ROBERT E. WHITE WANTED to get the long, complicated story down straight once and for all. A former American ambassador to El Salvador, he hoped to put together a coherent account of the bizarre events, a document that might be useful in persuading some members of Congress to sue the FBI. While three tape recorders churned, preserving every syllable, White asked Frank Varelli the first of many questions. "You left Salvador in what year? '79? '80?"

Varelli rose from his seat and unzipped a bulky beige suitcase. He pulled out two fat, blue loose-leaf binders containing scores of documents, each carefully encased in plastic -- leaflets, telephone bills, legal papers, newspaper clippings, a list of names purported to be targets of the Salvadoran death squads, photographs of himself as an itinerant evangelist, fake IDs he used while spying for the FBI. He piled them on the conference table, then answered White's question. "I left El Salvador in April 1980 . . ."

Once again, Frank Varelli was telling his story. Since 1981, Varelli has recounted his tale -- in various, sometimes contradictory versions -- to the FBI, to the Secret Service, to newspaper reporters, to television cameras and to the House Judiciary subcommittee on civil and constitutional rights. Though he is not a particularly artful storyteller -- he tends to ramble and digress -- Varelli has earned a fair amount of money by talking. He is a kind of professional tattletale: For much of this decade, he has been paid by various patrons who hoped that he could corroborate their political conspiracy theories. For three years in the early '80s, the FBI paid Varelli to infiltrate a leftist group in Dallas and report on its activities. For two years in the mid-'80s, a member of the John Birch Society supported Varelli while he recounted tales of leftist plots and FBI cover-ups. And in the spring of 1987, White's liberal group, the International Center for Development Policy, hired Varelli at $2,000 a month to blow the whistle on alleged FBI burglaries and harassment of dissenters.

On a hot morning in late May, Varelli sat at a conference table at the International Center's Washington office, his short, plump body clad in a dark pin-stripe suit, while two interviewers led him through his story. After a couple of hours, the interviewers ordered sandwiches; after a couple more, they sent out for blank tapes. Varelli barely touched his sandwich, but he filled the tapes with words. In a slow, soft voice, he told of his adventures preaching the Gospel, fighting communists and spying for the FBI.

It is a strange and troubling saga. Much of it is corroborated by other sources -- including the FBI itself -- but much is contradicted by former associates of Varelli, who cast doubts on his version of the events and his veracity.

Like many informers, Frank Varelli is a mysterious character, a man of multiple names and many identities, of shifting loyalties and a dubious past. His story illuminates that frontier where the nation's official law enforcement apparatus intersects with a bizarre subculture of political extremists, conspiracy theorists, cut-rate informants and would-be spies.

Varelli's tale is one in which nearly every fact is disputed. It is a story that raises many questions but answers few. Is Varelli a naive idealist or a crafty scam artist? Was the FBI the credulous victim of a hoax or the eager perpetrator of a plot to harass dissenters? Did Varelli hustle the FBI? Did the Bureau hustle Varelli? Or were the two parties willing partners in a cynical waltz of mutual self-interest? VARELLI PREACHES THE GOSPEL AND SHOOTS COMMUNISTS

Frank Varelli is not his given name. It is an Americanization adopted in the 1980s. He was born Franklin Agustin Martinez Varela in El Salvador in 1950. He speaks with awe of his father, Agustin Martinez Varela, who held various high positions in the Salvadoran government -- director of the military academy, head of the national police, minister of the interior, ambassador to Guatemala. In El Salvador's oligarchy, Varelli could reasonably expect to follow his father into power. Somehow, though, he never quite made it.

After high school, he entered the military academy but dropped out twice, he says, because of injuries, one of them a gunshot wound. Born Catholic, he turned against the clergy -- they "had tendencies toward the Left, the Communists" -- and at age 19, he became a born-again Baptist. He came to the United States in the early '70s, studied English at small language schools, then attended two Bible colleges in Tennessee. He didn't graduate from either one; in fact, he never completed two consecutive semesters. In 1975, however, he decided to become an itinerant evangelist. He claims that he was ordained at Nashville's Beacon Baptist Church, but the Rev. Terry Samples, who was then pastor of the church, says that the church only sponsored Varelli and never ordained him. Varelli also claims that he received an honorary doctorate of divinity from the Arlington Baptist Seminary, but the Texas college has no record of such an award. One thing is certain, though: the man was a spellbinding preacher. A member of Beacon Baptist recalls Varelli's emotional orations about his pre-Christian life of drink, drugs, Satanism and suicide attempts.

It was at Beacon Baptist that Varelli met an American divorce'e with three children, and they were married in the church in October 1975. After that, Varelli lived with his in-laws when he wasn't traveling and preaching, raising money to finance his dream -- an evangelical crusade in El Salvador.

He made the crusade in 1977, and it was a rousing success. He preached to tens of thousands in a San Salvador stadium, distributed 100,000 Bibles and was photographed with President Carlos Romero. For a young man living in the shadow of a famous father, it was a heady triumph. Finally, he had won the kind of respect his father had long enjoyed: His countrymen addressed him as "Rev. Varela" or "Dr. Varela."

In 1978, Varelli returned to the United States and continued to travel and preach. He testified at an evangelical crusade in Birmingham and impressed the Rev. T.K. Dailey so much that Dailey invited Varelli and his wife and her kids to move into his house in Bessemer, Ala. "He was very charismatic," recalls Dailey. So charismatic, in fact, that one member of Dailey's church let the family live rent-free in a new house while others chipped in to buy Varelli a station wagon.

Still, he was strapped for cash. Varelli says that the Baptists cut off support for his crusade when they learned that he had allowed Pentecostals to participate in his services in El Salvador. Dailey recalls it differently: "His total problem revolved around alcohol." Baptists frown on liquor, and Varelli was known, he freely admits, to take an occasional drink. When word spread that he was not a teetotaler, Dailey recalls, the churches that had supported him began to cancel his speaking engagements.

In October 1978, Varelli quit preaching and joined the United States Army. Though he wasn't an American citizen, he longed to be a U.S. Army chaplain. It was a perfect job for him, combining his father's profession and his own. But he never made it. His marriage was falling apart, he says, and he figured that a divorced man could not succeed as a chaplain. Varelli requested release from the Army, and, he says, after some diplomatic string-pulling by his father, he received an honorable discharge in June 1979.

A 29-year-old man with a broken marriage and two shattered careers, Varelli returned to El Salvador. He found the country in chaos. Marxist guerrillas controlled large portions of the countryside, and hit squads of the Left and the Right regularly gunned down their enemies in the streets of the capital. Varelli joined an armed band that patrolled the affluent San Salvador neighborhood where his family lived, and he was, he claims, involved in several shoot-outs. The worst came on April 2, 1980, when eight leftist gunmen attacked Varelli's father at the family home. Varelli helped drive them away, according to Salvadoran press accounts, wounding four with a shotgun.

Fearing further attacks, the family -- Varelli, his parents and two brothers -- fled to the United States and were awarded political asylum. They settled in Los Angeles, apparently planning to live in exile on Col. Varela's military pension and the money earned by renting their Salvadoran home. But Varelli worried that the family might be attacked in Los Angeles, he says, and he discussed those fears with an FBI agent and two Episcopal ministers who were active in refugee work. In the fall of 1980, the ministers gave Varelli $1,550 to finance the family's move to Dallas.

There, Episcopal Archdeacon Courtland Moore heard from his colleagues in Los Angeles that the Varelas were "in danger and needed a safe haven." Using church money, Father Moore paid the Varelas' rent -- "about $300 a month" -- for several months. He also paid the $94 monthly furniture rental bill for well over two years and made several "emergency" grants of $100 or $200. But Moore and his colleagues gradually grew suspicious of Varelli. "We found him very difficult to deal with," Moore recalls. "We were trying to help him and his family and he was making demands on us -- he needed this and that. He was always out of money, always out of a job, always in conflict with somebody." More than a year after his arrival, Varelli still appeared periodically to beg for money to buy food or to ransom his repossessed car, Moore recalls. The priest obliged for months before cutting Varelli off: "We began to think he was a con artist."

Long before the Episcopal money dried up, however, Varelli had found another source of funding: the FBI. P A R T 2 VARELLI SPIES FOR THE FBI

Frank Varelli says he was recruited by special agent Dan Flanagan of the FBI's Dallas field office because of his expertise in Marxism-Leninism. Flanagan remembers it differently: "He came to our doorstep and told us of Salvadoran terrorists stalking the streets of Dallas."

Either way, the two men soon became close friends. Flanagan, then 32, was just what Varelli expected from an agent in the fabled FBI: a handsome, smooth-talking lawman with a fondness for stylish suits and gold jewelry. Varelli was thrilled to learn that they shared a common interest: "He loved guns, and I love guns." Flanagan saw Varelli as "a very likable, honest person" burdened with troubles. "He had a tremendous amount of personal problems," Flanagan recalls, "from a very domineering father to complaints about never having dates." Flanagan guided the Varela family through the thickets of the immigration bureaucracy; he helped Varelli become an American citizen in January 1982; and he once sent Varelli a birthday card inscribed "to a very special friend."

He was, says Varelli, "my best friend."

He was also Varelli's boss. Flanagan was the Dallas "case agent" for the FBI's nationwide investigation of what it called "Salvadoran leftist activities in the U.S.," and he signed Varelli up as an informant.

That much is certain. Exactly what Varelli did in that role is a matter of much contention.

In testimony before the House Judiciary subcommittee on civil and constitutional rights, Varelli told the story this way:

He was recruited by Flanagan in early 1981 and was promised a full-time job at $1,000 a month, with a raise to $1,500 after six months. In April, he was dispatched to El Salvador, he testified, to set up an "exchange of information" with the Salvadoran National Guard, an organization with close ties to the infamous right-wing death squads. When he made that contact, he said, he heard guardsmen brag about their role in the killing of four American churchwomen and two American land reform advisers, and he was given a long list of death-squad targets. Back in Dallas, Varelli testified, that list was entered into FBI computers, and later, when Salvadoran aliens were arrested, their names were checked against it. If they were on the list, Varelli said, they were deported, and he would call the National Guard with information on when the unlucky deportee would arrive. Such calls were akin to signing a death warrant, Varelli said later, but that didn't bother him: "I could tell you that at the time I felt sorry, but I would be lying. I felt that if we got rid of the communists, that would end all the trouble in El Salvador."

Varelli testified that in the summer of 1981 his Bureau bosses instructed him to infiltrate the Dallas chapter of a leftist group called CISPES -- the Committee in Solidarity with the People of El Salvador. CISPES is, by its own description, an organization that raises money for humanitarian aid to El Salvador while lobbying against American policy there. To the American Right, it is a propaganda front for the Salvadoran guerrillas. Masquerading as an illegal Salvadoran immigrant named Gilberto Mendoza, Varelli began attending CISPES meetings. At one gathering, he gave an impassioned speech about fictitious atrocities the Salvadoran National Guard had committed against his fictitious family. "Some of the nuns {in CISPES} were crying by the time I finished," he later recalled proudly.

While Varelli was attending CISPES meetings -- and donating $25 of FBI money to the group every month -- he was reporting the names, addresses and license plate numbers of CISPES members to the Bureau, he testified. His bosses told him that the FBI wanted to "break" CISPES, he said. To that end, agents vandalized cars outside CISPES meetings, tapped the group's phones and burglarized its offices in Dallas and Washington, D.C., Varelli claimed.

While spying on CISPES, Varelli was also working to compile a "Terrorist Photo Album" for the Bureau, he testified. The album began with photos and brief biographies of Salvadoran guerrilla leaders, Varelli said, but soon grew to include hundreds of Americans opposed to Reagan administration policy in El Salvador, including Sens. Christopher Dodd and Claiborne Pell, Rep. Patricia Schroeder and, ironically, Varelli's current patron, former ambassador White, whom Varelli described in the album as an ally of the Communist Party.

Varelli worked for the FBI from March 1981 to the summer of 1984 and would have continued indefinitely, he says, if not for the aftermath of a routine car burglary in Washington, D.C. In April 1984, Dan Flanagan, in Washington on Bureau business, parked his car and strolled along the Potomac. He returned to find that his luggage, handgun, badge and files on Varelli's infiltration of CISPES were stolen. During the FBI investigation of the incident, Varelli says, he accused his friend Flanagan of withholding much of his pay and expense money. Flanagan denied the allegation.

On May 16, 1984, Dan Flanagan, a 13-year veteran of the FBI, resigned from the Bureau. "Many reasons went into that decision," he says. "The money issue was only one aspect."

A few months later, Varelli quit, too. But not before he hired a lawyer and demanded $66,507.50 from the FBI in back pay and expenses. THE FBI HAS NEVER ISSUED A DETAILED RESPONSE to Frank Varelli's accusations. However, at various times FBI officials have confirmed some aspects of Varelli's story in legal documents, in letters and in testimony before Congress.

The Bureau confirms that Varelli was a "paid informant" in an "international terrorism investigation," and that Flanagan was his "handling agent." It says that Varelli was paid $17,722 "for information furnished" and that the FBI bought him a used Chevrolet Chevette, which was registered under Varelli's alias, Gilberto Mendoza. The Bureau denies that it owes Varelli the $66,000 he claims is due him. In April 1985, an FBI attorney made a written offer of $2,825 to settle the matter, but Varelli refused to accept it. In October 1985, the Bureau upped that offer to $5,375, provided that Varelli would agree never to discuss his relationship with the FBI. Again, he declined.

The FBI confirms that it flew Varelli to its Quantico academy to speak on Salvadoran terrorism. It says it possesses 3,500 pages of files on Varelli, as well as "17 volumes" of information on CISPES gathered by 23 FBI field offices. (Neither has yet been released.) The Bureau also acknowledges that it maintains a "Terrorist Photograph Album" but denies that the album contains Varelli's entries on Schroeder and other American politicians. "You do not appear in our album," William Webster, then director of the FBI, wrote to Schroeder in April, "nor have you ever appeared in our album . . ."

On March 3, 1987, Webster told the House Judiciary subcommittee on civil and constitutional rights that the Bureau would respond to the committee's questions about the Varelli case in approximately 30 days. That response has not yet come. FOR THREE YEARS AFTER QUITTING THE BUREAU, Dan Flanagan refused to discuss the Varelli affair. This spring, angry that Varelli's highly publicized accusations against him have gone unanswered, he broke his silence. "I lost a job {with a Dallas insurance company} because of the lies he told The Dallas Morning News," says Flanagan, who is now a private investigator. "I lost the respect of my son when he read the article and I was not there to explain it to him. The relationship between my son and I will never be the same."

Flanagan once felt sorry for his old friend. No more. "He was simply lazy," Flanagan recalls, "He expected the government to totally support him and his family, with no questions asked." Varelli, he says, suffers from "delusions of grandeur."

Varelli's version of the events contains "countless lies," Flanagan charges. Flanagan denies committing burglaries or vandalism against CISPES. He denies sending Varelli to El Salvador. He denies that Varelli's "death squad list" -- which he says was compiled from Salvadoran newspapers -- was ever used to deport aliens from the United States. He denies that Varelli ever called the Salvadoran National Guard with information on deportees because "he had no way of knowing" about deportees. He denies instructing Varelli to include American dissidents in his "Terrorist Photo Album." And Flanagan says he paid Varelli everything he was due. He did withhold pay temporarily, he says, when Varelli had failed to perform any work. "This occurred perhaps five times," Flanagan says, "and the total amount withheld amounted to around $500, which was kept in the office." Flanagan says that he bypassed Bureau procedure by not returning the withheld pay to Washington, but that process, he claims, "would have involved tons of red tape."

It was Varelli's allegations that CISPES was smuggling Salvadoran terrorists into the country that caused the Bureau to begin its nationwide investigation of the group, Flanagan says. Those allegations "made a big splash in Washington," and Varelli was summoned to Quantico to brief 30 agents from around the country on CISPES and Salvadoran terrorism. Back in Dallas, Varelli joined CISPES and reported that it was "a very, very radical, very dangerous group," according to Flanagan. For a while, Varelli had credibility: "Nobody knew anything about CISPES." But after years went by and Varelli produced "no solid evidence," Flanagan suspected that the whole thing might be a "snow job," an attempt by Varelli to "stay on the payroll." Now, Flanagan is convinced that "the CISPES group was non-violent and they were never a threat to anyone."

Linda Hajek, head of the Dallas chapter of CISPES, agrees with that assessment. "Our staff is very middle-of-the-road and geared to helping conservative Dallas understand Central America." The chapter held monthly meetings, sponsored speakers and organized an occasional non-violent demonstration, she says. "If they were looking for hot stuff, they shouldn't have come here." She remembers Varelli as "a very low-key, very articulate man" but not a particularly active member. "He floated in and out." She isn't sure she believes Varelli when he says that the FBI burglarized her office. She recalls no evidence of a break-in and says that the papers Varelli claims were stolen could have been obtained at a public meeting. "He tends to exaggerate," she says. "He tends to embellish things." CLEAR AWAY THE SMOKE OF CHARGES AND

counter-charges, and innumerable questions remain. One is obvious: Who is telling the truth? Others are more subtle: Did the FBI actually believe a dubious informant's wild and unsubstantiated charges? Or did the Bureau merely use Varelli's accusations to justify investigating a group not beloved by the Reagan administration?

And, perhaps most important of all: Was the affair an isolated incident or does the FBI have other Varellis on the payroll? P A R T 3 VARELLI RECOUNTS AN INCREDIBLE ASSASSINATION PLOT

In the spring of 1984, a few months before he quit working for the FBI, Frank Varelli visited a Dallas doctor named Paul Elliott, complaining of headaches, back spasms and anxiety attacks. Dr. Elliott diagnosed the symptoms as signs of stress. When he asked his patient if something was troubling him, Varelli recounted an astonishing story.

As Elliott recalls it, Varelli said that he worked as an FBI operative, that he had infiltrated CISPES and uncovered plots to kill President Reagan during the Republican National Convention in Dallas that summer. The alleged CISPES plots ranged from sabotaging a helicopter landing pad to shooting stolen U.S. Army rockets at Reagan's motorcade to dropping dynamite on the president from ultralight airplanes. Varelli claimed that his FBI superiors were covering up those plots, Elliott recalls, and he feared that either the FBI or CISPES might kill him.

Elliott, now 43, a tall, intense man who is a member of the John Birch Society, believed Varelli. In fact, he still believes him: "Either he was far better than Frederick Forsyth and Robert Ludlum or he was telling the truth."

Seeking help for Varelli -- and for Reagan -- Elliott told Varelli's story to Secret Service agent Jerry Kluber. On August 14, six days before the convention opened, Kluber called Varelli in for an interview. Rod Poirot, then Varelli's attorney, taped the conversation. Dr. Elliott cites that tape as proof of the assassination plots; Poirot sees it as proof that there were no plots.

The tape, which is now among Varelli's papers at the International Center, is marred by background hums and abrupt stops and starts. Its audible portions reveal a frustrated Kluber trying in vain to pin down a rambling Varelli. The informant speaks of vague "suspicions" of plots involving CISPES, "SDS members" and Iranians. The Secret Serviceman asks for "specifics that we can verify." Varelli complains that the FBI inhibited his investigation: "I wasn't allowed to learn more." Kluber keeps pressing for "specifics," and Varelli talks of "inflammatory" speeches and "harsh" literature.

"There's no individual making threats?" Kluber asks. "There's no individual coordinating efforts to put together groups of people who could carry out these threats? It was all general conversation?"

"General conversation," Varelli replies, "and general things and general threats that people made."

"Did you ever hear the word, in these meetings, 'assassinate' or 'kill'? "

"No."

The conversation continues through one entire tape and the start of a second. As Varelli speaks of vague "West Coast" people with vague plans to disrupt the presidential motorcade, the conversation abruptly ends. There is a long pause, then the sound of Varelli dictating. "This is the third part of the FBI statement on my resignation from work due to wrongful treatment . . ."

In a slow, heavy voice, Varelli identifies the date of this dictation as May 3, 1985, nearly nine months after the Secret Service interview. He complains that he is unemployed, broke and sick. "I am very depressed and very sad . . ." He demands an apology from the Bureau. "Unless I receive that, I cannot live without honor, and the disgrace that has come upon me is going to kill me. A disgrace that they brought upon me. The disgrace that they made me have in the eyes of my father is so great that I am even ashamed to go to the streets . . ."

As his voice grows slower and more slurred, Varelli talks about communists. "They're not coming, they're already here. And they're growing and growing in numbers. One of these days, they'll be so strong, they'll take us to the parks and kill us. I might not see that because my time is coming. The time of my departure might be, I believe, very near . . ."

The voice deepens and the pauses between words grow longer. "I demand that the guilty be punished and that the innocent be exonerated. History will be the judge. God will be the judge. Thank you so much for listening. Thank you so much for the time, and God bless you. Goodbye."

There is a click, then silence. P A R T 4 VARELLI IS GROOMED FOR RIGHT-WING STARDOM

Frank Varelli was sunk in depression. For months, in late 1984 and early 1985, he recalls, all he did was "watch TV and try to sort out what went wrong." He suffered from insomnia and was often unable to sleep without drinking wine or beer.

Though he was almost inert, Varelli once again managed to cultivate a generous benefactor. Elliott was, for all practical purposes, supporting him. When Varelli complained that CISPES knew where he lived and might come to kill him, Elliott moved the whole family -- Varelli, his mother and father and young stepbrother -- into a new apartment. He paid the rent -- about $1,000 a month -- for more than two years, he says. He also furnished the apartment, provided Varelli with a pickup truck, paid his phone bill, provided free medical care for the entire family and paid for their medical supplies. The total bill, Elliott estimates, came to "more than $20,000" a year. "I thought that the man and his family needed some help until he got a job."

Dr. Elliott had great plans for his prote'ge'. He gave Varelli a word processor, a tape recorder and 100 blank tapes and encouraged him to write, or to tell, his story. He set up a foundation designed to support Varelli's work and he wrote to conservative activists, seeking someone to "publish his freelance writing, distribute his tapes, use him for talk shows, etc." In his letters, Elliott was extravagant in his praise of Varelli: "Nothing short of an assassin's bullet will stop him!," he wrote. "His dedication to the work of the Lord and Christian anti-communist activism will not be quenched!"

Actually, Varelli's dedication was sporadic at best. He spent more time watching TV and brooding, he acknowledges, than he did writing and lecturing. Elliott introduced Varelli to several right-wing activists, writers and publishers, but few were impressed with the informant. Elliott dragged his prote'ge' to a couple of John Birch Society meetings, where he lectured on Central America, but his heart wasn't in it. Birch gatherings "are so boring," he complains. The only concrete product of Elliott's two years of patronage is a 12-page typewritten memoir titled "Subversion." Written in the first person, it recounts the story of Varelli's alleged infiltration of CISPES, his uncovering of plots to kill Reagan and his mistreatment by the FBI. Varelli now claims that Elliott concocted the document; Elliott says he merely edited it. The argument is moot: If Varelli didn't write "Subversion," he certainly distributed it. In March 1986, Varelli sent several copies -- along with cover letters in his unmistakable handwriting -- to conservative activists around the country.

That was a mistake. Spoken words evaporate into air, but written words endure. And "Subversion" would return to embarrass Varelli. P A R T 5 VARELLI TURNS LEFT

Within six months of the distribution of "Subversion," Varelli and Elliott had parted company and Varelli's political views had changed radically. There are, of course, two versions of that story.

Varelli says that he outgrew Elliott and right-wing politics. He read the Pentagon Papers and expose's of the CIA and FBI, he claims, and he began to question his beliefs. He met new people -- the lawyer who prepared his suit demanding back pay from the FBI, the reporters who covered his story -- and they broadened his horizons. "From talking exclusively to right-wing fanatics, I moved into circles of people with a more open mind, and they made me think," he says. For the first time, he understood that the CISPES activists were dissenters, not terrorists, he says, and that criticism of the president did not imply a plot to kill him. He decided that the Bureau was wrong to harass CISPES. "We were violating the rights of these people," he says. "I get very upset about that."

Those political changes led to conflicts with Elliott, Varelli says, and the conflicts caused Elliott to cut back on his charity: "He started to take things away, like a punishment."

Elliott tells a different story. Varelli was lazy, he says. He refused to work. Elliott kept suggesting that Varelli get a job, but Varelli kept making excuses. "I realized that he was becoming addicted to a form of welfare -- my welfare." Finally, in the summer of 1986, Elliott terminated his support. After that, he says, Varelli started moving to the left. "It seems as though he wanted to continue to operate a shell game," Elliott says. "When one individual or group stops supporting him, he moves on to another individual or group."

Although the cause of Varelli's political transformation may be in doubt, the result is not: He became famous. Within months, he went from lecturing to a half-dozen Birchers in a living room in Plano, Tex., to speaking to America in a two-part report on "The CBS Evening News."

His new message shocked the people who'd heard the old one. CISPES, he said, was a benign band "of religious individuals" harassed and burglarized by a lawless FBI. "The agents that I worked with said that they didn't give a damn about laws," he told CBS. "Laws apply to civilians . . ."

Within a few days, Varelli's accusations appeared in newspapers around the country. WHEN REP. DON EDWARDS (D-CALIF.) HEARD Varelli's story, he thought he might have found "the smoking gun."

Edwards is chairman of the House Judiciary subcommittee on civil and constitutional rights, which monitors the FBI. Though he is a former FBI agent, Edwards has long opposed the break-ins and political surveillance that the Bureau engaged in during "the bad old days." Now, he worried that those days might be back. Almost daily, Edwards heard reports of FBI agents interrogating Americans who'd traveled to Nicaragua. In some cases, agents had photocopied travelers' address books and diaries or visited their employers and landlords. To Edwards, that smacked of "harassment." He was also concerned about reports of more than 50 unusual burglaries of the offices of groups opposed to the administration's policy in Cen- tral America, burglaries in which valuables were ignored while files were rifled. Edwards didn't want to believe that the Bureau was behind the burglaries. But now, Varelli was claiming that the Bureau was involved. He decided to call Varelli to testify.

Varelli appeared before the subcommittee on the morning of February 20. While TV cameras rolled, he read a long account of his FBI adventures. He told of his trip to El Salvador, of bringing back the death squad list, of compiling Terrorist Photo Album entries on American dissidents. He talked of spying on CISPES and claimed that Flanagan had burglarized the group's office and the home of one of its members. The Bureau wanted to "break" CISPES, he said, but it never managed to uncover any crimes. "Not once did I find, see, hear or observe any illegal conduct of any nature," he testified. "The organization was entirely lawful in its operation and contained many religious people."

"I must say Mr. Varelli's testimony is astounding," said Rep. Robert Kastenmeier (D-Wis.), "because, if true, it seems to implicate the Federal Bureau of Investigation really in a political operation of astounding proportions."

A few moments later, Rep. F. James Sensenbrenner (R-Wis.) produced an equally astounding document: "Subversion." He read a bit of the introduction, then asked, "Did you write that?"

"Yes," Varelli replied.

Sensenbrenner read more: "During my investigation, I discovered and duly reported several well-planned efforts by some members of CISPES with worldwide Communist coordination to make an attempt against the life of President Reagan at the 1984 Republican convention in Dallas." Was that, Sensenbrenner asked, "an accurate statement?"

"To a certain degree, yes," Varelli replied. He looked, as one spectator recalls, like the proverbial kid caught with his hand in a cookie jar. The plotters were "individuals posing as members of CISPES," he told the committee. Then he launched into an account of how his FBI bosses tried to stop him from telling the Secret Service of the plot. Soon, he degenerated into gibberish: "Under this whole issue is the fact that of the many reports, in no way, you know, could I find at that time any justification like I see it to go and right now pretend to say that we were right in 1981-1982 or other years in our investigation. That cannot be justified."

Varelli was floundering and his lawyer, Douglas Larson, leaped to his aid. But Larson's defense proved almost as damaging to Varelli's credibility as Sensenbrenner's attack. "Whenever Mr. Varelli would file reports with the FBI, he would spout the FBI line as to what they wanted him to say," Larson said. "He told them what they wanted to hear and reported it to them the way they wanted to hear it." P A R T 6 VARELLI FINDS ANOTHER PATRON

Sensenbrenner's bombshell failed to end Varelli's new career as FBI whistleblower. In the next few months, The Nation, The Village Voice and the Boston Phoenix ran long, sympathetic articles on Varelli, National Public Radio covered his accusations, and a documentary filmmaker contacted him about making a movie.

About a month after the hearing, Varelli was again summoned to Washington, this time at the invitation of Robert White. The former ambassador was very interested in Varelli's accusations. White had appeared on what Varelli called his death-squad list; he had been identified as a Communist in Varelli's Terrorist Photo Album, and his organization, the International Center, had been burglarized in November by someone who ignored valuable office equipment while stealing documents from White's investigation of American ties to the contras. White believed in using defectors from the other side: For his contra investigation, he'd hired Jack Terrell, an American mercenary who'd fought with the contras. Now, White wanted to sit Varelli down with a few knowledgeable interviewers and "produce a structured document about what he knows." That document, he thought, might convince Schroeder, Dodd and other politicians who had appeared in Varelli's photo album to join "some kind of lawsuit" against the FBI.

But Varelli's first visit to the International Center ended in fiasco. "He got very nervous," White says. "He took to his bed, and we didn't see him for a day and a half." When he emerged, Varelli complained of high blood pressure, a bad heart and a severe shortage of funds. His lament earned him a job at $2,000 a month. "We sort of put him on as a consultant," White says, "and said, 'Go pay your rent, go to a doctor, get some rest and come back and tell your story.' "

After living on the largesse of his Baptist brethren, the Episcopal Church, the FBI and Dr. Paul Elliott, Varelli had found another patron.

Six weeks later, Frank Varelli returned, feeling better, he said, but still complaining about his heart, his stomach and his aching back. After two days of telling his story to interviewers at the International Center, he seemed exhausted and melancholy. He wasn't enjoying his fame. He had hoped to avoid all this, he said, and he would have if only the FBI had paid him his money. "You think this is fun, what I'm doing?" he said. "This is hell on earth."

He lives in constant fear of enemies, he said. "I don't even go out at night anymore in Dallas. They'll pull my pickup over for something, and something will happen. I don't leave home without a quarter because you can't make a phone call from jail without one. I carry a shotgun and 9-mm pistol all the time. I carry a 12-gauge. It's legal in Texas. And I sleep with a 9-mm pistol under my pillow."

In his hotel room, Varelli sagged into a chair and rubbed his eyes. He was tired. He'd barely slept the previous night, he said. All night long, he'd lain in bed worrying -- about his lawsuit, about his health, about his future. And all night long, whenever the ancient elevator opened with a bang outside his room, he'd thought for a moment that somebody was breaking down his door, somebody who'd come to kill him.

Many people were eager to see him dead, he said, and he'd felt vulnerable without his pistol under the pillow. "I'm wanted by both sides, the communists and the Right," he said softly, his body slumped in a chair. "The Left has already condemned me to death in El Salvador. Dr. Elliott is harmless -- he's just crazy -- but there are people who would kill me . . . I don't go alone anywhere. I don't have a social life. I have to watch everywhere I go, everything I say. When you work for the Bureau, you see how easy it is to kill somebody. If you're alive, you're alive by the grace of God. I'm a born-again Christian, and I believe my life is in the hands of God."

Suddenly, he sprang out of the chair. He raised his right hand, with his index finger pointing like a gun barrel and his thumb cocked like a firing pin. His tired voice picked up energy as he described how people he knew were gunned down in San Salvador. They were riding in a car, he said, and the gunman stuck a pistol in the window and blew them away. He mimed the action, his forefinger pistol blasting away. "Bam! bam! bam!" he said.

For the first time all day, Frank Varelli was smiling. ::