Fiske Ousted in Whitewater Case; Move Is Surprise : Investigation: Federal three-judge panel names Kenneth Starr as new special counsel. Switch is seen as prolonging probe. The action stuns Clinton’s advisers.

WASHINGTON —  The controversial Whitewater criminal investigation took a surprising turn Friday when a three-judge panel replaced special counsel Robert B. Fiske Jr. with Kenneth W. Starr, solicitor general under former President George Bush.

The move stunned President Clinton’s advisers, who had asked the court to reappoint Fiske under the terms of a newly enacted independent counsel law that had lapsed when the investigation began more than six months ago.

At the White House, Counsel Lloyd N. Cutler issued a terse statement saying that the President will continue to “cooperate fully” with the investigation into allegations that Clinton may have benefited from money funneled to the Whitewater Development Corp. from a now-defunct Arkansas savings and loan owned by James B. McDougal, his investment partner in the Whitewater real estate venture.

Ironically, although the three-judge panel said that it needed to replace Fiske to assure the independence of the investigation because he had been chosen by the Clinton Administration, the switch actually could heighten the partisan nature of the inquiry.

While both Fiske and Starr are Republicans, Starr is widely viewed as a more partisan choice because of his service under Clinton’s 1992 political opponent and because he is said to have given legal advice to the lawyers for Paula Corbin Jones, the woman who is suing Clinton for alleged sexual harassment.

In addition, lawyers involved in the case predicted that the switch in investigators will delay the conclusion of the investigation, perhaps forcing Clinton to defend himself against embarrassing conclusions closer to the 1996 presidential election.

“The only problem with this is the time it’s going to take . . . “ said Clinton political adviser Bob Shrum. “The frustrating thing here is that this will probably delay it some weeks or months.”

A senior White House official, who declined to be identified by name, said the President’s aides believe that they are being treated unfairly, facing “a kind of double jeopardy” with the switch to a second prosecutor.

Under the terms of his appointment by the court, Starr has wide-ranging authority to either accept all of the work that Fiske has done so far or to begin the investigation over again. Lawyers involved in the case predicted that he would keep on some of Fiske’s appointees to ensure continuity.

The setback for Clinton comes at a time when he is suffering the effects of unfavorable publicity generated by nearly two weeks of Whitewater hearings in Congress, which have focused on questionable contacts between the Treasury Department and the White House.

Republicans, who have been critical of Fiske’s approach, immediately applauded the choice of Starr. Rep. Jim Leach of Iowa, the President’s leading Republican critic on Whitewater, praised the choice of Starr, whom he described as a man of “impeccable credentials and stature.”

Terry Eastland, a former Republican Justice Department official who worked with Starr, said that the White House should view Starr’s appointment as a plus. “If he clears him,” he said, “that’s the best news Clinton could have.”

Starr, 48, now an attorney in private practice, is high on the Republicans’ list of possible future appointees to the Supreme Court. He has served on the U.S. Court of Appeals in Washington as well as having been solicitor general.

Recently, Gilbert Davis--who represents Jones in her suit alleging that Clinton, when he was governor of Arkansas, lured her into a hotel room and asked her for oral sex--told The Times that Starr had offered to draft an amicus brief supporting his defendant’s right to sue the President.

At the time, Starr declined to comment but he told a PBS interviewer “that it’s a very serious step” to argue, as the President has, that he is above such lawsuits.

Fiske came under fire from Republicans recently when he concluded that the death last summer of former Deputy White House Counsel Vincent Foster was a suicide, not a murder, and that the controversial White House-Treasury discussions violated no law. Some Republicans, such as Rep. Dan Burton of Indiana, still think that he may have been wrong on both counts.

In addition, 10 GOP congressmen sent a letter dated July 13 to the three-judge panel, recommending that Fiske not be appointed independent counsel. Among those signing the letter were Rep. Robert K. Dornan (R-Garden Grove), Christopher Cox (R-Newport Beach) and Dana Rohrabacher (R-Huntington Beach).

“Starr is a real Republican, and he’ll give us a real investigation,” Dornan said. “Republicans will have to accept whatever comes out of the Ken Starr deal.”

The court’s order does not explicitly empower Starr to re-examine the death of Foster as Fiske’s charter did but it does give him authority to investigate any future allegations that the Administration might have tried to interfere with the Whitewater criminal investigation.

Republicans also objected to the role that Fiske played in helping Democrats delay until next year congressional hearings into central allegations in the Whitewater case and to the deference that he has shown for the Clintons, the Foster family and others ensnared in the controversy.

In response to the court’s decision, Fiske, a prominent New York attorney, issued a statement saying that it had been a privilege to serve as independent counsel. “I wish Ken Starr the very best,” he said, “and will do everything I can to help him with a speedy and orderly transition.”

Starr, who was attending an American Bar Assn. meeting in New Orleans, could not be reached for comment.

Although Atty. Gen. Janet Reno had asked the court to reappoint Fiske, the judges said they had concluded that to choose an investigator favored by the Administration “would not be consistent with the purposes” of the newly re-enacted law providing for independent investigations of alleged crimes involving the President or his top appointees. The independent counsel law was re-enacted earlier this year and signed into law by Clinton on June 30.

“This reflects no conclusion on the part of the court that Fiske lacks either the actual independence or any other attribute necessary to the conclusion of the investigation,” the judges wrote. “Rather, the court reaches this conclusion because the act contemplates an apparent as well as an actual independence on the part of the counsel. . . .

“As Fiske was appointed by the incumbent Administration, the court therefore deems it in the best interest of the appearance of independence contemplated by the act that a person not affiliated with the incumbent Administration be appointed.”

For those same reasons, Reno initially resisted Republican demands for an Administration-appointed prosecutor on grounds that, lacking a law giving him the independence of being a court appointee, his findings would never be fully accepted by Clinton’s critics. But she eventually yielded to the pressure and selected Fiske.

On Friday, she recalled that she had hoped the independent counsel law would be re-enacted earlier, before she was forced to appoint a Whitewater investigator. She said she recommended that the court reappoint Fiske to ensure “no delays or loss of continuity.”

The court invested Starr with the “full power, independent authority and jurisdiction to investigate to the maximum extent authorized” by the new law possible violations of law relating to the relationship of the Clintons and McDougal and his now-defunct savings and loan.

Times staff writer David Lauter contributed to this story.