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.
Walter Hubbell and His Wife
This independent counsel was appointed by the special division, upon the application of the Attorney General, on Aug. 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.
The original grant gave the independent counsel further authority to investigate any violation of 28 U.S.C. 1826, or any obstruction of the due administration of justice, or any material false testimony or statement in violation of Federal criminal law, in connection with any investigation of the matters described above, as well as the activities of any co-conspirators and/or aiders and abettors involved in any of the matters described above. Finally, presumably in order to ensure that the independent counsel was given all the authority he must have under the Ethics in Government Act, the special division recited the exact language of 593(b)(3): [The special division] shall assure that the independent counsel has adequate authority to fully investigate and prosecute the subject matter with respect to which the Attorney General has requested the appointment of the independent counsel, and all matters related to that subject matter. Such jurisdiction shall also include the authority to investigate and prosecute Federal crimes ... that may arise out of the investigation or prosecution of the matter with respect to which the Attorney General's request was made, including perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses.
One month after the original grant ... the independent counsel requested, and the special division granted, the referral to his office of certain matters dealing with defendant Webster L. Hubbell. Specifically, the special division expressly expanded the independent counsel's jurisdiction to include: [W]hether Webster L. Hubbell ... violated any Federal criminal law (including mail fraud and criminal tax violations) in his billing or expense practices while a member of the Rose Law Firm, and all matters arising from that investigation to the same extent as all other criminal matters arising under the jurisdiction set forth in the original order.
The independent counsel thereafter brought charges against Hubbell for fraudulent billing while he was in the private practice of law in Little Rock, Ark., and for income tax evasion. Hubbell pleaded guilty to two counts of mail fraud and tax evasion on Dec. 6, 1994. He was sentenced to 21 months' imprisonment and was incarcerated from Aug. 7, 1995, to Feb. 12, 1997.
On Jan. 6, 1998, the special division granted another request by the independent counsel for referral of matters involving Hubbell. It is this second Hubbell referral that gives rise to the present case and this motion. It gave the independent counsel authority to investigate (i) whether Webster L. Hubbell or any individual or entity violated any criminal law, including but not limited to criminal tax violations and mail and wire fraud, regarding Hubbell's income since Jan. 1, 1994, and his tax and other debts to the United States, the State of Arkansas, the District of Columbia, the Rose Law Firm, and others; and (ii) whether Webster L. Hubbell or any individual or entity violated any criminal law, including but not limited to obstruction of justice, perjury, false statements, and mail and wire fraud, related to payments that Hubbell has received from various individuals and entities since Jan. 1, 1994.
A grand jury in this District handed up this indictment of Hubbell, his wife, his accountant, and his tax lawyer, on April 30, 1998. All 10 counts of the indictment relate to an alleged scheme to avoid paying the taxes Hubbell agreed to pay as part of his 1994 guilty plea and taxes on income Hubbell received after leaving the Department of Justice in 1994.
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. The scope of this argument was limited by the independent counsel's concession, at oral argument, that a criminal defendant is indeed harmed by an ultra vires indictment and that these defendants would have had standing to challenge the independent counsel's jurisdiction if the special division had not issued the tax referral. What remains of the independent counsel's standing argument, accordingly, is the assertion that the special division's tax referral is unreviewable, or, at least, that it is not reviewable by a United States District Court.
That core argument requires analysis of the exact nature of a referral order under 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 courts 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?
The special division in fact is not a court of appeals.
The special division hears referral applications ex parte, as judges hear wiretap applications. 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 594(e) referral function is an Article III function, it must be ministerial, rather than "supervisory" or "executive," or it violates Article III. 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. This limitation is constitutional, and, if it is to mean anything at all, must be enforceable upon a proper challenge.
The special division may authorize an independent counsel to investigate matters that are demonstrably related to the Attorney General's application for appointment. Morrison v. Olson. It follows, and is undisputed, that the "demonstrably related" rule governs referrals as well. The special division itself has stated: A matter referred by this court, rather than by the Attorney General, has to meet an apparently higher standard of being "demonstratably related." ... Relatedness for purposes of referral under 594(e) depends upon the procedural and factual link between the O.I.C.'s original prosecutorial jurisdiction and the matter sought to be referred.
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 analysis was applied or what record was before the special division. ... 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, 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.
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.
The independent counsel's explanation of how this indictment is connected with the original grant was a recitation spanning six degrees of relationship. I find the asserted connection too attenuated and conclude that neither the tax referral order nor the indictment is connected with or demonstrably related to the original grant.
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 Hubbell's post-conviction consulting income from entities associated with the Clinton Administration at a time when Hubbell clearly was under investigation, and known publicly to be an important witness regarding Madison Guaranty/Whitewater matters, 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 investigating 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.
It is not disputed that the independent counsel has jurisdiction to investigate and prosecute such conduct. But his argument here is that he is entitled to investigate matters that arise out of investigation of matters that arise out of the original grant.
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 Hubbell was involved in an obstruction of the original Whitewater investigation. Defendants have argued, without any effective response from the independent counsel, that his position, if adopted, would allow the independent counsel to stray in as many directions and ... as far in any given direction as [his] energy and zeal might take him. ... [T]he Attorney General, when ceding a piece of the Justice Department's jurisdiction, would have no way of knowing how much jurisdiction the independent counsel might later take.
The demonstrable relationship requirement will not support the prosecution of factually unrelated charges whose only connection to the original grant is that they arose out of an obstruction investigation, which in turn arose out of the original grant.
Had the independent counsel applied for a referral from the Attorney General under 594(e), ... or asked the Attorney General to petition the special division to expand his jurisdiction under 593(c), as he did in the investigation of the matters involving Monica Lewinsky, he might have received proper authority or at least unreviewable authority to prosecute these charges. As it is, however, the indictment must be dismissed.
On Nov. 1, 1996, after the independent counsel had successfully prosecuted Webster Hubbell under the billings referral, and while 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 Jan. 1, 1993, to the date of the subpoena. 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. ... The order also granted Hubbell immunity to the extent allowed by law.
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. 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.
The use and derivative use immunity statute provides that, where a witness validly asserts the privilege against self-incrimination and is given use immunity, the witness may not refuse to testify, but no testimony or other information compelled under the order (or any information directly or indirectly derived from such testimony or other information) may be used against the witness in any criminal case except a prosecution for perjury, giving a false statement, or otherwise failing to comply with the order.
The requirement of 6002 that "no information directly or indirectly derived from [immunized] testimony or other information [gained through a grant of immunity]" may be used against an immunized witness, and Kastigar's prohibition on any use of immunized testimony, have been strictly adhered to in this circuit. ... In United States v. North, the court held that the prosecution of Oliver North might be infirm even though the prosecution had sealed its evidence with the court before the defendant gave his immunized Congressional testimony. The problem, the court held, was the possibility that witnesses against the defendant might have seen his immunized testimony on television and allowed it to taint their own trial testimony.
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 Hubbell pursuant to the production immunity.
The independent counsel's argument in opposition to the motion to dismiss starts, not with 6002 or with Kastigar, but from the premise that the contents of voluntarily prepared documents are never protected by the Fifth Amendment privilege.
From this premise, which is beyond dispute, the independent counsel contends that only Hubbell's act of producing the documents needed to be immunized, that, 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 Hubbell. He asserts that all the documents, and all the information derived from them, may be used against Hubbell at trial and that the United States is free to use the records' contents to create a link between the defendant and the records, but only so long as the factfinder is never told that it was Hubbell who produced the documents.
The independent counsel does not claim that he knew any of the facts relevant to the charges in this indictment at the time of the subpoena: He conceded at oral argument that he learned of the Bridgeport Group, the F.B.O. account at the Pulaski County Bank, and the pension account check swap charged in the indictment only through the documents.
The subpoena itself was so broad as to belie any previous knowledge of those allegations.
Indeed, the independent counsel was not even pursuing tax evasion charges at the time of the subpoena.
The independent counsel does not and at oral argument conceded that he could not, claim that these documents would have been obtained by means of a search warrant based on probable cause. Independent counsel asserted at oral argument that he could have gotten a Dun & Bradstreet on Hubbell, subpoenaed the individual banks, gone to the papers he filed with the IRS, the accountant, [and] his credit card companies.
He did not explain, however, how he would have known what to look for in order to find such things as the Pulaski County Bank account, which was not even in Hubbell's name.
The Fifth Amendment implications of compliance with a subpoena like the one in this case were discussed in United States v. Fox. There, the court held that a broad-sweeping summons seeking all books and records of a sole proprietorship, appeared to be an "attempt to compensate for [the prosecutor's] lack of knowledge by requiring [the witness] to become the primary informant against himself.
It is precisely this sort of fishing expedition that the Fifth Amendment was designed to prevent.
The subpoena served on Hubbell was the quintessential fishing expedition. The independent counsel freely admits that he was not investigating tax-related charges when he issued it. Instead, he learned about the unreported income and other crimes from studying the records' contents. His application for authority to investigate potential tax violations by the Hubbells was not filed with the special division until Dec. 31, 1997, 14 months after the subpoena had issued.
Hubbell's compelled production of documents allowed the independent counsel to build a case against Hubbell different in all material respects from the case for which they had been subpoenaed. Hubbell was thereby turned into the primary informant against himself.
The motion to dismiss all counts against defendant Webster Hubbell must be granted.
Excerpts of District Court Judge James Robertson's ruling that dismissed tax evasion charges against Webster Hubbell:
One of the motions seeks dismissal of the entire case and will be granted: The charges in the indictment neither relate to nor arise out of the subject of the original grant of jurisdiction to the independent counsel, and the referral order under which the independent counsel is proceeding impermissibly expands that jurisdiction.
A second motion, dispositive only as to defendant Webster L. Hubbell, will also be granted: The independent counsel concedes that he built his case against Mr. Hubbell using 13,120 pages of records that Mr. Hubbell was compelled to produce under subpoena. That use violates the immunity given to Mr. Hubbell by the United States District Court for the Eastern District of Arkansas.
Defendants third and fourth motions are to dismiss the mail and wire fraud charges and to dismiss a single charge of violation of the ``omnibus'' provision of the criminal tax code. Those motions will be denied.
The Madison-Whitewater matters that were the subject of the original grant (appointment of Independent Counsel Kenneth Starr) 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 of conduct, cited no 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.'' ... The independent counsel's explanation of how this indictment is ``connected with'' the original grant was a recitation spanning six degrees of relationship. ... I find the asserted connection too attenuated and conclude that neither the tax referral order nor the indictment is ``connected with'' or ``demonstrably related to'' the original grant.
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 ... he might have received proper authority -- or at least unreviewable authority -- to prosecute these charges. As it is, however, the indictment must be dismissed.
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.” ... 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.''