Susan McDougal's moment of truth

Susan McDougal says Clinton told the truth about the Whitewater loan.

Published March 24, 1999 8:00PM (EST)

LITTLE ROCK, Ark. -- As Susan McDougal entered the federal courthouse here Tuesday, she waved to supporters who had traveled from as far away as Minnesota, California and Kansas to watch her testify in her landmark trial on obstruction of justice charges. Soon she took the stand, pulled a tissue from a box and broke a costly silence that began four years ago.

Dressed in a white blouse, a long chestnut brown floral skirt and brown leather pumps, McDougal spent the day weaving for the jury a dark fairy tale that ended in a broken marriage to a manic-depressive, a failed land deal and a long ordeal with independent counsel Kenneth Starr. At times, she painted herself a victim, a wife who did as she was told by her mover and shaker husband, James McDougal, who died in March 1998. Mark Geragos, Susan McDougal's lawyer, asked his client the questions she refused to answer when she appeared before a federal grand jury in September 1996 and again in April 1998. McDougal's unwillingness to cooperate with Starr landed her in jail for 18 months and formed the basis of the obstruction of justice charge she's on trial for today.

Often crying but quickly regaining control, McDougal denied that President Clinton had known about a fraudulent $300,000 loan to the McDougals, part of which went to the failing Whitewater real estate venture in which the Clintons and the McDougals were investors. Prosecutors have charged that Clinton pressured Arkansas businessman David Hale into making the fraudulent $300,000 loan to McDougal and her husband -- the key to the Whitewater scandal. Hale, in turn, has been accused of lying about Clinton to get out of his own legal troubles and taking money from Clinton enemies, through the $2.4 million, Richard Mellon Scaife-funded Arkansas Project to investigate the president.

Within her first 45 minutes on the stand, Susan McDougal looked directly at the jury and told them that Clinton told the truth in videotaped testimony in her 1996 trial on Whitewater-related fraud and conspiracy charges when he said he knew nothing about the loan.

"Nothing he said was untrue to me,'' said McDougal, who was convicted of four felonies in that case. "As I sat there that day, I did not hear anything untruthful.''

"I never discussed the loan with William Jefferson Clinton,'' McDougal said emphatically.

As McDougal gave the long-awaited answers -- always looking straight at the jury -- prosecutor Mark Barrett complained to U.S. District Judge George Howard. In a heated argument, Barrett said that McDougal's answers were "rehearsed" and "unresponsive." Geragos denied the charge, and by the day's end, he had cast a serious cloud over the independent counsel's tactics.

McDougal's family sat in the second row and watched as she cried just 10 minutes into her testimony, when she described the early days of her romance with James McDougal. She oozed Southern charm as she recounted her first meeting with McDougal when she was 20 and he was 35. After a year of courtship, they married, and she worked as her husband's assistant.

"When he would tell me what to do, I'd go," McDougal said. Her trouble began, she said, "the day I met Jim McDougal."

When Clinton became governor in 1978, the McDougals' marriage suffered. Jim McDougal worked in the Clinton administration and poured himself into politics. During that time, Susan McDougal first realized her husband's obsessive behavior wasn't normal. Jim McDougal left his wife with several land deals as she struggled, she said, to understand the nature of the real estate business.

With a marriage careening out of control, the McDougals continued buying land and then a bank in Kingston, Ark., with a front that "looked like a candy shop." Susan McDougal said her husband became just as obsessed with banking as he had been with politics. Then he bought a bankrupt bank in Augusta, Ark., and renamed it Madison Guaranty Savings and Loan. McDougal testified that her husband said he wasn't a banker, and would be better off in the savings and loan business. He told her they could roll the real estate business into the savings and loan. Susan McDougal lived with her in-laws while James McDougal stayed in Kingston and ran the bank there. One day he called his wife.

"Get on a dress and meet me in Little Rock. I just announced for Congress," he told her.

From politics to banking and back, the McDougals rode a roller coaster: success one day, failure the next. In 1986, federal regulators forced them out of their failing savings and loan. By then the couple was estranged and in financial straits, and their troubles included the foundering Whitewater investment with the Clintons. McDougal said her husband's health was poor and she struggled to solve the problems herself without letting on how bad things were.

"I didn't want to tell Bill and Hillary Clinton,'' she said in tears, because she was too proud.

The jury sat stone-faced as McDougal's supporters shared in a tear or two as they listened to the testimony.

As James McDougal plummeted into deeper depression and attempted to bounce back from a stroke, he felt as if friends like Clinton and Arkansas Gov. Jim Guy Tucker -- who was convicted with the McDougals on Whitewater-related fraud charges -- had abandoned him during troubled times. "When trouble hits, everybody runs," she said.

By the end of the day, she had cast doubt on her former husband's motives for cooperating with Starr. She testified that James McDougal felt abandoned by Clinton, and told her "he was going to pay back the Clintons.'' Republican activist and Little Rock lawyer Sheffield Nelson, James McDougal told her, was willing to "pay him some money'' for talking to the New York Times about Clinton, and in 1992 he told her that, in fact, one of Clinton's political enemies was paying him to tell the New York Times about Whitewater.

She said her husband also told her he discussed Clinton's past "in a conference call with the Bush White House'' during the presidential campaign, and felt the Bush administration would give him a job if they stayed in office. Eventually, James McDougal told prosecutors that Clinton lied in his videotaped testimony for the 1996 trial. James McDougal was a beaten man, his ex-wife said, until "he struck a deal with the independent counsel."

Geragos attempted to show that the independent counsel had a history of striking deals with those who held information that it wanted. Those who didn't agree were threatened with prosecution. Susan McDougal said she was offered a proffer of immunity in exchange for her testimony against the Clintons in 1996, but such a deal made her think "something was up."

On Monday, Geragos won a skirmish over whether the judge would allow defense witness Steve Smith to say whether he believed Starr's prosecutors were seeking the truth in using him in their investigation. Smith, who pleaded guilty in 1995 to a conspiracy charge in the Whitewater investigation in exchange for his testimony, told the jurors, "I think they were seeking truthful information that would conform with their theory of the case. They sort of had a story line about what happened."

Smith said Starr's deputies would listen if he had some information that conformed to their thinking, but they weren't interested if his information didn't fit their ideas. He testified that former associate independent counsel Amy St. Eve handed him a "script" to read to grand jurors, which he said contained inaccuracies that made him fear a perjury charge if he read it as written. Smith testified that he read the statement after he and St. Eve made changes to it. Starr's office denies the charge.

McDougal told the jury that defying the independent counsel wasn't easy for her, or her family.

"It's been a long road, a very long road ... and it was not an easy decision to make," McDougal told the court.

By Suzi Parker

Suzi Parker is an Arkansas writer.

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