Memo to Meese Is Called Damaging : Pipeline Note Clearly ‘Conspiratorial’ in Tone, Government Sources Say

A key memo and related documents that are the focus of an independent counsel’s investigation of Atty. Gen. Edwin Meese III are clearly “conspiratorial” in tone and contain some material so questionable that it should have set off alarm bells in Meese’s mind, government sources have told The Times.

Although Meese’s lawyers sharply challenged this characterization, even some officials who support the attorney general say the memo and the related papers are fraught with potentially damaging material and suggestions of possible improprieties. In addition, contrary to suggestions by Meese, sources say the questionable material is not confined to one 10-word passage.

In one example, sources say, just before describing a plan to pay the Israeli Labor Party for help on a $1-billion Iraqi pipeline deal, the memo contains the cautionary phrase “ . . . to be denied everywhere.” Under the arrangement, sources have said, Israel was to guarantee that it would not interfere with the pipeline’s being built by Iraq, its enemy of four decades.

Status Report on Pipeline

“The levels of conduct covered by these documents range from suspicious to unethical to concern that a crime is in the making,” one source said. “The language is unambiguously conspiratorial.”

The 1985 memo to Meese was a status report on the pipeline deal written by his longtime friend E. Robert Wallach, who was working as a private attorney on the project. Wallach had sought the attorney general’s influence in obtaining a U.S. stamp of political and financial stability on behalf of the pipeline.

Meese did nothing about his knowledge of the Israeli payment plan, though it is not known whether he did anything that could be construed as illegal. The Foreign Corrupt Practices Act prohibits U.S. citizens from bribing foreign officials and specifically requires the attorney general to take legal action to prevent a violation if it appears that one is about to occur.

James E. Rocap, a Meese attorney, disputed the description of the memo as “conspiratorial” and dismissed the contention that it should have alerted the attorney general to possible wrongdoing. “Quite the contrary,” he said. “That is an unfair and wrong characterization.”

‘To Be Denied Everywhere’

Rocap was asked what other interpretation could be made of the phrase “to be denied everywhere.” Without confirming that the phrase appears in the document, he said: “In my view, the way he (Wallach) writes memos, you cannot attach any particular significance to those words. On perfectly innocent topics, he’ll use initials to refer to individuals--for no reason whatsoever.”

A senior White House official also discounted the “conspiratorial” characterization of the Wallach-to-Meese correspondence, saying: “You could probably find some other people who might interpret it differently. . . . Only (independent counsel James C.) McKay is going to be in a position to determine whether the letter is damaging.”

However, several other government sources interviewed by The Times, all of whom spoke on the condition that they not be identified by name or agency, believe that the documents are far more damaging than the attorney general has indicated.

One official who has studied the memo and a number of supporting documents said the materials “would raise the eyebrows of anybody, let alone a trained lawyer.”

The contents of the memo remain classified, but sources who have studied the document say it raises serious questions about Meese’s statement earlier this month that he “certainly did not receive from the memorandum any impression of illegality whatsoever.”

The statement by Meese, who insisted that he played only an “extremely limited” role in the affair, was “carefully crafted,” one official said. “The Wallach memo is extremely troublesome, and it’s not limited to 10 words.”

Official Surprised

A former high government official involved in the matter expressed surprise at the way Meese characterized Wallach’s memo, asking: “Since when does the suspect structure the inquiry?”

In reading his statement on his role in the pipeline affair on Feb. 1--a highly unusual move in the midst of a continuing investigation of the matter--Meese dismissed the significance of the memo, saying only 10 words in the document “have given rise to this speculation.”

The attorney general, responding to what he called “a cascade of misinformation” in the media, said: “Indeed, as I look at the full memorandum containing those 10 words today, I cannot believe that it fairly implies that a violation of law was committed or contemplated in connection with the pipeline.”

Meese said the document never mentioned the words “bribes” or “payoffs.”

But Bruce Rappaport, the Swiss oilman and promoter of the pipeline who retained Wallach to work on the project, confirmed that the memo refers to proposed payments to Israel and the Labor Party in connection with the project.

In an interview Friday night with ABC News, Rappaport said the document states “that there will be some money that will have to be paid to the government of Israel.” Rappaport, trying to recall the memo’s exact wording, said he believes that Wallach wrote that money would be paid to the Labor Party “and that some amounts would have to be paid annually.”

His comments, the first confirmation from a direct participant in the project about the contents of Wallach’s memo, matched those of a former high government official who said one document obtained by investigators described a schedule of future payments to the Labor Party.

Rappaport said he intended to bribe no one and that the memo did not name the individuals who were to receive the payments.

“The question is, what is the money Rappaport is talking about for? Is he saying that Bruce Rappaport, a supporter of the Labor Party for many years, intends to continue to support the party?” Meese attorney Rocap asked. “The critical issue is what does the memo say or suggest? Once you make a decision about that, you come up with the question: ‘Is there any violation of law?’ ”

When asked why Wallach would mention Rappaport’s continuing financial support of the Labor Party in a status report to Meese, Rocap said: “Bob Wallach puts everything in his memos.”

However, one official who has read the 1985 memo dismissed these arguments. Referring to Meese’s statement that the Wallach memo nowhere used the words “payoff” or “bribe,” this official said: “Even in a document you say should never see the light of day, you’re not going to say you’re going to bribe or pay off somebody.

‘A Disposition of Funds’

“But it’s pretty clear that there was going to be a disposition of funds, which should perk up somebody’s ears,” the source added.

Another source familiar with the work of an interagency group that is considering the declassification of the memorandum and hundreds of pages of related documents said members of the group “don’t want to see any problems in Meese’s conduct compounded by giving it the cloak of national security protection.”

Justice Department spokesman Patrick S. Korten said Friday that the State Department had withdrawn an objection to declassifying the documents. Another source said the opposition is based primarily on an effort to avoid embarrassing Israel Foreign Minister Shimon Peres, whose Labor Party was to receive a portion of the pipeline proceeds under the plan outlined by Wallach.

Peres was prime minister at the time Wallach wrote his memo to Meese.

Investigators for McKay have turned up no information that any payment was actually made to the Labor Party, and Peres has denied receiving any such funds.

But one source familiar with the investigation said “there are actions and information” that will be embarrassing to Peres, who is regarded as the United States’ major hope among the Israeli leadership in efforts to work out a peaceful solution to conflicts in the Middle East.

If McKay, as expected, moves this week to declassify documents reviewed by the interagency committee, he then will have to decide whether to make public the Wallach-Meese memo and related documents.

When asked about the assessment of the situation within the Administration, the senior White House official said presidential Chief of Staff Howard H. Baker Jr. “is not in a position to do anything (about Meese) until McKay makes a decision.”

As for the President, the official said: “There is no indication of any wavering as it relates to Ed Meese.”

Meese, meanwhile, spent Saturday in Mexico, taking part in a summit conference held by Reagan and Mexican President Miguel de la Madrid. The attorney general, asked after the meeting whether he would make the Wallach memo public, replied: “This is a meeting in Mexico and that’s an inappropriate question.”

Staff writers James Gerstenzang, traveling with President Reagan in Mexico and California, and Michael Wines in Washington contributed to this story.