Arkansas Development Finance Authority
The Arkansas Development Finance Authority (ADFA) is a state agency which encourages economic development in Arkansas. Its charter was drafted by Webster Hubbell, passed by the Arkansas state legislature at Gov. Bill Clinton's urging and signed into law by Gov. Clinton in 1985. The ADFA has no regulator and no legislative oversight. The governor appointed the board members and reviewed every bond issued. There was no limit on the value of bonds that could be issued.
Seth Ward, Webbster Hubbell's father-in-law and owner of Park-On-Meter (POM), an Arkansas manufacturer of parking meters, received the first loan from ADFA for $2.85 million. The money was intended to expand Ward's parking meter manufacturing into gun manufacturing for the CIA for use in Central America with untraceable serial numbers; however, the CIA did not make this request - someone in Gov. Clinton's Arkansas political machine blabbed openly about the covert supply chain operating out of Mena, Arkansas with Gov. Clinton's consent to aid the Nicaraguan Contras and their need for untraceable weapons due to the Boland Amendment.
The ADFA primarily served two masters: the Stephens, Inc., investment bank that received 78 percent of ADFA's underwriting fees and sales of housing and industrial bonds (Clinton had appointed two Stephens associates to the ADFA board); and Clinton crony Dan Lasater, whose municipal bond issues firm underwrote $664 million in Arkansas state bonds in just two yeaes.
ADFA was intended to be an elaborate money laundering scheme for drugs brought into the United States which had been traded for weapons to aid the Nicaraguan Contras in round trips from Mena, Arkansas to Central America. The Contras were fighting the Soviet and Cuban backed Sandinistas during the war in El Salvador. The White House had specifically been denied funding requests by Congress to overthrow the Nicaraguan communist regime which had been fomenting violent revolution outside its borders.
Hubbell and Ward's scheme, approved by Clinton, was ultimately viewed by the CIA as blackmail by Clinton cronies threatening to expose the ongoing Contra-aid program run out of Arkansas, and was one factor, among many, forcing the shut down of the operation which eventually became known as Iran-Contra.
How it worked
One form of money laundering worked through front companies set up by bond broker Dan Lasater. These companies would deposit cash in banks such as Worthen Bank, which would not fill out reporting forms. In return for this service, the companies would be obligated to buy bonds issued by the ADFA, and underwritten by Stephens Inc. Stephens would be compensated in the form of an investment banking fee.
The money from the bond issue, meanwhile, would go back to the same front companies. That is, in effect the companies bought their own bonds and paid Stephens a fee for the service.
The participation of the ADFA, a state agency, eliminated federal Securities and Exchange Commission scrutiny. ADFA formally issued and "guaranteed" the bonds, and thus collected a fee in the process. Some of these fees were translated into "loans" to the friends of the Bill Clinton.
- Davis, L. J., The Name of the Rose, The New Republic, April 4, 1994.