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Lawyer: Money From ‘Bogus Loans’ Secretly Funneled to Political Figures

March 2, 1994

LITTLE ROCK, Ark. (AP) _ Evidence of secret payments to politicians will emerge in a trial that is part of the Whitewater investigation involving President and Mrs. Clinton, a lawyer in the case says.

The lawyer, Randolph Satterfield, said Tuesday that a Little Rock business run by former municipal judge David Hale generated ″bogus loans″ to people who signed documents saying they received the loans when they actually didn’t.

″I anticipate that some of the bogus loan note signers are going to testify that the money went to highly important political figures,″ Satterfield said at a pre-trial hearing in U.S. District Court.

Satterfield did not identify the politicians, and special prosecutor Robert Fiske - who is prosecuting Hale as part of Fiske’s investigation of the Whitewater real estate venture involving the Clintons - declined to comment.

In other Whitewater developments Tuesday:

-Sen. Alfonse D’Amato, R-N.Y., said top Clinton administration officials should be placed under oath to testify about a briefing Deputy Treasury Secretary Roger C. Altman provided top White House officials on Whitewater. The ranking Republican on the House Banking Committee, Rep. Jim Leach, R-Iowa, said the White House meeting compromised the Resolution Trust Corp.’s independence, and that Altman should resign immediately as interim chief of the agency.

-A letter from Fiske was introduced in federal court in New York City backing a Justice Department effort to delay the release of a police report on the death of former White House aide Vincent Foster. Fiske wrote, ″Release at this time would be detrimental to the investigation currently being conducted by my office.″ There were documents on the Clintons’ investment in the Whitewater real estate venture in Foster’s White House office, but White House counsel Bernard Nussbaum refused to let investigators see them last July.

-Associate Attorney General Webster Hubbell is under scrutiny by his former law firm for possibly overbilling clients and using money from the firm to pay for personal expenses, The Washington Post reported. The Rose Law Firm - where Foster and Hillary Rodham Clinton also worked - has been gathering records to turn over to prosecutors in the Whitewater matter.

White House Press Secretary Dee Dee Myers said today she was not aware of the investigation. ″I think I’ll just refer you back to Webb’s lawyers comments who denied the charges,″ she said. ″It’s an internal Rose Law Firm issue.″

Hale, who stepped down as judge following his indictment in September, has alleged he was pressured by Clinton to make a $300,000 loan in 1986 to a company run by the wife of Clinton business partner James McDougal. Hale says Clinton and McDougal diverted a chunk of the $300,000 to Whitewater, co-owned by the Clintons and McDougals. Clinton says he knows nothing about the loan, according to the White House, which accuses Hale of inventing the story about Clinton pressuring Hale in an attempt to avoid indictment.

Hale is accused of conspiring to defraud the Small Business Administration of $900,000 by falsely representing that $800,000 was invested in his business when it really wasn’t. Hale’s trial - he also is accused of lying to the SBA - is scheduled to start March 28.

Satterfield argued that his client, Hale co-defendant Eugene Fitzhugh, had no knowledge of ″bogus loans″ to politicians and should therefore be given a separate trial.

U.S. District Judge Stephen Reasoner agreed with Satterfield’s argument that Fitzhugh, as well as the third defendant in the Hale case, attorney and securities broker Charles Matthews, should not be tainted by any testimony about ″bogus loans″ and scheduled a June 20 trial for Fitzhugh and Matthews.

Meanwhile, a witness from Hale’s pre-trial hearing said in an interview with The Associated Press that he was ″stunned″ to find out this week that Hale showed only $800,000 to the Small Business Administration.

Gayland Westbrook testified Monday at Hale’s pre-trial hearing that $1.375 million was sent to Hale’s firm from Louisiana businessman Harry Townsend for several months in 1988 and 1989. The purpose, said Westbrook, was for Hale to show the entire $1.375 million to the SBA - a step designed to leverage more than $4 million in government-backed loans out of the federal agency for Hale’s company.

″I asked Mr. Fiske’s prosecutors Monday night what happened to the rest of the money - why it wasn’t fronted into Hale’s company,″ Westbrook said. ″The prosecutors said they weren’t at liberty to discuss it.″

Westbrook said the $1.375 million was returned to Townsend in 1989.

Hale’s lawyer, Randy Coleman, declined to comment on the matter.

2-94 1047EST

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