Verdict on Starr's witness

Whitewater figure David Hale is found guilty on Arkansas state criminal charges.

Published March 27, 1999 8:00PM (EST)

David Hale, the central witness to the Whitewater investigation of independent counsel Kenneth Starr, was convicted late Thursday night on charges that he deceived Arkansas regulators about the solvency of an insurance company that he once owned. But he was sentenced to only 21 days in prison, as jurors seemed to honor pleas for leniency, given Hale's health problems.

Hale was convicted of a single felony count of placing $150,000 into the bank account of his National Savings Life Insurance Company, only to withdraw the funds days later. Arkansas prosecutors charged that those bank transfers were sham transactions designed by Hale to lead insurance regulators to falsely believe the firm was solvent so that they would not shut it down.

The conviction of Hale on the state charges was a setback to Starr's four-year, $40 million Whitewater probe. Hale has been the most important witness to the Whitewater phase of Starr's investigation, and this new criminal conviction only raises additional questions about the reliability of Hale as a federal witness.

Hale's testimony in federal court in 1996 helped Starr convict then-Arkansas Gov. Jim Guy Tucker, and James and Susan McDougal, the Clintons' partners in their failed Whitewater real estate investment, on fraud charges.

More importantly, Hale has also been Starr's chief witness against President Clinton: Hale had alleged that in l986, while Hale headed a federally subsidized lending company, then-Arkansas Gov. Clinton pressured him to make a fraudulent and illegal $300,000 loan to Susan McDougal.

In the fall of 1997, Starr considered sending an impeachment referral to the House of Representatives alleging there was evidence that Clinton had committed perjury to a federal jury by denying under oath that he had pressured Hale to make the loan to Susan McDougal, according to federal law enforcement sources. The referral ultimately was not sent, because many on Starr's staff believed that there was not enough evidence to substantiate Hale's claims.

A later consideration of making such a referral was stymied, sources said, because Hale had by then become the focus of a seperate federal grand jury investigation into his allegedly receiving cash payments and gratuities from conservative political activists.

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The state conviction of Hale also was a setback for Starr because the independent counsel had tried to prevent Hale's prosecution, alleging that Arkansas prosecutors brought charges against Hale in an attempt to discredit him as a prosecution witness for Starr's office.

Larry Jegley, the prosecuting attorney for the Arkansas 6th Judicial District who tried the case against Hale, said the jury's guilty verdict vindicated his office and discredited Starr's claims that his prosecution was politically motivated. Jegley said Starr's allegations are "hogwash. I've said it before and I'll say it again. Prove it."

Salon disclosed last August that Starr intervened with state prosecutors on numerous occasions between 1994 and 1996 in an attempt to prevent them from indicting Hale. Starr had been so determined to stop the state prosecutors from charging Hale that in September 1995, one of Starr's top deputies threatened that the independent counsel would consider charging Arkansas prosecutors with federal witness intimidation if they proceeded with charging Hale.

Starr was concerned at the time that the state criminal charges would discredit Hale's testimony as a witness against then-Gov. Tucker and the McDougals. He was also said by associates to believe that a conviction of Hale on the state charges would ultimately harm Hale's credibility as a witness in any potential Whitewater-related impeachment referral to Congress.

Starr's office declined to comment about Hale's conviction.

The jury that found Hale guilty Thursday night only sentenced him to 21 days in prison, even though it could have sentenced him to as long as eight years in prison.

Hale's wife, Linda Sue, pleaded with the jury not to incarcerate her 57-year old husband for any lengthy period of time, because of what she described as his life-endangering health problems. Noting that Hale had suffered two heart attacks and had had heart surgery, she testified that any long sentence would almost certainly be a death sentence.

"I don't think David would make it through another prison sentence," she told the jury during the sentencing phase of the trial.

Hale had already served 20 months in prison, a result of his having pleaded guilty to two felonies as part of a plea-bargain with Whitewater prosecutors in March 1994. Hale then admitted to having defrauded the Small Business Administration of more than $3.2 million by making a series of fraudulent loans through his federally subsidized lending company.

Hale received a substantially reduced prison sentence by agreeing to provide the independent counsel with information about alleged wrongdoing by Tucker, the McDougals, President Clinton and other Arkansas political and business leaders.

Jegley, the state prosecutor, did not ask the jury for the maximum sentence, nor did he criticize the jury's lenient verdict. The jury, Jegley said outside the courtroom, "tempered justice with mercy."

"I think they realized that Mr. Hale was ill [but] they also wanted to give him some time," Jegley said. Jegley pointed out that more importantly, Hale faces a lifetime ban on ever working in the insurance business in the United States. "He took advantage of poor people, he took advantage of the elderly, he took advantage of retirees, and now he can't do that anymore," Jegley said.

While waiting for the jury to return the verdict, Hale held hands and said prayers with his wife, his 26-year-old daughter, Amy, and his three attorneys. Hale said that he was able to "find it in my heart" to forgive those who meant to do him harm, such as the state prosecutors, because of his strongly held religious beliefs. During breaks in the trial, Hale read the biography of an evangelist whose life he said he was trying to emulate.

By Suzi Parker

Suzi Parker is an Arkansas writer.

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