a203  0921  07 Feb 88
AM-Contra-Legality, Bjt,0734
Justice Department Gives Go-Ahead to Private Contra Efforts
By LARRY MARGASAK
Associated Press Writer
    WASHINGTON (AP) - The Justice Department says private supporters of
the Nicaraguan Contras can legally raise funds for the rebels.
    The Contras' backers will have to step gingerly, though, if they
want to avoid past mistakes that have led to criminal charges or made
them - both wittingly and unwittingly - part of the Iran-Contra
affair.
    For instance, U.S. law would prohibit the private backers from
shipping arms now in the United States to the Contras without State
Department approval.
    And the department would have to agree before U.S.-made arms could
be sent from other countries to the rebels.
    Other laws prohibit the launching of private military operations
from U.S. soil and require registration of anyone operating as an
agent of a foreign entity.
    Internal Revenue Service rules say that tax-exempt charitable
organizations must raise money for food, clothing and shelter - not
for weapons.
    Private Contra backers said last week they would try anew to raise
money for the rebels because of the House's rejection of $36.2
million in aid.
    ''Based on my conversations with lawyers here in the department,
it's my understanding that there currently are no laws which prohibit
a private citizen from donating money to the Contras,'' Justice
Department Terry Eastland said.
    Last year, public relations executive Richard Miller and
conservative fund-raiser Carl R. ''Spitz'' Channell pleaded guilty to
conspiring to defraud the government. Independent Counsel Lawrence
Walsh charged them with illegally using a tax-exempt foundation to
raise $3 million to arm the Contras.
    The government was cheated out of tax revenue from donors, who were
wrongly told they could deduct the funds from their income taxes,
Walsh said at the time.
    Wilson Fadely, an Internal Revenue Service spokesman, said
tax-exempt organizations ''will have to show us evidence'' that money
is raised for humanitarian aid. If a group can't do so, it will lose
its tax-exempt status, and also could be subject to criminal laws -
such as the conspiracy statute used against Miller and Channell.
    Individual contributors, who take a deduction for donating to a
group that later loses its tax-exempt status, are safe from
penalties.
    But Fadely said the IRS could collect back taxes from anyone who
took a deduction knowing that the tax-exempt group was not raising
money for charitable purposes.
    Last Nov. 25, the IRS revoked the tax-exempt status of the U.S.
Council for World Freedom, headed by retired Maj. Gen. John Singlaub.
That action was taken because of the group's earlier fund-raising
activities for the Contras.
    On Thursday, Singlaub said he plans to raise money anew, commenting,
''We will make every effort, everything humanly possible within the
law, to raise money.''
    Singlaub and other conservatives said they would join forces to sell
Contra war bonds to raise money for military equipment, food and
supplies.
    Fund-raisers also have to follow the 200-year-old Neutrality Act,
which prohibits the launching of a military expedition from the
United States against a nation at peace with this country.
    A Justice Department source, speaking on condition of anonymity,
said it would be illegal to use private funds to support such an
effort.
    But the source said the department believes there is no violation
when money is raised in the United States, and sent to aid a military
operation launched from another country.
    The source, speaking on condition of anonymity, said it would be
illegal if private funds went to support such a military expedition
sent from U.S. soil.
    The Arms Export Control Act governs the right to ship weapons out of
the United States or to transfer weapons abroad that are U.S. made or
manufactured with U.S. technology.
    Generally, private citizens could raise money to purchase
foreign-made arms that could be shipped to the Contras from abroad.
    But State Department approval would be needed under the act, to ship
arms from the United States - or from abroad, if they were U.S.-made
or manufactured with U.S. technology.
    Under the Foreign Agents Registration Act, anyone acting as an agent
of a foreign entity must register with the government and file
records of collections and expenditures.
    The government usually enforces this law through civil actions,
designed to force the agents to register.
    
 
AP-NY-02-07-88 1206EST
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