Walsh Probing ‘Deceit’ at Highest Levels : Iran-Contra: The special prosecutor hints that Reagan and other top officials knew Congress was not being told of aid to the Nicaragua rebels.

Independent counsel Lawrence E. Walsh said Thursday that he is pressing forward with his investigation into the Iran-Contra affair and is concentrating on what he now considers the “essence of the crime”: “a pattern of deceit” at the highest levels of the Ronald Reagan Administration.

Walsh said that part of the deception centered on Administration efforts to hide from Congress the White House’s secret efforts to arm the Nicaraguan Contras during a two-year congressional ban on U.S. military aid to the rebels.

Although he refused to discuss former President Reagan’s role, Walsh hinted that Reagan and other Administration officials were aware that Congress was not being told of the secret Contra support during the aid ban.

“How could it be unknown (that) Congress was not getting the true story?” Walsh asked. For example, he said, Administration officials knew that during the aid ban the bulk of the financing for the Contras came from Saudi Arabia.

Reagan has admitted discussing the Saudis’ Contra donation with King Fahd, and one of his former national security advisers, Robert C. McFarlane, has pleaded guilty to withholding from Congress his knowledge of the Saudi funding.

“Regardless of who knew what about particular details of the operation, was there any doubt (in the Administration) that Congress was not being told these details honestly?” Walsh said.

“You knew the Contras were being funded,” Walsh said, referring to Administration officials. “You knew (the Contras) would not get (new congressional) funding if Congress was told the Contras already were getting money from the Saudis and other places.”

Walsh said the driving force behind deceiving Congress was not whether the Administration was violating the aid ban, known as the Boland Amendment, but that Reagan aides feared Congress would refuse to resume direct U.S. military assistance to the Contras if it learned of the secret White House activities.

Walsh said he has concluded that the diversion of U.S.-Iranian arms sales profits to the Contras--the issue that has dominated his investigation and a separate one by Congress--was a “distraction.”

For example, he said, the recent successful prosecution of former National Security Adviser John M. Poindexter clearly demonstrated that the secret diversion of U.S.-Iranian arms sale profits to the Contras was one element of a larger, “generalized pattern of deceit.”

Walsh said the Poindexter case showed also that the “pattern of deceit” included concealing from Congress that the Administration was engaged in trading arms with Iran to gain the release of American hostages held in Lebanon.

Poindexter was convicted of obstructing and lying to Congress about the U.S. role in a politically embarrassing November, 1985, shipment of U.S.-made Hawk antiaircraft missiles to Iran and on charges of obstructing and lying to Congress about the secret Contra resupply operation.

Walsh said Poindexter’s conviction Saturday on all five felony charges filed against him has invigorated his investigation, begun more than three years ago, and will allow him to delve further into whether other former Administration officials were part of the conspiracy to mislead Congress.

Although Walsh said he could not discuss the details of his continuing inquiry, sources have said that the investigation is expected to zero in on agencies outside the White House, particularly the Central Intelligence Agency’s and National Security Agency’s involvement in both the secret arming of the Contras and the U.S.-Iranian arms sales.

Walsh plans also to complete his examination of the precise roles played by Reagan and other members of the National Security Council, including then-Vice President George Bush, then-Atty. Gen. Edwin Meese III and the late CIA director, William J. Casey.

Casey was identified in the Poindexter trial as a co-conspirator with Poindexter in covering up the U.S. role in the Hawk shipment.

There is no indication that Walsh has concluded that Reagan, Bush or Meese was involved in any criminal wrongdoing, but sources said Walsh feels obligated to pin down what they knew.

False statements to Congress are likely to be the core of any further charges Walsh might bring.

Walsh said court rulings in the Iran-Contra cases have established an important principle: that lying to Congress is a crime even if an official is not questioned under oath.

For example, Poindexter was convicted of lying to two House committees for statements he gave that were not under oath.

“There’s plenty of room for informal give and take between Congress and the executive branch,” Walsh said. But, “when (congressional) inquiries are formalized, they have to be responded to honestly.”