North’s Payment of Salary to Contra Leader Reported

Fired White House aide Oliver L. North, dipping into his secret foreign bank accounts, had moderate Nicaraguan rebel leader Arturo Cruz on his payroll for most of last year, a spokesman for Cruz said Thursday.

North paid Cruz about $7,000 a month from January through October, 1986, a period when the U.S. government was prohibited from providing most forms of aid to the contras , the spokesman said. At the time, Congress permitted the CIA to give secret aid to the contras’ political organizations but the agency said it was not paying salaries to the rebel leaders, congressional sources said.

Though not a clear violation of the law, the secret payments could tarnish the reputation of Cruz, who has been highly regarded by Congress, and thereby impair the contras’ chances of winning renewed U.S. aid this year.

The payments are also a new example of how North used his access to secret funds to run covert operations that were not controlled by normal CIA or congressional procedures.

Cruz’s secret salary may have come from the same accounts in which North stashed money from the Reagan Administration’s secret arms sales to Iran. But it could not be determined whether any of the money actually came from the arms profits, which North has been accused of diverting to the contras.

North has become a major target of several investigations because of the alleged diversion of Iranian funds and his role in setting up a secret air cargo operation for the contras. But Administration officials familiar with his activities have said that there were still more such projects.

“(The Iran arms deal) wasn’t the only operation,” one said. “They had other operations, all keyed to supporting the contras, that he was running.”

Cruz acknowledged through a spokesman that he received the money from North after knowledgeable U.S. and Nicaraguan sources disclosed the arrangement.

“He had no other source of support,” said the spokesman, who agreed to speak on the condition that he not be identified. “He’s not trying to hide it. But he didn’t know where Ollie got the money. All he knew was that it was from foreign sources.”

North instructed Cruz to open a bank account in Costa Rica, and the money was deposited on a monthly basis, the spokesman said.

The spokesman said Cruz used some of his salary from North for expenses of his political operation and paid U.S. income tax on his entire salary. He said Cruz’s net income came to about $4,000 a month, which he pointed out was less than Cruz had earned as a banker. The spokesman said the deposits to Cruz’s salary account stopped arriving after North was fired on Nov. 25 when the diversion of Iranian arms profits to the contras was discovered. “He’s now in debt,” the spokesman said.

Cruz told the FBI about the funds when agents interviewed him for any clues to North’s alleged diversion of Iranian arms funds, the spokesman said.

Cruz, the most liberal of the three top contra leaders, was apparently the only one to receive such payments from North.

Cruz had left his bank job and possessed only a modest family fortune when he went into opposition politics in 1983. At first, the CIA paid him a salary through a dummy foundation but halted the payments after the arrangement became known and members of Congress objected.

Cruz and another moderate contra leader, Alfonso Robelo, have been locked in a struggle for control of the rebel movement with the most conservative--and most powerful--member of the rebel troika, Adolfo Calero.

Threat to Resign

Cruz recently threatened to resign from the coalition unless Calero’s power was checked. On Thursday, Cruz and Robelo announced that they had decided to remain in the leadership to press their demands for reform, but set a deadline of mid-April for the rebel army to come under civilian command.

Several Cruz allies, while not contesting the report that he had been paid by North, charged that the story was being spread by his opponents in Calero’s organization and by the CIA, which has largely backed Calero in the internal dispute.

“This is all coming from the intelligence community,” one charged. “Someone in the intelligence community is trying to destroy him.

“It isn’t serious money, either,” he said. “Calero’s got millions that are missing, and people are worried about a couple of thousand that were given to Arturo Cruz?”