Reprinted from The Washington Times, March 20, 1998
Hillary's ties to real estate deal hidden or destroyed
By Jerry Seper
THE WASHINGTON TIMES
Documents describing Hillary Rodham Clinton's ties to a questionable Arkansas real estate project were systematically destroyed or hidden in 1988 as federal banking regulators closed in on the troubled Madison Guaranty Savings and Loan Association.
The extent of the scheme far exceeds what previously was known about the disappearance of records of the Castle Grande venture and has drawn the attention of independent counsel Kenneth W. Starr's Whitewater investigation, according to persons familiar with the plan.
The documents included loan papers and other records involving the 1,050-acre project south of Little Rock. The sources said records at Castle Grande; Madison, which helped finance the project; and the Rose Law Firm disappeared just before the Federal Home Loan Bank board audited Madison.
At the time, Arkansas Gov. Bill Clinton was considering a run for president and, the sources said, the document dump was part of a plan to protect the Clintons from media scrutiny. Madison was closed in 1989 at a cost of $50 million.
Mr. Starr's latest Whitewater witness, former Arkansas Gov. Jim Guy Tucker, who averted a trial in a $2 million bankruptcy scheme in exchange for his cooperation, controlled Castle Grande and was intimately familiar with its operation.
Tucker, who testified for six hours on Wednesday and is scheduled to return for more questions, is believed to know what may have happened to the documents, the sources said.
Castle Grande, which federal regulators called a "sham" transaction, failed in 1989 at a cost of $4 million.
Included in the records was an option agreement written by Mrs. Clinton and Webster L. Hubbell, partners at the Rose firm. Regulators said the option "facilitated" the payment of $300,000 in questionable commission fees to Mr. Hubbell's father-in-law, Seth Ward, a Madison official.
A grand jury is probing Mrs. Clinton's ties to Castle Grande, the cash payment to Mr. Ward and suspected efforts to cover up the first lady's involvement.
The sources said Madison's owner, James B. McDougal, a Whitewater witness who died March 8, told prosecutors the thrift's records were moved to a small warehouse before the audit. Mr. McDougal hired Mrs. Clinton for Madison's legal work, at the request of her husband, and paid her a $2,000-a-month retainer. He said her work included the Castle Grande venture.
In sworn statements to the Federal Deposit Insurance Corp. and the Resolution Trust Corp., Mrs. Clinton said she did little or no work for Castle Grande.
But Rose firm billing records mysteriously found in 1996 in the White House residence suggest her ties to the project, which called for a trailer park, a shopping mall, a microbrewery, and a sewer and water system, were extensive. Evidence that Mrs. Clinton lied under oath about Castle Grande could result in perjury charges. Efforts since to cover up her involvement, the sources said, could constitute obstruction of justice.
While Mrs. Clinton has denied any wrongdoing, she has acknowledged taking part in a Rose firm "housekeeping effort" in 1988 during which Madison records were destroyed. Sworn statements by Mrs. Clinton show she ordered the destruction of the files, which included work on Castle Grande. She told the RTC she "cooperated" with Rose firm managers in an effort to reduce storage costs and turned over "certain files relating to the firm's representation of Madison Guaranty." One file involved the Ward option.
It is not clear why Mrs. Clinton would have destroyed the records. Litigation concerning Castle Grande and Mr. Ward began that same year and continued through 1990.
In Little Rock Thursday, a former loan officer for Madison testified before the Whitewater grand jury and said he was asked about Mrs. Clinton's legal work for Castle Grande and about Mr. Hubbell's involvement in the real estate project, Reuters reported.
Don Denton said he told the grand jury that he raised questions with Mrs. Clinton about shares in Castle Grande sold by Mr. Ward.
"She pretty well dismissed my concerns and assured that she was handling the legal part of it," Mr. Denton said. "The impression I received from that conversation was that she simply didn't understand what I was talking about."
Mr. Denton said he would not speculate on whether the grand jury was preparing to indict the first lady or Mr. Hubbell.
The billing records show Mrs. Clinton charged Madison for 60 hours of legal work in a 15-month period, spoke with Mr. Ward on 14 occasions in a seven-month period, discussed legal matters with James or Susan McDougal 16 times in 1985 and 1986, had 28 meetings with Rose firm lawyers on Madison, and met with state regulators about Madison at least twice.
The records also show that Mrs. Clinton billed Madison for two hours' work for preparing the option.
The FDIC said Mrs. Clinton and Mr. Hubbell, who pleaded guilty in 1994 to stealing $482,000 from his Rose firm partners, drafted legal documents for Castle Grande that were used to deceive bank examiners. The FDIC said the documents "facilitated" substantial commission payments to Mr. Ward, who served as a "straw buyer" in the Castle Grande deal. A straw buyer is someone who owns property in name only, having never put up any money or assumed any risk.
While the option was never exercised, investigators said it disguised the reason for the Ward payment and created a paper trail to justify the cash outlay.
Mrs. Clinton told regulators she had no memory of providing legal services for Mr. Ward, an Arkansas businessman hired by Mr. McDougal to buy property for Castle Grande. Mr. Ward has denied any wrongdoing.
Tucker, who underwent a liver transplant last year, agreed to cooperate in exchange for probation on his guilty plea in the bankruptcy scheme. His ties to Madison surfaced in 1992 in RTC criminal referrals, which named him as a "target" in a fraud scheme involving the thrift. The RTC listed the Clintons and Tucker as principals in "shell corporations" created by Mr. McDougal, saying they stood to benefit from a check-kiting scheme and account overdrafts authorized at Madison.Copyright 1998 News World Communications, Inc.
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