James McDougal, the imprisoned former savings and loan owner whose account about the Clintons fueled the Whitewater investigation, has died, leaving prosecutor Kenneth Starr to finish his probe without one of his most important witnesses.
Convicted of 18 felonies in 1996, McDougal turned on the Clintons. He detailed for Starr the alleged role of both the president and first lady in fraudulent loans and real estate transactions in Arkansas that cost taxpayers millions of dollars when McDougal's savings and loan failed.McDougal, 57, suffered from a variety of ailments, including heart disease and blocked arteries. He died Sunday afternoon at John Peter Smith Hospital in Fort Worth, Texas, of cardiac arrest, according to the Justice Department. He was serving a three-year prison term for conspiracy and fraud regarding the illegal transactions in which he says the Clintons played a role.
The president issued a statement saying he was "saddened" by McDougal's death. "I have good memories of the years we worked together in Arkansas, and I extend my condolences to his family," Clinton said.
McDougal's death deprives prosecutors of an element that otherwise has been sorely lacking in their investigation: an insider to criminal activity who was eager to testify against the Clintons.
"McDougal's death weakens Starr's hand vis-a-vis the president," said Georgetown University law professor Paul Rothstein. "Unless Starr has other equally direct evidence, he is quite weakened."
Clinton loyalists were quick to point out McDougal's credibility problems.
"Jim McDougal was a gentleman who was very likable, personally," said Bobby McDaniel, the lawyer for McDougal's ex-wife, Susan. "He was also a man who had had significant emotional problems in the past but who was vehement in his contempt for independent counsel before his conviction."
Prosecutors now are likely to turn up the heat even more against Susan McDougal, who worked closely with her ex-husband in some of his illegal dealings. She was convicted of fraud in the same trial as her former husband.
Susan McDougal is in jail for refusing to cooperate with Starr's inquiry, and prosecutors could seek criminal contempt charges against her that would put her in prison for years. She faces state charges in California for allegedly stealing money from conductor Zubin Mehta and his wife. She also faces a two-year sentence for her Whitewater convictions.
Former Arkansas Gov. Jim Guy Tucker, who was convicted with McDougal at his 1996 criminal trial, began cooperating with prosecutors in recent weeks. Tucker and McDougal were friends, but Tucker had little if any contact with Clinton. The two were political rivals.
In Little Rock, Ark., Tucker said Sunday: "I'm sorry to hear of his death. I knew he had been in ill health for 10 years or so. I, too, can remember pleasant associations with him many years ago."
Individuals familiar with Tucker's cooperation say he is providing information regarding one of McDougal's biggest money losers - a 1,050-acre development south of Little Rock called Castle Grande.
Riddled with fraudulent transactions, Castle Grande ultimately cost taxpayers $4 million. As a partner at the Rose Law Firm, Hillary Clinton did some work on Castle Grande. Her ex-colleagues from the law firm repeatedly have gone before the Whitewater grand jury over the past four months.
Hillary Clinton says she remembers nothing about the small amount of work that she did and that she knew nothing about the fraudulent aspects of the project. Tucker had no face-to-face contact with Hillary Clinton, according to individuals familiar with the investigation, but was aware of some of the details of Castle Grande. He bought a utility on the property, using money borrowed from McDougal's savings and loan.
After first detailing his Whitewater real estate investment with the Clintons to The New York Times in 1992, McDougal withdrew from public view, then surfaced again when federal regulators and municipal judge David Hale triggered a full-scale criminal investigation into possible involvement by the Clintons in McDougal's failed savings and loan. Hale, under indictment, began making accusations of wrongdoing about Clinton.
For the first 2 1/2 years of the Whitewater investigation, McDougal maintained that Clinton had done nothing wrong. But faced with a lengthy prison term, McDougal changed his story.
McDougal offered a different reason for testifying against Clinton, saying "I just got sick and tired of lying for the fellow."
McDougal gave Starr information about the following areas:
-McDougal said then-Gov. Clinton was present at a 1986 meeting at McDougal's trailer office south of Little Rock to plan a loan used in part to bolster the Clintons' foundering Whitewater real estate investment. The fraudulent $300,000 federally backed loan from Hale's company went into the McDougals' checking account and never has been repaid. Clinton denies being at any such meeting and says he knows nothing about the loan.
-McDougal told prosecutors that Clinton - contrary to his sworn testimony in 1996 - got a $27,000 loan from McDougal's saving and loan to pay down some of the debt on Whitewater. A year ago, McDougal's story was corroborated when a cashier's check made out to Clinton turned up in an abandoned car - one of the more bizarre twists in the Whitewater probe.
There was no Clinton signature on the cashier's check, but McDougal told reporters that there were additional savings and loan documents in the trunk of the car that bear out his version of the story. The $27,000 loan was taken over and repaid by an Arkansas businessman so that Clinton's name would not be on the deal, McDougal said.