Hubbell Admits to Fraudulently Billing Clients

Former Associate Atty. Gen. Webster L. Hubbell, one of President Clinton’s closest friends, agreed Tuesday to cooperate with the Whitewater independent counsel and entered a guilty plea to charges that he had billed his legal clients fraudulently for at least $394,000 in personal expenditures between 1989 and 1992.

Once the nation’s third-ranking law enforcement officer, Hubbell, 46, admitted to committing two felonies--mail fraud and tax evasion--each of which carries a maximum five-year prison sentence. He almost certainly will go to prison, even though his sentence could be reduced in exchange for supplying information to Whitewater counsel Kenneth W. Starr.

While Hubbell’s crimes have virtually nothing to do with the central Whitewater allegations against the President, lawyers familiar with the case said that his testimony could be helpful to Starr in determining whether Clinton appointees made any effort to interfere with the government’s early investigation of the case.

Starr told reporters outside the courthouse that he is “looking forward” to Hubbell’s cooperation with the inquiry, which so far has centered primarily on allegations that federally guaranteed savings and loan money may have been funneled improperly to Clinton through his investment in the Whitewater real estate development in the Ozarks.

Hubbell’s courtroom confession also caused obvious personal and political embarrassment for the President, a frequent golf partner who once described Hubbell as “my best friend,” and First Lady Hillary Rodham Clinton, who was Hubbell’s partner at the Rose Law Firm of Little Rock.

Until he resigned from the Justice Department last March 14, Hubbell was a close legal adviser to the White House and one of the most visible Arkansans in the Clinton Administration.

Not surprisingly, David Kendall, the President’s lawyer, sought to distance the Clintons from Hubbell’s crimes. “This matter does not concern the President, the First Lady or Whitewater Development Corp. in any way,” Kendall said.

In a contrite statement to the court at the close of the one-hour hearing in which he entered his plea, Hubbell indicated that he was painfully aware of the embarrassment he had caused the Clintons, the Rose Law Firm and his family.

“I deeply regret that my actions have reflected on my family, friends and those who have placed me in positions of trust,” Hubbell told Judge William R. Wilson. “If the consequences of my actions were only mine, this would be a lot easier.”

Once widely admired in this town as a former college football star, former state Supreme Court chief justice and a former mayor, Hubbell was clearly shaken by the experience of publicly confessing to private acts of greed that will tarnish his reputation and cause him to lose his license to practice law. His voice cracked, as if choking back tears.

In detailing the evidence that had been gathered against Hubbell, W. Hickman Ewing Jr., an assistant to the independent counsel, told a remarkable tale of a highly successful, well-paid attorney who on at least 400 occasions charged his law firm and its clients for his own family’s extravagant expenditures at a variety of fancy shops in Little Rock and Dallas, including a fur salon and Victoria’s Secret.

According to Ewing, Hubbell frequently used checks drawn on the Rose Law Firm’s partnership banking account to pay off personal credit card bills. He then would add these charges to the bills sent to a wide variety of the firm’s clients.

Among the clients who were bilked in this manner were the Federal Deposit Insurance Corp. and the Resolution Trust Corp., both of whom had hired the Rose Law Firm to assist in the cleanup of several savings and loan failures in Arkansas.

The prosecution cited one bill that Hubbell submitted to the FDIC on March 7, 1990, for work that the Rose Law Firm did in pursuing the government’s case against Frost & Co., an accounting firm, for negligence in auditing the accounts of Madison Guaranty Savings & Loan. Madison was owned by James B. McDougal, Clinton’s partner in the Whitewater investment.

The bill asked the FDIC to reimburse the Rose Law Firm $612 for so-called “publications costs” and $694.29 for “deposition costs.” But Ewing said that the FBI traced both of those expenditures back to personal credit card purchases by Hubbell and his family.

Hubbell did not charge his clients for all of the personal bills that he paid from the law firm checking account, however. In some cases, Ewing said, Hubbell simply “wrote off” the charge--meaning that the law firm itself shouldered the cost.

It was the extraordinary number of these so-called “write-offs” by Hubbell that first caught the attention of his law partners after he went to Washington to join the Administration in January, 1993. When they questioned him, he promised to provide the firm with documentation to support the write-offs.

But, as Ewing told the judge, “it never came.”

Moreover, Hubbell filed tax returns for the years 1989 through 1992 that did not reflect any of the income he received from his fraudulent billing practices, according to the government. In 1992, for example, he received income of $309,168, but reported only $194,966. Overall, it is estimated that he failed to pay the government $130,291 in taxes owed.

Normally, plea-bargains such as the one between Hubbell and Starr are used as a way for the prosecution to obtain information from the defendant and for the defendant to limit his legal liability.

To lawyers familiar with Hubbell’s case, the charges to which he pleaded guilty appear to be unusually stiff for such a plea-bargain.

It was not known what other evidence Starr might have had against him, although some investigators had questioned whether Hubbell’s work for the FDIC and the RTC represented a conflict of interest, since his firm also had represented Madison.

As associate attorney general, Hubbell also may have been privy to internal government discussions about a so-called “criminal referral” from the RTC to the Justice Department regarding Madison that mentioned involvement by the Clintons.

At the time of the referral, Paula Casey, the U.S. attorney in Little Rock and a Clinton appointee, resisted passing it along to her superiors at the Justice Department.

U.S. District Judge William R. Wilson agreed to release Hubbell on his own recognizance, pending sentencing. No date was set for sentencing.

Hubbell, who still lives in Washington, was accompanied into court by his wife, Suzanne, and his attorney, former Iran-Contra committee counsel John W. Nields Jr.

Although Suzanne Hubbell’s shopping habits clearly contributed to her husband’s downfall, he was clearly sensitive to her feelings during the hearing.

“Are you OK?” he whispered to her as Judge Wilson read the charges. She nodded.