CLINTON AIDE SWEPT UP IN WHITEWATER.

Byline: Robert A. Rankin and Aaron Epstein Knight-Ridder Tribune News Wire

Bruce Lindsey, President Clinton's closest aide and most trusted friend, will be named an unindicted co-conspirator by federal prosecutors in the Whitewater trial in Arkansas, a defense lawyer said Wednesday.

Lindsey soon will be accused in court of conspiring with bankers to hide from the Internal Revenue Service large cash withdrawals by Clinton's 1990 campaign for re-election as Arkansas governor. Lindsey was the campaign's treasurer.

The bankers are charged separately with illegally siphoning tens of thousands of dollars from their bank into Clinton's campaign.

Whitewater Independent Counsel Kenneth Starr's office in Little Rock declined to comment, but Dan Guthrie, defense attorney for one of the two Arkansas bankers standing trial, told reporters Wednesday that Starr's prosecutors have informed him that Lindsey will be identified as an unindicted co-conspirator.

That designation will permit prosecutors to elicit testimony about Lindsey's conversations with the bankers, which otherwise would be inadmissible in court as hearsay.

Lindsey denies any wrongdoing, and Clinton said he retains full confidence in him.

While the legal implications for Lindsey are somewhat unclear, the political repercussions are shaking the White House.

Before his resignation in 1974, Richard Nixon was damned with that same phrase - ``unindicted co-conspirator'' - by the Watergate special prosecutor. Hanging the same label on Lindsey now stretches the criminal shadow of Whitewater closer to Clinton than ever before. Other than Hillary Rodham Clinton, no one is closer to the president than Lindsey.

When Clinton lost the 1980 gubernatorial election in Arkansas after one term in office, he suffered a midlife crisis that Lindsey helped him overcome by taking Clinton into his Little Rock law firm of Wright, Lindsey & Jennings.

Affable, low-key, discreet, Lindsey now holds the title of White House deputy counsel, but he has served Clinton as a friend, sounding board and trouble-shooter since they came to Washington in January 1993. Clinton rarely travels without him; when the president wants to play hearts on Air Force One, more often than not he plays with Lindsey.

One of Lindsey's main White House roles has been dealing with potentially explosive charges against Clinton. When allegations erupted in December 1993 that Clinton, when governor, had used Arkansas state troopers to procure women for him, Lindsey was given responsibility for all White House responses.

And when Whitewater inquiries dogged the Clintons through their first year in Washington, they initially turned over responsibility for dealing with them to Lindsey, hoping his narrow, lawyerly approach might contain the controversy. It didn't.

Last year Starr's prosecutors told Lindsey he was a target of their Whitewater investigation, but he was never indicted. White House Press Secretary Mike McCurry stressed that Wednesday, saying ``what is significant is that in many long months of inquiry he was not indicted.''

Clinton affirmed his faith in Lindsey during an Oval Office photo session later. ``I'm confident he didn't do anything wrong,'' he said.

But by naming Lindsey an unindicted co-conspirator, prosecutors will be able to question their key witness, Neal T. Ainley, about his conversations with Lindsey at the time of the bank withdrawals - conversations the court otherwise would rule inadmissible as hearsay, legal experts say. Ainley's testimony could disclose whether Lindsey knew of - or suggested - the alleged plan to hide the transactions from the IRS.

According to a grand jury indictment, Ainley conspired with Herby Branscum and Robert M. Hill to conceal two withdrawals totaling more than $50,000 from the Perry County Bank in Arkansas by the 1990 Clinton for Governor campaign.

Ainley was the bank's president, Branscum and Hill its principal owners, and Lindsey was the campaign treasurer. Ainley made a deal with prosecutors and is now the principal federal witness against Branscum and Hill.

Lindsey personally withdrew $30,000 four days before the May 1990 primary election. Another campaign aide picked up $22,500 on the Friday before the November general election.

Lindsey provoked suspicion by writing four separate checks for $7,500 each in May, instead of withdrawing the full $30,000 in a single check. All transactions over $10,000 must be reported to the IRS.

But Allen Snyder, Lindsey's lawyer, said Lindsey did that not to deceive the IRS, but for purely political reasons.

In a statement issued through Snyder on Tuesday night, Lindsey said he wanted to reduce the risk that someone in the bank might tell Clinton's primary opponent about the large cash withdrawal, information the opponent might misuse ``during the final weekend of the campaign when we might not have had time to respond effectively . . .''

Lindsey said ``it doesn't make sense that I would even care about whether the bank'' filed a report with the IRS. ``The thought . . . simply did not cross my mind.''

In a telling measure of the building pressure, Lindsey rushed to the White House lawn Wednesday afternoon to admonish a television correspondent who had just reported on the development.

``I didn't offer to resign,'' Lindsey said. ``I did nothing wrong. There is no reason or purpose for me to resign.''

Some judges have criticized the government's practice of naming unindicted co-conspirators as ``potentially damaging to the reputation of someone who is not charged with anything,'' said Neal R. Sonnett, a Miami lawyer and former president of the National Association of Criminal Defense Lawyers.

Lindsey minimized the significance of being named an unindicted co-conspirator in brief remarks to reporters Wednesday on the White House lawn.

``The whole purpose of naming me as an unindicted co-conspirator is to allow Neil Ainley to talk about what otherwise would be hearsay testimony. I have no idea what Neil Ainley's going to say. In the past Neil Ainley has said his dealings with me were normal and routine,'' Lindsey said.

Ainley has pleaded guilty to charges of failing to inform the IRS that the Clinton campaign fund twice withdrew more than $10,000 from his bank.

But Lindsey's lawyer Snyder said both withdrawals were reported on campaign-finance forms within 30 days of the elections, as required by state law.

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Photo: (Color) Bruce Lindsey

Cash withdrawals at issue