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Hubbell indicted on tax evasion Clinton's close friend is accused of failing to pay $850,000; Charges hint of hush money; Ex-Justice official says Starr is trying to pressure him to lie


WASHINGTON -- Webster Hubbell, the longtime confidant of President Clinton and former law partner of Hillary Rodham Clinton, was indicted yesterday on charges that he failed to pay more than $850,000 in taxes and penalties over the past four years.

Much of the tax money was owed on income steered to him by friends of the Clintons when prosecutors were seeking Hubbell's testimony against them.

The 10-count indictment of conspiracy, tax evasion and mail fraud outlined a scheme in which Hubbell and his wife, Suzanna, earned more than $1 million and spent more than $750,000 at the time but took steps to conceal their income from tax collectors.

It also charged that two Arkansas advisers to the Hubbell family, accountant Michael Schaufele and lawyer Charles Owen, had played important roles in a conspiracy to evade taxes.

Yesterday's indictment of the four marks the second time the Whitewater independent counsel, Kenneth W. Starr, has made a criminal case against Hubbell, who served nearly 17 months in prison after pleading guilty to tax evasion in 1994.

The charges presented a new political embarrassment to the Clintons, old friends who first met Hubbell when they took the Arkansas bar exam together.

The charges also suggest, without making the point directly, that some of the money Hubbell received in 1994 may have been given to discourage him from being more candid with investigators.

As a legal matter, however, the indictment is in one sense a hopeful sign for the Clintons.

It reflects the fact that investigators could not reach an agreement with Hubbell and that therefore he is either unable or unwilling to provide them with any new incriminating evidence about the first family.

Hubbell said that he would vigorously contest the charges and that the only reason they were filed was to pressure him into making false and incriminating statements about the Clintons.

"They think by indicting my wife and my friends that I will lie about the president and the first lady. I will not do so," Hubbell told reporters in front of his Washington home last night.

"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 that have been brought today."

Schaufele and Owen also said they believed the charges were politically motivated and they would fight them.

Insider's knowledge

Investigators have long been interested in reaching a deal with Hubbell because of his extensive knowledge both of the inner workings of the White House and about the Clintons' ties to the late James McDougal, the operator of a corrupt savings and loan association in the 1980s.

As early as 1992, when issues arose during Clinton's first presidential campaign about the couple's ties to McDougal, campaign officials were unable to get clear answers from Hubbell about what he knew of those ties, according to campaign papers that have since become public.

Last night, the White House issued a statement expressing sympathy for the Hubbells and the two other defendants.

"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 the statement by Jim Kennedy, an adviser to the White House counsel.

Yearlong investigation

The indictment is the product of a yearlong investigation into the income Hubbell received between the time he resigned from the Justice Department as associate attorney general in April 1994 and the end of that year, when he pleaded guilty to two felony counts for stealing nearly $400,000 from his former clients and law partners. Some of the back taxes Hubbell is accused of evading are due on the money he stole.

The indictment said that between 1994 and 1997, the Hubbells earned more than $1 million, but paid only $29,938 to meet back-tax obligations of $894,000.

It also alleged schemes undertaken by the Hubbells to conceal income from tax collectors and avoid payments, despite repeated notices from the Internal Revenue Service and a tax lien slapped on their Washington, D.C., home.

Much of the income Hubbell received in 1994 came from contracts arranged by close friends and supporters of the Clintons, suggesting to investigators that Hubbell may have been given money to discourage him from cooperating with the Whitewater independent counsel's office.

Although Hubbell earned $450,000 in 1994 for his consulting business after leaving the Justice Department, the indictment said, he reported only $376,075 and made no tax payments at the time.

hTC 'Little or no work'

While there was no specific criminal charge that Hubbell was given hush money to discourage him from cooperating with investigators, the indictment strongly hinted that investigators believe he was.

It said that Hubbell performed "little or no work" for some of the payments he received while he was first under a criminal investigation in 1994.

It also noted that after a March 1994 meeting at the White House to discuss whether Hubbell should resign as associate attorney general, "one or more individuals suggested that efforts be taken to assist Webster L. Hubbell in obtaining work."

Pub Date: 5/01/98

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