Conspiracy, Fraud, Theft and Cover-Up

By Jacob V. Lamar

Throughout his 15-month investigation of the Iran-contra affair, Independent Counsel Lawrence Walsh has been a figure of courtly stoicism. Amid the drama of last summer's congressional Iranscam hearings, the stern-faced 76-year-old prosecutor remained quietly in the background. Despite the court battle over the constitutionality of his appointment and the barbs of critics who said his probe was moving too slowly, he moved calmly ahead with his search for evidence. But when he appeared outside federal court in Washington last week, Walsh uncharacteristically allowed his thin lips to curl into a tight, satisfied smile. Finally, he could announce the fruits of his meticulous labor: a 23-count indictment that contained sweeping charges of criminal dealings at the White House.

The targets were Ronald Reagan's former National Security Adviser John Poindexter; fired NSC Aide Oliver North; and two arms dealers, former Air Force Major General Richard Secord and Iranian-born Businessman Albert Hakim. They were charged with conspiring to defraud the U.S. by establishing and concealing a plan for illegally supporting the Nicaraguan contras. The federal grand jury also charged all four defendants with theft of Government property for siphoning off more than $17 million in proceeds from U.S. arms sales to Iran, and with wire fraud resulting from the movement of the money through Swiss bank accounts. The three counts together carry maximum penalties of 20 years in prison and fines totaling as much as $750,000.

In addition, Poindexter and North were accused of trying to cover up their illicit actions by destroying and removing documents and making false statements. North was charged with lying to Attorney General Edwin Meese about NSC involvement in the diversion of funds to the contras and writing misleading letters to Congress denying that the NSC was supporting the contras. Former National Security Adviser Robert McFarlane pleaded guilty two weeks ago to misdemeanor charges for signing the letters; he may testify against North. Poindexter was accused of a peculiarly high-tech cover-up: he purged his NSC computer files of all messages relating to the contra supply operation.

North, who told Congress last summer that he and Poindexter were Iran- contra's designated "fall guys," bore the brunt of the indictment. Piled onto the conspiracy and obstruction charges were accusations that the Marine lieutenant colonel had embezzled $4,300 worth of traveler's checks and received an illegal gratuity by accepting a $13,800 home-security system from Secord.

North was also accused of conspiring to defraud the Internal Revenue Service by using the tax-exempt National Endowment for the Preservation of Liberty to solicit $3.2 million in contributions, which he used to buy lethal contra aid. NEPL President Carl ("Spitz") Channell and Public Relations Consultant Richard Miller pleaded guilty to the same charges last spring, and presumably will testify against North. On all the charges, North faces a possible sentence of 85 years in prison and a staggering $4 million in fines.

He refused to take the bad news quietly. "I did not commit any crime," North declared in a press conference at his lawyer's office, his voice trembling with emotion. "I have been caught up in a bitter dispute between the Congress and the President over the control of foreign policy, the power of the President to deter Communism in Central America, and his duty to protect our citizens from terrorist acts abroad . . . I intend to fight allegations of wrongdoing for as long as necessary."

North held another emotional news conference late in the week to announce his resignation from the Marine Corps. True to his sense of theater, he had traded in his olive-green uniform and chestful of ribbons for a business suit, although his resignation will not be effective until May 1. Continued service in the Marines, said North, would be incompatible with defending himself against the charges, particularly since his lawyer may subpoena the "highest- | ranking officials of our Government." The implication seemed clear: if North was to play the fall guy, he intended to drag some big shots down with him. The list of top officials North's attorney may call on to testify could very well include President Reagan and Vice President George Bush.

Richard Secord responded to his indictment with contempt, appearing on TV news shows to denounce Walsh's investigation as a "witch-hunt." "The charges are absolutely ludicrous, and I intend to grind them to dust," he declared. Poindexter and Hakim, the more self-effacing participants in what Secord called the "enterprise," commented only through their lawyers.

At the White House, the President refused to concede that some of his former aides may have violated the law. "I have no knowledge of anything that was broken," said Reagan during a photo session with Israeli Prime Minister Yitzhak Shamir. Reagan's remarks renewed speculation that he may grant presidential pardons to the accused. White House Spokesman Marlin Fitzwater reacted stonily to such suggestions. "We don't discuss pardons," he said. "Period."

Certainly it would be politically risky for Reagan to exercise his right to pardon before the presidential election. The move could create problems for likely Republican Nominee George Bush, whose role in the scandal remains a campaign issue. But after Nov. 8, Reagan will have more than two months left in office. Then only the judgment of history may prevent the President from protecting the men he still regards as loyal patriots.

Pardon or no, Bush will continue to be confronted by questions about his knowledge of the Iran-contra affair. Discussing the indictment on the campaign trail last week, Bush said, "The American people aren't interested" in the scandal anymore. "They think it's been exhaustively looked into." But Democratic Presidential Candidate Richard Gephardt gave the Vice President a taste of the criticism he stands to receive as the race heats up. "George Bush has already pleaded guilty to exercising bad judgment in what turned out to be the biggest American foreign policy debacle in decades," said the Missouri Congressman. "That's enough for me."

The candidates and the country have not heard the last from Walsh. "The grand jury is not finished," the independent counsel said as he announced the indictments. "This is simply an interim report." Thus the stage was set for more indictments and more scrutiny of the scandal that refuses to die.

The 101-page indictment sheds little new light on the tangled Iran-contra affair; it simply places events in a criminal framework. The grand jury treats the initiative to sell arms to Iran in exchange for U.S. hostages as a legitimate covert operation, not a crime. It is the abuse of that operation, the diversion of funds and other related activities, that led to the possible breaking of laws. The grand jury seems to have reached the same conclusion as the Tower commission and the congressional committees about Reagan's involvement in the contra scheme: the President was practically an innocent bystander in his own Administration, oblivious to the machinations of his overzealous aides.

Walsh cast a wide net around the four defendants by handing up broad conspiracy charges as well as precise allegations of skimming for personal benefit. Conspiracy convictions are sometimes difficult to win. The Iran- contra defendants will counter the charges by saying they believed they had presidential authorization for their schemes to supply the Nicaraguan rebels. But if Walsh can convince a jury that the defendants were busy lining their pockets, it could help him win guilty verdicts on the broader counts as well.

According to the grand jury, North was cagey and aggressive in securing profits for the enterprise managed by Secord and Hakim. In January 1986, for instance, North arranged to sell 4,000 TOW missiles to Iran for $10,000 each. The Iranians paid $10 million for the first shipment of 1,000 TOWs. But North told the CIA he had sold the weapons for only $3,469 apiece. The U.S. Government, through the CIA, received just $3.7 million on the deal. Some of the remaining $6.3 million was used to aid the contras, but the bulk of it was retained by Secord and Hakim. Walsh charges that the money is the rightful property of the U.S., but the arms merchants have repeatedly said the money belongs only to the enterprise.

The grand jury alleges that Secord and Hakim encouraged North to remain on the NSC staff so they could continue to realize "opportunities for substantial revenues and profits." To persuade North to stay in his White House post, Secord gave him the expensive security system while Hakim established the "B. Button" investment account, a $200,000 fund to be used for the education of North's children. During his congressional testimony, North passionately denied any knowledge of the Button account and said he needed the security system to protect his family from the terrorist Abu Nidal. % It remains to be seen how effective that explanation will be in a courtroom, where North's rambling account will be constrained by rules of evidence and a prosecutor's cross examination.

But if the defendants have their way, the Iran-contra case will never come to trial. Defense attorneys will try to undermine Walsh's investigation from two angles. In January a federal appeals court ruled that the law authorizing independent counsels is unconstitutional. Walsh is protected by a backup appointment from Attorney General Edwin Meese. But the three months' worth of evidence that Walsh gathered before Meese's appointment could be ruled inadmissible if the Supreme Court strikes down the independent-counsel law.

A legal challenge on immunity could also lead to a protracted court battle. Poindexter, North and Hakim testified before Congress under grants of limited immunity, preventing Walsh from using any of their testimony against them. All but one of the 29 attorneys on Walsh's team avoided TV, the radio, newspapers and magazines when immunized testimony was being aired or discussed; the exception, designated as the "tainted" prosecutor, was assigned to steer the others away from trouble. Nevertheless, the defense will argue that the indictment was affected by the forbidden testimony. The burden of proof is on Walsh. "It's not just a matter of proving that the prosecutors were in hermetically sealed isolation chambers for the last year," says Philip Lacovara, a member of the Watergate prosecution team, "but that the grand jurors were in the same isolation chamber. That's not easy." If Walsh loses that challenge, the entire indictment could be dismissed. The arguments could drag on for a year or more. By the time North and his associates ever face a jury, Ronald Reagan may be long gone from the White House.

CHART: TEXT NOT AVAILABLE

CREDIT: TIME Chart by Cynthia Davis

CAPTION: THE INDICTMENT

DESCRIPTION: Summary of charges against Iran-contra suspects Oliver North, John Poindexter, Richard Secord and Albert Hakim; color illustrations: map of Iran backed by missiles; three men in see-no-evil, speak-no-evil, hear-no- evil pose stand at papershredder; three men holding dollar sign.

With reporting by Anne Constable/Washington