Clinton rocked by Whitewater trial verdict

Three guilty: Little Rock jury undermines the President's credibility as friends convicted of fraud
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President Clinton's hopes of putting the Whitewater affair behind him took a major blow last night as a Little Rock jury delivered an overwhelming majority of guilty verdicts in the first court trial arising from the case, in which he had personally testified on behalf of one of the three defendants.

After almost eight days of deliberation, the jury found former Arkansas businessman Jim McDougal, the President's original partner in the ill- fated Whitewater real estate venture, guilty on 18 of 19 counts in a $3 million fraud and embezzlement case dating back to the mid and late 1980s.

Jim Guy Tucker, Mr Clinton's successor as Governor, was found guilty on two out of seven counts while - most damaging of all for the President - Mr McDougal's wife, Susan, was convicted on all four embezzlement counts against her. All three were accused of securing improper loans from a Government-backed investment bank - and then using the money for their own purposes.

Implicitly at least, the verdict against Ms McDougal refutes Mr Clinton's videotaped testimony from the White House, last month in which he denied ever having been present at a 1986 meeting at which he pressured David Hale, the bank's head, to provide a $300,000 loan for Ms McDougal. The proceeds of that loan in fact went to prop up the failing Madison Guaranty savings bank, owned by her husband.

The result was "a vindication of our justice system," a delighted special prosecutor, Kenneth Starr, said last night. "We move forward," Mr Starr declared, noting that another, and separate, Whitewater case was due in court in Little Rock in mid-June, and that the Washington phase of the investigation - essentially involving allegations of White House interference with the investigation - was "very active".

No charges have been brought against either Mr Clinton or the First Lady, Hillary Clinton, in the affair. But last night's verdicts signal that the jury chose to believe Mr Hale's account of the loan's circumstances, even though he is an admitted liar who himself, struck a plea bargain to secure a reduced 28-month sentence for fraud.

The scales appear to have been tipped by documentary evidence showing the loan was improper.

In a terse initial reaction, the White House insisted that Mr Clinton "had nothing to do with the allegations that were the substance of the trial". The President himself said he "felt sorry personally" for the three convicted defendants.

But however much his aides insist otherwise, the outcome of the 12-week trial is a sorely needed victory for Mr Starr, and one that will give new impetus to the protracted and meandering Senate Whitewater hearings on Capitol Hill, which had been due to wrap up in two weeks' time.

It will also give the presumptive Republican candidate, Bob Dole, more scope to play the "character" card against Mr Clinton, in what is already shaping up as a no-holds-barred election campaign. "Ethically, this is very serious," said Jim Leach, the respected Republican chairman of the House Banking Committee and a specialist in Whitewater.

The McDougals indicated last night they would appeal against the verdicts, and Mr Tucker has previously signalled that he too would not resign even in the event of being found guilty.

Yesterday, meanwhile, brought separate embarrassment for Mr Clinton, as his lawyers amended a legal brief to the Supreme Court which attempts to delay the sexual harassment suit brought against him by former Arkansas state employee Paula Jones.

The President had tried to argue, inter alia, that his position as commander- in-chief entitled him to the delay. His lawyers, however, have now dropped this claim, after much criticism among Republicans of Mr Clinton's lack of military service in Vietnam, and a derisive advertisement against the President to the background music of You're in the Army Now.