BLOCK ADMITS HEARING TALK OF CONTRA LINK.

Byline: Janet Gilmore and Patrick McGreevy Daily News Staff Writers

The Los Angeles County Sheriff's Department had heard, through informants, of a link between the Contras and a major drug ring, but the sheriff denied a cover-up Monday.

Sheriff Sherman Block acknowledged that investigators suspected that the ring was selling large quantities of cocaine in the Los Angeles area and funneling the proceeds to Nicaraguan rebels.

``Never at any time did we try to conceal that fact, and nothing we've obtained then or now would indicate any knowledge of involvement by the CIA,'' the sheriff said.

The information came to light Monday after Rep. Maxine Waters, D-Los Angeles, walked into the Sheriff's Department unannounced and, after some resistance, obtained copies of search warrants.

She said the warrants provide evidence of the degree to which authorities knew about a cocaine ring she contended was run by Oscar Danilo Blandon, a civilian leader of the CIA-run Contras.

On Monday, the Los Angeles Police Department and the Police Commission's inspector general said they have launched their own reviews to determine whether LAPD officers may have had information on Contra supporters smuggling drugs into Los Angeles.

``The LAPD is diligently searching its files and contacting past employees to see whether they have any information,'' said Katherine Mader, the Police Commission's inspector general.

Mader confirmed Monday that she is monitoring the LAPD review and conducting a review of her own to determine whether there are any LAPD ties to the controversy.

The Los Angeles City Council is scheduled today to formally request Mader to report on whether she can assist a federal investigation into the CIA-Contra allegations.

Waters has been calling for federal investigations into whether CIA operatives introduced crack cocaine into South Central Los Angeles to fund the Contras. Sen. Dianne Feinstein, D-Calif., also has called for investigations.

Block said he, too, would back such an inquiry and would turn over additional documents only to such a forum in an effort to avoid the information from getting ``distorted'' in newspaper accounts.

Earlier in the day, Waters released copies of the Sheriff's Department documents, which she said showed that authorities failed to stop a CIA operative from selling cocaine in South Los Angeles.

Waters stood on the corner of Central Avenue and Adams Boulevard and said it was one of the locations used by Blandon to sell as much as 10 kilos of cocaine per week.

``This information is clearly stated in the search warrant affidavit,'' she said. ``Amazingly all of this information was provided to law enforcement officials by informants over three years.''

Blandon ran his drug operation out of a bar nearby, but his empire involved 14 locations and 200 people, Waters said.

She said another man, Ronald Lister, told police who showed up with search warrants Oct. 27, 1986 at his Mission Viejo home: ``I'm with the CIA. I'm with the CIA. Let me call my contact at Langley (Va., where the CIA is headquartered).''

Block said Lister never was arrested, and neither he nor Blandon was prosecuted because the raid netted only about an ounce of cocaine. The sheriff also emphasized that the remark about the CIA did not dissuade law enforcement officers from carrying out their investigation, especially since such boasts are not unusual.

Block said evidence was logged, booked, and when no prosecution resulted, returned to owners or disposed of in some other manner. Copies of all items were given to federal authorities.

``The case wasn't handled any differently than any other case,'' he said. ``There was nothing that was concealed in any way.''

Block said federal authorities saw no reason to continue with an investigation after prosecuting agencies declined to go forward with drug charges. And the allegations in the search warrant affidavits were never proved, Block said.

Waters continues to question why no prosecution ensued. Even an ounce of cocaine, which Block said they had recovered, can produce 300 rocks of cocaine, according to Waters. And prosecutors could have chosen to prosecute under a conspiracy theory.