once upon a time in arkansas

VIET DINH: Yes. And certainly should have known the likely use it was going to be put to by Jim McDougal and other officials at Madison-- that is, to present to federal regulators as a means to conceal the fraudulent nature of the underlying transaction.

PETER BOYER: Federal investigators believe that is why those billing records went missing. The records directly tie Hillary Clinton to legal work on Castle Grande, a land deal that has already put two people in prison: Jim McDougal and Judge David Hale. And former Arkansas governor Jim Guy Tucker was convicted of financial fraud.

So a four-year investigation by two independent counsels is narrowing to two people and what each did in connection with Castle Grande. Regarding the president, there had been a persistent story in Arkansas that the reason Judge Hale gave that loan to Susan McDougal was because he'd been asked to do so by then governor Bill Clinton and during the Whitewater trial Judge Hale testified that the story was true. But when President Clinton was asked the question, he said in sworn testimony it never happened.

1st READER: [attorney] All right, were you ever present at Mr. McDougal's office on 145th Street when a discussion occurred about financial assistance from David Hale or his Capitol Management Services Company involving any other business that you or Mr. McDougal may have had?

2nd READER: [Bill Clinton] No, sir. Never.

1st READER: [attorney] Were you ever present at any time for any meeting between Mr. McDougal and David Hale?

2nd READER: [Bill Clinton] Never. I never was present at any meeting.

PETER BOYER: The independent counsel has anecdotal evidence that President Clinton committed perjury when he categorically said he was never present at any meeting. There is the testimony of David Hale. He says he met with Jim McDougal out here at the Castle Grande sales offices. Then Governor Clinton arrived and asked about that $300,000 Small Business Administration loan to Susan.

3rd READER: [David Hale] I received a call from Jim McDougal to meet he and Governor Clinton at the Castle Grande office to talk about getting their loan ready and consummated. And we met at the Castle Grande office, in Jim's office.

4th READER: [Attorney Ray Jahn] When you arrived, did you notice any cars in the parking lot?

3rd READER: [David Hale] Jim's Jaguar was there.

PETER BOYER: And there is the word of Jim McDougal. He talked to us at the federal penitentiary in Lexington, Kentucky.

JIM McDOUGAL: Mr. Hale and I had a meeting to discuss a shopping center he was proposing to build on property at Castle Grande and then Governor Clinton arrived, after we had concluded the meeting and gotten out in the yard.

PETER BOYER: And you have no doubt that he knew that there was such a thing as the Susan loan?

JIM McDOUGAL: Well, he inquired directly about it. Yes, I believe he knew.

PETER BOYER: Who do you suppose told him about that?

JIM McDOUGAL: I'll let you draw your own conclusion.


JIM McDOUGAL: I think we just need to understand that there are certain things that I'm not going to say and one thing I'm not going to say is anything which will reflect badly on Susan McDougal. No matter what she has to say about me, I wish her well. I'm very fond of her.

PETER BOYER: Susan McDougal is in a federal prison in Los Angeles. She has been sent there for refusing to answer any of the questions the independent counsel wants to ask her. Was Bill Clinton at that Castle Grande meeting? Did he know about her loan from Judge Hale? Did she and the governor have a relationship at the time?

[interviewing] To your knowledge, did the President testify truthfully at your trial?

SUSAN McDOUGAL: I won't answer any questions that might help the independent counsel in his investigation.

PETER BOYER: To your knowledge, how much did Bill Clinton know about that $300,000 loan that--

McDOUGAL ATTORNEY: I'm sorry, but we can't go into this.

SUSAN McDOUGAL: I'll tell you what--

McDOUGAL ATTORNEY: This is something we talked about beforehand. [crosstalk]

SUSAN McDOUGAL: I can answer in the way that I answered to them, is that I don't know of anything-- [crosstalk]

McDOUGAL ATTORNEY: She is not going to answer anything related to Clinton (inaudible) relationship with this $300,000 loan, with Whitewater, to any question that Kenneth Starr would likely ask her before the Whitewater grand jury. [crosstalk]

PETER BOYER: Let's not waste any more time on that. I'm asking about--

SUSAN McDOUGAL: I've been in jail for a year about this, a year. This is why I came to jail, because I won't have anything to do with questions that have to do with the investigation. I just won't.

PETER BOYER: Did you have a relationship with Bill Clinton?


PETER BOYER: When he was governor?


PETER BOYER: So that leaves the word of Hale and McDougal, two convicted felons. But that's not all the independent counsel has. FRONTLINE has learned that the independent counsel believes there was another witness to the meeting.

[interviewing] Wasn't there at least one other person in a position to say whether or not the Governor had been out there that day?


PETER BOYER: And it's our information that that person is known to the independent counsel.


PETER BOYER: And wouldn't that, in your view, suggest that the president was lying in his videotaped testimony in your trial?

JIM McDOUGAL: For that you'll want to read my book, which I will-- where I will divulge the name of this person and cover that episode in detail.

PETER BOYER: Investigators have been told that R.D. Randolph, business partner to Jim McDougal and Jim Guy Tucker, also witnessed Governor Clinton's presence at the alleged Castle Grande meeting. Randolph is not cooperating with the independent counsel, but he told FRONTLINE that while such a meeting could have taken place, he doesn't recall it.

What happened to that $300,000 loan Susan received from Judge Hale? Twenty-five thousand dollars of it covered a debt on that land development the Clintons and McDougals got involved in back in the 1970's which Susan called "Whitewater."

But while the independent counsel is pursuing the perjury question, there's also the question of possible obstruction of justice. Remember the '92 presidential campaign, when Gennifer Flowers, Bill Clinton's draft record and Whitewater were dogging him? His campaign officials wanted to know just how much work Hillary Clinton had done for Jim McDougal. So over at the Rose law firm, her billing records were printed from the computer file and the computer file itself-- well, it vanished.

VIET DINH: Somebody had erased the last remaining complete record as to what work the Rose law firm performed for Madison and also what lawyer performed what work for Madison.

PETER BOYER: The printout of the billing records help explain the Castle Grande tangle. That's why it has become so important to prosecutors to determine how those records went missing and whether the First Lady had a hand in hiding them-- in other words, in obstructing justice.

VIET DINH: Whoever had the documents themselves were under a legal obligation to produce them. That much is clear. And the failure of that production, if it is conscious, if it's intentional, an intentional withholding of documents subject to a federal subpoena, would be obstruction of justice. The question is who had the documents.

PETER BOYER: Webb Hubbell had been the managing partner at Rose. He remembers reviewing the printout during the '92 campaign.

WEBB HUBBELL: [Congressional hearing] The bills were pulled and reviewed by myself and Mr. Foster.

RICHARD BEN-VENISTE, Committee Counsel: Did you review them together with Mr. Foster?

WEBB HUBBELL: I believe at least that I reviewed them and gave them to Mr. Foster.

RICHARD BEN-VENISTE: So to the best of your knowledge, after the review by you and Mr. Foster, Mr. Foster had possession of them, at least in early 1992?

WEBB HUBBELL: That's correct.

RICHARD BEN-VENISTE: And did you see them again after that review?

WEBB HUBBELL: I don't believe so.

VIET DINH: We know that these billing records were in Vince Foster's possession. He had made notations to them specifically directed to the First Lady, questions like, "HRC-- I believe there's a subsequent bill."

PETER BOYER: To help determine exactly who had the billing records, the FBI checked for fingerprints. Indeed, they found Vince Foster's prints right next to that April 7th phone call to Don Denton. That was the call, Denton says, in which Hillary Clinton brushes off his cautions about the sham deal.

VIET DINH: One of the few places that Vince Foster had his fingerprints on the billing records was exactly at the entry where Mrs. Clinton billed for a 12-minute phone call on April 7th, 1986, on a telephone conference with Don Denton.

PETER BOYER: And the FBI also found Hillary Clinton's prints.

VIET DINH: So Vince Foster certainly had them. Webb Hubbell admits that he had them and reviewed them at one point. And we know that Hillary certainly had them at one point. The question is, who had them at the relevant point?

PETER BOYER: The theoretical motive for hiding the records is pretty simple.

VIET DINH: What they reveal is the extent and nature of Mrs. Clinton's involvement and work in the Castle Grande transaction. Without the billing records, we would not have the full picture of the Castle Grande transaction as we now know.

PETER BOYER: How the billing records got to the Clintons' private quarters in the White House was a key subject of Hillary Clinton's long session before the grand jury.

HILLARY RODHAM CLINTON: I do not know how the billing records came to be found where they were found, but I am pleased that they were found because they confirm what I have been saying.

PETER BOYER: Mrs. Clinton says the records show that she did very little work for Madison Guaranty, so little she doesn't remember the details. That's why her attorney told us that the case of the missing billing records is a "meaningless mystery." It's now up to the Whitewater grand jury to decide whether or not to accept the First Lady's account. The Senate Whitewater committee has already reached its conclusion.

VIET DINH: I think there is significant evidence to conclude that Mrs. Clinton was more likely than any other known person to have placed the records in the book room, or at least to have knowledge of how they came to be there. And I think that that conclusion was based on sound evidence.

PETER BOYER: The prosecutors' view is that the billing records are part of a larger pattern of concealment beginning in 1988 with the destruction of Madison Guaranty files and the vanishing computer records in 1992, the removing of files from Vince Foster's office in 1993. From the vantage point of a prison cell in Kentucky, Mrs. Clinton's former client and friend has his view.

JIM McDOUGAL: If they had been forthcoming, if they had told the absolute truth from the outset, this story would have died a long, long, long time ago. It's the-- it's the lying about it, just-- and it is following the Watergate scenario to a T, right down to the fellow being reelected by an overwhelming majority and then it getting worse and worse and worse.

PETER BOYER: But it might have all been different. There had been a moment, back when McDougal so desperately hoped for redemption and a helping hand from his friend, Governor Bill Clinton, when there was still a chance for a happy ending.

SUSAN McDOUGAL: It would've changed Jim's life and in doing that, this Whitewater, this entire episode would never have happened. It would have been a different destiny for Jim McDougal.

PETER BOYER: She believes at that exact moment when Clinton promised McDougal's mother a job, but didn't call except to ask for $3,000-- at that moment Jim McDougal felt betrayed. A course of action presented itself: revenge. Back in the summer of 92-- Gennifer Flowers, the draft allegations, when the billing records from Rose were disappearing:

BILL HENLEY: He was feeling a great deal of anger and animosity toward Bill Clinton and he was seething in Arkadelphia, Arkansas, while he saw this young man running for president and not offering any kind of a hand to him.

PETER BOYER: That's when Jim McDougal paid a visit to a Little Rock lawyer named Sheffield Nelson, who happened to be a Republican and one of Bill Clinton's worst political enemies. Nelson was, at the time, acting as a source for the first "New York Times" stories which ignited Whitewater.

SUSAN McDOUGAL: His bitterness is what led him to meet with the "New York Times" writer that wrote the first story on Whitewater. I saw Jim moments before he met with Jeff Gerth. It was meant.

BILL HENLEY: He gave Jeff Gerth my name and number as a source to back up what he was saying to Jeff Gerth about Whitewater and the Clintons and I never spoke with Jeff Gerth. This young man, running for the presidency of the United States, who grew up 30 miles from my home and had a chance to win and Jim McDougal wanting to-- wanting to do anything he could to sabotage that chance and I was not going to be a part of it. You have to understand that Jim McDougal felt he had nothing to lose.

JIM McDOUGAL: I went to Sheffield Nelson and, actually, that's how all of this Whitewater thing got started.

PETER BOYER: Because you said?

JIM McDOUGAL: I think he asked me something about Clinton and at that point I wasn't in a very good humor with either of them, probably much worse than I am now. And he said, "There's a fellow here investigating some business that involves you." And I said, "Oh," and he said, "Yes, Jeff Gerth of `The New York Times.' "

PETER BOYER: Sheffield Nelson recorded McDougal's conversation and this is what McDougal said.

JIM McDOUGAL: [audiotape] "I can sink it quicker than they could lie about it, if I could get in a position so I wouldn't have my head beaten off. And Bill knows that."

PETER BOYER: "I can sink it quicker than they could lie about and Bill knows that."

SUSAN McDOUGAL: Although I don't think he calculated the harm that it did do. I don't think he, in his wildest dreams, knew that this would happen. In fact, the people decimated by what he did was himself and me. And so, of course, in his usual way of kicking down a door, he never thought about the end result of what was going to happen.

PETER BOYER: Could it be that simple? All the illegalities, the troubles-- could they have stayed covered up if only Bill Clinton had helped Jim McDougal once upon a time in Arkansas?

Pres. FRANKLIN DELANO ROOSEVELT: There is a mysterious cycle in human events--

SUSAN McDOUGAL: It would've changed his entire destiny. I absolutely believe that.

Pres. FRANKLIN DELANO ROOSEVELT: --of other generations much is expected. This generation of Americans has a rendezvous with destiny.

ANNOUNCER: Still interested? Check out FRONTLINE on the Web for a closer look at President Clinton's taped deposition in the Jim McDougal trial, a synopsis of the Castle Grande deal, a special report on how the media covered Whitewater and more of our exclusive interviews. Explore FRONTLINE on line at www.pbs.org.

(Audio During the credits) Next time on FRONTLINE:

HARRISON FORD: For anyone who's ever questioned what can one person do comes a story of one man who brought relief to Ethiopia, water to Sarajevo and tried desperately to bring peace to Chechnya. I'm Harrison Ford. Join me for the complex life and mysterious disappearance of an American hero next time on FRONTLINE.


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