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The Hubbells
Webster and Suzanna Hubbell
(AP file photo)

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Related Links
_ Excerpts of the Ruling

_ Hubbell Tax Case Challenged by Judge (Washington Post, June 27)

_ Hubbell, Wife To Stand Trial in October (Washington Post, June 3)

_ Hubbells, Associates Enter Pleas of Not Guilty (Washington Post, May 9)

_ Full Text of Indictment

_ Full Coverage: Clinton Accused

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Judge Dismisses Hubbell Tax Case

By Ruth Marcus and Susan Schmidt
Washington Post Staff Writers
Thursday, July 2, 1998; Page A01

A federal judge yesterday dismissed the tax evasion indictment of Webster L. Hubbell, ruling that independent counsel Kenneth W. Starr exceeded his authority in going after Hubbell and that the case was improperly based on documents the former Justice Department official turned over under a grant of immunity.

U.S. District Judge James Robertson also threw out the April indictment of Hubbell's wife, Suzanna, his accountant and his tax lawyer. Starr immediately announced he would appeal the dismissal, a move that is virtually certain to delay resolution of the case until next year and further extend the long-running Whitewater investigation.

Robertson, appointed by President Clinton, said the three-judge court that oversees independent counsels erred when it approved Starr's request to expand his jurisdiction to include the Hubbell tax charges. The court can act only if such a move is requested by the attorney general, Robertson said.

But his 35-page opinion was also laced with criticism of Starr, suggesting that the independent counsel strayed too far afield of his original mandate to investigate President Clinton's Whitewater real estate investment. He said Starr went on "the quintessential fishing expedition" in subpoenaing 13,120 pages of records from Hubbell under an immunity grant and then using them as the basis to build the tax prosecution.

The ruling is the third significant setback to the independent counsel in as many weeks, coming on the heels of the Supreme Court's rejection of Starr's efforts to obtain evidence from the lawyer for the late Vincent W. Foster Jr. and the release from prison of Susan McDougal, the Clintons' Whitewater business partner. McDougal was freed for health reasons four months into her two-year bank fraud sentence.

While Starr noted in a statement yesterday that Robertson's ruling conflicts with two other recent federal court decisions, it is certain to be cited by Starr's critics as evidence of what they have described as the independent counsel's overreaching.

"It's ammunition," said St. John's University law professor John Q. Barrett. "For people who want to criticize Starr, this is this week's foul-up. Last week he loses a Supreme Court case, this week he loses an indictment. The guy can't shoot straight. That's the argument people will make, whether it's fair or not."

A former law partner of Hillary Rodham Clinton and close friend of the president, Hubbell served as associate attorney general, the No. 3 job at the Justice Department, before being forced to resign in March 1994 amid an investigation by the independent counsel into his billing practices at the Rose Law Firm.

Hubbell served 18 months after pleading guilty in December 1994 to embezzling from the firm's clients and partners. As part of that plea, he agreed to cooperate with Starr's office in its Whitewater investigation. But Starr's prosecutors were not happy with Hubbell's cooperation and launched an obstruction-of-justice investigation after learning that Hubbell had received lucrative consulting contracts arranged by Clinton allies.

In April, Starr indicted Hubbell on federal tax evasion and fraud charges stemming from some of the more than $700,000 in payments he received from the Clinton supporters. Hubbell was accused of earning more than $1 million since 1994 but still owing the government $894,000 in back taxes and penalties, while spending most of the money to maintain a lavish lifestyle.

After Robertson dismissed the case, Hubbell told reporters outside his house yesterday, "We're just very, very grateful. We didn't expect anything this quick."

In Shanghai, Clinton, who is finishing a nine-day China trip, said he was "happy for [the Hubbells] personally." Deputy counsel Bruce R. Lindsey had been awakened in the middle of the night with the news. Back in Washington, White House officials were thrilled but decided during a meeting to restrain themselves in their public comments, lest they appear to be gloating.

"The judge's opinion speaks for itself," said senior presidential adviser Rahm Emanuel. "It's impossible to expand beyond the judge's words, such as 'really scary,' 'fishing expedition' [and] 'violating his rights.' It speaks volumes about this investigation."

The special court in charge of independent counsels named Starr in 1994, granting him the power to investigate the Clintons and their late business partner James B. McDougal in relation to the Whitewater land deal and two lending institutions, including McDougal's savings and loan Madison Guaranty. The mandate also gave Starr authority to probe violations "by any person or entity developed during the Independent Counsel's investigation . . . and connected with or arising out of that investigation."

Hubbell was part of the probe because of his involvement with Madison Guaranty and his position at the Rose Law Firm, which represented Madison.

In defending his second prosecution of Hubbell, Starr argued that it was "demonstrably related" to his original jurisdiction and that, in any case, he had taken the added precaution of asking the special court to expressly grant him the authority.

Starr did not seek Attorney General Janet Reno's consent for the new expansion, concluding he did not need it in the wake of a decision that allowed independent counsel Donald M. Smaltz to investigate Ronald H. Blackley, former Agriculture Department chief of staff, over Reno's objections.

Robertson said Starr was wrong on both fronts.

"The independent counsel's explanation of how this indictment is 'connected with' the original grant was a recitation spanning six degrees of relationship," he wrote.

"The argument is that, so long as the independent counsel is investigating obstruction, he may prosecute whatever crimes he may come across, committed by whomever he may come across, regardless of whether the charges or the individuals are demonstrably related in any substantive way to the original grant, and regardless of whether he has found any obstruction."

Robertson said the special court that appoints and oversees independent counsels has power only to interpret their original grant of authority, not to expand it without the consent of the attorney general. In the most active part of Starr's investigation, the allegations involving Clinton and Monica S. Lewinsky, Starr asked Reno to seek the expansion of his jurisdiction.

In another section of his ruling, Robertson said that the charges against Hubbell were improperly based on material Hubbell gave prosecutors under an immunity grant that barred them from using Hubbell's "production" of the documents against him. The independent counsel subpoenaed Hubbell's financial records as part of its inquiry into whether there had been an effort to buy his silence about Whitewater.

Starr argued, and the judge agreed, that the contents of the documents themselves were not covered by the immunity deal. But Robertson said Hubbell gave prosecutors leads to bank records and other transactions about which they had no previous knowledge.

"Mr. Hubbell's compelled production of documents allowed the independent counsel to build a case against Mr. Hubbell different in all material respects from the case for which they had been subpoenaed," Robertson wrote. "Mr. Hubbell was thereby turned into the primary informant against himself."


© Copyright 1998 The Washington Post Company

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