THE SPECIAL PROSECUTOR appointed to scrutinize the business dealings of Bill and Hillary Rodham Clinton will focus on their role in an Ozark land development called Whitewater.
But another case buried deep in court records could prove equally troubling to them - particularly if special prosecutor Robert Fiske makes good on his pledge to publish a report on the Clintons' political and business relationships when he was governor of Arkansas in the 1980s.
The matter involves a court case that Mrs. Clinton helped settle when she was a high-powered lawyer in Little Rock, and the government was trying to sort out the problems of a bankrupt Illinois savings and loan.
The case suggests that she, as a private lawyer, had a glaring conflict of interest. As an attorney for the Federal Deposit Insurance Corp., she helped negotiate an out-of-court settlement that ended the government's suit against a family friend and an influential benefactor of her husband.
But the political problems the case could pose for the president and his wife may go far beyond the narrow questions about Mrs. Clinton's conduct as a lawyer.
As in Whitewater, the Illinois case places the Clintons once again in an association with a wheeler-dealer who had strong personal ties to the Clintons and even stronger financial ties to the Clinton administration in Little Rock.
In Whitewater, the trouble stems from the Clintons' business relationship with James McDougal, the guiding force behind Madison Guaranty, an Arkansas savings and loan that went broke and cost taxpayers more than $80 million. Special prosecutor Fiske will examine whether Clinton or his gubernatorial campaign benefited from McDougal's favorable treatment by a state agency in Arkansas when Clinton was governor.
In the Illinois case, the problem stems from the Clintons' friendship with Dan Lasater, a convicted felon whose high-flying bond trading firm played a hand in the troubles of several savings and loans, including First American Savings and Loan Association. The S&L in Oak Brook, Ill., was headed by another politician, Dan Walker, who was governor of Illinois from 1973 to 1977.
The case begins in 1979 at the Oaklawn Park race track in Hot Springs, Ark. Clinton's c mother, Virginia Kelley, had a passion for thoroughbred horse racing, and her box at the track was next to Lasater's.
He met Kelley and Clinton's half-brother, Roger Clinton, at the racetrack. The racetrack friendship soon blossomed into an introduction to Bill Clinton, who was trying to regain the governor's mansion after losing an election in 1980.
By early 1983, Lasater had given Roger Clinton a job at his Florida horse farm; Bill Clinton had reclaimed the governor's mansion; and Lasater's bond firm had been added to a list of brokerage firms eligible to underwrite state bond issues, a classification that generated millions of dollars in business for his firm, according to published reports.
Over the next two years, the ties between Lasater and the Clintons grew stronger. The Clintons benefited from the relationship, as Lasater:
Contributed money to the governor's campaign.
Lent Roger Clinton $8,000 to pay off a drug debt.
Sponsored fund-raising parties at his offices.
Made his private plane available to the governor for campaign jaunts.
Encouraged his staff to donate to the governor's campaign, promising higher commissions to compensate for the donations, according to published reports.
At one point in 1985, Lasater also made his plane available to squire celebrities to a charity function organized by Hillary Clinton.
He benefited from the closer ties, too. In the summer of 1985, Bill Clinton successfully lobbied the Arkansas Legislature to approve a contract for Lasater to sell $30.2 million in bonds for the new state police radio system. …