FEDS CHASE BAD LOANS TO CLINTON DONOR

The Federal Deposit Insurance Corp. said yesterday it was still trying to recover a fraction of some $14 million in bad loans to Sant Singh Chatwal, the deadbeat businessman who recently funneled hundreds of thousands of dollars in soft money to Hillary Rodham Clinton's Senate campaign.

"I can't say how much at this point," said FDIC spokesman David Barr. "We're getting close to having a final settlement amount ready. The court is looking at it."

But it seemed unlikely the FDIC would be able to recover even one dime.

The FDIC is at the mercy of Manhattan's federal bankruptcy court - where banks, the IRS, the state, the city and dozens upon dozens of creditors have been begging for five years to recoup Chatwal debts estimated at more than $100 million.

In 1998 a court-appointed trustee found that legally, Chatwal had "no property available for distribution" - even as he entertained dignitaries and politicians at his hotels and Bombay Palace restaurants.
The FDIC would not disclose whether it recommended criminal charges.

"If we uncover anything that we determine is a little shady and we think may be in violation of the law, we turn it over to the Department of Justice," Barr said. "We're not prosecutors. We leave it up to them to determine whether there's any criminal wrongdoing."

Justice officials did not respond to questions about the case yesterday.

Neither President Clinton nor the First Lady - who have accepted large soft-money donations from Chatwal for years - responded to questions about the matter. His attorney did not return calls yesterday.
The FDIC says it lost $25 million attributable to Chatwal in the 1992 failure of First New York Bank for Business, which began in 1975 as First Women's Bank - created to help women get credit and business loans.

Chatwal became a bank director in 1987. To protect depositors, the state locked the bank's doors in 1992.

He arranged loans to himself and his businesses and stiffed his own bank, the FDIC said in court documents. His wife borrowed $1.8 million to buy their upper East Side penthouse.

The FDIC accused Chatwal of gross negligence, breaching his fiduciary duty and benefiting from improper insider loans.

Despite all this controversy, the Clintons have maintained a close relationship with Chatwal during the past year while Hillary Clinton ran for the Senate here.

Chatwal accompanied the President and daughter Chelsea on their state visit to India in March.

In September, the Clintons held a private $500,000 fund-raiser at Chatwal's penthouse. Days later, Chatwal funneled checks for at least $210,000 to Hillary Clinton's soft-money fund from at least 14 businesses in amounts ranging from $9,000 to $25,000.

The First Lady's campaign recorded all the donations on the same day.

Tuesday, November 7th 2000, 2:14AM
Source: Daily News

By BOB PORT DAILY NEWS STAFF WRITER With Russ Buettner