The opinion of the court was delivered by: ROBERTSON
Before this Court are four motions challenging the indictment in this tax evasion case.
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.
I. MOTION TO DISMISS THE INDICTMENT AS BEYOND THE AUTHORITY OF THE INDEPENDENT COUNSEL
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. Morrison v. Olson, 487 U.S. 654, 101 L. Ed. 2d 569, 108 S. Ct. 2597 (1988). The defendants in this case assert that the Special Division exceeded the statutory and constitutional limits on its authority by referring the subject matter of this case to Independent Counsel Kenneth Starr. They are correct.
This independent counsel was appointed by the Special Division, upon the application of the Attorney General, on August 5, 1994. The appointing order (the "Original Grant") gave him authority to investigate
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 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." (Emphasis added). 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 coconspirators 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.
Section 594(e) of the Ethics in Government Act allows an independent counsel to ask either the Attorney General or the Special Division to refer "matters related to the independent counsel's prosecutorial jurisdiction." One month after the Original Grant, acting pursuant to §§ 594(e), 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:
Whether Webster L. Hubbell, a covered person under 28 U.S.C. § 591(b), 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.
In re Madison Guaranty Savings & Loan Association (Webster L. Hubbell), (Spec. Div. Sept. 1, 1994) (hereinafter "Billings Referral"). The independent counsel thereafter brought charges against Mr. Hubbell for fraudulent billing while he was in the private practice of law in Little Rock, Arkansas, and for income tax evasion. Mr. Hubbell pleaded guilty to two counts of mail fraud and tax evasion on December 6, 1994. He was sentenced to twenty-one months' imprisonment and was incarcerated from August 7, 1995 to February 12, 1997.
On January 6, 1998, the Special Division granted another request by the independent counsel for referral of matters involving Mr. 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 Mr. Hubbell's income since January 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 Mr. Hubbell has received from various individuals and entities since January 1, 1994.
In re Madison Guaranty Savings & Loan Association, (Spec. Div. Jan. 6, 1998) (hereinafter "Tax Referral"). A grand jury in this District handed up this indictment of Mr. Hubbell, his wife, his accountant, and his tax lawyer, on April 30, 1998. All ten counts of the indictment relate to an alleged scheme to avoid paying the taxes Mr. Hubbell agreed to pay as part of his 1994 guilty plea and taxes on income Mr. Hubbell received after leaving the Department of Justice in 1994
A. Reviewability of the Special Division's referral order
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," p. 14. 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. Tr. at 63, 79-80.
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 court's 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?
Nonreviewable discretionary act: In United States v. Tucker, 78 F.3d 1313, 1317 (8th Cir.), cert. denied, 117 S. Ct. 76 (1996), the Eighth Circuit held that a referral to the independent counsel of a "related" matter under § 594(e) by the Attorney General is a nonreviewable act of prosecutiorial discretion. The Tucker case did not involve a referral by the Special Division and is not precedent for the question presented here. If a Special Division referral order were an unreviewable act of prosecutorial discretion, the referral power would be unconstitutional. Morrison v. Olson allowed the independent counsel statute to pass constitutional muster only because the duties assigned to the Special Division are either so limited as to be merely ancillary to the powers assigned to judges under the Appointments Clause (this is Morrison's characterization of the Special Division's power to define an independent counsel's jurisdiction), or "essentially ministerial," see Morrison, 487 U.S. at 681. The Special Division would be acting in an unconstitutional "supervisory" executive capacity if it exceeded those limits. See id. at 680-81 (citing Buckley v. Valeo, 424 U.S. 1, 123, 46 L. Ed. 2d 659, 96 S. Ct. 612 (1976)). A § 594(e) referral by the Special Division cannot constitutionally be an unreviewable discretionary act.
Controlling authority or precedent: The Special Division consists of three Article III judges sitting as a division of the D.C. Circuit, see Note 3, supra. Two judges of this District Court, both confronted with challenges to a § 594(e) referral related to an independent counsel investigation of a former Secretary of Agriculture, concluded that they were bound by the referral:
Congress designated the Special Division a "division of the United States Court of Appeals for the District of Columbia Circuit." 28 U.S.C. § 49. For this court to review the constitutionality of the referral jurisdiction granted in In re Espy would require it to sit in an appellate capacity over the D.C. Circuit, which it cannot and will not do. If the Special Division concluded that "the new matter is demonstrably related to the factual circumstances that gave rise to the Attorney General's initial investigation and request for appointment of an independent counsel," . . . this court is not empowered to disturb those findings. Nor may this court substitute its own constitutional analysis of § 594(e) . . . .
United States v. Blackley, 986 F. Supp. 607, 616 (D.D.C. 1997) (Lamberth, J.); see also United States v. Espy, 989 F. Supp. ...