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Whitewater Case Misc. '95-96 Documents Incl. Perry County Bank Indictment

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Office of the Independent Counsel
Two Financial Centre
10825 Financial Centre Parkway, Suite 134
Little Rock, Arkansas 72211
(501) 221-8700 Fax (501) 221-8707

February 20, 1996

FOR IMMEDIATE RELEASE

The following statement was issued by Independent Counsel Kenneth W. Starr from his office in Little Rock, Arkansas:

Herby Branscum, Jr. and Robert M. Hill were indicted today by a federal grand Jury in Little Rock, Arkansas on 11 felony charges. The Indictment charges the defendants with respect to conduct at the Perry County Bank in Perryville, Arkansas.

Mr. Branscum is a lawyer, and a director of the Perry County Bank and a controlling shareholder of Perry County Bancshares, Inc., the parent corporation of Perry County Bank.

Mr. Hill is a certified public accountant. He is also a director of the Perry County Bank and a controlling shareholder of Perry County Bancshares, Inc.

The Indictment contains 11 felony counts: conspiracy to defraud the United States by impeding the functions of the Federal Deposit Insurance Corporation and the Internal Revenue Service in violation of 18 U.S.C. Section 371 (Counts One and Two); making false entries in bank records in violation of 18 U.S.C. Section 1005 (Counts 3-5 and 9); misapplication of bank funds in violation of 18 U.S.C. Section 656 (Counts 6-8 and 10); and making a false statement to an agency of the United States in violation of 18 U.S.C. Section 1001 (Count 11).

Conviction on each of Counts 1, 2 and 11 is punishable by imprisonment of up to five years, a fine of up to $250,000, and a special assessment of $50. Conviction on each of Counts 3 through 10 is punishable by imprisonment of up to 30 years, a fine of up to $1,000,000, and a special assessment of $50.

The investigation into Perry County Bank activities began under regulatory Independent Counsel Robert B. Fiske, Jr. The Office of the Independent Counsel filed in federal court in Little Rock today a Notice of Prosecutorial Jurisdiction establishing that Attorney General Janet Reno expressly referred the matters charged in the Indictment to this Office for investigation and possible prosecution.

An indictment is merely an accusation and a defendant is presumed innocent unless and until proven guilty.

The Indictment does not charge criminal wrongdoing by President William Jefferson Clinton or First Lady Hillary Rodham Clinton.

NOTE: Copies of the Indictment and the Notice of Prosecutorial Jurisdiction are available in the Independent Counsel's offices in Little Rock, Arkansas and Washington, D.C.

===========================================

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS WESTERN DIVISION

UNITED STATES-OF AMERICA v. HERBY BRANSCUM, JR. and ROBERT M. HILL

No. LR-CR-96___

18 U.S.C. Section 371;
18 U.S.C. Sections 2, 656;
18 U.S.C. Sections 2, 1005;
18 U.S.C. Sections 2, 1001

INDICTMENT

THE GRAND JURY CHARGES:

COUNT ONE (Conspiracy)

A. Introduction

At various times material to this Indictment:

1. The Perry County Bank was a state-chartered bank located in Perryville, Arkansas. The deposits of the Perry County Bank were insured by the Federal Deposit Insurance Corporation ("FDIC").

2. The FDIC was an agency of the United States government established to regulate and supervise institutions insured by the FDIC. The FDIC periodically examined insured institutions, including the Perry County Bank, to ensure that they were operated in a safe and sound manner and in conformity with applicable laws and regulations.

3. Perry County Bancshares, Inc. was a bank holding company and the parent corporation of the Perry County Bank.

4. Defendant HERBY BRANSCUM, JR. was a licensed attorney practicing law under the name "Herby Branscum, Jr., P.A." Beginning in or about 1985, and continuing until the present, defendant HERBY BRANSCUM, JR. was a director of the Perry County Bank and a controlling shareholder of Perry County Bancshares, Inc. On or about January 23, 1991, defendant HERBY BRANSCUM, JR. was appointed a Commissioner of the Arkansas State Highway Commission.

5. Defendant ROBERT M. HILL was a former Internal Revenue Service ("IRS") Revenue Agent and a certified public accountant doing business as "Robert M. Hill, CPA". Beginning in or about 1985, and continuing until the present, defendant ROBERT M. HILL was a director of the Perry County Bank and a controlling shareholder of Perry County Bancshares, Inc. On or about December 31, 1991, defendant ROBERT M. HILL was re- appointed a member of the Arkansas State Banking Board.

6. In or about June 1989, defendants HERBY BRANSCUM, JR. and ROBERT M. HILL hired Neal T. Ainley as the President of the Perry County Bank. Neal Ainley was the President of the Perry County Bank from in or about June 1989 until in or about March 1994.

7. Clinton for Governor wan a political campaign organization to conduct William Jefferson Clinton's campaign for re-election as Governor of the State of Arkansas in 1990. Clinton for Governor maintained account no. 114129 at the Perry County Bank from approximately March 1990 to at least April 1994.

8. As a federally insured institution, the Perry County Bank was subject to periodic examinations by the FDIC to ensure that the Perry County Bank was operated in a safe and sound manner in conformity with, among other things, the laws and regulations prohibiting self-dealing, theft, embezzlement or misapplication of bank moneys and funds by persons affiliated with the Perry County Bank.

B. The Conspiracy

9. Beginning on or about May 1990, and continuing thereafter through at least November 1993, in the Eastern District of Arkansas, defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined, agreed and conspired with each other and with Neal T. Ainley (a) to defraud the United States by impairing, impeding, obstructing and defeating the lawful function of the FDIC; and (b) to violate Title 18, United States Code, Sections 656 and 1005.

10. It was an object of the conspiracy that defendants HERBY BRANSCUM, JR. and ROBERT M. HILL intentionally would obstruct, impair and impede the FDIC in the lawful discharge of its function of examining the books and records of the Perry County Bank to ensure that the Perry County Bank was being operated in a safe and sound manner and in conformity with, among other things, the laws and regulations prohibiting self- dealing, theft, embezzlement or misapplication of bank moneys and funds by persons affiliated with the Perry County Bank.

11. It was a further object of the conspiracy to permit defendants HERBY BRANSCUM, JR. and ROBERT M. HILL willfully to misapply moneys and funds belonging to the Perry County Bank without detection by state or federal banking regulators, and to funnel the misapplied funds through the defendants, members of the defendants' families, and others to various federal and state political campaigns, candidates and office holders.

12. It was a further object of the conspiracy that defendants HERBY BRANSCUM, JR. and ROBERT M. HILL would willfully make and cause to be made false and misleading entries in the books and records of the Perry County Bank with intent to deceive the FDIC and examiners appointed to examine the affairs of the Perry County Bank, as follows:

a. Defendants caused at least $7,200 in checks made payable to the defendants and others to be recorded in the Perry County Bank's books and records in May and December 1990 as payments for convention expenses, miscellaneous expenses, and legal and professional services rendered to the Perry County Bank, when in fact, as the defendants well knew, the payments were not for convention expenses, miscellaneous expenses and legal or professional services rendered to the Perry County Bank, but instead were to reimburse the defendants, members of the defendants' families, and others for political contributions they made at the direction of the defendants;

b. Defendants caused at least a $3,000 payment to HERBY BRANSCUM, JR., to be recorded in the Perry County Bank's books and records in October 1991 as payments for legal and professional services rendered to the Perry County Bank, when in fact, as the defendants well knew, the payments were not for legal or professional services rendered to the Perry County Bank, but instead were to reimburse the HERBY BRANSCUM, JR., members of his family, and others for political contributions they made at the direction of the defendants; and

c. Defendants caused at least $1,500 in checks payable to the defendants and others to be recorded in the Perry County Bank's books and records in October and November 1993 as payments for miscellaneous expenses incurred on behalf of the Perry County Bank, when in fact, as the defendants well knew, the payments were not for miscellaneous expenses incurred on behalf of the Perry County Bank, but instead were to reimburse the defendants and others for political contributions they made at the direction of the defendants.

C. The Means of the Conspiracy

13. The means and methods used to accomplish this conspiracy were as follows:

a. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed to obtain and misapply at least $7,200 in moneys and funds belonging to the Perry County Bank by obtaining "expense" checks from Perry County Bank's operating account, falsely recorded as payments for convention expenses, miscellaneous expenses and legal and professional services rendered to the Perry County Bank, and thereafter using such proceeds to reimburse the defendants, members of the defendants' families, and others for political contributions made in their names to the Clinton for Governor Campaign. Defendant ROBERT M. HILL hand delivered at least $7,000 in political contributions reimbursed by moneys and funds misapplied from the Perry County Bank to then-Governor William Jefferson Clinton at a meeting on or about December 14, 1990.

b. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed to obtain and misapply at least $3,000 in moneys and funds belonging to the Perry County Bank by obtaining a cashier's check drawn on the Perry County Bank, falsely recorded as payments for legal and professional services rendered to the Perry County Bank, and thereafter using such proceeds to reimburse HERBY BRANSCUM, JR., members of his family, and others for political contributions they made to a candidate for federal office.

c. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed to obtain and misapply at least $1,500 in moneys and funds belonging to the Perry County Bank by obtaining "expense" checks from Perry County Bank's operating account, falsely recorded as payments for miscellaneous expenses incurred on behalf of the Perry County Bank, and thereafter using such proceeds to reimburse the defendants and others for political contributions they made to candidates for Arkansas state office.

d. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed to make, and to cause to be made, false entries in the records of the Perry County Bank by:

(1) withdrawing from the Perry County Bank at least $200 in the form of an expense check made payable to Neal Ainley, on or about May 23, 1990, and causing such expenditures to be falsely recorded as for convention expenses;

(2) withdrawing from the Perry County Bank at least $7,000 in the form of expense checks made payable to the defendants and Neal Ainley, on or about December 11, 1990, and causing such expenditures to be falsely recorded as for legal and professional services;

(3) withdrawing from the Perry County Bank $3,000 in the form of a cashier's check made payable to Herby Branscum, Jr., P.A., on or about October 1, 1991, and causing such expenditures to be falsely recorded as for legal fees;

(4) withdrawing from the Perry County Bank at least $750 in the form of expense checks payable to the defendants, on or about October 21, 1993, and October 29, 1993, and causing such expenditures to be falsely recorded as for miscellaneous expenses; and

(5) withdrawing from the Perry County Bank at least $750 in the form of expense checks payable to the defendants and Neal Ainley, on or about October 19, 1993, October 21, 1993, and November 3, 1993, and causing such expenditures to be falsely recorded as for miscellaneous expenses.

D. Overt Acts

14. In furtherance of the conspiracy and to accomplish its unlawful objectives, defendants HERBY BRANSCUM, JR. and ROBERT M. HILL committed and caused to be committed various overt acts in the Eastern District of Arkansas, among which were the following:

a. On or about May 23, 1990, a $200 expense check was drawn on Perry County Bank operating account no. 20140, check no. 13179, payable to Neal Ainley;

b. On or about December 11, 1990, a $3,000 expense check was drawn on Perry County Bank operating account no. 20140, check no. 13850, payable to Herby Branscum, Jr. Attorney;

c. On or about December 14, 1990, a $3,000 expense check drawn on Perry County Bank operating account no. 20140, check no. 13850, payable to Herby Branscum, Jr. Attorney, was deposited into the account of Herby Branscum, Jr., P.A. Attorney at Law Escrow, at the Perry County Bank, account no. 24688;

d. On or about December 11, 1990, a $3,000 expense check was drawn on Perry County Bank operating account no. 20140, check no. 13851, payable to Robert Hill, CPA;

e. On or about December 13, 1990, a $3,000 expense check drawn on Perry County Bank operating account no. 20140, check no. 13851, payable to Robert Hill, was deposited into the account of Robert M. Hill, CPA, at the Perry County Bank, account no. 64347;

f. On or about December 11, 1990, a $1,000 expense check was drawn on Perry County Bank operating account no. 20140, check no. 13852, payable to Neal Ainley;

g. On or about December 11, 1990, a $1,000 expense check drawn on the Perry County Bank account no. 20140, check no. 13852, payable to Neal Ainley, was deposited into his business account at the Perry County Bank, account no. 11-328-5;

h. On or about October 1, 1991, a $3,000 cashier's check was drawn on the Perry County Bank, check no. 40239, payable to Herby Branscum, Jr., P.A;

i. On or about October 7, 1991, a $3,000 cashier's check drawn on the Perry County Bank, check no. 40239, payable to Herby Branscum, Jr., P.A., was deposited into the account of Herby Branscum, Jr. P.A. Attorney at Law, at the Perry County Bank, account no. 67975;

j. On or about October 19, 1993, a $861.14 expense check was drawn on Perry County Bank operating account no. 20140, check no. 17424, payable to Robert M. Hill;

k. On or about October 20, 1993, a $861.14 expense check drawn on Perry County Bank operating account no. 20140, check no. 17424, payable to Robert M. Hill, was cashed at Perry County Bank;

l. On or about October 21, 1993, a $536 expense check was drawn on Perry County Bank operating account no. 20140, check no. 17432, payable to Herby Branscum;

m. On or about October 21, 1993, $400 of the proceeds of a $536 expense check drawn on Perry County Bank operating account no. 20140, check no. 17432, payable to Herby Branscum, was applied to loan number 8053200, in the name of Herby Branscum, Jr., at the Perry County Bank; the balance of the $536 expense check was received in cash at the Perry County Bank;

n. On or about October 29, 1993, a $1,369.56 expense check was drawn on Perry County Bank operating account no. 20140, check no. 17450, payable to Robert M. Hill;

o. On or about October 29, 1993, a $1,369.56 expense check drawn on Perry County Bank operating account no. 20140, check no. 17450, payable to Robert M. Hill, was deposited into the account of Robert M. Hill, CPA, at the Perry County Bank, account no. 64347;

p. On or about November 3, 1993, a $250 expense check was drawn on Perry County Bank operating account no. 20140, check no. 17471, payable to Neal Ainley; and

q. On or about November 3, 1993, a $250 expense check drawn on Perry County Bank operating account no. 20140, check no. 17471, payable to Neal Ainley, was deposited into the business account of Neal Ainley, at the Perry County Bank, account no. 11-328-5.

All in violation of Title 18, United States Code, Section 371.

COUNT TWO (Conspiracy)

A. Introduction

15. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

16. As a federally insured institution, the Perry County Bank was subject to Title 31, Chapter 53, of the United States Code and regulations issued thereunder requiring financial institutions to file with the IRS a written report of each currency transaction in excess of $10,000, including each withdrawal of currency in excess of $10,000. This report is known as a Currency Transaction Report (IRS Form 4789) or "CTR".

17. As a federally insured institution, the Perry County Bank was subject to periodic examinations by the FDIC to ensure that the Perry County Bank was operated in conformity with, among other things, the laws and regulations regarding the reporting of currency transactions.

18. On or about May 25, 1990, the Clinton for Governor Campaign withdrew $30,000 in currency from its account, no. 114129, at the Perry County Bank. On or about November 2, 1990, the gubernatorial campaign withdrew $22,500 in currency from the same account at the Perry County Bank. B. The Conspiracy

19. Beginning on or about May 25, 1990, and continuing thereafter through at least February 20, 1991, in the Eastern District of Arkansas, defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined, agreed and conspired with each other and with Neal T. Ainley (a) to defraud the United States by impairing, impeding, obstructing and defeating the lawful function of the IRS; (b) to defraud the United States by impairing, impeding, obstructing and defeating the lawful function of the FDIC; and (c) to violate Title 18, United States Code, Section 1005.

20. It was an object of the conspiracy that defendants HERBY BRANSCUM, JR. and ROBERT M. HILL intentionally would obstruct, impair and impede the IRS in the lawful discharge of its function of receiving and reviewing reports of currency transactions at the Perry County Bank.

21. It was a further object of the conspiracy that defendants HERBY BRANSCUM, JR. and ROBERT M. HILL intentionally would obstruct, impair and impede the FDIC in the lawful discharge of its function of examining the books and records of the Perry County Bank to ensure that the Perry County Bank was being operated in conformity with, among other things, the laws and regulations regarding the reporting of currency transactions.

22. It was a further object of the conspiracy that defendants HERBY BRANSCUM, JR. and ROBERT M. HILL willfully would make and cause to be made false entries in the books and records of the Perry County Bank regarding the withdrawal of $22,500 in currency on or about November 2, 1990.

C. The Means of the Conspiracy

23. The means and methods used to accomplish this conspiracy were as follows:

a. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed with Neal T. Ainley that the Perry County Bank would not file with the IRS reports of the withdrawal of $30,000 in currency on or about May 25, 1990 and the withdrawal of $22,500 in currency on or about November 2, 1990; and

b. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL combined and agreed with Neal T. Ainley to make and cause to be made false entries in the records of the Perry County Bank with intent to deceive the FDIC and the examiners appointed to examine the affairs of the Perry County Bank. Defendants HERBY BRANSCUM, JR. and ROBERT M. HILL caused Neal T. Ainley to intercept from the outgoing mail at the Perry County Bank a CTR prepared by an officer of the Bank on or about November 2, 1990 regarding the withdrawal of $22,500 that same day. A copy of the CTR was maintained in the records of the Perry County Bank with intent to conceal from the FDIC and examiners appointed to examine the affairs of the Perry County Bank the fact that the original CTR was not mailed and filed with the IRS.

D. Overt Acts

24. In furtherance of the conspiracy and to accomplish its unlawful objectives, defendants HERBY BRANSCUM, JR. and ROBERT M. HILL committed and caused to be committed various overt acts in the Eastern District of Arkansas, among which were the following:

a. On or about May 25, 1990, defendant HERBY BRANSCUM, JR. had a conversation with Neal Ainley in which defendant HERBY BRANSCUM, JR. advised Ainley that the Clinton for Governor Campaign wished to make a cash withdrawal from its account at the Perry County Bank;

b. On or about May 25, 1990, defendant ROBERT M. HILL had a conversation with Neal Ainley in which defendant ROBERT M. HILL advised Ainley that if Ainley took care of the cash withdrawal, a report would not have to be filed;

c. On or about May 25, 1990, defendant HERBY BRANSCUM, JR. had a conversation with Neal Ainley in which Ainley advised defendant HERBY BRANSCUM, JR. that a report of the cash withdrawal had not been filed;

d. On or about May 25, 1990, defendant ROBERT M. HILL had a conversation with Neal Ainley in which Ainley advised defendant ROBERT M. HILL that a report of the cash withdrawal had not been filed;

e. On or about November 2, 1990, defendant ROBERT M. HILL had a conversation with Neal Ainley in which defendant ROBERT M. HILL asked Ainley whether Ainley was sure that a CTR had to be filed for the withdrawal of $22-,500 made that day;

f. On or about November 2, 1990, defendant ROBERT M. HILL had a conversation with Neal Ainley in which defendant ROBERT M. HILL asked Ainley if there was any way Ainley could get his hands on the CTR that had been prepared for filing with the IRS;

g. On or about November 2, 1990, pursuant to the request of defendant ROBERT M. HILL, Neal Ainley intercepted from the outgoing mail the CTR that had been prepared for filing with the IRS;

h. On or about November 2, 1990, Neal Ainley telephoned defendant ROBERT M. HILL and advised him that he had removed the CTR from the mail;

i. At the next meeting of the Perry County Bank Loan Committee following November 2, 1990, at which defendants HERBY BRANSCUM, JR. and ROBERT M. HILL were present, Neal Ainley gave the envelope containing the CTR to defendant ROBERT M. HILL; and

j. On or about February 20, 1991, Neal Ainley certified falsely to the FDIC that the Perry County Bank files a CTR for each deposit, withdrawal, transfer or exchange of currency of more than $10,000 for customers who have not been granted an exemption from reporting.

All in violation of Title 18, United States Code, Section 371.

COUNT THREE (False Entries in Bank Records)

25. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

26. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

with intent to deceive the FDIC and the examiners appointed to examine the affairs of the Perry County Bank, knowingly and willfully made and caused to be made a false and misleading entry in the books of the Perry County Bank, in that the defendants caused Check No. 13850, a $3,000 check made payable to Herby Branscum, Jr. Attorney, to be recorded in Perry County Bank's books and records as payment for legal and professional services rendered to the Perry County Bank, when in fact, as the defendants well knew, the payment was not for legal or professional services rendered to the Perry County Bank, but instead to reimburse defendant HERBY BRANSCUM, JR and members of his family for political contributions they made at the direction of defendant HERBY BRANSCUM, JR.

All in violation of Title 18, United States Code, Section 1005 and Title 18, United States Code, Section 2.

COUNT FOUR (False Entries in Bank Records)

27. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

28. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

with intent to deceive the FDIC and the examiners appointed to examine the affairs of the Perry County Bank, knowingly and willfully made and caused to be made a false and misleading entry in the books of the Perry County Bank, in that the defendants caused Check No. 13851, a $3,000 check made payable to Robert M. Hill, CPA, to be recorded in Perry County Bank's books and records as payment for legal and professional services rendered to the Perry County Bank, when in fact, as the defendants well knew, the payment was not for legal or professional services rendered to the Perry County Bank, but instead to reimburse members of the family of defendant ROBERT M. HILL for political contributions they made at the direction of defendant ROBERT M. HILL.

All in violation of Title 18, United States Code, Section 1005 and Title 18, United States Code, Section 2.

COUNT FIVE (False Entries in Bank Records)

29. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

30. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

with intent to deceive the FDIC and the examiners appointed to examine the affairs of the Perry County Bank, knowingly and willfully made and caused to be made a false and misleading entry in the books of the Perry County Bank, in that the defendants caused Check No. 13852, a $1,000 check made payable to Neal Ainley, to be recorded in Perry County Bank's books and records as payment for legal and professional services rendered to the Perry County Bank, when in fact, as the defendants well knew, the payment was not for legal or professional services rendered to the Perry County Bank, but instead to reimburse Neal Ainley and his wife for political contributions they made at the direction of defendants HERBY BRANSCUM, JR. and ROBERT M. HILL.

All in violation of Title 18, United States Code, Section 1005 and Title 18, United States Code, Section 2.

COUNT SIX (Misapplication of Bank Funds)

31. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

32. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

each connected in a capacity with the Perry County Bank, a financial institution the accounts of which were insured by the FDIC, with intent to injure and defraud the Perry County Bank, knowingly and willfully misapplied and caused to be misapplied moneys and funds in excess of $100 belonging to the Perry County Bank, in that the defendants caused the issuance of Check No. 13850, drawn on the Perry County Bank's legal and professional expenses account, in the amount $3,000, payable to Herby Branscum, Jr. Attorney, knowing full well that the $3,000 proceeds were not in payment for legal or other professional services rendered to the Perry County Bank, but rather to provide funds for defendant HERBY BRANSCUM, JR. to reimburse himself, and to pass on reimbursement to members of his family, for political contributions they made at the direction of defendant HERBY BRANSCUM, JR.

All in violation of Title 18, United States Code, Section 656 and Title 18, United States Code, Section 2.

COUNT SEVEN (Misapplication of Bank Funds)

33. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

34. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

each connected in a capacity with the Perry County Bank, a financial institution the accounts of which were insured by the FDIC, with intent to injure and defraud the Perry County Bank, knowingly and willfully misapplied and caused to be misapplied moneys and funds in excess of $100 belonging to the Perry County Bank, in that the defendants caused the issuance of Check No. 13851, drawn on the Perry County Bank's legal and professional expenses account, in the amount $3,000, payable to Robert Hill, CPA, knowing full well that the $3,000 proceeds were not in payment for legal or other professional servicer rendered to the Perry County Bank, but rather to provide funds for defendant ROBERT M. HILL to reimburse members of his family for political contributions they made at the direction of defendant ROBERT M. HILL.

All in violation of Title 18, United States Code, Section 656 and Title 18, United States Code,.Section 2.

COUNT EIGHT (Misapplication of Bank Funds)

35. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

36. On or about December 11, 1990, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

each connected in a capacity with the Perry County Bank, a financial institution the accounts of which were insured by the FDIC, with intent to injure and defraud the Perry County Bank, knowingly and willfully misapplied and caused to be misapplied moneys and funds in excess of $100 belonging to the Perry County Bank, in that the defendants caused the issuance of Check No. 13852, drawn on the Perry County Bank's legal and professional expenses account, in the amount $1,000, payable to Neal Ainley, knowing full well that the $1,000 proceeds were not in payment for legal or other professional services rendered to the Perry County Bank, but rather to reimburse Neal Ainley and his wife for political contributions they made at the direction of defendants HERBY BRANSCUM, JR. and ROBERT M. HILL.

All in violation of Title 18, United States Code, Section 656 and Title 18, United States Code, Section 2.

COUNT NINE (False Entries in Bank Records)

37. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

38. On or about October 1, 1991, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

with intent to deceive the FDIC and the examiners appointed to examine the affairs of the Perry County Bank, knowingly and willfully made and caused to be made a false and misleading entry in the books of the Perry County Bank, in that the defendants caused Check No. 40239, a $3,000 cashier's check made payable to Herby Branscum, Jr., P.A., to be recorded in the Perry County Bank's books and records as for payment of legal fees, when in fact, as defendants well knew, the payment was not for legal services rendered to the Perry County Bank, but instead to reimburse defendant HERBY BRANSCUM, JR., members of his family, and certain of his employees for political contributions they made at the direction of defendant HERBY BRANSCUM, JR. in September 1991.

All in violation of Title 18, United States Code, Section 1005 and Title 18, United States Code, Section 2.

COUNT TEN (Misapplication of Bank Funds)

39. Paragraphs 1 through 7 of Count One are hereby realleged and incorporated as though set forth in full herein.

40. On or about October 1, 1991, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

each connected in a capacity with the Perry County Bank, a financial institution the accounts of which were insured by the FDIC, with intent to injure and defraud the Perry County Bank, knowingly and willfully misapplied and caused to be misapplied moneys and funds in excess of $100 belonging to the Perry County Bank, in that the defendants caused the issuance of Cashier's Check No. 40239, drawn on the Perry County Bank, in the amount of $3,000, payable to Herby Branscum, Jr., P.A., knowing full well that the $3,000 proceeds were not in payment for legal services rendered to the Perry County Bank, but rather to provide funds for defendant HERBY BRANSCUM, JR. to reimburse himself, and to pass on reimbursement to members of his family and certain of his employees, for political contributions they made at the direction of defendant HERBY BRANSCUM, JR. in September 1991.

All in violation of Title 18, United States Code, Section 656 and Title 18, United States Code, Section 2.

COUNT ELEVEN (False Statement)

41. Paragraphs 15 through 18 of Count Two are hereby realleged and incorporated as though set forth in full herein.

42. On or about February 20, 1991, within the Eastern District of Arkansas, defendants

HERBY BRANSCUM, JR. And ROBERT M. HILL,

directors and agents of the Perry County Bank, in a matter within the jurisdiction of the FDIC, a department or agency of the United States, knowingly and willfully falsified, concealed and covered up by trick, scheme and device, a material fact, and knowingly and willfully made a false, fictitious and fraudulent statement or representation of material fact, in that the defendants caused Neal Ainley, an employee of the Perry County Bank, to certify as true and correct a statement that the Perry County Bank files a CTR for each deposit, withdrawal, transfer or exchange of currency of more than $10,000 for customers that have not been granted an exemption, when in fact the defendants knew that no such CTR had been filed with the IRS for withdrawals of currency of more than $10,000 on or about May 25, 1990 and November 2, 1990.

All in violation of Title 18, United States Code, Section 1001 and Title 18, United States Code, Section 2.

A TRUE BILL.
_________________
FOREMAN
_________________
KENNETH W. STARR
INDEPENDENT COUNSEL

Dated: February 20, 1996

=========================================

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION

UNITED STATES OF AMERICA v. HERBY BRANSCUM, JR. and ROBERT M. HILL

No. LR-CR-96-___

NOTICE OF PROSECUTORIAL JURISDICTION

Pursuant to 28 U.S.C., Section 593(b)(4), the Independent Counsel hereby gives notice of his prosecutorial jurisdiction over this matter, as follows:

1. On August 29, 1994, the Independent Counsel advised Attorney General Janet Reno of a matter relating to the Perry County Bank, the investigation of which bad begun under regulatory Independent Counsel Robert B. Fiske, Jr. The Independent Counsel requested that Attorney General Reno refer investigative and prosecutorial jurisdiction over that matter to the Office of the Independent Counsel pursuant to 28 U.S.C. Section 594(e), as a matter related to the Independent Counsel's jurisdiction.

2. By letter dated September 2, 1994, the Attorney General referred investigative and prosecutorial jurisdiction to the Office of the Independent Counsel over the following: "Whether any person committed any federal crime in connection with accounts maintained by the 1990 Clinton gubernatorial campaign at the Perry County Bank" (the "Perry County Bank matter"). (Exhibit 1).

3. The Independent Counsel subsequently requested that the United States Court of Appeals for the District of Columbia Circuit, Division for the Purpose of Appointing Independent Counsels (the "Special Division"), also refer the Perry County Bank matter to the Office of the Independent Counsel pursuant to 28 U.S.C. Section 594(e) as a matter related to the Independent Counsel's jurisdiction. By Order entered December 19, 1994, the Special Division referred investigative and prosecutorial jurisdiction over the Perry County Bank matter to the Office of the Independent Counsel. (Exhibit 2).

4. Pursuant to 28 U.S.C. Section 594(e), on June 8, 1995, the Independent Counsel requested that Attorney General Reno refer to the Office of the Independent Counsel investigative and prosecutorial jurisdiction over another matter related to the Independent Counsel's jurisdiction: "Whether any person committed any federal crime in connection with contributions made by Herby Branscum, Jr., Robert M. Hill, members of their families, or any other persons associated with them, to the 1990 Clinton gubernatorial campaign or the 1992 Clinton presidential campaign" (the "Campaign Contributions matter").

5. By letter dated June 21, 1995, the Attorney General referred investigative and prosecutorial jurisdiction over the Campaign Contributions matter to the Office of the Independent Counsel. (Exhibit 3).

6. The Independent Counsel subsequently requested that the Special Division also refer the Campaign Contributions matter to the Office of the Independent Counsel pursuant to 28 U.S.C. Section 594(e) as a matter related to the Independent Counsel's jurisdiction. By Order entered July 28, 1995, the Special Division referred investigative and prosecutorial jurisdiction over the Campaign Contributions matter to the Office of the Independent Counsel. (Exhibit 4). Dated: February 20, 1996

KENNETH W. STARR
INDEPENDENT COUNSEL

Jackie M. Bennett, Jr.
Timothy J. Mayopoulos
Associate Counsel
Office of The Independent Counsel
Two Financial Centre, Suite 134
10825 Financial Centre Parkway
Little Rock, Arkansas 72211
Tel.: 501-221-8700

CERTIFICATE OF SERVICE

I hereby certify that on February 20, 1996, I caused a true copy of the foregoing Notice of Prosecutorial Jurisdiction to be mailed by first class mail, postage prepaid, to counsel for defendants, at the addresses below:

Dan C. Guthrie, Jr., Esq.
1845 Woodall Rodgers Freeway
Suite 1000
Dallas, Texas 75201

Jack T. Lassiter, Esq.
Hatfield & Lassiter
401 West Capitol
Suite 502
Little Rock, Arkansas 72201

_______________________
Timothy J. Mayopoulos

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U.S. Department of Justice Criminal Division
Office of the Assistant Attorney General

September 2, 1994

Mr. Kenneth W. Starr
Two Financial Centre
10825 Financial Centre Parkway
Suite 134
Little Rock, Arkansas 72211

Dear Mr. Starr:

The Attorney General has received your letter of August 29, 1994 requesting that the Department of Justice refer to the Office of Independent Counsel/Madison Guaranty Bank related matters pursuant to 28 U.S.C. Section 594(e). After reviewing your description of the information developed in the the course of the investigation conducted by the Office of Independent Counsel, she has concluded that these matters are related to your investigation and that referral to your office would be appropriate. I therefore refer-investigative and prosecutorial jurisdiction over the following matters to your Office:

(1) Whether any person committed any federal crime in connection with accounts maintained by the 1990 Clinton gubernatorial campaign at the Perry County Bank; and

REDACT........ REDACT........ REDACT

Your jurisdiction affords you necessary flexibility in structuring your investigation. To the extent you determine that expects of these matters which might fall technically within the broad scope of your jurisdiction are not sufficiently related to your mandate to warrant handling by your office, you may wish to consider referring those aspects back to the Department of Justice for handling pursuant to 28 U.S.C. Section 597 (a).

Should you wish at any time to consult with the Department of Justice concerning Departmental policies with respect to these criminal tax, campaign financing, or other matters, 28 U.S.C. Section 594(f)(1), I invite you to contact Lee J. Radek, Chief, Public Integrity Section, Criminal Division, who will put you in touch with the appropriate Departmental officials. He can be reached at (202) 514-1412.

To complete our files, I would appreciate your providing Mr. Radek with a copy of your notification to the Special Division of the Court of this referral. 28 U.S.C. Section 594(e). Please let us know if we can be of any further assistance to you in the course of your investigation.

Sincerely,

John C. Keeney
Acting Assistant Attorney General
Criminal Division

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UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Division of the Purpose of the Purpose of Appointing Independent Counsels

Ethics in Government Ace of 1978, As Amended

In re: Madison Guaranty Savings & Loan Association

Division No. 94-1

UNDER SEAL
Filed Dec. 19, 1994

ORDER

Upon consideration of the Application for Order of Referral and Order of Jurisdiction of Independent Counsel filed under seal, it is

HEREBY ORDERED that investigative and prosecutorial jurisdiction over the following matters be referred to the Independent Counsel Kenneth W. Starr and to the Office of the Independent Counsel (hereinafter collectively "the Office") an related matters pursuant to 28 U.S.C. Section 594(e):

(1) Whether any person committed any federal crime in connection with accounts maintained by the 1990 Clinton gubernatorial campaign at the Perry County Bank;

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IT IS FURTHER ORDERED, that, as a result of the referral of the above- described matters and the Jurisdictional grant made by this Court on August 5, 1994, Kenneth W. Starr ha. full power, independent authority, and jurisdiction to investigate to the maximum extent authorized by the Independent Counsel Reauthorization Act of 1994 whether any individuals or entities have committed a violation of any federal criminal law, other than a Class B or C misdemeanor or infraction, relating in any way to James B. McDougal's, President William Jefferson Clinton's, or Mrs. Hillary Rodham Clinton's relationships with Madison Guaranty Savings & Loan Association, Whitewater Development Corporation, or Capital Management Services, Inc.

The Independent Counsel further has.Jurisdiction and authority to investigate other allegations or evidence of violation of any federal criminal law, other than a Class B or C misdemeanor or infraction, by any person or entity developed during; the Independent Counsel's investigation referred to above and connected with or arising out of that investigation, including, but not limited to:

(1) Whether any person committed any federal crime in connection with accounts maintained by the 1990 Clinton gubernatorial campaign at the Perry County Bank:

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The Independent Counsel has jurisdiction and authority to investigate any violation of 28 U.S.C. Section 1826, or any obstruction of the due administration of justice, or any material false testimony or statement in violation of federal criminal law, in connection with any investigation of the matters described above.

The Independent Counsel has jurisdiction and authority to seek indictment and to prosecute any persons or entities involved in any of the matters described above, who are reasonably believed to have committed a violation of any federal criminal law arising out of such matters, including persons or entities who have engaged in an unlawful conspiracy or who have aided or abetted any federal offense.

The Independent Counsel has all the powers and authority provided by the Independent Counsel Reauthorization Act of 1994.

The Independent Counsel, as authorized by 28 U.S.C. Section 594, has prosecutorial jurisdiction to fully investigate and prosecute the subject matter with respect to which the Attorney General requested the appointment of independent counsel, and all matters and individuals whose acts may be related to that subject matter, inclusive of authority to investigate and prosecute federal crimes (other than those classified as Class B or C misdemeanors or infractions) that may arise out of the above described matter, including perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses.

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IT IS SO ORDERED.

Dated: December 19, 1994

Per. Curiam
For the Court:
_________________
Ron Garvin, Clerk

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U.S. Department of Justice Criminal Division Office of the Assistant Attorney General

June 21, 1995

The Honorable Kenneth W. Starr
Independent Counsel
Office of the Independent Counsel
Two Financial Centre Parkway
Suite 134
Little Rock, Arkansas 72211

Dear Judge Starr:

The Attorney General has received your letter of June 8, 1995, requesting that the Department of Justice refer to the Office of the Independent Counsel/Madison Guaranty Bank a related matter pursuant to 28 U.S.C. Section 594(e). After reviewing your description of the information developed in the course of the investigation conducted by the Office of the Independent Counsel, she has concluded that this matter is related to one of the matters referred to you by the Department of Justice on September 2, 1994, and that referral to your office would be appropriate. We therefore refer investigative and prosecutorial jurisdiction over the following matter to your office:

Whether any person committed any federal crime in connection with contributions made by Herby Branscum, Jr., Robert M. Hill, members of their families, or any other persons associated with them, to the 1990 Clinton gubernatorial campaign or the 1992 Clinton presidential campaign.

This referral is broad enough to afford you necessary flexibility in structuring your investigation. However, to the extent you determine that aspects of this matter which might fa: technically within the broad scope of your jurisdiction are not sufficiently related to your mandate to warrant handling by your office, you may refer those aspects back to the Department of Justice. 28 U.S.C. Section 597(a).

Should you wish at any time to consult with the Department of Justice concerning Departmental policies with respect to this or any other matter, 28 U.S.C. Section 594(f)(1), please do not hesitate to contact either me or Lee J. Radek, Chief, Public Integrity Section, and we will put you in touch with the appropriate Departmental officials.

To complete our files, I would appreciate your providing me with a copy of your notification to the Special Division of the Court of this referral. 28 U.S.C. Section 594(e). Please let me know if we can be of any further assistance to you in the course of your investigation.

Sincerely,
Jo Ann Harris
Assistant Attorney General

=================================

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Division for the Purpose of Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

In re: Madison Guaranty Savings & Loan Association

Division No. 94-1

FILED UNDER SEAL
Filed July 28, 1995

ORDER

Before: Sentelle, Presiding, Butzner and Fay, Senior Circuit Judges

Upon consideration of the Application for Order of Referral and Order of Jurisdiction of Independent Counsel filed under seal on July 21, 1995, it is

HEREBY ORDERED that investigative and prosecutorial jurisdiction over the following matters be referred to the Independent Counsel Kenneth W. Starr and to the Office of the Independent Counsel (hereinafter collectively "the Office") as related matters pursuant to 28 U.S.C. Section 594(e):

(1) Whether any person committed any federal crime in connection with contributions made by Herby Branscum, Jr., Robert M. Hill, members of their families, or any other persons associated with them, to the 1990 Clinton gubernatorial campaign or the 1992 Clinton presidential campaign; and

REDACTED........ REDACTED........ REDACTED

IT IS FURTHER ORDERED, that, as a result of the referral of the above- described matters, the referral of the matters set forth in the Order of this Court entered December 19, 1994, and the jurisdictional grant made by this Court on August 5, 1994, Kenneth W. Starr hen full power, independent authority, and jurisdiction to investigate to the maximum extent authorized by the Independent Counsel Reauthorization Act of 1994 whether any individuals or entities have committed a violation of any federal criminal law, other than a Class B or C misdemeanor or infraction, relating in any way to James B. McDougal's, President William Jefferson Clinton's, or Mrs. Hillary Rodham Clinton's relationships with Madison Guaranty Savings & Loan Association, Whitewater Development Corporation, or Capital Management Services, Inc.

The Independent Counsel further has jurisdiction and authority to investigate other allegations or evidence of violation of any federal criminal law, other than a Class B or C misdemeanor or infraction, by any person or entity developed during the Independent Counsel's investigation referred to above and connected with or arising out of that investigation, including, but not limited to:

(1) Whether any person committed any federal crime in connection with accounts maintained by the 1990 Clinton gubernatorial campaign at the Perry County Bank;

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(8) Whether any person committed any federal crime in connection with contributions made by Herby Branscum, Jr., Robert M. Hill, members of their families, or any other persons associated with them, to the 1990 Clinton gubernatorial campaign or the 1992 Clinton presidential campaign; and

REDACTED........ REDACTED........ REDACTED

The Independent Counsel has jurisdiction and authority to investigate any violation of 28 U.S.C. Section 1826, or any obstruction of the due administration of justice, or any material false testimony or statement in violation of federal criminal law, in connection-with any investigation of the matters described above.

The Independent Counsel has jurisdiction and authority to seek indictment and to prosecute any persons or entities involved in any of the matters described above, who are reasonably believed to have committed a violation of any federal criminal law arising out of such matters, including persons or entities who have engaged in an unlawful conspiracy or who have aided or abetted any federal offense.

The Independent Counsel has all the powers and authority provided by the Independent Counsel Reauthorization Act of 1994.

The Independent Counsel, as authorized by 28 U.S.C. Section 594, has prosecutorial jurisdiction to fully investigate and prosecute the subject matter with respect to which the Attorney General requested the appointment of independent counsel, and all matters and individuals whose acts may be related to that subject matter, inclusive of authority to investigate and prosecute federal crimes (other than those classified an Class B or C misdemeanors or infractions) that may arise out of the above described matter, including perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses.

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IT IS SO ORDERED.

Dated: July 28, 1995

Per curiam
For the Court:
Mark J. Langer, Clerk

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