The story Starr did not want to hear

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These days, Kenneth Starr's prosecutorial machinery and the Washington establishment are obsessed with whether President Clinton enjoyed the sexual favors of an intern. But before Monica Lewinsky became a household name, Starr's four-year, $40 million investigation was directed at the series of Arkansas real estate and financial dealings known as Whitewater. Starr has bid farewell to his Little Rock grand jury, without an indictment of Hillary Clinton or an impeachment report on the president, and the independent counsel has let it be known that his upcoming impeachment report to Congress will contain nothing about Whitewater. But Clinton's critics still promote the idea that he and his wife were guilty of something back in Arkansas. No president in American history has been the target of such a lengthy investigation, one that has not yet produced any criminal proceedings against him.

At the core of Starr's Whitewater investigation are allegations made by Hale that, in early 1986, then-Arkansas Gov. Clinton pressured Hale, who ran a federally subsidized lending company, to make a fraudulent and illegal $300,000 loan to Susan McDougal. Hale's credibility, then, became a key factor in the Whitewater trials of Tucker and the McDougals. Their defense attorneys hoped that jurors would disbelieve charges made by a self-confessed liar, thief and felon about a popular political figure from their home state who had gone on to become president of the United States. If Hale was lying about Clinton, the lawyers argued, he could also very well be fabricating allegations of criminal misconduct by their clients.

As part of their strategy to highlight that issue, attorneys for Tucker and the McDougals called President Clinton as a witness in the case. In a historic, videotaped deposition that was played for the jury, Clinton not only adamantly denied that he had ever pressured Hale to make the fraudulent loan to Susan McDougal, but also testified that he had not even discussed the matter at all with Hale.

Clinton's sworn testimony dramatically raised the stakes for both the president and Starr: If Hale, the star Whitewater witness, was telling the truth, that meant that the president of the United States had committed perjury. If, on the other hand, Hale was shown to be lying about the president, that would suggest Starr had relied on an untrustworthy witness to build his most important cases.

As a prosecution witness in the Tucker-McDougal case, Watt not only gave important testimony about the business relationships between Hale and former Gov. Tucker and the McDougals, he also provided evidence that appeared -- to a degree, at least -- to corroborate Hale's allegation that Clinton had pressured Hale to make the illegal loan to Susan McDougal.

Watt specifically testified that Hale had told him in early l986 -- contemporaneous to the actual events in question -- that Clinton was pressuring Hale to make the fraudulent loan. Watt's testimony was cited during the trial by deputy Whitewater independent counsel Jackie Bennett Jr. as corroboration of Hale's charges.

In several interviews with Salon, however, Watt seriously questioned whether Hale had told him the truth in l986 when he alleged that Clinton was pressuring him to make the fraudulent loan. Watt also said that he felt pressed by Whitewater investigators to corroborate Hale's story beyond what he personally knew about the matter. And, most important of all, Watt alleged that he provided investigators with information favorable to Bill Clinton that was left out of FBI reports of the interviews.

Watt made his allegations of misconduct by Whitewater investigators in a series of interviews with Salon over the last several months. But he was reluctant until recently to go on the record with his story, saying he feared retaliation from Whitewater prosecutors and attacks by conservative media outlets.

Though Watt is a former friend of Clinton, it does not appear that his story is motivated by allegiance to the president. "He expresses as much bitterness towards the Clintonites as he does towards Whitewater prosecutors," says a Little Rock attorney who has known Watt for many years and had appeared before him while Watt was still on the bench.

Watt himself says that he has felt not only persecuted by Starr's office but also mistreated by Clinton loyalists who attacked him politically and professionally for cooperating with prosecutors. "This has kind of been like the Queen Elizabeth and Lusitania passing each other in the middle of the ocean, and you're between them in a rowboat," Watt says. "It's been a dilemma that so many people have found themselves in since this thing has begun."

He adds, "I resent the fact that the Clinton people take the attitude that if you become a target, they abandon you. They didn't show any loyalty on the front end."

Watt today maintains a small law practice and manages real estate properties in North Little Rock. He says that he is contemplating a return to politics and says that he was motivated to publicly tell his story by a desire to clear his name. Ironically, by speaking out for the first time, he may be focusing attention on the allegations of misconduct in his own past.

Next Page: Watt and Clinton's mutual interest -- chasing women

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