Memo Viewed as Key Item in Probe : Indicates Poindexter Told Reagan of Diverting Funds for Covert Activities

The congressional panels investigating the Iran- contra scandal have a document indicating that former White House National Security Adviser John M. Poindexter discussed with President Reagan the possibility of diverting money from Iran arms sales to other covert activities, Sen. Daniel K. Inouye (D-Hawaii) said Sunday.

The document was briefly mentioned by Senate committee counsel Arthur L. Liman as he questioned Lt. Col. Oliver L. North on Friday, and Inouye indicated Sunday that it will be one of the key items in the crucial appearance of Poindexter, expected Tuesday.

During four days of questioning last week, North told of sending forward for higher approval at least five recommendations for operations that would put arms sale proceeds to the benefit of guerrillas fighting the Sandinista government in Nicaragua. But he said he had never personally told President Reagan of the diversion plan, which has become the central question in the investigation.

Poindexter Key Witness

North’s testimony made Poindexter, his former boss, the key witness on the question of whether the President knew of the scheme.

Appearing on the CBS program “Face the Nation,” Inouye, who heads the Senate investigating panel, said Sunday that the document in question “does not speak of diverting the residuals for the use of the contras. It says using the residuals for other covert activities.”

It is, the senator said, “an important document in which he says, ‘I briefed the President, the President agrees on the use of these residuals.’ ”

The questions awaiting Poindexter, he said, are: “Did he or did he not brief the President, and did the President approve or disapprove?”

“He will either say yes, I did, or he must say that I falsified it. And the question will be, why?”

North will return to Capitol Hill today for his fifth day before the committees, a day in which he will be questioned by senators and representatives, most of whom listened in silence as North was questioned by lawyers last week.

Inouye and Sen. Warren B. Rudman (R-N.H.), vice chairman of the Senate panel, indicated Sunday that the last day of questioning could be a tough one, although North last week rallied enormous public support, and stuck doggedly to his story that he always acted under orders as the ramrod of the operation.

Lack of Candor Suggested

Some documents in the committee’s possession, Inouye said, “suggest that North wasn’t absolutely candid” on some points.

“For the most part, especially on the larger issues, he was rather candid,” the Hawaii senator said, “at times rather explosively candid . . . . But there are a few minor points that must be followed up.”

Neither Inouye nor Rudman, the ranking Republican on the panel, would be specific about the points where they found North’s answers less than forthright.

“There are certain areas we may never know because documents have been destroyed,” Inouye said, including a ledger of North’s day-by-day activities, which he said the late William J. Casey, director of the CIA, had ordered him to destroy.

Because of destroyed documents and the death of Casey last May, Inouye said, it may be impossible to corroborate some aspects of North’s testimony. “But there are many other instances,” he said, “that we can use documents to either refute or to support.”

With North’s evident success in explaining his own role in the affair, Poindexter has emerged as potentially the most important witness in the entire probe.

Like North, he will appear under a grant of limited immunity, but unlike the Marine officer, Poindexter will go before the televised hearings after having testified in private session before attorneys and key committee members.

Testimony Not Divulged

Inouye and Rudman, as well as other committee members interviewed Sunday, refused to divulge anything of Poindexter’s preliminary private testimony, but Rudman hinted that the admiral may leave still open the issue of whether the President knew of the fund diversion.

“I think that you’re going to have to hear Poindexter’s testimony, how he phrases it, what he says, why he did what he did, and then the American people can reach whatever conclusion they have the right to achieve,” the New Hampshire senator declared.

He and Inouye agreed they see little likelihood of an impeachment move against the President.

“I haven’t seen anything, as far as I am concerned,” Inouye said, “that would be sufficient grounds to impeach the President of the United States.”

Justice Dept. Scored

Both of the committee members leveled scathing criticism at the Justice Department for its handling of the investigation in the first days after the arms sales to Iran were reported.

In one of the highlights of his testimony last week, North told of continuing to put documents into a shredder in his office while Justice Department officials, who had begun their probe, sat at a desk a few feet away.

A Justice Department official flatly denied North’s account, but Inouye and Rudman said Sunday that was a part of the colonel’s testimony which they accepted.

“I think they were totally unqualified,” Rudman said of the Justice Department investigators. “They needed some tough FBI agents and some good street-smart people down there, not, frankly, what I call silk-stocking lawyers doing this investigation.”

The handling of the investigation, Inouye said, left open the question of whether the Justice Department’s handling of it was itself a part of the cover-up. “This places a terrible cloud,” he said. “The attorney general will have an opportunity” to explain.