Webster Hubbell, the longtime confidant of President Clinton and former law partner of Hillary Rodham Clinton, was indicted Thursday on charges of tax evasion that included failure to pay taxes and penalties of more than $850,000 over the past four years.
Prosecutors say much of the taxes were owed on embezzled money and hundreds of thousands of dollars in income steered to him by friends of the Clintons while prosecutors were seeking information from Hubbell about the president and his wife.
The 10-count indictment of conspiracy, tax evasion and mail fraud accused Hubbell and his wife, Suzanna, of taking part in a scheme in which they earned more than $1-million and spent more than $750,000 but took steps to conceal their income from tax collectors. It also charged that two Arkansas advisers to the Hubbell family, Michael Schaufele, an accountant, and Charles Owen, a lawyer, had played important roles in a conspiracy to evade taxes.
The charges on Thursday were the second time that the Whitewater independent counsel has made a criminal case against Hubbell, who served nearly 17 months in prison after pleading guilty to tax evasion in 1994, and presented a new political embarrassment to the Clintons, old friends who first met Hubbell when they took the Arkansas bar examination.
The charges also suggested, without making the point directly, that some money Hubbell received in 1994, for which the prosecutor said he did "little or no work," might 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 shows that investigators could not reach an agreement with Hubbell and that therefore he is either unable or unwilling to provide them with incriminating evidence about the Clintons.
Hubbell said that he would vigorously contest the charges and that the only reason they were filed against him, his wife, and his two friends 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," Hubbell said to reporters in front of his home on Thursday. "I will not 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 that have been brought today."
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 association in the 1980s. As early as 1992, when questions arose in Clinton's first presidential campaign about the couple's ties to McDougal, campaign officials were unable to gain clear answers from Hubbell about what he knew of those ties, according to campaign papers that have since become public.
The indictment is the product of a yearlong investigation into the income Hubbell received from the time he resigned from the Justice Department as associate attorney general in April 1994 until the end of that year, when he pleaded guilty to two felony counts of mail fraud and tax evasion in the theft of $400,000 from his former clients and law partners. Some of the taxes Hubbell is accused of evading are due on the money he admitted stealing in the earlier case.
The indictment said that from 1994 to 1997 the Hubbells earned more than $1-million but paid only $29,938 to meet back-tax obligations of $894,000. Over the same period, the indictment said, the couple spent more than $750,000 on personal items, like clothing and private schools.
The indictment also described a series of schemes the Hubbells were accused of undertaking to conceal income from tax collectors and avoid making payments.
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.
While there was no specific criminal charge that Hubbell was given 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."