Hubbell's Reputation Melted In Capital Heat -- Image As Top Lawyer Tarnished By Whitewater Fallout

WASHINGTON - On documents submitted to the Senate Judiciary Committee last year, Associate Attorney General Webster Hubbell listed among his "ten most significant litigated matters" a complicated patent dispute involving Hunter Engineering and the F.M.C. Corp.

"I was the lead trial counsel," Hubbell wrote to the senators reviewing his fitness for the Justice Department position.

But the Hunter Engineering case never went to trial, and other lawyers involved in the 18-month dispute have a different memory of Hubbell's role. "I wasn't ever in the same room with him," said Greg Upchurch, the St. Louis attorney who handled the case for Hunter Engineering and remembers only minimal involvement by Hubbell's firm.

In the narrow world of Arkansas law and politics, few lawyers could top Hubbell's public image. A champion Arkansas Razorback linebacker who became Little Rock's mayor at 31, he headed the litigation section at the Rose Law Firm and accumulated a net worth of nearly $1 million before following friends Bill and Hillary Rodham Clinton to Washington. "You'd have to go a long way in my state to find anybody who commands more respect, both professionally and as a person, than Webb Hubbell," said Sen. Dale Bumpers, D-Ark. And in some ways Hubbell lived up to his billing. He was widely seen as a stabilizing influence at Justice, managing large portions of the department, developing a close working relationship with Attorney General Janet Reno and emerging as the principal source of contact with the White House on major policy issues.

But in recent weeks, as Hubbell's legal activities came under scrutiny - by his own law firm, the federal agencies who had used his services and the press - a less clear picture of Hubbell emerged. In an internal inquiry, the Rose firm raised serious questions about possible improprieties in Hubbell's client billings and expense reports that may have resulted in hundreds of thousands of dollars in losses for the firm and excessive bills to some of its clients - including accusations, confirmed yesterday by a federal official who requested anonymity, that the federal government was billed several times for the same work.

Both the Federal Deposit Insurance Corp. and the Resolution Trust Corp. (RTC) recently began re-examining Rose firm bills from the time when Hubbell served as supervising attorney on savings-and-loan cases. Rose firm partners have been preparing to take the matter to the state bar and are considering bringing a lawsuit against Hubbell, according to sources close to the firm.

Rose partners plan for future

Rose firm partners met last night to discuss how to proceed, although there was no immediate word on what they might have decided. Knowledgeable sources said Hubbell decided to resign after his attorney, John Nields, had tried but failed to negotiate a solution to the dispute.

For his Senate Judiciary hearings, Hubbell submitted a 26-page questionnaire that included his description of the 10 most significant litigated matters that he handled. Among the matters he successfully litigated were cases for the Audubon Society of Little Rock and the Arkansas-based Tyson Foods Inc.

However, in roughly half of the cases he listed as significant, other lawyers involved said Hubbell played either a minor role or the cases themselves were not significant.

Hubbell said he handled for then-governor Bill Clinton a challenge to a ballot initiative setting new ethics disclosure requirements for public officials. But Scott Trotter, who worked with Hubbell to defend the proposal, said, "There is no way that any of those ballot title challenges can be considered major litigation."

In a case involving a roof collapse at a Little Rock car dealership, Hubbell represented a subcontractor while most of the case focused on the general contractor and the architect. Some lawyers described it as a standard construction dispute; Hubbell portrayed it to the Judiciary Committee as the "longest civil trial in Pulaski County history."

In another situation, Hubbell listed a company among clients from whom he said he received more than $5,000 in recent years. But Clay Robinson, the former president, board member and outside counsel for Environmental Systems Co., said: "I'd be very much surprised if Webb Hubbell ever did a dollar's worth of work for Ensco." Current officials with the company declined comment.

But in the end, it was the Whitewater controversy and the investigation of the failed Madison Guaranty Savings and Loan that proved most troublesome for Hubbell.

After Madison was taken over by federal regulators in 1989, Hubbell and other Rose lawyers were hired by the FDIC to represent the agency in a malpractice suit against Madison's accountants. Hubbell secured the legal work for the Rose firm despite several possible conflicts:

-- The owner of the thrift, James McDougal, was a partner with another member of the Rose firm, Mrs. Clinton, in the Whitewater Development Corp. - the land deal that along with the collapse of Madison is being investigated by independent counsel Robert Fiske.

-- The firm also had earlier been hired by McDougal to help salvage Madison's finances - an effort that involved Mrs. Clinton representing the thrift before regulators appointed by her husband.

-- Hubbell's father-in-law was an employee and was involved in one of the land projects criticized repeatedly by federal bank investigators.

Though the FDIC recently cleared Hubbell of ethics violations, his Madison involvement is likely to become an issue not only for Fiske's investigators, but also for the RTC inspector general who is conducting an audit of his work.

Harry Don Denton, formerly Madison's senior vice president and loan officer, said that Hubbell drafted language for a $1.15 million Madison loan for Hubbell's father-in-law that was used to finance a real-estate deal in a project now under federal investigation.

The wording in the 1985 loan to Seth Ward, an employee of Madison's real-estate subsidiary, said Ward could not be held personally liable for repayment, according to Denton.

"Hubbell structured . . . the wording for Seth's non-recourse note," Denton said in an interview. "There wasn't anyone obligated to repay it."

Denton said he met with Hubbell in the fall of 1985, and that Hubbell prepared the language in a promissory note under which Ward would have no personal liability on a loan to buy about half of Madison's 1,100-acre Castle Grande project south of Little Rock. Fiske has subpoenaed Castle Grande records.

Hubbell, who recused himself from the Madison investigation late last year, said through a spokesman that he does not recall helping draft the terms of the loan for Ward.

Ward has declined to be interviewed. His attorney, Alston Jennings, said: "As far as (Ward) knows, Webb Hubbell had nothing whatsoever to do with the transaction."

Ward's loan was repaid through the sale of Castle Grande lots. Madison, which financed those sales, was unable to collect on most loans. Castle Grande was harshly criticized in a confidential 1986 federal bank examination, which found that it was "purchased and sold in a series of fictitious transactions" that generated $1.8 million in inflated profits and payments to Madison owners and employees.

Three years later, when Madison failed and the RTC wanted to file suit against the thrift's accountants for malpractice, Hubbell was hired without informing the government that his father-in-law had been a Madison insider who was in the midst of his own legal dispute with the RTC over Madison funds.

In June 1989, after federal officials learned of Hubbell's connection to Ward, they sought and received a letter from him in which he stated, "I have not represented Mr. Seth Ward in connection with any issue or matter relating to his disputes with Madison Guaranty." Hubbell further pledged he had "no intention" of representing Ward.

Four months later, Hubbell - still representing the RTC - informed Ward's lawyer of a key court development, according to testimony by the lawyer. That information led the lawyer to obtain $400,000 in disputed RTC funds.

Under a side contract never made part of the S&L's records, Madison owner McDougal had agreed Madison would pay Ward a 10 percent commission on all commercial land sold at Castle Grande, no matter who actually sold it. Ward claimed $356,840 in commissions on commercial land sales at Castle Grande.

Ward sues

Ward sued Madison in Arkansas state court and won. Then $400,000 was placed in an escrow account while the case was appealed. After the RTC stepped in and moved the case to federal court, the state appeal was dismissed.

Hubbell advised Jennings, Ward's lawyer, about the state court decision. That gave Jennings an opportunity to take the $400,000 out of escrow - setting off yet another court dispute with the RTC.

"I guess it must have been Wednesday morning of last week I was advised . . . by Webb Hubbell, who is Seth Ward's son-in-law . . . that the (state) Court of Appeals had dismissed the appeal in this case. . . . I decided that Mr. Ward was entitled to his money and I went down to Worthen Bank and got it," Jennings testified on Oct. 31, 1989. He said he also read an item in the local newspaper about the dismissal.

Ward's victory was overturned in federal court, and he ended up returning most of the money in a settlement with the RTC.