lawyer in Arkansas had a telephone conversation in 1996 with W. Ray Jahn, a prosecutor on Starr’s staff, and he told her he could make the Mehta case “go away and be over with . . . if you come in and give us the information we want.” McDougal said Jahn told her, “You know who this investigation is about and we want information on those two.”

“From that day forward, I knew that investigation was not looking for the truth . . . it was to get the Clintons,” McDougal said.

Charles Bakaly, spokesman for the independent counsel, denied McDougal’s account. A federal prosecutor, he said, would not have the authority to offer immunity in a Los Angeles County case.

High-Profile Prisoner

McDougal’s return to Los Angeles for the Mehta trial will be under much more favorable conditions than her last stay here. When she was brought out from Texas in 1996 for pretrial hearings, she was serving an 18-month sentence for civil contempt after she refused to testify about the Clintons before a Whitewater grand jury.

She was housed primarily at the Los Angeles County women’s jail, the Sybil Brand Institute.

Although her crime of civil contempt was one of the least serious at the jail, she was among the most restricted prisoners. Sheriff’s officials said this was for McDougal’s own protection because she was a high-profile inmate whose name was in the news.

The ACLU petition, filed against the federal Marshals Service, said McDougal should be moved to a federal prison where the conditions would not be as harsh. It contended that because McDougal was being held on a federal charge, she belonged in a federal prison.

In a statement accompanying the legal brief, the ACLU stated that McDougal was “held under lockdown up to 23 hours a day, most often in near-total isolation, while other inmates, including those charged with serious violent crimes are allowed 12 hours a day outside their cells and up to six hours a day access . . . to television, exercise bikes and the like.”

“Ms. McDougal was classified K-10--keep away status, and issued a red uniform to identify her status. This uniform is typically worn by women who have killed their babies, and informants.”

On the days she was transported by the County Jail bus for her court appearances, according to the brief, McDougal was locked in a cage with the other women classified K-10, and they were surrounded by male prisoners.

“Men would spit on us, pull their pants down, ejaculate in front of us,” McDougal said. “Many of the women had killed children, so they’d scream ‘child killer’ at us. It was so horrifying.”

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Sheriff’s Cmdr. Dan Burt, who supervises the county’s jails, said McDougal’s restricted, high-security status was for her own protection because sometimes other inmates want to make names for themselves by attacking a well-known prisoner. And because McDougal was incarcerated for a civil charge, jail personnel were required by law to keep her separate from other inmates.

Shortly after McDougal arrived at the County Jail, Santa Monica Superior Court Judge Paul G. Flynn, who was handling the Mehta case at the time, ordered her returned to prison in Texas. But federal marshals declined to pick her up, and county authorities would not transport her.

The Justice Department contended at the time that a state court did not have authority over the federal marshals.

In July 1997, a federal magistrate ordered the marshals to respond to the ACLU petition. Justice Department officials said that ruling gave marshals the power to pick McDougal up at County Jail and transport her to a downtown Los Angeles federal jail. Once she was transferred, McDougal said, her living conditions immediately improved.

The ACLU and Geragos say that the Sheriff’s Department could have saved everyone a lot of time in court--and could have saved McDougal a lot of hardship--had they simply transported her, themselves, the one mile from the County Jail to the federal downtown prison right after Flynn’s order. Geragos contends that sheriff’s officials didn’t want to alienate federal authorities because the department has numerous contracts to house federal prisoners and “there’s a lot of money involved.”

But county counsel Jim Owens, who reviewed Judge Flynn’s orders at the time, said it was not a matter of money.

“We have a lot of inmates going from County Jail to U.S. District Court on drug trials and other cases,” Owens said. “We need to have a good working relationship with the federal government. Long after Susan McDougal left town, we had to continue to get along with federal authorities here.”