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First lady's '98 deposition focused on S&L, ties to McDougals

By The Arkansas Democrat-Gazette

This article was published March 17, 1999 at 4:19 a.m.

Hillary Rodham Clinton gave a videotaped deposition from the White House on April 25, 1998, in lieu of an appearance before a federal grand jury meeting in Little Rock. Part of that testimony was made public Tuesday when the tape was played during Susan McDougal's trial on obstruction of justice and criminal contempt of court charges.

Present during the deposition were the first lady; her private attorneys, David Kendall and Nicole Seligman; two attorneys from the Office of the Counsel to the President, Charles Ruff and Cheryl Mills; independent counsel Kenneth Starr; four of Starr's prosecutors, Soloman L. Wisenberg, Robert J. Bittman, Patrick M. O'Brien and W. Hickman Ewing Jr. Also present were the court reporter and videographer.

The questioning focused on Mrs. Clinton's representation during the 1980s of Madison Guaranty Savings and Loan, owned by James and Susan McDougal, as well as her relationships with James McDougal, Seth Ward and Webb Hubbell.

Below are excerpts from the transcript of the deposition released Tuesday, March 16, 1999.

QUESTIONING BY MR. EWING:

Q. Now, let me ask you some questions because we are going to talk about the McDougals some today, and I will show you some documents related to the early years. But just tell us, if you will, did you and your husband acquire jointly with Jim and Susan McDougal this property up in Marion County back in 1978?

A. Yes, we did.

Q. And would you tell us, as far as -- I know you've talked about this before -- what your obligation was as far as being on any notes?

A. We were liable along with the McDougals for the notes that were used to fund the purchase of the property.

Q. Let me hand you what we have marked as Exhibit 5. And some of these numbers may not get used, but let me hand you Exhibit 5. And I would ask you --

A. Thank you.

Q. -- if that appears to be a -- I will represent to you that this appears to be a copy of a document, Citizens Bank, Flippin, Ark. And it says $182,600, and it appears to have signatures on there. I would ask you if that appears to be your signature?

A. Yes, it does.

Q. And were you, Mrs. Clinton, actually liable on this note from 1978 until it was ultimately paid off finally in 1992?

A. Yes, I was.

Q. As was your husband?

A. Yes.

Q. And it's my understanding that about a year after you all borrowed this money in your individual names, the Whitewater Development Corp. was incorporated.

A. Yes.

Q. Is that correct?

A. Yes, about a year or so later.

Q. And the loan actually was then put into corporate name, but you all were still liable on it if the corporation could not make the payments?

A. Mr. Ewing, my understanding was the loan never was put into the corporation. I might be wrong about that, but certainly from my understanding we were always liable on the loan, personally liable.

Q. I want to hand you a copy of what has been marked as Exhibit 6. This is a clipping that was obtained from the Arkansas Democrat. It's block-stamped Oct. 27, 1979, and it is entitled "Conflicts surround acreage." Then there is another article there, copy of it, "McDougal files ethics form 9 months late."

I key this in, because according to this article, Mr. McDougal, in the third paragraph there, it says, he is Clinton's liaison to the Securities Department, the Bank Department and the Highway and Transportation Department.

Was Mr. --

MR. KENDALL: Just wait.

THE WITNESS: Yes, Mr. Ewing?

BY MR. EWING:

Q. OK. My question is, was Jim McDougal in your husband's first administration when he had been elected governor in, I guess, November of '78?

A. He was. He served for some period of time in that first administration.

Q. And according to this article, he was the liaison to these departments. Do you -- is that correct?

A. I do not know that.

Q. OK. But were you and Mr. McDougal and Mrs. McDougal, were you all social friends, you and your husband?

A. No, we were not.

Q. Mr. McDougal in about 1980 acquired an institution in Madison County over in west Arkansas called the Madison Bank and Trust. It was actually called the Bank of Kingston first and the name was changed. Included in that was Mr. [Jim Guy] Tucker, Steve Smith and other folks.

Did you obtain a loan from the Madison Bank and Trust shortly after Mr. McDougal had acquired that institution?

A. Yes.

Q. Was this the $30,000 in your name?

A. Yes, it was.

Q. And was it your understanding that this was, even though it was in your name, it was going to be taken care of by the corporation paying that back?

A. That was my understanding.

Q. In addition to that $30,000 loan, there was another loan payable to -- made to the Whitewater Development Corp., also in 1981. Are you familiar with that loan?

A. I don't know if I am or not, Mr. Ewing.

Q. Let me hand you what has been marked as Exhibit 7.

A. I wish you could have gotten bigger print. I can't see anything any more. It's impossible here.

Q. Now, my question was, are you familiar with that loan?

A. I do not believe I am familiar with this loan, Mr. Ewing.

Q. Did you, have you -- again, I guess one of the questions was, what were you familiar with at the time and have you learned of this loan, a $30,000 loan, or a $27,000 loan, to the Whitewater Development Corp. through your examination of various documents over the years?

A. I don't know what I knew back in 1980, '81, and I don't know that I paid any attention if this has ever been shown to me since then. I don't have any recognition or knowledge of it. It's signed by James McDougal. I can't tell you any more than that.

Q. And at that point, he was acting as the president of the corporation, according to that?

A. So far as I knew, he always ran the corporation until the very end.

Q. I hand you what has been marked as Exhibit 9, and I am going to direct you to a portion of it. This is the minutes of a meeting of the board of directors of the Madison Bank and Trust on Oct. 17, 1982, called to order by chairman McDougal. And I will direct your attention, there is a highlighted portion there, beginning at the bottom of page 5,671, going over to page 5,672.

I'm going to give you a little context. Let me tell you that in the summer of 1982, the Federal Deposit Insurance Corporation did an examination of the Madison Bank and Trust. Shortly before this meeting, the FDIC had asked the board of directors of Madison Bank and Trust to come to Little Rock, and they had raised various questions about loans and other banking documents at Madison Bank and Trust, which then caused the Madison Bank and Trust to be required to take certain action. These are the follow-on minutes where the board actually met.

And the part I highlighted there is Mr. McDougal was talking about various loans, and then he says, pertinent to here, beginning at that 5,671, "Another $30,000 is owned by a corporation, owned by Bill Clinton, his wife, Susan and myself. It will be moved within 30 days. I was under the impression that the bank's earnings could be increased by collecting the escrow fees and interest. There was a misunderstanding as to the regulations and on what had been advised by various parties."

So, I take it, it was true that as of October of '82, the corporation was owned by you and your husband and Mr. McDougal and Mrs. McDougal?

A. Well, I think it probably would be fair to say that. There's been a lot of confusion about who owned stock and who didn't have stock issued. But certainly I believed at the time that the assets of Whitewater were the land and then the escrow contracts, and that, you know, we were liable on the notes of the underlying obligation. But, we had no involvement in the running of the business and didn't know anything about what went on on a day-to-day basis.

Q. But was it your understanding, in essence, that the Clintons and the McDougals were 50-50?

A. Yes, that was my understanding.

Q. Now, I've shown you that because I'm next going to show you a document that has been marked as Exhibit 10, and this is a cashier's check, drawn not on Madison Bank and Trust, but Madison Guaranty Savings & Loan, dated Nov. 15, 1982. It says, pay to the order of Bill Clinton, in the amount of $27,600. Again, it is a cashier's check. If you will look, at the bottom of that page is the carbon copy or the bank copy they would keep.

Then on the back, there is a stamp that indicates it is credit to the account of the named payee, and then it says Madison Bank and Trust, Kingston, Ark.

I don't have the underlying documents of that bank, except to say that it appears that this check, payable to Bill Clinton, retired the indebtedness to the Whitewater Corporation. We just went over the minutes, where Mr. McDougal stated that he was going to move that loan within 30 days. That loan was paid off within 30 days by this instrument here. Again, this is the copy. We have the original.

But my question to you is, did you know that that loan was being paid off by a check to your husband?

A. Are we still talking about the loan that I took out in --

Q. No, ma'am.

A. -- 1980?

Q. No. I'm talking about, if you will get the context here, in the minutes, which are marked as Exhibit 9 --

A. Uh-huh.

Q. -- Mr. McDougal said there is a loan to a corporation which is owned by the Clintons and the McDougals. And because of -- that loan will be moved within 30 days. The loan that is paid off was the loan to the Whitewater Corporation. This is separate from your $30,000 loan in your name. This is a loan to the Whitewater Corporation.

The records reflect that this check which you have before you, Exhibit 10, was sent to the Madison Bank and Trust, and it was credited and paid off the loan to the Whitewater Corporation.

In other words, that loan that Mr. McDougal referred to in the minutes was paid off by this instrument.

A. I'm sorry, Mr. Ewing. I don't know anything about this.

Q. OK. Now, have you had an opportunity to look at the books and records of the Whitewater Corporation? In other words, Mr. Charles James kept some books from time to time and he would record various obligations of the corporation. Have you ever seen on the books and records of the Whitewater Corporation a $27,600 entry that would correspond with the amount that is in this check that appears to be payable to your husband?

A. Mr. Ewing, I never spent any significant time at all looking at the books and records of Whitewater. I have absolutely no memory of seeing any such entry.

Q. All right. I hand you what has been marked as Exhibit 11. Whereas Exhibit 10 was a copy of an original check, what I've put before you is a microfilm copy that is not real good. It looks like there's a couple of copies here. And the amount, this is a check drawn on the James B. McDougal Trustee account at Madison Guaranty. It has a date of 8-1-83 and the written amount there is $5,081.82, signed S. H. McDougal.

I will tell you that the $27,600 check payable to Bill Clinton is represented in certain records of Madison Guaranty as a loan to Bill Clinton. The loan was there until August of 1983. At that time, that $27,600, plus interest, was paid off through a check to Chris Wade for $25,000, plus this is the remainder of it, this $5,081 check signed by apparently Mrs. McDougal. And, if you note, someone has written there, for "Payoff Clinton".

So, it appears that the records reflect that the $27,600 check paid off the Whitewater obligation. And then through two other instruments, that $27,600 was paid off by this check and funds advanced to Chris Wade.

Now, do you know anything about this?

A. No, I do not, Mr. Ewing. I've never seen these documents before and I have no information about them.

Q. Do you know why Susan McDougal would not say why she wrote "payoff Clinton" on there?

A. I have no information whatsoever.

* * *

BY MR. EWING:

Q. Mrs. Clinton, let me direct you attention back to Exhibit 2 a minute, the billing records.

A. Uh-huh.

Q. On page DEK014978, this is over in the August 1985 time frame, there is a bill there that says on matter number two. Do you see that?

A. Yes, I do.

Q. And there is an entry on 7/18/85, H. Clinton, telephone conference with R. Massey (2); telephone conference with S. McDougal (2); review memo.

Do you know what that is about?

A. I do not.

Q. Do you recall -- well, let me put it this way. Let me hand you what has been marked as Exhibit 63. I may just have one copy of that.

I will tell you as you are looking, this is some notes obtained from Loretta Lynch, who was a worker in the 1992 campaign -- here's another copy.

These were produced to us. And she is, on behalf of the campaign, talking with people to try to determine certain matters, including what your role was with relation to Madison Guaranty.

And if you will look about half-way down the first page, I think I may have highlighted that copy, it says 2/24, Webb Hubbell. Do you see that?

A. Yes, I do.

Q. OK. Then, it's been represented to us that she then goes through with Mr. Hubbell what Mr. Hubbell is saying about your involvement with Madison. And it talks about the Bank of Kingston, the earlier matter, and so forth.

But on this particular one, and I'm keying this out on Mrs. McDougal, on the second page, there are a couple of entries, but the third entry down looks like there is one that says, "also involved in acquisition of large tract of land toward Pine Bluff IDC11, and then it looks like she's written in there, "Industrial Development Corp Property."

Do you see that?

A. Yes.

Q. Then the next entry says, "also involved with conversations re: Susan's interior decorating." And at this point, Mr. Hubbell purportedly is telling this person in the campaign, here's all that Mrs. Clinton was doing vis-a-vis Madison Guaranty.

Now, we've talked today about your involvement in the property down toward Pine Bluff. But the only billing entry we see for Mrs. McDougal was the one I just mentioned.

And Hubbell, we've been told, has the billing records in front of him, and he is telling Loretta Lynch from that.

But it says nothing on there about interior decorating. And from that, we assume Mr. Hubbell had to get that from somebody. And we would assume that somebody is you.

Now, that's why I'm saying, can you now, based on what Mr. Hubbell is writing down, say what you were talking to Mrs. McDougal about?

A. I have no idea what this is about.

Copyright © 1998, Arkansas Democrat-Gazette, Inc. All rights reserved.

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