Channell Pleads Guilty to Fraud in Iran Inquiry : Fund-Raiser Names North as a Co-Conspirator in Scheme to Provide Aid for Nicaraguan Rebels

In a major break in the Iran- contra investigation, conservative fund-raiser Carl R. (Spitz) Channell pleaded guilty Wednesday to conspiring to defraud the government in connection with more than $2 million he raised for the Nicaraguan rebels. He also named former White House aide Oliver L. North as a co-conspirator.

As part of a plea agreement with independent counsel Lawrence E. Walsh, Channell promised to cooperate in the continuing investigation. U.S. District Judge Stanley S. Harris postponed sentencing him at the request of prosecutors to gauge the extent of his help in other possible cases.

Public Relations Chief Named

Channell, 41, also named Richard R. Miller, head of a Washington public relations firm, as participating in the conspiracy, which involved raising funds through Channell’s tax-exempt foundation to buy arms and other non-humanitarian supplies for the contras.

The Channell plea marked the first criminal action taken by Walsh in his 4-month-old investigation. Coming less than a week before a joint Senate-House hearing on the Iran-contra affair begins, it is expected to mute criticism from Capitol Hill that the independent counsel has been moving too slowly and on too broad a front.

The guilty plea, which Walsh called “a significant step forward,” also appears to increase the chances of criminal prosecution of North, the central figure in the Iran operation and a chief target of the probe.

Channell, a crisply dressed, short man with a thin mustache, stood alongside his lawyer during most of the court proceedings with his hands clasped in front of him. On the way out of the courtroom, he declined comment, saying only: “I’ve said it all.”

‘Relieve the Burdens’

A spokesman later issued a statement, saying that Channell “hopes that his cooperation will relieve the burdens that have been placed upon him and others who, like himself, were drawn into these issues by the belief in the need for freedom and democracy in Central America.”

Channell faces a maximum penalty of five years in prison and a $250,000 fine.

According to the charge, Channell, from April, 1985, to the present, conspired with others to defraud the Internal Revenue Service by using his tax-exempt organization, the National Endowment for the Preservation of Liberty, to solicit contributions to buy aid for the contras.

The National Endowment purported to be an educational and charitable organization devoted to studying American socio-economic and political systems, according to the one-count criminal information. Under the internal revenue code, it was exempt from federal taxes, and contributions made to it for charitable purposes were tax deductions for the donors.

Walsh’s charge specified that the conspiracy called for falsely representing as tax-deductible contributions $2,120,000 in gifts that were used to purchase military and other types of non-humanitarian aid for the contras.

The charge listed a series of meetings among Channell, an unnamed U.S. government official and “principals” of a public relations firm and endowment contributors at a fashionable Washington hotel, at the government official’s office and in Dallas.

$1.15 Million in Stocks

Although those parties were not named in the charge, Channell, under questioning by Harris, identified the alleged co-conspirators as North and Miller, respectively. One unnamed contributor transferred $1.15 million in stocks to a brokerage account of Channell’s organization in Washington on April 15, 1986, and $350,000 to a bank account a month later, the charge said. That account appears to match Channell’s largest donor, Ellen St. John Garwood, of Austin, Tex.

Two sources in the contra fund-raising network said Wednesday that she is cooperating with Walsh’s investigators.

The conspiracy allegation appears to broaden North’s vulnerability to potential criminal prosecution. Walsh’s grand jury is also investigating reports that North, who was fired from his National Security Council post last November, was involved in the destruction and alteration of documents after the diversion of Iranian arms sale proceeds to the contras was discovered.

The criminal charge also stands to further embarrass the White House and the Administration. It was previously reported that President Reagan took part in at least two meetings organized for Channell and his major donors.

Reagan Praise of Channell

Reagan, in a letter on Feb. 21, 1986, to Channell, praised the conservative activist for his pro-contra stand. “Your Central American Freedom Program puts you on ‘America’s Front Line’ in the battle for democracy,” it said.

In addition, the State Department gave Miller’s firm, International Business Communications, a $276,000 contract to coordinate speaking tours for anti-Sandinista Nicaraguans in the United States.

White House spokesman Marlin Fitzwater said he would have no comment on Channell’s guilty plea. There has been no evidence made public that Reagan was aware the contra supporters he met were being solicited for improper contributions.

Miller, 34, who worked on Reagan’s 1980 and 1984 presidential campaigns, did not return a reporter’s calls Wednesday.

During the brief court hearing Wednesday, David Zornow, an associate counsel of Walsh, said that three employees of Channell’s endowment had signed agreements to cooperate with the prosecution, and outside the court he added that they would not be charged.

Keep Agreement Private

The prosecutors, however, took the unusual step of not making public the agreement they had struck with Channell and the others.

When asked why, associate counsel Michael Bromwich said only: “The investigation on a variety of fronts and matters is continuing.”

Prosecutors did not oppose Channell’s being released on his own recognizance, but did get the judge to order that Channell surrender his passport.

Channell and his fund-raising for the Nicaraguan rebels have shown up in various places in the unfolding contra investigation.

The report of the presidential commission headed by former Sen. John Tower (R-Tex.), for example, included a message from North to his then-boss, former National Security Adviser John M. Poindexter, which said: “Re my private U.S. operation . . . the President obviously knows why he has been meeting with several select people to thank them for their ‘support for democracy in (Central America).’ ” However, the commission report did not conclude that Reagan had full knowledge of the activities.

‘Involved Very Deeply’

On Wednesday, Sen. Daniel K. Inouye (D-Hawaii), chairman of the Senate committee investigating the affair, reiterated his statement that President Reagan “was very much knowledgeable about the events occurring around him, that in raising funds from private sources for the contras, he was not just a peripheral player and he was involved very deeply.”

Inouye, in an interview with CBS News, elaborated on comments he made to the Washington Post last week, based on his review of excerpts of Reagan’s diaries.

“You know, people have suggested that he was getting old and he didn’t know what was happening. What we are saying is from what we have seen, for example in some of the notes, he knew what was happening,” Inouye said.

He said, however, there was no evidence that Reagan knew that profits from the weapons sales to Iran had been diverted to the Nicaraguan rebels.

Last week, after Inouye’s statement, President Reagan said his diaries contained no embarrassing disclosures about the Iran-contra affair and said of Inouye: “I think he’s wrong.”

Staff writer Doyle McManus contributed to this story.