VOLUME III WASHINGTON, D.C. INVESTIGATION

TABLE OF CONTENTS

PAGE

Part C Webster L. Hubbell's Billing Practices and Tax Filings

I. INTRODUCTION ...... 1

II. FINDINGS...... 3

III. FACTUAL SUMMARY...... 5

A. Violated Federal Mail Fraud and Tax Laws While a Partner with the ...... 5

1. After Hubbell Was Appointed Associate Attorney General, Both Civil and Criminal Investigations of His Billing Practices and Tax Filings Commenced...... 5

2. Webster Hubbell Pleaded Guilty to Mail Fraud and Tax Evasion in December 1994 ...... 8

3. Rose's Efforts to Recover its Losses from Webster Hubbell ...... 12

B. Before Entering into His Plea Agreement, Webster Hubbell Started a Consulting Business Concentrating on Supporters of the President...... 13

1. Hubbell's Contacts with Clinton Administration Members and Prominent Democratic Party Supporters...... 13

a. Hubbell's Contacts with Administration and Former Campaign Officials ...... 14

b. Contact with the President and the First Lady...... 14

2. Meetings Were Held in the White House to Discuss Hubbell's Situation before He Resigned ...... 15

3. Efforts to Help Webster Hubbell Find Post-Administration Employment Resulted in at Least Seventeen Consulting Agreements ...... 17

i 4. Hubbell's Consulting Agreements ...... 21

a. American Income Life (Bernard Rapoport)...... 22

b. C.W. Conn Industries (Carroll Wayne Conn)...... 23

c. Consumer Support and Education Fund (John Phillips)...... 24

d. Entrecorp (Ben Barnes)...... 27

e. Hong Kong China Limited/Lippo Group (James Riady)...... 28

f. John Moores...... 37

g. Barbara Lindemann...... 38

h. Mid-America Dairymen...... 39

i. Nicholas Stonnington (Merrill Lynch)...... 40

j. Pacific Telesis...... 41

k. Revlon (MacAndrews & Forbes)...... 44

l. SunAmerica (Eli Broad) ...... 47

m. Time Warner ...... 49

n. Truman Arnold Companies (Truman Arnold)...... 50

o. Wayne Reaud (Reaud, Morgan & Quinn) ...... 52

p. Sprint Corporation...... 52

q. City of Los Angeles Department of Airports...... 54

C. The Tax Prosecution of Webster Hubbell, Suzanna Hubbell, Michael Schaufele, and Charles Owen ...... 56

1. "Related to" Jurisdiction ...... 58

2. U.S. v. Hubbell et al., Crim. Action No. 98-0151 (JR)...... 59

a. April 1998 Indictment...... 60

b. Jurisdictional Issue...... 62

ii c. Act of Production Immunity Issue...... 63

d. Hubbell's June 1999 Conditional Plea Agreement ...... 64

e. Supreme Court Review...... 65

IV. ANALYSIS...... 66

A. Obstruction of Justice ...... 67

B. Tax Fraud...... 69

V. SUMMARY CONCLUSION ...... 70

Part D Rose Law Firm Billing Records

I. INTRODUCTION ...... 71

II. FINDINGS...... 76

III. FACTUAL SUMMARY...... 79

A. Creation and Collection of Billing Records at Rose...... 80

1. Requests During the 1992 Campaign to Gather the Billing Records ...... 81

a. Computer Billing Records ...... 81

b. Billing Records in Remote Storage...... 82

2. Webb Hubbell and Had the Billing Records in 1992...... 84

3. Attempts to Locate Mrs. Clinton's Time Sheets ...... 87

B. Transferring the Documents from Little Rock to Washington, D.C...... 88

1. Moving Documents from the Governor's Mansion to the White House between 1993 and 1996 ...... 88

a. Packing in Little Rock ...... 88

b. The White House Residence...... 89

c. Unloading at the White House...... 91

iii d. Moving the Files -- 1993 to 1996 ...... 93

2. Rose Shipped Documents to the White House ...... 95

3. Boxes from Vincent Foster's Rose Office...... 95

4. Documents from the Presidential Campaign ...... 96

5. Documents Maintained by Webster Hubbell...... 97

C. Search and Production of Documents to the Independent Counsel...... 99

1. Personal Records...... 99

2. Mrs. Clinton's Rose Records...... 100

3. Hubbell/Wright Records...... 100

4. Rose Billing Records ...... 102

D. Huber Testified She Found the Records in Room 319A ...... 102

1. Denials of Responsibility...... 103

2. Extrinsic Evidence Relating to Room 319A...... 104

a. Access to White House Residence...... 105

b. Renovations to Residence...... 106

c. Evidence Relating to Mrs. Clinton's Conduct in July 1995...... 108

d. Documents from Foster's Office ...... 113

e. Mrs. Clinton's Testimony about Billing Records Found in Room 319A...... 115

E. Evidence Regarding Discovery of Rose Billing Records in the White House...... 116

1. Carolyn Huber's Initial Discovery of Billing Records...... 117

2. Huber's Re-Discovery and Realization of the Billing Records ...... 119

a. Kendall, Schuelke, and Sherburne Are Notified of the Billing Records' Discovery ...... 120

iv b. Kendall, Schuelke, and Sherburne Review Records with Huber ...... 120

F. The Office of the Independent Counsel Asked the FBI to Conduct Forensic Analyses of the Billing Records...... 123

1. Fingerprint Analysis Disclosed Mrs. Clinton's and Vince Foster's Prints...... 124

2. Rose Employees Hatch and Alston Explained Their Fingerprints...... 125

3. Mrs. Clinton's Explanation of Her Fingerprints...... 126

G. Billing Records Found in Foster's Attic -- July 1997 ...... 130

1. Discovery of Second Set of Rose Billing Records Relating to and Madison Bank & Trust...... 130

a. Comparison of Billing Records Discovered in White House with Those Discovered in Foster's Attic...... 133

b. Mrs. Clinton's Testimony on the Billing Records in Foster's Attic ...... 134

2. Other Documents in Foster's Briefcase...... 135

3. Forensic Analysis...... 139

IV. ANALYSIS...... 139

A. Mrs. Clinton...... 140

B. Other Hypotheses...... 142

V. SUMMARY CONCLUSIONS...... 143

Part E The Discovery and Removal of Documents from Vincent W. Foster Jr.'s Office

I. INTRODUCTION ...... 145

II. FINDINGS...... 150

III. FACTUAL SUMMARY...... 156

v A. Notification of Foster's Death ...... 156

B. Evidence about Tampering with Documents or Foster's Note before the July 22 Search...... 159

1. White House Officials Failed to Seal the Office ...... 161

a. Braun and Watkins...... 161

b. White House Discussions ...... 163

2. The Confidential Witness ...... 165

3. Thomasson/Nussbaum/Williams in Foster's Office...... 166

a. Discussion at Foster's House...... 166

b. Gail Kennedy's Account of the Night of July 20 ...... 167

c. The White House ...... 169

i. Patsy Thomasson...... 171

ii. ...... 175

iii. Maggie Williams...... 177

iv. Henry O'Neill...... 180

v. Other Evidence about O'Neill and Williams...... 188

vi. Telephone Conversations the Evening of July 20 and Early Morning Hours of July 21...... 189

4. The Trash from Foster's Office...... 193

5. Betsy Pond Entered Foster's Office on the Morning of July 21...... 195

6. Craig Livingstone's Activities on July 21 ...... 195

C. The Procedure for Searching Foster's Office...... 200

1. White House Meeting on July 21...... 201

2. Morning Meeting on July 22: Department of Justice Attorneys Object to Method of Search ...... 207

D. Events between the Meeting on July 21 and the Search on July 22 ...... 210 vi 1. Telephone Conversations before the July 22 Morning Meeting of Nussbaum, Margolis, and Adams ...... 211

a. July 21: Evening Discussions ...... 213

b. July 22: Telephone Traffic...... 216

i. Bernard Nussbaum...... 218

ii. ...... 220

iii. Maggie Williams...... 225

iv. Hillary Rodham Clinton...... 227

2. More Discussions at the White House...... 228

3. Susan Thomases's Multiple Phone Calls to the White House on July 22...... 232

E. The Search of Foster's Office...... 235

F. Handling of Foster's Documents after the Search...... 238

1. Overview...... 238

2. Collecting the Clintons' Personal Documents...... 240

3. The Clintons' Personal Files Go to the Residence ...... 244

4. Conflicting Testimony over Whether One or Two Boxes of Documents Were Taken to the White House Residence ...... 253

a. Thomas Castleton...... 253

b. Bernard Nussbaum...... 254

c. Deborah Gorham...... 255

d. Linda Tripp ...... 256

5. The Boxes Taken to the Foster Family Attorneys at Swidler & Berlin ...... 257

6. The Box Seen by the White House Plumbing Foreman ...... 257

7. The Return of a White House Renovation File...... 259

a. Nussbaum's Testimony ...... 260 vii b. Williams's Testimony ...... 264

c. Neuwirth's Testimony...... 266

d. The Yellow Envelope ...... 268

e. Fingerprint Analysis...... 270

f. The File Returned by Swidler & Berlin...... 270

G. The Foster Funeral: Discussions of Documents ...... 271

H. The Weekend ...... 272

I. The Foster Note...... 277

1. Discovery ...... 277

2. Handling of Briefcase before Discovery of Note ...... 281

3. Disclosure of Note to Law Enforcement ...... 289

J. The Transfer of Documents to Williams & Connolly ...... 293

1. Monday, July 26, 1993...... 293

2. Tuesday, July 27, 1993 ...... 295

3. Susan Thomases's Memory...... 302

IV. ANALYSIS...... 304

A. Maggie Williams's Testimony about Her Removal of Documents from Foster's Office on the Night of His Death...... 305

B. Bernard Nussbaum's Search of Foster's Office...... 307

C. Susan Thomases's Testimony to this Office and Congress about Her Discussions with Mrs. Clinton and Bearnard Nussbaum about the Search...... 309

D. Maggie Williams's and Mrs. Clinton's Testimony about the Removal of the Clintons' Personal Documents from Foster's Office and Their Placement in the White House Residence...... 310

E. The Clintons' Personal Documents Removed from Foster's Office and the Testimony of Mrs. Clinton, Maggie Williams, and Robert Barnett...... 312

viii F. Craig Livingstone's Testimony about His Activities on the Morning of July 21, 1993...... 313

V. SUMMARY CONCLUSIONS...... 315

APPENDIX 1- PLEA AGREEMENT, UNITED STATES V. WEBSTER HUBBELL, CASE NO. LR-CR-94-241 (DECEMBER 6, 1994) AND PLEA AGREEMENT AND PLEA ALLOCUTION, UNITED STATES V. WEBSTER L. HUBBELL, CASE NOS. 98-0394, 98-0151 (JUNE 30, 1999)

APPENDIX 2 - CLIENTS AND CLIENT-GENERATED INCOME FOR WEBSTER L. HUBBELL (1994-1995)

APPENDIX 3 - THE WHITE HOUSE'S NON-COMPLIANCE WITH SUBPOENA REQUESTS FOR ELECTRONICALLY MAINTAINED DOCUMENTS

I. INTRODUCTION ...... i

II. THE INDEPENDENT COUNSEL LEARNED IN FEBRUARY 2000 THAT ELECTRONIC RECORDS FROM THE BEGINNING OF THE ADMINISTRATION MAY NOT HAVE BEEN SEARCHED IN COMPLIANCE WITH LAWFULLY ISSUED SUBPOENAS...... i

A. Reconstructed E-Mails for the Time Period of January 1993 through July 1994 ...... iii

B. The MAIL2 and User-D Problems That Prevented Incoming E- Mails from Being Records Managed ...... vi

1. The White House Counsel's Office Performed a "Test" Search and Incorrectly Concluded There Was Not a Compliance Problem...... viii

2. Backup Tapes of E-Mails...... xiii

C. Contrary to White House Assertions That All Responsive Documents Have Been Produced, the Independent Counsel Learned That Hard Drives of Departed Employees Have Not Been Searched...... xvi

D. E-Mail from the WAVES System, the Quorum System and the Executive Residence ...... xviii

1. Executive Residence E-Mail...... xviii

2. WAVES System...... xix

ix 3. Quorum System ...... xix

III. ALLEGATIONS OF THREATS MADE TO NORTHROP GRUMMAN EMPLOYEES TO CONCEAL THE E-MAIL PROBLEM ...... xix

A. Background on Allegations of Threats ...... xx

B. Callahan Refuted Allegations of Threats...... xxiv

IV. THE WHITE HOUSE'S FAILURE TO PRODUCE ALL RELEVANT DOCUMENTS CONCERNING VINCENT FOSTER...... xxvi

A. The Unexplained Appearance and Disappearance of Vincent Foster's and Deborah Gorham's Hard Drives and Backup Tapes ...... xxvi

B. Missing Files from Steven Neuwirth's List of Documents in Foster's Office ...... xxxvii

V. CONCLUSION...... xxxviii

x