Shultz Scoffs at Report of Contras Aid Misuse

From a Times Staff Writer

Secretary of State George P. Shultz on Thursday scoffed at an audit showing possible misuse of at least $4.8 million in U.S. aid to Nicaraguan rebels, branding the report "a little side chase" devised by opponents of the Administration's proposal to provide $100 million more for the contras .

"Obviously, it was concocted by people in the Congress who are opposing us on this vote," said Shultz, his face flushed with anger. He was replying to questions about a General Accounting Office report critical of the existing program of $27 million in "humanitarian aid" to the rebels opposing the leftist Managua government.

Investigative Arm

"This is just a little side chase that people are trying to concoct to somehow divert attention from the real point here," Shultz said, adding that the Administration was not allowed to review the report before it was made public. The GAO is the investigative arm of Congress.

The report, issued Wednesday during a House subcommittee hearing, said that almost $1.2 million in "humanitarian" aid funds was paid to the Honduras army and $3.6 million ended up in bank accounts in the United States, the Bahamas and the Cayman Islands.

The audit covered the existing program earmarked by Congress for medical supplies, uniforms, food and other "non-lethal" forms of aid. The Administration is seeking congressional approval for much more extensive aid, which could also be used for weapons.

Denial in Honduras

In Honduras, Gen. Humberto Regalado Hernandez, the nation's military chief, denied the allegations.

"It is a political game by some members of the Congress of the United States that are opposed to American aid to the anti-Sandinista insurgents," the general told reporters. "Proof should be presented because we will demand it."

A spokesman for the Nicaraguan Democratic Force, the largest rebel group fighting Nicaragua's Sandinista government, also denied the allegations.

Shultz spoke to an impromptu press conference in the State Department lobby with three leaders of the United Nicaraguan Opposition--Alfonso Robelo, Arturo Cruz and Adolfo Calero--at his side. He said that U.S. aid to the contras "must have gotten through" because the rebels have continued to fight.

At the White House, presidential spokesman Larry Speakes called the GAO study "not a careful and thoughtful effort" and said: "The report seems to be more of an analysis and does not offer any specific proof of wrongdoing. I do not think anybody should jump to conclusions based on this information."

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