WASHINGTON — A newly declassified 1985 memo to Atty. Gen. Edwin Meese III confirms that Israel's Labor Party was to receive part of as much as $700 million in proceeds from a controversial Iraqi pipeline project being promoted by a longtime friend of Meese.
The memo, which is central to an independent counsel's investigation of the attorney general, cited a plan to provide the money to nail down a commitment by Israel not to attack the $1-billion pipeline. Iraq has been Israel's enemy for four decades.
Release of the Sept. 25, 1985, memo marked the first official disclosure that Israel was to have shared in the pipeline revenues. Headed "PERSONAL & CONFIDENTIAL--FOR YOUR EYES, ONLY," the document said that the arrangement for channeling some of the funds to the Labor Party "would be denied everywhere."
Sought Meese's Help
It was written by San Francisco lawyer E. Robert Wallach, a longtime Meese associate, at a time when he was seeking the attorney general's help in obtaining a U.S. stamp of political and financial stability for the pipeline project. Wallach had been hired as a private attorney for the project, which was never built.
The proposed payments to Israel are being investigated by independent counsel James C. McKay, who is looking into possible violations of the Foreign Corrupt Practices Act. The federal law prohibits U.S. citizens from bribing foreign officials and specifically requires the attorney general to take legal action to prevent a violation if one appears imminent.
In his memo, Wallach said that the information about the payment plan was provided by "B. R.," initials that Meese's lawyers said referred to Bruce Rappaport, a Swiss oilman and friend of then-Israeli Prime Minister Shimon Peres, who had retained Wallach in the venture. Rappaport has strongly denied knowing about or suggesting any plan to bribe Peres or his Labor Party.
The two-page memo and other documents were declassified last Friday and made public Monday by Meese's lawyers to counter what they called "incendiary allegations" that have appeared in the press about the attorney general and the pipeline project.
In addition to the 1985 document, Meese attorney Nathan Lewin released another memo from Wallach to the attorney general dated on the same day, a handwritten letter from Peres to Meese, and Meese's handwritten response.
Viewed 'in Context'
If the passage referring to the Labor Party payments is viewed "in context," Lewin said, "no one can fairly infer that Mr. Meese or anyone else reading the document should have understood that there was a 'bribe' or 'payoff' scheme to obtain the Israeli Labor Party's support for the pipeline project."
After existence of the Wallach-Meese memo was first disclosed by The Times on Jan. 29, Meese read a statement on his role in the pipeline matter--a highly unusual move in the midst of a continuing investigation--saying that only 10 words "have given rise to this speculation." He added that he did not recall having read those words, which refer to the Labor Party payment plan, but that he still does not believe they suggest any violation of law.
"The statement that a portion of the funds to be received by Israel 'will go directly to Labor' would not alert a knowledgeable reader to any illegality," Lewin said in a seven-page statement distributed with the documents.
"Israel provides direct governmental funding to its political parties," Lewin said. "Atty. Gen. Meese could not have known whether these funds would go 'directly' from the Israeli government or by some other internal allocation over which United States officials have no knowledge or control."
Peres, who heads the Labor Party, said in his Sept. 19, 1985, letter to Meese that he "would go a long way to help it (the pipeline project) out. But then discretion is demanded on our part."
Noting that he would be in Washington the following month, Peres said he wanted to discuss the project with Secretary of State George P. Shultz and asked Meese to let Shultz know ahead of time.
Cites Meese's Judgment
"I have asked my friend Bruce (Rappaport) and Bob (Wallach) to let you know the whole story, and I shall depend on your judgment about the best way to handle this matter," said Peres, now Israel's foreign minister.
Sources have said that this letter to Meese, when examined with other pipeline documents, could seriously undermine Peres' political standing. State Department fears of this potential damage to Peres, widely viewed as the United States' major hope for a breakthrough in Middle East peace efforts, was at least partly responsible for a delay in declassification of the papers.