False Witness, Part 1

Salon launches "False Witness," an investigative series on David Hale, President Clinton and the untold story of Whitewater.

Published August 12, 1998 7:00PM (EDT)

LITTLE ROCK, Ark. -- The secret criminal life of David Hale began falling apart on July 20, 1993, when FBI agents executed a surprise search warrant on his offices in a nondescript building he owned at 1910 North Grant St. in Little Rock. For Hale, the raid was his worst fear come true. According to one former employee, Hale was constantly battling an unrelenting anxiety "that he was going to be found out." He had become so fearful that he had taken to typing all his business correspondence himself, compulsively destroying the typewriter ribbons at the end of each day.

Until the FBI raid, Hale, who was then a Pulaski County municipal judge and president of a federally subsidized loan company, was a respected member of the Little Rock community. When he was a younger man, Hale had served as president of the National Jaycees. A devout Baptist, Hale was not only a regular churchgoer, but also made much of the fact that one of the many businesses he owned manufactured church pews.

But when his shadowy life was finally exposed, it became clear that Hale had been using his reputable positions to facilitate his criminal activities. He had turned his loan company, Capital Management Services, into a private piggy bank, making fraudulent and illegal loans that benefited himself and powerful Arkansas political and business figures -- the crime that brought the FBI agents to his offices that day. While president of the National Jaycees, he embezzled funds from the organization, according to records obtained by Salon. As a judge, Hale received kickbacks from a private fine-collection business he allowed to illegally operate out of his courthouse, according to former courthouse employees and law enforcement records. Even the company that manufactured church pews was used as a front to launder money for corrupt deals.

After the FBI raid, Hale did not sit quietly while the wheels of justice decided his fate. Instead, he turned for help and guidance to old friends and acquaintances, who happened to be dedicated foes of President Clinton. With the help of these friends, Hale managed to wriggle out of the legal net that had fallen on him by leveling criminal charges against Clinton, which in turn triggered the appointment of an independent prosecutor, setting off the longest, most expensive investigation of a president in American history.

But even five years later, as Clinton's political future hangs in the balance, relatively little information has come to light about the secret effort by a small group of conservative activists, funded in part by a reclusive billionaire, to use Hale's charges to try to bring down the president.

In response to evidence first reported by Salon, federal investigators are now probing allegations that Hale received cash payments and other gratuities from the conservative Clinton foes during the period he was becoming independent counsel Kenneth Starr's key witness in the so-called Whitewater case. Starr granted Hale lenient treatment in return for his testimony against Clinton in that matter.

In addition to these allegations, there is now compelling new evidence that the ties between Hale and the conservative activists were much closer than has previously been revealed. According to Hale's telephone records, which have been made available to Salon, Hale was in frequent, close contact with the two conservative political activists who directed the controversial Arkansas Project, a $2.4 million campaign to discredit Clinton, as Hale was first making his charges against the president and seeking the appointment of an independent investigator to examine his accusations.

According to the records, Hale frequently placed calls to Stephen S. Boynton, a Vienna, Va., attorney and lobbyist; and Dave Henderson, the vice president of the American Spectator Educational Foundation. Boynton and Henderson, who were close political advisors to ultraconservative Pittsburgh philanthropist Richard Mellon Scaife, oversaw the Arkansas Project, which was funded with Scaife money secretly funneled through the American Spectator and a tax-exempt foundation that runs the conservative periodical.

Boynton and Henderson had previously told Salon and other media outlets that they did not have their first discussions with Hale about his Clinton allegations until February 1994. But the telephone records obtained by Salon show that Hale had conversations with Henderson more than two months earlier -- as early as Nov. 22, 1993, with a dozen additional calls over the next several weeks as well. The records are incomplete: While they reflect telephone calls that Hale placed to Boynton or Henderson, they do not show any calls that the activists might have placed back to Hale.

The timing of these first contacts between Hale, Boynton and Henderson is significant because all three men have asserted that they did not begin working together until months after Hale made his allegations of illegal wrongdoing by the president. But Hale's telephone records directly contradict those claims.

These records detail hundreds of telephone calls placed by Hale from his home and office, as well as from the office of the now-defunct Little Rock law firm of Skokos & Coleman, which was then representing Hale. The records cover a period from early 1993 to late 1994.

The telephone records were originally obtained by investigators working for the Whitewater independent counsel's office during the course of their probe of Hale's charges. It is routine in criminal inquiries to obtain the phone records of the principal figures involved in such an investigation.

When Salon first published allegations of the payments to Hale, the independent counsel's office insisted it had never heard of such charges. Hickman Ewing, Starr's chief deputy in Little Rock, asserted, "We're convinced that none of our people had any knowledge of any such payments."

But sources close to Starr's investigation say that it was known among some Whitewater investigators that Hale was in contact with numerous conservative activists and journalists, including several associated with the American Spectator, just prior to and during Hale's cooperation with the independent counsel. Indeed, in papers filed in a federal lawsuit, Starr's office conceded it had known of Hale's connection with the American Spectator. The fact that Starr's office also had in its possession telephone records detailing Hale's contacts with the Scaife-funded Arkansas Project might also indicate that Starr's investigators knew of a possible financial connection between Hale and Clinton's critics. But the same law enforcement sources say these facts would not necessarily have caused Starr's investigators to suspect that payments were made to Hale.

"That they were in touch with one another doesn't necessarily follow that anyone from this office could have known that there might have been money that exchanged hands," a senior federal law enforcement official stated.

Henderson and Boynton have told a number of contradictory stories about their involvement with Hale and their work in directing the Arkansas Project. Boynton first told the press that he had met David Hale in February 1994. Boynton admitted meeting Hale at a Hot Springs, Ark., fishing resort owned by a mutual friend, Parker Dozhier, who has been implicated in the alleged payments to Hale. "We fished together," recalled Boynton. "We fished together many times," he said, without apparent irony.

Boynton also denied at that time that he or Henderson had ever discussed anything about Whitewater with Hale: "I vaguely remember that David was somehow involved with something about Whitewater. But that was something we have never spoken about. It was something that I only knew about from reading the newspaper. That was not part of our relationship."

Since those disclosures, Henderson has acknowledged in the press that the Arkansas Project was indeed an effort to investigate and discredit President Clinton, and that Hale assisted them in that endeavor by serving as a source of information.

Both Henderson and Boynton declined to comment for this article. When a reporter reached Boynton at home, telling him that Hale's telephone records contradicted his account as to when he first spoke with Hale, he only said, "Isn't that just splendid," before abruptly hanging up. David Bowden, an attorney for Hale, said, "I'll tell you the same thing I always tell you: David [Hale] will talk to you when it snows in hell."

One of the first people Hale contacted after the FBI raid on his office was an old family friend, Jim Johnson, a former Arkansas state Supreme Court justice, who had been involved in the state's Democratic party politics for more than three decades. An avowed segregationist and racist, Johnson had been at the forefront of efforts in the late 1950s to maintain segregation in Arkansas' public schools.

In 1966, Johnson was the Democratic candidate for governor, losing a narrow race to Republican Winthrop Rockefeller. During that campaign, Johnson made speeches proudly asserting that the "crime of desegregation" was worse than rape and murder. A key aide to Johnson during his gubernatorial bid was Parker Dozhier, who would later frequently host David Hale at his fishing camp while Hale was cooperating with the Whitewater investigation.

According to a friend of both men, Johnson and Dozhier shared extreme views on civil rights: "They both hate blacks. That's the common denominator." According to a former intimate of his, "One of Dozhier's favorite jokes went like this: 'Why are blacks buried 12 feet down instead of the usual six feet? Because deep down, they're good people.'"

Hale often winced at such racist talk while in the company of Dozhier and Johnson. But he did not show the same sensitivities when dealing with the poor black families in the delta area south of Little Rock who were victims of one of his schemes. National Savings Life, an insurance company owned by Hale, offered burial insurance to the mostly black and poor population who lived around the town of Pine Bluff. In exchange for their monthly payments, Hale's clients were assured a casket, church service and burial plot upon death. But Hale looted the company's funds, and if state regulators hadn't later taken over the firm, Hale's victims would have been left without the means for a decent funeral.

Johnson recalled in interviews with this reporter in 1996 and 1997 that he was in almost daily contact with Hale shortly after the FBI raid on Hale's office: "David was a young man who was in some trouble, and it was because of things that he did with Bill Clinton. We wanted to see to it that they were not able to cover that up."

According to Johnson, Hale even came to live with him and his wife at their farm -- which Johnson calls "White Haven" -- for a short period so they could devise a plan as to how Hale should proceed. "Virginia [Johnson's wife] thought it was very important that we help David," Johnson said.

A mutual friend of both Hale and Johnson say that ties between their respective families go back generations. According to the friend, Johnson was a pallbearer at the funeral of Hale's father.

Following the FBI raid, Johnson put Hale in touch with conservative political activists who he thought might help his cause. Among them, according to previously published accounts, was Citizens United, an ultraconservative group that publicized the Whitewater land deal and other alleged wrongdoing by the president. The phone records obtained by Salon confirm several calls by Hale to the Citizens United office during that period.

Boynton and Henderson would not confirm whether Johnson also introduced Hale to them. But several individuals close to Johnson say that Boynton and Johnson are longtime friends. They said Boynton and Johnson came to know each other through Dozhier.

It was while consulting with Johnson that Hale started making his allegations against the president, claiming that then-Gov. Clinton had pressured him in 1986 to make a fraudulent $300,000 loan to Susan McDougal. Jim and Susan McDougal were then partners of the Clintons in their failed Whitewater land deal. Despite the four-year, $40 million investigation by the Whitewater independent counsel, scant evidence has been unearthed to confirm Hale's charges.

In August 1993, Randy Coleman, who was then Hale's attorney, met with officials in U.S. Attorney Paula Casey's office in Little Rock to argue that Hale should not be charged. Coleman implied that Hale had valuable information to provide prosecutors about powerful Arkansas political figures.

On Sept. 7, Coleman met with Casey to try to negotiate a plea-bargain agreement for his client. Coleman demanded that Hale either be given complete immunity from prosecution or be required to plead guilty only to misdemeanor charges in exchange for his information. Sources close to Hale say that he even hoped that as part of the plea bargain he would be allowed to stay on the bench.

During the discussion, Coleman "insinuated that Mr. Hale could give information about people who were too big for me to prosecute," Casey would later testify to the Senate Whitewater Committee.

But the U.S. attorney, citing the fact that Hale had stolen millions from the federal government, rejected Coleman's proposal, insisting that Hale plead guilty to at least one felony.

Failing to strike a deal with Casey, Hale and his attorney then mounted a campaign to have a special investigator take over the inquiry from her, claiming that she had a conflict of interest because she had been appointed by President Clinton and had ties to Arkansas Gov. Jim Guy Tucker, another target of Hale's allegations. "That's how David conducts business," says a former associate of his. "If someone's a threat against you, you accuse them of something."

On Sept. 15, Coleman wrote a letter to Casey, charging that she was reluctant to make a plea deal with his client because of "the potential political sensitivity and fallout regarding the information which Mr. Hale could provide to the office." That information, said Coleman, "would be of substantial assistance in investigating the banking and borrowing practices of ... the elite political circles of the State of Arkansas, past and present." Coleman then asked Casey to step aside in favor of an independent investigator.

Casey wrote back to Coleman the very next day, standing firm. The only issue, stated the U.S. attorney, was that Hale refused to plead guilty to a felony count. "Therefore, our plea negotiations are at an impasse," she wrote.

On Sept. 23, 1993, the Justice Department returned a four-count felony indictment against Hale, charging that he defrauded the Small Business Administration of more than $3.4 million.

Around that time, Hale's contacts with Jim Johnson intensified, according to his telephone records. The records show that Hale made at least 28 calls to Johnson between Sept. 27 and Dec. 21, 1993.

Hale made what appears to be his first telephone call to the Arkansas Project's Dave Henderson on Nov. 22, 1993, according to the telephone records. Over the next few weeks, Hale would make at least 10 more calls to the home and work numbers of both Henderson and Boynton. Hale's calls to Henderson and Boynton would often occur on the same day, the day before or the day after Hale also called Jim Johnson, the records show.

Although Hale by that time had already told some journalists and conservative activists of his allegations about Clinton, his story about the president evolved over time. As time went on, Hale came up with claims of more contacts with Clinton regarding the Susan McDougal loan, added dramatic details that he hadn't previously mentioned and even charged the U.S. attorney's office that refused to give him the plea agreement he desired with a cover-up of the scandal. The evolution of Hale's allegations are documented in federal law enforcement records, contemporaneous records maintained by Hale and his attorneys and various press reports.

Around the same time that Hale had his first contacts with Boynton and Henderson, according to his telephone records, he also retained as one of his attorneys Theodore B. Olson, a conservative partisan who is a partner with the prestigious Washington, D.C., law firm of Gibson, Dunn & Crutcher. As Salon has previously reported, Olson played a role in launching the Arkansas Project, hosting a meeting in late 1993 with Boynton and Henderson at his downtown Washington law office, during the period that Hale has said Olson first began representing him. According to sworn testimony he gave at the trial of Tucker and the McDougals, Hale, who was the Whitewater prosecutor's star witness in the case, testified that he retained Olson in December 1993.

In addition to his work for the Arkansas Project, Olson has served on the American Spectator's board of directors, as the magazine's secretary-treasurer and as its attorney. He is reportedly one of several individuals overseeing an internal "analysis" and financial audit of the Arkansas Project for the magazine's board. Olson and his wife, conservative activist Barbara Olson, are outspoken supporters of Starr's investigation of the president.

During the fall of 1993, Hale and his attorney, Coleman, also contacted several news organizations, in an effort to publicly tell his story about President Clinton. Hale and Coleman did so with a clear agenda: They hoped that the publicity would lead U.S. Attorney Casey to recuse herself from the case, in favor of another prosecutor who would offer Hale the more favorable plea-bargain he desired. Hale's phone records show that Hale spoke during that period with reporters for Time, Newsweek, the Washington Times, the Washington Post and the conservative Weekly Standard.

In mid-September, Coleman also contacted Jeff Gerth, an investigative reporter for the New York Times who had broken the first Whitewater story. Gerth and another Times reporter went to Little Rock and interviewed Hale at length, but the Times declined to publish the story because it could not independently verify Hale's allegations. Hale's phone records show that he and his attorney made at least 23 telephone calls to Gerth between Sept. 19 and Dec. 10, 1993.

Even though the New York Times did not publish his story, Hale's contact with the newspaper had the desired effect: During the course of his reporting, according to federal law enforcement records, Gerth contacted senior officials of both the FBI and the Justice Department to tell them about Hale's allegations.

Gerth told law enforcement officials that Hale had information about the Clintons' involvement with a possible fraudulent loan, the proceeds of which were allegedly funneled to their failed Whitewater land deal. Moreover, according to an FBI report, Gerth alleged that U.S. Attorney Casey was not appropriately investigating Hale's charges because of her ties to Clinton and Tucker. "Gerth alluded that this was why the United States Attorney Casey would not work out a suitable deal for [Coleman's] client," stated the FBI report.

It was through Gerth's inquiry that senior Justice Department officials learned of a potential conflict by Casey in investigating Hale. They then moved to have Casey recuse herself from further investigating Hale's allegations. After Casey stepped aside on Nov. 8, 1993, she was replaced on the case the very next day by a career Justice Department prosecutor in Washington, Donald McKay.

Hale had succeeded in removing the main obstacle in his path to leniency.
But that still wasn't good enough for him. Hale thought it was to his advantage to shop for an even more favorably disposed prosecutor. Now in league with Boynton and Henderson, Hale worked behind the scenes for the appointment of an independent counsel with no connections to the Justice Department, according to documents and sources.

Other events were then also independently creating momentum for the appointment of an independent counsel, including the "Troopergate" story of alleged Clinton sexual misconduct, published in the Los Angeles Times in December 1993, as well as criticisms of White House officials in the aftermath of Clinton counsel Vince Foster's suicide. Meanwhile, the Wall Street Journal editorial pages and other conservative media outlets continued to pound away by publicizing Hale's allegations.

In February 1994, at the request of the White House, Attorney General Janet Reno appointed a Whitewater independent counsel, Robert Fiske. Ironically, the plea-bargain arrangement that Hale ultimately received from Fiske was not as generous a deal as the one that Casey had originally offered Hale. While Casey had required Hale to plead guilty to just one felony, under his deal with Fiske, Hale pleaded guilty to two felonies. Still he would have to serve only 20 months in prison in exchange for his cooperation.

The same month he struck a deal with the Whitewater prosecutor, Hale was taken for the first time to Dozhier's fishing resort by Boynton and Henderson. Hale and Dozhier had known each other slightly many years before, but the two men now developed a close friendship.

Often accompanied by FBI agents from the Whitewater prosecutor's office who were guarding him, Hale stayed at Dozhier's resort numerous times during the next three years, while he was a cooperating witness for the independent counsel. It was during this time, according to Dozhier's former live-in girlfriend Caryn Mann and her 17-year-old son, Joshua Rand, that they first became aware of payments by Dozhier to Hale.

"Sometimes it was only $40, $60 or $80 at a time, but other times it was $120 or $240 or $500," Rand told Salon. "If Hale needed to pay a $200 bill, Parker would give him the money, plus an extra $100 or $120 for his pocket. It depended on how many times he came to town."

Mann and Rand also watched as Hale and Dozhier waged an obsessive war against those whom Hale blamed for his misfortunes, foremost among whom was Paula Casey, the U.S. attorney who had the audacity to demand that Hale plead guilty to a felony before she would do business with him. "They blamed Paula Casey for everything that seemed to go wrong," recalled Mann. "They worked on her from every angle they could." According to Mann, Hale and Dozhier worked closely with their favorite journalist, Micah Morrison, an editorial writer for the Wall Street Journal, who produced an article for the newspaper in August 1994 attacking Casey as a henchwoman for Clinton.

Hale and Dozhier uncorked bottles of Korbel champagne after Jim Guy Tucker was convicted based on testimony given by Hale. Indeed, a whole collection of bottles with the names of Hale's enemies written on them lined the shelves at Dozhier's bait shop.

As a result of Mann and Rand's allegations about the payments to Hale, yet another federal prosecutor has been appointed to investigate the key Whitewater witness. This time it's Michael E. Shaheen Jr., the former Justice Department internal watchdog, who was named by Starr to pursue the accusations about Hale.

"Never in the history of the Western world have there been so many prosecutors recused, removed and named to investigate -- all because of one person," said one federal law enforcement official, speaking of Hale. "You know what? Whatever one thinks of David, he will be remembered for singlehandedly enacting the Federal Law Enforcement Full Employment Act."

By Murray Waas

Murray Waas is a frequent contributor to Salon.

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