Starr Asks Court to Revive Hubbell Case
Washington Post Staff Writer
Thursday, October 22, 1998; Page A03
Independent counsel Kenneth W. Starr asked a federal appeals court yesterday to reinstate a tax evasion indictment against Webster L. Hubbell, arguing that he already had adequate power to bring the case even as he separately is seeking formal Justice Department approval for his investigation of the tax matter.
Starr is working on two fronts to revive his prosecution of Hubbell, a former law partner of Hillary Rodham Clinton and onetime top Justice Department official. Arguing yesterday before the appeals panel here, Starr contended that he had been granted authority to investigate the tax charges by the special court that oversees independent counsels and that the appeals court should not interfere with that judgment.
But the arguments also revealed that Starr asked Attorney General Janet Reno last week to formally expand his investigation to include the Hubbell tax charges. Reno, who worked with Hubbell when he was associate attorney general in 1993 and 1994, has taken herself out of the decision-making process to avoid any appearance of conflict. Deputy Attorney General Eric H. Holder Jr. is reviewing Starr's request, and Justice officials said yesterday that no decision has been made.
In July, U.S. District Judge James Robertson threw out Hubbell's indictment on the grounds that Starr did not have the power to bring the case without obtaining Justice Department approval -- a position supported yesterday by the department. The judge said the special court let Starr stray too far afield of his original mandate.
The case involves complicated legal issues, but it also presents the broad question of how far independent counsels can go in pursuing their investigations. Starr's probe of Hubbell began shortly after his appointment in August 1994 with the question of whether Hubbell bilked his partners and clients at the Rose Law Firm. Hubbell, who eventually pleaded guilty to those charges and promised to cooperate with Starr, was relevant to Starr's Whitewater investigation because of his potential knowledge about the Clintons' complicated financial dealings.
However, prosecutors were not satisfied with what he told them and grew suspicious of the more than $700,000 in consulting fees paid to Hubbell by Clinton allies after he left the Justice Department. That led Starr to launch yet another probe to determine whether White House aides and Democratic Party fund-raisers sought to obstruct justice and buy Hubbell's silence on Whitewater matters. In December, Starr went back to the special court that oversees his work and asked for approval to look into the consulting payments as well as potential tax irregularities. The court issued an order confirming Starr's authority.
Yesterday, Starr argued that he had played by the rules laid out in the independent counsel law in obtaining that approval. "It is a red herring, a shibboleth, to say: What does this have to do with" Whitewater, he said.
But Hubbell's lawyer, John Nields, said that if Starr were allowed to pursue the tax case, "there are no knowable or foreseeable limits to where the independent counsel can go." Justice Department attorney J. Douglas Wilson agreed: "You've basically opened the door to allowing the independent counsel to pursue matters that he simply stumbles across."
The 10-count indictment, returned April 30, accused Hubbell, Hubbell's wife, Suzanna, and two longtime associates of conspiring to hide hundreds of thousands of dollars generated by Hubbell's consulting. Hubbell was accused of earning more than $1 million since 1994 but still owing the government $894,000 in back taxes and penalties.
Hearing the case were judges Patricia M. Wald, a Carter appointee, Stephen F. Williams, a Reagan appointee, and David S. Tatel, a Clinton appointee. Hubbell and his wife sat in the front row of the standing-room-only courtroom during the 90 minutes of arguments.
Wald asked Starr whether he could go after any crime he uncovers no matter how unrelated it might be to his investigation -- for example, whether he could seek to indict someone for illegal gambling or failing to pay taxes on his grandmother's inheritance discovered during an obstruction-of-justice probe.
"That is a considerably closer case," Starr said.
Tatel questioned Starr about his power to bring tax charges given that he did not seek to charge Hubbell with obstruction, the ultimate object of his investigation.
"I don't think this court should indulge the assumption there is no evidence of obstruction," Starr retorted, offering to let the court examine secret evidence gathered by the grand jury that handled the case.
Williams seemed sympathetic to Starr's argument, telling Nields at one point, "Under your reading . . . the independent counsel is a hobbled prosecutor, unable to do the things most prosecutors do."
A separate issue in the case concerns whether Starr improperly used information from materials Hubbell provided under a grant of immunity. Robertson dismissed the charges against Hubbell on that ground as well, saying that Hubbell had essentially been forced to incriminate himself by turning over to the government documents that became the basis for the tax evasion case.
On that issue, the Justice Department weighed in on Starr's side. But Nields argued, "What happened here is the government required Mr. Hubbell to disclose . . . documents and then they took those documents and used them to indict him."
Staff writer Roberto Suro contributed to this report.
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