Indictment Claims Hubbells Lived Lavishly By Susan Schmidt
Washington Post Staff Writer
Friday, May 1, 1998; Page A01 Independent counsel Kenneth W. Starr yesterday brought a new set of federal tax evasion and fraud charges against Webster L. Hubbell, a former top Justice Department official and close friend of the Clintons who has already been sent to prison once by Starr on unrelated embezzlement charges.

Hubbell's wife, Suzanna, his Little Rock lawyer and his accountant also were charged in the 10-count indictment, which includes alleged tax violations stemming from some of the more than $700,000 in payments made to Hubbell by Clinton supporters.

Hubbell, a former law partner of first lady Hillary Rodham Clinton at Little Rock's Rose Law Firm, admitted in 1994 -- in a plea bargain arrangement with the independent counsel -- that he stole nearly $500,000 from his old law firm and its clients. But the indictment, handed up by a Washington grand jury yesterday, alleges that even as he was negotiating his guilty plea with Starr, Hubbell was committing new acts of fraud and tax evasion.

Yesterday's indictment alleges that Hubbell and his wife, a Clinton administration political appointee in the Interior Department, have earned more than $1 million since 1994 but owe the government $894,000 in back taxes and penalties. The Hubbells spent most of their money on a lavish lifestyle, the indictment claims, while putting less than $30,000 of those earnings toward their tax liability.

But yesterday's indictment was also significant for what it did not include: any charges related to obstruction. While Starr's office said its investigation is continuing, prosecutors have considered such charges for more than two years as they tried to learn whether Clinton backers were trying to buy Hubbell's silence by arranging more than $700,000 in consulting fees for him at the same time he was under pressure to cooperate with Starr's Whitewater probe.

Hubbell has said the payments were not meant to influence his testimony in the Whitewater investigation. And yesterday, choking up as he and his wife talked to reporters outside their Washington home, Hubbell said the new indictment was intended only to pressure him to lie about the president.

"I will not do so, and my wife would not want me to do so. I want you to know 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 brought today."

Starr has been trying in recent weeks to wind up his long-running Whitewater investigation, and legal sources said he may be attempting to put pressure once again on Hubbell to cooperate. Hubbell could provide information related to several areas of Starr's investigation, including the Clintons' Arkansas real estate dealings and legal work Hillary Clinton did at the Rose Law Firm for a savings and loan owned by the Clintons' business partners.

The indictment charges the Hubbells, Little Rock accountant Michael C. Schaufele and Little Rock tax lawyer Charles C. Owen with conspiracy, tax evasion, impeding and impairing the Internal Revenue Service and mail fraud. All four defendants, prosecutors charged, tried to "evade and defeat the payment of" back taxes already owed by the Hubbells for the period from 1989 to 1992, as well as taxes owed on the nearly $1 million the Hubbells collected in 1994 and 1995.

A White House spokesman said yesterday, "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."

The Hubbells' lawyer, John W. Nields, said Starr was improperly singling out Hubbell for prosecution. The indictment, he said in a statement, constitutes "a rare type of tax charge . . . that would never have been brought against an ordinary taxpayer by the Department of Justice."

Added Nields, "The crime of evasion of payment occurs only when a taxpayer commits some sort of fraud of concealment intended to prevent the IRS from collecting a tax -- like putting assets in another person's name or putting money in a numbered Swiss account. And that did not happen here."

The 42-page indictment details lavish spending by the Hubbells since they came to Washington after Clinton's 1992 election -- even maintaining a deluxe lifestyle during the period that Hubbell was under investigation and during his 18 months in prison. In that way the indictment is similar to information contained in Hubbell's December 1994 plea bargain, in which he admitted embezzling $482,000 from Rose and its clients and spending it on luxuries like vacations, a fur coat and lingerie.

According to the new indictment, the Hubbells used about 20 credit cards and spent $85,000 on clothes, $95,000 on private school tuition, $20,000 for telephone bills, $10,000 for laundry and dry cleaning, $11,500 for beverages in addition to groceries, $5,000 for beauty salon visits and $9,900 for domestic help.

Hubbell also withdrew $223,000 from his individual retirement account over time, repeatedly electing not to pay the usual 20 percent tax withholding. On one occasion, the indictment alleges, he engaged in an elaborate scheme to "swap checks" so that he could pay off a $29,000 debt at the Rose Law Firm using money from his pension account funneled through his IRA to avoid the pension fund's automatic tax-withholding requirement.

The indictment also charges that the Hubbells set up a company called Bridgeport Group in March 1997 to hide money from the Internal Revenue Service. Webster Hubbell entered into a book contract with the William Morrow & Co. publisher through Bridgeport, which received a check for $49,500 in June 1997 as the first installment.

The Hubbells paid no estimated tax on the money and "were able to spend the book advance before the IRS could discover the location of the funds," the indictment said.

The indictment said that Hubbell was hired by about 15 clients in 1994 after allegations of billing fraud surfaced and he resigned his post as associate attorney general. Prosecutors contended that Hubbell did "little or no work" for the consulting fees, which ranged from $5,000 to $100,000. The largest single payment came from the Lippo Group conglomerate of Indonesia.

Senior White House aides and Clinton advisers helped Hubbell line up the consulting jobs, nearly all of them for companies or individuals that were strong political backers of Clinton and the Democratic Party. Those who helped included top Clinton aides Thomas F. "Mack" McLarty, current Chief of Staff Erskine B. Bowles, then-U.S. Trade Representative Mickey Kantor and Washington superlawyer Vernon E. Jordan Jr.

Accountant Schaufele, a longtime friend of the Hubbells from Little Rock, prepared and filed false tax returns for the couple for 1994, 1995 and 1996, the indictment alleged. He and attorney Owen, another Hubbell friend, set up bank accounts and the Bridgeport corporation that the Hubbells allegedly used to conceal income from the IRS, the Rose firm and other creditors.

"Mr. Schaufele is innocent," said his attorney, Chris Todd. "Without pay and out of true friendship, Mike Schaufele helped Webb and Suzy Hubbell with their taxes during the most difficult time of the Hubbells' lives."

Efforts to reach Owen's lawyer for comment were unsuccessful.

Staff writer Peter Baker and staff researcher Ben White contributed to this report.

© Copyright 1998 The Washington Post Company

Back to the top

ncG1vNJzZmivp6x7uK3SoaCnn6Sku7G70q1lnKedZMSxedKrrWion6G2tbXCrGasqJWYtqK4jpyjoqakpLtwv9OoqaKdo2S1tq7BnqOlaGVlfnqEjaGrpg%3D%3D