Walsh Alleges Thornburgh Blocked Data : Security: Independent counsel accuses the attorney general of joining with the CIA to prevent disclosure of agency’s role in aiding the Contras.

The Iran-Contra prosecutor Wednesday accused Atty. Gen. Dick Thornburgh of joining with the CIA to block public disclosure of the extent of the intelligence agency’s involvement in illegal support of the Nicaraguan rebels.

In a 12-page report to the chairmen and ranking minority members of the Senate and House Intelligence committees, independent counsel Lawrence E. Walsh questioned “the power of intelligence agencies to frustrate investigations of their own misconduct by professing exaggerated concerns for the preservation of national security.”

A Justice Department official denied that Thornburgh and the CIA had attempted to cover up wrongdoing.

Walsh’s criticism marked his strongest attack yet on Thornburgh’s Oct. 12 decision blocking disclosure of classified information that led to the dismissal of false statement and obstructing investigation charges against Joseph F. Fernandez, former CIA station chief in Costa Rica.

And the Justice Department, in a letter of its own to the lawmakers, said that the prosecution was dropped because of a tactical decision by Walsh early in the litigation and belittled the case as “a relatively weak one.”

W. Lee Rawls, assistant attorney general for legislative affairs, said that “those . . . familiar with the case” had said it would not have been brought “had Fernandez been willing to cooperate with the prosecution.”

While a criminal conviction of Fernandez might have spurred his cooperation, Rawls said, there are other mechanisms available to elicit it, an obvious reference to giving the former CIA official immunity from prosecution.

James Reynolds, a career Justice Department lawyer who has worked on its legal positions relating to Walsh’s efforts, said: “Obviously, the attorney general and the CIA are not engaging in collusion to cover up wrongdoing.”

The CIA did not respond to a request for comment.

The unusual public exchange of criticism by two federal prosecutive arms could be a preview of the intense dispute expected in 1992 when the independent counsel statute comes up for renewal.

Walsh promised “a more comprehensive presentation” on the power of intelligence agencies to block investigations when he makes his final report to Congress, expected next year.

“But this brief supplemental report concerns the present capability of agency (CIA) lawyers to exhaust and frustrate courts and independent prosecutors confronted with problems of law enforcement,” Walsh said.

At issue is the move by Fernandez to disclose secret U.S. projects in Costa Rica and the location of CIA facilities in Central America to support his defense that CIA headquarters had detailed information about the program to resupply the Contras and that it encouraged the efforts.

The U.S. 4th Circuit Court of Appeals, in upholding the Fernandez position last month, said that the key to his defense “was to use the fact of massive CIA involvement in the resupply operation” to prove that he had not misrepresented his involvement.

Walsh said that 15 months elapsed between a federal judge’s ruling favoring Fernandez and Thornburgh’s final decision that the information could not be disclosed without grave damage to national security.

“The attorney general and the CIA not only frustrated the public development of this proof, but did so in a manner that exasperated the district court and dragged out the resolution of this issue in unproductive litigation,” Walsh said in his report.