Judges Revive Starr's Prosecution of Hubbell
Washington Post Staff Writer
Wednesday, January 27, 1999; Page A3
A federal appeals court panel yesterday reinstated independent counsel Kenneth W. Starr's tax case against Webster L. Hubbell. But the decision may be a hollow victory for the prosecution, because the court warned that Starr may not get to use Hubbell's own financial records as evidence against him.
The ruling, issued by a divided D.C. Circuit Court of Appeals, reverses an opinion issued last summer by U.S. District Judge James Robertson, who had thrown out the indictment with a stinging rebuke of Starr's tactics. Robertson found that Starr exceeded his authority in pursuing tax evasion charges against Hubbell, and said the independent counsel improperly built the case with financial records that Hubbell provided after Starr granted him immunity from prosecution.
In a key finding, the appellate court panel ruled 2 to 1 that Starr did not abuse the mandate that launched his original Whitewater investigation, reversing an element of Robertson's opinion that Starr's critics had loudly touted in attacks on the independent counsel's handling of the Monica S. Lewinsky investigation.
But the judges said Starr can use Hubbell's records only if he convinces Robertson that prosecutors did not force Hubbell to incriminate himself by requiring him to turn over the documents. The judges questioned whether Starr can meet the test, thus raising the possibility that Starr will not be able to present evidence at heart of his case.
For now, the decision means that Hubbell, the former No. 3 Justice Department official and onetime Little Rock law partner of Hillary Rodham Clinton, must fight Starr on two legal fronts. In addition to the tax charges, he faces a separate 15-count indictment stemming from work done in the mid-1980s for a failed Arkansas savings and loan. That indictment, returned last fall, was not part of the appeal decided yesterday. Robertson has set a hearing for Feb. 16 on defense motions to dismiss that case.
Hubbell said he felt "slugged in the stomach" when he first learned that the tax indictment, which also names his wife, Suzanna, his accountant and his tax lawyer, had been revived. But he said he was pleased that serious questions were raised about Starr's use of the financial records.
"We'd love for it to be over, for obvious reasons," Hubbell said. "On the underlying charges, I'm innocent. So are my friends and so is my wife."
Hubbell's lawyer, John W. Nields Jr., said he was "gratified" by the court's concerns about Starr's use of the financial records and that he is considering what to do next. Either side could ask the full appellate court to review the case.
At Starr's office, spokesman Charles G. Bakaly III said he was generally pleased with the ruling and confident that any remaining legal hurdles will be overcome. "Yesterday there was no indictment. Today there is," Bakaly said. "We'll go through the hearing process and see what happens."
Starr's office began investigating Hubbell more than four years ago, focusing initially on the Whitewater land deal and other business matters in Arkansas. Hubbell -- who was forced to resign from his Justice Department post -- spent 18 months in prison after pleading guilty in December 1994 to embezzling from clients and partners of the Rose Law Firm in Little Rock. As part of that plea, he agreed to cooperate with Starr on the Whitewater probe. But prosecutors were not satisfied with what he told them, and eventually turned their attention to his personal financial dealings.
Between his resignation and imprisonment, Hubbell found consulting work with a number of clients, including some of President Clinton's close friends and political backers.
Suspecting that the consulting payments might have been hush money, Starr obtained 13,120 pages of Hubbell's financial documents.
Information gleaned from the records was used to build the tax evasion case. The indictment alleged that Hubbell did little or no work for some of the more than $700,000 in consulting payments he received. It alleged that Hubbell, his wife, their accountant, Michael C. Schaufele, and their tax lawyer, Charles Owen, conspired to hide and deplete assets and duck payment on hundreds of thousands of dollars in tax debts.
Robertson agreed with Hubbell's lawyers that the tax case strayed too far afield from Starr's original Whitewater mandate.
But two of the three judges on the appellate panel agreed in a 100-page decision issued yesterday that they saw a clear tie-in.
"If payments Hubbell received beginning in 1994 were indeed hush money to secure Hubbell's silence vis-a-vis Whitewater, the possible obstruction of justice therein would certainly be a crime 'relating to' Whitewater, for it would be an attempt to cover up the wrongdoing afterward," wrote Judge Stephen F. Williams. Tax evasion, he said, could be a tactic to keep payments secret.
Williams was joined in that view by Judge Patricia M. Wald. David S. Tatel dissented, saying Starr appeared to be exercising limitless discretion.
The immunity issue also divided the court. While saying that Robertson should have first held a hearing on the issue, Wald and Tatel said Starr must show that he knew that Hubbell had the specific records that were later produced. Otherwise, they said, Hubbell was forced to incriminate himself by turning over the materials.
Williams disagreed, finding that Hubbell's grant of immunity only extended to his actual production of documents and did not shield him from the information on them.
Writing for the majority, Wald said that Starr only had "snippets of information" about one or two of Hubbell's clients before issuing the subpoena, and that the prosecution's prior knowledge about his records appeared "scant at best."
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