Pipeline Memo to Meese Gives Plan for Paying Israelis

A newly declassified 1985 memo to Atty. Gen. Edwin Meese III confirms that Israel’s Labor Party was to receive part of as much as $700 million in proceeds from a controversial Iraqi pipeline project being promoted by a longtime friend of Meese.

The memo, which is central to an independent counsel’s investigation of the attorney general, cited a plan to provide the money to nail down a commitment by Israel not to attack the $1-billion pipeline. Iraq has been Israel’s enemy for four decades.

Release of the Sept. 25, 1985, memo marked the first official disclosure that Israel was to have shared in the pipeline revenues. Headed “PERSONAL & CONFIDENTIAL--FOR YOUR EYES, ONLY,” the document said that the arrangement for channeling some of the funds to the Labor Party “would be denied everywhere.”

Sought Meese’s Help

It was written by San Francisco lawyer E. Robert Wallach, a longtime Meese associate, at a time when he was seeking the attorney general’s help in obtaining a U.S. stamp of political and financial stability for the pipeline project. Wallach had been hired as a private attorney for the project, which was never built.

The proposed payments to Israel are being investigated by independent counsel James C. McKay, who is looking into possible violations of the Foreign Corrupt Practices Act. The federal law prohibits U.S. citizens from bribing foreign officials and specifically requires the attorney general to take legal action to prevent a violation if one appears imminent.

In his memo, Wallach said that the information about the payment plan was provided by “B. R.,” initials that Meese’s lawyers said referred to Bruce Rappaport, a Swiss oilman and friend of then-Israeli Prime Minister Shimon Peres, who had retained Wallach in the venture. Rappaport has strongly denied knowing about or suggesting any plan to bribe Peres or his Labor Party.

The two-page memo and other documents were declassified last Friday and made public Monday by Meese’s lawyers to counter what they called “incendiary allegations” that have appeared in the press about the attorney general and the pipeline project.

In addition to the 1985 document, Meese attorney Nathan Lewin released another memo from Wallach to the attorney general dated on the same day, a handwritten letter from Peres to Meese, and Meese’s handwritten response.

Viewed ‘in Context’

If the passage referring to the Labor Party payments is viewed “in context,” Lewin said, “no one can fairly infer that Mr. Meese or anyone else reading the document should have understood that there was a ‘bribe’ or ‘payoff’ scheme to obtain the Israeli Labor Party’s support for the pipeline project.”

After existence of the Wallach-Meese memo was first disclosed by The Times on Jan. 29, Meese read a statement on his role in the pipeline matter--a highly unusual move in the midst of a continuing investigation--saying that only 10 words “have given rise to this speculation.” He added that he did not recall having read those words, which refer to the Labor Party payment plan, but that he still does not believe they suggest any violation of law.

“The statement that a portion of the funds to be received by Israel ‘will go directly to Labor’ would not alert a knowledgeable reader to any illegality,” Lewin said in a seven-page statement distributed with the documents.

“Israel provides direct governmental funding to its political parties,” Lewin said. “Atty. Gen. Meese could not have known whether these funds would go ‘directly’ from the Israeli government or by some other internal allocation over which United States officials have no knowledge or control.”

Peres, who heads the Labor Party, said in his Sept. 19, 1985, letter to Meese that he “would go a long way to help it (the pipeline project) out. But then discretion is demanded on our part.”

Noting that he would be in Washington the following month, Peres said he wanted to discuss the project with Secretary of State George P. Shultz and asked Meese to let Shultz know ahead of time.

Cites Meese’s Judgment

“I have asked my friend Bruce (Rappaport) and Bob (Wallach) to let you know the whole story, and I shall depend on your judgment about the best way to handle this matter,” said Peres, now Israel’s foreign minister.

Sources have said that this letter to Meese, when examined with other pipeline documents, could seriously undermine Peres’ political standing. State Department fears of this potential damage to Peres, widely viewed as the United States’ major hope for a breakthrough in Middle East peace efforts, was at least partly responsible for a delay in declassification of the papers.

Wallach, who delivered his memos to Meese along with Peres’ letter, said in the memo that mentioned the funds for the Labor Party: “The prime minister is very sensitive to the letter which he sent. He wants it returned if there’s not going to be some kind of appropriate response when he comes to Washington. That appropriate response would clearly be a meeting with the President and with Bud McFarlane which would include this project.”

Reply by Meese

Meese, in a response to the letter on Oct. 7, 1985, said he was pleased to learn of Peres’ interest in the project and recommended that the Israeli official discuss the matter with Robert C. McFarlane, then President Reagan’s national security adviser. He noted that Shultz had to recuse himself from the matter because he is a former employee of Bechtel Group Inc., the huge construction firm that was seeking to build the pipeline.

Peres, in a television interview Sunday, strongly denied being approached on any scheme to pay the Labor Party in connection with the pipeline project and said he favored it because it would promote security in the region and allow Israel to “enjoy oil for a lesser price.”

Yossi Gal, a spokesman for the Israeli Embassy, denied that there had been any “offer, arrangement and certainly no payment ever made to the Labor Party, government or to Mr. Peres.” But he withheld comment on the proposal to give up to $700 million of proceeds from the pipeline to Israel until he could contact officials in Jerusalem.

Letter to McFarlane

Peres also wrote to McFarlane on Nov. 20, 1985, spelling out the guarantees his country was willing to give the pipeline. The letter was not released with the other documents Monday, but a copy of the correspondence was obtained by The Times.

In the letter, Peres said that the pipeline “will be inviolate from any unprovoked Israeli initiative or action.” He said the guarantee would extend 18 months from the start of construction and for four years after crude oil began to flow through the line to the port of Aqaba.

On Sunday, Peres said he turned to Meese, who as attorney general handles principally domestic matters, instead of State Department officials because he had been “approached by people who told me that the attorney general will deal with it.” A source familiar with the matter said Rappaport suggested Peres contact Meese.

Rappaport has said he retained Wallach because of his Washington contacts, the chief of which is Meese.

‘Appropriate Response’

Meese’s chief lawyer, Lewin, noted that the attorney general “did not take up Mr. Wallach’s suggestions that he personally participate in any discussions concerning the project, that he arrange a meeting with the President, or that he learn--and tell Mr. Peres in advance of his departure for the United States--whether there would be an ‘appropriate response’ to his letter.

Wallach’s “words ‘which would be denied everywhere’ did not imply illegality of any kind,” Lewin said. “The fact that Rappaport intended to provide large amounts of financial support to the Labor Party, or that through some governmental arrangement the Labor Party would be receiving indirectly some of the project’s proceeds, could cause political embarrassment in Israel and was obviously not a matter to be publicized.

“Mr. Wallach frequently used colorful phrases suggesting intrigue and secrecy in his memoranda, even on subjects that were patently innocuous,” Lewin said.

In San Francisco, Wallach attorney George G. Walker said the release of the memorandum, which recounts a purported conversation with Rappaport, “puts to rest” any suggestion that Wallach violated U.S. law by offering a bribe to Peres.

“The one who stated that” payment proposal, Walker said, “is Mr. Rappaport, not Mr. Wallach. All Mr. Wallach was doing, as I understand it, was updating Mr. Meese as to (Rappaport’s) developments as far as the pipeline was concerned.”

Walker said that he believes Wallach “was not sure” what Rappaport meant when he cited a plan to direct payments of pipeline money to the Israelis, “and that is why he sent it on” to Meese in the memorandum.

Rappaport’s attorney, Stephen McGregor, had no immediate comment on the memorandum but said his client may make a statement on the matter today.

Summoned to Geneva

The second Wallach memo to Meese released Monday, also written by him on Sept. 25, recounted how Wallach had been mysteriously summoned to Geneva that month to receive a document from Rappaport.

“I was cryptically advised that there was a written message that I was to transmit back to Washington, to an unnamed person, and additional information to be received directly in person,” Wallach’s memo to Meese states. “In a subsequent phone conversation the following morning . . . I was advised that the message-letter was directed to you.”

The “message-letter” was the handwritten note, from Peres to Meese, in which Peres offered assurances that Israel supported the pipeline and asked for U.S. help in promoting the project.

In the memo, Wallach bemoaned foot-dragging by U.S. government agencies asked to assemble a $400-million insurance package for the pipeline that had been demanded by Iraq as a condition for proceeding with construction of the project. Iraq had refused to accept Peres’ oral assurances that Israel would not attack the project.

‘No Further Efforts’

Wallach complained at one point that Roger W. Robinson, a National Security Council aide assigned to help Wallach, had “indicated that there would be no further efforts to influence the established and traditional banking considerations” of the government-run insurance agency in the deal, the Overseas Private Investment Corp.

Wallach’s own solution to that foot-dragging was for the United States to help Israel provide the $400-million insurance by itself. Israel, Wallach wrote, “is unable to accomplish this on its own and would need some assurance-guarantee that such a step would not impair its . . . domestic economic stability.”

He called for Meese to establish a formal U.S. position on the pipeline project before a Peres visit to Washington scheduled for the next month, saying that Meese, McFarlane and Shultz should be considered as participants.

“I know it goes without saying that a discussion of this subject with the President would be most desired, and I think most effective,” Wallach added.

Wallach’s lawyer said he knows of no evidence that Meese approached either President Reagan or Shultz about government aid for the pipeline deal.

Wallach indicated that his own efforts to win U.S. government support for the project had been impeded by suspicions that were “obliquely stated” in negotiations--”mainly, the fact that B.R. (Rappaport) is going to ‘make a lot of money’ on this project.”