Clinton Confidant Hubbell Charged

Webster L. Hubbell, the former law partner of Hillary Rodham Clinton and confidant of the president, was hit with new criminal charges on Thursday alleging that he, his wife and two of their friends conspired illegally to reduce the Hubbells’ tax burden.

The charges were brought by the office of independent counsel Kenneth W. Starr, whom Clinton portrayed just hours before as bent on dismantling his presidency.

If convicted of all 10 counts of a federal grand jury’s indictment, Hubbell could face up to 49 years in prison and $2.5 million in penalties.

Hubbell, the former No. 3 official in the Justice Department, already served 18 months in federal custody on previous tax and fraud charges.

Gaining Hubbell’s cooperation has long been a goal of Starr’s prosecutors--particularly because of his and Mrs. Clinton’s familiarity with certain transactions at the core of the Whitewater controversy.

But in brief, emotional comments to reporters outside his home in Washington, Hubbell, 50, vowed not to be broken by Starr.

“It’s apparent to me that they think by indicting my wife and my friends, that I will lie about the president and the first lady,” said Hubbell, who was joined by his wife, Suzanna. “I will not do so. And my wife would not want me to do so.

“I want you to know that the Office of Independent Counsel can indict my dog; they can indict my cat. But I’m not going to lie about the president; I’m not going to lie about the first lady or anyone else. My wife and I are innocent of the charges. . . . This is an attempt to get me to lie.”

Suzanna Hubbell is a presidential appointee in the U.S. Interior Department. It could not be determined whether the new charges will affect her position.

The new charges against the Hubbells and their tax accountant, Michael C. Schaufele, and a tax attorney, Charles C. Owen, center largely on the handling of income from consulting fees that Hubbell received in 1994 and 1995 after he had resigned from the Clinton administration.

Because the contracts were arranged with the assistance of top aides and supporters of the president--at a time when Hubbell was under pressure to cooperate in the Whitewater investigation--prosecutors have suspected the payments were hush money.

Indeed, Starr over the last year has summoned several of the president’s men before grand juries in Washington and Little Rock, Ark., including former Commerce Secretary Mickey Kantor, White House Chief of Staff Erskine B. Bowles Jr., and former staff chief Thomas F. “Mack” McLarty.

The indictment handed out Thursday does not allege a hush-money conspiracy. But the charges do contain various, critical references to the consulting deals Hubbell obtained.

For instance, after stating that “approximately 15 clients” paid a wide range of consulting fees, the indictment said that “Hubbell performed little or no work for some of these payments,” adding:

“The payers of these fees included Hong Kong China Limited ($100,000), Revlon ($62,775) and others.”

In identifying the Hong Kong company and Revlon, prosecutors touched on what have been seen as hot buttons in Starr’s overall investigation:

The Hong Kong company is controlled by James T. Riady, the Indonesian billionaire whose support of Clinton’s reelection remains under investigation by the Justice Department. Hubbell was retained by Riady’s company in June 1994 within days of meetings that Riady and his former executive, John Huang, held with Clinton at the White House.

And Revlon, the Manhattan-based cosmetics giant, hired Hubbell at the behest of Vernon E. Jordan Jr., a trusted Clinton advisor. Starr is also investigating Jordan’s role in lining up a Revlon job for former White House intern Monica S. Lewinsky, whose relationship with Clinton is under scrutiny.

Following the indictment Thursday, the Clintons expressed their sympathies.

“The president and first lady are very saddened by the developments in this matter and feel bad for Webb and Suzy Hubbell, Mike Schaufele, Charlie Owen and all of their families,” said a White House spokesman, James Kennedy.

According to the indictment, between the 1989 and 1995 tax years, the Hubbells underpaid their income taxes by $577,670. In 1994, for example, when Webster Hubbell won the consulting contracts, he and his wife reported $141,432 in taxes due on their return, but paid only $9,122.

Meanwhile, the Hubbells were spending freely, the indictment alleges. They used approximately 20 credit cards and between 1994 and 1997 spent $750,000, the prosecutors charge.

Moreover, the indictment charges that Schaufele, on behalf of the Hubbells, opened a bank account in Little Rock to conceal book-related proceeds obtained by Hubbell. According to the indictment, the account was “used to impede and impair” the IRS and other entities.

Webster Hubbell, aided by Schaufele, also maneuvered to avoid paying tax on money withdrawn from a profit-sharing and pension plan at the Rose Law Firm, the indictment charges.

The indictment also calls into question the handling of contributions solicited for a trust fund designated for the education of the Hubbells’ children. According to the indictment, Webster Hubbell and Schaufele transferred some of the money out of the fund to pay for the family’s personal living expenses.

An attorney for Schaufele, K. Chris Todd, said the accountant helped the Hubbells at no charge and cooperated extensively with Starr’s investigation.

“Mr. Schaufele is shocked and saddened that he could be charged with wrongdoing when he merely did his best to help friends who had difficult IRS problems,” Todd said.

Starr, for his part, did not appear publicly to announce the indictment but said in a prepared statement that “the independent counsel’s investigation is continuing.” His spokesman, Charles G. Bakaly III, said he would not comment “about any other grand jury matters.”

The Hubbells’ lawyer, John W. Nields Jr., suggested that his clients “would never” have been indicted if not for what he implied were the vindictive aims of the independent counsel.

“In order to get at” Hubbell, Nields said, “they have . . . brought these charges against his wife, Suzy, and two tax professionals she turned to for advice while Webb was in jail--tax professionals who worked for free solely out of the goodness of their hearts to help a family in distress.”

Nields said Hubbell was justly prosecuted in 1994 for bilking his former clients and law partners of more than $400,000. But he added: “Now that he is struggling to get up off his knees and rebuild his life, the independent counsel wants to shove him back down and prosecute him again--this time not for stealing, but for failing to pay the enormous tax debt he owes because of the first prosecution. This time they have gone too far.”

Times staff writer Tom Schultz contributed to this story.