Whitewater Figure James McDougal Dies In Prison

McDougal appearing on "Larry King Live" in April 1997

FORT WORTH, Texas (AllPolitics, March 8) -- James McDougal, President Bill Clinton's former business partner in Arkansas and a cooperating witness in the Whitewater investigation, died Sunday while serving a federal prison term. He was 57.

McDougal died at 12:01 p.m. CT at John Petersmith Hospital, according to the federal Bureau of Prisons.

He arrived at the hospital in full cardiac arrest at 11:38 a.m. CT, a hospital spokeswoman said. He was taken to the hospital by ambulance from the Bureau of Prisons medical facility in Fort Worth.

The apparent cause of death was a heart attack, but an autopsy is planned for Monday, said Todd Craig of the Bureau of Prisons. McDougal suffered from several health problems, including heart disease and blocked arteries.

McDougal was convicted in 1996 of fraud in relation to the failed Whitewater land deal. Before his conviction, McDougal did not cooperate with Whitewater independent counsel Ken Starr and said he was innocent.

After being convicted on 18 felony counts, McDougal began to cooperate with Starr's investigation in August 1996 in exchange for a reduced prison sentence. Initially facing 84 years, he was sentenced to a three-year term and would have been released in September 1999.

McDougal speaks to a reporter in Little Rock in January 1996

His death means Clinton and his wife, Hillary Rodham Clinton, no longer face the prospect of McDougal giving damaging testimony against them. McDougal had testified extensively to the Whitewater grand jury in Little Rock, Ark.

Starr and his deputies met for several hours on Sunday after McDougal's death was announced. Starr told reporters McDougal was "a great gentleman, a real Southern gentleman and throughout our dealings with him he was always gracious and kind, and I think in these later years he wanted to end on a high moral note and end by telling the truth ... so we miss him."

James B. Stewart, a journalist and author of the Whitewater book "Blood Sport: The President and His Adversaries," said McDougal's death was a blow to Starr's inquiry, "but Jim McDougal wasn't going to be much of a witness anyway."

"He's appeared many times before the Little RocK grand jury, so we know pretty much or Starr knows what McDougal knows," Stewart said. "And it was always going to depend on finding other witnesses to corroborate that. But still it is a loss. The testimony before the grand jury can now not be admitted in any other further proceedings.

"He had to point Starr towards documents and towards other witnesses who could say and testify under oath the things that McDougal knew about, because he changed his own story too many times to be a credible witness," Stewart said.

Clinton said on Sunday in a statement: "I am saddened to learn about Jim McDougal's death today. I have good memories of the years we worked together in Arkansas and I extend my condolences to his family."

McDougal owned Madison Guaranty Savings & Loan, which was the underwriter of the failed Whitewater land deal. The institution and the land deal both failed, costing taxpayers about $60 million.

Once he began cooperating with Starr, McDougal changed his testimony and corroborated an account provided by Whitewater figure David Hale.

Hale said he and McDougal had met with Clinton in 1986 and planned a taxpayer-backed loan that was used in part to prop up the Clintons' Whitewater real estate investment. The fraudulent $300,000 loan has never been repaid, and Clinton has denied knowing about it.

Susan McDougal

McDougal's ex-wife, Susan, also was involved in the land deal and has refused to cooperate with Starr. She went to jail for contempt for refusing to answer Starr's questions before the grand jury and has remained there for 18 months.

James McDougal also was a key witness as prosecutors investigated the fraudulent Castle Grande real estate development south of Little Rock on which Hillary Clinton conducted work as a partner in the Rose Law Firm.

In a bizarre discovery, Whitewater prosecutors came across evidence that provided some support for an allegation by McDougal that Clinton in the early 1980s took out a loan from McDougal's savings and loan to support Whitewater. During his videotaped testimony at McDougal's trial, Clinton denied taking out a loan from the S&L.

McDougal said last year that he and Clinton agreed to get the loan off the S&L's books by shifting the loan to an Arkansas businessman to pay off.

A canceled cashier's check for more than $27,000 from McDougal's S&L to Clinton was found in the trunk of an abandoned car in 1997 by a garage mechanic and turned over to Starr's office.

The cashier's check tracked the story McDougal had been telling prosecutors about a loan to Clinton. The cashier's check was not endorsed.

The Associated Press contributed to this report.

Sunday March 8, 1998

• Whitewater Figure James McDougal Dies In Prison
• GOP Airs Differences Over Lewinsky Probe