Tax Evasion Case Against Hubbell Is Thrown Out

In a setback for independent counsel Kenneth W. Starr, a federal judge Wednesday dismissed the tax evasion case that Starr brought recently against presidential friend Webster L. Hubbell, his wife and two associates.

Granting a defense motion to throw out the case, U.S. District Judge James Robertson said Starr exceeded his authority when he sought tax-related charges against Hubbell and had built his criminal case improperly on evidence Hubbell furnished while he was protected by limited immunity from prosecution.

Robertson’s opinion that Starr veered outside his jurisdiction was the first time a judge has lent support to critics of Starr who claim that the prosecutor is out of control. At the White House, spokesman Jim Kennedy said: “We believe the judge’s written opinion speaks for itself.”

The ruling, which Starr immediately vowed to appeal, likely will make it more difficult for the independent counsel to obtain evidence of alleged criminal wrongdoing by First Lady Hillary Rodham Clinton.

Starr’s criminal charges against Hubbell, once a high-ranking Justice Department official and former Little Rock, Ark., law partner of Mrs. Clinton, were part of his effort to obtain Hubbell’s cooperation in the Whitewater investigation of the Clintons’ past financial transactions and whether the president or first lady sought to hide evidence of wrongdoing.

Specifically, Hubbell has been presumed to have information about some of Mrs. Clinton’s old law firm records that had been subpoenaed by federal investigators. The records mysteriously disappeared only to resurface--just as mysteriously--two years later in the White House residence quarters.

Hubbell, however, long has resisted pressure from Starr, saying the prosecutor has hoped in vain “that I will lie about the president and first lady.” Two years ago, he told the Senate Whitewater Committee that he could shed no light on where the billing records were from the time they were subpoenaed in 1994 until they showed up in the White House.

Outside his home here Wednesday, Hubbell appeared surprised but pleased by the ruling. “The last five years have been very difficult,” he said. “And we’re very happy and very grateful.”

His wife, Suzy, expressed thanks to the judge and their attorneys, adding: “Most of all, I’m grateful to God that maybe, hopefully this is finally over.”

President Clinton, who is in China, was informed of the judge’s decision.

“This decision speaks for itself, but I’m happy for Webb and Suzy and their family,” Clinton said in a remark relayed by White House Press Secretary Mike McCurry. Clinton added that he is happy for the Hubbells’ associates and their families.

Starr, however, made it clear that he has not given up.

In a statement, Starr said: “With respect to the jurisdiction issue, the district judge’s opinion expressly sets itself in disagreement with two other rulings” in U.S. District Court here. As to Robertson’s contention that Hubbell’s 5th Amendment right against self-incrimination had been violated, Starr said: “We will seek prompt review of this ruling” on grounds that it runs counter to an appellate court opinion.

Starr’s tax charges against the Hubbells and their associates were based on information contained in documents Hubbell turned over to the independent counsel as part of an immunity agreement.

Hubbell’s lawyers called Robertson’s opinion “well reasoned.”

Robertson, in his 36-page ruling, went so far as to declare that a three-judge panel that oversees independent counsels had sought to give powers to Starr last January in the Hubbell tax investigation that went beyond his legally established mandate when Starr was appointed in August 1994.

Referring to Starr’s original authority to investigate the Clintons’ role in Madison Guaranty Savings & Loan, a Little Rock thrift at the heart of Whitewater allegations, Robertson said in his ruling:

“The Madison-Whitewater matters that were the subject of the original grant [of authority to Starr] and the [Hubbell] tax matters that are the subject of this case have nothing in common . . . except Webster Hubbell.”

Robertson said the special court supervising independent counsels may “interpret” their original mandates but “may not expand the independent counsel’s jurisdiction without the consent of the attorney general,” which was not granted in this matter.

The judge also noted that Starr “built his case against Mr. Hubbell using 13,120 pages of records that Mr. Hubbell was compelled to produce under subpoena.”

Hubbell, who in 1994 pleaded guilty to bilking the partners and clients of his former law firm and served 18 months in federal custody, later turned over his personal tax documents to Whitewater prosecutors under a limited grant of immunity.

Robertson said those records, subpoenaed by Starr’s office, should not have been used in any criminal prosecution, even though the Internal Revenue Service could collect back taxes in a civil action based on those records.

“The subpoena served on Mr. Hubbell was the quintessential fishing expedition,” Robertson said. “The independent counsel freely admits that he was not investigating tax-related charges when he issued it.”

At a court hearing last week, the judge had sharply criticized the tax indictment Starr obtained from a grand jury April 30. The indictment also named the Hubbells’ tax accountant and a tax attorney. Robertson said it was “scary” that some key documents may have been obtained improperly by the prosecutors.

Hubbell and Mrs. Clinton were senior partners in the Rose Law Firm, which performed legal work for the late James B. McDougal, who owned the now-defunct Madison Guaranty.

Appointed to the No. 3 post in the Justice Department at the beginning of the Clinton administration, Hubbell once was a frequent golfing partner of the president.

Hubbell also did legal work on a related land development near Little Rock called Castle Grande, which federal bank examiners found to be part of a fraudulent scheme engineered by McDougal. Hubbell has said that neither he nor Mrs. Clinton, who also worked on the project, knew about any illegal aspects of it.

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