THE guilty verdict for all three defendants in the so called Whitewater trial is a setback for resident Clinton, who had testified in their favour. They were onetime close personal friends and business associates of the President and his wife, Hillary, when they lived in Arkansas.
But the White House has moved quickly to point out that the Clintons themselves were in no way on trial and that the prosecutor himself had made that clear when an attempt was made by a witness, Mr David Hale, to implicate Mr Clinton.
The guilty verdicts on James and Susan McDougal and the Arkansas Governor, Mr Jim Guy Tucker, will now give a new lease bf life to separate inquiries into Whitewater by the Special Proseutor, Mr Kenneth Starr, and into the Senate hearings on the affair.
The hearings are investigating the role of Mrs Clinton as a lawyer involved in some of the operations of the McDougal savings bank which later failed.
The background to the Whitewater affair is that back in 1278, Bill and Hillary Clinton joined with the McDougals to invest in a 220 acre resort development in Arkansas where Mr Clinton was then attorney general. The plan was to subdivide the land known as Whitewater and sell it for holiday homes.
The four borrowed about $200,000 but the project failed to take off and, instead of profits, the investors were saddled with increasing interest payments on their loans. The Clintons were able to claim tax deductions for these payments but have recently had to repay amounts illegally deducted.
The Clintons have always claimed that they left the running, of the investment to James McDougal, and in 1992 their financial involvement in it ended just after Mr Clinton was elected President.
But McDougal had earlier founded the Madison Guaranty Savings and Loan bank and it was his management of it and its eventual failure in 1989 that led to his being charged with numerous counts of fraud along with his wife, Susan, and the present Governor of Arkansas, Mr Jimmy Tucker.
During the trial, however, a former local judge, Mr David Hale, claimed that in 1986 Mr Clinton, who was then governor of Arkansas, pressurised him to make a $300,000 loan to Susan McDougal from his Little Rock investment company. This loan was then used to obtain federal grants illegally.
But Mr Hale has already been convicted and sentenced on charges of fraud and he has been a key prosecution witness against the McDougals in the trial.
If the defendants had been cleared of the charges, the Whitewater affair was expected to die off. It is extremely complex, and few people understand the details.
But now that these onetime business associates of the Clintons have been found guilty of fraud and the role of Mrs Clinton in her professional dealings with the McDougal bank his still to be clarified, the political fallout can only be negative for the President as he faces into his re-election campaign.