Whitewater Probe to Hear Stein Testify

Ted Stein, the Encino lawyer-developer who is running for Los Angeles city attorney, will travel to Little Rock, Ark., next month to testify before a federal grand jury probing the Whitewater affair.

Stein, a former president of the city’s Airport Commission, was asked by special prosecutor Kenneth Starr’s office to explain his 1994 hiring of former U.S. Associate Atty. Gen. Webster L. Hubbell as a consultant for Los Angeles International Airport.

Among Starr’s questions are why Hubbell was hired and whether he performed the airport consulting duties for which the city paid him $24,750. Hubbell’s six-month, $49,500 arrangement with LAX--awarded without competition based on an oral contract--was terminated in December 1994 when Hubbell pleaded guilty to federal charges that he bilked his clients and law partners out of $482,410 and evaded $143,747 in income taxes.

Airport Director Jack Driscoll said Tuesday that he also has agreed to testify in Little Rock, but that a date has not been set. Stein plans to testify Feb. 6.

“I am not a target of the grand jury, nor am I a subject of the investigation,” Stein said. “I’m simply a witness who’s trying to be as helpful as I can.”

He said Starr had asked him to decline public comment on what he would tell grand jurors.

In a related development, the U.S. Department of Transportation’s inspector general will begin an audit today of operations at LAX.

Sources said the two-week audit, to be conducted out of a field office in Lawndale, will focus on the extent to which Los Angeles city officials have diverted airport-generated revenue to the city’s general fund. Hubbell was hired to help smooth disputes between the federal government and LAX over such diversion issues.

The Arkansas grand jury is investigating land and financial transactions that have come to be known as Whitewater. Hubbell was a partner of Hillary Rodham Clinton at the Rose Law Firm, as well as a golfing buddy of the president before Hubbell’s guilty plea.

Starr’s office began looking into Hubbell’s work in Los Angeles after articles in The Times last October revealed that the city had hired Hubbell at the urging of President Clinton’s former top fund-raiser in California, Mary E. Leslie, and her husband, Democratic consultant Alan S. Arkatov.

Leslie worked for Mayor Richard Riordan at the time; she and Arkatov have both said they recommended hiring Hubbell because he needed the money and they thought he could help the city.

The Times also disclosed that Hubbell’s work fell far short of what he claimed in two letters he sent to city officials to justify payment. It further reported that Hubbell told federal transportation investigators that Stein and Driscoll helped him draft those letters.

With the campaign for April’s municipal election just getting underway, City Atty. James K. Hahn is already trying to make Hubbell a campaign issue.

Reacting Tuesday to the news that Stein would testify in the Whitewater investigation, Hahn campaign consultant Matt Middlebrook said: “You have to ask: ‘What next?’ ”

Stein “oversaw this fiasco--he has some explaining to do,” Middlebrook said. “If he was helping to draft fraudulent documents, it’s inexcusable. It speaks to his honesty.”

Stein “categorically” denied helping Hubbell write the letters, in which Hubbell said he was in “almost daily contact” with Department of Transportation and Federal Aviation Administration officials and “in constant contact” with the city’s Washington, D.C. lawyers while performing his city lobbying duties.

The federal officials have said they only recall spending a couple of minutes, not 15 hours, on the phone with Hubbell, and bills from the city’s lawyers do not show a large volume of telephone contact with Hubbell.

Stein further pointed out that a representative of Hahn’s office signed off on each of three authorizations for payment to Hubbell, and accused his opponent of risking the federal investigation in order to play politics.

“Jimmy should be ashamed of himself,” Stein said of Hahn. “They don’t want to talk about the issues in the city attorney’s race or his failed record. Rather, they just want to character assassinate. . . . I guess if my record were as bad as Jimmy’s, I wouldn’t want my record to be discussed, either.”

Middlebrook said he believes Stein’s record on the Airport Commission is pertinent to the campaign, and that Hahn’s deputy only signed the authorizations because Driscoll and Stein assured him it was appropriate.

“He’s got to point the finger somewhere else because he doesn’t like it being pointed at him,” Middlebrook said.

The city controller’s office also is conducting an investigation into Hubbell’s role at LAX, attempting to discern whether he performed the work for which he was paid and why he was hired in the first place.

In addition to the LAX deal, Starr’s office is examining how Hubbell came to land two other consulting arrangements in the period between his departure from the Justice Department in spring 1994 and December of that year, when he entered a guilty plea in Little Rock. Hubbell was paid $45,000 by a nonprofit foundation to write articles about public service; he collected the money but did not write the articles.

Hubbell also was retained by a unit of Indonesia’s Lippo financial group, whose representatives remain at the center of a controversy over campaign contributions funneled to the Democratic National Committee. In testimony last June before a Senate committee, Hubbell declined to discuss what he was paid, or other details of his arrangement with Lippo.

Wilgoren reported from Los Angeles, Willman from Washington.