$10 Million May Have Gone to Khashoggi, Not Rebels : U.S. Urged Sultan to Get Contra Aid Back

WASHINGTON —  The State Department, after soliciting $10 million in aid for the Nicaraguan rebels from oil-rich Brunei, advised the sultan of the Asian nation to ask for a refund because there was no assurance that the money would actually go to the contras , officials said Tuesday.

Assistant Secretary of State Elliott Abrams, who had asked the sultan last summer to send the money to White House aide Oliver L. North, called back last month to warn Brunei officials that they should ask for the money back after North was fired, the officials said.

North Controlled Accounts

But the money already had disappeared into the Swiss bank accounts controlled by North and his associates, they said.

“We don’t know whether the contras ever saw a dime,” said one official with knowledge of the strange series of transactions.

One official said that there is some suspicion that the $10 million may have gone to reimburse Saudi Arabian middleman Adnan Khashoggi for money he and others had advanced to finance the Reagan Administration’s secret arms sales to Iran. “The amount matches up, but we haven’t seen any real evidence,” he said.

Abrams, acting on orders from Secretary of State George P. Shultz, had asked the sultan to contribute to the contras last summer when the rebels were low on funds, officials said. At the time, Congress had blocked U.S. military aid to the contras for two years and a $27-million fund for non-military aid to the rebels was running out.

Action Called Legal

Abrams’ action was legal under a 1985 law that specifically allows the State Department to seek “humanitarian aid” for the contras from other countries, officials said.

The sultan, a strongly anti-communist leader who has sought a closer relationship with the United States, agreed to help the rebel cause. U.S. officials then provided Brunei with the number of a secret Swiss bank account under North’s control.

But Abrams did not know that the sultan had sent the $10 million because North had told him that no money had been received. “Either he (North) was lying, or he didn’t know himself,” an official said.

Only last month, after North was fired from the National Security Council staff, did Abrams check back with Brunei.

“He said: ‘If you haven’t sent the money, don’t--and if you have sent the money, get it back,’ ” the official said. “The Bruneians said: ‘We sent $10 million.’

“As far as we know, they haven’t gotten it back,” he said.

Accounts Frozen

The official said it is not clear whether any of the sultan’s money is still in the secret bank accounts, which have been frozen by Swiss authorities at the request of the U.S. Justice Department.

A Khashoggi associate complained to CIA Director William J. Casey in October that the Saudi financier and several business partners were short $10 million for their part in the Iranian arms deals. The Khashoggi group had put up that sum to finance a shipment of U.S. weapons to Iran last July, but the shipment fell through and the money apparently disappeared, congressional investigators said.

But the investigators and other officials said it is not clear whether there is any connection between Khashoggi’s $10 million and the sultan’s missing money beyond the fact that the amounts are identical.

Couldn’t Monitor Funds

An Administration official said that the State Department had been prepared to monitor the use of the money from Brunei to ensure that it was not spent for weapons but could not because North never notified Abrams that the money had arrived.

Direct U.S. military aid to the contras has been legal since October. The CIA is now shipping arms, ammunition and other supplies to the rebels through bases in Honduras and Costa Rica, U.S. and contra officials said.