Hubbell Agrees to Guilty Pleas in Deal With Starr

Independent counsel Kenneth W. Starr’s years-long pursuit of President Clinton friend Webster L. Hubbell is nearing an end, with the former Justice Department official agreeing to plead guilty to charges of covering up his role in a fraudulent Arkansas land deal, sources said Monday.

For several weeks, Hubbell’s attorney has been considering an offer from Starr, according to Los Angeles attorney Mark Geragos, who has worked with the defense team. In exchange for the pleas, Starr would recommend no prison time for Hubbell and agree to drop separate tax-evasion charges against Hubbell’s wife, tax attorney and accountant, the sources said.

The deal would spare First Lady Hillary Rodham Clinton, who is considering a run for the U.S. Senate in New York, the potential political hazard of having to testify at Hubbell’s trial, now scheduled to begin in August.

Clinton and Hubbell were partners at the Rose Law Firm in Little Rock, Ark., and Starr’s investigators believe that she was intimately involved in a real estate deal called Castle Grande, which was at the center of one set of charges against Hubbell. The indictment of Hubbell included about three dozen mentions of his “billing partner,” a clear reference to the first lady.

Hubbell’s agreement with the independent counsel likely includes submitting to questions about the first lady’s role in the deal but analysts said they doubted that Hubbell, a longtime Clinton loyalist, would say anything that could be damaging to her.

Clinton has denied any wrongdoing in the Castle Grande matter.

Hubbell’s pending trial has been the most pressing issue for the independent counsel’s office. A deal to resolve the charges against him likely would pave the way for Starr to conclude his 5-year-old investigation, leaving only final reports to be written.

“This is as clear a signal as you’ll ever see that the independent counsel has recognized that this is the end and there’s nowhere left to go,” said Steven A. Saltzburg, a former prosecutor with the Justice Department and independent counsel’s investigation of the Iran-Contra affair.

Starr’s critics have attacked him for being overzealous, citing his prosecution of peripheral figures, including Whitewater defendant Susan McDougal, and his pursuit of indictments against Hubbell on three separate matters.

A guilty plea from Hubbell would be a vindication of sorts for Starr because he could claim victory without a lengthy, potentially risky trial, analysts said. And by not seeking to send Hubbell back to prison, they added, Starr could temper his merciless public image with a more compassionate action.

The third-ranking official at the Justice Department in the early days of the Clinton administration, Hubbell resigned his government post over questions about his work for the Rose Law Firm. Starr’s office said that he had bilked the firm and its clients of nearly $400,000 in the 1980s. After pleading guilty in 1994 to tax evasion and mail fraud, Hubbell served 18 months in prison.

Hubbell promised at the time to cooperate with Starr’s investigation of the Clintons. But investigators focused once again on potential illegalities by Hubbell in 1995 after discovering that, after Hubbell’s conviction, supporters of the Clintons had paid him hundreds of thousands of dollars in consulting fee for little or no work. Some on Starr’s staff believed that the fees amounted to “hush money.”

That inquiry led to new tax-evasion charges against Hubbell for unreported income. His wife, Suzanna, his accountant and his tax lawyer were also charged in the case.

In the Castle Grande matter, Hubbell was charged with testifying falsely and trying to obstruct Starr’s inquiry into the land deal. Investigators said that there was insider dealing and fictitious sales in the transactions over the 1,050-acre Arkansas tract.

Clinton has said publicly that her work on the project was minimal and that she did nothing wrong. Her connection to Castle Grande became a subject of intense speculation in 1996, however, when her missing law firm billing records mysteriously appeared at the White House, about two years after Starr’s office had subpoenaed them.

Starr’s prosecutors had listed the first lady as a potential witness at Hubbell’s trial. Even though she now may be spared the embarrassment of having to testify, a plea bargain in connection with Castle Grande could still tarnish her politically, suggested Jonathan Turley, a law professor at George Washington University here.

“If Hubbell states he committed a felony during the course of these events, naturally attention will focus on her,” Turley said. “It is hardly a resume [builder] for a senatorial candidate.”

But Clinton’s supporters maintain that she has little to worry about, either legally or politically, in the Castle Grande case.

“Mentioning her in this indictment as if she was thick as thieves with [Hubbell] on this whole transaction was classic Starr hype,” said one legal ally of the Clintons.

John Nields, Hubbell’s attorney, did not return repeated calls seeking comment on the reported plea agreement and Starr’s office said that it could not confirm or deny the existence of a deal.

Nields met with Starr at the independent counsel’s office about two weeks ago and Starr emerged from the session appearing upbeat, according to one lawyer familiar with the meeting.

Geragos, the Los Angeles defense attorney who won an acquittal for McDougal at her Arkansas trial earlier this year, said he understood that Hubbell’s defense team began seriously considering the plea agreement several weeks ago after it was proposed by Starr’s team.

Geragos said he would like to see Hubbell fight the charges--and Starr.

“I still can’t believe they’re going to go forward with this,” he said. “The case is abysmal.”

But protecting his wife’s interests has always been one of Hubbell’s top priorities and the reported deal would accomplish that, said Nancy Luque, a Washington, D.C., attorney who is assisting in the defense of Suzanna Hubbell.

Luque said she was not aware of any negotiations and wanted Hubbell to fight the charges but that she considers the deal as reported in the media a loss for Starr. “When a prosecutor says “plead guilty and I won’t send you to jail, that’s basically him surrendering,” said Luque, who also represented Julie Hiatt Steele, a defendant in another case filed by Starr.

Little Rock accountant Michael Schaufele--also charged in connection with Hubbell’s alleged-tax evasion scheme--said:

“I hope it’s true. This is all brand new to me today and all I can hope is that at some point, this is all over.”

Times staff writers Alan C. Miller and Ronald J. Ostrow contributed to this story.