Hubbell to Admit to Tax Evasion, Sources Say

Former Associate Atty. Gen. Webster L. Hubbell, a close friend of President Clinton and a former law partner of First Lady Hillary Rodham Clinton, has agreed to plead guilty to two felony charges arising from the Whitewater investigation, sources said Thursday.

Hubbell, 46, who will admit to tax evasion and mail fraud, becomes the first major political figure and Clinton associate to be snared by the investigation of Whitewater independent counsel Kenneth W. Starr. The plea comes in response to evidence gathered by Starr that Hubbell had overbilled his legal clients, including the federal government.

Until he resigned last March 14, Hubbell was the nation’s No. 3 law enforcement official and an early appointee of the President. Not since the aftermath of the Watergate scandal in the mid-1970s has a former top Justice Department official ended up on the other end of the law as a result of a presidential scandal.

Neither Hubbell nor his attorney, John W. Nields, could be reached for comment. Starr and his associates declined to comment.

It was not yet known what penalty prosecutors would seek in the case.

Because of Hubbell’s long personal relationship to Clinton, the guilty plea surely will be portrayed by critics as another black eye for the President. Hubbell was the President’s frequent golfing partner and a close political ally during Clinton’s years as Arkansas governor.

During the 1990 gubernatorial campaign, in fact, Clinton called Hubbell “my best friend.” And White House counselor Thomas F. (Mack) McLarty, another close Clinton ally from Arkansas, told a Little Rock newspaperman in a recently published book that Hubbell “is the person whose company the President enjoys most in the world.”

Since coming to Washington with a large entourage of former Arkansas associates, the Clintons have watched as many of their old friends have encountered difficulty in high office.

Of Mrs. Clinton’s three Rose Law Firm partners who accepted appointments in the Administration, none are still serving. Former White House Counsel Vincent W. Foster Jr. committed suicide, former White House Counsel William Kennedy has returned to Little Rock, and Hubbell resigned because of his legal problems.

The charges against Hubbell stem from work that the Rose Law Firm did for the government in resolving savings and loan failures in Arkansas. According to the Associated Press, documents provided to the independent counsel by the Rose firm show that Hubbell double-billed the government for at least $29,400 in the thrift cleanup work.

Sources said the government was only one of several clients overbilled by Hubbell. His federal financial disclosure form for 1992 listed $310,000 in income from Rose, which he said included some deferred earnings from 1991.

The charges against Hubbell were a byproduct of Starr’s investigation into the Whitewater real estate investment of the Clintons and James B. McDougal, owner of the now-defunct Madison Guaranty Savings & Loan. The central focus of the inquiry is whether either Clinton or his campaign were improperly enriched by money from Madison.

Rose firm lawyers, including Mrs. Clinton, had done legal work for Madison. After it collapsed, Hubbell was paid by the government to settle a lawsuit against an accounting company accused of negligence in Madison Guaranty’s failure.

Other members of Hubbell’s family are deeply involved in the case as well. His father-in-law and brother-in-law took out nearly $1.5 million in loans from Madison.

When Hubbell resigned in March, he said he was quitting government to deal with private matters relating to “compensation and reimbursement” questions raised by his former partners at the Rose firm. His departure caused widespread disappointment among career employees at the Justice Department, where he was regarded as a good administrator.

“It is also unfortunate that private issues between me and my firm have been cast, by some, as being part of a broad political net called Whitewater. These private issues have nothing to do with Whitewater, Madison Guaranty, the McDougals or the President and First Lady,” Hubbell said in his resignation statement.

Clinton said at the time that Hubbell had made “the right decision” in resigning and referred to Hubbell as a “good personal friend.”

The bulky Hubbell was an offensive lineman for the University of Arkansas football team in the late 1960s. He played in the Sugar Bowl, where he allowed an opponent to get past him and sack the quarterback.

“Quarterbacks and running backs are remembered for their achievements,” Hubbell once lamented. “Offensive linemen are remembered for their mistakes.”

Times staff writer John M. Broder contributed to this story.

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