BACKGROUND ON WHITEWATER

The following is a partial transcript of the Feb. 9 ABC Nightline report on Whitewater. Host is Ted Koppel.

Ted Koppel:

The greatest discrepancy between what the White House has claimed and what journalists are uncovering in the so-called Whitewater affair lies in the amount of money that Bill and Hillary Clinton say they lost on that land-investment deal: $68,900, they say; $13,500, says their former partner Jim McDougal. That's an important distinction because the Clintons and Jim McDougal and his ex-wife were equal partners in the Whitewater investment. Each couple owned 50 percent. Since the land cost over $200,000 the Clintons obviously contributed far less than the McDougals. But an investment of only $13,500 to purchase a half-ownership in a $200,000 property would come pretty close to defining a "sweetheart" deal.

On World News Tonight earlier this evening my colleague Jim Wooten reported on the results of an extensive ABC News investigation. It suggests that much of the $69,000 the Clintons say they lost in the Whitewater deal was actually money used to repay personal loans. Some, but not all, of Jim Wooten's report, is based on the testimony of Jim McDougal. At the moment only he of the four partners in Whitewater is talking. In fact, he will be our only guest on Nightline tonight. As background, I turn to a report by Nightline Correspondent, Chris Bury.

... The New York Times made that apparent sweetheart deal a national story in March, 1992 just as candidate Clinton campaigned in Texas. His version then as now: it was just a bad investment.

March 1992

Bill Clinton: "During that period I lost what was for me substantial sums of money."

The question is, how much?

Clinton: "I know we lost over $25,000 on this deal, never made a penny on it."

The campaign, concerned about political damage, asked Denver lawyer Jim Lyons, a Clinton friend, to look further. Those findings, the Lyons report, put the Clintons' losses at $68,900, the figure they've insisted on ever since.

Jim McDougal, "They now know there are vast and enormous errors in it, and it is embarrassing. That embarrassment caused them to be reluctant to release the records."

Most embarrassing, according to McDougal, is the true amount of the Clintons' loss. He puts it at just over $13,000: the amount of interest the Clintons paid on Whitewater loans in 1980. The White House insists the Clintons also paid on Whitewater debt in 1978 and 1979. Those tax returns have not been made public.

Despite his quibbles with the White House over how much the Clintons may have lost, McDougal insists the president did nothing wrong, that Bill Clinton was so busy as governor and so bored by the business details of Whitewater that his eyes would glaze over.

It was Hillary Clinton according to McDougal who dotted the i's and crossed the t's....

McDougal's personal and financial ties to both Clintons has investigators asking if they benefited in other ways. Was money from McDougal's Madison Savings and Loan used to cover and retire personal loans to Bill and Hillary Clinton? Did Madison secretly pay off a Clinton campaign debt in 1985? Was it a conflict of interest for Hillary Clinton, then the governor's wife, to do legal work for Madison before state regulators?...

By 1986, Jim McDougal, like his savings and loan, was sliding deeper into trouble. He was removed from Madison, suffered a mental breakdown and lost his fortune. He was indicted for fraud in 1989 and acquitted a year later. By the time his old friend was headed to the White House, Jim McDougal had faded into the obscurity of Arkadelphia, until the Whitewater story thrust him back into the limelight with the Clintons once more....

The relationship that once seemed so promising ended formally in 1992 when the Clintons sold their interest in Whitewater for $1,000. Now, just 10 years after running in the Clintons' circle, McDougal finds himself the odd man out, caught in a credibility contest with the White House. It's his word against the Clintons, and the Clintons aren't talking....