"Demo Says IRS Blocked Probe Of Drugs, Arms" THE SAN FRANCISCO CHRONICLE July 28, 1989 Washington -- An Arkansas congressman yesterday accused the Internal Revenue Service of blocking congressional and police attempts to investigate an alleged drugs-for-arms operation linking Arkansas and Central America. Representative Bill Alexander, D-Ark., said two House subcommittees, the Arkansas State Police and the General Accounting Office have been investigating possible violations at the Mena, Ark., airport. He said cargo planes apparently were leaving the airport for Central America with arms and returning with drugs. "This investigation led us to the IRS about a year ago," said Alexander during House Government Operations subcommittee hearings on alleged corruption at the IRS. Investigations of reported links between drug trafficking and arms supplies to the Contra rebels in Nicaragua have been conducted by congressional hearings in August 1987, the CIA Central American Task Force chief said many members of the Nicaraguan resistance were known to be trafficking in cocaine. IRS OFFICIALS QUESTIONED Alexander's comments came during questioning of newly appointed IRS Commissioner Fred Goldberg, former Commissioner Larry Gibbs, Senior Deputy Commissioner Michael Murphy and other IRS officials. Alexander said Congress and the State Police wanted access to William Duncan, then an agent for the IRS' Criminal Investigative Division, who was investigating a money laundering scheme connected to the overall narcotics trafficking probe. Alexander said the IRS would not cooperate, citing privacy restrictions regarding tax information. "The effect of the failure of your cooperation has been to let the statute of limitations run out on drug traffickers," Alexander said to the IRS officials. "I will make it crystal clear to all our employees that they will cooperate to the fullest extent of the law" with you, said Goldberg, after Alexander asked him to order his people to cooperate. Duncan was investigating the activities of the late Barry Seal, a convicted drug smuggler turned government informant, who operated out of the Mena airport from 1984 until he was slain in February 1986 in Baton Rouge, La., the Arkansas Gazette reported yesterday. Alexander told the Gazette that Duncan was under orders from the office of then-Attorney General Edwin Meese to withhold evidence in federal grand jury proceedings that examined activities at the Mena airport. "ADVISED TO LIE' Alexander said during the hearing yesterday that it was only through Duncan's resignation from the IRS that any information became available. Duncan, who testified earlier in the day, said he resigned after 17 years with the IRS because he was advised by an IRS attorney to lie to Congress about the investigation. He said he was told by an attorney with the IRS Disclosure Litigation office not to offer an opinion to the subcommittee on whether the case was being stalled. Before he was to testify, Duncan said, he received a phone call with a tip on possible bribery of a ""high-level government official" connected to the case. He said an IRS attorney told him that if he were asked about the matter by the subcommittee, he should respond, ""I have no information on that." Duncan said he felt that would be perjury and said he would not testify rather than lie. Eventually, after many heated discussions, Duncan said, his superiors at the IRS said he could say that he got a phone call with the tip. Duncan said he did testify on the money-laundering case in February 1988, telling about the tip.