Setback For Starr

Dealing a setback to prosecutor Kenneth Starr's case against Susan McDougal, a federal judge ruled Tuesday that a Virginia woman can testify about her alleged mistreatment by Starr's office.

The decision by U.S. District Judge George Howard came after McDougal lawyer Mark Geragos depicted Julie Hiatt Steele as a victim of Starr's investigation of President Clinton. Steele will testify at McDougal's trial Friday.

The judge said Steele can give "limited testimony" and that Geragos "is simply presenting this to the jury to show modus operandi" by Starr's prosecutors. Howard assured prosecutors he would allow them to present rebuttal witnesses to counter Steele's testimony.

After the ruling, Starr prosecutor Mark Barrett told the judge "this is mammoth," and asked that the trial be recessed until Monday so that he could familiarize himself with Starr's case against Steele. The judge refused, delaying Steele's appearance until Friday but saying the case will continue in the meantime with other witnesses.

Steele is charged with three counts of obstruction of justice and one count of making a false statement. She was indicted after giving testimony that undercut the account of presidential accuser Kathleen Willey, who alleged that Clinton made an unwanted sexual advance.

Geragos said Ms. Steele is "the logical extension" of Susuan McDougal, who says she feared she'd be charged with perjury if she failed to give testimony that implicated the president in wrongdoing. McDougal refused to give grand jury testimony in Starr's probe of the Clintons in 1996 and again in 1998 and is now charged with criminal contempt and obstruction.

Earlier Tuesday, McDougal testified that she knows nothing about two checks, including one bearing her own signature, that raise questions about the truthfulness of Clinton's testimony in the Whitewater investigation.

"According to what I know, everything that I know, Bill Clinton answered truthfully... about all the... questions he was asked that had anything to do with me," she said on her fifth day on the witness stand.

Mr. Clinton testified at McDougal's 1996 trial that he never borrowed from the savings and loan owned by McDougal and her husband, Jim, who were the president and Mrs. Clinton's partners in the Whitewater real estate venture.

Kenneth Starr's office later found a $27,600 cashier's check that was a loan made payable to "Bill Clinton" from the S&L. The investigators also discovered a $5,081 check signed by Mrs. McDougal that was used to pay off part of the Clinton loan.

Under cross-examination by Barrett, McDougal acknowledged her own signature on the check, but said she would have written the check on her ex-husband's instructions.

And she reiterated an answer she gave last week that her impression on seeing the check recently was that it was for land the McDougals had in Clinton, Ark. In fact, the money pad off part of the loan made in Mr. Clinton's name. The check bears the notation "payoff Clinton" in Susan McDougal's handwriting.

McDougal said she had no information to contradict Mr. Clinton's denials about taking out a loan and she noted that her ex-husband testified at the 1996 Whitewater trial that Mr. Clinton hadn't taken out a loan. Jim McDougal later cooperated with Starr's office, leading investigators to the loan in Mr. Clinton's name.