AN ARKANSAS ROUNDUP

By NINA BURLEIGH WASHINGTON

In the 12 months independent counsel Kenneth Starr has been investigating the Whitewater affair, he has always telegraphed his punches. Early on, he did not deny reports that Arkansas Governor Jim Guy Tucker was a prosecutorial goal-and eventually Tucker was indicted. In May, Starr quashed speculation about the imminent indictment of presidential adviser Bruce Lindsey; Lindsey has not been indicted.

So White House lawyers working on Whitewater were relieved last week when the 21-count felony indictment of Tucker and former Clinton business partners Susan and James McDougal didn't mention the Clintons-or Whitewater-at all. Starr hammered the point home: "The indictment does not charge criminal wrongdoing by President William Jefferson Clinton or First Lady Hillary Rodham Clinton." To White House officials, this was vindication: Starr, they believe, has accepted their contention that the Whitewater mess was only one small scam in a host of shady deals by Jim McDougal.

Indeed, Starr's latest charges focused on a series of allegedly fraudulent loans made to the McDougals and to Tucker, then a lawyer. The loans were issued by former Arkansas municipal judge David Hale, who ran a federally backed investment company for small businesses called Capital Management Services; the money helped finance various real estate developments in the mid-1980s. The indictment alleges that Hale gave McDougal four loans backed by the Small Business Administration in exchange for $825,000 in financing by McDougal for a fraudulent real estate deal. The financing was provided by McDougal's savings and loan, Madison Guaranty. Part of Madison's $825,000 was allegedly kicked back to Hale so he could qualify for $1.5 million more in SBA money. The indictment alleges that in 1985 and 1986, Hale, Tucker and the McDougals conspired to shuffle money between various entities they controlled to benefit themselves and keep the transactions from the watchful eyes of government auditors and examiners. Starr further charges that McDougal & Co. engaged in "land flips" and other illegal transactions to insulate themselves personally from loss and shift risk to Madison Guaranty and Capital Management. In 1989 Madison was shut down at a cost to taxpayers of $65 million.

McDougal was tried and acquitted in 1990 on bank-fraud charges stemming from the failure of his S&L. Last week he said he would fight the new indictment. "It's going to be fun for everybody except for this Republican prosecutor who is bringing these bogus, fabricated charges," McDougal said. His ex-wife Susan will also fight the charges.

Tucker was indicted in June on charges of defrauding the IRS and falsifying a loan application. Last week he vowed to contest the 11 new charges and continue serving as Governor, a post he inherited when Clinton became President. He won the office in an election last year.

The latest indictments are based heavily on testimony by Hale, who has already pleaded guilty to reduced charges in exchange for his cooperation. He remains unsentenced and reportedly under protective custody. But while Hale may have helped take the spotlight off the White House last week, he has other allegations that may, if Starr chooses to give them credence, still trouble the Clintons. Shortly after being indicted on other loan-fraud charges in September 1993, Hale claimed that on two occasions Bill Clinton personally pressured him to give Susan McDougal a $300,000 SBA loan. Later, about $25,000 of that SBA-backed money was used to buy a property that briefly passed through Whitewater Development Corp. in late 1986. If Hale's charges are true, Clinton could conceivably be implicated in a conspiracy to defraud. If not, the Arkansas end of the Whitewater investigation may be near its close.

Starr has a remarkable record of persuading his indictees to turn state's evidence. Nine of the 14 charged so far have pleaded guilty in return for cooperation with the prosecution. Jim McDougal has always taken a feisty stand, but his health is poor and he might theoretically find cooperating an appealing alternative to a stretch behind bars. (Almost all counts of the latest indictment are punishable by up to five years in prison.) TIME has learned from attorney Bobby McDaniel that his client Susan McDougal has refused an offer from Starr to plead guilty to a misdemeanor in return for her cooperation. The Administration is now cautiously optimistic that barring another indictee's turning state's evidence, the worst is over.

Republicans, who have never hesitated to charge Clinton with all kinds of wrongdoing, were uncharacteristically low-key in the wake of Starr's latest indictments. Senator Al D'Amato insists that the indictments prove the need for more hearings by his Senate Banking Committee: "These indictments are troubling and disturbing and point to a pattern of wrongdoing among people closely associated with the President and the First Lady.'' Starr has not announced the end of his investigation and, even as Administration officials predicted a positive conclusion for the Clintons, a federal judge extended Starr's grand jury another six months. Most observers believe he will complete his investigation by the end of this year. That would mean he would issue a report next spring, long enough before the presidential election in November to avoid charges of politicization. As if there hasn't been enough of that already.

--With reporting by Suneel Ratan/Washington

With reporting by Suneel Ratan/Washington