Starr Secures an Indictment of McDougal

Independent counsel Kenneth W. Starr obtained the indictment of another defiant Whitewater witness Monday, charging Susan McDougal, the jailed former business partner of President Clinton and his wife, for refusing to testify about the group’s past Arkansas land deals.

The grand jury indictment of McDougal, on two counts of criminal contempt and one count of obstruction of justice, followed the tax charges brought by Starr last week against Webster L. Hubbell, the Clinton friend and former high-ranking Justice Department official who spent 18 months in a federal detention facility for bilking his former law clients and partners.

The McDougal indictment, handed down nearly two years after she first refused to testify, came as federal grand jurors in Little Rock, Ark., are completing their last week of work before their term is due to expire.

Another panel under the direction of Starr and his prosecutors continues to hear Whitewater-related evidence in Washington.

While the new charges are designed primarily to encourage McDougal to testify, they also represent an escalation of the independent counsel’s unrelenting, years-long effort to get to the bottom of the Clintons’ involvement in the Whitewater matter.

Both the president and first lady--the key targets of the investigation--have testified under oath in the case, but only their friends and associates have faced indictment, prosecution, trial and imprisonment.

Starr issued a statement Monday saying that McDougal’s indictment did not imply wrongdoing by the president. However, a spokesman for the independent counsel said that Clinton had rejected repeated requests from Starr’s office to urge McDougal to testify before the grand jury.

William Henley, McDougal’s brother, said McDougal had been informed by prosecutors in a letter that she would be charged if she refused to talk by noon Monday. In a public display two weeks ago, she restated her defiance of Starr at the federal courthouse in Little Rock.

“I won’t be talking,” she said then, as she entered the building in an orange prison jumpsuit wearing leg irons and wrist-to-waist shackles.

Henley said McDougal looks forward to a trial because “it is going to give us the opportunity to show what a tainted investigation this was.” If convicted of criminal contempt and obstruction of justice, she could be sentenced to more than 10 years in prison and fined a total of $750,000.

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Mark J. Geragos of Los Angeles, McDougal’s lawyer, called the indictment “moronic . . . nonsense . . . a sophisticated game of chicken,” adding, “Susan will not be bullied.”

The long-running battle of wills between the feisty McDougal and the hard-driving Starr has been one of the more dramatic subplots of Starr’s lengthy investigation of Whitewater financial deals. And, much like McDougal, Hubbell has refused to cooperate with the investigation. He and his wife, Suzy, were hit with tax-related charges last week.

McDougal, 43, already has served an 18-month court-ordered sentence for civil contempt for refusing to testify before the grand jury, but she now faces a jury trial on new criminal charges. Although most Americans enjoy a constitutional right to refuse to testify on grounds of self-incrimination, McDougal forfeited that right by virtue of her 1996 fraud and conspiracy conviction in the Whitewater real estate promotion.

McDougal and her late husband, James B. McDougal, were convicted, along with then-Arkansas Gov. Jim Guy Tucker, in a 1996 trial in Little Rock. A prosecution witness, former Municipal Judge David Hale, testified at the trial that Clinton had approved the misapplication of a $300,000 federally supported loan. The president denied it in videotaped testimony played at the trial.

Clinton testified at the time that he never had any loans or financial dealings with Madison Guaranty Savings & Loan, the failed thrift owned by the McDougals that was at the core of Starr’s original investigation.

But court records made public Monday showed that prosecutors had sought to question Susan McDougal two weeks ago about a 1983 check for $5,081 that she signed over to Madison Guaranty, suggesting that it was a payment on behalf of Clinton. She would not answer questions about the check.

Tucker has been cooperating with Starr the past two months as part of his negotiated plea to a new conspiracy charge, but it is not clear whether his testimony has helped Starr’s investigation of the president and First Lady Hillary Rodham Clinton.

Prosecutors have sought to question Tucker about whether Clinton was truthful when he denied complicity in the loan fraud. Legal sources said Tucker also has been interrogated at length about a controversial land purchase in the 1980s known as the Castle Grande development, for which Hillary Clinton performed some legal work.

Although a six-year statute of limitations on any fraud related to Castle Grande has expired, the first lady in recent years has given sworn testimony to investigators about the deal, including videotaped testimony for the grand jury as recently as last month.

At one time, the McDougals and Clintons were close friends, as well as investment partners in the ill-fated Whitewater land venture in the Ozark Mountains.

Charles Bakaly, a spokesman for Starr, said Monday that the independent counsel had asked Clinton repeatedly to urge McDougal to talk to the grand jury, but the requests were rejected. McDougal has said her refusal is based on her distrust of Starr’s honesty.

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White House Counsel Charles F.C. Ruff said Monday it is “reckless and irresponsible” to suggest that it is Clinton’s job to urge any action by McDougal.

“The president has always urged everyone to tell the truth. At the same time, he understands that it is not appropriate for him to intervene personally in this matter,” Ruff said.

David E. Kendall, a private attorney representing the Clintons, issued a statement Monday declaring that any inference that the president “has somehow improperly ‘injected’ himself into the investigation of Ms. McDougal . . . is wholly false.”

Kendall noted that McDougal “has at all times been represented by her own counsel.”

* HUBBELL TAPES RELEASED

More tapes of Webster L. Hubbell’s calls are released. A15