Beyond Whitewater

......................................... James Ring Adams Beyond Whitewater A look into the account books of Madison Guaranty, the S&L run into the ground by Clinton pal James McDougal, shows that the president has more to hide than anyone suspected. he appointment of interviews with several key Robert B. Fiske as participants and the study of T independent counsel several thousand pages of with a broad mandate brings a documents have provided The new level of permanence to American Spectator with the the Whitewatergate scandal, beginnings of a recon- Bill and Hillary Clinton’s struction of the secrets of involvement in a relatively these files. This evidence, small real-estate development some of which the federal in the Arkansas Ozarks. Two government has forgotten events brought the furor to that it has and some of which this point. The first was the it so far has refused to hear, suicide last July 20 of deputy shows a pattern of corruption White House counsel Vincent every bit as damaging as the Foster, who was also the White House seems to fear. Clintons’ friend and personal lawyer. The second was the revelation that White House ’ Whitener and Associates aides entered Foster’s office soon after his death and I Freddy Dean Whitener lives in a battered mobile home six removed files dealing with the Whitewater Development miles out of Bradford, pop. 874, in north-central Arkansas. Company. The press, and the public, are asking if some- After the hour-long drive from Little Rock, you take the thing in those files could have caused a sensitive man to turn at Bradford’s one stoplight, just past the auto repair take his life. The speculation may be deeply painful to Mr, shop with the stacks and stacks of used tires in front, and Foster’s friends and family, but the Clintons have egged it , follow the country roads past the small farms and scattered on with their extreme reluctance to release the files. ! one-story houses. When the pavement runs out, you know What in these files so upsets the Clinton ad- you’ve gone several hundred yards past the gravel driveway ministration? Are they a legitimate concern for public pol- 1 that runs across the creek and up the rise to Freddy’s house. icy, and multiple federal investigations? Weeks of in-depth A chicken wire pen in the front yard holds a yearling deer __.. __ . - .~~. .~.~ - that one of his sons found newborn in the woods. James Ring Adams is the author of The Big Fix: Inside the In his early fifties, Freddy is tall and lean, with gray hair S&L Scandal (Wiley) and eo-author (with Douglas Frantz) Ii and a short salt-and-pepper mustache that he often strokes of A Full Service Bank: How BCCI Stole Billions Around I1 reflectively. He keeps busy, building a new house nearby, the World (Pocket Books). Evan Fitzmaurice helped in the tending a few head of cattle, and occasionally putting ~ research for this article. together projects in his tool shed. He shows off a bright yel- ~.- .- ..~~~ ~ ~ .~_ .- ..- --.- ~ - .. The American Spectator February 1994 . 49 LICENSED TO UNZ.ORG ELECTRONIC REPRODUCTION PROHIBITED low go-cart that he constructed for his youngest son two veteran had decided to build an Arkansas banking empire. Christmases ago, piecing together parts from a tractor, a In 1980, he took over the Bank of Kingston in the northwest motorcycle, and two sit-down lawn mowers. He says he corner of the state and in 1983 bought the ailing Woodruff worked on it sixteen days and sixteen nights, to keep his Savings and Loan, based in Augusta, across the White River mind off his troubles. But sometimes he will walk down the from Bradford. He opened a branch in Bradford, giving hill past an older son’s house and just sit a spell on the log many local people access to bank credit for the first time. wall next to the long one-story home that the Resolution Freddy himself took out a car loan. Then one day, Trust Corporation took from him two years ago. McDougal invited Freddy to lunch. By chance, says Freddy can’t remember exactly how many years he lived Whitener, he had a map of the proposed real estate project in the now-empty house. He started building it himself early on his dashboard, and took it in with him. The deal roused in his 37-year marriage to his bright, petite wife Dorothy. McDougal’s ready enthusiasm and by the end of the meal (Freddy was 15 when they wed; since he was born at home, he had talked Freddy into launching a development called he was able to add a year or two to his age when he finally Gold Mine Springs. applied for a birth certificate.) They raised their six children Freddy doesn’t dodge responsibility. He admits that he there, adding rooms as they saved some money. No one else was blinded by his hopes to make a bundle and that he put would buy it after the foreclosure, and Freddy winces as he too much trust in the wrong person. But no one could really notes all the repairs it now needs. have foreseen the disaster that followed. McDougal and The RTC took the home during a cold week in January Whitener formed a limited partnership called Whitener and 1991, giving Freddy forty-eight hours to get out. Freddy Associates; McDougal drew up papers making Freddy the remembers how his children and the preacher helped carry general partner, which gave Freddy legal responsibility. his furniture up the hill in a sleet storm. “When they came Freddy signed everything McDougal put in front of him. in the house, there was ice on their hair and everything,” he McDougal’s thrift, now called the Madison Guaranty said. “That was about the lowest point.” Savings and Loan, put up the down payment. Freddy con- tributed the sweat of his whole family as equity, calling his he RTC took Freddy’s home in the aftermath of its children out of college to help clear the building lots and lay seizure of Madison Guaranty Savings and Loan, the down the roads. T failed thrift owned by President Clinton’s friend and The partnership had some advantages for Freddy. business partner, James McDougal. Whitener has quite a Although McDougal never bragged about his friendship story to tell about his involvement with McDougal and with then-governor Bill Clinton, he clearly could pull Madison Guaranty, a story supported by extensive docu- strings to keep Freddy from trouble. A state geologist once ments. But he can’t understand why the RTC or its big-time called the sales office to complain about the reference to Little Rock lawyer never wanted to hear it. “They made like gold mines in the development’s name; although there had they never heard of McDougal,” he said. Even national been some on the site, they were played out, and he threat- reporters would lose interest and close up their notebooks ened to complain to the. state attorney general about false when he told them that none of his papers mentioned Bill or advertising. “When he’s sitting in the attorney general’s of- Hillary Clinton. Yet Whitener’s financial disaster opens one fice,” McDougal assured Whitener, “I’ll be sitting in the of the best windows yet into a morass engulfing the presi- governor’s office.” Later that evening the highly perturbed dent, key administration officials, and much of the Arkansas geologist called Freddy with an abject apology and asked political elite from which they sprang. him to report the call to McDougal. “I’ve been told that if-I Freddy’s business career reads like an episode of “The don’t apologize to you by midnight, I’ll lose my job,” he Honeymooners” written as tragedy, a working man’s dream said. for the big break gone sour. After years of back-breaking As Whitener got deeper into the road building, labor in construction, spending months from home on McDougal suggested that his thrift take over all the book- pipeline projects, he started building roads around his keeping and payments, and Whitener gave him physical hometown and took a fling in real-estate development. His control of the partnership checkbook. It was the worst mis- first effort worked out. He bought a few hundred acres of take Freddy ever made. By the time McDougal dissolved raw land, platted it and put in access roads, and retired the the partnership, in January 1986, Gold Mine Springs was mortgage as he sold off the lots. A local real-estate dealer facing foreclosure by the original land owner; one of the watched his success and tried to talk him into doing the original buyers, a contractor, had won a suit to claim tens of same with several thousand acres. Freddy hesitated to take thousands of dollars in promised payments and the return of it on, until he met James McDougal. his lot, and the new management of Madison Guaranty was McDougal was a hometown boy who made good, a pretending it never heard of Whitener and Associates. It got native of Bradford who had gone away to college and a worse. When the RTC closed Madison Guaranty in 1989, career as a staffer on Capitol Hill. Freddy says he had one of the hundred minor perpetrators in the half-trillion- known McDougal when they were in school, but didn’t see dollar Saving and Loan debacle, Freddy learned that the him ‘again until 1983, when McDougal came back home.

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