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Prosecutors: Whitewater Defendants Tried To Smear Gov’t Witness

June 25, 1996

LITTLE ROCK, Ark. (AP) _ Two Arkansas men whose bank held Bill Clinton’s 1990 campaign cash tried to smear their former top officer when investigators began focusing on their institution, Whitewater prosecutors contended Tuesday.

Prosecutor Jackie Bennett told the judge in the Whitewater trial, outside the jury’s presence, that he would show the two bankers began to discredit the ex-officer after learning he was cooperating with the government.

Then, with the jurors listening, a bank vice president testified that one of the bankers, Robert M. Hill, ``discovered″ expense account irregularities by the ex-officer in June 1994 _ the same month that investigators began questioning bank officials about the Clinton campaign.

Hill and his co-defendant, Herby Branscum Jr., then ordered an investigation of Neal T. Ainley, their former president and chief operating officer, the witness testified. In October 1994, the bank notified federal authorities that Ainley should be criminally investigated for alleged misuse of his expense account.

The government has charged Hill and Branscum, co-owners of Perry County Bank, with conspiring to misuse bank funds to reimburse themselves and others for political contributions made to Clinton and other politicians.

They also are accused of concealing from the Internal Revenue Service separate cash withdrawals of $30,000 and $22,500 made by Clinton’s 1990 gubernatorial campaign. The bank did not file the required IRS forms showing cash withdrawals of more than $10,000.

Ainley will be the government’s chief witness in the trial. He is expected to testify not only against Hill and Branscum, but also against White House aide Bruce Lindsey. Prosecutors said Lindsey, who has denied wrongdoing, was part of a plot to conceal one of the withdrawals from the IRS. The defense said it was notified by prosecutors that Lindsey is an unindicted co-conspirator.

Ainley pleaded guilty to two misdemeanors in a deal for his cooperation.

Bennett, the prosecutor, told U.S. District Judge Susan Webber Wright that after the two defendants ``learned Mr. Ainley was cooperating with the government,″ they ``commissioned a person to go out and smear Mr. Ainley.″ Dan Guthrie, lawyer for Branscum, protested that ``Mr. Branscum did not know Neal Ainley was cooperating with the FBI″ when an accountant was hired to investigate Ainley for the bank.

Prosecutors developed their theme by questioning Perry County Bank vice president Buford M. Satterfield, who testified he made the decision to file the criminal referral. As a prosecution witness, Satterfield was forced to testify about the activities of his bosses.

Bennett: Who was reported as the person who discovered the matter ... referred (for criminal investigation)?

Satterfield: It was Mr. Hill. ... It was in June.

Bennett: This would have coincided with the time the IRS and FBI came to the bank to interview you?

Satterfield: Yes, sir.

Another part of the bank’s audit report on Ainley focused on the failure to file the currency transaction reports on the Clinton campaign’s withdrawals. But this was not made part of their criminal referral, even though the alleged concealment led to major charges against Branscum and Hill.

Asked why he requested a criminal investigation on $4,000 to $6,000 of Ainley’s expense money, but not on the concealment issue, Satterfield said: ``We must have determined in that particular case it was not necessary.″

Satterfield added that ``to this day,″ he has not concluded that failure to file the transaction reports was an intentional criminal act.

Satterfield said he wasn’t certain that Ainley misused the bank’s expense money, but filed the criminal referral because Ainley was the bank’s chief operating officer, and the institution was scolded by authorities for not filing a referral several years ago.

``I was concerned there may have been a misconnection″ between Ainley and the bank’s board over expense account policy, Satterfield said. ``Ainley may have interpreted the expenses as legitimate ....

``I had some questions regarding the allegations.″

Chief prosecutor W. Hickman Ewing Jr. told reporters the investigation of Ainley was an effort by the defendants ``to point the finger at Mr. Ainley and away from themselves.″

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