- The Washington Times - Monday, April 16, 2001

A former Arkansas judge who was the government's star witness in the Whitewater investigation has asked the U.S. Supreme Court to overturn a 1999 conviction in a state insurance case saying a federal grant of immunity protected him from prosecution.

David L. Hale, ex-Pulaski County judge and owner of a Little Rock, Ark., lending agency whose $300,000 loan to Whitewater figure Susan McDougal was key to the government's case, said in a 104-page motion last week that a 1994 plea agreement and grant of immunity from the independent counsel's office shielded him from being charged in the state case.

Hale's attorney, David O. Bowden, argued that the state's case was "in direct violation of the plea and immunity agreement" approved by former Whitewater special counsel Robert B. Fiske and was "retaliatory and brought in bad faith" to punish his client for cooperating in the Whitewater probe.

The former judge, who owned Capital Management Services Inc., was convicted on March 25, 1999, of lying to the Arkansas Insurance Department about the financial health of an insurance company he owned.

The court said Hale put $150,000 into the company's bank account to show it was financially stable, then withdrew it days later. Hale argued the infraction was a technicality, had never been charged before and caused no losses.

Although Hale faced eight years in prison, the jury that found him guilty recommended a sentence of 21 days which he is now appealing.

Hale, a key Democratic Party official in Arkansas, pleaded guilty in the Whitewater investigation to two felonies and served 21 months of a 28-month sentence in federal prison.

He was the government's key witness against Arkansas Gov. Jim Guy Tucker and James and Susan McDougal, owners of Madison Guaranty Savings and Loan Association, all of whom were convicted in the first Whitewater trial on charges of fraud and conspiracy in a $3.13 million bogus loan scheme involving Madison and Capital-Management.

In 1996, Whitewater independent counsel Kenneth W. Starr who succeeded Mr. Fiske said in court papers the state's prosecution of Hale was intended to punish his key witness for his cooperation in the case. Mr. Starr told the court it was "highly unusual, if not unprecedented," to bring charges against a cooperating federal witness.

Mr. Starr also filed documents showing that Little Rock police had warned Pulaski County Prosecutor Mark Stodola against bringing the case against Hale, saying it would be "a big mistake" because he was "cooperating with authorities in other matters."

In a letter to Mr. Stodola, Little Rock Police Chief Louie C. Caudell said "nothing should be done [in the Hale case] that would hinder the progress" of the federal inquiry.

Despite the warnings, Mr. Stodola began a formal investigation in December 1995 and charged Hale in July 1996 just before the expiration of the statute of limitations.

Less than a month after announcing plans to charge Hale, Mr. Stodola began receiving campaign donations from Democratic fund-raisers loyal to President Clinton, including Charles Yah Lin Trie, who pleaded guilty in the Justice Department's campaign-finance probe.

Mr. Stodola, defeated in 1996 for an Arkansas congressional seat, has denied any wrongdoing.

Hale was accused of violating the state's insurance code by failing to maintain sufficient cash reserves for his insurance company. He was charged on one felony count of making false statements to regulators in 1993 about his involvement with the firm, known as the National Savings Life Insurance Co.

A criminal referral in the case had been brought to prosecutors by Arkansas Insurance Commissioner Lee Douglas, who had been appointed to office by Mr. Clinton and reappointed by Mr. Tucker.

About 2,000 policyholders who bought insurance packages from the firm for about $1 a month to guarantee burial plots and coffins were involved, although no one lost any money. State records show no other Arkansas insurance official has ever been charged criminally in a similar case.

Mr. Bowden argued that only Hale was targeted by state officials for prosecution as a result of the Whitewater investigation.

He said no similar concern was given to former Rose Law Firm partner Webster L. Hubbell, who pleaded guilty in the Whitewater probe to stealing more than $480,000 from his law firm partners but failed to deliver on promises to cooperate.

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