CIA HEAD ORDERS CONTRA-DRUG PROBE.

Byline: Steven Lee Myers The New York Times

The director of the Central Intelligence Agency has ordered an inquiry into a newspaper's reports that the Contra rebels supported by the CIA had trafficked drugs on the streets of Los Angeles in the 1980s, then used the profits in their war against Nicaragua's Communist government.

The director, John Deutch, insisted there was no evidence that the CIA ever aided drug trafficking by the Contra rebels. Nor did the reports - in a three-part series that appeared last month in the San Jose Mercury News - show that agency officials engaged in trafficking, though it suggested the rebels had been shielded from prosecution by the agency.

The articles nonetheless have provoked a strong reaction from civil-rights groups and African-American members of Congress, threatening to turn U.S. covert activities in Latin America and the scourge of crack cocaine in American cities into an overarching political issue in the midst of an election campaign. And the suggestion of a connection has become fodder for intense debate and speculation on talk radio.

Deutch announced the inquiry Thursday at a hearing of the Senate's Select Intelligence Committee. He had informed several members of Congress of the inquiry in letters and discussed the issue with members of the Congressional Black Caucus on Thursday. He said he had ordered the agency's independent inspector general, Frederick P. Hitz, to begin an inquiry and issue a report within 60 days.

``I regard these allegations with the utmost seriousness,'' Deutch said at the committee hearing. ``They go to the heart and integrity of the CIA enterprise, and it's something that has to be addressed, and addressed in a forthright and complete fashion.''

The connection between drug trafficking and the Contras has been the subject of news accounts and congressional inquiries dating back to the mid-1980s, shortly after President Reagan made the fight against the Sandinista government in Nicaragua a priority in the U.S. effort to combat communism in Latin America.

A 1989 report by the Senate Foreign Relations Subcommittee on Narcotics, Terrorism and International Operations concluded that U.S. national security concerns had overridden efforts to police drug trafficking from countries like Nicaragua, Panama and Honduras, from which the Contra rebels staged their insurgency. It also implicated some members of the Contra movement as being directly involved in trafficking.

The subcommittee, led by Sen. John Kerry, D-Mass., said agencies involved in foreign policy had failed to acknowledge or had understated the extent of drug trafficking and did not pass on to law enforcement agencies information uncovered about those supported by the United States.

The reports in the Mercury News said two civilian supporters of the Nicaraguan Democratic Force, one of the anti-Communist groups known familiarly as the Contras, sold large amounts of crack cocaine to gangs in Los Angeles starting in 1981 and turned unspecified amounts of the profits over to the Contras.

The newspaper identified Oscar Danilo Blandon Reyes and Juan Norwin Meneses Cantarero, both Nicaraguan exiles who operated out of the San Francisco Bay area, as the dealers. It said Blandon had since become an informer for the Drug Enforcement Agency after serving 28 months in jail on drug charges in the 1980s.

At Thursday's hearing, Deutch said ``our initial review'' had found no evidence that the CIA had supported the drug dealing. In letters sent to members of Congress on Sept. 4, Deutch also said that ``the agency never had any relationship'' with the two men featured in the articles. Former senior CIA officials involved in the Contra operations said this week that they had never heard of the Nicaraguans, one of whom was described as a leader of the Nicaraguan Democratic Force, also known as the FDN.

Rep. Donald Payne, D-N.J., and chairman of the Congressional Black Caucus, welcomed the inquiry. He said there was ``a tremendous amount of distrust in the black community'' that led people to believe that the CIA had been involved. ``This is going to stay on the front burner for us,'' Payne said.