After all Whitewater turned out to be a big nothing.
WOW!
Whitewater Investigations and Prosecutions to the Present Day
Office of the Independent Counsel
Wednesday, Sept. 20, 2000
From the Office of the Independent Counsel's Annual Status Report to Congress
This Office is carefully investigating the matters within its jurisdiction. Certain investigations remain active and ongoing.
In the past year, this Office concluded the investigations In re: William David Watkins (commonly referred to as the "Travel Office" matter), In re: Anthony Marceca (commonly referred to as the "FBI Files" matter), and In re: Bernard Nussbaum. With respect to each investigation, the Independent Counsel determined that no prosecutions were warranted.
Previously, this Office had announced the conclusion of the "Arkansas phase" of its investigation into matters relating to the original mandate of jurisdiction assigned to this Office on August 5, 1994: "whether 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 Office expects to announce its findings and conclusions with respect to this matter during the Fall 2000. During this phase of our investigation, the Office conducted three jury trials, convicting three defendants and secured fourteen convictions of twelve defendants by guilty pleas.
In conducting its investigations and prosecutions, the Office has endeavored to comply with the policies of the Department of Justice, except to the extent that doing so would be inconsistent with the purposes of the Ethics in Government Act. See 28 U.S.C. § 594(f)(1). Numerous attorneys, investigators, and administrative and support personnel have ably assisted this Office, including persons detailed from the Department of Justice, several United States Attorneys Offices, the Federal Bureau of Investigation, and the Internal Revenue Service.
We summarize below the trials, indictments, guilty pleas, and reports resulting from this Office's work to date.
A. Trials and Indictments
To date, this Office has prosecuted four jury trials -- three in the United States District Court for the Eastern District of Arkansas and one in the United States District Court for the Eastern District of Virginia.
On March 4, 1996, the trial of United States v. James B. McDougal, Susan McDougal, and Jim Guy Tucker commenced before Judge George Howard, Jr. of the United States District Court for the Eastern District of Arkansas. On May 28, 1996, the jury returned guilty verdicts against all three defendants. James B. McDougal was convicted on 18 felony counts: one felony violation of 18 U.S.C. § 371 (conspiracy); two felony violations of 18 U.S.C. § 1343 (wire fraud); one felony violation of 18 U.S.C. § 1344 (bank fraud); three felony violations of 18 U.S.C. § 1341 (mail fraud); one felony violation of 18 U.S.C. § 1006 (false bank entries); three felony violations of 18 U.S.C. § 1014 and § 2 (false loan applications); four felony violations of 18 U.S.C. § 657 and § 2 (misapplication of bank funds); and three felony violations of 18 U.S.C. § 1006 and § 2. Susan McDougal was convicted on four felony counts: one felony violation of 18 U.S.C. § 1341; one felony violation of 18 U.S.C. § 657 and § 2; one felony violation of 18 U.S.C. § 1006 and § 2; and one felony violation of 18 U.S.C. § 1014 and § 2. Jim Guy Tucker was convicted on two felony counts: one felony violation of 18 U.S.C. § 371 and one felony violation of 18 U.S.C. § 1341.
On August 19, 1997, Judge Howard sentenced Jim Guy Tucker to 18 months home confinement as part of a four-year probationary term; restitution of $150,000; a $25,000 fine; and specified community service. On February 23, 1998, the United States Court of Appeals for the Eighth Circuit rejected Mr. Tucker's challenge to the sufficiency of the evidence supporting his conviction. The Court of Appeals remanded the case to the district court for a hearing on issues relating to possible juror misconduct.
On February 17, 1999, following an extensive evidentiary hearing, Judge Howard again determined that no juror misconduct had occurred. Mr. Tucker has appealed this determination to the Eighth Circuit, the matter was argued on September 13, 1999, and that appeal is still pending.
On August 20, 1996, Judge Howard sentenced Ms. McDougal to 24 months on three counts of conviction (the court suspended sentence on the fourth), to be followed by three years probation; restitution of $300,000; a $5,000 fine; and 300 hours of community service. Ms. McDougal's conviction was affirmed by the United States Court of Appeals for the Eighth Circuit on February 23, 1998. Ms. McDougal began serving her sentence on March 9, 1998, following expiration of her period of confinement for civil contempt.
On June 25, 1998, after Ms. McDougal had served three and one-half months of her sentence, Judge Howard granted her motion for reduction of sentence pursuant to Federal Rule of Criminal Procedure 35, and commuted her sentence to time served. As a condition of probation Ms. McDougal was required to serve a 90-day period of home confinement.
On September 4, 1996, Ms. McDougal appeared before a federal grand jury pursuant to a subpoena and an immunity order of Judge Susan Webber Wright of the United States District Court for the Eastern District of Arkansas. Ms. McDougal was a business partner in Whitewater Development Corporation and one of the major shareholders of Madison Guaranty Savings & Loan Association, two of the entities named in the original order appointing the Independent Counsel, and she thus would be expected to possess information highly relevant to the investigation. Ms. McDougal refused to answer questions.
Judge Wright held a civil contempt hearing and ordered that Ms. McDougal be incarcerated on September 9, 1996, and remain incarcerated until she purged herself of contempt. Ms. McDougal immediately appealed the District Court's order to the United States Court of Appeals for the Eighth Circuit. That appeal was denied on October 9, 1996.
On October 24, 1996, Ms. McDougal moved the District Court to vacate the civil contempt order. That motion was denied on November 14, 1996. On May 16, 1997, Ms. McDougal filed another motion to vacate the civil contempt order, and that motion was again denied on June 30, 1997. Ms. McDougal's confinement for contempt expired on March 9, 1998, at which time she began serving her term of imprisonment for her criminal convictions.
On April 14, 1997, Judge Howard sentenced James B. McDougal to concurrent terms of five years imprisonment for 15 of the counts for which he was convicted, with two years suspended. On the remaining three counts, Judge Howard suspended the imposition of sentence and imposed a three-year probationary term.
In sum, Mr. McDougal's effective sentence was three years imprisonment followed by three years of probation. The Court also imposed a $10,000 fine and ordered Mr. McDougal to pay $4,274,301.27 in restitution, divided between the Federal Deposit Insurance Corporation and the Small Business Administration. On March 8, 1998, Mr. McDougal died at the Federal Medical Center, Fort Worth, Texas, of natural causes.
The trial of United States v. Herby Branscum Jr. and Robert Hill commenced on June 17, 1996 before Judge Wright. On August 1, 1996, the jury deadlocked on seven counts: one count of 18 U.S.C. § 371; three counts of 18 U.S.C. § 1005 (false bank entries); and three counts of 18 U.S.C. § 656 (embezzlement). The jury returned not guilty verdicts for both defendants on four felony counts: one count of 18 U.S.C. § 371; one count of 18 U.S.C. § 1005; one count of 18 U.S.C. § 656; and one count of 18 U.S.C. § 1001 (false statements). Judge G. Thomas Eisele of the United States District Court for the Eastern District of Arkansas declared a mistrial as to the seven deadlocked counts. On September 13, 1996, this Office filed a motion to dismiss the remaining counts.
On May 4, 1998, Susan McDougal was indicted on two counts of criminal contempt, in violation of 18 U.S.C. § 402, and one count of obstruction of justice, in violation of 18 U.S.C. § 1503. Trial on this matter commenced on March 8, 1999 before Judge Howard. On April 12, 1999, the jury returned a verdict of not guilty as to the obstruction of justice charge. The jury deadlocked on the two counts alleging criminal contempt and Judge Howard declared a mistrial as to the two deadlocked counts. On May 25, 1999, this Office filed a motion to dismiss the remaining counts of the indictment.
On January 7, 1999, a federal grand jury in the Eastern District of Virginia returned a four-count indictment naming Julie Hiatt Steele as a defendant. Counts one through three of the indictment charged Ms. Steele with obstruction of justice, in violation of 18 U.S.C. § 1503, for attempting to influence and obstruct the civil case of Jones v. Clinton, a federal grand jury sitting in the District of Columbia, and a federal grand jury sitting in the Eastern District of Virginia. Count four charged Ms. Steele with making false statements to agents of the FBI, in violation of 18 U.S.C. § 1001. Trial commenced on May 3, 1999 before Chief Judge Claude M. Hilton.
On May 7, 1999, the jury deadlocked as to all counts and Chief Judge Hilton declared a mistrial. On May 25, 1999, this Office filed a motion to dismiss the indictment.
B. Guilty Pleas
In addition to the three defendants convicted after jury trials, the investigations thus far have resulted in fourteen convictions of twelve defendants by guilty pleas. Twelve such pleas have occurred in the United States District Court for the Eastern District of Arkansas. Two guilty pleas have occurred in the United States District Court for the District of Columbia.
David L. Hale pleaded guilty on March 22, 1994 to one felony violation of 18 U.S.C. § 371 and one felony violation of 18 U.S.C. § 1341 and 18 U.S.C. § 2. He was sentenced on March 25, 1996, by Chief Judge Stephen M. Reasoner of the United States District Court for the Eastern District of Arkansas, to 28 months of imprisonment, three years of supervised release, and a $10,000 fine, and further was ordered to make restitution in the amount of $2,040,000.
Charles Matthews pleaded guilty on June 23, 1994 to two misdemeanor violations of 18 U.S.C. § 215 (receipt of gifts). He was sentenced by Chief Judge Reasoner on January 3, 1995 to 16 months of imprisonment.
Eugene Fitzhugh pleaded guilty on June 23, 1994 to one misdemeanor violation of 18 U.S.C. § 215. On April 13, 1995, he was sentenced by Chief Judge Reasoner to one year of imprisonment and one year of supervised release.
Mr. Fitzhugh filed a motion for withdrawal of his guilty plea, which was denied by Chief Judge Reasoner on April 13, 1995. On appeal, the Eighth Circuit upheld Chief Judge Reasoner's denial of Mr. Fitzhugh's motion to withdraw his guilty plea, but ordered that Mr. Fitzhugh be resentenced. Mr. Fitzhugh petitioned for a writ of certiorari, which the Supreme Court denied.
On October 24, 1996, Chief Judge Reasoner resentenced Mr. Fitzhugh to a ten-month sentence. The Eighth Circuit denied his appeal on May 7, 1997. Mr. Fitzhugh petitioned the Court of Appeals for rehearing en banc, which the Court of Appeals denied. Mr. Fitzhugh then filed a motion for reconsideration of his sentence in the District Court. Chief Judge Reasoner denied the motion on July 14, 1997, and he ordered that Mr. Fitzhugh report to a Bureau of Prisons facility by September 15, 1997.
Mr. Fitzhugh's appeal of the denial of the motion for reconsideration was also denied. On February 20, 1998, the District Court stayed Mr. Fitzhugh's reporting date pending further consideration of Mr. Fitzhugh's health.
On December 15, 1999, in light of Mr. Fitzhugh's health, the Court ordered that Mr. Fitzhugh serve five months of his ten- month sentence in a Bureau of Prisons' halfway house, followed by five months of home detention and a year of supervised release.
Robert W. Palmer pleaded guilty on December 5, 1994 to one felony violation of 18 U.S.C. § 371. He was sentenced by Judge Howard on June 16, 1995 to three years of probation, with home detention and electronic monitoring for the first year, and a $5,000 fine.
Webster L. Hubbell pleaded guilty on December 6, 1994 to one felony violation of 18 U.S.C. § 1341 and one felony violation of 26 U.S.C. § 7201. He was sentenced by Judge Howard on June 28, 1995 to 21 months of imprisonment followed by three years of supervised release, and was ordered to make restitution to the Rose Law Firm in the amount of $135,000.
Christopher V. Wade pleaded guilty on March 21, 1995 to one felony violation of 18 U.S.C. § 152 (false statements) and one felony violation of 18 U.S.C. § 1014. He was sentenced by Judge Wright on December 1, 1995 to 15 months of imprisonment followed by three years of supervisory probation, and a $3,000 fine.
Neal T. Ainley pleaded guilty on May 2, 1995 to one misdemeanor violation of 26 U.S.C. § 7207 and 18 U.S.C. § 2 (false tax returns), and one misdemeanor violation of 26 U.S.C. § 7207. He was sentenced by Judge Wright on January 18, 1996 to two years of probation, a $1,000 fine, and 416 hours of community service. On January 30, 1998, Judge Wright determined that Mr. Ainley had violated the conditions of his probation and sentenced Mr. Ainley to three months confinement in a halfway house.
Stephen A. Smith pleaded guilty on June 8, 1995 to one misdemeanor violation of 18 U.S.C. § 371. On July 12, 1996, he was sentenced by United States Magistrate Judge John F. Forster of the Eastern District of Arkansas to one year probation, a $1,000 fine, and 100 hours of community service.
Larry E. Kuca pleaded guilty on July 13, 1995 to one misdemeanor violation of 18 U.S.C. § 371. On October 11, 1995, he was sentenced by United States Magistrate Judge H. David Young of the Eastern District of Arkansas to two years of probation and 80 hours of community service, and was ordered to make restitution in the amount of $65,862.
On August 28, 1997, William J. Marks, Sr. pleaded guilty to one felony count of conspiracy to defraud the Internal Revenue Service of the United States in violation of 18 U.S.C. § 371. On May 18, 1998, Mr. Marks was sentenced to a four-year term of probation and ordered to pay $1 million in restitution to the United States.
On February 20, 1998, Jim Guy Tucker pleaded guilty to one felony count of conspiracy to defraud the Internal Revenue Service of the United States in violation of 18 U.S.C. § 371. On May 17, 1999, Mr. Tucker was sentenced to a four-year term of probation, including the requirement that he perform four hours per week of community service during his probationary term. Mr. Tucker was also fined $6,000 and ordered to pay $1 million in restitution to the United States.
Mr. Tucker appealed the restitution order to the Eighth Circuit. The Eighth Circuit ruled on July 3, 2000 that the record was insufficient to support the restitution order and remanded the case to the District Court solely for resentencing with respect to the amount of any restitution. That matter is now pending in the District Court.
On February 20, 1998, John Haley pleaded guilty to one misdemeanor count of aiding and abetting the willful failure to supply information to the Internal Revenue Service, in violation of 26 U.S.C. § 7203. On August 20, 1998, Mr. Haley was sentenced to a three-year term of probation, including the requirement that he perform eight hours per week of community service during his probationary term. Mr. Haley was also fined $30,000 and ordered to pay $40,000 in restitution to the United States.
On June 30, 1999, Webster L. Hubbell pleaded guilty to one felony count of falsifying, concealing, and covering up by scheme material facts within the jurisdiction of the Federal Deposit Insurance Corporation and the Resolution Trust Corporation, in violation of 18 U.S.C. § 1001. Judge James Robertson of the United States District Court for the District of Columbia sentenced Mr. Hubbell to a one-year term of probation.
On April 30, 1998, a federal grand jury in the District of Columbia indicted Webster L. Hubbell and three others for 10 felony counts of various tax-related offenses. On July 1, 1998, the United States District Court for the District of Columbia dismissed the indictment as to all four defendants, ruling that the indictment was beyond the jurisdiction of the Independent Counsel. Judge Robertson also ruled that the indictment had to be dismissed as to Mr. Hubbell because, when the government used the contents of documents that Mr. Hubbell had produced under a limited order of immunity, it violated his Fifth Amendment right against compelled self-incrimination. The government appealed.
On January 26, 1999, the United States Court of Appeals for the District of Columbia Circuit reversed. It held that the indictment was within the jurisdiction of the Independent Counsel. It also held that Judge Robertson had applied an incorrect standard in evaluating Mr. Hubbell's Fifth Amendment claim. The court of appeals remanded the case for Judge Robertson to apply the standard that it had articulated. The government concluded that it could not prevail under the standard articulated by the court of appeals and decided to seek relief from the Supreme Court.
In the interim, on June 30, 1999, Mr. Hubbell pleaded guilty to a superseding criminal information charging him with one misdemeanor count of willful tax evasion in violation of 26 U.S.C. § 7203. The government agreed to dismiss the indictment as to the remaining three defendants. It also agreed to move to dismiss Hubbell's misdemeanor conviction if the government was unable to obtain review of the court of appeals' decision in the Supreme Court or if the Supreme Court's decision did not materially improve the government's ability to use against Mr. Hubbell the contents of the documents that he produced.
On July 26, 1999, the government filed a petition for certiorari in the Supreme Court of the United States. The Court granted the petition on October 12, 1999, and the case was argued February 22, 2000.
On June 5, 2000, the Supreme Court held that the indictment against Mr. Hubbell had impermissibly used the contents of the documents that he had produced under immunity. Consistent with the plea agreement, at the appropriate time, the government will move to vacate Mr. Hubbell's misdemeanor conviction in the District Court. Mr. Hubbell's felony conviction in the District of Columbia, as well as his felony convictions in the Eastern District of Arkansas, remain unaffected by the Supreme Court's ruling.
C. Reports
On July 15, 1997, this Office filed a report on the death of former Deputy White House Counsel Vincent W. Foster, Jr. with the Special Division of the United States Court of Appeals for the District of Columbia Circuit. Under the independent counsel statute, the Special Division may authorize public release of a report after it notifies, and receives comments from, appropriate persons. See 28 U.S.C. § 594(h)(2). Based on investigation, analysis, and review of the evidence by experts and experienced investigators and prosecutors, the Office concluded that Mr. Foster committed suicide by gunshot in Fort Marcy Park, Virginia, on July 20, 1993.
On September 9, 1998, this Office filed a Referral with the United States House of Representatives concerning the actions of President William Jefferson Clinton. See House Doc. 105-310 (Sept. 11, 1998). The Referral was filed in conformity with the requirements of 28 U.S.C. § 595(c). Based on investigation, analysis, and review of the evidence by experts and experienced investigators and prosecutors, the Office concluded that it possessed substantial and credible information that may constitute grounds for the impeachment of President William Jefferson Clinton. The President was impeached by the House of Representatives but not removed from office by the Senate.
On March 16, 2000, this Office filed Final Reports in connection with In re: Anthony Marceca and In re: Bernard Nussbaum. These reports were filed in accordance with 28 U.S.C. § 594(h)(1)(B)(1994), which requires an independent counsel to "file a final report . . . setting forth fully and completely a description of the work of the independent counsel, including the disposition of all cases brought." With respect to both of these matters, after a full investigation involving experienced prosecutors and criminal investigators, the Independent Counsel determined that no prosecutions were warranted. The Special Division authorized the public release of these reports on July 28, 2000.
OPERATIONS
The work of this Office is substantially completed in Little Rock, Arkansas and before the United States District Court for the Eastern District of Arkansas. In January 1994, Robert B. Fiske opened the Little Rock phase of the investigation. In August 1994, Independent Counsel Kenneth W. Starr assumed responsibility for the Little Rock operations and office; and Independent Counsel Robert W. Ray, in turn, assumed that responsibility upon his appointment. In December 1999, the main office space in Little Rock was relinquished; the remaining Little Rock activity was consolidated in a small basement office in the Little Rock Federal building and a records warehouse.
Effective August 31, 2000, this Office will relinquish all its offices and facilities in Little Rock. As of the date of this report, the Little Rock office space and resources, which have accounted for a large portion of the total cost of the investigation since 1994, have been substantially reduced. The voluminous files and records accumulated in the Little Rock phase of the investigation have been moved to the Washington area, housed in a satellite metropolitan Washington location waiting to be archived. Any remaining work related to Arkansas will be conducted from the Washington office.
The main Office of the Independent Counsel continues to be its original Washington location on Pennsylvania Avenue, selected by the Department of Justice under Mr. Fiske in 1994.
* * * * *
For several independent reasons, it would be inappropriate for this report to disclose or discuss the evidence gathered during this Office's investigations beyond the convictions already obtained, the reports already issued, and the litigation that is a matter of public record. First, Section 595(a)(2) directs that this report describe "the activities" of an independent counsel but, unlike some federal statutes, does not require or authorize this Office to disclose or discuss the evidence gathered during the investigation. Cf. 10 U.S.C. § 1034(e)(4); 18 U.S.C. § 3333.
Second, because investigations are active, it is the judgment of the Independent Counsel that the evidence should be kept confidential because disclosure of it could hinder the ongoing investigations. Cf. 28 U.S.C. § 595(a)(2) ("Such report may omit any matter that in the judgment of the independent counsel should be kept confidential."). In particular, the Independent Counsel has previously disclosed that the matter In re: Monica Lewinsky remains open, with decisions relating to that investigation pending the conclusion of President Clinton's term of office in January 2001.
Third, Rule 6(e) of the Federal Rules of Criminal Procedure prevents an attorney for the government from disclosing any "matters occurring before the grand jury," and therefore precludes disclosure of a substantial portion of the information gathered during the investigations. See In re North, 16 F.3d 1234, 1245 (D.C. Cir. 1994) ("[T]he Independent Counsel as an attorney for the United States is covered by the strictures of Rule 6(e) of the Federal Rules of Criminal Procedure.").
Fourth, an independent counsel "shall, except to the extent that to do so would be inconsistent with the purposes of [the statute], comply with the written or other established policies of the Department of Justice respecting enforcement of the criminal laws." 28 U.S.C. § 594(f)(1). Consistent with its historical practice, the Department of Justice does not ordinarily disclose evidence gathered during an investigation except through the mechanism of indictment and trial. See 28 C.F.R. § 50.2. In the judgment of the Independent Counsel, that policy is consistent with the purposes of the Ethics in Government Act.
CONCLUSION
The Office has prepared the appropriate financial statements required by statute to ensure the fiscal accountability of the independent counsel. See 28 U.S.C. § 596(c)(1). In that regard, the Office is mindful of its important obligation to conduct its investigations and prosecutions in a manner that is fair, thorough and responsible, yet timely and cost-effective, 28 U.S.C. § 593 (b)(2), particularly in light of Congress's determination not to re-authorize the Independent Counsel statute, which expired on June 30, 1999. Cf. 28 U.S.C. § 599 ("except that this chapter shall continue in effect with respect to the then pending matters . . . that . . . require such continuation until [the] independent counsel determines such matters have been completed.").
The Office is taking every appropriate step to meet these obligations. |
