Whitewater verdict's meaning Shady deals: Washington waits to see what the conviction of Arkansas' governor and two former associates of President Clinton's will mean to Clinton and his Republican rivals.

The guilty verdicts this week in the first Whitewater trial are of great interest to the special prosecutor, to President Clinton and to the president's Republican foes.

For the prosecutor, the verdicts could accelerate other parts of his investigation. For Republicans, they are ammunition in an election year. For the White House, there is only the modest comfort that the president himself had little to do with the case just concluded.


Susan Baer of The Sun's national staff takes a look at what the trial means to the Whitewater saga -- and what it doesn't.

The defendants -- James B. and Susan McDougal and Gov. Jim Guy Tucker of Arkansas -- were found guilty. What were their crimes? The three were found guilty of conspiring to defraud the government of about $3 million through an elaborate scheme of real estate deals and loans. The jury decided the defendants had jacked up the value of properties -- through bogus loans -- in order to borrow an inflated amount of money from a federal lending company run by another crony, David Hale. That company was permitted to make loans only to disadvantaged business owners.


What does this have to do with the Whitewater land deal -- the genesis for this whole controversy?

There's not much of a direct connection. The McDougals were Bill and Hillary Clinton's partners in the Whitewater land deal from 1978 to 1992. One of the fraudulent loans the jury heard about was a $300,000 loan that Hale made to Susan McDougal. About $50,000 of that money ended up paying for expenses in the Whitewater deal. Clinton, who testified for the defense by videotape, insisted he knew nothing about the loan.

But "Whitewater" has become shorthand for a web of shady dealings among Arkansas' political and business elite in the 1980s, when Clinton was governor. The conviction of the McDougals, whose ties to the Clintons spanned many years, casts a cloud over the president, even though he was not accused of wrongdoing by the prosecutors.

Does that mean the Clintons were not involved in any of the transactions the jury found fraudulent?

It depends on whom you believe.

Hale, who pleaded guilty to fraud and is cooperating with the government in exchange for a lighter sentence, has said Clinton pressured him to make the $300,000 loan to Mrs. McDougal. Hale is the only witness to accuse Clinton of wrongdoing. Clinton, in his taped testimony, adamantly denied having asked Hale to make the loan.

The prosecutor at the trial, W. Ray Jahn, told the jury, "The man occupying the position of the office of the presidency of the United states is not on trial here." But after the verdict, he suggested that Whitewater investigators now had ammunition to build a case against others. That could include the president.

If he was not on trial, why did Clinton testify?


He was subpoenaed by Mr. McDougal, who hoped Clinton would challenge, and destroy, the credibility of Hale, the prosecution's star witness. Hale testified that the McDougals and Tucker conspired with him to cook up the fraudulent deals.

As it turned out, some jurors said they returned guilty verdicts not because they believed Hale's word over Clinton's, but because of the mountain of documentary evidence the prosecution had presented.

Why is the verdict bad news for Clinton?

Aside from the political implications of Clinton's associates' being deemed crooks, the verdict gives a boost and a stamp of approval to the Whitewater independent counsel, Kenneth W. Starr. He has has been pursuing and expanding his investigation for almost two years. It also gives a second wind to the Senate Whitewater Committee, which had seemed to have run out of steam.

The prosecution's success makes it difficult for Democrats to continue to denounce the investigations as mere political witch hunts.

What will the Senate Whitewater Committee do now?


The committee chairman, Sen. Alfonse M. D'Amato, said he would try to revive the hearings, which sputtered to an anticlimactic finish weeks ago. The New York Republican said he would renew an effort to have Hale testify before the panel. Hale has said in the past that he would invoke his Fifth Amendment right and refuse to testify.

The verdict is also likely to make the committee's Republicans more aggressive in drafting their final report, due next month. They uncovered no "smoking gun," but perhaps enough smoke to satisfy them that a group of Clinton cronies in Arkansas enriched themselves at taxpayer expense, and that key White House officials tried to head off the Whitewater investigation.

Where does Starr, the independent counsel, go from here?

First, he will turn his attention to another trial, due to start June 17 in Little Rock. That case centers on contributions to Clinton's 1990 re-election campaign as governor that prosecutors allege were illegally hidden in an Arkansas bank. Clinton has been subpoenaed by the defense to testify at that trial as well.

And Starr says the "Washington phase" of his investigation -- involving the Clinton White House's handling of the Whitewater matter, including the mysterious appearance of Hillary Rodham Clinton's billing records this year -- is "very active." That investigation also includes the events surrounding the 1993 suicide of Vincent W. Foster Jr., who was deputy White House counsel.

Starr is also examining the 1993 firing of seven White House travel office employees. Some evidence suggests Mrs. Clinton may have had a heavier hand in that than she has acknowledged.


How damaging could the "Washington phase" be to the president and first lady?

Perhaps more damaging than the "Arkansas phase," because it deals with actions while Clinton was in the White House rather than years ago in Arkansas. Starr is trying to prove that administration officials -- possibly even the first lady -- tried to impede or manipulate the Whitewater investigation.

Indeed, one potential peril for Clinton is the possibility that Starr would turn his prosecutorial ardor on Mrs. Clinton. The Republican lawyer has already forced her to testify before a grand jury in Washington.

Starr must prove that Mrs. Clinton had a hand in hiding law-firm billing records that had been under subpoena for two years before they surfaced at the White House, or that she otherwise obstructed justice.

Will Starr eventually bring charges against either Clinton?

That is the big question. There is no evidence on the public record that either of the Clintons committed a crime. But there have been conflicting accounts of numerous events that could link one of the Clintons to a crime -- such as how Mr. McDougal's savings and loan came to hire Mrs. Clinton to do legal work, and why Justice Department officials were barred from searching Foster's office after his suicide.


Will the people convicted this week offer testimony against the Clintons in return for a lenient sentence?

It is unlikely that Mr. McDougal would strike a deal with the prosecution. He testified for two days at this trial and was an unconvincing witness. (He and Clinton were the only defense witnesses.) He could provide new information but would not be much use as a government witness.

Because neither Tucker, who faces a second criminal trial on tax fraud charges, nor Susan McDougal testified, they are not locked into sworn statements, as Mr. McDougal is, and could well be of use to the prosecution.

Starr could also bring the three defendants before a grand jury to question them about the Clintons.

Pub Date: 5/30/96