Death of American Virtue - Ken Gormley [36]
Hillary replied curtly, “I won’t be talked to in that manner.”
Susan shot back, “I’m telling you right now if it comes down to you signing my name to something that takes that away from Jim when he is, you know, struggling to feed himself, that I won’t have anything to do with it.”
On this acrimonious note, Hillary Clinton and Susan McDougal ended their conversation. When it came to the power of attorney, Susan “never heard from [the Clintons] again.” But this incident gave Jim McDougal a reason to hate his old friends Bill and Hillary with a newfound intensity.
CHAPTER
5
SEEDS OF SCANDAL
The Whitewater/Madison Guaranty debacle was the rare scandal that, like a cat, lived multiple lives. The first was born in the autumn of 1989, when Jim McDougal was indicted—along with Susan’s two brothers, David and James Henley—on eight felony counts of bank fraud and misapplication of funds. The federal charges involved suspect transactions related to the old industrial park south of Little Rock that McDougal had dubbed Castle Grande. It was adjacent to a thousand landlocked acres that he had already purchased from International Paper.
McDougal had picked up the Castle Grande property for a song—$1.75 million—with a goal of subdividing it to build the area’s first microbrewery on the site, a trendy new amenity. In fact, with Madison Guaranty stretched beyond its limits, he was devising a plan to swiftly resell the property at inflated prices, to create the appearance that Madison’s net worth had risen by $3 million. This was McDougal’s quick fix to keep the S&L from sinking into insolvency.
Castle Grande and its companion deals would eventually surface as part of a broader criminal scheme that reached far beyond the McDougals. Ultimately, the list of those tangled up in this complex scam would read like a Who’s Who of some of Arkansas’s most prominent business and political luminaries. Hillary Clinton would be the subject of a draft indictment relating to her legal work on this project, even though that indictment was never issued and remains locked up in a Washington archive.
For now, in the fall of 1989, U.S. Attorney Charles Banks began investigating only one narrow aspect of the Castle Grande investment. A thick report, prepared by special counsel investigating Madison’s transactions, dubbed “the Borod & Huggins Report,” found that “numerous tracts of land were sold or ‘flipped’ at inflated values” in order to generate “paper profits” that allowed McDougal to receive jacked-up compensation. On top of “numerous regulatory violations,” there were “apparent criminal violations” as well.
Senator J. William Fulbright had suffered a serious stroke in 1988 and was still recovering in Washington. In this enfeebled state and now a witness to potential crimes, he wrote a letter summarizing his dealings with McDougal for the federal bank examiners. Fulbright explained despondently: “As I told you, Jim has gone to California and will not respond in any way. Apparently, he has had a nervous breakdown and simply given up. [Madison] Guaranty is now suing him and foreclosing on his house in Little Rock.… So it is a sad tale of misplaced trust, but I expect you have encountered it before.”
During his arraignment in front of a United States Magistrate in Little Rock, Jim McDougal, now forty-nine, declared that he had “no assets whatsoever.” He had been unemployed for over three years. He was subsisting on social security disability payments of $560 per month, living rent-free in the Rileys’ trailer-cottage in Arkadelphia.
McDougal still insisted, in letters to his lawyer, that he was being persecuted for political reasons. Yet there is scant evidence that politics played any role in the first prosecution of McDougal. As McDougal’s own lawyer, Sam Heuer, later admitted, “[It was] the documents. They smelled to high heaven.”
Indeed, the U.S. attorney in Little Rock who brought McDougal to trial in May 1990 was the antithesis of a partisan