Reprinted from The Washington Times , 5am -- March 31, 1998
Prosecutor owed money to Arkansas thrift
By Jerry Seper
THE WASHINGTON TIMES
An Arkansas prosecutor who brought felony charges against a cooperating Whitewater witness in what law enforcement officials said was an effort to impede the Whitewater probe failed to repay a $169,000 loan from the Little Rock thrift at the heart of the investigation, court records say.
Prosecutor Mark Stodola charged David L. Hale with violating the state's insurance code after the former Little Rock municipal judge had been identified as a witness in the investigation and had helped convict former Arkansas Gov. Jim Guy Tucker and James and Susan McDougal on 24 felony counts in the first Whitewater trial.
Court records show Mr. Stodola failed to make principal and interest payments on a January 1986 loan from Madison Guaranty Savings and Loan Association, the thrift owned by the McDougals and under investigation by independent counsel Kenneth W. Starr since 1994. The loan was assumed in October 1992 by the Resolution Trust Corp., which had begun investigating Madison's 1989 failure, and sold to a Missouri bank. The note later was resold to a North Carolina mortgage company.
The Madison note has become the focus of a pending lawsuit by Mr. Hale aimed at stopping the state prosecution.
"Madison Guaranty was operated as a personal piggy bank for the Arkansas political family, including Mr. Stodola," Mr. Hale said in a motion filed in U.S. District Court in Little Rock.
"Stodola was an active participant in this era of creative financial schemes by those individuals who had friends in authority or influence with financial institutions.
"As such, he had a great interest in seeing plaintiff, with his great knowledge of these matters, prosecuted and sent away for as long as possible," Mr. Hale said.
In his federal court motion, Mr. Hale said the Madison loan was approved for Mr. Stodola at Tucker's request for "certain campaign loans and favors." Mr. Hale, who had numerous business dealings with both Madison and Tucker as the owner of a Small Business Administration-licensed lending agency known as Capital-Management Services Inc., said his knowledge of the Stodola loan was "part of the motivation" for the state charges.
Mr. Stodola confirmed he was in arrears on the Madison loan but said he was negotiating with the RTC about payments when the note was assumed by the agency and sold. He denied any improprieties involving the loan or its award and vigorously rejected claims there was a connection between it and the Hale prosecution.
The prosecutor, who was defeated in a 1996 congressional race and has since returned to private practice in Little Rock, said the charges against Mr. Hale in the case were warranted.
"We reacted to a criminal referral from the Insurance Commission," Mr. Stodola said. "It was my job to uphold the law, not to avoid it. These accusations are incorrect and false."
Mr. Hale said in his motion that Mr. Stodola repurchased the Madison note in May 1993 for $80,000 and "skimmed from this loan flip scheme cash in excess of $100,000 at taxpayers expense."
He said that the original note was used to buy four parcels of land in an old area of Little Rock and that Mr. Stodola sold the property in October 1996 to a Little Rock developer.
The former judge called the transaction an illegal land flip.
"Clearly, something is amiss here," Mr. Hale said. "That something would appear to be bank fraud and presents a powerful reason why plaintiff, knowing of these transactions as he did, should be discredited, imprisoned and ... prosecuted in bad faith by Mark Stodola," he said.
Mr. Stodola denied that any land flip occurred, saying his efforts to buy back the note were legal and in accordance with federal regulations. A land flip is the purchase of property by a "straw man," who assumes no risk and signs the land over to another, usually the original seller, for a fee.
"There was no land flip, and accusations that there was are incorrect," he said.
When Mr. Stodola brought charges against Mr. Hale in 1996, Whitewater prosecutors said in court papers they were filed to punish the former judge for his cooperation in their ongoing investigation. Mr. Starr told the court it was "highly unusual, if not unprecedented" to bring charges against a cooperating witness "in an important federal investigation."
Mr. Hale was named on felony charges of violating the state's insurance code by failing to maintain a sufficient cash reserve for an insurance company he owned. He is scheduled for trial April 22 on charges of lying to state regulators in 1993 about his involvement with National Savings Life Insurance Co., a firm he owned that provided burial plots for mostly low-income clients in southeastern Arkansas.
About 2,000 policyholders are believed involved, although none lost money. State records show that no other Arkansas insurance official has even been charged criminally in a similar case.Copyright 1998 News World Communications, Inc.
Reprinted with permission of
The Washington Times.
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