Charges Against North Dismissed : Iran-Contra: Judge drops case at request of independent counsel. Testimony by McFarlane is cited as roadblock to reinstating ex-Marine’s convictions.

A federal judge on Monday dropped all criminal charges against Oliver L. North, the central figure in the Iran-Contra scandal, ending a saga that the former White House aide characterized as “five years of fire.”

U.S. District Judge Gerhard A. Gesell dismissed the case at the request of independent counsel Lawrence E. Walsh, who said that testimony provided last week by North’s former boss, Robert C. McFarlane, made it unlikely that North’s previous convictions could be reinstated.

North, a retired Marine lieutenant colonel, was accused of setting up a network to finance the Nicaraguan rebels after Congress had outlawed such assistance and of diverting funds from the secret sales of arms to Iran to help pay for the assistance.

He was convicted in May, 1989, on three charges arising from his role in the scandal. But an appeals court later ordered Gesell to hold a special hearing to determine whether any of the witnesses at his trial had been influenced by North’s congressional testimony, which he had been assured would not be used against him in court.

North, who four months ago denounced Walsh as “an imperial prosecutor” and “a vindictive wretch” for pursuing the case against him, appeared relieved but subdued Monday as he declared himself “totally vindicated.”

Walsh, however, was more circumspect. “These things speak for themselves,” he said. “I don’t think prosecutors should comment beyond that.”

Although some Republican senators immediately called for Walsh to shut down his 4 1/2-year investigation of Iran-Contra, the independent counsel made clear he has no such intention. He said the recently rejuvenated inquiry is operating under “very heavy pressure” imposed by a five-year statute of limitations, and indicated that additional prosecutions are likely.

The dismissal came in a three-minute court session as Gesell declared: “This terminates the case.” North, markedly grayer than when he defiantly testified during six days of televised congressional hearings four years ago, hugged Brendan V. Sullivan Jr., his chief defense counsel, his beaming wife, Betsy, two daughters and friends who surrounded him.

In July, 1990, the U.S. Circuit Court of Appeals threw out North’s conviction on one count of destroying documents. The appeals panel set aside his convictions on the remaining two counts of aiding in the obstruction of Congress and accepting an illegal gratuity--a $14,000 security fence for his home.

The appellate court, splitting 2 to 1 with the panel’s two Ronald Reagan appointees voting to overturn, held that the prosecutors had to prove in court that North’s televised testimony had not influenced that of other trial witnesses.

McFarlane, the first witness at the hearing called by Gesell to carry out the appellate court’s order, jolted prosecutors by asserting that North’s “riveting” congressional testimony had colored the version of events that he provided at the trial.

Asked about Monday’s ruling, President Bush told reporters he was “very pleased to see the Ollie North decision. He’s been through enough.”

“That’s the system of justice working,” Bush said, adding that “on a personal basis and for his family who’ve been through a lot, I’m very, very pleased.”

Gesell sentenced North in July, 1989, to 1,200 hours of community service, $150,000 in fines and two years of probation. North performed the community service by working in an anti-drug program in a narcotics-infested area of Washington, but the fine was not paid pending resolution of North’s appeal.

“Congratulations, colonel,” a U.S. marshal said as North entered Gesell’s high-ceilinged courtroom Monday morning. “Thanks,” North responded, patting the marshal on the shoulder. “It’s a great day,” he added as he followed his wife and daughters inside.

During the hearing North sat motionless and ramrod straight on the edge of his chair, his head slightly cocked as if straining to hear every word.

After the hearing, North said the dismissal restored his status as “a lieutenant colonel, United States Marine Corps, retired,” presumably including his pension.

Although the independent counsel provisions of the Ethics in Government Act appear to bar the government from reimbursing legal fees once an indictment occurs, North said in an interview that he had been discussing attempts to recover the fees. “Our expenses have been extraordinary,” he said. When asked to disclose the actual amount, he laughed and said “billions.”

A substantial portion of the fees, however, are believed to have been covered through fund-raising efforts by North’s supporters.

Walsh declined comment on whether the dismissal would have any effect on the appeal of former White House National Security Adviser John M. Poindexter of his Iran-Contra convictions on five felony counts. Poindexter, who was sentenced to six months in prison, raised the issue of immunized testimony tainting his trial when the case was argued seven months ago.

Walsh, noting that he had urged Congress not to grant immunity to North or other potential criminal defendants, said the dropping of the case against North “is a very serious warning that immunity is not to be granted lightly.”

Congress has “the very broad political responsibility for making a judgment as to whether it’s more important that the country hear the facts quickly or that they await a prosecution,” said Walsh, a former federal judge.

“Any illusion that immunity can be granted and then a successful prosecution follow is fraught with utmost difficulty,” he added.

House Speaker Thomas S. Foley (D-Wash.), while insisting that Congress has been “extraordinarily careful” before granting immunity to prospective criminal defendants, acknowledged “there is always a risk that when immunity is granted, that it could affect prosecutions of individual witnesses.”

But he said that Congress’ investigatory role “is one of its fundamental legislative constitutional powers.” Foley said he felt Congress had not made a mistake in granting North immunity.

Senate Republican leader Bob Dole of Kansas said Walsh’s move to dismiss the charges “was made only after years of harassment and millions of dollars of legal fees.”

Contending that Walsh had spent $50 million in his nearly five-year probe, he said every conviction won by Walsh’s prosecutors has been overturned or is likely to be.

Walsh’s office said his expenditures totaled $27.4 million and that nine defendants had been convicted or pleaded guilty, with only North’s conviction reversed.

BACKGROUND

Oliver L. North, a former National Security Council aide, was the key figure in the secret sale of arms to Iran to win the release of hostages and the diversion of proceeds from those sales to finance the Nicaraguan Contras, despite a congressional ban on such assistance. North was one of nine persons convicted so far in the still-unfolding scandal--the most serious blemish on the Administration of former President Ronald Reagan. As the five-year statute of limitations nears for some of the suspected criminal activity, independent counsel Lawrence E. Walsh is probing alleged CIA participation in the Iran-Contra cover-up.