McDougal Testifies He Spoke First of Hiring Mrs. Clinton

Whitewater defendant James B. McDougal, testifying Wednesday at his conspiracy trial, altered his account of a 1985 conversation with then-Gov. Bill Clinton in which McDougal agreed to retain Hillary Rodham Clinton as a lawyer for his savings and loan.

McDougal, who was the Clintons’ investment partner in the failed Whitewater resort development, said he decided to retain Mrs. Clinton as attorney for Madison Guaranty Savings & Loan after Clinton stopped by his office in August 1985. McDougal said that he remembers the discussion vividly because Clinton, who had been jogging, left perspiration stains on a new leather chair in his office.

McDougal said that he, not Clinton, had raised the subject of hiring Mrs. Clinton. McDougal previously told reporters and government investigators that Clinton had asked him to hire Mrs. Clinton on a $2,000-a-month retainer, apparently because the future first family needed money.

Prosecutors said that Clinton, whose videotaped testimony is expected to be played in the courtroom today, will insist that he has no recollection of any such conversation with McDougal.

The 1985 encounter is the most important matter in the Whitewater investigation on which Clinton and McDougal disagree, but it has no direct bearing on the conspiracy case. The prosecution brought it up Wednesday in an effort to undermine McDougal’s credibility with the jury.

McDougal, 55, who chose to take the witness stand despite his failing health and an illness-addled memory, is being tried by independent counsel Kenneth W. Starr on charges that he conspired to defraud two federally backed financial institutions. His co-defendants are his former wife, Susan McDougal, and Arkansas Gov. Jim Guy Tucker.

Under long hours of intense cross-examination by government attorney Ray Jahn, McDougal repeatedly has denied the allegations against him. He also has maintained that neither his co-defendants nor the president was involved in any wrongdoing.

McDougal’s account contradicts the testimony of the government’s central witness, David Hale, who said earlier in the 10-week trial that he conspired with McDougal, Clinton, Tucker and others to defraud the Madison Guaranty thrift owned by McDougal and a government-backed small business investment corporation owned by Hale.

In many instances, McDougal has said that he does not remember events of a decade ago that are important to his case. During a pretrial hearing, a forensic psychiatrist testified that blockages in the arteries to McDougal’s brain are such that he recalls only those events in his past which were emotionally charged.

According to the psychiatrist, McDougal remembers the day he and Clinton discussed the $2,000-a-month retainer for Mrs. Clinton because he was upset that the then-governor was ruining his leather chair.

McDougal testified Wednesday that Clinton “plopped down” in the new chair wearing perspiration-soaked jogging clothes and, “when he got up, the outline of his body was there in sweat.”

In past interviews, McDougal has said Clinton raised the idea with him that Madison Guaranty could put Mrs. Clinton on retainer. But on Wednesday, he said: “I said to Bill, ‘We’re needing more legal help. Would it help Hillary to give it to the Rose firm?’ ”

Under questioning from Jahn, McDougal denied that he had told a different version of this story to the FBI. He insisted: “I told them that the conversation developed in response to my question, ‘Would it help Hillary. . . ?’ I did not say Clinton came in claiming he had financial problems.”

When told that Clinton himself has no recollection of the meeting, McDougal replied: “That he came by and ruined my chair is pretty clear in my mind.”

Records show that McDougal immediately took steps after that alleged encounter with Clinton to arrange to pay a $2,000-a-month retainer to Hillary’s firm. Mrs. Clinton, however, claims that the arrangement was negotiated by one of her associates many months later, in early 1986.

McDougal also sought to minimize a comment that he apparently made to the FBI about his co-defendant, Tucker.

When asked by Jahn if he had told the FBI that Tucker was “a thief who would steal anything that wasn’t nailed down,” he replied: “That’s not exactly what I said.”

He said that his exact words were “He’s like all lawyers, who would steal anything that isn’t nailed down.”