Though by American standards, any revelation of the secret program could easily have back-fired, given the supercharged political atmosphere in Nicaragua and Ronald Reagan’s seven-year attempt to destablize the Sandinista regime. The Congress in the fall of 1989 approved open expenditure of $9 million on the Nicaraguan election through agencies such as National Endowment for DEmocracy; but it explicitly banned covert CIA financial support for UNO, precisely because it feared the political impact if the payments were discovered. “Having this election jeopardized by so little money and so few people,: one U.S. intelligence official said of the $600,000 operation, “it’s so stupid.”

No administration official would talk on the record last week about the program. Senior officials defending the payments insisted they were no more than moving expenses for about 100 contras who wanted to return home. William Webster, the CIA director at the time, told NEWSWEEK that “this was a legitamate program. The money was given in small amounts to people with no expectation that they would go back and use it for the campaign.” But CIA records show that Webster was unaware of the program until congressional investigators brought it to his attention in the spring of 1990. Other administration officials contended that the fund amounted to a larger secret subsidy for exiles returning to work in opposition political parties. “We were spending this money for then to go back and work in the Chamorro campaign,” insisted one administration official knowledgeable about the program. “They knew what they were supposed to do.” Chamorro aides deny knowledge of such funds.

The program was conceived in the summer of 1989, when President Bush was ending the retainers–up to $15,000 a month for expenses and walking-around money–that the CIA had been giving the Miami-based contra directors since the mid-1980s. The administration believed that opposition leaders would be more valuable to U.S. policy as anti-Sandinista activists in Nicaragua and wanted to lure them home.

Without telling Congress, the CIA formed a new covert operation called the Nicaraguan Exile Relocation Program (NERP). According to senior administration officials, NERP dispensed up to $600,000 to 30 contra leaders in Miami between July 1989 and February 1990. They, in turn, redistributed the cash to subordinates. Alfredo Cesar, the former head of Nicaragua’s Central Bank and member of the Nicaraguan Resistance Directorate, received “roughly $100,000” in NERP money “to distribute to his people “’ said an administration official who knew about the program. Cesar told NEWSWEEK that all of the money that came through him was used for repatriation expenses; none went to the Chamorro campaign.

The program nevertheless violated the spirit and perhaps the letter of the congressional ban on covert political aid. Yet Congress suspected nothing until October 1989, when staffers noticed an unusual line item that appeared for the first time on the monthly accounting sheets the CIA provided the House and Senate intelligence committees. They called the agency to ask: what was NERP? Small one-time cash payments, they were told, given to Miami-based contras for relocation to Managua. But it wasn’t until after the February elections that the Senate intelligence committee learned that NERP involved larger regular payments to certain individuals. Chairman David Boren felt he “had been had,” says an intelligence source: four months earlier he had assured Carter that no agency money was going into Nicaragua. An irate Boren demanded that Webster launch an immediate investigation.

It was the first Webster had heard about NERP. “We looked at it very carefully,” he says. “The issue was whether this program was being used for putting election funds in the hands of Chamorro supporters, and the answer is no.” The CIA’s internal audit and inspector general’s report claimed that NERP money was used solely for repatriation. Boren’s committee spent two months digging into NERP without being able to prove that it was set up as a secret campaign fund. But the same investigations uncovered sloppy bookkeeping that obscured how the funds were distributed. The CIA audit completed in May 1990 also revealed that as many as 11 of the 100 contra exiles funded by NERP became candidates in the February elections.

NERP was probably not the brainchild of the CIA. It was fully “vetted with the State Department,” says Webster. “This was not something we created.” Senior administration officials say that the agency was simply carrying out State’s request to help repatriate the contras. Yet the blowup between Boren and the CIA was a closely guarded secret in early 1990. The State Department feared that a public airing of the matter would bring NERP to light-and tempt the Sandinista-controlled Army to overturn the election result before Chamorro’s April 25 Inauguration. Last week one of the leading spokesmen for Ronald Reagan’s bellicose policies in Nicaragua, Elliott Abrams, pleaded guilty to withholding information from Congress about covert aid to the contras. The irony is that the Bush administration was trying to reverse that hard line and bring the contra leaders into the political process. It was a worthy to goal–one nearly subverted by the shadowy world of covert operations.

The U.S.-backed rebellion in Nicaragua ended with the elections that ousted the Sandinistas. Some highlights from that period:

The Sandinistas take power.

The Reagan administration suspends aid to Nicaragua, charging the Sandinistas with supporting Marxist rebels in El Salvador.

The CIA funnels $29 million in covert military aid to the fledgling contra rebels. At the year-end, the House of Representatives unanimously approves the Boland Amendment, barring covert aid to overthrow the Sandinistas.

The CIA mines Nicaraguan harbors.

Congress approves $27 million in “nonlethal” aid to the contras.

The World Court rules the United States violated international law. Investigators discover that the Reagan administration has been selling arms to Iran and using the proceeds to finance the contras.

A peace accord is signed by five Central American presidents.

Violeta Chamorro is elected president of Nicaragua.