Newsreal: Clinton's ghost

How a manic-depressive's quest for revenge finally killed him, but not before he embroiled the country in a tortuous six-year quest called the Whitewater investigation.

By Gene Lyons

Published March 16, 1998 8:00PM (EST)

LITTLE ROCK, Ark. -- The man dubbed the "epicenter" of Kenneth Starr's Whitewater investigation is dead, eulogized at his graveside by the prosecutor who hounded him, broke his will and sent him to die in prison. No doubt, certain self-styled journalists are scouring the Fort Worth, Texas, hospital where James McDougal died, concocting a scenario whereby President Clinton had the poor man bumped off to further cover up the crimes of his presidency.

To more rational minds, McDougal's passing can't help but provoke reflection. Truly, the man was one of a kind. Among Arkansas journalists who'd covered McDougal's colorful and increasingly erratic public career, there was a genuine sense of loss. Old-time agrarian populist, failed politician, professor, real estate developer, banker, entrepreneur, promoter, salesman, opportunist, bunco artist, raconteur, confidence man and betrayer: McDougal performed all of the above roles and more during his 58 years in this mortal coil. He could recite Biblical verses and quote lengthy passages from Shakespeare or James Madison from memory. To the extent that he committed financial crimes, which ultimately broke his spirit, McDougal did so more out of a desperate wish to keep his ramshackle empire solvent -- and to keep the people who worked for him gainfully employed -- than he did out of greed.

An editorial in the Arkansas Democrat-Gazette captured the paradox of the man perfectly: "Was he just the last of the straight-faced kidders, or a fellow with the kind of bead on truth that only the best confidence men have, and can turn to their advantage? Was he closer to the truth when he was manic or depressive, when he was professing his innocence or confessing his guilt and turning state's evidence? ... We grieve for ourselves at never again being able to buy his lunch ... He may have told tales that we didn't believe, but that were all the more delightful for the willing suspension of disbelief. Isn't that the prerequisite for poetry? This bard's forte was fraud recollected in tranquillity."

The pathos and irony of McDougal's fate were lost on hardly anybody. Even Jeff Gerth, the New York Times reporter whose sloppily tendentious Whitewater reporting contributed greatly to his sorrowful demise, pointed out that "McDougal was the victim of his own acts of revenge." Gerth was referring to McDougal's dashed expectation, having emerged victorious from a 1990 bank fraud trial in Little Rock federal court, that then-Gov. Clinton would give him a job. Like some corn pone King Lear, the poor man took his largely imaginary grievances to Sheffield Nelson, Clinton's bitterest Republican enemy in Arkansas. Only too happy to be of service, Nelson contacted Gerth, and the resulting political firestorm consumed what remained of McDougal's life.

"He intended the attack to harm Mr. Clinton," Gerth wrote the day after Jim McDougal's death. "Instead, it destroyed Mr. McDougal, leading to the appointment of the Whitewater independent counsel, who indicted, convicted and jailed him for his management of a corrupt savings and loan association."

Not surprisingly, neither the Times nor any of the other journalists who created and sustained the Whitewater delusion over six long years accepted any share of the blame. In his initial, innuendo-laden Whitewater story on March 8, 1992, Gerth noted that McDougal suffered from manic-depressive illness, but described him as "stable, careful and calm." That bit of amateur diagnosis out of the way, the effect of McDougal's illness upon his turbulent business and personal life was rarely mentioned. More's the pity.

The simplest way to put it is this: Describe to a psychiatrist McDougal's financial situation back around 1982 -- his ramshackle empire of heavily mortgaged real estate investments, his ownership of a small, unprofitable bank and a floundering savings and loan -- then add the fact that he suffered from an undiagnosed, untreated organic brain disorder -- and the doctor could tell you the rest of the story. Whether or not they'd ever heard of Whitewater or Clinton.

Kay Redfield Jamison's book "An Unquiet Mind" is useful. A Johns Hopkins University psychologist, Jamison herself suffers from the disorder.

"When I am high," she writes, "I couldn't worry about money if I tried. The money will come from somewhere; I am entitled; God will provide ... But then back on lithium and rotating on the planet at the same pace as everybody else, you find your credit is decimated, your mortification complete." Jamison once bought three Rolex watches, 12 snakebite kits and a truckload of elegant furniture on the same shopping trip. Just imagine if she'd owned Madison Guaranty Savings & Loan during the great S&L flameout of the Reagan years.

It's also common, say the psychiatric texts, for manic individuals to succumb to "grandiose delusions involving a special relationship to God, or some well-known figure from the political, religious or entertainment world." A fantasy about taking down the president might qualify.

After McDougal's 1996 conviction, and his decision to cooperate with
independent counsel Kenneth Starr in a desperate bid to avoid dying in
prison, he began to tell
interviewers that he'd lied at his trial to protect President Clinton. Now,
he expounded, he was like Brutus, to Clinton's Julius Caesar. What a joke.
In fact, McDougal had snatched his own defeat from the jaws of a
prosecution that looked to be in very bad shape. Jurors later
told reporters they hadn't believed a thing the independent counsel's star
witness, David Hale, said. Enter McDougal, begged by his lawyers to remain
silent, boasting to reporters that he would
kick Starr's butt up between his shoulder blades. Fellow defendants were
appalled. Susan McDougal insists that her ex-husband was unmedicated and
delusional at the time.

McDougal's prosecutor, Ray Jahn, was delighted, shrewdly comparing
McDougal's testimony with Clinton's.
During Clinton's videotaped testimony, Jahn had led the president
methodically through the history of the Whitewater Development Corporation,
demonstrating at every turn that as his business partner's S&L began to
totter in the mid-1980s (along with 745 others across the country),
McDougal had begun a frantic fiscal juggling act, shifting money among his
various business entities in a desperate attempt to save himself.

One of those entities was Whitewater. Without telling the Clintons
or even asking them, McDougal, in May 1985, sold the company's real estate
assets for pennies on the dollar. That sale, noted the
Pillsbury Report, the $3.6 million study of Whitewater commissioned by the
Treasury Department and all but universally ignored by the nation's
high-dollar press, "marked the end of Whitewater as a project ... the
company would continue to exist but there was never again any prospect that
it might turn a profit."

Whitewater was gone, but the Clintons didn't know it. McDougal
continued to ply them with upbeat letters. Nor, the documentary evidence
shows, did Bill or Hillary know about the several ways in which McDougal
used the shell of the company to make even more speculative plunges in the
real estate market --
even after Susan McDougal left him in 1984, state and federal regulators
had removed him from Madison Guaranty in 1986 and he'd
suffered a subsequent heart attack and psychiatric hospitalization.

In December 1986, McDougal wrote the Clintons a letter to the
effect that the company had lost $90,000, but that he was willing to absorb
the loss for tax purposes. He enclosed a stock transfer certificate for
them to sign over their share of the company. In effect, he was offering to
buy their half of the company for the amount of the loss. Except he
propose to relieve his former partners of the remaining debt -- for which
they were, jointly and severally, 100 percent responsible. Unaware that
McDougal had liquidated the company's assets, Hillary Rodham Clinton
apparently balked and demanded to see the books. Books? What books?

It was Hillary Clinton's refusal that rankled McDougal until the
day he died. "While Hillary was technically correct about the mortgage,"
James B. Stewart wrote with amazing disingenuousness in "Blood Sport," "from
McDougal's point of view he didn't see the problem." "Technically,"
indeed. I keep the company, you pay the debt. What a deal. So no, one
guesses McDougal didn't see the problem. Any more than Stewart, famed
investigative reporter, gave any evidence of having seen the Pillsbury
report, where it's all spelled out in eight volumes of turgid details and

"Why isn't [the president] on trial?" prosecutor Jahn asked in
his closing argument at the Tucker-McDougal trial? "Because he didn't set
up any phony corporations to get employees to sign for loans that were
basically worthless ... The president didn't backdate any leases. He didn't
backdate any documents ... He didn't come up with any phony reasons not to
repay the property. He didn't lie to any examiners. He didn't lie to any

Poor, sick Jim McDougal, on the other hand, did all of the above
and more. While the vaunted scribes from the Times and the Post evidently
snoozed, Jahn walked the jury through an explanation of how McDougal
scammed the Clintons over
Whitewater -- just as he scammed everybody else he dealt with as the house
of cards he'd built at Madison Guaranty began to collapse. McDougal may
never have intended to cheat his partners. But the evidence showed that he
did. Jahn described his attempt to hide behind the president as "an act of

What kind of witness would McDougal have made had he survived
to testify against the president? The worst witness in the world. Even when
McDougal tried to put his ex-wife in bed with Clinton, it was obvious
that his heart really wasn't in it. First he told James B. Stewart in the
New Yorker an improbable tale about overhearing Susan McDougal and the
then-governor whispering sweet nothings after a long distance operator
mistakenly patched him into a phone conversation. On "Larry King Live" a
few days later, he said that while he'd heard rumors about intimacy between
the pair, he'd seen no evidence. Even the relentlessly prosecutorial Jeff
Gerth concedes, with regard to Whitewater, that McDougal "had no new
documents, and his last encounter with the Clintons was more than a decade
old." (Actually, McDougal and the president met under formal circumstances
at the White House in 1996 on the occasion of Clinton's videotaped

So what does it all mean? "In 1995," Gerth's obituary finally
admits after years of murky, hyperbolic accusations, "a law firm hired by
the RTC found no wrongdoing by the Clintons in Whitewater. But they also
affirmed the politically damaging point Mr. McDougal was trying to make
when he leaked the documents -- the McDougals had absorbed far more of
Whitewater's losses than their equal partners, the Clintons."

Is it really possible that we've spent almost six years and more than $30
million for that?

Gene Lyons

Arkansas Times columnist Gene Lyons is a National Magazine Award winner and co-author of "The Hunting of the President" (St. Martin's Press, 2000). You can e-mail Lyons at

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