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Memorandum from b6 CC Re: Mozark b7C DETAILS CONTINUED: used his company to defraud the Small Business Administration (SBA) of millions of dollars in funding. Hale's company,/lCapital Management Services, Inc., was a Small Business Investment Company (sbic) which obtained funding from the SBA. For informational purposes, the SBA grants the status of SBic to. those companies filing for it. The purpose of the SBic is to lend money to disadvantaged minority companies. For every dollar. of investment money raised by the sBic, the sBA will match it $3 to $1. The investor will receive a return on his capital and also a tax deduction of 36 percent of the investment. The basic scheme used by Hale and associates to defraud the sBA was to obtain "investment" money from friends and associates. Hale would then present this money to the SBA as new investment money and request up to the $3 to $1 match. When Hale back to his "investors." In order to obtain the sBA money, Hale made various false statements and false representations to the SBA. On 9/24/93, David Hale and two other co-conspirators were indicted by a Federal Grand Jury in Little Rock on charges b6 of defrauding the sbA. After Hale learned he was to be indicted b7C he claimed to the press that President clinton; ; and James McDougal Madison Guaranty Savings and financial position of MgsL by lending SBic money to those individuals who owed money to the savings bank. These individuals, most of them friends of McDougal, then used the SBic money to pay back the loans at the savings bank. Hale claims that a $3oo,ooo loan was made to Susan.McDougal, some of the money went to pay back a personal loan/business loan of President and Mrs. clinton at mgsL. This transaction related to a business venture of-the clintons and McDougals named white Water Development (wwD). These allegations have led to massive press coverage of this matter regarding the. clintons involvement in wwd and other financial dealings of the clintons, McDougals, and other prominent business leaders in Arkansas. (CONTINUED - OVER) 2