Tuttle Tells of Hubbell Fraud Report

WASHINGTON —  Appearing Thursday before a federal grand jury probing the Whitewater affair, Los Angeles Controller Rick Tuttle gave prosecutors further ammunition as they consider seeking fraud charges against former Justice Department official Webster L. Hubbell in connection with a disputed consulting payment from the city.

Tuttle testified for about three hours, answering questions primarily about details of a report his office issued earlier this year regarding Hubbell’s deal, he said.

In an interview, Tuttle said he told the grand jury that he affirmed the report’s conclusion that Hubbell defrauded the city by providing a false accounting of his consulting services in order to win payment of $24,750.

“My answer was yes, there were material misrepresentations,” Tuttle said, adding that he testified about various other aspects of his report.

For instance, Tuttle said he confirmed that he was encouraged to approve the payment to Hubbell once or twice in 1995 by Lisa Specht, a prominent Los Angeles lawyer and lobbyist with close ties to Mickey Kantor, then a member of Clinton’s Cabinet.

Tuttle said he stood behind his earlier sworn testimony regarding Specht’s contact, which he gave as part of his office’s investigation of the matter. At that time, Tuttle said, Specht told him she was calling “as a friend of the family or as a friend of a friend of the family.”

At the time of Specht’s 1995 contact with Tuttle, the controller’s office was withholding any payment to Hubbell because auditors had questioned the validity of his arrangement.

Specht acknowledged in an interview earlier this year that she had contacted Tuttle after learning at a 1995 Washington dinner party that Hubbell was having difficulty obtaining the $24,750. Specht declined to say whether she conferred with Kantor before discussing Hubbell’s plight with Tuttle.

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Records obtained by The Times under the Freedom of Information Act show several contacts between Kantor and Specht, and Kantor and Hubbell, in 1995--months after Hubbell had resigned from the Justice Department and pleaded guilty to tax evasion and fraud charges. The records show that Specht returned a call from Kantor on Sept. 6, 1995--eight days before Tuttle’s office approved Hubbell’s payment.

The question of whether Specht was in any way spurred to act by Kantor is of interest to federal investigators as they examine why he and other top aides to President Clinton helped Hubbell financially in 1994 and 1995.

Hubbell won 14 or more deals, worth a total of about $500,000, in the months after his April 1994 resignation as the No. 3 official at the Justice Department. The staff of Whitewater Independent Counsel Kenneth W. Starr is assessing whether the deals were intended to discourage Hubbell from providing testimony damaging to the Clintons.

Hubbell, a former law partner of First Lady Hillary Rodham Clinton, came under investigation by Whitewater prosecutors immediately after his resignation. Prosecutors at the time were eager to probe his knowledge of the president’s and Hillary Clinton’s involvement with certain real estate and banking transactions.

Hubbell pleaded guilty in December 1994 to the fraud and tax charges for having stolen $482,410 from his former law clients and partners in Little Rock.

Kantor, who on Tuesday testified before the Whitewater grand jury, has not responded to calls seeking his comment. Kantor has said previously that whatever help he extended to Hubbell was provided out of friendship alone.

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Kantor has acknowledged that he helped Hubbell’s son land two jobs and that he raised money for the private schooling of Hubbell’s three other children. Hubbell, in a just-published book, cited Kantor as one of a handful of friends with whom he “started networking” to find employment in spring 1994.

Specht, who for years worked in a five-lawyer unit headed by Kantor at the Century City law firm of Manatt, Phelps & Phillips, did not return calls seeking comment.

The earlier city controller’s report, based in part on sworn testimony collected from 15 witnesses, recommended that local or federal prosecutors consider charging Hubbell with “wire fraud, mail fraud, and presenting a false claim to the city.”