Starr Witnesses
Adams, James Ring
Starr Witnesses As Kenneth Starr probes deeper into Whitewater, two plea-bargainers are about to connect the dots of Arkansas banking and Bill Clinton's political machine. by James Ring...
...The Flippen bank held the mortgage on the Whitewater Development Company...
...Smith left the governor's staff in 1980, after Clinton failed to back him in a dispute with the timber industry over clear-cutting...
...Clinton's friends have elsewhere shown that they regard the state pension funds as a financial backup...
...Clinton's spin doctors can and do claim that he saw Tucker as a political rival and even tried to undercut the career of the state's other young charismatic politician...
...He told TAS he couldn't discuss his business affairs, but did confirm the details of his career...
...Some of the money came from a $20,800 loan to Bill Clinton from the Security Bank of Paragould...
...Smith's resources had been eroded by a series of bad land investments with his political contacts...
...Smith, then a liberal 21-year-old state legislator from Fayetteville, was the only Arkansas delegate to cast a first-round vote for McGovern at the Democratic Convention...
...In early 1983, they called a halt...
...by James Ring Adams Whitewater counsel Kenneth Starr's June indictment of Arkansas Governor Jim Guy Tucker may roil Razorback politics, but two recent plea bargains are even more important...
...It was on November 2, 1990, that Ainsley pulled the report to the IRS from his outgoing mail, and whoever told him to do it is vulnerable to a conspiracy indictment until November of this year...
...Ainsley pled guilty to two counts of filing false currency transaction reports (CTRs) for withdrawals from the Clinton James Ring Adams covers Whitewater for The American Spectator...
...Other investments went through, however, sometimes after heavy political pressure on Jones, who during the 1980s was often the one dissenting pension fund trustee...
...Unlike other debtors, Hillary did not go to Madison Guaranty to get the money to pay off the loan...
...The next year they began buying land and took out a loan of $165,000 from the Worthen National Bank...
...Clinton's Payoffs Early on, independent counsel Robert Fiske took a big interest in the Clintons' election-year finances...
...Lindsey has said that the money was used for "get out the vote" efforts—a euphemism for cash payments to community leaders...
...But the administration's sigh of relief may have been premature...
...Smith's guilty plea on this charge bears several bad omens for Bill Clinton...
...McDougal cut a more spectacular swathe through the thrift he acquired two years later and renamed Madison Guaranty Savings & Loan, but the doings at the Kingston Bank now look like a turning point in the scandal...
...There were obvious rewards for Clinton's creditors, even if the case of a quid pro quo is hard to prove...
...With only $5 million in assets, the bank went on a lending spree to Clinton's political allies...
...Smith, Clinton, and David Hale One of the loans the FDIC classed as "substandard" in 1983 belonged to Stephen Smith...
...Smith is saving his talking for Starr's people...
...He is a witness, in short, with plenty to tell about Clinton's ability to get loans and substantial infusions of cash in the days before crucial elections...
...It contained one of the bank's federally guaranteed farm loans and a letter that read: Would you please offer this to the various retirements Es?}funds with which you are acquainted and see if this is marketable and if not under what terms we can restructure it so as to make it marketable...
...One: $5 Five: $20 Ten: $35 Twenty-five: $75 Fifty: $130 One hundred: $250 (Quantity discounts apply only to orders for the same report...
...r The American Spectator, P.O...
...Address: City: State: Zip Code: RP9508 L 27 began to phase them out...
...But it now appears that Tucker was intricately involved in the business life of such Clinton allies as Stephen Smith, Jim McDougal, and David Hale...
...Clinton used Smith as a middle-man in 1973 to win a post as professor at the University of Arkansas Law School...
...It makes it harder for the White House to avoid entanglement with the legal problems of Arkansas Governor Tucker...
...One of those "other persons" has been widely identified as deputy White House counsel Bruce Lindsey, treasurer of the 1990 campaign...
...Stephens, Inc., the politically powerful investment bank founded by the brothers Wilton and Jackson T. Stephens, frequently brokered the deals...
...Both have now committed to give full cooperation to the investigation, a breakthrough that should lead to an eventful fall...
...One was Madison Guaranty...
...Hillary paid off her own Bank of Kingston loan in September 1983...
...In the late 1980s, under pressure from Republican state auditor Julia Hughes Jones, the pension fund trustees acknowledged that these were unsuitable investments and 26 The American Spectator August 1995 American Spectator Investigative Reports Available David Brock's "Strange Lies" reveals the truth behind Jane & Jill's sham attack on Clarence Thomas—and it's now available to TAS readers as a special report...
...He subpoenaed records from not only McDougal's bank and thrift and its subsidiaries, but also the Security Bank of Paragould, the Citizens Bank of Flippen, and the Bank of Cherry Valley—all lenders to the Clintons...
...In April 1980, he entered a partnership with McDougal and a separate three-way deal with McDougal and Tucker...
...These notes were investments in the banks, not deposits that carried federal insurance...
...Smith's letter, preserved in a pension-fund file, bears the notation, "Not Bank Commissioner's place to do this...
...Marlin Jackson of Security Bank became bank commissioner (granted, before his former bank refinanced Hillary's loan...
...The pension funds took the risk of an ordinary stockholder, standing first in line to lose money...
...Just how these loans were made, what the money was used for, and what Clinton did in return, look like topics of great interest for the Whitewater investigation...
...they flagged the transaction to the examiners looking at McDougal's thrift at Little Rock...
...But one series of capital notes persists to this day...
...According to Hale, his lawyer—Jim Guy Tucker—took him to meet McDougal in the fall of 1985...
...Lindsey, long the administration's answer man on Whitewater, faces a broader set of campaign-finance questions...
...To judge from McDougal's financial statement, Smith put up more than $180,000 all told—and within two years lost two-thirds of the stake...
...Smith became president...
...Readers will remember Hale as the first major break in the Whitewater case...
...The bank was owned by Clinton ally Herb Branscum, who held the patronage post of State Highway Commissioner...
...According to Daniel Wattenberg's "Cash Voting" (TAS, December 1994), the money would be sent to the governor's mansion for safekeeping and dispatched around the state in the governor's official car...
...The White House has portrayed them as trivial incidents involving bit players, but, in context, they point to one of Bill Clinton's fundamental political secrets: his history of financing campaigns by striking sweetheart deals with local financial institutions...
...Jackson now says that he placed his Security Bank holdings in a blind trust when he took office, and that he wasn't involved in the loan...
...In 1984, Kings River renewed the loan in the amount of $115,000, personally guaranteed by each shareholder and due at the end of the year...
...This loan has a number of features of great interest to the Whitewater investigators...
...These $200,000 in capital notes, in the bank that once refinanced Hillary's loan, are the only ones currently held in either system...
...Although his role has been overlooked in most Whitewater coverage, he was president of a bigger political piggybank than even the Whitewater investment...
...According to the just-released biennial report of the Treasurer of State, the State Police Retirement fund holds a capital note for $120,000 in the Security Bank of Paragould, and the Judicial Retirement System holds another for $80,000...
...Nonetheless, the transaction would tie the Clintons' finances into the McDougals' in a long-lasting way...
...Get the full scoop on the tax returns of the president who gave America its largest tax increase in history with Lisa Schiffren's "The Unauthorized Clinton Financial Audit...
...In anticipation of the problem, McDougal turned to another sort of political piggybank, a federally funded small-business investment corporation called Capital Management Services, Inc., owned by Pulaski County Judge David Hale...
...He had borrowed at least $43,000 against his professor's salary and the proceeds of a political consulting company that seemed to do most of its business with Bill Clinton...
...In October, Smith and McDougal took over the Bank of Kingston, a local institution in the Ozarks...
...This plea resulted in a series of loans, including one of $65,000 to Smith, ostensibly to expand his political consulting firm, The Communication Company...
...Lindsey dodged one bullet at the end of May, when the five-year statute of limitations expired on one of the money-laundering incidents...
...In 1980, according to the plea agreement, Smith joined with his father, McDougal, and Tucker to form the Kings River Land Company...
...Until several months before this loan, the president of this bank, located in a small town in northeast Arkansas, was Marlin D. Jackson, whom Bill Clinton appointed banking commissioner in mid-1983...
...Twice in the 1990 campaign, admitted Ainsley, he "agreed with other persons" not to file the CTRs...
...Jim Guy Tucker bought $2,000 worth of stock and joined the board of directors...
...So are James Ring Adams's blistering reports on the Whitewater scandal, as well as Brock's "Living With the Clintons," the inside story of Troopergate that the mainstream media didn't want you to know, and Daniel Wattenberg's "Lady Macbeth of Little Rock," a no-holds-barred portrait of the first co-president of the United States...
...Later that year, Smith was issues director for Clinton's first congressional campaign...
...Some of these investments overlapped with the Clintons' private finances...
...When Clinton became state attorney general in 1976, Smith went to Little Rock with him as chief of staff, and stayed on as a senior aide in his first term as governor...
...Such investments will provide a full agenda for the independent counsel Kenneth Starr, who, in pursuing Clinton's political exploitation of banking, has tapped into one of the constants in the president's career...
...Whitewater coverage slights this institution, later renamed Madison Bank and Trust...
...The Second Most Dangerous Man The plea bargain with Stephen A. Smith gives Starr a cooperating witness who should know the world of the slush fund from both sides...
...The plea bargains were made by University of Arkansas professor Stephen A. Smith and bank president Neal T. Ainsley...
...Smith is one of Clinton's oldest political friends...
...Furthermore, Hale's credibility is enhanced by Smith's plea, giving greater weight to Hale's charge that Clinton personally took a hand in arranging illegal loans to bail out Madison Guaranty...
...As Jeff Gerth reported in the New York Times, Bill didn't retire one of these loans until the week after he declared for president, and it's still not clear where he got the money...
...The excess alarmed examiners from the Federal Deposit Insurance Corporation...
...For the next two years, James and Susan McDougal made payments on the loan by writing checks on the White Water [sic] Development Corporation account at Madison Guaranty...
...These and our other best-selling articles make ideal gifts for friends, colleagues, teachers, local news editors—and your political representatives...
...The disbursement from Security Bank (check number 12677) went directly to McDougal's Madison Bank & Trust...
...According to the David Maraniss presidential biography First in His Class, Clinton knew Smith from the 1972 McGovern campaign...
...The American Spectator August 1995 25 counsel...
...When the FDIC saw what was happening, its regional director tipped off thrift regulators, who began the series of examinations that eventually drove McDougal out of Madison Guaranty...
...The remainder of the Perry County Bank loans, a total of $100,000, hung over the Clintons through the presidential campaign...
...The Ainsley case involved $52,500 of cash withdrawals from a total of $180,000 that the Perry County Bank lent in three installments to Bill and Hillary Clinton...
...The note was renewed again, but in mid-1985, federal examiners were pushing Worthen Bank to get such loans off its books...
...Just before the election, he even went to his mailroom to intercept a copy of the form that an employee was sending to the IRS...
...Order your copies of The American Spectator's exclusive reports today...
...Many of them were real money-losers for the state's retirees, if not for the bond houses and banks that brokered them...
...McDougal told Hale they needed help in cleaning up the affairs of their "political family...
...Ainsley was president of the Perry County Bank in Perryville, which held the bank account for the 1990 Clinton for Governor campaign...
...Clinton enhanced its potential in the mid-1980s by changing the law to give the pension fund directors broad discretion in making investments...
...A third deal led to Smith's miseries with the independent Hale's credibility is enhanced by Smith's plea, giving greater weight to Hale's charge that Clinton personally took a hand in arranging illegal loans to bail out Madison Guaranty...
...A insley's guilty plea in May revealed that independent counsel Kenneth Starr was homing in on Clinton's slush funds...
...Clinton was well aware of the withdrawals and the reporting requirements, and sometimes complained when a recipient failed to spread the cash around...
...More subtle rewards, however, lie in the state's own financial system...
...24 The American Spectator August 1995 account...
...On June 10, 1986, banking c ommissioner Jackson received a packet from W. Maurice Smith III, executive vice president of the Bank of Cherry Valley, and the son of Clinton's "father figure...
...During the 1970s, for instance, pension funds were in the habit of buying "capital notes" in certain state banks...
...Neal Ainsley opened a window on the workings of a recent campaign, but Stephen Smith can tell the story from the beginning...
...Federal bank law requires that cash withdrawals of $10,000 and more be reported, so that the Internal Revenue Service can monitor potential tax evasion and money laundering...
...The Clintons Go to the Bank The most important story Smith may have to tell concerns October 1980, when Hillary took a $30,000 loan from the Bank of Kingston, almost precisely when he and McDougal took charge of the bank...
...McDougal made himself chairman and named his wife Susan vice president...
...Several prominent bankers showed up in his administration...
...After Webb Hubbell (who can talk about both Washington affairs and the Rose Law Firm), Smith looks like the second most dangerous man in the Whitewater investigation...
...Someone earns interest on that money, and in the hands of a politician as sophisticated as Clinton, that offers a rich, and even legal, harvest of political patronage...
...This request, recently shown to TAS, was more than the other trustees could stomach...
...Box 549, Arlington, VA 22216-0549 -I Yes, please send me: copies of James Ring Adams's "Beyond Whitewater" $ copies of James Ring Adams's "The Whitewater Obstructionists" copies of John Cony's "The MIA Cover-Up" copies of Michael Fumento's "This Magic Moment" copies of Daniel Wattenberg's "Lady Macbeth of Little Rock" copies of Daniel Wattenberg's "Love and Hate in Arkansas" copies of Terry Eastland's "Rush Limbaugh: Talking Back" copies of "The Incredible Shrinking AIDS Epidemic" copies of Lisa Schiffren's "The Unauthorized Clinton Financial Audit" copies of David Brock's "Living With the Clintons" copies of David Brock's "The Real Anita Hill" copies of David Brock's "The Travelgate Cover-Up" copies of David Brock's "Strange Lies" copies of Daniel Wattenberg's "Gunning for Koresh" Sub-Total VA residents add 4.5% sales tax Total Enclosed $ Name...
...McDougal's clique responded by taking their political loans off the bank's books and refinancing them at other friendly institutions...
...By January 1986, Kings River had reduced its debt to $55,000, but the whole sum had come due...
...In early 1984, the examiners noted that Smith paid most of the loan off with a cashier's check from Madison Guaranty Savings and Loan...
...Find out the truth behind what happened in Waco from Daniel Wattenberg's report on David Koresh...
...CI The American Spectator August 1995...
...The Clintons entrusted repayment of the loan to James and Susan McDougal, and it became thoroughly enmeshed with their apparent check-kiting in the Whitewater bank accounts...
...Arkansas takes in $11.5 billion in revenues a year, and several public employee pension funds place another half billion dollars in the treasurer's safekeeping...
...The Cherry Valley bank lent the Clintons $50,000 in 1984, and it was this loan that McDougal helped retire with his now famous April 4, 1985 fund-raiser in the lobby of the Madison Guaranty headquarters...
...Gerth reports, however, that Lindsey managed to obscure the issue through a series of misleading financial disclosures, and the press never picked up the trail...
...Since the money really went to retire the Kings River note, Smith committed the misdemeanor of submitting a false loan application to a federally funded SBIC...
...W. Maurice Smith, Jr., the owner of the Bank of Cherry Valley whom Betsey Wright called "a father figure to Bill Clinton," became State Highway Commissioner in 1988...
Vol. 28 • August 1995 • No. 8
