Reagan Has Faith in Meese Despite Probe, Baker Says

President Reagan has full confidence in Atty. Gen. Edwin Meese III despite being told last week that Meese is the “focal point” of a criminal probe into a $1-billion pipeline project backed by Meese’s close friend, E. Robert Wallach, White House Chief of Staff Howard H. Baker Jr. said Sunday.

Baker said he was informed of Meese’s role last Wednesday by independent counsel James C. McKay, who is investigating whether Meese and Wallach improperly used White House influence to promote the proposed pipeline.

In a briefing with Baker and White House counsel A. B. Culvahouse, McKay did not specifically identify Meese as a target of his inquiry, a legal term that would mean that Meese is under direct threat of criminal indictment, Baker said.

President Briefed

“I use the same term that I believe Mr. McKay has used, a ‘focal point’ of the investigation,” Baker said. Culvahouse later gave Reagan an account of the meeting with McKay, he said.

The President will closely monitor the progress of McKay’s investigation, Baker said, but was “very adamant” last week in denying to aides that Meese would be asked to resign or temporarily step aside while the inquiry is under way.

Baker made the comments in an interview on the CBS program “Face the Nation.” His statements came amid indications that McKay’s pipeline inquiry has spread to involve other parts of the U.S. government.

The probe centers on efforts by Wallach and Meese in 1985 to secure guarantees from Israel and the banking community that would permit financing of the pipeline, which was to carry oil from Iraq to the Jordanian port of Aqaba. The Iraq government refused to permit construction to begin without ironclad assurances that Israel, its enemy, would not destroy the completed pipeline.

Security Council Helped

At Meese’s request, the White House’s National Security Council and the Overseas Private Investment Corp. (OPIC), a quasi-public agency that insures U.S. investments abroad, worked with Wallach in late 1985 to arrange insurance for the pipeline.

McKay is reported to be examining a 1985 memo from Wallach to Meese that cites a plan to make payments to the Israeli Labor Party or Shimon Peres, then Israel’s prime minister, to secure Israel’s promise not to attack the pipeline.

Peres later secretly pledged, in November, 1985, to refrain from attacking the pipeline and to use American aid to Israel to finance repairs should that promise be broken.

On Sunday, the New York Times reported that McKay is investigating the relationship between former CIA Director William J. Casey, who died last May, and Swiss oilman and multimillionaire Bruce Rappaport, an associate of Wallach in the pipeline venture.

Rappaport Staged Party

Rappaport held a party at Fourways, an exclusive Washington restaurant, in the summer of 1985 for Casey and others, including some U.S. officials who were working on the pipeline venture, the newspaper reported.

One former U.S. official who requested anonymity told the Los Angeles Times on Sunday that the Washington party did take place, but said it occurred in the spring of 1985 as Wallach’s attempts to secure White House aid for the pipeline were first getting under way.

Wallach and Meese later met with Robert C. McFarlane, then President Reagan’s national security adviser, to request White House help in arranging an Israeli security guarantee for the project, and Rappaport and Wallach later met with NSC and OPIC aides on the issue.

During Casey’s tenure as CIA director, the agency provided OPIC officials with a profile of Rappaport, stamped secret, which appears to have omitted significant information about Rappaport’s business dealings and his ties to Israel. One source who has seen the profile said it consisted largely of publicly available newspaper excerpts.

Bank Shunned Rappaport

OPIC regularly receives CIA reports on the political risks of U.S. investments overseas. It sought the CIA profile in mid-1985 after the New York banking giant Citicorp refused to deal directly with Rappaport in the Iraqi pipeline venture, citing poor previous experiences with him, a source familiar with the project said Sunday.

It is not clear why the CIA biography provided to OPIC officials had been sanitized, or whether Casey played a role in answering the OPIC request. At almost the same time, the CIA provided a much more detailed profile to former National Security Adviser William P. Clark, who was then advising the White House on the pipeline project at McFarlane’s request.

In Sunday’s CBS interview, Baker said he sees no evidence that the pipeline affair will mushroom into a governmentwide scandal similar to the Iran-Contra affair.

However, he added that he sees “intriguing” parallels between the pipeline and Iran-Contra affairs, both of which involve Israel and wealthy middlemen seeking to use the influence of the United States.