McDougal had the right man. Nelson, a wealthy former utility executive and Clinton’s 1990 Republican gubernatorial opponent, is the president’s most formidable political enemy in Arkansas-and widely reputed to be an important source of the anti-Clinton documents, tips and raw gossip constantly circulating through Little Rock. Like Cliff Jackson, another local lawyer and an ex-Oxford chum of Clinton’s who has steered the press to allegations of draft avoidance and womanizing, Nelson gets frequent visits from out-of-town reporters. From his 34th-floor office in the TCBY building, Whitewater sprang to life as a national news story.
Soon after Nelson says he began meeting with McDougal, Whitewater hit the national newspapers. When an attorney hired by Clinton’s presidential campaign showed that the Clintons had lost $69,000 in the venture, the story disappeared. But late last year federal investigators began to look into allegations that Madison had diverted depositor funds into Whitewater and Clinton’s 1984 gubernatorial campaign. On Jan. 20, Attorney General Janet Reno named New York attorney Robert Fiske special prosecutor to examine the Clintons’ investment in Whitewater and its possible links to Madison’s failure.
Nelson expects that the substance of his discussions with McDougal will be part of Fiske’s investigation. He says he taped at least one of their conversations. A 38-page transcript-authenticated by Nelson but obtained by NEWSWEEK from independent sources -quotes McDougal saying that the Clintons were not truthful about their Whitewater losses. “I could sink [the claim of a $69,000 loss] quicker than they could lie about it … And Bill Clinton knows it,” McDougal says, according to the transcript. McDougal’s attorney did not respond to requests for comment.
Clinton aides say that Nelson, motivated by resentment and thwarted ambition, is pursuing a vendetta–a charge Nelson denies. The son of an itinerant laborer from Brinkley, Ark., he caught the eye of investment–banking patriarch Witt Stephens as a college student. Stephens gave him a job as a management trainee at Arkla, Inc., the natural-gas utility he controlled. Within 10 years Nelson was president of the company. Once a Democrat, he wanted to run for governor in 1986 but was asked by the incumbent Clinton to wait until 1990. When Clinton ran for a fourth term, Nelson felt betrayed and switched to the GOP. That year, an investigation Clinton ordered reportedly found a 1982 Arkla gas-lease sale “imprudent.” Nelson “is extremely bitter about Clinton,” says Tucker, now governor.
Some Clinton sources believe Nelson is even financing the legal defense of David Hale, a former Little Rock judge under federal indictment for fraud charges. Hale alleges that he was pressured by Clinton and McDougal into lending $300,000 to McDougal’s wife to prop up Madison. Nelson denies any role in Hale’s defense. But Clintonites are still wondering how far Nelson will go to settle an old score.
WAS HILLARY RODHAM Clinton more deeply involved in legal work for Whitewater partner James McDougal than she has previously acknowledged? in 1985, McDougal hired the Rose law firm to represent his ailing savings and loan, Madison Guaranty, in dealings with state regulators. Mrs. Clinton asked state securities commissioner Beverly Bassett (an appointee of her husband) to allow a novel plan that would have permitted Madison to raise cash by selling preferred stock. Bassett subsequently replied to the firm in a “Dear Hillary” letter indicating her consent. The letter raised the possibility that McDougal received favorable treatment for Madison because of his relationship with the Clintons. Bassett denies extending any special consideration. Mrs. Clinton has said that her personal involvement in the matter was “minimal.”
But NEWSWEEK has discovered additional correspondence linking Mrs. Clinton to state regulators. In state files, her name is also on a 1985 Rose firm letter asking approval for Madison to set up a brokerage subsidiary. A copy of the letter from files is only partly legible; just the name “Clinton” is visible. But a former state official familiar with the records confirmed last week that the letter contained Hillary Rodham Clinton’s full name.
The White House says the letter does not suggest a wider role for Mrs. Clinton in her representation of McDougal than previously disclosed. “I don’t think any of that is new information,” says Bruce Lindsey, one of President Clinton’s senior advisers. Regulators were not enthusiastic about the brokerage scheme, though they never flatly rejected it. They only insisted that Madison be recapitalized through the stock sale first. Neither plan was followed. Buckling under millions in bad loans, Madison needed more than Mrs. Clinton’s clout to keep it from failing in 1989.
