String of Deals Enriched Hubbell Amid Fraud Probe

Within an eight-month period in 1994, a handful of President Clinton’s friends and biggest supporters got the same idea:

They decided to bolster the financial well-being of Webster L. Hubbell--the close friend of the first family who had resigned as associate attorney general and was facing a criminal investigation.

During these months, Hubbell was given at least 10 paying engagements, generating income that easily surpassed the $123,100 salary he had received at the Justice Department, an examination of the transactions shows.

Among those who made arrangements for Hubbell was Mickey Kantor, then Clinton’s trade representative and former manager of Clinton’s 1992 campaign. Kantor sought money for Hubbell’s legal-defense and family trust funds. He also urged the chief executive of the nation’s leading mortgage financier, the Federal National Mortgage Assn., to hire Hubbell’s son, according to interviews and records.

Kantor and others say they were motivated solely by concern about the welfare of a friend in trouble. “You’re darned right I was calling,” Kantor said. “It was a family that was going to go in a lot of pain. I was trying to help.”

However, the deals, more numerous and elaborate than previously known, are sensitive because they came at a time when prosecutors were attempting to elicit Hubbell’s account of events central to the Whitewater investigation enveloping the Clintons.

The surge of income and the role of a top administration official could heighten suspicions among Clinton critics of an effort to ensure Hubbell’s loyalty as investigators were looking into whether First Lady Hillary Rodham Clinton, his former law partner, violated the law in her dealings with a failed Arkansas savings and loan.

Extraordinary, Coordinated Effort

A reconstruction of the fast-paced transactions shows that they went well beyond isolated favors for a troubled friend, rather involving an extraordinary and at times coordinated effort by members of the president’s inner circle.

The sources of business tapped were far flung and varied and included areas in which Hubbell had no apparent career background.

For example, The Times has learned that Hubbell obtained separate deals to represent companies that were on opposite sides of the multibillion-dollar struggle over how the nation’s telecommunications law would be changed.

Hubbell was hired by Sprint, a long-distance carrier that wanted to break into lucrative local phone markets. At the same time, Hubbell was hired by California-based Pacific Telesis, one of the Baby Bell communications companies, which wanted access to the long-distance market.

Pacific Telesis retained Hubbell from July 1994 to May 1995--a full six months after he pleaded guilty to federal charges, a company spokesman confirmed.

Bill Brittingham, the Pacific Telesis spokesman, said that Hubbell was retained to provide “strategic advice on matters relating to the pending telecommunications legislation.” Pacific Telesis has given $213,000 to the Democratic Party since 1991.

A spokeswoman for Sprint said that the company retained Hubbell’s services as a lawyer in late 1994 and terminated him when the company learned of his guilty plea. Sprint has given $204,000 to the Democratic Party since 1991.

Hubbell pleaded guilty in December 1994 to separate fraud and tax-evasion charges related to his bilking of $482,410 from his former law partners and clients at the Rose Law Firm in Little Rock, Ark. He was released recently after serving a 16-month term in a federal prison. Hubbell’s guilty plea included a promise to cooperate with Whitewater prosecutors.

Soon after Hubbell’s resignation three years ago, the wide assortment of financial and other benefits began to flow to him.

Michael Cardozo, the head of the Clintons’ legal defense fund, provided free office space in Washington to Hubbell from the spring of 1994 through November 1994.

“I did make an empty office in the building available to him,” Cardozo said, adding that he acted independently and not in consultation with the Clintons. “He decided he was going to plead guilty to something--and he removed himself from our office.”

Kantor, pointing out his long ties with Hubbell, said that he helped the former administration official strictly out of friendship rather than because of a desire to dissuade him from providing testimony damaging to the first lady.

“Absolutely not. It would never enter my mind . . . ,” said Kantor, who remained in frequent phone contact with Hubbell after his resignation and guilty plea. “You can say what you want about Webb but he was a close friend. And he was tremendously loyal to the president, the first lady, as people were to him.”

Refuses Comment on Lippo Group Dealings

Some of those who hired Hubbell said that they valued his expertise. Others declined to comment, as did Hubbell, through his lawyer. In sworn testimony to a Senate committee last year, Hubbell refused to say how much he was paid or what he had done for one of his clients, an affiliate of the Indonesia-based Lippo Group.

The unfolding circumstances surrounding the various deals and assistance steered to Hubbell are now under intense investigation by the office of Whitewater independent counsel Kenneth W. Starr.

Those who hired Hubbell continue to be questioned by investigators. Subpoenas seeking documents related to Hubbell’s arrangements recently were delivered to a number of former and current administration officials--including Kantor.

Neither the president nor Mrs. Clinton have met with Hubbell since his departure from the Justice Department. However, both she and the president have gotten updates from Kantor and others on how Hubbell was faring, according to a person familiar with the conversations.

The Times reported on Feb. 25 that Marsha Scott, another trusted aide to the president, remained in frequent contact with Hubbell after he had left the administration.

Bernard Rapoport, a man who is a top campaign contributor to Clinton and who also hired Hubbell for six months in 1994, said that he may have told the president he was putting Hubbell on the payroll of his insurance company, which is based in Waco, Texas.

“I very well could have and I very well couldn’t have,” said Rapoport, who over the last six years has contributed more than $250,000 to Clinton’s campaigns. “I do a lot of nice things for the president and I don’t say anything about it. . . . I don’t tell him every little thing I do.”

$5,000 Put in Trust Fund for Children

Rapoport said that he paid Hubbell a total of $18,000 in monthly retainers from May to November 1994, when he learned that Hubbell would plead guilty. A week after Hubbell reported to prison, Rapoport said, he gave $5,000 to a trust fund for Hubbell’s children.

Rapoport, who was questioned last week by investigators for the Whitewater independent counsel, said that he hired Hubbell at the urging of Truman Arnold, another major Clinton campaign donor who served in 1995 as finance chairman of the Democratic National Committee. He said that Hubbell researched state insurance regulations. Rapoport’s hiring of Hubbell was first reported by the New York Times.

Arnold, an oil executive based in Texarkana, Texas, could not be reached.

Arnold also hired Hubbell. Although in some of Hubbell’s deals it was not clear what services he may have provided, internal White House phone records show that Hubbell helped Arnold stage a dinner party for a group of major campaign contributors.

On July 25, 1994, four months after Hubbell announced his resignation, he left a phone message for Bruce Lindsey, Clinton’s deputy White House counsel, urging him to attend the gathering. Both Lindsey and Clinton attended the dinner party, according to people who were present. Hubbell did not.

Lanny J. Davis, a White House special counsel, acknowledged that Lindsey and Hubbell spoke several times over the phone after Hubbell resigned.

“Prior to his incarceration [on Aug. 7, 1995] there were some social occasions and conversations between Bruce and Webb Hubbell as old friends,” Davis said, “and sympathy for a man who was concerned about the future of himself and his family.”

Another major Clinton contributor, Los Angeles-based executive Eli Broad, also retained Hubbell in 1994, through his financial services company, SunAmerica Inc. A spokeswoman said that SunAmerica retained Hubbell “to aid in its public policy efforts to generate further interest in the development of a comprehensive national retirement savings policy.”

Broad or his companies have contributed more than $165,000 to Clinton’s campaign and the Democratic National Committee.

Davis, the White House counsel, said that President Clinton “never asked or suggested that anyone hire Webb Hubbell.”

Hubbell’s son, Walter, landed a job with Kantor’s help at the Washington offices of the Federal National Mortgage Assn. Walter Hubbell was hired into the association’s marketing department after Kantor phoned CEO James A. Johnson, with whom he worked in previous Democratic campaigns.

“You’re darn right I called Jim Johnson, [to] see if there was anything for him,” Kantor said. “As I would, frankly, for the kid of any other friend. Look, when our children get out of college, get out of law, whatever, you call friends. You say: ‘Gee, here’s a bright young man, do you have a place?’ ”

A spokesman for Johnson said that the younger Hubbell “was an outstanding young man who was recommended to us. He was invited to compete for a job, got the job [and] did extremely well.” Walter Hubbell was traveling Thursday and could not be reached.

Before coming to Washington in 1993, Hubbell and Mrs. Clinton had been partners at the Rose Law Firm, where both had dealings with Madison Guaranty Savings & Loan, a failed Arkansas thrift that federal juries have found was a center of insider deals. The S&L; was owned by James B. and Susan McDougal, who also owned a parcel of undeveloped land with the Clintons, along Arkansas’ Whitewater River.

Prosecutors have been frustrated by Hubbell’s inability to recall transactions involving Mrs. Clinton’s role as a lawyer with Madison, whose collapse has cost taxpayers at least $50 million.

Indeed, because of his own dealings with Madison and, more recently, with Lippo, Hubbell unwillingly bestrides both the Whitewater affair and the mushrooming controversy over the extent of foreign influence on Clinton’s presidency.

Time Warner, Dairymen Assn. Deals

Some of the financial arrangements that aided Hubbell after he left the Clinton administration are publicly known, while others have not previously been reported. In addition to Hubbell’s deals with Lippo, Pacific Telesis, Sprint, Broad’s company, Rapoport’s company and Arnold’s company, he also won engagements in 1994 with these additional employers:

* Time Warner Inc., which hired Hubbell at the request of Washington lobbyist Michael S. Berman, a Clinton supporter who worked on the 1984 Democratic presidential campaign of Walter F. Mondale. A Time Warner spokesman said that Hubbell attended one meeting, regarding an antitrust matter, was paid $5,000 and was terminated “after his legal circumstances changed.” Time Warner has given more than $200,000 to the Democratic Party since 1991. Time magazine first reported his hiring.

* The Missouri-based, Mid-America Dairymen Assn. Spokesman Dan Reuwee said that it is “nobody’s business what we hired him for.”

* The city of Los Angeles Department of Airports, which retained Hubbell from August to December 1994, on the basis of a no-bid, oral contract and paid him $24,750. Hubbell was hired after being recommended by a former appointee of Clinton, Mary E. Leslie, who was his chief California fund-raiser in 1992.

* A California-based non-profit group called the Consumer Support and Education Fund, which paid Hubbell $45,000 to write articles about public service. Hubbell never wrote the articles. Washington lawyer John R. Phillips, a friend who recommended him for the grant, said that he repaid the money.