Part One By Murray Waas Key Kenneth Starr witness David Hale's strategy for getting out of legal trouble: Blame President Clinton (08/12/98) Part Two By Murray Waas David Hale lied under oath during his testimony in the Whitewater case to conceal his secret ties to conservative activists (08/13/98) Part Three By Murray Waas THow David Hale falsely invoked Bill Clinton's name to win a $50,000 payoff (08/14/98) Part Five By Michael Haddigan and Murray Waas Why there will never be a Whitewater Report from Ken Starr (08/21/98) T A B L E+T A L K Today's headlines: Semen, oral sex and the presidency! How do you think the media are handling the Clinton Crisis? Sound off in the Politics area of Table Talk D A I L Y+Q U O T E I may be crazy, but I'm no cannibal! R E C E N T L Y Democrats running scared By Jonathan Broder Capitol Hill Democrats fear the future (08/10/98) Click here for Viagra (or other drugs) By Greg Critser Your Viagra is only a click away (08/07/98) Just do it, Bill By Fred Branfman The president should tell the truth (08/06/98) Clinton's sexual scorched-earth plan By Jonathan Broder and Harry Jaffe The White House may be ready to declare a "total war" on Congress over the Lewinsky case (08/05/98) New JFK death film By Scott McLemee New Zapruder film doesn't solve JFK case (08/04/98) - - - - - - - - - - - - - - - - Browse the Newsreal Archives - - - - - - - - - - - - - - - -
		FALSE WITNESS | PAGE 1, 2, 3, 4, 5 - - - - - - - - - - Watt's involvement with Whitewater stems from a period in the mid-1980s when he was an occasional business partner and attorney for Hale. The two men were partners in real estate deals and at one time contemplated purchasing a life insurance company together, according to federal law enforcement records. Watt also saw transacting business with Hale as a way to make political allies who could do him favors some day. Ironically, it was Watt who, of the two men, was closer to Clinton. "David Hale boasted of his ties to Clinton, but they were never very real," says a former friend of both men. "Watt had a personal tie, if not a political tie." Three individuals who knew both Watt and Clinton say that the two men shared a mutual interest at the time in chasing women. One longtime Arkansas friend of Clinton recalled, "Watt was one of those Arkansas people who Hillary never wanted around Bill. She had this great hostility towards Watt. He was one of those people who were perceived to be a bad influence on Bill. That's because he really was a bad influence." One Clinton acquaintance recalled an evening when Hillary ordered the staff to have Watt thrown out of the governor's mansion. In his interviews with Salon, Watt said nothing to dispel such notions of his colorful past, but emphasized that he is now a married man with children, and that he has put these times behind him. During the time that Watt and Hale were engaged in business together, Hale was the president of Capital Management Services (CMS), a Little Rock-based lending company that was licensed and partially funded by the federal Small Business Administration (SBA). CMS's mandate was to distribute federal funds and private capital to small businesses owned by minorities and the disadvantaged. But Hale instead largely used his federally subsidized loan institution as a private piggy bank, making fraudulent and illegal loans that benefited himself and powerful Arkansas political and business figures, such as former Gov. Tucker and the McDougals. In early 1993, the SBA discovered the massive fraud at CMS and referred the matter to the U.S. attorney in Little Rock for a criminal investigation. Facing federal criminal charges in the summer of 1993, Hale first publicly made allegations that Clinton had pressured him in early l986 to make an illegal $300,000 loan to Susan McDougal. He then made a deal with Starr's Whitewater investigators. Hale pled guilty in March 1994 to two felonies, admitting that he had defrauded the SBA of more than $3.4 million. In exchange for providing information to prosecutors about the president, Tucker, the McDougals and numerous others, he received a reduced sentence. The story Hale told in return for Starr's leniency was this: He claimed that in February 1986 he had met with then-Gov. Clinton and Jim McDougal at McDougal's office in a housing development just outside Little Rock, known as Castle Grande, to discuss the loan. According to Hale, Clinton specifically asked him to "help Jim and me out" by making the loan to Susan McDougal. During the discussion, Hale claimed, Clinton even offered to put up land he owned in Marion County -- which later turned out to be his Whitewater parcel -- as collateral for the loan. According to Hale's account, Clinton also warned him, "Be sure -- my name cannot show up on this." Hale said he believed that Clinton pressed him to make the loan because Jim McDougal was a political ally of the governor. President Clinton has always adamantly denied the allegations. Partisans of the president have maintained that Hale fabricated the story to win a reduced sentence from prosecutors. Whatever did or did not transpire between Hale and Clinton, Hale ultimately made a $300,000 loan to Susan McDougal. On the loan application, the recipient was designated to be an advertising company called Master Marketing. In reality, there was no such company, and Jim and Susan McDougal misappropriated the money for their own personal use. Some federal law enforcement officials who have worked on the Whitewater investigation have always been privately skeptical of Hale's account regarding Clinton, and they point to much more important motives for Hale to make the loan to Susan McDougal than doing a favor for Clinton. At the time Hale provided the "Master Marketing" loan to Susan McDougal, federal investigators would later discover, Jim McDougal and Hale were swapping fraudulent loans with each other, in the process defrauding the federal government of millions of dollars. In exchange for the fraudulent loan to Susan McDougal's mythical marketing firm, Jim McDougal's Madison Guaranty Savings & Loan agreed to finance the purchase of a Hale property for $825,000, vastly more than it was actually worth, according to court and law enforcement records. To obtain his loan from Madison Guaranty, Hale needed to get an inflated appraisal for his land. Hale approached Watt and inquired if a real estate appraiser named Robert Palmer, a longtime friend of Watt's, could do the job. Palmer had previously done a number of appraisals for Madison Guaranty and had a reputation for cutting corners on occasion. According to Watt, his own involvement in the deal resulted from a good-natured desire to do favors for two friends, Hale and Palmer. In a plea-bargain agreement with Whitewater prosecutors, Palmer later pled guilty to a single felony charge for having performed an inflated appraisal for McDougal's Madison Guaranty and assisting McDougal in deceiving federal banking regulators. Palmer testified at the Tucker-McDougal trial that he had inflated the appraisals for Hale at Watt's urging. All together, Palmer testified, he had made three inflated appraisals for the benefit of Hale and McDougal. Hale similarly claimed, during his debriefings with the FBI, that Watt had been a willing participant in the scheme to obtain the inflated appraisals. A confidential FBI report states: "Hale related a story about a signal that McDougal, Watt and Palmer would use between them concerning appraisals. Hale believes that a password was used by Palmer, McDougal and Watt, which was a signal for Palmer to know that this appraisal needed to be a certain amount of money. Hale recalls that the password was 'This one's for Jim.'" Watt adamantly denies that he ordered Palmer to do anything illegal: "Did I ask Robert to break the law? No. Did I do the appraisal? No. But in the eyes of the government, I'm in the loop. And I didn't make any money off the transaction. I didn't have any future gain. I didn't have any reason to tell Robert to do something wrong. "If I had done something wrong, the prosecutors would have charged me," he continues. "But what they found was that I didn't take any money from Hale or Madison in arranging for Robert to do the appraisals. I didn't have any future profits." Watt believes that Hale wanted him involved him in the deal because he needed some deniability if the fraudulent appraisals ever became known: "David put me in the middle. He knew that I did [real estate] work. So I was the logical one. He knew that I knew Palmer. He figured that I would [be] the cushion because there would be someone to blame everyone on if something went wrong." Palmer initially was reluctant to do the inflated appraisals, according to his testimony at the Tucker-McDougal trial. But Hale began invoking Clinton's name with Watt in an effort to motivate Watt to press Palmer to do the job. "[Hale] said, 'I've gotta have this done,'" Watt testified at the Tucker-McDougal trial. He said Hale told him that he had been to a meeting at either the state capitol building or governor's mansion and that "Governor Clinton is interested. He wants me to try to get it to him to try and help his friends." This was not the only time Hale would use Clinton's name to enrich himself. Four years later, in 1990, Hale falsely invoked the governor's name to persuade executives for an Alabama health care company he could secure them a lucrative Arkansas state contract. This time, whether it was true or not, Hale's reference to Clinton's involvement in the deal helped convince Watt to intensify his pressure on Palmer to do the appraisals. Palmer finally agreed, providing Hale with the desired appraisal at the inflated price. Whitewater prosecutors cited Watt's testimony, and Palmer's subsequent actions, as evidence that Hale was telling the truth about Clinton's involvement in the illegal loan. Deputy Whitewater counsel Bennett explained to the presiding judge at the Tucker-McDougal trial, Federal District Court Judge George Howard Jr., why he considered Watt's testimony so critical to the prosecution's case. Attorneys for Tucker and the McDougals, Bennett pointed out, had asserted in their opening arguments "that it was not until Bill Clinton was elected president that [Hale's] story ever came out and that statement was a lie at the inception." Hale had fabricated the allegations about Clinton, the defense attorneys argued, so he would have something to trade prosecutors in exchange for a greatly reduced sentence. But Bennett contended that Watt's testimony rebutted the "charge of recent fabrication, which is at the core of their defense." Watt's account, Bennett pointed out, included "a couple of contemporaneous statements made in 1986, which was long before Mr. Clinton was elected president." However, in interviews with Salon, Watt said he had no way to be sure that Hale was telling the truth about the alleged meeting with Clinton, and he raised the possibility that Hale had falsely invoked Clinton's name to motivate him to press Palmer to do the appraisal. "Hale had a habit of using names and dropping names," Watt said. "David in fact used the governor's name a lot, but he used other names a lot. So you never really knew one way or another which was which. You never knew when he was telling the truth." As to whether or not he believed Hale was telling the truth about Clinton, Watt says, "I didn't have any independent knowledge of whether or not he was ever telling the truth." But, as Jim McDougal's attorney would point out during his trial, by invoking Clinton's name with Watt, Hale, the consummate con man, had pressed exactly the right buttons to get the appraisal he wanted done. "David got you involved in this ... transaction basically by pushing the political buttons, didn't he," McDougal's attorney asked Watt during cross-examination, "and by letting you know there were connections and opportunities? And that was the carrot he put in front of you, wasn't it?" "I had carrots ... hung out that there were future business deals," answered Watt. "I was currently involved in an elective process at that time, and my main concern was simply not to alienate any people or create any undue problems for that elective process." Indeed, Hale perceived that Watt owed his political career to him, and had boasted as much to Whitewater investigators, according to federal law enforcement officials who have spoken to Hale at length. An FBI report of an interview with Hale details the extent to which Hale believed that Watt was politically indebted to him. "Watt ran for a Little Rock Municipal Judge position in 1984 but lost," stated the report. "Hale [then] helped Watt put together a campaign for a special election that was being held in 1986 ... Hale said he helped Watt by probably giving money to his campaign and also putting Watt in touch with other people who could contribute. Watt won the 1986 special election for Little Rock Municipal Judge." N E X T+P A G E+| Watt is pressured by Starr's agents