The Man In The Middle

BUT FOR HIS SIZE AND HIS BATtered briefcase, there was nothing remarkable about the big guy on the Washington Metro last week. Webster Hubbell, the Little Rock lawyer who became number three at the U.S. Justice Department on the strength of his long association with Bill and Hillary Clinton, was wearing khakis, a winter jacket and hiking boots-and like everyone else on the subway, he endured morning rush hour in stoic silence. After pleading guilty to embezzling nearly $500,000 from his Rose Law Firm partners and clients in special prosecutor Kenneth Starr's Whitewater investigation, Hubbell is now finishing out his 21-month sentence at a halfway house in the D.C. slums. "Until you've been on the other side," Hubbell told NEWSWEEK, referring to prison life, "you don't know what a sentence can do to a man."

Hubbell, who spends his days researching alternative-sentencing proposals for a liberal think tank in Alexandria, Va., may get another real-life lesson in crime and punishment when his work-release program ends this week. Starr's probe of the Clintons' involvement in Whitewater seems stalled for lack of reliable witnesses-and Hubbell, who was Hillary's lawpartner as well as the governor's golf buddy, has long been seen as a key to cracking the case. Specifically, investigators say Hubbell drafted documents for a land deal called Castle Grande-a transaction that is a prime target for Starr's staff because it involved both Jim McDougal, the Clinton political ally now convicted of S&L fraud, and Hillary Clinton, who did legal work for McDougal's thrift. Put enough pressure on Hubbell, Starr's prosecutors have reasoned, and he will lead them to Hillary or Bill--and maybe both.

That is a typical strategy in white-collar-crime eases, although it hasn't worked so far. But Starr's staff may now have new leverage over Hubbell. In recent months, the special prosecutor's team has begun looking into three consulting contracts Hubbell landed after his resignation from the Justice Department in 1994. One involved lobbying for the Los Angeles City Airport Commission and netted Hubbell nearly $25,000; according to federal auditors, Hubbell did very little actual work and may have submitted grossly inflated bills. Another involved writing a series of articles about the perils of public life for the Consumer Support and Education Fund, a Los Angeles-based public-interest group; though Hubbell was paid $45,000, the articles were never delivered. The third centers on unspecified work for the Lippo Group, the Indonesian conglomerate that is a focus of investigations into allegedly improper fund raising by the Democrats. A source dose to the ease said Hubbell was paid more than $100,000 by Lippo, and that several months before he pleaded guilty, he had lunch on Aug. 9,1994, with John Huang, the former Lippo executive who solicited hundreds of thousands of dollars in questionable campaign contributions. Was the Lippo contract hush money? "That's pretty rotten," Hubbell indignantly told Senate Whitewater probers last year. "Nobody's promised me a damn thing." The White House says that the president was unaware of the Lippo contract until he read about it in the newspapers.

Starr's investigators aren't so sure. They think Hubbell can help unravel the pattern of incestuous financial dealings that permeated Little Rock during the Clinton years. Meanwhile, Starr filed court papers last week saying Jim McDougal had provided him "new and important" information, and sources say that includes corroboration of Clinton's supposed involvement in an illegal $300,000 loan. But McDougal, who has frequently changed his story, is a shaky witness at best--which may be why investigators are threatening the man on the Metro with a new round of felony charges.

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