By Bill Miller
"Not guilty, your honor," Hubbell, a former law partner of first lady Hillary Rodham Clinton at Little Rock's Rose Law Firm, declared when asked by U.S. District Judge James Robertson how he pleaded to the 10-count indictment.
Independent counsel Kenneth W. Starr brought the new charges against Hubbell last week in a move that the former third-ranking Justice Department official condemned as an effort to pressure him to falsely implicate the Clintons.
Faced by a swarm of reporters as he and his wife left the courthouse yesterday, Hubbell passed up a chance to take the offensive, as he did last week when he declared that Starr's prosecutors "can indict my dog, they can indict my cat, but I'm not going to lie about the president." Instead, he declined to comment, not even mentioning the political controversy swirling around the release by the House Government Reform and Oversight Committee of selectively edited transcripts of his prison phone calls.
The Hubbells' attorney, John W. Nields Jr., also took a low-key approach yesterday. "The case is in the courts now. From now on, we will be doing our talking in court," Nields said.
Hubbell, 50, has already served an 18-month federal sentence after pleading guilty to embezzling from Rose Law Firm clients and partners in a case brought by Starr. The new indictment alleges that Hubbell; his wife, Suzanna; the couple's accountant, Michael C. Schaufele; and tax lawyer, Charles Owen, conspired to evade paying taxes and conceal income. The couple allegedly owed back taxes and penalties of close to $900,000 but paid less than $30,000 between 1994 and 1997, when they earned more than $1 million. Much of that income came from consulting payments Hubbell received from Clinton supporters at a time when Hubbell was already under investigation by Starr and serving his prison sentence.
Starr's investigators have tried to determine if White House aides and Democratic Party fund-raisers sought to buy Hubbell's silence on Whitewater matters involving the Clintons by lining up consulting fees for which he did little or no work in 1994 and 1995, when Starr was investigating him for the Rose billing scheme. The indictment, however, makes no mention of such allegations.
During yesterday's 45-minute hearing, Nields vowed to seek a quick dismissal of the charges and said he would challenge Starr's authority to pursue the case, contending that the issues are outside the scope of Starr's mandate in the long-running Whitewater investigation.
Starr's prosecutors did not respond to Nields's arguments yesterday. The independent counsel won a similar jurisdictional battle two years ago when a federal appeals court reinstated a tax fraud indictment against then-Arkansas governor Jim Guy Tucker after Tucker argued the charges went far afield of Starr's mandate to investigate the Clintons' Arkansas business dealings.
Nields said last week that Starr is improperly singling out Hubbell for prosecution. The indictment, he said, constitutes "a rare type of tax charge . . . that would never have been brought against an ordinary taxpayer by the Department of Justice."
Nields said that the crime of evasion occurs "only when a taxpayer commits some sort of fraud of concealment intended to prevent the IRS from collecting a tax -- like putting assets in another person's name or putting money in a numbered Swiss account. And that did not happen here."
Some experts agreed the prosecution of Hubbell, his wife, his lawyer and accountant was an aggressive use of the criminal provisions of the tax laws, which are more often enforced through assessing civil penalties and interest. They said that criminal prosecutions for failing to pay taxes owed are rare, as are going after the taxpayer's wife and associates.
"If you sent everybody in the world to prison for doing what he has done, you'd have no room for real criminals," said former Internal Revenue Service commissioner Sheldon Cohen, saying that the "essence" of the government's case was Hubbell's failure to pay taxes on all of his income. "It's not off the wall but on the other hand it is not at all usual. It really is entirely unusual."
He said the indictment of Hubbell's wife Suzanna "looks like it's a heavy heel trying to push him so that he'll do what they want him to do. It isn't nice."
Another former IRS commissioner, Donald Alexander, said the allegations against Hubbell "could be treated as criminal behavior" and noted that the government routinely goes after high-profile people in tax cases because of the potential deterrent value. "The bottom line is I think there's enough to support the indictment," he said.
Staff writers Ruth Marcus and Susan Schmidt contributed to this report.
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