Susan McDougal Gets 2 Years in Prison

LITTLE ROCK, Ark. —  Susan McDougal, one of President Clinton’s longtime friends and investment partners, was sentenced Tuesday to two years in prison and ordered to repay about $600,000 to the government for her conviction on fraud charges in the Whitewater investigation.

Even though McDougal played a relatively small part in the Whitewater saga, she received one of the toughest sentences meted out so far--only four months less than the central figure in the conspiracy, David Hale.

Her attorney, Bobby McDaniel, said Tuesday that Susan McDougal, 42, received a harsh sentence because, unlike many other defendants, she has refused all entreaties to cooperate with Whitewater independent counsel Kenneth W. Starr.

The sentencing of co-defendant James B. McDougal, her ex-husband, has been delayed until Nov. 18 because he is cooperating with the prosecution in exchange for leniency. A third defendant in the case, former Arkansas Gov. Jim Guy Tucker, was sentenced to four years’ probation Monday after his lawyer argued that he would die of a life-threatening illness if confined to prison.

McDaniel said that Starr’s staff recently offered to get Susan McDougal’s sentence reduced to probation if she would “provide information that she might have against Bill and Hillary Clinton.”

He said that she refused to cooperate because she has no information of wrongdoing by the Clintons. Starr, a Republican, repeatedly has insisted that his intention is to uncover the truth about Whitewater, not to build a case against the Clintons.

As a result of Susan McDougal’s refusal to cooperate with what she believes is a politically motivated investigation of the Clintons, McDaniel said, “she feels like what she: is a political prisoner in the United States.”

Although she intends to appeal, U.S. District Judge George Howard Jr. ordered her to begin serving her sentence on Sept. 30. In addition to a fine of $5,000, she was instructed to reimburse the government for a $300,000 loan she failed to repay to a federally backed institution, plus about the same amount in interest.

Susan McDougal, who has no source of income, was convicted on three counts of fraud in connection with the loan, which she received in the mid-1980s from a small-business investment owned by Hale and funded by the government.

Wiping tears from her eyes, McDougal pleaded with Howard for a sentence of probation. She said that she was a naive 21-year-old when she married James McDougal, her college professor 15 years her senior. She said she did everything he told her, including signing for the loan.

The Whitewater scandal, she said, has destroyed her life, preventing her from holding a job or marrying Eugene P. Harris, the man she fell in love with after leaving her husband in 1985. “If not for Whitewater,” she sobbed, “I would have been married and have children.”

The prosecution, however, characterized her as a woman who has lived a life of deception. She was called upon during the sentencing hearing to defend herself against charges pending in Los Angeles that were brought by the wife of Zubin Mehta, former music director of the Los Angeles Philharmonic orchestra. She is accused of embezzling money from the Mehtas while working for the couple as a personal secretary after leaving Arkansas.

She said that she never stole from the Mehtas and insisted that she had been permitted to use the family credit cards as repayment for work.

The $300,000 loan at issue in the trial was one of a number of transactions that were reputedly part of a larger financial conspiracy by the McDougals, Hale and Tucker to defraud Hale’s investment firm and Madison Guaranty Savings & Loan, which was owned by the McDougals.

Hale has maintained that he made the loan, which was never repaid, to Susan McDougal under pressure from her then-husband and then-Gov. Clinton. He said that Clinton later told him Susan McDougal had squandered the money.

Although her loan application concealed the real purpose of her loan, Susan McDougal has said that she borrowed $300,000 from Hale to develop a real estate venture known as Lorrance Heights. About $25,000 went toward acquiring the property from International Paper Co., she said, and another $105,000 for the construction of roads and drainage.

At one point shortly after Lorrance Heights was acquired, the property was held briefly by the Whitewater venture. James McDougal has said that he put the property under Whitewater ownership briefly because he thought the Clintons were going to sign their portion of the investment over to him and he hoped that Lorrance Heights then could reap the tax benefits of a $145,000 loss that had been suffered by the Whitewater partnership.

He said that he removed the Lorrance Heights property from Whitewater ownership shortly thereafter when the Clintons failed to give him their stock in the partnership. As a result, he has insisted, the Clintons enjoyed no benefit from the $300,000 loan in question.

When Susan McDougal realized that she could not repay the $300,000 loan, she tried to compensate Hale by giving him 5,744 shares of stock in Madison Guaranty, which soon was closed by the government for mismanagement. She later consented to a $396,000 judgment that Hale filed against her but never paid the money.