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Susan McDougal stretched her legs in the ample passenger space of her husband, Jim's, light green Mercedes 280-S as it cruised north along the winding Route 65 to the resort town of Eureka Springs, Arkansas. It was a mild, brilliantly sunny winter day in early 1978. Susan was wearing bell-bottom pants and a tight white tank top. She knew her husband liked the impression she made along Arkansas's rural highways. Susan gazed out on the rugged hills of north-central Arkansas and thought how pretty it was. They passed occasional signs advertising campgrounds and raft trips down the White River. With the mild winters and scenery, McDougal was convinced that real estate in the area would be attractive to growing numbers of retirees. Jim and Susan McDougal were always on the lookout for real estate deals.
The big Mercedes was one of her husband's few indulgences. Given the money they were making, the McDougals didn't live lavishly. They lived in a modest, $74,000 house on Shadow Lane in Little Rock. Jim seemed indifferent to most of the trappings of wealth, but he loved clothes and cars, especially Mercedes. He'd had one of the first diesel-powered Mercedes in Arkansas. He also had a Jeep, which he abandoned after backing hard into a gas pump, smashing both the car and the pump, spewing gasoline. The gas station attendant had been apoplectic when McDougal got out of the car and casually lit a cigarette. Then he'd gotten a yellow 450-SL convertible. While driving to work with one of his close friends, future Arkansas governor Jim Guy Tucker, he managed to beach the car on the dividing strip of North University Street in Little Rock, stopping traffic during rush hour. McDougal was unfazed, chatting with Tucker as though nothing had happened. ''Don't get out and look around, giving everyone the satisfaction of seeing what an idiot you've been,'' he told his passenger. ''Don't worry. Somebody will come and take care of this.'' (Someone did.)
It was one of the many ways in which McDougal seemed to live on a higher plane than ordinary mortals, and it was one of the qualities that had dazzled Susan when, as a sheltered nineteen-year-old student at Ouachita Baptist University in Arkadelphia, she first met McDougal, fifteen years her senior, who was teaching political science there, an interlude in a career that had included stints as an aide to Arkansas senators John McClellan and J. William Fulbright. McDougal had all but run the state of Arkansas with his closest friend, Bob Riley, a decorated Marine Corps veteran who was blinded during World War II. Riley was Arkansas's lieutenant governor under Dale Bumpers, and when Bumpers defeated Fulbright in 1974 and went to the U.S. Senate, Riley served as governor for two weeks until Bumpers's elected successor was inaugurated. McDougal was his only staff. Riley was now chairman of the Political Science Department at Ouachita, and persuaded McDougal to join him on the faculty. McDougal's experience made him one of the most respected professors in the department, even though he was actually completing his own bachelor's and master's degrees while he taught.
Even people who wouldn't call the balding, slender McDougal handsome had to admit his appearance was striking. With his Savile Row suits, straw hats, and aristocratic accent, McDougal cut quite a swath in remote Arkadelphia, a town of ten thousand people about an hour's drive southwest of Little Rock that still had a few dirt streets and houses without indoor plumbing. McDougal sprang from equally humble origins. His grandfather had owned a pear orchard outside tiny Bradford, Arkansas, and operated a fruit stand. McDougal's father ran a dime store and restaurant near Bradford, where McDougal was forced to work in high school (he hated it). By the standards of Bradford, the McDougals were well-off; they were the first family in town to have air-conditioning. The young McDougal was a precocious student who was obsessed with politics. When he was sixteen he heard Adlai Stevenson speak in Little Rock, and came home with reams of campaign literature, thrilled by the experience. He dazzled family and peers with his vocabulary and even as a child could recite from memory speeches by Thomas Jefferson and Andrew Jackson. He was a fervent admirer of Franklin Delano Roosevelt, Woodrow Wilson, and Winston Churchill.
At the age of eighteen, McDougal was named an assistant ''reading clerk,'' the person who reads the title, numbers, and contents of proposed legislation in the Arkansas House of Representatives. Though he left to return to the University of Arkansas, his attention was already focused on the State House. He dropped out and at age twenty, even before he could vote, he managed to get himself elected to the state's Democratic party central committee, the youngest member ever. He worked on the Kennedy campaign and then landed a job on McClellan's staff in Washington. He later joined Fulbright's staff and ran the senator's successful 1968 campaign. Fulbright liked McDougal, the senator once said, because he could write a good speech and ''buy three watermelons at a good price.'' In the process McDougal acquired a storehouse of Arkansas political lore. It seemed he knew everybody who was, had been, or wanted to be a figure in Arkansas politics.
McDougal didn't hesitate to embroider his own legend. Despite his upbringing in rural Arkansas, he liked to boast that he had inherited royal blood: he was a direct descendant of an early Scottish lord, Somerled, who married a Norwegian princess. The McDougals, he claimed, once owned a third of all the land in Scotland, and it was to those roots that he ascribed his affinity for real estate.
No one questioned the literal accuracy of such claims. In Arkadelphia, such tales added welcome romance to a world that seemed far removed from the glamour and excitement people read about elsewhere and saw on TV. Susan Henley, in particular, who grew up in rural Camden, Arkansas, with her six brothers and sisters, was swept off her feet by McDougal. Susan's father had been an army motorcycle policeman and career officer. During World War II he rescued an attractive Belgian medical student during an air raid. He later married her, and Susan was born in Germany, where the couple was stationed at the time. The family moved back to Camden, her father's hometown, while Susan was a child. He owned and ran several service stations there with military efficiency. At Henley's stations, before a customer even turned off the motor, an attendant would be standing stiffly at the window. By the time the gas had been pumped, the attendant was expected to have completed an inventory of the tires, the oil, the underside of the car, and to have washed the windscreen. Susan was a precocious, imaginative child, and loved acting in school plays. She dreamed of someday moving to New York and becoming an actress like Ethel Barrymore.
During the summer before her senior year, Susan got a job as a researcher for another political science professor, who decided that his attractive but naive young employee should be introduced to a more worldly man. His first candidate was Cliff Harris, who played football for the Dallas Cowboys. That was perhaps too worldly for Susan, who was tongue-tied on their date. Next he introduced her to his colleague in the department, Jim McDougal, who asked Susan for a date. She was busy. ''I only ask a girl once,'' McDougal warned, then walked away. So Susan asked him for their first date.
Later that summer, McDougal invited Susan to join him for an afternoon with Bob Riley and his wife, Claudia, on the Rileys' pontoon houseboat at De Gray Lake. Susan looked gorgeous in her bathing suit. McDougal prided himself on his unblemished skin, which he took care to shield from the sun's rays. He had a year-round pallor that somehow added to his genteel appearance. But this afternoon, he shed his clothes, donned a bathing suit, threw himself into the water, and even water-skied -- all, Claudia Riley felt certain, to impress Susan.
McDougal was a Southern gentleman of the old school, and he treated Susan with elaborate courtesy, as if she were Scarlett in Gone With the Wind. One afternoon Susan had forgotten her keys, and was locked out of an office where she needed to finish some work. McDougal simply knocked the door down.
Susan was dating another student at the time, but she found McDougal hard to resist. Soon they were seeing each other regularly, even though Susan was still a senior in college. At conservative Ouachita, she was required to be in her room in the women-only dorm every evening by 10 P.M., which cramped McDougal's courtship. It would have been a minor scandal for a prominent professor to be found dating a student. The university president once warned McDougal against corrupting the morality of a student. Still, it all lent a certain illicit excitement to the affair.
One afternoon that fall Jim called, sounding excited. ''Bill Clinton is coming down with an advance guy, and he needs a crowd. See what you can do.'' It was 1975, and the young politician was in the midst of his campaign for Arkansas attorney general.
McDougal and Clinton were already close, even though McDougal was six years older and considered himself vastly more experienced. He still tended to think of Clinton as the twenty-one-year-old ''boy'' he'd met in 1968 during Fulbright's Senate campaign. It was the first time in three elections that Fulbright faced any opposition, from Jim Johnson, a segregationist supporter of Alabama governor George Wallace. McDougal was running the senator's Arkansas campaign office, and had asked for some help. Lee Williams, then Fulbright's administrative assistant, had called McDougal and said, ''I'll send this Clinton boy out to help you.''
Clinton, who'd just finished his senior year at Georgetown, had been working for two years on the Senate Foreign Relations Committee staff. He had met Fulbright while attending Boys Nation years before, and the powerful chairman of the Senate Foreign Relations Committee, a former Rhodes Scholar, had encouraged Clinton to apply for the coveted scholarship and had intervened to help assure that Clinton was named as one. Clinton would be heading for Oxford that fall. For the campaign, McDougal assigned Clinton to the post of Fulbright's driver. Clinton took advantage of the long, hot trips out of Little Rock and Hot Springs into the small, impoverished towns of the Delta to talk at length with the senator. One afternoon Fulbright called McDougal and Williams at campaign headquarters from Nashville, Arkansas. It was about 100 degrees and humid. ''Something is wrong with our car,'' Fulbright reported. ''We've got the goddamn air-conditioner on,'' he drawled. McDougal turned to Williams. ''Two goddamn Rhodes Scholars in one car out there and they can't figure out why they're making rain.'' Clinton, it turned out, had been running the air-conditioner with the vents closed.
Shortly after, Fulbright and Clinton pulled into the Arlington Hotel in Hot Springs where Clinton parked the car blocking the main entrance, then left with the car keys. When Fulbright located Clinton he found him arguing about the Vietnam War with a constituent -- the editor of the Hope Star. Fulbright was furious. ''This is not going to happen again,'' he told McDougal, adding that he was tired of listening to Clinton's incessant chatter about politics and foreign affairs in the car. Clinton was dismissed as Fulbright's driver, though he continued lending a hand in the campaign.
Despite the inauspicious beginning, McDougal liked Clinton. He saw him, as he later put it, ''as an amiable fuck-up who needed help.'' For starters, Clinton needed to learn how to dress. On campaign swings through Fayetteville, McDougal took Clinton to his favorite clothing store, which was holding a going-out-of-business sale, and insisted that he buy a suit and a decent shirt. The two would have long conversations about politics, with Clinton subtly flattering McDougal with his attentiveness and eagerness to please. And the two discussed their personal lives. McDougal confided in Clinton that he was enrolled in Alcoholics Anonymous, where he was now sponsoring another member. McDougal had long been a hard drinker, but few had realized how serious his problem had become. Now, in keeping with AA strictures, McDougal didn't touch a drop of liquor. Clinton seemed fascinated; he told McDougal that his stepfather had been an alcoholic, and he seemed eager to know more about alcoholism as a way to better understand his own family background. They also talked about women. McDougal made it a point to hire attractive young women for the campaign staff. Clinton was constantly flirting with them.
That fall, as Clinton was en route to Oxford, he and McDougal were in Washington, and met Fulbright in the Senate dining room for lunch. Despite McDougal's efforts, Clinton had long hair and was wearing a checkered shirt and sloppy clothes. Even McDougal, in a nod to the times, had let his sideburns grow out. Fulbright, deeply traditional despite his antiwar political views, was incensed. ''God damn,'' he said to Clinton. ''If I'd known you were going to look like some god-damned hippie, I wouldn't have gotten you this appointment.'' Then he turned to McDougal. ''And look at you. You always had a crease in your trousers. Now you look like a footman to Henry VIII.'' The senator turned away and refused to eat with them or talk to them any further.
Since then Clinton had finished his stint at Oxford, graduated from Yale Law School, and returned to Arkansas to launch his political career. Susan had never met Clinton, and barely knew who he was. She knew from Jim that he'd recently run for Congress in another district, lost, and was now campaigning for attorney general. Susan could tell that Clinton had struck a chord with Jim. Since McDougal was something of a political kingmaker in Arkansas, most aspiring Democrats made the pilgrimage to Arkadelphia to seek his support. Few displayed the combination of brains, energy, and ambition that McDougal looked for. But Clinton, Jim told Susan, was a young man with dreams. McDougal, a man who still harbored many dreams of his own, had a weakness for young men with dreams. There were too few of them in Arkansas, he'd often say.
That afternoon, Susan happened to have a speech class at Ouachita's neighboring school in Arkadelphia, Henderson State University. After class, she managed to drag virtually the whole class, about forty-five students, and their professor to the Henderson cafeteria. Clinton arrived looking younger than she expected and delivered a short talk. Jim seemed thrilled by Susan's efforts: apart from the speech students, the ''crowd'' consisted of Jim and four other people. They all laughed with Clinton about it later that evening, when Susan met him for the first time. That evening McDougal wrote Clinton a check for $1,500, the legal maximum for individual political contributions. Shortly after, Clinton sent McDougal a thank-you note. ''I really liked that pretty girl,'' Clinton wrote, referring to Susan.
About a month later, McDougal told Susan he'd been invited to Hot Springs for a party to celebrate Clinton's engagement to a fellow Yale Law School graduate, Hillary Rodham. Did Susan want to join him?
Hot Springs! Susan was thrilled. It could have been Monte Carlo and she wouldn't have been any more excited. She'd never been farther away from home without her family than Arkadelphia, an hour's drive from Camden. In her mind, Hot Springs, the most prominent resort in Arkansas, was synonymous with glamour, excitement, sophistication. Jim bought her a new dress for the occasion. She wanted to look good for him and his high-powered friends.
The party was held at the home of a friend of Clinton's in Hot Springs, where Clinton's mother, Virginia Dwire, lived and where Clinton had grown up. When Susan and Jim arrived, the party was in full swing, and Susan was hardly prepared for the experience. She'd grown up in a home where smoking and drinking and dancing were strictly prohibited. Here, rock music was throbbing, a pall of smoke hung over the room, there was an open bar, and as far as she could tell, most of the guests seemed drunk. When she went to the bathroom, one woman had passed out on the floor. ''My God, where am I and what have I gotten myself into,'' Susan thought. ''This is hell.''
The evening took on a slightly surreal quality. Susan was introduced to Hillary Rodham, and it just didn't add up. This was Clinton's fiancée? The party was filled with people who were Bill's old friends. The women all seemed to be tall, blond or brunette, wearing lots of makeup and jewelry. Susan thought they were nearly all beautiful and sophisticated. Hillary looked nothing like them. She seemed to pay little or no attention to her appearance. She wore almost no makeup, and it looked like she hadn't even been to the hairdresser the day of her own engagement party. She wore big, unattractive glasses that made her look bookish, which was poison when it came to men as far as Susan was concerned. Susan thought she would rather die than stick out the way Hillary did, especially in a place like Hot Springs. In Hot Springs, Susan had always been told, women cared about their appearance. Hot Springs was a city where people put on airs.
Hillary and Susan spoke briefly; Susan took note of Hillary's harsh Yankee accent. Bill Clinton seemed in high spirits, working the crowd, throwing his arm around friends, flattering the women. Susan thought Clinton was attentive to his future bride. But at one point he sidled up to Susan, and pointed out an attractive woman he'd just been talking with. He leaned in close to Susan's ear. ''See that older woman?'' he said. ''Older women are really sexy, hot.'' Susan pulled back, startled. She was shocked by the remark. Yet she was also excited by it. Clinton looked amused by her obvious discomfort.
Unlike Susan, McDougal spent quite a bit of time talking to Hillary, discussing Arkansas politics and Clinton's campaign. Hardly anyone else seemed to be talking to her. Afterward he couldn't stop talking about Hillary: her great education, her intellect, her poise. McDougal was very friendly with Clinton's mother, Virginia, who'd made no secret of her own disapproval of Hillary. As Virginia Kelley (she married Dick Kelley in 1982) wrote in her autobiography, ''Hillary...was different. No makeup. Coke bottle glasses. Brown hair with no apparent style....She was quiet, cool, unresponsive.'' But McDougal told Susan that Virginia had it all wrong. Her son was attracted to intelligent women, and so was he. It all made Susan a little uncomfortable. She was just a Southern country, girl. She'd never known anyone like Hillary. She'd certainly never heard that these were qualities that men looked for in a woman. Why was McDougal interested in her if he could be with women like Hillary? Was this what men looked for in places like New York and Washington?
Susan needn't have worried. McDougal seemed to court her single-mindedly. He showered her with flowers and gifts. He proposed to her on a student trip to Washington, D.C. She told her parents about McDougal, and they were horrified. McDougal was not only fifteen years older, he was divorced. ''You'll ruin your life,'' her mother warned her. Susan introduced Jim to her brother Bill Henley, who also had a negative reaction. Not only was McDougal too old, in his view, but he pontificated. Bill thought he might be the smartest person he'd ever met, but he was no conversationalist. He preferred to hold court. Susan didn't care. She was in love.
On the morning of her graduation, McDougal pulled up in his yellow convertible. When Susan reached the car, he said, ''I'm taking you away.''
''I'll miss graduation,'' she protested. But she got in. McDougal drove her to the small bungalow he still owned in Little Rock, which he'd freshly decorated with French wallpaper. ''Either you marry me now or I'm taking you back and I'll never want to see you again,'' he said. They called Susan's parents to break the news. ''I have to do it,'' Susan told them.
They were married in May 1976, in an afternoon ceremony on the lawn of the bungalow decorated with a flower-entwined arbor. It was a beautiful afternoon. Bob Riley, who also happened to be a licensed minister, officiated, and one of Susan's sisters was a bridesmaid. Bill Clinton and Hillary Rodham were there, arriving late after Bill gave a campaign speech. Bill and Hillary had been married in Fayetteville the year before, and Hillary had kept her own name, another thing Susan had trouble understanding. She couldn't wait to be Susan McDougal rather than Susan Henley. Also attending were Betty and Jim Guy Tucker. Among Arkansas Democrats, it was like an extended family gathering.
Susan's parents overcame their disapproval and showed up. They'd never fully reconciled themselves to the idea of Susan marrying Jim, and they were especially upset that the wedding ceremony wasn't held in a church. They felt out of place among Jim's political cronies; none of their friends were there. A modest reception with punch and cookies followed. Many of the guests, including the Rileys, had dinner at McDonald's afterward. Jim and Susan left immediately for New York City, prior to embarking on a honeymoon tour of Europe. Jim borrowed $3,000 for the trip. Susan could hardly believe she would be seeing places she'd always dreamed of. To Claudia Riley, it was like something out of Camelot: Jim and Susan were the perfect couple with the world at their feet.
Susan had assumed life with Jim McDougal would be interesting. But it had proven even more of an adventure than she anticipated, in ways large and small. One afternoon she was in the bungalow when she heard a chain saw. When she went outside, Jim was leaning out of a freshly cut diamond-shaped hole in the hayloft of the barn. ''This is the window of the new guest cottage,'' he called down to her. ''I'm roughing it in.'' McDougal had scant skills as a carpenter, and someone else had to finish the work. But eventually the barn was transformed into a guest cottage. It was typical of McDougal's style. He'd have a big, imaginative idea, and somehow he'd get others to carry it out, or rescue him when he ran into trouble.
Despite his entrepreneurial energies and instincts, McDougal paid no attention to managing money, leaving the family finances to Susan, and he was generous to a fault. Susan had redecorated the bungalow, and the first piece of furniture she bought was a small glass-topped table. It held considerable sentimental value for her. When the McDougals decided to sell the house, a young couple agreed to buy it. McDougal liked them, and when they admired Susan's table, he gave it to them on the spot. Susan was furious, but when they moved, McDougal insisted it stay behind. Susan never quite got over the loss of that table.
Now, as McDougal sped the Mercedes through some hairpin turns in the foothills of the Ozark Mountains, Susan wondered where this expedition to northwest Arkansas was likely to lead. Apart from politics and his growing real estate deals, McDougal had virtually no interests or hobbies. Specifically, in sports-crazy Arkansas, he liked to reinforce his iconoclastic reputation by boasting that he wasn't interested in ''anything that involves a ball.'' That ran the gamut from football to golf. His idea of a good time was to drive along remote roads around Little Rock, looking for parcels of real estate that he could clean up, carve up, and resell at a profit.
Susan loved real estate, too -- up to a point. This weekend was supposed to be a quiet getaway to Eureka Springs, a quaint Ozarks tourist town just south of the Missouri border. But after they arrived and checked into their hotel for the night, they awoke the next morning to discover that a freak snowstorm had blown in overnight, making driving difficult. Jim wanted to stay in, and in no time, Susan noticed, was scanning the real estate ads in the local paper. Suddenly he looked up with a gleam in his eye. ''Look at this,'' he told Susan. ''Twelve hundred acres in Marion County for less than $100 an acre.'' He paused thoughtfully. It struck him as an amazingly good deal. ''Is there any land in America that could be worth less than $100 an acre?'' Susan looked at the ad. Echoing what she knew her husband already thought, Susan said no.
They bought the land within a week, sight unseen.
Flippin, population one thousand, is located in the far northern part of Arkansas in the foothills of the Ozarks, about an hour east of Eureka Springs and a three-hour drive from Little Rock. Though the area is popular with anglers and white-water rafters, it has never developed into a major tourist area, and remains far overshadowed by the Missouri Ozarks, with attractions like country music capital Branson. Flippin doesn't even have a motel. The town is little more than the intersection of two state highways, and the main street has vacant lots on it. Ozarks Realty is located just past the intersection, just down the street from the Citizens Bank and Trust Co. of Flippin.
Chris Wade, the owner of Ozarks Realty, didn't expect much walk-in trade. Still, he'd showed up at the office the weekend after the McDougals bought the land in Marion County. There wasn't much else to do anyway, and he liked to shoot the breeze with his agents, his heavyset frame settled in his chair, feet propped up on his desk, glancing out the picture window of the former barber shop that now served as Ozarks's office. His wife, Rosalee, usually came along. She handled the bookkeeping and kept the office running. It was a nice, small-town operation.
Wade had every reason to look with satisfaction on his life and career there. He'd grown up poor; his father had been driving through the area en route from New Mexico to Florida, and liked the terrain and scenery. On impulse, he stopped to go fishing, then traded the family station wagon for a piece of land, and the family settled down.
From such modest beginnings, Wade had become one of the area's leading citizens. He got his real estate license at age seventeen and began selling in the Flippin and Yellville area. In addition to his real estate operation, he was president of the local chamber of commerce, a post that brought him into contact with most of the state's political figures. He'd helped found the Citizens Bank along with other local businessmen concerned that the area's existing bank, located in the nearby town of Yellville, was favoring Yellville customers at the expense of Flippin. Wade was on the bank's board. True, there was some grumbling about Wade at the bank, where some referred to him as ''fifty-cents-down Wade.'' Many of Wade's real estate customers were poor, and bought property with little down and financing provided by Wade. Many defaulted, Wade would repossess, and sell the property again, all with a speed that some found unseemly.
About midafternoon, Wade looked out and saw a large Mercedes pull into his adjoining parking lot, parking next to his pickup. Hardly anyone in Flippin drove an import, let alone a Mercedes. Out walked Jim McDougal, impeccably dressed in a dark suit even though it was the weekend, and Susan in her tank top. The two came in and announced they had just bought 1,200 acres nearby. Wade pointed out that the acreage consisted of scattered parcels, some of them lacking road frontage or access. McDougal was impressed that Wade seemed to know what he was talking about; he knew land, he knew the area, and he knew the customer base. The two chatted a little, and Wade was impressed by the fact that McDougal was a professor with political connections. They drove out to a few of the parcels, but most of them McDougal never saw. He listed the land with Wade for immediate resale.
As McDougal saw it, there was little risk. He had a half-dozen real estate developments underway, and he needed an outlet for the growing cash flow they were generating. He and Susan had formed Great Southern Land Co. to invest in land, and had already developed three parcels around Little Rock. They needed inventory, and McDougal thought the Flippin area held promise as a retirement and vacation haven. In any event, McDougal didn't expect to own the property for very long. Even as he reached an agreement to list the parcel, he told Wade to divide it up and sell the individual pieces. As events turned out, Wade was able to sell all of them by the time McDougal closed on his own purchase, netting McDougal a handsome profit without ever having put his capital at risk. For his part, Wade was delighted at the commissions.
McDougal had never expected to get into real estate until he was persuaded to invest by his own sponsor in AA, Doyle Rowe. Rowe was a big believer in land, and owned twenty-two parcels around Little Rock. McDougal had mentioned he wanted to make some money, and one day Rowe took him out to a parcel that was for sale. ''Buy it,'' he told McDougal. ''If you don't make money I'll pay you back.'' McDougal took a $500 cash advance from his credit card for the down payment and borrowed the rest of the $40,000 purchase price from the seller. The property was overgrown with weeds and bushes and looked like a mess. McDougal rented a brush hog and cleared and groomed the parcel. The broker sold it six months later for $80,000. McDougal was thrilled. It was the easiest money he'd ever made.
Soon after, another broker called him. ''I've got eight hundred acres at $140 an acre,'' he said, ''but half of it doesn't have road access.'' McDougal went out to see the tract and calculated that the land with the frontage alone was worth the purchase price. He bought it, cleaned it up, obtained easements for the plots lacking frontage, and sold it again in six months. This time his profit was more than $180,000.
McDougal occasionally mentioned his ventures to Senator Fulbright, who had inherited considerable wealth and had a net worth of several million dollars. One day Fulbright asked, ''How'd that land of yours do?'' When McDougal told him, Fulbright exclaimed, ''Jesus Christ! Inflation is eating away everything I inherited. I could use something like that.'' McDougal said he'd see what he could do.
Soon after, in 1973, McDougal heard about a tract near Benton, a cash deal for $150,000. Fulbright had been a mentor, a father figure for him, and McDougal liked the idea of being able to somehow repay him. He asked Fulbright if he'd like to come in on the deal, and Fulbright agreed. The two formed a partnership, Rolling Manor, and they co-signed a note for the property. Fulbright was campaigning at the time, and was too busy to be involved. He never saw the property and showed little interest until it was subdivided and sold within a year, more than tripling Fulbright's investment.
Fulbright was thrilled, and word soon spread among the senator's circle of McDougal's financial acumen. For McDougal, the name Fulbright was also magic in Arkansas banking circles. Borrowing was easy, often at below-market rates offered the senator.
Soon after Clinton's visit to Arkadelphia, McDougal had his eye on another small plot near Little Rock, and, almost offhand, mentioned it one day in a conversation with Clinton. ''You ought to buy this, Bill,'' McDougal said. Clinton knew of McDougal's success with Fulbright, and was interested. He was still paying off student loans he'd taken to finish Yale Law School and he was $24,000 in debt from his unsuccessful 1974 campaign for Congress. Still, Clinton knew next to nothing about real estate, mortgages, or finance. McDougal was amazed that a Rhodes Scholar and Yale law graduate seemed to know so little about business and money. After McDougal walked him through it, Clinton went in on the five-acre investment, paying $500 down and sending a monthly payment of $75, which he did conscientiously.
McDougal's motives in this instance were the reverse of his ventures with Fulbright; here McDougal was the mentor, the father figure, and Clinton the neophyte. McDougal was a professor still harboring some political ambitions; Clinton was a young man with a future, but hadn't yet been elected to office. McDougal included Clinton because he liked him and wanted to remain a player in the Arkansas political world. From Clinton he expected gratitude and respect, but little more. He took satisfaction in helping him, much as he did the people he helped in AA. And McDougal simply liked having a partner. An only child, it helped satisfy the longing he'd always felt for a brother or sister.
Soon after Clinton's first investment with McDougal, in 1976, Clinton won the race for Arkansas attorney general, and he and Hillary moved to Little Rock into a house at 5419 L Street just west of the State Capitol. While small and unpretentious, the house was located in the older, comfortable Hillcrest neighborhood, and its purchase took all the financial resources the couple could muster. Hillary went to work for the Rose Law Firm, arguably the state's most prestigious, at an associate's salary of $24,500. As attorney general, Clinton earned a meager $26,500. Their combined salaries in 1978 were $51,000. The McDougals were among the new circle of friends the Clintons cultivated, and they often dropped by each other's houses or bumped into each other at the Black-Eyed Pea, a blue-plate restaurant with country atmosphere featuring Southern food located just minutes from each of their homes.
Clinton liked to use nicknames for Susan that he'd coined: either ''Child Bride'' or ''The Kid.'' They all discussed their political ambitions, including Jim Guy Tucker's interest in the Senate seat held by former governor David Pryor, and Clinton's own decision to seek the governor's mansion rather than run for Pryor's seat himself. Susan was thrilled that Clinton, somebody she and her husband knew personally, was becoming so powerful and had moved to Little Rock with Hillary. Susan considered Hillary and Betty Tucker to be her best friends. Still, Hillary continued to both intrigue and mystify Susan. Not long after the Clintons' marriage and after Bill's election as attorney general, on one of her first visits to the Clintons' home, Susan and Hillary were chatting, and Susan said, ''Your parents must be really proud of you.''
''Not really,'' Hillary answered. Susan was perplexed. If she'd married the attorney general, her parents would have been delighted.
''My parents didn't even know where Arkansas was,'' Hillary continued, a trace of bitterness in her voice. ''I had to get out the map and show them. They thought I'd end up in Washington, D.C., doing something with my life.''
The comment made an impression on Susan. She herself still hadn't thought of having an identity beyond that of her husband. Yet obviously Hillary longed for a career of her own.
During their frequent visits, McDougal and Susan would sometimes mention their successful real estate operations; Susan had even obtained a real estate license and was working as a broker. The Clintons, by contrast, complained that they could barely make ends meet. But at least Clinton's small land investment worked out well. In 1978, just as Clinton was starting to mount his campaign for governor, McDougal was able to sell the tract for $5,000, a 75 percent return on their initial investment of $2,850.
That transaction had closed just two months before. So that summer, when Wade happened to mention that he had a new listing he thought might interest McDougal, the Clintons' finances were on McDougal's mind. He mentioned to Wade, ''I'd like to do something to help Bill Clinton. He's starving to death as attorney general. I'd really like to see him make a little money.'' McDougal said he'd jump in the car with Susan and come up and take a look.
Wade was delighted at the mention of Clinton's name. He'd first met Clinton when he was running for Congress from the Third District, which included Flippin. Clinton had not only visited Flippin personally; he'd walked down the streets, going door-to-door and visiting with voters. Not long before McDougal's visit, Wade had been astounded by Clinton at a chamber of commerce lunch in Flippin. Clinton, as attorney general, was the featured guest, and sat with Wade at the head table. During lunch, Clinton asked Wade to tell him the name of every chamber of commerce member and that of their wives, about thirty people, which Wade did. After Clinton spoke, he greeted every member of the audience by their first name, without any notes or further prompting. Wade thought the feat not only demonstrated a prodigious memory, but showed that Clinton really cared about people in Flippin. That spring, Clinton had easily won the Democratic nomination for governor, which in Arkansas at the time was tantamount to election. Just about everybody in Flippin had voted for him. Wade was flattered that any future governor of the state might be interested in investing in his area, but especially flattered that it was Bill Clinton.
''Take a look at this,'' Wade said when the McDougals arrived in Flippin after the three-hour drive from Little Rock. A group of local businesspeople, shareholders of the 101 Development Corp., had just listed a parcel of 230 acres along the White River, about a twenty-minute drive from Flippin. The group had bought the property, known locally as part of the Ranchettes development, after the prior owner, a company called Horseshoe Bend Development Corp., had fallen into bankruptcy. The group had named their company after Arkansas Route 101, which runs to the tract the group acquired. Route 101 is a remarkably broad, well-paved thoroughfare for such a rugged and sparsely populated area of the state, especially given the poor condition of many of the other, more heavily traveled state roads in Arkansas. Indeed, Route 101 is one of the many legacies of former Democratic governor Orval Faubus, whose administration built Route 101 after Faubus received generous contributions from local land owners. Asked by a reporter how he could afford a $200,000 home when he retired from his $10,000-a-year job as governor, Faubus replied, ''I was frugal.''
McDougal was intrigued, especially because the acreage had a lot of frontage on the White River. The river descends through the rugged terrain of north-central Arkansas and has stretches of white water, making it popular for rafting expeditions and with fishermen. There was only so much river frontage available, McDougal figured, and given his vision for the area as a retirement and vacation haven, he thought a premium could be charged for access to and views of the river. Like his previous investments, the large tract seemed ideal for subdividing and reselling as individual lots. Jim and Susan joined Wade in his truck and they drove to the property.
The last mile or so was over a pretty rugged road, but as they reached sight of the river the McDougals were captivated. The land was hilly, lightly forested, descending fairly steeply to the rushing water of the river. No houses were visible on the other side, and the place felt remote and unspoiled. There was already a public boat landing on some adjoining property. Susan, in particular, accustomed to the flat, scrub properties McDougal had been buying near Little Rock, thought it was beautiful and had a certain romance. She could almost see the marketing brochure she could create.
The McDougals told Wade they were interested, and wanted to talk to the Clintons and maybe some other potential investors about it. They weren't told that the price per acre of nearly $900, a total of $203,000, was more than double what the 101 group was paying for it in a deal that hadn't even yet closed, or that they were the buyers in a deal where the seller was breaking up and reselling a large parcel. As Wade pointed out, they would be getting the most desirable acreage, with most of the river frontage. That was worth a large premium to the average price that 101 had paid for a lot of undistinguished land. Wade said he'd do a rough subdivision plan for the McDougals so they could get a sense of how the land could be resold. As with his earlier deal with Wade, McDougal wanted to move quickly, listing the individual lots for resale as soon as possible, even before closing. He didn't see the investment as more than a two- or three-year venture.
The McDougals were excited by the prospects. Later Jim invited Nancy Pietrafesa and John Danner, a married couple who were among the Clintons' closest friends at Yale, to see the property. Independently well-off and idealistic, originally from California, they'd come down that summer to help the Clintons plan a transition to the governor's mansion and were thinking of moving to Arkansas after the general election to work in Clinton's administration. They were living with the Clintons in the Hillcrest bungalow that summer and had met the McDougals. Jim saw them as practically the Clintons' closest friends. He suggested they drive up for the weekend, look at the property, and arrange a rafting trip on the river. Danner and Pietrafesa had barely gotten out of sweltering Little Rock, and they liked Jim and Susan, so they accepted.
''Are these low-income housing projects?'' Nancy asked as they drove north and passed rows of dilapidated wooden structures. ''No,'' McDougal replied. ''They're chicken coops.''
When they got to the Flippin area, Danner went into a local grocery and ordered sandwiches for the raft trip. ''You all aren't from around here, are you?'' the man behind the counter said.
''No,'' Danner replied.
''Well, let me tell you a little joke, boy. Do you know the difference between a Yankee and a damn Yankee?''
Danner had learned to answer ''No, sir'' in all such circumstances.
''The damn Yankee stayed.''
To Danner and Pietrafesa, the raft trip was a sweltering bore. The tract of land for sale, which Jim and Susan eagerly pointed out as they drifted by at an all too leisurely pace, was undistinguished, second-growth scrub forest in the middle of nowhere. But they didn't have the heart to share their real feelings. Jim and Susan had the impression they loved it.
The couple's reaction hadn't had any effect on the Clintons. The Sunday after their trip to Flippin, Jim and Susan had bumped into Bill and Hillary having dinner at the Black-Eyed Pea. Jim started telling them about the great piece of property he'd just stumbled upon near Flippin. ''You'll want to go in with us on this,'' McDougal confidently predicted.
''What do you have to do?'' Bill asked.
''I'll take care of it,'' McDougal said. ''You may have to sign a mortgage.'' McDougal explained that the investment would involve little or no cash -- they'd borrow the full amount and flip the land as quickly as possible. While they would have to borrow the purchase price, he could easily borrow the full amount on the strength of his own financial position and track record. McDougal didn't want to emphasize the point, but the Clintons' own personal finances were so precarious that they would add little or nothing to the borrowing power of the enterprise.
Both Bill and Hillary seemed excited at the prospect of making some money and agreed on the spot to join in the venture. McDougal was pleasantly surprised, given how uninterested the two had generally seemed on the subject of making money. Maybe the prospect of becoming governor had caused a change of heart. But McDougal didn't dwell on the question very long. McDougal might never be a politician himself, but he had a knack for making money. Every politician he'd ever known had needed money, and that meant they'd need him.
Given that Wade was a founder and director of the Citizens Bank and Trust Co. of Flippin, it wasn't surprising that McDougal turned there first to finance the purchase of the 101 tract, with Wade's encouragement. The loan officer was a young senior vice president, Frank Burge, who was soon to be named president of the bank. The president then was James Patterson, who happened to be one of the investors in 101 Development Corp., which was selling the land.
Given the incestuous relationships (prohibited under current banking laws), it's surprising the application didn't breeze through the approval process. Despite its small asset base and remote location, the bank in Flippin was conservatively run. By its standards, a $200,000 loan was a big deal. Even Wade acknowledged that the price was a little rich (but he was, after all, the agent for the seller, with an obligation to get the highest price possible). The McDougals and the Clintons couldn't borrow 100 percent of the purchase price, which violated the bank's guideline requiring a 10 percent down payment. Burge was also concerned that the small bank had too many loans outstanding in this single area around the White River, since the bank had also financed some of the 101 Development Corp.'s purchase of the larger parcel from which the 230 acres were being carved. Along with several other neighboring land deals the bank had financed, it represented what Burge considered an unhealthy geographic concentration of credit.
Burge discussed his concerns with the bank's board members. They were, of course, aware that Clinton was likely to be the state's next governor. They were flattered that he was interested in investing in their part of the state, and even more flattered that, as McDougal informed them, Bill and Hillary were planning to use one of the lots for their own vacation home. Burge, in particular, thought the presence of Clinton in the deal made it all but a sure thing, assuming Clinton did become governor. He assumed that wealthy Clinton supporters would simply buy the lots at highly inflated prices as a clandestine means of funneling money into the governor's pockets, thereby gaining influence. That, at least, was how he'd always assumed these deals worked in Arkansas. The bank's board members were also aware that one of the sellers was the bank's president, the agent was also a fellow board member, and both obviously wanted the profitable deal to go through.
Under the circumstances, it's probably remarkable that the bank insisted on any conditions for granting the loan. It decided it could live with the credit concentration problem, but insisted that the McDougals and Clintons come up with a 10 percent down payment. It also insisted that all the owners, including both Bill and Hillary, be jointly and severally liable for the mortgage. The terms were easily enough satisfied. McDougal and Bill Clinton simply borrowed the down payment from another bank, Union National Bank of Little Rock, where McDougal had been borrowing since 1970.
McDougal and Harry Don Denton, Union Bank's chief loan officer, were friends, Union having handled most of McDougal's earlier ventures with Senator Fulbright, financed at below-market interest rates ''as an accommodation'' to the senator, according to the bank's records. Referring to an earlier financial statement submitted by McDougal, the bank cited McDougal's assets as $975,245, liabilities of $424,054, for a net worth of $551,191; for Clinton it listed only unsecured liabilities of $27,211. The bank sought no security for the loan.
The McDougals and Clintons didn't tell Citizens Bank that they were borrowing the down payment. The Clintons agreed to co-sign the mortgage and appear at the closing. The risk seemed minimal given the speed with which McDougal expected to resell the property and pay off the mortgage. The loan would be short-term -- principal and interest due in six months -- and the interest rate would be 10 percent. As Union Bank noted when it agreed to take a half-participation in the Citizens Bank mortgage, ''Due to the individuals and the collateral involved, the risk is minimal.''
The closing was set for August 2, 1978, at 10 A.M. Despite bank policy requiring the attendance of all borrowers, the Clintons didn't attend. With a flurry of checks, documents, and signatures, the closing was soon over, with Jim and Susan, Bill and Hillary equal owners of the 230 acres, jointly and severally liable for the mortgage debt and interest. Susan christened the property White Water, and produced the marketing brochure she'd dreamed of: eight pages, with over a dozen full-color photographs.
''Now this is what most folks think of as White Water,'' the brochure concludes over a photo of sun-dappled water and babbling falls:
''Clean rippling water and stepping stones -- but it's really so much more. More than a place to live, it's a way to live...quiet, peaceful, serene, simple and honest. One weekend here and you'll never want to live anywhere else.''
Foreword and Afterword copyright © 1997 by James B. Stewart
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