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James C. McKay
in the
New York Times -- January 31, 1988



U.S. Aides Say Counsel Told How the Attorney General Sustained '85 Project

Special to the New York Times

The special prosecutor investigating Attorney General Edwin Meese 3d told senior White House aides Friday morning that Mr. Meese had played an important and sustained role in 1985 in promoting an oil pipeline project in which Mr. Meese's close friend had a financial interest, according to Administration officials.

One official said today that the special prosecutor, James. C. McKay, had described steps Mr. Meese took to assist the project, which is the focus of Mr. McKay's inquiry.

Administration officials familiar with the project, which was never carried out, said Mr. Meese's intervention almost succeeded in reviving a project that in mid-1985 seemed moribund. The project was not definitively abandoned until January 1986.

President Affirms Support

Meanwhile, there is no evidence that the White House is urging Mr. Meese to resign. In fact, after the Friday briefing, the President publicly reaffirmed his faith in Mr. Meese. The White House repeated that affirmation today.

Mr. McKay appears unlikely to take any conclusive action in the near future. Many of the potential witnesses have said they have not yet appeared before a grand jury. Mr. McKay's case also involves in part foreign nationals and other countries, which complicates the gathering of evidence.

Status of Inquiry Unclear

The precise status of the investigation is unclear; witnesses have been instructed not to discuss their testimony. And Mr. McKay has not made any public statements about his inquiry.

Mr. McKay appears to be building his case around a 1985 plan by Mr. Meese's close friend, E. Robert Wallach, to enlist Mr. Meese's backing for a billion-dollar Iraqi pipeline project in which Mr. Wallach had a financial interest, according to numerous sources familiar with the investigation.

Israel's Foreign Minister, Shimon Peres, confirmed today that his Government gave the United States guarantees that Israel would not interfere with the pipeline. Mr. Peres did not specifically deny that his Labor Party was to have received payoffs in return for a promise not to harm the pipeline. He did say, however, that he never discussed financial matters with Mr. Wallach. [ Page 11. ] Part of Mr. McKay's evidence is derived from memos Mr. Wallach wrote to Mr. Meese about the project, including one memo that indicated that the project would involve a series of payments to the Israeli Labor Party, according to present and former United States Government officials. Though the project was never carried out, the plans and lobbying for the pipeline may have involved violations of American law, the officials added.

The special prosecutor is said to be examining the possibility of a violation of the Federal Corrupt Practices Act of 1977, which makes the Attorney General responsible for prosecuting American citizens or companies that try to bribe foreign officials.

Potential Criminal Charges

Under that law, Mr. Meese could face legal problems if he had knowledge of an illegal bribe plot and did nothing. Beyond that, if Mr. Meese assisted Mr. Wallach in a violation of that or other laws, he could also face potential criminal charges.

Attorneys for both Mr. Wallach and Mr. Meese have denied their clients were involved in any wrongdoing, but they have not denied they were involved in the pipeline project.

A lawyer for Mr. Wallach, George Walker, said yesterday that the allegations of misconduct against his client were "totally incorrect" and that Mr. Wallach "had not done anything unlawful in any activity he performed while he was in Washington or at any other time."

Mr. Walker, a San Francisco lawyer, represents Mr. Wallach in other matters, including the investigation into the Wedtech Corporation, a Bronx military contractor. Mr. Walker said Mr. Wallach was precluded from making detailed responses because they involved "a national security matter" and "it's classified so you can't even discuss it."

"It is distressing to have what appears to be an unconscionable approach by the media in relying on so-called reliable, anonymous sources," Mr. Walker said when reached by telephone at the Essex House in New York. He said the allegations were "obviously" an attempt to smear Mr. Meese.

The role of Israel in the pipeline project complicates Mr. McKay's investigation. It is believed that Mr. McKay did not obtain all the evidence he needs from Israel before news accounts of his investigation began to appear.

The investigation of Mr. Meese began last May, as Mr. McKay studied efforts by Mr. Wallach and Mr. Meese to help the Wedtech Corporation.

On Friday, at the trial of Lyn Nofziger, a former aide to President Reagan, on charges of violating Government ethics laws, a former official of the Small Business Administration testified that the agency helped Wedtech finance a military contract only because of interest expressed by a top aide to Mr. Meese.

Mr. McKay obtained permission from a Federal appeals court last August to broaden his investigation to include areas other than Wedtech. It appears that in obtaining the correspondence between the two men—it is not clear from whom Mr. McKay secured the memo in question—he learned about the pipeline project. By September, Mr. McKay's investigators had begun questioning witnesses about the pipeline.

An Investment Partnership

Mr. McKay has also been examining Mr. Meese's finances. In May 1985, when Mr. Wallach enlisted Mr. Meese's official help for the pipeline, he also steered the Attorney General to invest his assets with a friend in an investment partnership that Mr. McKay has also been examining.

Finally, Mr. Meese may have been prohibited under conflict of interest laws from any official dealings with Mr. Wallach during May 1985, because Mr. Wallach had not yet been paid for legal work he did for Mr. Meese in 1984.

Mr. Wallach's use of his influence with Mr. Meese led to his indictment last December on charges he received payments from Wedtech in 1983 and 1984 as part of a scheme to influence Mr. Meese. There is no evidence that Mr. Meese shared in any of those payments.

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