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A14 SUNDAY.OCTOBER 311993 THE WASHINGTON POST Hillary Clinton, then a lawyer with. Failed Arkansas S&L's Political Ties Questioned the influential Rose law firm of Little. Rock, acted as an attorney for Mad- ison when it went before the State began soon after the S&L was ta- Corp., a land company Bill and Hil- the handling of S&L funds by Mad- Securities Commission in 1985. An RTC, From A1 ken over by federal regulators.Be- lary Clinton jointly owned with ison officials, sources said.. issue was raised during Clinton's RTC investigators have been un- fore itwas taken over, regulators McDougal and his former wife, Su- The RTC's investigators who are 1992 presidential campaign about able to secure bank records that... ....-.were-critical of- Madison's manage-- san-MeDougal, according-to~govern--- based in Kansas City were prepared whether her work for the~S&L was a would show where money from the ment, contending it permitted con- ment sources. The corporation main- to forward the information earlier conflict of interest.She said her legal checks went, the sources said. flicts of interest, inflated real estate tained an account at Madison. and this fall, but the decision to send the work had been minimal. The RTC takes the step of refer- appraisals, and unsupported loan sources said Whitewater's activities referrals on was not made until ear- Controversy also arose during the ring cases to law enforcement agen- documentation and that it failed to are among the matters referred to ly October, the sources said. 1992 campaign over Whitewater's cies when its own investigation of a collect debts, state records show. Casey for further investigation. Madison, which grew from a tiny finances. Press investigations of failed S&L's books and loan files The RTC probe intensified about Whitewater, which the Clintons Arkansas thrift into a bustling insti- Madison showed that Susan McDou- raises "aggravated suspicion" of a year ago as investigators exam- have described as a money-losing tution during McDougal's years gal's advertising firm, which was as- possible criminal activity. Referrals ined loans and financial transactions venture that developed land in the . there, has surfaced before as an is- sociated with Madison, de ted are often made to the FBI or the involving a small group of borrow- Ozark Mountains, was formed in sue for Clinton. During his presiden- money in Whitewater's acc at Justice Department on limited ev- ers, including some S&L officers 1978. tial campaign last year, he was faced the S&I, to cover an overdraft. idence. The RTC has limited sub- and directors and local politicians There was protracted debate with questions about whether his Under intense media scrutiny, poena powers and no authority to who were Madison customers. within the RTC about whether administration in Arkansas gave fa- Denver lawyer James Lyons was re- bring criminal cases itself. As part of the investigation, the Madison transactions involving the 'vorable treatment to the troubled tained by the campaign to do a report Sources familiar with the Mad- RTC went to extraordinary lengths Clintons should be included in doc- S&L in the mid-1980s when it was on Whitewater's business dealings ison referrals said Casey's office to trace real estate transactions in- uments sent to Casey, because the seeking state permission for new and he found the Clinton's lost mon- will have to evaluate whether trans- volving. Whitewater Development investigation focuses primarily on ways to raise money.. ey on the investment and had done actions dating back to the mid-'80s nothing improper. Officials said they warrant criminal investigation. could not locate many of the records Casey declined to comment. that might answer questions about RTC spokesman Steve Katsanos the transactions. would neither confirm nor deny Tucker, a former congressman whether the agency asked Casey to and state attorney general, was in- further investigate Madison. "We volved in a number of Madison loans, have found Madison to be a very which went to fund small real estate interesting institution and we con- deals, Tucker's cable television com- duct investigations in cases of all pany and major industrial proj failed S&Ls,' he said. Madison loaned one of Sources said that the RTC also asked Casey to investigate whether more than $1 million. His company McDougal had violated S&L reg- was to provide service to the Castle ulations. He was acquitted of bank Grande mobile home park, a Madison fraud in 1990 in a case that focused Financial Corp. development near on bonuses andprofits he earned Little Rock, but the S&L ended up for real estate deals involving the Iosing $861,000 on the loan, the development subsidiary, Madison RTC said in an 1990 court docu- Financial Corp. ment. The RTC action comes after a Staff writers Michael Isikoff in long-running probe of Madison that Washington and Howard Schneider in Little Rock contributed to this report.