Whitewater Special Prosecutor Kenneth Starr turns his attention to two directors of a small Arkansas bank, following the convictions of Jim and Sue McDougal and Arkansas Gov. Jim Guy Tucker. Herby Branscum and Robert Hill face charges of conspiracy to defraud and violations of banking laws. The trial is scheduled to begin this June.

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



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


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;

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

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

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

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

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

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

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

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

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:

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

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

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

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

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

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

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

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

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.

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

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

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

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


IT IS SO ORDERED.

Dated: December 19, 1994

Per. Curiam
For the Court:

__________________
Ron Garvin, Clerk



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

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;

REDACTED........ REDACTED

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

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

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

(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.

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

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


IT IS SO ORDERED.

Dated: July 28, 1995


Per curiam
For the Court:

Mark J. Langer, Clerk