Whitewater Figure Is Given 28 Months

David Hale, the former municipal court judge and businessman who pleaded guilty to fraud and has been a central witness in the Whitewater inquiry, was sentenced today to 28 months in prison and ordered to make restitution of $2.4 million.

Mr. Hale's sentence, handed down by Judge Stephen M. Reasoner of United States District Court, was about half the maximum prison time specified under Federal sentencing guidelines for the crimes he admitted. It was the longest sentence of anyone prosecuted in the Whitewater inquiry, imposed on a figure whom prosecutors today described as crucial to their investigation.

In 1994, Mr. Hale agreed to plead guilty to one count of mail fraud and one count of defrauding the Federal Small Business Administration in connection with $900,000 in loans made in 1988 and 1989 by a small-business lending company he ran.

Mr. Hale, 55, is a major prosecution witness in the fraud trial of James B. McDougal, his former wife, Susan, and Gov. Jim Guy Tucker of Arkansas, brought by the Whitewater independent counsel, Kenneth W. Starr, and under way here. The three defendants are accused of violating fraud and conspiracy laws, and of making false statements in obtaining millions of dollars of federally backed loans in the 1980's.

The McDougals were business partners of the Clintons in the Whitewater Development Company, and Mr. McDougal ran the the now-defunct Madison Guaranty Savings and Loan Association.

Mr. Hale has contended that when President Clinton was Governor of Arkansas, he pressured Mr. Hale to make an improper $300,000 federally backed loan to Mrs. McDougal. Mr. Clinton has denied this accusation.

In addition to the prison term, and three years of probation that will follow, Judge Reasoner also fined Mr. Hale $10,000 and ordered him to make restitution to the Federal Government of $2.4 million that he admitted had been fraudulently lent and lost over seven years by his lending company.

In court today, Mr. Starr said Mr. Hale's cooperation had provided 'the substantial foundations" of a half dozen other prosecutions by his office. Mr. Starr also lauded "Judge Hale's contrition and humble spirit."

But in more precisely calculating the importance of Mr. Hale's cooperation, J. Hickman Ewing, one of Mr. Starr's deputies, told the court that without him, there was little to pursue.

"There was no progress being made until Mr. Hale came forward," Mr. Ewing said. "Unless people with knowledge of the system cooperate, we can't proceed."

Joining Mr. Starr in court today were his predecessor as independent counsel, Robert B. Fiske Jr., as well as three former deputy prosecutors, all now in private practice.

Under Federal sentencing guidelines, Mr. Hale could have received 47 to 58 months in prison. But the guidelines permit a judge to reduce a sentence in certain circumstances, among them if the defendant has significantly cooperated with prosecutors in an investigation.

"I have not seen a case in which the cooperation was more significant than in this case," Judge Reasoner said in issuing the sentence.

But he then went on to note that Mr. Hale had, nonetheless, been a willing participant in fraudulent loan schemes. "You willingly operated this service for these people, and you may not be the only one at fault, but you are not a victim," Judge Reasoner said.

Mr. Hale once ran Capital Management Services Inc., a small business lending company financed in part by loans from the Small Business Administration, and set up to aid small, disadvantaged and minority businesses. At the same time, he was a municipal judge in Little Rock. He has told prosecutors that the lending company operated as a slush fund of sorts for the wealthy and powerful in Little Rock who were looking for quick money to advance often questionable deals.

Prosecutors maintain that friends of Mr. Hale and other powerful political figures obtained six-figure loans from the company without filling out loan applications and for projects that were not allowed under the Federal laws governing such lending companies. At least six others have been indicted and convicted on charges growing out of Mr. Hale's cooperation.

Mr. Hale's sentence was longer than the 21-month prison term received by Webster L. Hubbell, the former associate attorney general prosecuted by Mr. Starr who was once a partner of Hillary Rodham Clinton in the Rose Law Firm here.

Mr. Hubbell had also promised to cooperate with prosecutors when he pleaded guilty to two felony counts for bilking his clients and law firm of $482,000.

But Mr. Starr had pointedly noted at Mr. Hubbell's sentencing last year that his cooperation had produced little and failed to meet the strict standards for granting leniency. As a result, his sentence followed the guidelines calling for a 21-to-27 month sentence.

Experts said that Mr. Hale had got the longer sentence because even though he had offered more cooperation, he had confessed to crimes involving about twice as much money as Mr. Hubbell had.