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Classified Iran-Contra documents lost

Federal agents are investigating a missing suitcase of classified documents that Lawrence Walsh, the Iran-Contra prosecutor, lost after he met secretly in the summer with former President Ronald Reagan in Los Angeles, an administration official said Friday.

The inquiry was first disclosed in a letter, dated Aug. 14, from a Justice Department official to Walsh. The letter was made public Friday by Knight-Ridder Newspapers, which said it had been obtained from someone in the Bush administration who hoped to embarrass Walsh.

It was unclear whether the documents in the suitcase, all related to the Iran-Contra affair, were stolen or misplaced, or whether they included material that could compromise national security.

Mary Belcher, a spokesman for Walsh, would not comment on the letter. The letter, which also disclosed that prosecutors interviewed Reagan last summer, provided a glimpse into Walsh's inquiry at a time when he was examining whether top administration officials engaged in a coverup of Reagan's knowledge of the sale of arms to Iran during several meetings in November 1986. It was then that the affair began spilling into public view.

Accompanied by two aides, Walsh traveled to Los Angeles to interview Reagan, who did not want to travel to Washington for such a meeting, said a person involved. A court reporter made a transcript of the interview and each side agreed to keep the all-day session a secret.

Returning to Los Angeles International Airport, an aide to Walsh dropped off a suitcase containing the documents at a curbside check-in. The suitcase was never again seen by the prosecutor.

Several days after the interview, Walsh sent Reagan's lawyers a letter saying the former president was not under scrutiny in the investigation. It represented a turning point in the tangled inquiry and indicated Walsh was most likely to conclude his investigation without finding that a conspiracy existed to conceal Reagan's knowledge of the affair.

Theodore B. Olson, an attorney for Reagan, would not comment on whether Reagan had been interviewed but said Friday that the former president had "cooperated fully and comprehensively" with investigators.

The loss of the suitcase prompted an angry letter from Deputy Attorney General George J. Terwilliger III, who accused Walsh's office of a "flagrant violation" of security procedures for safeguarding classified materials.

Friday, Terwilliger said he was "upset" that the Justice Department would be accused of disclosing the letter.

The letter contended that Walsh took more than two weeks to report the loss and advised him that judges in pending Iran-Contra cases were being notified "of the possible compromise of classified information."

Walsh was criticized on another front Friday when an audit by the General Accounting Office, the investigative arm of Congress, found sloppy record keeping and some improper expense account practices by Walsh and some senior assistants, like Craig Gillen, his chief deputy.