Fiske Ousted in Whitewater Case; Move Is Surprise : Investigation: Federal three-judge panel names Kenneth Starr as new special counsel. Switch is seen as prolonging probe. The action stuns Clinton’s advisers.

The controversial Whitewater criminal investigation took a surprising turn Friday when a three-judge panel replaced special counsel Robert B. Fiske Jr. with Kenneth W. Starr, solicitor general under former President George Bush.

The move stunned President Clinton’s advisers, who had asked the court to reappoint Fiske under the terms of a newly enacted independent counsel law that had lapsed when the investigation began more than six months ago.

At the White House, Counsel Lloyd N. Cutler issued a terse statement saying that the President will continue to “cooperate fully” with the investigation into allegations that Clinton may have benefited from money funneled to the Whitewater Development Corp. from a now-defunct Arkansas savings and loan owned by James B. McDougal, his investment partner in the Whitewater real estate venture.

Ironically, although the three-judge panel said that it needed to replace Fiske to assure the independence of the investigation because he had been chosen by the Clinton Administration, the switch actually could heighten the partisan nature of the inquiry.

While both Fiske and Starr are Republicans, Starr is widely viewed as a more partisan choice because of his service under Clinton’s 1992 political opponent and because he is said to have given legal advice to the lawyers for Paula Corbin Jones, the woman who is suing Clinton for alleged sexual harassment.

In addition, lawyers involved in the case predicted that the switch in investigators will delay the conclusion of the investigation, perhaps forcing Clinton to defend himself against embarrassing conclusions closer to the 1996 presidential election.

“The only problem with this is the time it’s going to take . . . “ said Clinton political adviser Bob Shrum. “The frustrating thing here is that this will probably delay it some weeks or months.”

A senior White House official, who declined to be identified by name, said the President’s aides believe that they are being treated unfairly, facing “a kind of double jeopardy” with the switch to a second prosecutor.

Under the terms of his appointment by the court, Starr has wide-ranging authority to either accept all of the work that Fiske has done so far or to begin the investigation over again. Lawyers involved in the case predicted that he would keep on some of Fiske’s appointees to ensure continuity.

The setback for Clinton comes at a time when he is suffering the effects of unfavorable publicity generated by nearly two weeks of Whitewater hearings in Congress, which have focused on questionable contacts between the Treasury Department and the White House.

Republicans, who have been critical of Fiske’s approach, immediately applauded the choice of Starr. Rep. Jim Leach of Iowa, the President’s leading Republican critic on Whitewater, praised the choice of Starr, whom he described as a man of “impeccable credentials and stature.”

Terry Eastland, a former Republican Justice Department official who worked with Starr, said that the White House should view Starr’s appointment as a plus. “If he clears him,” he said, “that’s the best news Clinton could have.”

Starr, 48, now an attorney in private practice, is high on the Republicans’ list of possible future appointees to the Supreme Court. He has served on the U.S. Court of Appeals in Washington as well as having been solicitor general.

Recently, Gilbert Davis--who represents Jones in her suit alleging that Clinton, when he was governor of Arkansas, lured her into a hotel room and asked her for oral sex--told The Times that Starr had offered to draft an amicus brief supporting his defendant’s right to sue the President.

At the time, Starr declined to comment but he told a PBS interviewer “that it’s a very serious step” to argue, as the President has, that he is above such lawsuits.

Fiske came under fire from Republicans recently when he concluded that the death last summer of former Deputy White House Counsel Vincent Foster was a suicide, not a murder, and that the controversial White House-Treasury discussions violated no law. Some Republicans, such as Rep. Dan Burton of Indiana, still think that he may have been wrong on both counts.

The court’s order does not explicitly empower Starr to reexamine the death of Foster as Fiske’s charter did but it does give him authority to investigate any future allegations that the Administration might have tried to interfere with the Whitewater criminal investigation.

Republicans also objected to the role that Fiske played in helping Democrats delay until next year congressional hearings into central allegations in the Whitewater case and to the deference that he has shown for the Clintons, the Foster family and others ensnared in the controversy.

In response to the court’s decision, Fiske, a prominent New York attorney, issued a statement saying that it had been a privilege to serve as independent counsel. “I wish Ken Starr the very best,” he said, “and will do everything I can to help him with a speedy and orderly transition.”

Starr, who was attending an American Bar Assn. meeting in New Orleans, could not be reached for comment.

Although Atty. Gen. Janet Reno had asked the court to reappoint Fiske, the judges said they had concluded that to choose an investigator favored by the Administration “would not be consistent with the purposes” of the newly re-enacted law providing for independent investigations of alleged crimes involving the President or his top appointees. The independent counsel law was re-enacted earlier this year and signed into law by Clinton.

“This reflects no conclusion on the part of the court” that Fiske lacks either the actual independence “or any other attribute necessary to the conclusion of the investigation,” the judges wrote. “Rather, the court reaches this conclusion because the act contemplates an apparent as well as an actual independence on the part of the counsel. . . .

“As Fiske was appointed by the incumbent Administration, the court therefore deems it in the best interest of the appearance of independence contemplated by the act that a person not affiliated with the incumbent Administration be appointed.”

For those same reasons, Reno initially resisted Republican demands for an Administration-appointed prosecutor on grounds that, lacking a law giving him the independence of being a court appointee, his findings would never be fully accepted by Clinton’s critics. But she eventually yielded to the pressure and selected Fiske.

On Friday, she recalled that she had hoped the independent counsel law would be re-enacted earlier, before she was forced to appoint a Whitewater investigator.

The court invested Starr with the “full power, independent authority and jurisdiction to investigate to the maximum extent authorized” by the new law possible violations of law relating to the relationship of the Clintons and McDougal and his now-defunct savings and loan.

Times staff writer David Lauter contributed to this story.

An Overview of the Whitewater Probe

July 20, 1993: Vincent Foster, deputy counsel to the White House, is found dead in a Virginia park. U.S. Park Police say he shot himself in the head. Two days later, White House Counsel Bernard Nussbaum removes Whitewater files from Foster’s office, a fact unknown until December.

Oct. 8: The Resolution Trust Corp., which for years has been sorting out the mess at the failed Madison Guaranty S & L in Little Rock, Ark., asks the Justice Department for a criminal investigation. Madison was owned by James B. McDougal, he Clintons’ business partner in Whitewater Development Corp. The RTC says money might have flowed from Madison Guaranty to the Whitewater development and Clinton’s gubernatorial campaign in 1985.

Dec. 18: Justice Department renews its interest in Foster’s suicide because of media speculation that he was alarmed about the Whitewater scandal to come.

Dec. 23: Clinton tells his personal lawyer to turn over all Whitewater documents to the Justice Department, including files from Foster’s office. It is later learned this was done under a negotiated subpoena to keep the documents sealed from the public, press and Congress. The first of 10 boxes of files are delivered two weeks later after being ‘catalouged.’

Jan. 12, 1994: Clinton directs Atty. Gen. Janet Reno to name an independent counsel to probe the Whitewater affair after congressional Republicans clamor for a special congressional committee to mount an investigation.

Jan. 20: Reno names New York lawyer Robert B. Fiske Jr. as special counsel to conduct a wide-ranging criminal investigation into Whitewater.

Feb. 25: Deputy Treasury Secretary Roger Altman reveals that he briefed White House officials on the RTC’s investigation of Madison Guaranty. It is later learned that there were three meetings between White House and Treasury officials, all involving Nussbaum, plus unknown numbers of phone calls and hallway conversations.

March 4: The FBI subpoenas 10 White House and Treasury officials who took part in the meetings to testify before the grand jury and bring any related documents. The White House freezes all memos and computer files so nothing will be destroyed.

March 5: Nussbaum is ousted by Clinton. His resignation is effective April 5.

March 8: Clinton names attorney Lloyd N. Cutler, an influential old Washington hand with political savvy, as temporary White House counsel to help him through the Whitewater mess.

March 9: Fiske meets with Senate Republicans, says he continues to oppose hearings into the controversy. Republicans indicate their willingness to delay hearings until late May or early June, but majority Democrats, who ultimately will decide whether to schedule hearings, hold fast to their position that the probe should be left to a special counsel.

March 22: Democratic leaders of House back off earlier opposition to possible Whitewater hearings.

June 12: The Clintons interviewed under oath by Fiske about Whitewater, including Foster’s death.

June 21: Senate votes to hold Whitewater hearings. House also plans hearings.

June 29: The Clintons set up legal defense fund for mounting legal bills from Whitewater and sexual harassment lawsuit filed against the president by Paula Corbin Jones, a former Arkansas state clerk. Clintons limit donations to $1,000 from individuals only.

June 30: Fiske issues interim report on the Washington aspects of the affair. He finds Foster’s death was a suicide unrelated to the case and says he will file no criminal charges over the White House-Treasury contacts.

July 26-Aug. 5: Congressional hearings.

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INDEPENDENT COUNSEL LAW

The law requires the Justice Department to conduct a preliminary investigation if the attorney general receives “specific and credible” information alleging criminal wrongdoing by any of 60 senior executive branch officials, including the President. If that probe finds “reasonable grounds” to believe further investigation is necessary, the attorney general is required to ask a special three-judge panel of the U.S. Court of Appeals to appoint an independent counsel.

NEXT STEP: The court order takes effect immediately. Fiske said he would work with Kenneth W. Starr, who was named independent counsel Friday, for a “speedy and orderly transition,” but one of his aides speculated that the investigation would be set back several months. If Starr decides to use Fiske’s staff the transition would be more rapid.

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PROFILE: KENNETH W. STARR

AGE: 48

HOMETOWN: Vernon, Tex. (son of a minister)

EDUCATION: B.A., George Washington University; M.A., Brown University; J.D. Duke University.

CAREER: Law clerk to Chief Justice Warren E. Burger, 1975-77; associate partner, law firm of Gibson, Dunn & Crutcher, 1977-81; counselor to the attorney general, 1981-83; judge, U.S. Circuit Court of Appeals for the District of Columbia, 1983-89; solicitor general of the United States, 1989-93. Partner, law firm of Kirkland & Ellis, 1993-present.

POLITICAL CONNECTION: Former colleagues on the federal appeals court in Washington, liberals and conservatives alike, have praised Starr. He was seen as a moderate conservative whose views were not always predictable.