Castle Grande facts for kids

Castle Grande was a large piece of land in Arkansas, about 10 miles south of Little Rock. It became famous because of the Whitewater investigations. In 1985, a businessman named Jim McDougal wanted to build a big project there. He planned to include a small brewery, a shopping center, and a trailer park. The land was about 1,050-acre (4.2 km²) of scrub pine forest. It had already failed as an industrial area.

The land was bought for $1.75 million. Jim McDougal's company, Madison Guaranty S&L, could only invest a small part of its money. So, he put in $600,000 from Madison. For the rest, he had Seth Ward put in $1.15 million. This money was borrowed from Madison Guaranty. If government regulators found out, McDougal's S&L could be in trouble.

What Was the Castle Grande Project?

Castle Grande was a plan to develop a large area of land. It was meant to include different businesses and homes. The project was connected to the Whitewater controversy. This was a big investigation into financial dealings in Arkansas.

Key People Involved

Several people were involved in the Castle Grande project. Their actions led to problems and investigations.

Seth Ward's Role

Seth Ward, an Arkansas businessman, helped Jim McDougal buy the land for Castle Grande. He was also the father-in-law of Webster Hubbell. Hillary Clinton, a lawyer at the Rose Law Firm, worked on some legal parts of the project. This part was called the Industrial Development Corporation (IDC). Webster Hubbell also worked at the Rose Law Firm. Bad loans for this project ended up costing the public about $4 million.

Robert W. Palmer's Appraisals

Robert W. Palmer was a land appraiser for some Castle Grande loans. He later admitted to working with Jim McDougal and others from Madison Guaranty. They made the land estimates seem higher than they were. This helped them get bigger loans. Investigators found that Palmer made estimates higher for loans given to Governor Jim Guy Tucker of Arkansas.

Mr. Palmer did many appraisals for Madison Guaranty loans. One large appraisal was for a $1.05 million loan to Governor Jim Guy Tucker. This loan was to buy a water and sewer system for Castle Grande. Later, it was found the system was worth only about half that amount. When the loan was not paid back, it caused a big loss for Madison. Madison Guaranty later failed in 1989, costing taxpayers $68 million.

Palmer admitted he was guilty of conspiracy on December 6, 1994. This was related to the Whitewater controversy. He was given 3 years of probation and a $5,000 fine. Later, Bill Clinton gave him a pardon.

Jim McDougal's Business

Jim McDougal ran Madison Guaranty Savings and Loan starting in 1982. On April 14, 1997, McDougal was found guilty of 18 charges related to fraud. These charges were about unfair loans made by Madison. Since Madison S&L was insured by the government, taxpayers had to pay for the bad loans, which totaled $68 million.

Reports about Madison Guaranty's unfair loans first went to Paula Casey. She was the U.S. Attorney for Eastern Arkansas. She decided not to pursue charges. Paula Casey had been appointed by President Bill Clinton and was also his former student. Later, special government investigators found 14 people guilty of over 40 crimes in Arkansas. This included the sitting Governor, Jim Guy Tucker, who had to resign. Jim McDougal, who was Bill Clinton's partner in Whitewater, was also found guilty.

David Hale's Loans

Since 1979, David Hale ran a company called Capital Management Services, Inc. This company helped provide loans to minority groups and people with low incomes. These loans were supported by the Small Business Administration (SBA). David Hale said that he, Jim McDougal, and future-Governor Jim Guy Tucker created a plan. They would use Hale's company to get more loans from Madison.

Dean Paul, a friend of Hale's, borrowed $825,000 from Madison. This money was supposed to buy three properties from David Hale. But Paul never used the money. Instead, it went to Hale. He used it to get more matching funds from the SBA for his company. Hale then loaned $150,000 to Jim Guy Tucker and his business partner, R.D. Randolph. They used this money to buy part of Seth Ward's Castle Grande land for $1.2 million. Tucker and Randolph borrowed another $1.05 million from Madison.

McDougal then loaned $700,000 to his old friend, Senator William Fulbright. This was to buy most of Ward's remaining land. These deals helped remove Ward's loan from Madison's records. They also created sales profits for Madison. The deals were made to be confusing. This was to prevent regulators from finding Ward's loan and Madison's full investment in Castle Grande.

Government examiners arrived in March 1986. Jim Clark, a federal examiner, found that Seth Ward was behind the Castle Grande deal. The land was bought with Madison's money in an unfair way. Clark said Madison was one of the worst cases of unfair insider dealing he had seen in 20 years.

Hillary Clinton's Involvement

Hillary Clinton has stated she did not work on the Castle Grande project. She was asked about it by federal agencies during the Whitewater probe. In May 1995, she said, "I don't believe I knew anything about any of these real estate parcels and projects."

However, later, billing records from the Rose Law Firm were found. These records showed she charged Madison for about 30 hours of work with Seth Ward in 1985 and 1986. She and her lawyers said this work was for a company called IDC, not Castle Grande. IDC was the company that sold the land to Madison. She said the only Castle Grande she knew was Castle Grande Estates, a trailer park, for which she did no work.

In a January 1996 interview, Hillary Clinton told Barbara Walters: "Castle Grande was a trailer park on a piece of property that was about a thousand acres big. I never did work for Castle Grande." She added that when asked about it, she didn't recognize or remember it. She said her billing records showed she worked for IDC, which she believed was separate from Castle Grande.

When asked to explain the difference between IDC and Castle Grande, Hillary Clinton said:

Well, my understanding is that the work for Madison concerned property that was referred to then at the time and continually by the Rose Firm as IDC or Industrial Development Corporation property. I know that work as IDC. That's how it was billed. And I did not know that there was something called Castle Grande, to the best of my recollection, until it came to my attention through these investigations, the entire thousand acres that we referred to as IDC was being called Castle Grande . . . I was informed sometime within the last year or two that there was a trailer park on the IDC property called Castle Grande Estates. To the best of my recollection, that was the first I had ever heard of Castle Grande Estates.

She also said she could not remember her work on the project or 15 conversations with Seth Ward.

Susan McDougal's Refusal to Testify

Government officials said that the charges against Susan McDougal included questions about Hillary Clinton and Castle Grande. Mrs. McDougal refused to answer these questions.

During a grand jury, McDougal stated her name but refused to answer more questions. She said, "Get another independent counsel and I'll answer every question." A judge sentenced her to prison for refusing to answer questions. One question was whether Bill Clinton lied in his testimony about a $300,000 loan.

Susan McDougal spent 18 months in prison for refusing to answer questions. This included 8 months alone. After that, she started serving a two-year sentence from an earlier conviction. Later, she was charged with refusing to cooperate with the court and trying to block justice.

After serving four months, McDougal was released from prison for health reasons. She was later found not guilty of other charges in California. In 1999, she settled a lawsuit outside of court.

Her trial for refusing to cooperate and blocking justice began in March 1999. The jury could not agree on one charge, and she was found not guilty on the other.

McDougal received a full Presidential pardon from President Bill Clinton in 2001.

David Kendall's Role

David E. Kendall was Hillary Clinton's personal lawyer. He announced that the Rose Law Firm billing records had been found. He gave them to the Whitewater independent counsel. He called the records "another of the meaningless mysteries of Whitewater." Alston Jennings, a lawyer from Little Rock, represented Seth Ward. He visited the White House and spoke with Hillary Clinton and David Kendall about the billing records. Kendall continued to represent the Clintons in other legal matters.

Vincent Foster's Work

Vincent Foster was a partner at the Rose Law Firm with Hillary Clinton. He went with her to the White House as a deputy counsel. At the Rose Law Firm, he had worked on accounts for Madison Bank & Trust with Hillary Clinton. At the White House, he was unhappy with working in politics. He later passed away in July 1993.

Sam Bratton's Alert

Sam Bratton was an aide to Governor Bill Clinton. He handled state rules and issues. He was told by Beverly Bassett Schaffer, the Arkansas Securities Commissioner, that Madison S&L was having problems with federal regulators.