Whitewater defense targets fraud scheme
Key witness Hale on stand for sixth day
April 8, 1996
Web posted at: 5:35 p.m. EDTLITTLE ROCK, Arkansas (CNN) -- The key witness against President Clinton's Whitewater business partners testified Monday that as part of his plea bargain he won't have to pay back taxes on money he made cheating the Small Business Administration.
"You paid nothing and you expect to pay nothing?" David Hale was asked under cross-examination by a lawyer for Gov. Jim Guy Tucker, a co-defendant with James and Susan McDougal.
"That's correct," Hale said. The back taxes could amount to several thousand dollars.
Hale, who owned the Capital Management Services Inc. lending company, pleaded guilty to two felony counts of defrauding the SBA. He was sentenced last month to 28 months in prison and ordered to repay $2.04 million.
The McDougals, who co-owned the Whitewater land development in northern Arkansas with Bill Clinton, then governor of Arkansas, and Hillary Rodham Clinton from 1978 to 1992, and Tucker are accused of fraudulently obtaining nearly $3 million in loans from a pair of federally backed banks.
Hale, in his sixth day on the stand, is central to the government's case. He has testified that he helped arrange many of the loans for which the defendants are accused. Defense attorneys dismiss Hale's stories as inconsistent claims from a non-credible source.
Key to the case is an $825,000 loan from the McDougals' Madison Guaranty Savings and Loan to Dean Paul for the purchase of land from Hale that the government says was overvalued. The transaction was designed to net Hale $500,000, which he used to obtain $1.5 million in SBA matching funds.
In his questioning Monday, attorney George Collins suggested that Hale set up the Dean Paul loan so he could eventually lend himself money to buy the National Savings Life Insurance Co. Hale said he and Bill Watt, a Little Rock municipal judge who testified previously, set up a phony company, Sun Belt Inc., through which to buy National Savings Life. Hale lent Sun Belt $300,000 on paper.
Hale said he used $245,000 of the loan to buy 56 percent of the insurance company, took $4,000 in expense reimbursement and pocketed $31,000. The remaining $20,000 was not accounted for in court. He later bought the rest of the insurance company for $112,000, Hale said.
The Associated Press contributed to this report.
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- Whitewater defense paints Hale as opportunist - April 5
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- Hale Takes The Stand - April 2, 1996
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- Whitewater Probe Widened - March 25, 1996
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