GENEVA — Swiss financier Bruce Rappaport, lashing out at his one-time associate in an Iraqi pipeline project now at the center of an investigation of Atty. Gen. Edwin Meese III, says the most serious allegations in the inquiry have resulted from a "twisted" account of the affair put forth by E. Robert Wallach, a longtime friend of Meese.
Rappaport, in his first public denunciation of Wallach, denied that any pipeline proceeds were to go to the Israeli Labor Party, a proposal cited in a 1985 memo from Wallach to Meese that is the primary focus of an independent counsel's investigation.
Instead, Rappaport said, under a secret arrangement, Israel itself would have been a one-third partner in the venture, receiving a total of $65 million to $70 million a year in oil or cash.
Sought U.S. Support
Speaking of Wallach and his memo's references to Labor Party payments, Rappaport, the main promoter of the $1.2-billion pipeline, said: "I don't know how to read his crooked mind."
Rappaport retained Wallach because of Wallach's Washington contacts--chief of whom is Meese--in an effort to obtain U.S. support for the pipeline. In the 1985 memo to the attorney general, Wallach outlined "an arrangement with (then Israeli Prime Minister Shimon) Peres to the effect that Israel will receive somewhere between $65-$70 million a year for 10 years" in exchange for a guarantee that it would not interfere with the pipeline, which was never built.
But Wallach's memo went on to say that, although it "would be denied everywhere," a portion of the funds would go to Peres' Labor Party. Sources say that could constitute a potential violation of the Foreign Corrupt Practices Act, which prohibits U.S. citizens, firms or their agents from bribing foreign officials. The act also says the attorney general may, at his discretion, take legal action if a possible violation appears imminent.
Rappaport's angry and blunt remarks, made in an interview with The Times, indicate a deep division among the ranks of the principal players in the pipeline dealings. The financier, an extremely private man who has shunned publicity for most of his long and successful career, said he felt compelled to tell his side of the pipeline story to clear up what he called distorted and erroneous reports.
The account by Rappaport, one of only a handful of principals with extensive knowledge of the complicated affair, provides a number of revelations in the labyrinthine tale of international political intrigue. Among other things, Rappaport said:
--Israel was to have received its share of the pipeline proceeds in cash or in oil secretly funneled through a third country. Israel stood to gain hundreds of millions of dollars overall through the project but, because Jerusalem and Baghdad are longtime enemies, it could have received Iraqi oil only through a third country, such as Mexico or Egypt.
--This agreement was never put into writing between the investment group and Israel. It was detailed, in distorted fashion, only in Wallach's memo to Meese.
--Wallach was paid a total of $150,000 in legal fees in a single payment forwarded to W. Franklyn Chinn, investment adviser to him and to Meese. Questions have been raised about whether Chinn could have used these funds to benefit the attorney general, although Meese's lawyers deny that he received any such financial gain.
--Former National Security Adviser William P. Clark, initially brought into the affair by U.S. officials as an unpaid private consultant to the government, was to have been paid $500 an hour by Rappaport, who called Clark "an idiot" for later turning against the project.
--The pipeline project is still alive, more than two years after it was believed to have been killed. Rappaport says his attorneys are trying to persuade Bechtel Group Inc., the huge construction firm that was to build the pipeline, "to move on it," although a spokesman for the company said that "we have no evidence that the project has been revived."
Rappaport said he was unaware that the attorney general was being informed about any details of the pipeline affair, such as through extensive memos by Wallach. He also said he will give sworn testimony, at a location outside the United States, to independent counsel James C. McKay in his investigation of Meese.
George G. Walker, Wallach's attorney, said he was puzzled by Rappaport's criticism of his client. "I don't know what Mr. Rappaport's state of mind is," Walker said. "I don't understand how he can say that. Bob Wallach wrote him (memos) every day."
But Rappaport said in the interview that although his office had received numerous memos from Wallach, he was unaware of them at the time because of his travels and busy schedule. He said he did not look at the memos until he was contacted by the special prosecutor and found then that some had not even been opened. "The man loved to write. It was full of what he had for breakfast. It was mainly about himself," the financier said.