Julie Hiatt Steele of Richmond, Va., makes a statement as she leaves the federal courthouse in Alexandria on Tuesday. (AP Photo) Related Links Woman Who Disputed Willey Is Indicted (Post, Jan. 8, 1999) Starr Threatens to Charge Minor Witness With Perjury (Post, Dec. 1, 1998) Starr Probing Willey Allegations (Post, Nov. 1, 1998) Discrepancies Emerging on Both Sides of Willey Story (Post, March 19, 1998) Julie Hiattt Steele's Feb. 13, 1998 Affidavit Key Player: Kathleen Willey

By Brooke A. Masters
Washington Post Staff Writer
Wednesday, January 20, 1999; Page A9

Julie Hiatt Steele, the only person indicted in connection with the White House sex scandal, pleaded "absolutely not guilty" yesterday at her arraignment on charges of obstruction of justice and making false statements.

Steele, whose grand jury testimony cast doubt on former White House volunteer Kathleen E. Willey's claim that she was the victim of a sexual advance from President Clinton, faces a March 30 trial in U.S. District Court in Alexandria.

According to the four-count indictment, Steele, of Richmond, allegedly lied when she testified to grand juries in the District and Alexandria that Willey had not told her about the alleged 1993 encounter with Clinton. Steele also stands accused of trying to persuade an unnamed friend not to say that she had passed on Willey's allegations and of lying to the grand jury when she denied talking to the National Enquirer.

"I am not guilty of these or any other crimes. I intend to fight these charges with every last breath in my body," Steele said after the hearing. "Justice will prevail, and I will be vindicated."

Both Steele and Willey were drawn into the scandal when Paula Jones's lawyers called Willey as a witness in the now-settled sexual harassment case to try to prove a pattern of behavior by Clinton. Steele initially told a Newsweek reporter that Willey had described Clinton's alleged sexual advance to her, the indictment said. But later Steele recanted to Newsweek, saying that Willey had not told her about the incident at the time and that Willey had asked her to lie about their conversations, according to the indictment.

Steele's attorney, Nancy Luque, told U.S. District Judge Claude M. Hilton that she will seek to have the case transferred to the District because she believes independent counsel Kenneth W. Starr's office "manufactured" a reason to bring the case in Virginia.

"The grand jury investigation of this is in the District of Columbia. The alleged grope [of Willey by Clinton] is in the District of Columbia," Luque said.

Luque argued that Starr's office is improperly seeking to avoid the District courts because a prior effort to prosecute Clinton confidante Webster L. Hubbell ran into trouble there.

But Starr's office argued that Steele's case belongs in Alexandria. "The new charges and the recycled ones are baseless, and we will respond before the court as necessary," Starr spokesman Charles G. Bakaly III said.

In the Hubbell case, U.S. District Judge James Robertson dismissed a tax evasion indictment, saying, among other reasons, that Starr had exceeded his mandate to investigate the president.

Luque said she plans to raise similar issues in the Steele case, and Robertson's opinion would have more power as precedent if the case were heard in the District, lawyers said. The courts in the District also are more likely to give Luque additional time to prepare a defense, they said.

That could be an issue, because Luque sparred with Hilton yesterday over setting the trial date.

"The independent counsel spent over a year and millions of dollars researching this case, and I am not going to be ready in six weeks," Luque said.

But the judge said he didn't see any reason to delay the case beyond March.

Staff writer Susan Schmidt contributed to this report.