Republicans Pledge to Uncover Fraud Witness: No Proof Linking Clintons to Scheme

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Opening a new round of Whitewater hearings, House Republicans vowed Monday to show that President Bill Clinton and Hillary Rodham Clinton benefited from the defrauding of a failed savings and loan and a separate government lending program.

Appearing before the House Banking Committee, bank examiner James Clark described what he called an illegal real estate fraud scheme at the S & L owned by the Clintons' Whitewater business partner, James McDougal.

But Clark acknowledged that he could not connect Clinton, who was governor then, to the scheme.

Later, a General Accounting Office investigator, Donald Fulwider, testified that part of the proceeds from an improper loan backed by the Small Business Administration went to pay off an earlier loan that benefited Whitewater and to a real estate transaction involving Whitewater. The improper $300,000 loan has not been repaid.

"In this venture called Whitewater," the Clintons' partners "provided virtually all the money; the governor-in-the-making provided his name," said committee chairman James Leach, R-Iowa, Clinton's chief Whitewater critic.

Finally, an SBA officer, Wayne Foren, disclosed a previously unknown contact with the White House in which a top presidential adviser, Mack McLarty, was told that a criminal investigation had begun into the SBA-backed company that made the improper loan.

The owner of that company, disgraced Municipal Judge David Hale, would later allege that he was pressured by Clinton to make the $300,000 loan. The loan went to one of the Clintons' business partners, Susan McDougal, then the wife of James McDougal and part owner with her husband of the collapsed S & L at the center of the Whitewater investigation.

SBA officer Foren said he had briefed the agency's administrator, Erskine Bowles, on May 5, 1993, about opening a criminal investigation of Hale.

That night, Bowles told White House chief of staff McLarty about the inquiry of Hale, a longtime businessman and municipal judge involved in Arkansas politics, Foren said.

Bowles does not recall briefing McLarty, and McLarty has no recollection of ever being told about it, said White House spokesman Mark Fabiani.

For the first time, details of what happened to the proceeds of the $300,000 loan by Hale's company were laid out on an official public record.

A total of $111,500 paid off a loan by Stephens Security Bank to the McDougals, said Rep. J.D. Hayworth, R-Ariz., referring to canceled checks and other documents in the committee's custody.

And a portion of the $300,000 loan helped the McDougals buy 810 acres south of Little Rock for Whitewater. …