THE CRISIS IN THE WHITE HOUSE : Diverted Iran Money Poses Legal Issue: Were U.S. Public Funds Used?

Despite congressional assertions that at least three federal statutes have been violated, Justice Department experts Tuesday came up empty-handed in early efforts to determine whether Lt. Col. Oliver L. North’s alleged channeling of millions of dollars in Iranian arms funds broke any U.S. laws.

Officials involved in the legal scrutiny emphasize that the research is far from complete, and the FBI still has not officially entered the case. Also, they say that the few close aides at the department who assisted Atty. Gen. Edwin Meese III in his personal inquiry have focused on efforts to determine what took place before trying to fix any criminal responsibility.

“We wanted to develop the definitive story of what happened from Day One because there were as many different versions as there were people” involved, one official said.

“A central question,” another official said, “is, ‘Did the profit (from arms sales) belong to the U.S. government?’ ” And, he said, the answer may be no.

On Capitol Hill, however, there was far less doubt about whether North’s alleged actions had run afoul of federal law. Sen. Sam Nunn (D-Ga.) said that the channeling of Iranian funds to finance efforts by the contras to topple the government of Nicaragua probably amounted to a misappropriation of taxpayer funds.

Under a ban that existed in the law until last Oct. 1, the Administration was prohibited from spending any U.S. funds for military assistance to the contras. The Iranian sale proceeds reportedly were transferred to the contras between January and September of this year.

But Executive Branch experts on relevant laws countered that taxpayer funds may not have been at stake in the secret operation, noting that the money involved came from a foreign source.

The Foreign Assistance Act prohibits expenditure of any appropriated monies by or on behalf of the CIA for foreign covert operations without the President’s specific approval. But because the $10 million to $30 million that Meese estimated had been funneled to the contras was furnished by the Iranian arms buyers, the funds were not necessarily “appropriated money” governed by the act.

“Some sharp lawyer is going to say ‘He did not use U.S. funds--ha, ha, ha--he used Iranian money,’ ” David Durenberger (R-Minn.), chairman of the Senate Intelligence Committee, predicted.

That view, at first impression, was shared by Justice Department officials Tuesday. In addition, Executive Branch lawyers said, new federal restrictions on money-laundering do not seem to apply to this case. Although numbered Swiss bank accounts appear to have been used as a vehicle to channel the funds to the contras, the accounts were not used to convert the money to personal use.

Senators cited at least two other laws that they said were probably violated, both of which involved congressional reporting provisions:

--The Arms Export Control Act, which requires Congress to be notified of all transfers of American arms, even by third countries.

--The National Security Act, which includes a provision requiring the President to notify Congress of all covert operations by the U.S. government, either in advance or in a “timely” fashion.

However, because of ambiguities in these reporting laws, such as what constitutes “timely” disclosure--and doubts about when Reagan himself was informed about various aspects of the operation--questions addressing possible violations remained unclear.

Legislators contend, for example, that White House officials negotiated with Iranian officials for more than a year but that Reagan did not notify Congress until this month. Reagan, for his part, has insisted that the notification was timely, considering the risks that premature disclosure might have caused.

The prospect of any criminal charges against North’s superiors--former national security adviser Robert C. McFarlane and his successor, John M. Poindexter, whose resignation was announced Tuesday--appeared to hinge on whether any legal action is taken against North, who was fired. Meese indicated that both men at some point had at least general knowledge that the money was being channeled and failed to call it to the attention of authorities.

Establishing that they had knowledge of a felony and failed to report it--invoking the seldom-used misprision of a felony statute--would require proving first that North was guilty of a felony, officials noted, though it was unclear whether such action against McFarlane and Poindexter would depend on their recognition that North’s activities constituted a felony.

During a briefing in which he was considered unusually forthcoming in addressing such highly sensitive issues, Meese made clear that the investigation is still far from complete and did not rule out convening a federal grand jury on the matter.

The aides who participated in the earlier personal inquiry by the attorney general were political appointees close to Meese, presumably chosen to ensure confidentiality, but the current probe is being handled by a broader range of attorneys.

The American Civil Liberties Union, however, urged Meese to remove himself from the matter and seek appointment of an independent counsel.

“The attorney general is not in a position to ensure an impartial investigation,” said Morton Halperin, director of the ACLU’s Washington office.

Citing White House statements that Meese had certified the legality of shipping arms to Iran, Halperin said that one of the key tasks of the criminal investigation “must be to determine the extent to which high-level officials were involved or had knowledge of the illegal activity. Only an independent counsel can carry out such an investigation.”

Meese said that the question of whether to seek an independent counsel will be decided if his department investigation determines that any law has been broken and that the people involved are covered by the Ethics in Government Act, which generally applies to senior U.S. officials.