Starr Indicts Hubbell on 15 Counts

WASHINGTON — Independent counsel Kenneth W. Starr obtained a new federal indictment Friday against former Justice Department official Webster L. Hubbell and submitted to House investigators information related to allegations that President Clinton fondled a White House volunteer in 1993.

The 15-count indictment accused Hubbell, a close friend of the president and First Lady Hillary Rodham Clinton, of attempting to obstruct federal investigations of his Little Rock, Ark., law firm in several Whitewater-related transactions in the 1980s.

The indictment repeatedly mentioned related legal work done by an unnamed “billing partner” at the firm, a clear reference to Mrs. Clinton, also a Rose Law Firm attorney at the time. But the indictment did not accuse her of wrongdoing.

In the other matter, which also arose from Starr’s expanded 4-year-old Whitewater inquiry, Starr gave the House Judiciary Committee two file boxes of evidence and testimony of grand jury witnesses about accusations made by former volunteer Kathleen E. Willey. The material was placed in a secure room on Capitol Hill. Committee members will consider whether to release it next week.

The developments came a week before Starr is to testify in the committee’s inquiry into the possible impeachment of Clinton.

Clinton defenders insisted that the developments are a boost for the first family, since the indictment did not target Mrs. Clinton and the Willey files included no referral from Starr of additional grounds for impeachment.

“The fact that he [Starr] has done neither has illustrated the poverty of his investigation,” said a White House official. “Really, it is a way for him to kick up some dust before his appearance next week.”

“The timing strikes me as incredibly odd,” said Rep. Jerrold Nadler (D-N.Y.), a fierce Starr critic on the committee.

The independent counsel’s office said that the Willey information was provided in response to an earlier committee request for additional materials possibly relevant to the impeachment inquiry.

Charles G. Bakaly III, Starr’s spokesman, said that the timing of the Hubbell indictment is coincidental. “There really is no relation. We bring matters in the regular course.”

In a statement released by the White House, spokesman Jim Kennedy said that the Clintons were “saddened” by news of the Hubbell indictment and “would like to express their concern for Webb and his family.”

Hubbell Previously Convicted of Fraud

The new Hubbell indictment represented the first charges in more than two years relating to Arkansas transactions that had formed the core of Starr’s original mandate--long before he took up sexual allegations against Clinton.

Starr previously obtained 1996 fraud and conspiracy convictions against James B. McDougal, his former wife, Susan McDougal, and then-Arkansas Gov. Jim Guy Tucker.

Asked why it had taken so long to indict Hubbell on these charges, Bakaly said that “we have been confronted with lying and stonewalling” that took time to overcome.

Bakaly added that the inquiry involving former White House intern Monica S. Lewinsky had occupied much of the office’s energy for the last 10 months, but “now we are moving to resolve all matters.”

The indictment alleged that Hubbell testified falsely and tried to impede Starr’s investigation into the role of the Rose Law Firm in Whitewater land transactions involving Madison Guaranty Savings & Loan, a failed thrift headed by James McDougal, who was a business partner of the Clintons.

Hubbell allegedly covered up the true nature of the firm’s relationship with Seth Ward, a client of Mrs. Clinton’s who was Hubbell’s father-in-law. Federal banking regulators told Congress in 1995 that Ward was a middleman in a “sham transaction” involving a real estate development called Castle Grande.

Ward purchased land as a “straw party” on behalf of Madison Guaranty because the firm could not legally buy the property, according to the indictment. The Federal Deposit Insurance Corp. and the Resolution Trust Corp. later investigated this transaction and other Madison Guaranty loans after the federally insured thrift was declared insolvent in 1989.

Mrs. Clinton has stated publicly that she has little recollection of her work on Castle Grande but that it was minimal and only involved drafting option documents that never were exercised. She has denied wrongdoing.

Hubbell denied any wrongdoing Friday in remarks to reporters outside his Maryland home.

“I just do not know what it’s going to take to make this matter end,” Hubbell said. “I don’t know of any wrongdoing on behalf of the first lady or the president, and nothing the independent counsel can do to me is going to make me lie about that.”

It was the third time Hubbell has been indicted in Starr’s investigation, a point emphasized by John W. Nields Jr., Hubbell’s defense attorney.

“An absolutely unheard of amount of resources, government resources, have been devoted to trying to find some case, any case, to bring against Mr. Hubbell,” Nields said.

Hubbell pleaded guilty in 1994 to charges that he defrauded some clients and law partners out of thousands of dollars. He served 18 months in prison. Subsequently, he and his wife were indicted on tax charges that a federal judge dismissed and Starr has appealed.

The new Hubbell indictment represented the first charges in more than two years relating to Arkansas transactions that formed the core of Starr’s original mandate--long before he took up sexual allegations against Clinton.

Starr’s new material on Willey was taken to a secure room in the Ford House Office Building, where House committee staff members immediately began pouring through the information.

Clinton Denies Willey Allegations

Clinton has “emphatically” denied accusations that he groped Willey in an Oval Office encounter in November 1993, as she has alleged.

Starr is continuing to investigate the Willey allegations. In recent weeks, Starr’s prosecutors have brought witnesses before a federal grand jury in nearby Alexandria, Va.

Willey’s account has been challenged by a former close friend, Julie Hiatt Steele, who has said that Willey asked her to lie in confirming that Willey told her about the alleged incident.

*

Times staff writers Marc Lacey, Janet Hook and Elizabeth Shogren contributed to this story.