Arkansas S&L Tangle

December 05, 1993|By SUSAN BAER

WASHINGTON — Washington. -- Back in the '80s, with the worlds of politics and business mingling as easily as bourbon and branch water, the lives and fortunes of a group of Little Rock power brokers intersected at every turn.

Some of those lives took off for the highest heights; others shattered. And today, that decade-old tangle of money and influence has caught the eye of federal investigators at the Justice Department and two House committees, a complicated web that would look like any other savings and loan saga from the high-flying '80s were it not for the extraordinary cast of characters involved:

The president and first lady of the United States, the No. 3 official at the Justice Department, an S&L owner who parked Jaguars next to his Bentley a decade ago but lives today in isolation and ignominy in a trailer home in rural Arkansas. And last, a White House aide who put a gun to his head last summer.

Although the federal probe has no "-gate" attached to it yet, questions about improper practices and deals at a failed Arkansas S&L, Madison Guaranty Savings & Loan -- including deals that involve the Clintons and the then-governor's campaign funds -- have smoldered since Mr. Clinton's presidential campaign, resurfacing last month when federal bank regulators asked the Justice Department to launch a criminal investigation.

Neither President Clinton nor first lady Hillary Rodham Clinton is a target of the federal investigation, officials have said. But the probe is examining:

* Whether the owner of Madison, former Clinton friend and associate James B. McDougal, channeled depositors' funds into Clinton's 1984 gubernatorial re-election campaign chest.

* Whether a real estate corporation owned by the McDougals and the Clintons improperly benefited from Madison funds.

* Whether that same corporation improperly benefited from a loan backed by the Small Business Administration that was earmarked for socially or economically disadvantaged businesses,

* And whether there were conflicts of interest for the Rose Law Firm, the venerable Little Rock firm at which Mrs. Clinton, the late Vincent Foster Jr. (who committed suicide last summer) and Webster L. Hubbell, now associate attorney general, were all partners. The firm represented Madison in the mid-'80s when the failing thrift was trying to beat back state regulators and stay in business, and then, several years later, represented the government in its lawsuit against the collapsed thrift.

During the presidential campaign, the potential controversy bubbled up just before Super Tuesday but took a back seat to the simpler, more provocative stories of Gennifer Flowers and draft-dodging. And the Clintons successfully snuffed out the issue by defusing questions about Mrs. Clinton's work at Rose Law Firm with the suggestion that any such inquiry was a politically incorrect attack on working women.

President Clinton has said that neither he nor his wife had any improper dealings with the S&L or its owner, dismissing the latest flurry of interest and labeling it all an "old story."

But it is a story that continues to percolate with indictments, disclosures of questionable business practices and transactions -- and the continued search for answers to a mysterious, seemingly inexplicable suicide by a man who saw himself as not only a friend but a protector of and fixer for the Clintons.

In calling for an inquiry by the House Banking committee, Republican Rep. Jim Leach of Iowa said that the case bears a "striking similarity with other cases," including the $1 billion failure of Denver's Silverado thrift that ensnared Neil Bush, the former president's son, and the colossal collapse of Lincoln Savings and Loan at the hand of its chief, Charles Keating, sentenced to prison for swindling investors.

Mr. Leach said that although he and fellow Republicans do not believe "the questionable management practices of this rogue thrift amount to a scandal of Agnewesque dimensions," they are nonetheless concerned that "Keating-like influence peddling may have occurred, although on a smaller, state-centered scale."


The centerpiece of the complex investigation, Madison Guaranty Savings & Loan, soared in the go-go '80s -- like so many other S&Ls around the country -- only to come crashing down by the decade's end, costing taxpayers nearly $48 million in losses.

Mr. McDougal, now 53, bankrupt and living in a mobile home in rural Arkadelphia, Ark., had been a friend of Mr. Clinton's since the late '60s, when both men worked for Democratic Sen. J. William Fulbright.

An ambitious, one-time whiz kid in Arkansas, Mr. McDougal was an economic aide to newly elected Governor Clinton before buying Madison and turning the small rural thrift into a high-rolling financial powerhouse where the state's political movers came for cash.

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