Victims Behind the Scandal

LITTLE ROCK, Ark. —  Sarah Worsham Hawkins began to feel the effect of the Whitewater scandal on her own life in 1994, not long after chief investigator Kenneth W. Starr came to town.

Suddenly, Hawkins, a single parent who supports two daughters and two grandchildren, discovered that no one in the banking industry would hire her because of her connection to Madison Guaranty Savings & Loan. Before Madison went belly up, she had been an officer in the thrift, which had been owned by Bill and Hillary Clinton’s Whitewater business partner, James B. McDougal.

By early 1995 it became clear to Hawkins that her freedom, not just her livelihood, was in jeopardy. Starr, the Whitewater independent counsel, told her he had evidence that she had approved false appraisals for property on which Madison held loans. He threatened to charge her with a crime that could bring five years in prison.

There was only one way out, she was told: Enter into a plea bargain and cooperate with investigators.

But Hawkins refused. “My answer is ‘no,’ ” she told her lawyer. “I have no money. The only thing I have left is my integrity. I haven’t done anything wrong.”

She spent the next year fretting about her future, struggling to make ends meet and preparing for the possibility of a prison term. All the while, she watched in amazement as former Madison co-workers agreed to plea-bargain--a step that many now regret.

But Hawkins’ story has a surprise ending.

Without warning, Starr recently cleared her of wrongdoing and apologized for falsely accusing her. It was a welcome development, but one that has also cast new light on the hardships she and other unheralded players in the Whitewater affair have suffered as a result of the investigation.

Her experience shows the inevitable human costs of a national controversy such as Whitewater--costs that politicians do not acknowledge when they debate the pros and cons of the lengthy investigation into the Clinton years in Arkansas.

It is an element of the Whitewater saga that largely has been invisible. Unlike the Watergate scandal or the arms deal controversy known as Iran-Contra--both of which involved political stars acting out their parts on a grand stage--Whitewater has swept up many people who are not household names and who live in small towns far from the glare of the nation’s capital.

At age 41, Hawkins is setting out to rebuild her life.

Having declined to talk to the media until now, she told The Times that political forces beyond her control have deprived her of the dream of economic security that she has strived to achieve since growing up in a poor, black family in rural east Arkansas.

“Sarah Hawkins doesn’t even know Bill Clinton,” said her court-appointed lawyer, Richard E. Holiman. “This last year and a half for her has been pretty nightmarish--just having her name associated with the Whitewater case.”

Plea-Bargain Remorse

Hawkins is not the only minor figure who feels victimized by the investigation. Some among the dozens of Arkansans who have agreed to cooperate with the prosecution have publicly expressed second thoughts after entering into plea bargains. And many more resent their treatment by Starr.

Perhaps the most visible is Stephen A. Smith, an ex-Clinton political aide and University of Arkansas professor who recently filed a civil suit accusing Starr of publicly misrepresenting his plea bargain.

Smith, who pleaded guilty to a misdemeanor in June, objected when Starr was quoted as saying that Smith had pleaded guilty to a felony charge of filing a false loan application. He has demanded a public apology.

Chris Wade, a real estate agent in the southern Ozarks crossroads of Flippin, Ark., sold many of the lots at the Clintons’ Whitewater resort development. He complains that Starr coerced him into admitting to two felonies and has tried unsuccessfully to withdraw his guilty pleas.

Of course, it is not unusual for wrongdoers to cry foul after they are caught. Nor is there evidence that any of Starr’s defendants pleaded guilty to crimes they did not commit.

In one case, a minor player caught in the scandal counts himself among the more fortunate. Robert W. Palmer says he deserved to pay the consequences for supplying McDougal’s thrift with false real estate appraisals and he feels lucky to have been given a suspended sentence. His lawyer, David Hargis, goes so far as to mock Palmer’s easy sentence, saying: “He had to write on the blackboard 100 times that he wouldn’t do it again!”

Legal experts say the complaints voiced by Hawkins and others are the natural result of the unusually aggressive prosecutorial effort that is unleashed whenever an independent counsel is appointed to investigate the president or another top government official.

In a quest to convict higher-ups, the prosecutor puts intense pressure on minor figures thought to have some knowledge of the crime. In this case, Hawkins said, Starr wanted her to give him information on McDougal’s activities.

“It’s scary and it’s heavy-handed, but it’s quite common,” said James B. Stewart, a lawyer and author who has published a book about Whitewater. “It’s a common prosecutorial tactic.”

If the independent counsel’s methods seem to reverberate more in Little Rock than elsewhere, it may be because many locals--such as the columnists for the Arkansas Democrat-Gazette--are hostile to the Whitewater probe.

In the view of many here, it is a witch hunt designed to humiliate Clinton and to poke fun at the political mores of Arkansas.

But Hawkins’ complaint goes beyond parochial or political concerns. In her case, questions are being raised about whether the independent counsel’s office, in its zeal to build a case against the president and his friends in Arkansas, may have trespassed beyond the ethical boundaries of aggressive prosecution.

Holiman insists that Starr’s strategy toward Hawkins has been ruthless, and perhaps improper.

“These guys are mean,” he said, referring to Starr’s staff. “They’ll threaten and coerce you. They will go away. And then they’ll come back and threaten and coerce you again.”

Starr’s staff declined to comment on the Hawkins case or on Holiman’s complaints.

Government Ally

The irony of Hawkins’ legal showdown with the government is that when she went to work at Madison in 1984, she did so at the urging of federal officials who felt she could help to keep the thrift in compliance with the law.

In that role, she viewed herself as being on the government’s side.

After graduating from Philander Smith College with a business and accounting degree in 1975, Hawkins began her career by working eight years as an examiner for the Federal Home Loan Bank Board. She met McDougal while she was conducting an examination of Madison in 1984. He soon offered her a job.

When Hawkins joined Madison as the compliance officer, it was a rapidly growing, profitable institution with a commitment that she shared to reviving the predominantly black areas of Little Rock. “In 1985,” she boasts, “we had the best performance in Little Rock in making loans to minorities.”

It was not until several years later that it would become clear that McDougal was using Madison as a “piggy bank” to improperly fund his real estate development projects.

Even after McDougal was ousted from Madison for financial mismanagement in 1986, Hawkins served as the glue that held the institution together during subsequent regimes. She even served as interim CEO at the Federal Home Loan Bank Board’s request during one transition.

After Madison was finally closed by the board in 1990, she helped the Resolution Trust Corp. in resolving Madison’s finances and then went to work for the RTC on other thrift foreclosures.

Named Likely Target

In June 1994, however, Hawkins’ RTC-related employment--which had enabled her to earn as much as $10,000 a month in consulting fees--ended abruptly. When she asked why she no longer was getting these lucrative assignments, she learned she had been identified in the Wall Street Journal as a likely target of the independent counsel’s investigation.

“I’d love to help you, but I can’t,” replied one previously friendly employer from whom she sought RTC consulting work. “I don’t think it’s good for us to hire you,” another said.

Then, in early December 1994, two FBI agents showed up at Hawkins’ doorstep with a letter informing her that she was “one of the subjects” of the independent counsel’s probe. It said:

“This office is aware of substantial evidence that you knowingly participated in a scheme in late February 1986 to create and backdate a number of appraisals for the Madison loan files with intent to deceive the Bank Board examiners who you knew were arriving in early March 1986.”

The news so shocked her, Hawkins said, she could barely take it in. “I was in a daze,” she recalled. “I invited the FBI guys in for coffee, and they said, ‘Sarah, you need to take this seriously.’ ”

Within a few days, Hawkins had taken their advice and obtained an attorney.

The seriousness of her situation overwhelmed her when she saw the title of the court document appointing Holiman to represent her: “United States of America v. Sarah Hawkins.”

“I hadn’t even been indicted yet, and already I was feeling like a criminal,” she recalled. “I knew I was innocent, but I began to wonder. I spent a lot of time soul-searching, trying to decide whether I was guilty of anything.”

She then met face to face with Starr and his deputies. “They said they had evidence so strong, there is no way I could beat this case,” she recalls. “They told me I could make it easier on myself, my family and the taxpayers by pleading guilty to a single felony.”

What surprised Hawkins most about this meeting was that none of the prosecutors tried to engage her in a discussion of her alleged crime. “They didn’t even ask me to explain,” she said. “They never gave me an opportunity to say, ‘That’s not true.’ ”

Hawkins, who had just turned 40, felt her whole life was being destroyed. Not only had she failed to achieve her midlife career goals, but she now was afraid her family and friends might view her as a criminal.

“My child kept saying, ‘Mama, what did you do wrong?’ ”

It was the support of her church and her desire to set a good example that caused her to resist Starr’s overtures.

As she waited to be indicted, Hawkins got a low-paying job as the office manager of a construction company and “spent half my days crying and praying.” But she did not give up, even when Starr’s staff came back the following June seeking a guilty plea to a misdemeanor.

The good news arrived in a letter to Holiman on Dec. 6, 1995--almost a year to the day after Starr first notified her that she was likely to be indicted. It said simply: “We do not have sufficient evidence to prosecute her for any criminal offense” related to the Federal Home Loan Bank Board examination of Madison.

But Hawkins’ travails were not over.

In January, she was called to testify as a defense witness in a pretrial hearing for McDougal, his former wife, Susan, and Gov. Jim Guy Tucker. As she prepared to take the stand, Ray Jahn, Starr’s deputy, announced the investigation of her activities had been reopened on another matter.

As a result, Hawkins did not testify, citing her 5th Amendment right against self-incrimination.

‘Stood Up to Them’

But a new investigation never materialized, and Holiman now believes that Jahn improperly threatened to reopen the case against her simply to silence Hawkins.

“If they knew they were threatening her just to keep her off the witness stand, then that was improper,” he said.

Jahn could not be reached for comment.

In her quiet way, Sarah Hawkins finally prevailed over the larger political forces that seemed to be destroying her life. She has a new job with a consulting firm and she’s dreaming of starting a minority-owned bank in Little Rock.

“She stood up to them,” Holiman said. “She’s a very courageous woman.”