Walsh Picks Tough Prosecutor for Probe : Choice of an Ex-Judge Signals He’s Close to Seeking Indictments

Independent counsel Lawrence E. Walsh, signaling that he is close to seeking indictments in the Iran-Contra investigation, Wednesday retained a former federal judge and prosecutor to fight expected challenges by defendants who testified under grants of immunity at congressional hearings.

Because of the tough reputation of the newly appointed prosecutor, Herbert J. Stern, the announcement was an indication that Walsh is preparing for an all-out fight. Stern is held in high regard in the Justice Department and elsewhere because of his aggressive and successful prosecution of public officials on corruption charges in the early 1970s.

The independent counsel’s office said that Stern, who resigned in January after serving 13 years as a federal judge in New Jersey, can handle the expected challenges by defendants without exposing the prosecution staff to their immunized testimony.

Grants of Immunity

Potential defendants Oliver L. North, John M. Poindexter and Albert A. Hakim, if indicted, are expected to argue that grants of congressional immunity under which they testified at the televised hearings bar their prosecution.

From the outset of his investigation, begun in December, 1986, Walsh has cited potential legal difficulties about principals in the case giving public testimony under guarantees that they would not be prosecuted on the basis of their testimony.

As a result, he took several steps to avoid later problems on this point--barring most attorneys and investigators from reading press accounts of the congressional hearings or watching the televised hearings or shorter reports on television--and strongly urged the grand jury to follow the same strictures.

In addition, before the congressional hearings, Walsh periodically filed packages of sealed evidence with the federal court to demonstrate that it had not been obtained from immunized testimony.

Watergate Recalled

His actions went further than those taken by prosecutors in similar circumstances during the Watergate scandal, when those convicted--other than by guilty pleas--did not include anyone who testified at Senate hearings under immunity.

Nevertheless, legal authorities said they expect Iran-Contra defendants to raise a strong challenge to any indictments based on their congressional testimony under immunity grants.

North was removed from the National Security Council staff after disclosure that profits from the sales of U.S. arms to Iran had been diverted to the Nicaraguan rebels. On the same day, Poindexter resigned as President Reagan’s national security adviser.

Hakim was a private businessman involved in the arms sales. His partner in the deals, retired Air Force Maj. Gen. Richard V. Secord, testified without immunity, as did former National Security Adviser Robert C. McFarlane, who some sources close to the investigation have said is also a potential defendant.

Secord’s attorney has said he expects Walsh to seek his client’s indictment by next month.

James Wieghart, Walsh’s spokesman, refused to comment on the timetable for any actions by his office, but other sources familiar with the investigation indicated that the indictments are likely to be returned by March.

Under Supreme Court rulings, Walsh would bear the burden of proving that none of his evidence came directly or indirectly from the testimony.

Stern refused to discuss his assignment but noted that he found it “always a special honor to be asked to appear on behalf of the United States.”