An editor of the school newspaper calls it "blood money." A faculty member lambastes it as "appalling." The president of the school defends it as a generous gift from a worthy benefactor.

The debate, under way at American University, is over the "Adnan Khashoggi Sports and Convocation Center" -- a $14 million arena being built on the school's Northwest Washington campus and scheduled for completion this December. Three years ago, shortly after he was invited to join the school's board of trustees, Khashoggi, the flamboyant Saudi financier and international arms broker, pledged $5 million to help finance the sports center. The school enthusiastically accepted and agreed to name it in his honor.

Recently, however, disclosures about Khashoggi's role as middleman and financier of the secret U.S. arms shipments to Iran have revived a lively campus debate over the propriety of the gift. Some faculty members and students have sharply criticized the school's relationship with Khashoggi, saying it lends him undeserved respectability. And, with another Khashoggi contribution for the arena apparently due this year, the issue has refocused the spotlight on AU President Richard Berendzen, a friend and avid defender of the Saudi businessman.

"It's a shame that this school doesn't even have peace studies, but it will have a sports center named after an arms dealer," said senior Gidget Fuentes, editorial page editor of the school paper, The Eagle. "I call it blood money . . . I'm really upset that President Berendzen isn't going to do anything about it."

The debate over Khashoggi was highlighted in a recent issue of The Eagle, which devoted six articles to the matter, including opposing editorials under the headlines "The Center That Khashoggi Built? No Way|" (by Fuentes) and "Build the Center -- Keep Adnan's Cash." After what one editor called "a very heated" discussion, The Eagle's editorial staff deadlocked 6 to 6 over whether the paper should call for the school to return Khashoggi's money and expel him from the board of trustees.

The attention given the matter in The Eagle provoked campus discussion -- and no small degree of cynicism. One faculty member, assistant government professor Jeffrey Richelson, says he told his students that the center should be renamed the "Khashoggi Sports and Guerrilla Warfare Center." In addition, sources say that one board member, prominent lawyer R. Robert Linowes, resigned last year -- before the Iran revelations -- in part because of his concerns about the school's affiliation with Khashoggi.

One reason for the new concerns, some students and faculty members readily acknowledge, is purely monetary. There is no dispute on campus that the school badly needs the new 4,500-seat sports arena: AU's basketball team has been forced for years to play its games at Fort Myer in Virginia for lack of a sufficiently large on-campus facility.

The Iran affair has been accompanied by extensive publicity over Khashoggi's broader financial problems, raising new questions on campus about whether he will come

through with everything he has pledged.

In Salt Lake City, where 47 lawsuits have been filed against his U.S. holding company, Triad America Corp., for nonpayment of debts, Khashoggi has missed payments on a promised $1.37 million contribution to a hospital and a $150,000 pledge to the local ballet company.

Khashoggi's executive assistant in New York, Robert A. Shaheen, said last week that Khashoggi would not be available for an interview with The Washington Post because Shaheen's name was mentioned in a recent Post article about Khashoggi.

Berendzen said in an interview that he has no reason to doubt Khashoggi's continued financial commitment to AU. The financier's $5 million pledge for the sports arena was to be spread over a 10-year period, Berendzen said, and so far "he's up to date, he's done what he says he was going to do {and} he's said nothing negative to indicate there was a problem."

In his book published last year, "Is My Armor Straight? A Year in the Life of a University President," Berendzen wrote extensively about Khashoggi, including about being invited to parties at Khashoggi's palatial apartment in New York where he met a bevy of movie stars and international jet-setters, such as Koo Stark and Farrah Fawcett.

At the 1984 announcement of Khashoggi's gift to the school, Berendzen warmly praised the financier: "In every sense of the word, Mr. Khashoggi has exemplified at our university the true meaning of the word philanthropy: to love mankind."

While saying he is "not enamored of the concept of arms dealing," Berendzen said last week that nothing that has come out so far in connection with the Iranian affair has made him question the university's relationship with Khashoggi.

For openers, he noted, there were many people involved in the arms sales to Iran, from U.S. government figures to the Israelis to the U.S. defense contractors who manufactured the TOW antitank missiles and other weapons involved in the sales.

"Israel actually made the sales, and we receive Israeli bonds as gifts from some of our donors," said Berendzen. "I haven't heard anybody suggest that we not accept those . . . . And it's an interesting question whether trading in arms is more or less bad than holding stock in the companies that make them."

In his book, Berendzen wrote that while Khashoggi may have earned his huge fortune brokering arms deals for U.S. defense contractors in the 1970s, his business activity has long since branched out into other areas and only a "minuscule portion" still comes from arms sales. Last week, Berendzen revised this somewhat. "He's told me that the arms side is at most 20 percent," said Berendzen.

But irrespective of what portion of Khashoggi's business comes from arms and what portion from his many other ventures (last week it was announced that Khashoggi had teamed up with a Denver-based rock promoter and others to take over a Canadian mining concern that, according to Khashoggi, has the mining rights to the site of King Solomon's ancient gold mines in Africa), many members of the AU faculty say it would be hypocritical to turn on their benefactor now.

Basketball coach Ed Tapscott, who acknowledges more than a small vested interest in the new sports center, noted that the university was well aware for years of Khashoggi's role in the arms trade.

"We knew about that when we asked him for his money {in 1984} and he gave it," said Tapscott. "It seems to me, loyalty deserves loyalty."