In 1978, Arkansas Attorney General Bill Clinton and his wife Hillary Clinton joined James and Susan McDougal in borrowing $ 203,000 to buy 220 acres of land in the Ozark Mountains. Shortly after this purchase, they formed Whitewater Development Corp. with the intention of building vacation homes on the land. The Clintons and McDougals planned to resell the lots a few years later, but the period saw high interest rates and most families couldn’t afford a vacation home. In 1980, James McDougal bought a small bank in Arkansas and loaned Hillary Clinton $ 30,000 to build a model home on the Whitewater lot.
Later, James McDougal held a fundraising event at Madison Guaranty in an attempt to pay off Clinton’s remaining campaign debt of $ 50,000. McDougal was able to raise $ 35,000, but as it was later discovered, approximately $ 12,000 was improperly withdrawn from depositors’ funds. The discovery in question is that the money raised was for a personal debt and not a campaign obligation. It showed how James McDougal acted on a personal level to help the Clintons, and after McDougal was found to have acted illegally on a few occasions, both Bill and Hillary were forced to be dragged away.
In 1985, James McDougal began investing in local residential construction. McDougal labeled his Castle Grande project and purchased 1,000 acres for $ 1.75 million. Financial laws were in place to prevent McDougal from borrowing more than $ 600,000 from Madison Guaranty, its savings and loan association. To raise the additional $ 1.15 million, McDougal engaged Seth Ward, among others, to help channel the money that was required. The money moved a lot through other investors and intermediaries. This was an attempt to hide the source of the money that McDougal essentially borrowed the total of $ 1.75 million from Madison Guaranty. The Rose Law Firm, where Hillary Clinton worked, was hired to provide legal services to Castle Grande during these illegal transactions.
While all of this was going on, James McDougal also borrowed $ 300,000 from a company owned by David Hale, a former Little Rock judge. Hale’s company received federal funding from the Small Business Administration to make loans to disadvantaged business owners. However, an investigation conducted ten years later found that Hale slowed down by as much as $ 3 million to political figures rather than disadvantaged business owners.
In 1986, the suspicions of federal regulators came true when they discovered that all the money came entirely from Madison Guaranty. James McDougal was forced to resign from Madison Guaranty in July 1986 due to improper practices. Castle Grande earned just over $ 2 million from Madison Guaranty. The investigation collapsed in 1989, because it had cost the government more than $ 4 million and they were unwilling to spend more money on an investigation that was far from over.
In 1988, witnesses who worked at the Rose Law Firm said that Hillary Clinton requested that Madison Guaranty’s land contracts be destroyed. These accounts were never proven and Hillary was never charged with attempting to destroy incriminating documents. However, Hillary wanted to close all ties with Whitewater because it was causing too much trouble. Hillary contacted James McDougal later in 1988 and asked for a power of attorney to sell the remaining lots of Whitewater, as they were vacant, and also to settle the bank obligations. A year later, in 1989, Madison Guaranty finally collapsed after many investigations and many bad loans and a change in accounting practices.
Media attention on Whitewater briefly paused, but resurfaced when Bill Clinton ran for president of the United States in 1992. James McDougal felt he was burdened by a disproportionate amount of investment and loss. He met with the New York Times and gave them a lengthy and detailed account of what happened at Whitewater Development Corp. Questions were raised about Hillary’s representation of Madison Guaranty, as well as whether McDougal illegally transferred money from savings and loans. to Whitewater Development Corp. The incriminating questions were swirling and it couldn’t have come at a worse time for Clinton’s. A new investigation continued with Kenneth Starr at the helm and David Hale, with whom McDougal had previously done business, as a witness. Starr claimed that Bill Clinton pressured him to make an illegal $ 300,000 federally backed loan to Susan McDougal. Conveniently for Bill, David Hale was convicted of multiple felonies and all of his testimonies lost all credibility. All investigations into Whitewater Development Corp. found insufficient evidence to charge Bill or Hillary Clinton with any crime.
