ROANOKE TIMES

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, January 9, 1994                   TAG: 9401090042
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: Associated Press
DATELINE: LITTLE ROCK, ARK.                                LENGTH: Medium


CLINTON BUSINESS PAL DEFENDS DEALINGS

James McDougal - the reclusive, key figure in an Arkansas real estate partnership that has embroiled President Clinton in controversy - has emerged to emphatically defend his business dealings, and says they "in no way benefited" the first family.

In a 2 1/2-hour interview with The Associated Press, McDougal supported the Clintons' position that they did nothing wrong.

McDougal said he believes the Clintons may have lost far less on the Whitewater Development Corp. partnership with him than the $68,900 the presidential campaign claimed in 1992.

"My records don't reflect they did, although I don't wish to get into an argument about that," he said. Later he acknowledged that his "records" were his memory.

Whitewater has become a focus of the federal investigation into McDougal's Madison Guaranty Savings and Loan. Under a negotiated subpoena, the White House last week began turning over the Clintons' Whitewater records.

Among things federal investigators are reportedly trying to determine is whether S&L funds were used to pay off Clinton's gubernatorial campaign debts and whether Whitewater funds were used to pay off personal debts of the Clintons.

McDougal said no Whitewater funds were used for such personal debts, and that it would have been impossible to divert S&L funds to pay off the campaign debts without them showing up on the books.

"The Clintons in no way benefited from my handling of Madison Guaranty," McDougal said.

He also said he gained nothing from them. "I think that if you will search with every investigator and every lie detector or whatever that you'll find that what I got from my entire association with him is absolutely nothing," McDougal said.

McDougal, 53, who now lives on $723-a-month in Social Security disability, said the allegations of mismanagement at his S&L are being recycled from a 1990 federal fraud trial in which he was acquitted.

His relationship with the Clintons dates back to 1968, when they were campaign volunteers for the re-election campaign of Sen. J. William Fulbright, D-Ark. McDougal, six years older than Clinton, assigned Clinton to be Fulbright's driver.

He said he has not talked with Clinton since 1990, when Clinton called him after his acquittal.

McDougal confirmed that in the mid-1980s he authorized a $2,000-a-month retainer for the law firm that employed Hillary Rodham Clinton, but said he saw it as "giving a friend's wife some work."

Asked if that might be inappropriate, he replied: "I'm not teaching ethics this semester."

McDougal called the investigations of his business dealings a Republican "witch hunt."

The Clintons entered the Whitewater venture with McDougal and his wife in the late 1970s. It was a 50-50 partnership. During the presidential election, an accounting firm hired by the Clinton campaign to review the Whitewater deal concluded the Clintons lost at least $68,900 on the 230-acre real estate development.

McDougal said he could recall the Clintons investing only about $9,000. They sold their interest to him in 1992 and reported a $1,000 capital gain on the sale - the price McDougal paid for their shares. He said he wanted them to leave the venture because he felt he had put more money at risk than the Clintons and saw an opportunity to reap a return on an upcoming land deal.

McDougal owned Madison S&L and ran its real estate subsidiary, Madison Financial Corp. The S&L's failure in 1989 cost taxpayers $47 million.

McDougal contends the thrift was in good shape when he had to quit working in 1986 but retained ownership, after a stroke and prolonged problems as a manic depressive.

He blamed his business successors and federal regulators for ruining Madison after it was placed under the Resolution Trust Corp., the federal S&L cleanup agency.



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