A federal judge dismissed an indictment against former associate attorney general and long-time Clinton friend Webster Hubbell. U.S. District Judge James Robertson threw out the charges on July 1, 1998, ruling that Independent Counsel Kenneth Starr had overstepped his authority in bringing forth the Hubbell indictment. Robertson also charged that Starr had violated Hubbell's Fifth Amendment rights against self-incrimination by building a case that relied on materials collected under an immunity agreement with Hubbell.

The April 30 indictment indictment charged Hubbell with conspiring to commit tax fraud and tax evasion, along with five counts of mail fraud. The charges stemmed from consulting fees earned by Hubbell.

"We are just very, very grateful and hopeful that this is the beginning of a long process," said Hubbell outside his home after hearing of the judge's order. "The last five years have been very difficult."

The Hubbells' lawyer, John Nields, would not comment on the dismissal of the case.

The following are excerpts from the 40-page ruling.

I. MOTION TO DISMISS THE INDICTMENT AS BEYOND THE AUTHORITY OF THE INDEPENDENT COUNSEL

Independent counsels are appointed pursuant to the Ethics in Government Act. Congress carefully limited their authority, as well as that of the Special Division that appoints them. Those very limitations were identified by the Supreme Court as critical to the constitutionality of the Ethics in Government Act. Morrison v. Olson, 487 U.S. 654 (1988). The defendants in this case assert that the Special Division exceeded the statutory and constitutional limits on its authority by referring the subject matter of this case to Independent Counsel Kenneth Starr. They are correct.

This independent counsel was appointed by the Special Division, upon the application of the Attorney General, on August 5, 1994. The appointing order (the "Original Grant") gave him authority to investigate

[W]hether any individuals or entities have committed a violation of any federal criminal law, . . . relating in any way to James B. McDougal's, President William Jefferson Clinton's, or Mrs. Hillary Rodham Clinton's relationships with Madison Guaranty Savings & Loan Association, Whitewater Development Corporation, or Capital Management Services, Inc.

The Original Grant also gave the independent counsel the authority to "investigate other allegations or evidence of violation of any federal criminal law . . . by any person or entity developed during the Independent Counsel's investigation referred to above and connected with or arising out of that investigation." (Emphasis added).

A. Reviewability of the Special Division's referral order

The independent counsel's first response to this motion was to challenge defendants' right to question his authority. He said in his written response, using the language of standing, that defendants had "identified no concrete harm that has accrued (or will accrue) to them because the Independent Counsel is prosecuting this matter, rather than the Department of Justice," p. 14.

That core argument requires analysis of the exact nature of a referral order under Section 594(e) of the Ethics in Government Act: Is it, as this independent counsel asserts, a nonreviewable discretionary act? Is it, as two judges of this Court have suggested, controlling authority in this Circuit, or at least precedent flowing from the proper exercise of an appellate court's Article III powers? Or is it a ministerial act, flowing from the Special Division's Article II or III powers, that is reviewable on a proper challenge?

I respectfully disagree and conclude that the Supreme Court's analysis in Morrison v. Olson compels a different answer. The Ethics in Government Act provides for the designation of three judges and for their assignment to a division of the D.C. Circuit, but only "for the purpose of appointing independent counsels," 28 U.S.C. Section 49(a). Morrison made it clear that the power to appoint independent counsels derives solely from the Appointment Clause, Art. II, Section 2, cl.2, which enables judges to appoint inferior officers of the United States government. 487 U.S. at 676-77.

The Special Division in fact is not a court of appeals. The Special Division hears referral applications ex parte, as judges hear wiretap applications, 18 U.S.C. Sections 2516, 2518. And, like wiretap orders, referral orders could not be immune from collateral attack or appellate review. If they were, the effect would be to make binding on affected individuals rulings that were never litigated in an adversarial proceeding.

If the Special Division's Section 594(e) referral function is an Article III function, it must be ministerial, rather than "supervisory" or "executive," or it violates Article III. Id. The Special Division thus may interpret the independent counsel's Original Grant. It may not expand the independent counsel's jurisdiction without the consent of the Attorney General, which consent is required by another part of the Act (Section 593(c)(2)). Id. at 680 n.18. This limitation is constitutional, and, if it is to mean anything at all, must be enforceable upon a proper challenge.

In the present case, however, the reasons for the Special Division's decision to issue the Tax Referral are unstated. It is impossible to tell whether the same analysts was applied or what record was before the Special Division. We do not know, for example, whether the Attorney General responded to the independent counsel's Section 594(e) application in this case, whereas in the Espy matters the Attorney General objected to the referral applications, forcing the Special Division to resolve the dispute. In any event, and bearing respectfully in mind that it is only the independent counsel that has "intimate knowledge of the course of the investigation, including witness statements, and of other proceedings that may be ongoing before the grand jury," Tucker, 78 F. 3d at 1318, I must determine whether the independent counsel has shown that the Tax Referral is "demonstrably related" to the Original Grant.

The Madison-Whitewater matters that were the subject of the Original Grant and the tax matters that are the subject of this case have nothing in common -- nothing, at least, that appears on this record -- except Webster Hubbell. The independent counsel has made no serious effort to show the "overlap" found to exist in the Espy I referral. He has identified no common witnesses, described no similar patterns conduct, cited not similar applicable law. Nor has the independent counsel offered any real resistance to defendants' submission that this case involves "violations of other criminal statutes outlawing a different category of conduct and occurring on different occasions than those set forth in the [Original Grant] of jurisdiction." Espy II, supra. The independent counsel's explanation of how this indictment is "connected with" the Original Grant was a recitation spanning six degrees of relationship.

When pressed to demonstrate the relationship between the Tax Referral and the Original Grant, indeed, the independent counsel always returns to what seems to be his default position: that he has always been authorized to investigate obstruction of his original investigation; that, pursuing that line, he investigated Mr. Hubbell's post-conviction consulting income "from entities associated with the Clinton Administration at a time when Mr. Hubbell clearly was under investigation, and known publicly to be an important witness regarding Madison Guaranty/Whitewater matters," Response at 23; and that he discovered these tax charges in the course of that inquiry.

That default position relies directly upon the Original Grant and effectively jettisons the Tax Referral order. The argument is that, so long as the independent counsel is investigation obstruction, he may prosecute whatever crimes he may come across, committed by whomever he may come across, regardless of whether the charges or the individuals are demonstrably related in any substantive way to the Original Grant, and regardless of whether he has found any obstruction.

The controlling constitutional principles articulated in Morrison would be offended by permitting the independent counsel to tack these tax charges onto the Original Grant on the theory that they "arose out of" an apparently unsuccessful investigation of allegations that Mr. Hubbell was involved in an obstruction of the original Whitewater investigation.

Had the independent counsel applied for a referral from the Attorney General under Section 594(e), as he did in Tucker, supra, or asked the Attorney General to petition the Special Division to expand his jurisdiction under Section 593(c), as he did in the investigation of the matters involving Monica Lewinsky, see In re Motions of Dow Jones & Co., -- F.3d --, 1998 WL 216042 (D.C. Cir., May 5, 1998), petition for cert. filed, 66 U.S.L.W. 3790 (U.S. June 3, 1998) (No. 97-1959), he might have received proper authority -- or at least unreviewable authority -- to prosecute these charges. As it is, however, the indictment must be dismissed.

II. MOTION TO DISMISS AS TO WEBSTER HUBBELL FOR VIOLATION OF HIS USE IMMUNITY

On November 1, 1996, after the independent counsel had successfully prosecuted Webster Hubbell under the Billings Referral, and while Mr. Hubbell was still in prison, the independent counsel served him with a subpoena commanding the production of all his business, financial, and tax records from January 1, 1993 to the date of the subpoena. Mr. Hubbell refused to comply, invoking his Fifth Amendment privilege against self-incrimination. The independent counsel thereupon moved for, and the United States District Court for the Eastern District of Arkansas granted, an order compelling production of the documents. Pursuant to 18 U.S.C. Section 6002, the order also granted Mr. Hubbell "immunity to the extent allowed by law." In re Grand Jury Proceedings, No. GJ-96-3 (E.D. Ark., W.D. Nov. 14, 1996). Mr. Hubbell complied with that order and produced 13,120 pages of documents to the independent counsel. While the original purpose of the subpoena was to investigate allegations of obstruction of justice, the independent counsel brought no obstruction charges. Instead -- and the independent counsel concedes this important point -- he "used the contents of these documents to identify and develop evidence that led to this prosecution." Response at 5. Webster Hubbell now invokes the use immunity given to him with the order to compel production and moves to dismiss the charges against him, or in the alternative, for a Kastigar hearing to determine whether the independent counsel has impermissibly used any of his immunized testimony against him. See Kastigar v. United States, 406 U.S. 441 (1972).

The independent counsel has indicated that a Kastigar hearing is unnecessary because he "will make no bones about the fact that [he] did use the information provided by Mr. Hubbell pursuant to the production immunity." Tr. of Status Conf., June 2, 1998, at 8. He argues that the instant motion "will rise and fall on the law."

Those concessions compel me to find, and I do find, that all of the evidence the independent counsel would adduce at trial in support of the charges brought against these defendants was directly or indirectly derived from the documents Mr. Hubbell produced under subpoena.

. . . the independent counsel contends that only Mr. Hubbell's act of producing the documents needed to be immunized, that the "to the extent allowed by law" language of the immunity order extended only to the act of production, and that it was accordingly legitimate for the independent counsel to use the documents themselves, and their contents, to discover and build his case against Mr. Hubbell.

The independent counsel's central argument here (which may be characterized as "no problem as long as the finder of fact never learns who produced the documents") might be viable if the only testimonial aspects of Mr. Hubbell's production under subpoena were authenticity and possession. But the argument fails because it does not cover -- indeed, it practically ignores -- the question of the documents' existence. The documents Mr. Hubbell turned over under subpoena concededly added to the "sum total" of the dependent counsel's information about him.

The subpoena served on Mr. Hubbell was the quintessential fishing expedition. The independent counsel freely admits that he was not investigating tax-related charges when he issued it. . . . His application for authority to investigate potential tax violations by the Hubbells was not filed with the Special Division until December 31, 1997, fourteen months after the subpoena had issued.

Mr. Hubbell's compelled production of documents allowed the independent counsel to build a case against Mr. Hubbell different in all material respects from the case for which they had been subpoenaed. Mr. Hubbell was thereby turned into the primary informant against himself.

The motion to dismiss all counts against defendant Webster Hubbell must be granted.