May 9, 1996
MR. JAHN: Your Honor, we would move the introduction of Government's Exhibit 89.
BY MR. JAHN:
Q: Mr. President, if you would, going back to Government's
Exhibit 87, can you tell us what the amount was -- at the renewal
executed on September 30th, 1985, what was the amount of that
renewal?
A: The amount extended was $13,800.
Q: Okay. And as far as Government's Exhibit 89, as far as the
renewal in November of 1986 due on December 3rd, 1986, what was the
loan amount in that particular instance?
A: $100,121.
Q: Okay. And these were both Whitewater Development Corporation
obligations; is that correct?
A: Well --
Q: I mean, from your state of mind, from your point of view,
these were both Whitewater Development Corporation obligations; is
that correct, sir?
A: They were Whitewater Development obligations if Whitewater
Development had the money to pay them. Otherwise, they were our
obligations, personally. The four of us were jointly and
individually obligated on the big bank note, and I was obligated on
the small one.
Q: And it was your expectations and hopes and dreams and
visions, though, that Whitewater Development Corporation would
still be the entity that would be responsible for paying this note;
is that correct?
A: I hoped eventually we could at least break even, that's
right.
Q: All right. Now, in 1985 and 1986, sir, you still had -- I
believe you indicated Mr. McDougal had moved back into town. Did
you have fairly frequent contact with him during the year 1985, for
instance?
A: I'm not sure. I'm sure I saw him a few times. I don't know
how -- I hate to use the word "frequent," because I don't know how
many times. But I had some contact with him in 1985 over various
things.
Q: Okay. You talked about your jogging, and if you can, I think
it is on the record, but how far was Madison Guaranty Savings and
Loan from the mansion at that particular time?
A: It was less than a mile from the Governor's mansion.
Q: All right. And there would be occasions, then, on which you
would go out jogging on the streets of Little Rock; isn't that
correct?
A: That's correct.
Q: And when you would go jogging on the streets of Little Rock,
quite often, unlike today, sir, you had a lot more personal
freedom, did you not, as far as being able to move without the
necessary requirements of security?
A: Yes. And particularly if I was downtown in daylight, I would
run sometimes on Main Street, that was one of the streets I
regularly ran on.
Q: Okay. And you were free to run on your own and to go out and
run and go by and visit people and talk to people and the like?
A: That's correct.
Q: And did you, in fact, on occasion jog past or jog to Madison
Guaranty Savings and Loan?
A: On occasion, I did jog past it, yes.
Q: Okay. And on occasions, did you actually jog to it and go
inside and stop and visit with people, sir?
A: I believe that once or twice I actually went in, yes.
Q: Okay. Now, during, again, the year 1985, were there
occasions, sir, in which you, as governor of the State of Arkansas,
would seek out advice from Mr. McDougal?
A: It's possible. Could you refresh my memory? Have you got a
specific issue you want to raise?
Q: Yes, sir, I've got one. If you would, I want to --
(WHEREUPON, Government's Exhibit Number 73 was marked for
identification.)
MR. JAHN: Could we have Government's Exhibit 73?
MS. NANCE: (Complies.)
MR. JAHN: May I approach the witness, Your Honor?
THE COURT: You may.
BY MR. JAHN:
Q: I want to show you what has been marked for identification
purposes as Government's Exhibit 73.
A: (Witness reviews document.)
Q: Mr. President, I was showing you Government's Exhibit 73. And
perhaps to speed things up a little bit, sir, I will try a little
leading questions. That's a memo directed to you dated February
7th, 1985; is that correct, sir?
A: That's what it says, yes, sir.
Q: All right. And it is from Jim McDougal; is that correct?
A: Yes, it is all typed, there is no signatures on it, but it is
typed, it says, "To Governor Bill Clinton from Jim McDougal."
Q: Okay. And it is at the bottom left-hand side, sir, as far as the slug, I believe is what they call it, the initials, it says,
JRM/SS on the bottom left-hand corner; is that correct?
A: That's correct, sir.
MR. JAHN: Your Honor, we would move the introduction of
Government's Exhibit 73.
THE COURT: All right. Received.
(WHEREUPON, Government's Exhibit Number 73 was received into
evidence.)
BY MR. JAHN:
Q: Mr. President, in Government's Exhibit 73, Mr. McDougal is
writing to you concerning a request from someone in your office, is that correct, someone named Kathy?
A: Yes, sir.
Q: And who is Kathy, sir?
A: I'm not sure, but it could be Kathy McNatt, it probably is
someone who worked in the -- in the appointments section of the
governor's office.
Q: All right. And in it, it talks about recommendations for two
people to fill the vacancies on the State Savings and Loan Board.
A: Yes.
Q: Can you tell the jury, sir, what is the State Savings and
Loan Board?
A: The State Savings and Loan Board is a board -- let me say,
Arkansas has a lot of these boards, hundreds of them. The
legislature at one point in history created a board to advise the
person who is in charge of overseeing the state chartered savings
and loan. The board, by statute, has to be comprised of people who,
themselves, are in the savings and loan business, except there is a
consumer position by law and there might or might not be a position
for a senior citizen, I just don't remember. But otherwise, the
vast majority of the board members have to come out of the state
S&Ls, and I think at the time there were just a handful of them
left in Arkansas.
Q: And were you aware, sir, that Madison Guaranty Savings and
Loan was, in fact, a state chartered savings and loan?
A: Yes, sir, I was.
Q: And if you would, sir, second paragraph, in the second
paragraph, Mr. McDougal recommends John Latham, who was Chairman of
the Board of Madison Guaranty Savings and Loan. Did you know John
Latham, sir?
A: I did.
Q: And did you, in fact, appoint Mr. Latham to the Savings and
Loan Board based upon Mr. McDougal's recommendation?
A: Well, first of all, Mr. Jahn, let me say, I'm not sure I ever
saw this memo, but we did appoint Mr. Latham, and Mr. McDougal, I
believe, did recommend him, and I wouldn't be surprised if he
wasn't the only person that wanted to be on the board. It was hard,
we had to go scare up people to be on some of these boards by the
mid-1980s. So I believe he was appointed.
Q: Okay. But you are saying you're not sure you ever saw the
memo. If you saw the memo, though, would you follow Mr. McDougal's
recommendation?
A: Well, I might have, might have done it if I hadn't seen it.
Q: Okay.
A: But in this case, I'm not sure that -- as I've explained to
you, this was a board with relatively little power, that had -- the
membership requirements included the requirement that people would
be involved in the S&L business. We didn't have many state savings
and loans left by then, and I wouldn't be surprised if Mr. Latham
wasn't the only person that asked to be on this board.
Q: Okay. It had limited power, you indicated, but at the same
time it did have some power, did it not, as far as branch
regulations?
A: I expect it did.
Q: For instance, within the savings and loan institution?
A: Sure. I believe that's right.
Q: And were you familiar, sir, with a limitation that was placed
upon savings and loans, or state chartered savings and loans
concerning their investment in private businesses or their
investment in service corporations limiting their investment to
three percent?
A: I don't believe I was.
Q: Okay. Do you know whether or not Mr. McDougal was aware of
any such limitation?
A: I don't know.
Q: Do you know whether or not Mr. McDougal was having any
difficulty within his institution concerning any such limitation?
A: I do not.
Q: You indicated you know John Latham. Did you know Greg Young
at the Madison Guaranty Savings and Loan?
A: I don't remember him, no, sir.
Q: Okay. If you would, sir, can you, for the benefit of the
jury, read the last paragraph on Government's Exhibit 73, the memo
from Mr. McDougal to yourself.
A: It says, "Bill, we are down to only about 15 state chartered
savings and loan institutions, and I'm about the only one around
who has any interest in this board."
Q: Now, as far as a memo from Mr. McDougal where it contains a
personal sentiment such as this, "Bill," do you feel, sir, that
if you probably would have received a memo such as that, your staff
probably would have brought that to your attention?
A: I just don't know, sir. There is no check here. My mail was
opened by other people. It is quite possible that I would send an
appointment form, a recommendation, with just some note saying,
"Jim McDougal recommended him." I just don't know what happened.
But I certainly can't tell from this memo that I ever saw it,
because when I saw things, I nearly always checked where my name
was.
Q: Okay. I asked you concerning the status of Whitewater
Development Corporation, and as far as the trust and faith that you
put in Mr. McDougal. Did Whitewater Development Corporation in 1985
have a checking account, to your knowledge?
A: I don't know one way or the other. I never wrote any checks
from it or received any checks from it.
Q: Okay. That was the next question. Did you have any authority
over any checking accounts that bore the name "Whitewater
Development Corporation"?
A: I had -- we, I was a passive investor, Mr. McDougal was
managing the property.
Q: Okay. Did he ever talk to you, sir, concerning the status of
their particular investments or concerning the status of the
checking account in the spring of 1985?
A: I don't recall any conversations with Mr. McDougal about
Whitewater in 1985.
Q: Directing your attention to March 29, sir, 1985, were you
aware that the Whitewater Development Corporation checking account was overdrawn approximately $25,000?
A: If it, in fact, was overdrawn, I was unaware of that.
Q: Now, in -- you indicated that in the spring of 1985, let's
just go back, in the spring of 1985, did there come an occasion,
sir, in which Mr. McDougal raised funds for your campaign?
A: Yes, sir, there did.
Q: All right. Can you tell the jury, as far as -- first of all,
spring of 1985 was not a campaign year, was it, sir?
A: No.
Q: Okay. What type of debt was Mr. McDougal assisting you on?
A: I had been re-elected Governor in the fall of 1984, in a
campaign that I was fortunate enough to win handily, I got over 60
percent of the vote, but I owed about a $100,000 when the race was
over, and I was having to pay it off. And Mr. McDougal volunteered
to have a fund raiser to pay a portion of the debt off.
Q: Okay. Is it fair to say, sir, as far as a debt that is
incurred and exists after a campaign, sometimes those are the
hardest ones to get rid of?
A: Not if you are a Governor that won with over 60 percent of
the vote, it is not hard.
Q: Okay. But as far as the assistance that Mr. McDougal gave to
you, you appreciated it, did you not?
A: I sure did. I appreciate everybody that contributed to my
campaign.
Q: You made a comment, in fact, during the course of your direct
testimony that as a candidate, it is quite second nature to ask
people for their assistance; isn't that correct?
A: It is.
Q: Either their vote, perhaps some volunteering on the campaign;
is that correct, sir?
A: Yes, sir.
Q: Perhaps putting a sign, even something as small as putting a
sign up in their front yard can become something of importance to
you; is that correct?
A: Very important, yes.
Q: Then, of course, money is also important; is that correct?
A: It is.
Q: And also actually physically working in the campaign, going
door to door, knocking on the door and the like, that becomes very
important?
A: Yes, sir. It is.
Q: Is it fair to say, then, as a campaign, you are asking quite
a lot of people, then, "Can you help me out?"
A: That's the only way you can prevail is thousands of people
helping you.
Q: All right. And in fact, because as you indicated, as your
success in all your years in Arkansas, you must have asked
thousands and thousands and thousands of people for their help?
A: I certainly did.
Q: Now, as far as the campaign itself is concerned, you did, in
fact, attend a campaign fund raiser, it was located at Madison
Guaranty Savings and Loan; is that correct?
A: Yes, sir.
Q: And it was on April 4th, 1985; is that correct, sir?
A: I don't remember the exact date, but it was in the spring of
'85 sometime.
(WHEREUPON, Government's Exhibit Number 83 was marked for
identification.)
BY MR. JAHN:
Q: Okay. Let me, if you can, for the purpose of refreshing your
recollection only, I'm going to show you what has been marked for
identification as Government's Exhibit 83, and I believe I can
represent, sir, that this was your schedule for the day of April
the 4th, I believe, 1985.
A: (Witness reviews document.)
Q: And to be specific, sir, does it refer, "At 4:15 Jim
McDougal's fund raiser for the Governor"?
A: Yes, sir. This is a Thursday, April 4th, 1985, and it says
one of the things I did on this day was to leave the office at 4:15
to go to a fund raiser which Jim McDougal hosted.
Q: Okay. And does that refresh your recollection, then, as far
as the date of the fund raiser itself?
A: Yes, sir.
Q: Okay. And if --
A: I mean, I don't -- this appears to be one of my schedules, and
so -- I do know it was in the spring of '85, so it probably was on
April 4th.
Q: All right. And if you would, sir, during the course of that
fund raiser, did you receive contributions from -- either directly
or indirectly, from certain individuals that were at that fund
raiser?
A: Well, there were people who were there who contributed. I
don't believe I received them, I don't believe they handed me the
checks, but there were people there who contributed.
Q: Mr. President, during the course of your direct examination,
you were questioned concerning your relationship with Mr. Tucker
back during the time in which you and he ran against each other. Do
you remember that line of questioning, sir?
A: I do.
Q: And I believe you've indicated that your relationship was
estranged to a certain extent during the course of that campaign,
which was in 1982; is that correct?
A: That's correct, sir.
Q: Now, did it begin to improve, though, shortly thereafter?
A: Well, as I said, when we discussed this before, or when I
testified to this before, it was strained, but Governor Tucker, as
a private citizen, continued to support the Democratic Party in
Arkansas, continued to support my policies, and from time to time
gave me contributions, which I very much appreciated.
So, there was a distance between us throughout the 1980s that
had not been there before when we were younger and when we were
very close, but as time went on, and as I said before, it got
better. You know, time tends to heal those kinds of wounds.
Q: By 1985 and 1986, sir, was there still a distance between
yourself and Mr. Tucker, or had you, in fact, become closer
together?
A: Well, he contributed to my campaigns in the '80s a couple --
at least twice that I know of, but I think it would be fair to say
that we had not recovered the kind of close relationship we had
when we were young men.
Q: Had you gotten to a point, sir, where Mr. Tucker would
confide in you concerning his business relationships in 1985 and
1986?
A: No, sir, we had not.
Q: Were you aware, sir, that he was doing business with Mr.
McDougal during that period of time?
A: No, sir, I was not.
Q: Were you aware, sir, that he was seeking and obtaining loans
from Mr. Hale during that period of time?
A: No, sir, I was not.
Q: Did he talk to you concerning his financial status during the
years 1985 and 1986?
A: No, he didn't.
Q: Did he ever share with you any hopes or dreams or
expectations that he had concerning his business future during the
year 1985 and 1986?
A: I don't believe we ever had a conversation like that.
Q: All right. Now, as far as getting back to 1985, if you would, sir, I want to show you what has already been admitted as Government's Exhibit --
MR. JAHN: I'm sorry, has this one been admitted?
MS. NANCE: What number?
MR. JAHN: 533-B, I think.
MS. NANCE: No.
BY MR. JAHN:
Q: I won't show you that particular check, sir. Were you aware,
did Mr. McDougal ever talk to you, sir, concerning a development
called Flowerwood Farms in the spring of 1985?
A: I'm not aware that he did, sir. But perhaps you could help
me, maybe you know something I don't know. But I have no
recollection of that.
Q: In the spring of 1985, Mr. McDougal, the documents will show,
borrowed $135,000 from a Stephens Security Bank in Arkansas, a man
by the name of Richard Smith made the loan. Did Mr. McDougal ever
discuss with you, sir, the need to make a loan during the spring of
1985? We are talking about spring of 1985.
A: No, sir.
Q: Were you aware, or did he ever tell you, sir, that some of
the proceeds from that loan were utilized to make payments or
deposited in the account of Whitewater Development Corporation?
A: No, he did not.
Q: Okay. Again, back to the spring of 1985, who were you
trusting as far as the management of Whitewater Development
Corporation?
A: As I have said repeatedly, Mr. Jahn, Mr. McDougal was
managing the property and had since we first bought it.
(WHEREUPON, Government's Exhibit Number 76 was marked for
identification.)
BY MR. JAHN:
Q: I'm going to show you next, sir, what is marked as Government's Exhibit 76, being a Warranty Deed bearing a file stamp of the 10th day of June, 1985.
MR. JAHN: And Your Honor, we would move the introduction of
Government's Exhibit 76 based upon the understanding we had
concerning deeds that were filed in public -- in court.
THE WITNESS: (Witness reviews document.)
MR. JAHN: May I assume it has been admitted, Your Honor, without
objection?
THE COURT: Yes, received.
(WHEREUPON, Government's Exhibit Number 76 was received into
evidence.)
BY MR. JAHN:
Q: Mr. President, do you need more time to look at it, sir?
A: No, sir, I have looked at it.
Q: All right. Mr. President, this Warranty Deed reflects that on
the 30th day of May, 1985, James B. McDougal, as President of
Whitewater Development, Incorporated, also with a signature of
Susan H. McDougal, as Secretary of Whitewater Development,
Incorporated, transferred certain lots, and specifically lots two,
three, four, five, six, nine, 10, 11, 12, 14, 15, 16, 17, 18, 20,
22, 23, 24, 29, 30, 35, 37, 43, and 44 to an organization called
the Ozark Air Services, Incorporated. Do you know who or what Ozark
Air Services, Incorporated was, sir?
A: I don't believe I did know that, no.
Q: Did you know, sir, that these were the remaining unsold lots
of Whitewater Development Corporation, Incorporated?
A: I don't believe I knew that at the time, no.
Q: Did Mr. McDougal consult with you, sir, prior to his transfer
of the unsold lots of Whitewater Development in May of 1985?
A: No, sir.
Q: Did he ever tell you or did he tell you at that time, sir, as
to what his -- what he was receiving in exchange for these
particular lots?
A: I don't believe he did, no.
Q: Did he ever talk to you, sir, concerning the obligations
which you still, and you and Ms. Clinton still had, concerning the
payments of debts in the name of Whitewater Development Corporation
after 1985?
A: I'm not sure I understood that question, Mr. Jahn. Would you
ask it again, please?
Q: Well, if Whitewater doesn't have any more real estate left
over, where is the profit going to come from, Mr. President?
A: Well, presumably, sir, the real estate contracts were
accompanied by the obligation to pay certain funds into Whitewater,
that was the money that was going to be used to pay the bank notes
off.
Q: Yes, sir. That's what you were going to break even on, or
that's what Mr. McDougal told you?
A: That's what we hoped we would. And there were a period of
several years within the early '80s where, at least I assume, that
we were breaking even, or we were making the bank notes, the bank
payments we were supposed to be making.
Q: Okay. And in fact, the profit that you and Ms. Clinton hoped
to make was going to come from the sale of these excess lots,
wasn't that a fact, sir?
A: Well, by then, sir, I had pretty much given up on making a
profit, I was just hoping we could break even and not lose anything
else.
Q: Well, now, Government's Exhibit 76, sir, is dated May 30th,
1985, and you still had the obligations reflected in the
government's exhibits concerning the renewal of the loan which you signed in the fall of 1985. Do you remember that, sir?
A: Yes, sir.
Q: Did Mr. McDougal, when you renewed that loan in the fall of
1985, did he tell you, sir, that he had, in fact, sold or
transferred all of the real estate assets of Whitewater Development
Corporation to Ozark Air Services, Incorporated?
A: No, sir, he didn't.
Q: Sir, if you would, in October of 1985, Mr. Tucker purchased
35 acres, or 34 acres of property at that same location that you've
discussed previously in your testimony, that is, at 145th Street
and what later became known as the Castle Grande area. Were you
aware of that, sir, in October of 1985?
A: No, sir, I was not.
Q: OK. You indicated that you had been to that area on one
occasion, and your recollection was that it was in June of 1986. Do
you remember that?
A: Yes, I do.
Q: OK. If you would, sir, your calendar also reflects that in
October of 1985, more specifically, October 26th, 1985, you went to
the Siemens-Allison plant for their 15th anniversary celebration.
Do you remember, sir, going to the Siemens-Allison plant at that
location where you described in October of 1985 to celebrate their
15th celebration -- 15th anniversary?
A: I believe I did go there, yes, sir.
Q: All right. At the time that you went, sir, that was on a
Saturday, do you recall whether or not you knew Mr. Tucker had, in
fact, purchased some real estate in that particular area?
A: I did not know that.
Q: OK. Your telephone call, toll records, sir, reflect that on
the following Monday, October 28th, 1985, you received a phone call
from Mr. McDougal. Do you recall, sir, what it was that you spoke
to Mr. McDougal about on October 28th, 1985?
A: I don't know that I did speak to him.
Q: Well, if you can, let me show you some -- are you familiar
with the record-keeping system by Ms. Dixon, sir?
A: Yes, sir, I am.
Q: OK.
MR. JAHN: If I may have a second, Your Honor.
(WHEREUPON, Government's Exhibit Number 71-B was marked for
identification.)
BY MR. JAHN:
Q: I'm going to show what has been marked for identification as
Government's Exhibit 71-B as in boy, reflecting a page of her
records of October 28th, 1985. Do you see that before you, sir?
A: (Witness reviews document.) This appears to be just a series
of notes that Linda Dixon made to herself, yes, sir.
Q: And reflects a Jim McDougal, 3 p.m., 374-7777; is that
correct, sir?
A: Yes, sir. But it doesn't reflect whether he called for me or
for Betsey Wright.
Q: OK. That's a good point, sir. But as far as the notation or
the scratching out of the document, do you know what Ms. Dixon's
practice was as far as calls which were either completed or
returned as far as scratching out those particular document?
A: No, sir, I don't.
Q: OK. And Ms. Dixon was -- what was her position at the time,
sir?
A: She was my secretary.
Q: All right. And is she still employed with you, sir?
A: Yes, she is.
Q: OK. And what is her position now, sir?
A: She works in our office in Arkansas.
Q: OK. And as far as -- but back to the question, sir. Do you
recall receiving a phone call in October -- October 28th, 1985 from
Mr. McDougal?
A: No, sir. I have gotten a few phone calls since then. That was
more than 10 years ago. I don't remember it, no.
Q: Sir, the records of the governor's mansion of the state of
Arkansas reflect that on December 19th, 1985, Mr. McDougal and
Senator Fulbright came by the mansion and visited with you. Do you
remember that event, sir?
A: Yes, sir. I remember that Senator Fulbright was in town and
he wanted to see me, I wanted to see him, and Jim was good enough
to bring him by.
Q: OK. During the course of that visit, sir, did you and Mr.
McDougal have any conversations concerning the development of his
property called Castle Grande out at the 145th Street location that
you've talked about?
A: No, sir. I believe it was just a social visit with Senator
Fulbright.
Q: OK. In that case, then, do you recall any conversations you
might have had concerning some property that he desired to purchase
from International Paper Company, property that later became known
as the Lorance Heights development?
A: No, sir, we never talked about that.
Q: Now, you testified on your direct, sir, that you recall an
occasion in January of 1986 when Mr. McDougal came by the mansion
and visited with you; is that correct?
A: Yes, sir, he did.
Q: And your recollection, sir, was that that was sparked by some
difficulty that he was having with the state of Arkansas, with an
agency within the state of Arkansas?
A: That's correct.
(WHEREUPON, Government's Exhibit Number 81 was marked for
identification.)
BY MR. JAHN:
Q: Sir, if you would, I'm going to show you what has been marked
for identification as Government's Exhibit 81. Government's Exhibit
81, sir, is a memo addressed to you; is that correct?
A: Yes, sir.
Q: And it reflects the discussion concerning that meeting on
that Saturday in 1986, January 1986; is that correct?
A: Well, this is a memo to me from Nancy Hernreich, who was at
that time my scheduler, and it has got my check on it in a
handwritten notation, it is in my handwriting. It says Mr. McDougal
wants to see me before Tuesday.