PART ONE How key Starr witness plotted with Clinton enemies
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Letter from Baton Rouge
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Clinton takes the offensive
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Transcript of President Clinton's statement
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David Hale's days as a respected businessman and member of the judiciary came to an end on Sept. 23, 1993, when he was indicted by a federal grand jury in Little Rock on four felony counts that he had stolen $3.4 million from the federal Small Business Administration (SBA).
Even before Hale had been formally charged in that case, his attorney approached the U.S. attorney in Little Rock and attempted to obtain a favorable plea-bargain for his client by claiming that Hale had valuable information he could provide investigators about the "lending practices of the political elite of Arkansas." In exchange for his information, Hale had hoped that he would only have to plead guilty to a misdemeanor and that he would also be able to remain on the bench. But federal prosecutors insisted that he plead guilty to at least one felony.
It was then that Hale first made his fateful allegations of illegal activity by President Clinton and demanded that the Justice Department -- which would not give him the plea-bargain he desired -- turn the case over to an independent counsel. Hale claimed that because he was accusing the man who was now the president of wrongdoing, the Justice Department had a conflict of interest in investigating him.
Hale alleged that in 1986, then-Gov. Clinton had pressured him to make a fraudulent and illegal $300,000 loan to Susan McDougal, one of the Clintons' partners in the failed Whitewater land deal. Hale claimed that Clinton had told him to make the loan because the McDougals were part of his "political family."
At the time, Hale ran Capital Management Services (CMS), a private lending company that was licensed, and in part funded, by the SBA. CMS had received millions of dollars in federal funds from the SBA on the condition that it was only to make loans to businesses owned by minorities and the disadvantaged.
But Hale instead diverted millions of dollars from the federal loan program to provide fraudulent loans to himself and powerful Arkansas political figures, such as Jim Guy Tucker and the McDougals.
In large part due to Hale's charges, Attorney General Janet Reno appointed the first Whitewater independent counsel, Robert Fiske, in January 1994. In exchange for information that Hale agreed to provide investigators about Tucker, the McDougals and Clinton, Hale was rewarded with a substantially reduced sentence. Facing a prison stretch of more than 10 years, he was sentenced in federal court to serve only 28 months.
Later, Fiske's successor as Whitewater independent counsel, Kenneth Starr, asked a federal judge to further reduce Hale's sentence, citing the important cooperation that Hale had provided his office. As a result of Starr's recommendation for leniency, Hale ultimately served only 20 months in prison.
Hale's information and testimony won convictions for Starr against then-Gov. Tucker and both Jim and Susan McDougal. Other information that Hale provided Whitewater investigators led to guilty pleas by at least four other individuals, according to papers filed in federal court by Starr's office.
Hale's cooperation with Starr paid off for him as well. In addition to his reduced sentence, Hale was paid more than $60,000 by the government and provided with room, board and security during the time he was a cooperating witness in the Whitewater probe. Starr's office even intervened in an unsuccessful attempt to have Arkansas state prosecutors drop criminal charges against Hale for looting an insurance company that he owned.
Some federal law enforcement officials who have worked on the Whitewater investigation have told Salon that they have come to believe that Starr and some of his senior deputies were not sufficiently skeptical of Hale's allegations. They also questioned whether some of the favors provided by the independent counsel for his star witness were appropriate.
"With someone like Hale, you can never let down your guard. You should never get to a point where you begin to trust him," said one of the law enforcement officials. Another investigator asserted, "Any investigation of this sort has to be a search for the truth. You proceed cautiously and investigate meticulously. You not only look for evidence that corroborates your witness, you look for contradictions as well. That wasn't done in this case."
Two investigators point to a court appearance Starr made in March 1996, when he asked a federal judge for an additional sentence reduction for Hale, as one example of his poor judgment.
"I have seen, I have witnessed his [Hale's] contrition," Starr told the federal judge overseeing the sentence reduction hearing. "I believe, your honor, that he is genuinely remorseful of his criminal past. I have been impressed with his humble spirit." During the same proceedings, Starr also went out of his way to refer to Hale as "Judge Hale" as a sign of deference and respect. Those comments particularly distressed some of Starr's own staff, according to federal law enforcement sources.
It is not clear whether Starr personally knew at the time that Hale had used his position as a judge to illegally enrich himself and had later attempted to conceal that information from Whitewater investigators. Charles G. Bakaly III, a spokesman for Starr, declined to answer questions for this article.
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