The MacNeil/Lehrer NewsHour

Intro ROBERT MacNEIL: Good evening. Leading the news today, the administration has reportedly delayed its plan to provide protection for Kuwaiti tankers in the Persian Gulf. An ex CIA agent said he quit the secret operation to supply the contras because of corruption. A former U. S. Ambassador said he was sent to Costa Rico to open a second front for the contras. And a highranking cuban official has defected to the U. S. We'll have details in our news summary in a moment. Jim? JIM LEHRER: After the news summary, Judy Woodruff's coverage of the day's Iran contra hearings, a Charles Krause report from Costa Rica, a look at the big losses of the big banks, and an update from Seattle on the Archbishop Hunthausen case. News Summary LEHRER: There was bipartisan criticism from the Senate leadership today about U. S. Persian Gulf policy. Both the Democratic and Republican leaders raised questions about continued use of U. S. ships to escort oil tankers through the Gulf. Republican Minority Leader Robert Dole spoke after a White House meeting with President Reagan. Democratic Majority Leader Robert Byrd did his speaking on the Senate floor. Here's what each said.

Sen. ROBERT BYRD, Senate Majority Leader: I hope the administration will undertake to clearly explain the policy and the longterm goals of this nation to the American people. The failure to build this kind of necessary support before we put this nation's sons and daughters at risk jeopardizes our nation's ability to keep its commitments around the globe. Sen. ROBERT DOLE, Minority Leader: I think there are a lot of reservations on the part of the American people. We get about 7% of oil. We understand that we've been there for 40 years, and we don't want to turn that area over to the Soviet Union. But I don't believe we've yet explained any real reason that we should be providing free escort service to every other country that depends on that part of the world for its oil supply. I don't think we want to leave the Persian Gulf area, don't misunderstand me. But I think we do want a little clarification of our policy. LEHRER: Late this afternoon, the Associated Press quoted unnamed Pentagon officials saying the Persian Gulf protection plan had been put off for several weeks. The officials were quoted as saying ''Reregistering Kuwaiti oil tankers under the U. S. flag would continue, but military escorts by American naval vessels would not begin for several weeks. Earlier today, White House spokesman Marlin Fitzwater said Mr. Reagan would raise the Persian Gulf protection issue with U. S. allies at the economic summit in Vienna next month. Robin? MacNEIL: In the Iran contra hearings today, former CIA agent Felix Rodriguez said he broke with the secret operation to resupply the Nicaraguan contras run by Lt. Col. Oliver North because he was concerned about corruption. Rodriguez, a CIA veteran referred to overcharging, bribery, and unreliable ammunition. He was asked about his concern that retired General Richard Secord, who ran the operation for North, might steal the supply planes and stop the airlifts once the ban on U. S. aid expired.

Sen. PAUL TRIBLE, Jr., (R) Virginia: Why do you believe they attempted to terminate the operation? In your testimony -- in your transcript, you said, ''They had decided they were not going to get the CIA contract, they were trying to move everything out, and I was not going to let them steal it. '' FELIX RODRIGUEZ, former CIA Agent: Yes, sir. Sen. TRIBLE: Is that right? Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: That was your judgment at the time? Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: And that is your judgment today? Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: Who were you concerned about trying to steal those aircraft? Mr. RODRIGUEZ: Well, sir, I was concerned that they would receive orders from the owner, which is General Secord, and take the airplanes somewhere else. MacNEIL: Another witness, former U. S. Ambassador to Costa Rica, Lewis Tambs, said he was sent there with orders to open up the second front for the contras. Tambs said he didn't question the legality of his instructions. He said, ''When you take the King's schilling, you do the King's bidding. '' LEHRER: There was a prayer service today for the 24 men being held hostage in Lebanon and elsewhere in the Middle East. Families of the hostages and former hostages participated in the service at the Crystal Cathedral outside Los Angeles. Similar services were also held at Notre Dame Cathedral in Paris and at 200 other churches in Britain, South Korea and Ireland. MacNEIL: The State Department clashed with a special prosecutor today, to head off a diplomatic struggle with Canada over the perjury trial of former White House aide Michael Deaver. On Tuesday, the Independent Counsel, Whitney North Seymour, sent an FBI agent to subpoena the Canadian Ambassador, Allan Gotlieb, and his wife, to testify at the trial. The Canadians refused, citing diplomatic immunity. Seymour claimed they had waived immunity by answering questions earlier about Deaver's role as an advisor to Canada about acid rain. The Canadians said they had not waived immunity. LEHRER: The Senate Congress Committee today took on the issue of safety in the summer skies. They heard from Federal Aviation Administration head Donald Engen on why the FAA has decided not to order a reduction in airline flights, and then heard from the man who suggested such reductions, James Burnett, Chairman of the National Transportation Safety Board.

JAMES BURNETT, National Transportation Safety Board: The FAA, I believe, is trying to run the system up to the red line. And I'm not in favor of that. Ithink we don't need to play a game of ''chicken'' to see how close we can get. We need to run the system on cool instead of on hot. We need to build in a margin of safety, some slack, if you will. DONALD ENGEN, Federal Aviation Administration: I don't want to paint a rosy picture, but I am not concerned that we do not have the means to prevent near midair collisions. Sen. JOHN McCAIN, (R) Arizona: How do you reconcile these two diametrically opposed points of view? Mr. ENGEN: What I have resisted is just a blanket reduction out there, because somebody has a feeling that we've got just too many airplanes out there. The way to achieve safety -- true safety -- is to take every airplane and put it in a hangar and lock the hangar door, and everybody go on the train. LEHRER: A highranking Cuban defense official used an airplane to defect to the United States today. The plane landed in Key West Naval Air Station in Florida this afternoon with the man and his family. U. S. authorities identified the defector as Rafael del Pino. They said he was either a highranking Air Force official, or Deputy Chief of Defense. MacNEIL: Finally in the news today was the climax in one of the rites of spring -- the finals of the National Spelling Bee in Washington, D. C. The winner was 13 year old Stephanie Petit of Bethel Park, Pennsylvania, who outspelled Rachel Nussbaum, 14, of Ithaca, New York. Here are the final moments.

MODERATOR: Dyscalculia -- partly new Latin, partly Latin. It means an impairment of mathematical ability, due to an organic condition of the brain. RACHEL NUSSBAUM: Dyscalculia. D I S C A L C U L I A. STEPHANIE PETIT: Dyscalculia. D Y S C A L C U L I A. JUDGE: That is correct. MODERATOR: Staphylococci. Staphylococci is a plural -- Ms. NUSSBAUM: Staph -- oh, I'm sorry. MODERATOR: Are you ready? I don't want to ruin your momentum. It is any bacteria of the genus staphylococcus. Ms. PETIT: Staphylococci. S T A P H Y L O C O C C I. JUDGE: You're correct. MacNEIL: Ms. Petit emerged from a group of l85 spellers who began the competition yesterday. She will receive $1,500 among other prizes. Rachel Nussbaum, the runner up, will get $1,000. LEHRER: And that's it for the news summary tonight. Now it's on to the Iran contra hearings, a Charles Krause report on Costa Rica, the big bank loss problem, and the update on the Archbishop Hunthausen story. Iran-contra hearings LEHRER: The Iran contra hearings entertained two witnesses today -- a former ambassador and a former CIA operative. Judy Woodruff has our report.

JUDY WOODRUFF: The former CIA man was Felix Rodriguez, who returned for his second day at the witness table. Rodriguez was pressed this morning about his contacts with Vice President Bush's office -- in particular with Bush's National Security Advisor Donald Gregg. Democratic Senator George Mitchell asked about notes Gregg took in a conversation with Rodriguez last August -- which included a puzzling reference to swapping arms for money. Sen. GEORGE MITCHELL, (D) Maine: It also says in here, in about the 6th sentence, ''A swap of weapons for dollars was arranged to get aid for the contras. '' You did not say that to us here yesterday. And my first question is did you say that to Mr. Gregg? FELIX RODRIGUEZ, former CIA operative: No, sir. And I think the thing is very clear the way it's written here, group of make (unintelligible) for dollars. It's very unclear in the handwriting either, but I never said that,sir. Sen. MITCHELL: Now, let me see if I understand this now. You were meeting with Mr. Gregg in his office. You were telling him about your concerns with the Nicaraguan resupply operation? Mr. RODRIGUEZ: Right. Sen. MITCHELL: He was taking notes. Mr. RODRIGUEZ: Right. Sen. MITCHELL: These three pages of notes are his notes of that conversation, and it's your testimony that every other sentence in these notes reflects what you said to him, except for this one sentence that's in the middle. Mr. RODRIGUEZ: That's correct. You can say that. Sen. MITCHELL: So all of the sentences that he wrote before that one sentence accurately reflects what you said. And all of the sentences that he wrote after that one sentence accurately reflects what you said. But that one sentence regarding a swap of weapons for dollars arranged to get aid for the contras you did not say. Sen. MITCHELL: No, sir. Rep. ED JENKINS, (D) Georgia: You really only had two contacts within the U. S. government in high places in which to express your dissatisfaction, your concerns, and that was Col. North. And you did express those concerns to him. And your other high source was the Vice President's office. And you did express your concerns to Mr. Gregg, isn't that correct? Mr. RODRIGUEZ: Yes, sir. When I felt I could do that. Rep. JENKINS: As you had the opportunity to talk with the Vice President, apparently you did not feel that you ought to talk about this directly with him. It just seemed to me that this was the one opportunity that you would have to really express your concerns to the Vice President himself. And you didn't follow through on that, and I'm wondering why you didn't. Mr. RODRIGUEZ: Sir, going in retrospect, and looking back, the main reason I didn't express it to the Vice President or to Mr. Gregg before, I was very concerned with the aid to these people, and it was known to everybody, the people they were using, it would be a big scandal, which it is partially now, and I didn't want to be the one to start the ball rolling in that effect. Rep. JENKINS: You didn't want to bring down another Watergate. Mr. RODRIGUEZ: I didn't want to hurt the contra program at that time, sir. Rep. PETER RODINO, JR., (D) New Jersey: You laid out quite a case to Mr. Gregg about some of the things you considered as wrongdoing, the amount of money that was being charged, certain ammunition, certain weapons. Mr. RODRIGUEZ: Yes, sir. He was very surprised to hear about -- Rep. RODINO: Now, you came up there to see Mr. Gregg in order to communicate with him so that he in turn might communicate this to the Vice President? Mr. RODRIGUEZ: No, sir. I don't believe it was the Vice President's office's business to be involved on this. But I think that he -- Rep. RODINO: Why wouldn't you consider it the responsibility of the Vice President, who serves as the second under -- the second executive in command in this country to know what was going on in that administration? Mr. RODRIGUEZ: Mr. Rodino, they were not involved as far as I knew in all of this. And at the same time, I think the Vice President had a lot more important things to do than being involved something like this matter.

WOODRUFF: Rodriguez talked about the airplanes used to resupply the contras. He believed they belonged to the contras and that they might be taken away from them. Sen. TRIBLE: In your testimony in your transcript, you said, ''They had decided they were not going to get the CIA contract. They were trying to move everything out. And I was not going to let them steal it. '' Is that right? That was your judgment at the time? Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: And that is your judgment today? Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: Now, one final question. You indicated also that because you stood them down, the resupply continued. But then you said you put contra guards onboard the aircraft to make sure they were not stolen. Mr. RODRIGUEZ: Yes, sir. Sen. TRIBLE: Now, what you didn't say yesterday was who was going to try to steal them. Mr. RODRIGUEZ: Who? Would you say that again? Can you ask that question again? Sen. TRIBLE: Yes, sir. The question is, ''Who were you concerned about trying to steal those aircraft?'' Mr. RODRIGUEZ: Well, sir, there was concern they would receive orders from the owner, which is General Secord, and take the airplanes somewhere else.

WOODRUFF: Republican Senator Paul Trible continued to pursue other instances where it appeared those controlling the private operation were hoping to profit from it. Sen. TRIBLE: Now what about this first Caribou? ? You said there was a big profit. Did they make a lot of money on that as well? Mr. RODRIGUEZ: There were comments by some of the crew members that the Caribou had cost extensively more -- three times more -- than it usually will cost. That type of aircraft. Sen. TRIBLE: Now, let me move to another area. You found also examples of old ammunition being delivered to the contras. For example, 81 millimeter rounds built in the early 50s, and you expressed concern about that, did you not? Mr. RODRIGUEZ: Yes, sir. That was the main concern. That the 81 millimeter rounds -- the boxes said that they were built in 19 -- or they were made in 1954. So we had a concern of going through all the trouble of delivering these and then misfiring it. Sen. TRIBLE: What did all of this tell you about Mr. Secord and his lieutenants? Mr. RODRIGUEZ: I wasn't very confident with this type of operation that was being brought down there, sir. Sen. TRIBLE: In fact, it's true, is it not, that you told Col. North and others that this was the old Wilson gang in business once again? Mr. RODRIGUEZ: Yes, sir.

WOODRUFF: After Rodriguez was done, the Committee heard this afternoon from the man who was the U. S. Ambassador to Costa Rica during the period when much of the questionable U. S. support for the contras was taking place. Lewis Tambs describes how closely he worked with Oliver North and with the then CIA Station Chief in Costa Rica, a man who went by the name of Tomas Castillo. [voice over] Tambs is presently a professor of history at Arizona State University. A conservative Latin American scholar and a hardline anti communist, he is an ardent supporter of the contras. Tambs resigned as U. S. Ambassador to Costa Rica last December, amid reports that he had impoperly assisted the Nicaraguan rebels. When Tambs moved into his Costa Rican post in 1985, he reportedly said his only mission was to open a southern front for the contras. Tambs has consistently maintained that all his actions were taken on specific orders from high officials in Washington. MARK BELNICK, Exec. Asst. to Chief Counsel: Now, when Col. North told you -- and I think you used the term, ''We want you to open up the Southern front,'' -- who did you understand the ''we'' to be? LEWIS TAMBS, former Costa Rican Ambassador: It was my understanding that he was speaking for the RIG -- the Restricted Inter agency Group. Mr. BELNICK: Would you describe what you mean by the Restricted Inter agency Group, or the RIG? Mr. TAMBS: Well, that particular RIG dealt specifically with Central America. It was chaired by Assistant Secretary -- he had not been confirmed yet, if I may point that out -- it would be chaired by an assistant Secretary, assuming he had been confirmed, right? It would also include a member from the CIA -- Central American Taskforce -- and additionally a member of the National Security Council -- in this case would be Lt. Col. Oliver North. Mr. BELNICK: Now, the Assistant Secretary of State then awaiting confirmation for inter American Affairs, was Elliott Abrams. Mr. TAMBS: That's correct. Mr. BELNICK: So when you refer to the RIG, you are talking about a restricted agency group that was to be during your tenure in Costa Rica chaired by Assistant Secretary Abrams, correct? Mr. TAMBS: Yes. Mr. BELNICK: And the other members of which, as you understood it, were Oliver North, representing the National Security Council, correct? Mr. TAMBS: Right. Mr. BELNICK: And the Chief of the CIA's Central American Taskforce. Mr. TAMBS: Correct. Mr. BELNICK: What did you understand was the function of this RIG? Mr. TAMBS: It was my understanding that the function of this RIG was to carry out the United States foreign policy in Central America. Mr. BELNICK: Now, to go back. The instruction from North, as you testified to it, was to open a military front against Nicaragua, the Sandinista government in the south, from Costa Rica, right? Mr. TAMBS: Yes. Mr. BELNICK: Now, sir, that's not a typical ambassadorial function, is it? Opening military fronts? Mr. TAMBS: Well, you must understand that ambassadors have a very, very broad mission. One of them, of course, is to defend the United States against all enemies, foreign and domestic. And you're undoubtedly aware that the second stanza of the Sandinista hymn opens with the phrase declaring that the United States is ''the enemy of humanity. '' So one might suspect to have a certain position regarding the United States. Mr. BELNICK: Was this something that had been given to you as an instruction at the Foreign Service Institute -- instruction on opening military fronts as an ambassador? Mr. TAMBS: I never attended the Foreign Service Institute. Mr. BELNICK: Had you received any training at the State Department, or expectation that one of your assignments as an ambassador would be to help open military fronts? Mr. TAMBS: No. And I never received any instruction that I would ever have to deal with Marcos terrorists, either. As far as that goes. Mr. BELNICK: Didn't you consider that this position was in some conflict with the Boland Amendment then in force? Mr. TAMBS: They have a saying in the foreign service, ''When you take the king's schilling, you do the king's bidding. '' To my knowledge the Boland Amendment was very limited. It had been passed when I was ambassador in Colombia, and I'd never read it. I had read it then obviously. And the assumption is -- on my part -- was that if this were instructions that it had been cleared, obviously, with legal counsel or White House staff. And that you can't really expect people in the field to be constitutional lawyers. Because I think you can see what the implications would be -- that if any officer in the field -- be it in the foreign service, or be it in the CIA, whatever -- if he in effect is obliged to check with his own personal lawyer before he carries out an order given to him by a legitimate superior, that the entire government is going to come to immobilization and paralysis.

WOODRUFF: During his term as ambassador, Tambs helped locate a site for a secret air strip in Costa Rica. Tambs told the committee about one meeting in which the air strip was inadvertently brought up. Mr. BELNICK: Do you recall an occasion in the late fall of 1985 when the Assistant Secretary was in Costa Rica being briefed by various embassy officers and other U. S. government personnel at which you were present. Do you recall that? Mr. TAMBS: Yes. Mr. BELNICK: And can you tell us what you recall having happened at that briefing in connection with the airfield? Mr. TAMBS: Well, Tomas Castillo was also present. And the Assistant Secretary began to talk about the airstrip as the people in the room were familiar with. And the vast majority -- that is, all of them, with the exception of (unintelligible) Castillo and myself were not. And I thought that Castillo was going to have a cardiac arrest for a minute. Because it was -- everything was on a need to know basis. And Mr. Abrams had been pulled aside by Tomas Castillo and advised of his possible indiscretion.

WOODRUFF: When a new government was elected in Costa Rica in l986, the secrecy of that airstrip was put in jeopardy. Tambs describes what happened Mr. TAMBS: Well, I was on leave at that time. I was over in -- I think it was around the 5th, Friday the 5th of September -- over in Greenbriar in West Virginia. And I came back from dinner about midnight, and there was a call waiting for me. And I was ordered to call the White House switchboard. And actually I did. And it was Ollie. And he said he had received word fr m the senior CIA representative in Costa Rica that the next morning the Minister of Public Security, Mr. Garon, was going to give a press conference relating to the airstrip of Santa Elena. And that he did not believe that this was a good idea. Mr. BELNICK: Did Col. North ask you to do anything? Mr. TAMBS: Yes, he asked me to call the President, President Arias, and to see if we could dissuade him from this press conference. Mr. BELNICK: And you made that call? Mr. TAMBS: Yes, I eventually tracked -- it's a two hour time difference, so it was, what, midnight in West Virginia? That means it was about l0:00, l0:30 in San Jose. He was at dinner. They eat late there. Mr. BELNICK: And when you called, you told the President of Costa Rica that you didn't think it would be prudent for such a press conference to take place, particularly in light of the ICJ, the International Court of Justice case that was then pending, right? Mr. TAMBS: Correct. Mr. BELNICK: And he told you he would see what he could do about it, right? Mr. TAMBS: That's correct. Mr. BELNICK: And then you received a call back from him saying that he had spoken to the relevant minister, and that the press conference was not going to take place. Mr. TAMBS: That's correct, yes. Mr. BELNICK: You conveyed that information back to Col. North and Assistant Secretary Abrams on a conference call, right? Mr. TAMBS: That's correct. Mr. BELNICK: So the matter ended there, as far as you were concerned. Mr. TAMBS: Yes, because the next day I went on real leave. Mr. BELNICK: Yes, sir. Now, to your knowledge, did Col. North ever call the President of Costa Rica to talk about this press conference? Mr. TAMBS: Not to my knowledge. Mr. BELNICK: Do you have an opinion as to whether Col. North made such a call? Mr. TAMBS: I have an opinion. And the opinion is that I don't think that he did that. But I don't really know. LEHRER: Continuing now on this subject of Costa Rica, Correspondent Charles Krause has a report on problems that developed when Costa Rican officials found out about the secret U. S. backed contra support operations in their country.

CHARLES KRAUSE [voice over]: Costa Rica is the most prosperous, the most democratic, and by far the most peaceful country in Central America. It's a country with 30,000 teachers and no standing army. It's a country where elementary and high school education is compulsory. Illiteracy is virtually unknown. But like other countries in Latin America, Costa Rica has had its share of economic problems. The price of coffee, Costa Rica's most important export, is too low. The country's foreign debt is too high. But still, Costa Rica has a large middle class. And even the poor have easy access to public recreation, to health care, and to other government benefits unique in Central America. Beethoven, played by young musicians, not bullets fired by young revolutionary, reflects the country's national values, and so far, Costa Rica's peaceful way of life. What distinguishes Costa Rica from the rest of Central America is its tradition of democracy. Unlike Panama, Nicaragua, El Salvador, Honduras, and Guatemala, Costa Rica has not experienced the cycle of military coups that have plagued its neighbors. Elections here are held every four years, without violence or intimidation. Last year, for example, Oscar Arias Sanchez, the 45 year old political science professor, and a member of one of Costa Rica's most prominent families was elected President after a hard fought campaign. No charges of fraud, no military intervention. Once again, power was transferred peacefully. Costa Rica has lived under freely elected governments and enjoyed political stability for almost 40 years. OSCAR ARIAS, President, Costa Rica: One of the reasons -- not the only one -- is that we spend our money both from abroad and internal savings, in roads, in schools, in hospitals, in housing, in education, and not in defense. Costa Rica has shown the world and has shown Nicaragua that you can get social change without killing anyone. Without firing squads, without people in jail or in exile.

KRAUSE [voice over]: Since President Arias took office a year ago, he's tried to avoid conflict with his heavily armed neighbor, Nicaragua. Costa Rica abolished its army in l949. Since then, it's relied on a lightly armed national police force for internal security. To protect it from its neighbors, Costa Rica depends on its neutrality, international treaties and world opinion. The Reagan administration has always pointed to Costa Rica as the model of democracy. [on camera] But as a close reading of the Tower Commission Report makes clear, during l985 and l986, the administration was engaged in a covert plan that might have dragged Costa Rica into a war with its neighbor, Nicaragua. [voice over] The plan, apparently conceived by Oliver North, was designed to turn Costa Rica into a political and a military base for the contras. ENRIQUE CARRERAS, National Liberation Party: The whole idea was to convert Costa Rica into a (unintelligible) south.

KRAUSE: Enrique Carreras is a leading member of President Arias's National Liberation Party, an influential advisor to the party on international affairs. Mr. CARRERAS: We feel profoundly offended because, as you know, Costa Rica is perhaps the most, if not the only, pro Yankee country in Latin America. And we feel that certain people in the administration were taking advantage of that fact.

KRAUSE: The history of covert U. S. efforts to create a southern front for the contras, using Costa Rica as a base, dates back to the early years of the Reagan administration. Beginning in late 1982, the CIA backed a rebel army of approximately 2,000 men, commanded by a defector from the Sandinistas, Eden Pastora. According to reliable sources, the agency, and later Oliver North at the NSC, ran at least part of their contra support operation from this farm near the Nicaraguan border. The farm belongs to an ex patriot American named John Hall. From l982, until May of last year, Luis Alberto Monge, then President of Costa Rica, apparently agreed to look the other way. Monge's successor, Arias, has not. What's become a source of tension between Arias and the Reagan administration and a focus of the ongoing Iran contra investigations is the secret airstrip built in Costa Rica two years ago. At that time, Congress had prohibited any U. S. Government official or agency from providing military aid or assistance to the contras. During l985 and l986, the airstrip was used as a vital refueling stop for planes carrying guns and ammunition from El Salvador to the contras inside Nicaragua. According to the Tower Commission report, a Panamanian company controlled by Oliver North, the Udall Corporation, paid to have the airstrip built as part of what North called Project Democracy. Lewis Tambs, then the U. S. Ambassador to Costa Rica, had a direct role in the construction and the operation of the airstrip. Assistant Secretary of State Elliot Abrams on a trip to Costa Rica in l985, asked for details about the airstrip, according to a CIA officer interviewed by the Tower board. Abrams has yet to testify before the Select Committee investigating the Iran contra affair. But the Committee will undoubtedly want to know why the Assistant Secretary tried to stop the Arias government from publicly revealing the existence of the airstrip last September. According to the Tower Commission, Abrams, Ambassador Tambs, and Oliver North conferred urgently by telephone. Then Tambs called Arias, warning him not to proceed with the planned press conference about the airstrip. What angers President Arias is that privately he had asked the United States to stop using the airstrip long before he threatened to make it public. Pres. ARIAS: When I got in power, on the 8th of May, I found out that there was this secret airstrip in the north. And I told Mr. Tambs from now on no one is going to use this airstrip. So I felt very sad when I found out that against my will, that airstrip was used once -- at least what the Tower Report says -- once, perhaps a few other times. No one knows. This is why we sent (unintelligible) letter of protest to Mr. Shultz because we need to find out if that airport was used with the knowledge and with the support of State Department.

KRAUSE: In fact, it was the capture of Eugene Hasenfus by the Sandinistas last October -- not the Arias request to Tambs last May -- that finally brought an end to this secret contra resupply operation. Today, Arias has closed the Santa Elena Airstrip and sent l5 civil guards to protect it. They showed us through a barracks where the contras and their American advisors lived until about 8 months ago. They were apparently paid at least in part by money diverted from the Iranian arms sales. Obviously, at one time, North had plans to expand the operation, not close it down. Many informed Costa Ricans believe that North, the State Department and the CIA used U. S. economic aid as a lever to pressure the Costa Rican government to allow the airstrip at Santa Elena to be built. Federico Vargas was Costa Rica's Ambassador in Washington during l985 and part of l986, before Arias became President and before details of the Iran contra affair became known. [on camera] Mr. Vargas, when you were in Washington, what kinds of pressures were brought on you, or what kinds of discussions did you have with the State Department, with the White House, about Costa Rica's involvements with the contras. FEDERICO VARGAS, former Ambassador to United States: I cannot say that any kind of pressure was ever exerted on me. I did have some fine talks with some of the members of the U. S. diplomatic community -- people who worked with the State Department particularly. In the sense that they pointed out that we Costa Ricans had to be very much aware of the danger that Nicaragua holds for our country. KRAUSE: Were there specific things that they wanted you to do, or wanted you to allow the United States to do in Costa Rica? Mr. VARGAS: No, no. In regards to that, they never mentioned anything like, let us say, the use of Costa Rican soil for operations of the contras or things of that sort. KRAUSE: Did it surprise you when you learned that the CIA's station chief here in San Jose was literally deciding along with Oliver North where the contra resupply missions through Santa Elena were going to drop the material to the contras inside Nicaragua? Mr. VARGAS: It did surprise me, yes. I must confess that it did. KRAUSE: Did that seem to you as a Costa Rican to be appropriate that they were using the embassy right here in San Jose for that purpose? Mr. VARGAS: No, no, I don't think it was appropriate. I doubt that he had (unintelligible) authorization of our government. Pres. ARIAS: We think that our best defense is to be armyless -- not to have an army -- even thought this might sound very paradoxical, very ironic. But if we have no army, we have to believe in the strength of international law. And the strength of the inter American system. We are not afraid of an attack. But if we allow the contras to use our territory, we have to assume the consequences of that.

KRAUSE: One consequence of the war in Nicaragua -- a flood of refugees to Costa Rica. More than l00,000 since the Sandinista revolution in l979. About a third of the refugees live in camps like Alaparall -- men, women and children caught in a military and political struggle they barely understand. Costa Ricans, better educated, are better informed, and they don't have much sympathy for the revolutionary regime in Managua. But most Costa Ricans would rather try to coexist with the Sandinistas than be dragged into a military conflict with their far more powerful neighbor. Costa Rica does not want to recreate the army it abolished almost 40 years ago. Pres. ARIAS: Costa Rica is a country of teachers. It's a country of lawyers. We believe in dialogue. And if we allow our territory to be used by the contras, sooner or later we will get involved in those military conflicts. Sooner or later we'll have to reestablish an army. So how are we going to win this battle? If we show the world that this democracy is more efficient than the Marxist Totalitarian system in the north to fight poverty, fight unemployment, fight the slums, to offer a new, more optimistic 2lst century to the children of Nicaragua and Costa Rica. That's our main challenge.

KRAUSE: Ironically, the Iran contra affair and the revelations contained in the Tower Commission Report may help Costa Rica meet that challenge. The U. S. Ambassador, Lewis Tambs, has resigned and returned to the United States. The CIA station chief has been recalled to Washington. And the Reagan administration no longer has a free hand in Costa Rica. People here now know just how close they came to being dragged into a war with Nicaragua. But today, the Arias government has all but expelled the contras from Costa Rican territory, making clear to both Nicaragua and the United States that all Costa Rica wants is to live in peace. Dead Beat MacNEIL: There's an old saw that if you owe the bank a thousand dollars and can't pay, you're in trouble. But if you owe the bank a million dollars and can't pay, the bank's in trouble. It is suddenly very true. Big U. S. banks are owed billions of dollars by third world countries. They're having trouble paying, and the banks have begun admitting big losses. But if these banks are losing billions, what is the fallout. That's what we examine next. Citicorp, the nation's largest bank, said last week it would lose $2. 5 billion during the April to June second quarter. Yesterday, Chase Manhattan Bank said its second quarter loss would be . 5 billion. Norwest Corporation, a bank holding company based in Minneapolis reported 60 million quarterly loss. To tell us what this means we have John Lyons, former federal bank regulator who now runs his own bank consulting firm in New York, and Jeffrey Sachs, economics professor at Harvard University and advisor to several debtor nations. He joins us from Public Station WGBH in Boston. John Lyons, first of all, are Citicorp and the other banks actually writing off these loans? JOHN LYONS, Bank Analyst: No, they're not, Robin. They're setting up a reserve against them. It would be the same thing as if they had assumed that some of their bonds were worth a little bit less than par. So they've set up this reserve against them. They in effect have reflected them differently on their balance sheet. But in point of fact, they haven't forgiven anything. They still expect to collect back 100 cents on the dollar. MacNEIL: Setting up a reserve means they're taking some of their own assets and putting them aside somewhere? Mr. LYONS: Essentially, they're taking some of their earnings -- some of their past earnings and spending them by setting up this reserve. MacNEIL: I see. Why do banks -- these banks' stocks go up suddenly when they have -- for instance Citicorp -- declared that they've lost $2. 5 billion? Mr. LYONS: Well, the market is really quite intelligent when it comes to assessing the condition of some of these banking institutions. The market was basically saying, ''We knew that those losses were there all the time, and we're very pleased that you've admitted them. And now that you've admitted them, you can get on with your business. '' MacNEIL: Because you were presenting a face to the world of your own prosperity as though you were going to get fully paid by those countries -- Mr. LYONS: That's correct. MacNEIL: -- and now you're admitting you may not be. Mr. LYONS: And the market basically said, ''We knew that. '' MacNEIL: I see. Will more banks follow these banks? Mr. LYONS: Several have followed. There are several where following in exactly the footsteps that Citicorp entered would be virtually impossible, because they just basically don't have enough capital funds to take the same losses. MacNEIL: But they do have outstanding loans to these several countries. Mr. LYONS: The very same. MacNEIL: So do you predict any more banks will be able to do this? Mr. LYONS: Yes, there will be several more who certainly can afford to do so. One of the very largest banks -- the Bank of America -- this afternoon said that they would not do so. MacNEIL: And they're one of the ones that are in some trouble, are they not? Mr. LYONS: That's correct. MacNEIL: And would not be able to afford to do so. Mr. LYONS: Their net worth position right now is quite low. MacNEIL: How can banks absorb huge losses like this -- whether they're paper losses or not -- and not have it affect their other customers, their depositors, their credit card users, their shareholders and other people? Mr. LYONS: Well, if you speak to what they can charge their customers, what they can charge the people who hold their credit cards, that's really determined by competition in the marketplace. So the very fact that these banks need to make up a lot of earnings that they have lost in these writedowns has no bearing on what they can do to their customers. That's determined by competition. So they're going to have to -- they have to react to competition as opposed to reacting to the kind of losses that they've just -- MacNEIL: So no effect on American consumers with these huge losses. Mr. LYONS: Nothing directly, no. MacNEIL: Let's turn to Jeffrey Sachs. Do you agree -- no effect on American consumers? JEFFREY SACHS, Harvard University: I think the effect on American consumers is rather marginal. I would agree. MacNEIL: Do you agree more banks will follow? Mr. SACHS: I think almost all the big banks will have to follow eventually. And I think that the main point is that the market has already written down the value of these banks so that following -- by making the change on paper doesn't really make a big difference for them in the stock market. MacNEIL: Could some banks go out of business as a result of having to do this because of the market pressures? Mr. SACHS: I think it's unlikely, given the fact that we already have evidence of how the banks will react to the losses. Again, the stock market is already pricing these banks at quite a low level, and they're still surviving. So I think that all of the big banks basically can afford to do this and most or all will have to do this in the end. MacNEIL: Okay. So if these losses are not going to affect American consumers, you both agree, and they're not going to be disastrous for the banks, and in fact their stocks, their shares may even go up. How is this manner of dealing with the loans going to affect the third world countries that still have these huge debts to pay off? Mr. SACHS: This is potentially a positive development, but so far is a very small step. It's just a change on paper. As Mr. Lyons said, nothing has been forgiven to the debtor countries. They still owe every last dollar that they owed before these announcements were made. So they've gotten no relief to this point from such an announcement. But I think it's potentially a positive step for them. It shows to the world community that these loans probably can't be paid off. And equally important, it shows that the banks can absorb some of the losses without a major financial crisis. Once that's recognized, I think that it will be a good idea for our government, other governments and the international institutions to try to get some sort of realistic settlements between the debtor countries and the commercial banks. MacNEIL: Let's come back a step before anybody gets to that. You're saying that these debtor countries, which are having trouble paying back now, watching what Citicorp and others have done, can get tougher in their negotiations? Mr. SACHS: Nothing has really changed beside the paper accounting so far. But what the move of Chase and Citibank and Norwest does is to admit that they can absorb some losses and that they don't expect to be fully repaid. I think the debtor countries now can step forward and say that there is an opportunity for a deal where some realistic treatment of these outstanding loans is made. MacNEIL: Do you see it strengthening the hands of the third world, the debtor countries? Mr. LYONS: Not completely, no. I would take a somewhat different view of it. I would believe that Citicorp in particular has broken ranks with, among people, possibly the State Department and the Treasury Department -- was obviously in favor of continuing these loan commitments to the third world. Having broken step with the government, having broken step with the other banks, I believe that Citibank has said to the third world countries, ''We can take realistic reserves against your loan and it doesn't kill us. Therefore, when you come back and talk to us, and we will talk, and we may yet lend you more money, but we're going to be far tougher because you don't have us over a barrel. '' MacNEIL: What about that Jeffrey Sachs? Mr. SACHS: I think that what will happen eventually is that either the debtor countries themselves will also face up to the reality that they simply can't repay all of these debts, that it's crushing their economies, and will unilaterally stop paying some of the debts. Or the United States government will recognize that some sort of deal has to be struck. We saw in the Costa Rica segment just now how fragile the democracy there is. When you consider that throughout South America there are many, almost all of the major debtor countries are very new and fragile democracies, it's important now for the U. S. government to step in and say there are grounds for a reasonable settlement now, where the countries will pay some of what they owe and not have to pay every last penny, given that the banks have already recognized the reality that they won't get everything back. MacNEIL: Do you see this move by the American banks as step towards a comprehensive negotiated settlement? Do they mean it that way, or is that just the way you're interpreting it? Mr. SACHS: I don't think they mean it that way, but I think it is the reality. Given that the Latin American countries are in desperate economic situations, the reality is they cannot repay every last penny of these debts, and the banks are recognizing that, vis a vis their shareholders. They have yet to recognize it vis a vis the debtor countries themselves. MacNEIL: Do you read it that way, John Lyons, that it now opens the way for the U. S. government to step in with the international community and make some comprehensive settlement along these lines? Mr. LYONS: I suspect that Citicorp now having broken ranks with Treasury and with the State Department, I suspect that the government may in fact step in. And if they do step in, then we may be talking about some impact on the consumer, because I suspect that when they step in it will be with guarantees to some or all of the debt that's outstanding. MacNEIL: You're meaning the U. S. taxpayer would make good some of the necessary reserves to pay off these -- or to absorb the losses from these loans? Is that what you mean? Mr. LYONS: Right. MacNEIL: In other words, the Treasury would have to put up money. Mr. LYONS: The Treasury would put up guarantees, which is basically the ultimate guarantee being the U. S. taxpayer. MacNEIL: So that some banks that mightn't be as well off as Citicorp wouldn't go out of business if they wrote off -- Mr. LYONS: That's correct. And that particular bank could reach an accommodation with the third world country without being hurt badly. MacNEIL: Now, Jeffrey Sachs, in conclusion, what kind -- is there an agreement which is good for the United States and its banks and good for these third world countries? Mr. SACHS: I think there is an agreement -- which is some sort of compromise that eventually the countries have to pay back 50 or 75 cents on the dollar -- that can be structured to meet the particular needs of the particular debtor countries. I don't think that the taxpayers will have to pick up most of it. What we're finding out is the banks can absorb these losses without a serious harm to them. That's the real lessons of what's happened in the last couple of weeks. MacNEIL: Why is it in the interest of the United States and the banks to accept whatever you said -- 60 cents on the dollar? Mr. SACHS: First, it's the reality. Second, we care about the fact that Brazil, Argentina, Uruguay, Peru, Bolivia, Ecuador, Guatemala, are new democracies. And we have a very important interest in preserving the democracies in these countries and nurturing the democracies, rather than killing them basically by an unbearable debt burden. MacNEIL: Do you agree, briefly, that there is interest for both sides -- mutual interest -- in a negotiated settlement? Mr. LYONS: Positively. MacNEIL: You do. Does the Reagan administration see it that way? Mr. LYONS: Oh, I suspect it has seen it that way all along. And I think in their heart of hearts is somewhat disturbed by Citicorp's action. MacNEIL: Okay, we'll have to leave it there. Thank you both, John Lyons and Jeffrey Sachs in Boston. Truce? LEHRER: Finally tonight, an update on a scrap among Catholics. It is the one between the Vatican and the liberal Archbishop Hunthausen of Seattle. Yesterday, the Vatican announced it was restoring full powers to him, but Catholics on both sides of the battle do not agree what the decision really means. Our update report is from Lee Hochberg, Public Station KCTS, Seattle.

LEE HOCHBERG: The Archbishop seems clear enough about his new role. At a press conference yesterday in Seattle, he said he is being given back complete control over his archdiocese in Western Washington. ARCHBISHOP RAYMOND HUNTHAUSEN: I certainly expect and intend to continue as the ordinary, as the Archbishop of this Archdiocese, which means I have the ultimate authority in all matters.

HOCHBERG: Though the Vatican says it has restored to him those areas of control, it also dispatched to Seattle a special Assistant Archbishop, Thomas Murphy of Montana. Hunthausen will be forced to share leadership with him. Hunthausen introduced him to Western Washington yesterday, leaving the congregation wondering if Hunthausen is back in control, why the need for Murphy? Murphy himself spoke cautiously of his role. Bishop THOMAS MURPHY: I pledge my respect, my loyalty and commitment to Pope John Paul II, and the Holy Seed. I pledge my support and service to Archbishop Hunthausen and the Archdiocese of Seattle.

HOCHBERG: Under the direction of Archbishop Hunthausen, the Seattle Archdiocese has not been a typical Catholic diocese. Hunthausen established himself as a bit of a rebel several years ago when he withheld taxes to protest nuclear arms spending. He's been a vocal leader in the local peace movement. Though most of the Western Washington diocese has admired Hunthausen's liberal stand, critics long have argued that Hunthausen's beliefs are inappropriate for an archbishop. BUNNY BARRETT, Hunthausen critic: Had he paid more attention to his archdiocese and kept his priests to do the work that they're supposed to do, take care of the sick, the dying, instead of parading -- the couple of them did, not all of them -- parading out (unintelligible) I believe they would serve the church and the people.

HOCHBERG: But what angered his critics even more was when Hunthausen offered tacit recognition to gay Catholics. In fact, he allows gay Catholic masses like this one to be held in the parish every Sunday night. Mr. BARRETT: The Archbishop gave them the (unintelligible) room, gave them his support, as if homosexuality was the norm in the Catholic Church.

HOCHBERG: Last year, the Vatican drew the line on Hunthausen. It stripped him of his authority to counsel on homosexuality in the church. Also, in matters like sterilization and marriage annulment. A conservative auxiliary bishop, Donald Worrel, was sent to Seattle to handle these controversial matters. The move left the popular Hunthausen humiliated, and much of his large congregation furious. Many even threatened to picket and protest when the Pope comes to the United States later this year. Archbishop HUNTHAUSEN: This is a new moment for all of us. And like all new moments, it is most likely an uncertain and somewhat confusing one for many of us.

HOCHBERG: Now, Hunthausen appears to have gained authority, even though Murphy will be looking over his shoulder. It sounds like a victory for Hunthausen and his liberal flock. But the congregation itself is cynical about the Vatican's intentions. MARY PAT OLSON, Hunthausen supporter: I don't perceive it as a victory. I'm very troubled by the fact that they're calling Bishop Murphy a (unintelligible) Bishop. That (intelligible) not that he has the right of succession -- and a (intelligible) ay come with special faculties or without. And I am concerned about what the real relationship will be.

HOCHBERG: For the last months, rumors have circulated nationally that Hunthausen would regain his lost powers, only to be forced into retirement next year. Ms. OLSON: It would seem very unusual for me that a (unintelligible) would be named to an archbishop who's in good health, ten years prior to his accepted retirement.

HOCHBERG: Supporters, who have taken out ads in Catholic newspapers, fear the new arrangement is being implemented only to placate them until the Pope's planned visit this autumn -- long enough to get the Pope in and out of the country without any ugly protest rallies. It's not only Hunthausen's supporters who think bad news for Hunthausen is veiled in the Vatican action. His critics, too, suspect the Vatican may be setting up to lower the boom on what's been Washington's liberal church. Mr. BARRETT: We feel there's only one Catholic Church, period. Rome will speak and the case will be closed.

HOCHBERG: As they struggle to interpret the meanings of the Vatican's latest action, Hunthausen supporters and critics at least agree on one thing -- Rome works in mysterious ways. MacNEIL: Once again, the main points in the news. In the Iran contra hearing, the former Ambassador to Costa Rica, Lewis Tambs, said Lt. Col. Oliver North ordered him to open up the southern front for the Nicaraguan contra forces. A man identified as Rafael del Pino, Cuban Air Force Chief of Staff or Deputy Defense Chief, and his family defected to the U. S. And late today, there were reports the administration has postponed for several weeks its plan to provide protection for Kuwaiti tankers in the Persian Gulf. Good night, Jim. LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.