U.S. Clears Legal Hurdles for Indictment of Marcos

The Justice Department has cleared major legal hurdles to indicting former Philippine President Ferdinand E. Marcos, raising the likelihood that a federal grand jury in New York will be asked to return fraud charges, sources familiar with the investigation said Friday.

However, the indictment is expected to be more narrowly focused than the broad conspiracy case originally recommended by federal prosecutors. Sources said it would deal only with accusations of wrongdoing by Marcos after he was deposed in February, 1986.

Prosecutors recently narrowed their case to overcome doubts about whether U.S. law would apply to Marcos’ alleged efforts while outside the United States to misappropriate billions of dollars in Philippine taxpayers’ funds.

The New York investigation has centered on allegations that Marcos and his wife, Imelda, conspired with Saudi Arabian financier Adnan Khashoggi and others to violate U.S. court injunctions by secretly transferring ownership of hundreds of millions of dollars in stolen art and Manhattan real estate purchased with Philippine government funds.

According to court records in related civil lawsuits, Marcos took control of the assets while he was still president but used elaborate schemes involving front companies and agents to conceal his ownership and to liquidate the properties after he flew to exile in Hawaii at the invitation of President Reagan.

In one instance, according to sources and court records, federal agents have been investigating whether real estate ownership was transferred from Marcos with fraudulently backdated legal documents intended to make it appear that the property was sold before the Philippine revolution.

Although the New York criminal case still must pass a political review by the White House, elimination of nettlesome evidentiary problems--including internal Justice Department criticism about the thoroughness of the investigation--represents a significant breakthrough for prosecutors led by U.S. Atty. Rudolph W. Giuliani in New York.

Problems with the legal case were settled, sources said, before White House meetings this week of the inter-agency Policy Review Group, whose role became more prominent in the wake of the diplomatically embarrassing attempt to prosecute Panamanian strongman Manuel A. Noriega on federal drug charges in Florida.

Charges Detailed

At a White House meeting Tuesday, Giuliani and his staff presented details of their proposed criminal charges against Marcos to diplomatic and intelligence advisers who are expected to offer their own views next week on the case’s potential impact on U.S. foreign relations.

It is not clear when the President will make his decision or what it is likely to be, but sources have told The Times that there is important support for the indictment among State Department officials.

Philippine government officials welcomed word that the legal problems were solved but expressed some concern about what Reagan would do.

“There has been considerable skepticism in Manila about President Reagan’s willingness to approve the indictment of Mr. Marcos,” Severina Rivera, general counsel for the Philippine government’s Presidential Commission on Good Government, said in a statement issued from the embassy in Washington.

“If he approves it, Filipinos everywhere will applaud Mr. Reagan and the American system of justice that applies the full force of the law to corrupt dictators who violate U.S. laws.”

‘Will Lessen Tensions’

Other Philippine sources said a Marcos indictment in the United States “will lessen tensions” between the two countries.

But there was also some concern that news reports pointing to the likelihood of an imminent indictment might prompt Marcos to attempt to leave U.S. jurisdiction.

“He’s been trying to set up arrangements with various other countries for some time,” a source close to the investigation said. “We’re afraid that now that he sees the indictment getting close, he may flee to Morocco.”

The Marcos indictment, expected for several months, was delayed by a number of factors, including the Noriega controversy and the departure of top Justice Department officials before the recent resignation of Atty. Gen. Edwin Meese III.

There also was internal criticism of the quality of the legal case. Justice Department officials, including Francis A. Keating II, acting associate attorney general, through whom all criminal matters are routed, had expressed reservations about the draft charges Giuliani sent to Washington in July.

But additional investigation and restructuring of the charges have eliminated those reservations, sources said. The evidentiary “holes” have been filled, and the proposed charges now focus largely on actions Marcos allegedly took after leaving the Philippines, the sources said.

Feared ‘Wrong Message’

Officials feared that indicting Marcos for actions he took while in office would send the “wrong message” to other foreign leaders whom the United States might want to persuade to step down without a blood bath, one official explained. Such leaders could have cited Marcos’ experience in arguing that stepping down could lead to their indictments, the official said.

The proposed fraud and conspiracy charges, while including actions Marcos took in office, would depend heavily on allegations that he continued the activities while in exile, according to the sources.

The case is particularly sensitive for Reagan, who did not take part in Tuesday’s meeting with Giuliani, because the President ensured a safe haven in America for Marcos, a longtime friend, during the final days of his regime.