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Starr Brings Third Indictment Against Hubbell

Hubbell,AP Webster Hubbell meets reporters outside his Washington home on Friday. (AP)

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  • By Susan Schmidt
    Washington Post Staff Writer
    Saturday, November 14, 1998; Page A1

    Independent counsel Kenneth W. Starr yesterday secured a new federal indictment of Webster L. Hubbell, alleging that the former top Justice Department official lied to Congress and federal banking regulators to conceal work that he, Hillary Rodham Clinton and their law firm did in the mid-1980s for a rogue savings and loan.

    The 15-count indictment alleges that Hubbell covered up the Rose Law Firm's involvement in a phony multimillion-dollar land deal that caused losses big enough to bankrupt Madison Guaranty S&L, the thrift owned by the late James B. McDougal, the Clintons' Whitewater business partner. Hillary Clinton's legal work for Madison in the mid-1980s is referred to throughout the indictment but she is accused of no wrongdoing.

    The indictment of Hubbell is the third that Starr has brought against the former associate attorney general, an old friend of the Clintons. Hubbell pleaded guilty in 1994 to charges lodged by the independent counsel that he bilked Rose Law Firm clients and partners. A second case brought earlier this year by Starr dealt with alleged income tax violations but it is on appeal after being thrown out by a federal judge who said it strayed too far from Starr's original mandate.

    Yesterday's indictment deals more directly with the Whitewater matters Starr was appointed to investigate four years ago. The independent counsel lodged no Whitewater charges in his impeachment report to Congress on President Clinton and closed down his Arkansas office months ago without bringing charges against Hillary Clinton. The Hubbell indictment was issued by a grand jury here.

    Hubbell accused Starr of bringing the case in an effort to force him to falsely incriminate the Clintons. "I do not know of any wrongdoing on behalf of the first lady and president and nothing the independent counsel can do to me is going to make me lie about them," he told reporters yesterday.

    While Hillary Clinton's name is not mentioned in the indictment, her actions are described, albeit obliquely. She is mentioned some 35 times throughout the indictment, but only as Rose's "1985-86 billing partner" for the Madison account. The document describes some of her work on Madison's ill-fated Castle Grande project, an 1,100-acre industrial and trailer park development south of Little Rock.

    Overall, the indictment seeks to make a broad case that Hubbell engaged in myriad conflicts of interest related to Madison, then lied repeatedly between 1989 and 1995 about them to federal investigators and the House Banking Committee.

    The Rose Law Firm, with Hubbell as lead attorney, was hired by federal banking regulators in the late 1980s to sue Madison's former accountants after the thrift failed at an estimated $60 million cost to taxpayers. Hubbell is charged with concealing the fact that Rose had represented Madison and therefore had a conflict in taking the case.

    Some of the loans that the accountants were blamed for allowing Madison to make were Castle Grande transactions that Hillary Clinton and Hubbell worked on for his father-in-law, Seth Ward. The indictment charges that Hubbell falsely told regulators and Congress he did no work on Castle Grande matters and was not aware of what work Rose did for Madison.

    The indictment contends that Hillary Clinton prepared a real estate option agreement used by Madison officials to deceive federal regulators about hundreds of thousands of dollars in bogus real estate commissions that were being paid to Ward. While charging there was a scheme to hide the commissions and the tottering condition of the thrift, the indictment makes no allegation that Hillary Clinton knew anything about it.

    Some White House aides charged that the new indictment was an act of desperation on Starr's part as he prepares to testify in congressional impeachment proceedings next week. But the Clintons issued a restrained response. "The president and first lady are saddened about today's events involving Webb Hubbell, and would like to express their concern for Webb and his family," said White House spokesman James E. Kennedy.

    "I had hoped I could start my life anew again. And I'm now of the belief that I may never be able to do so. I just do not know what it is going to take to make this matter end," Hubbell said outside his Washington home.

    Added his lawyer, John W. Nields Jr.: "It is not normal for a prosecutor to keep indicting the same person over and over again."

    Starr also has been investigating payments of more than $700,000 in consulting fees to Hubbell from Clinton allies and Democratic Party supporters after he left the Justice Department in the spring of 1994 amid allegations he defrauded his former firm and clients. Yesterday's indictment makes no mention of the payments to Hubbell, which came as Starr was already investigating the Rose Law Firm and its ties to Madison and Castle Grande.

    Hubbell agreed to cooperate in Starr's investigation of those matters as part of his 1994 plea bargain for defrauding the law firm and its clients, but the independent counsel claimed Hubbell was not forthcoming about what he knew and refused to recommend a sentence reduction. Hubbell served 18 months in federal custody.

    In the new case, Hubbell is accused of taking on the job of suing Madison's accountants, Frost & Co., and concealing from the FDIC -- his client -- the information that Hillary Clinton had represented the failing thrift before the state securities department, submitting a report from Frost attesting to Madison's financial health at a time when the shaky thrift was seeking approval for a new stock issue.

    Frost was accused in the FDIC suit of failing to inform the Madison board of directors about "insider dealing, fictitious sales and land flips" at Castle Grande, along with permitting other risky loans, according to the indictment. Hubbell reached an out-of-court settlement for the FDIC with Frost instead of taking the case to trial.

    The indictment stems from criminal referrals Starr received from the inspectors general of the Federal Deposit Insurance Corp. and the federal thrift cleanup agency, the Resolution Trust Corp. In addition, Hubbell is accused of perjuring himself before the House Banking Committee in Aug. 10, 1995, testimony in which he said he was not aware of what work Rose did for Madison.

    In what may bode poorly for Starr in the new case, it has been assigned to U.S. District Judge James Robertson, the judge who threw out the earlier tax indictment.

    Staff writer Bill Miller contributed to this report.

    © Copyright The Washington Post Company

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