The Justice Department announced yesterday that it will not appoint a special prosecutor to investigate national security adviser Richard V. Allen's receipt of $1,000 from Japanese journalists because "it is clear there was no criminal violation by Allen."
The FBI will continue to look into irregularities in Allen's financial disclosure statements and into his acceptance of two watches from a Japanese friend, however.
Allen announced Sunday that he was taking an administrative leave of absence from his job pending completion of the Justice Department investigation. White House spokesman David Gergen said yesterday that Allen will not return to work until all phases of the investigation are complete.
Allen, who has been conducting a blitzkrieg media campaign in his defense since taking leave, told reporters yesterday that he expects President Reagan to permit him to resume White House duties if the Justice Department clears him.
"He above all has a sense of fairness about this," Allen said.
The FBI investigation concentrated on the laws on bribery and federal officials receiving gifts and concluded that Allen was guilty of no violation.
Allen's return to the White House is by no means certain, however. Two of the president's top three advisers, chief of staff James A. Baker III and deputy chief of staff Michael K. Deaver, plus Nancy Reagan, reportedly have urged that he be replaced, not because he violated the law, but because he exercised bad judgment in his dealings with the Japanese journalists and businessmen.
And, presidential counselor Edwin Meese III, who reportedly was Allen's sole supporter at the top of the Reagan hierarchy, said Monday that the Justice Department's report would be a major factor, but not the only one, in determining whether Allen would be permitted to return to his White House job.
But by exonerating Allen in unequivocal terms on the major controversy, the $1,000, the Justice Department made it more difficult for Allen's critics in the White House to fire him on grounds that can be clearly and publicly defended.
In a written statement, Attorney General William French Smith indicated that the department had decided to close the the inquiry into Allen's receipt of the $1,000 because the Criminal Division found no evidence that Allen "violated federal criminal law."
Allen said he intercepted the money, intended as an honorarium for Nancy Reagan from a Japanese women's magazine, and put it in an office safe where he forgot it until it was discovered in September.
Sources say the FBI completed its investigation into the $1,000 about two weeks ago but was asked to reopen it after news stories began to appear concerning Allen's receipt of the watches and the inconsistencies in his financial disclosure.
Tom DeCair, a spokesman for the Justice Department, said the investigation will continue in those two areas. But he would not say whether the FBI will look into the propriety of meetings Allen admitted to having with former business associates since he joined the White House staff, or into the conditions of Allen's sale of his consulting firm.
The statement said the FBI, aided by the Japanese National Police Agency, interviewed 36 people in the United States and Japan concerning the Allen case.
While the investigation cleared up some of the mysteries in the case, it created others.
Generally, the findings of the investigation support Allen's story: that he helped the Japanese magazine Shufu No Tomo (Housewife's Friend) arrange a brief interview with Nancy Reagan the day after President Reagan's inauguration at the request of the wife of a Japanese business associate.
Although Mrs. Reagan was not interviewed by the FBI, others present at the interview backed up Allen's statement that he intercepted the envelope as part of a sheaf of papers intended for Mrs. Reagan.
The documents included a large outer envelope bearing Oriental characters, a smaller inner envelope with $10,000 written on it containing ten $100 bills and a piece of paper resembling a receipt with Oriental writing that included the figure $10,000.
But records obtained from the magazine indicated that the $10,000 figure referred to the travel expenses for three women coming from Japan for the interview and included the $1,000 honorarium for Mrs. Reagan.
One of the mysteries is how Allen could have forgotten the money for eight months. Although Allen's secretary, Irene Derus, has taken the blame for failing to turn the money over to the government, the FBI investigation found that at least three other people found out about the money but did not turn it over to the Treasury or remind Allen that something should be done about it.
The FBI report indicates that a second secretary discovered the money in February, the month after it was originally put into the safe.
It also says that that secretary called yet a third secretary who then notified Derus that the cash had been found. Derus instructed her to turn the contents of the safe over to an assistant to Allen, Col. Donald Johnson.
"On his own initiative, the assistant Johnson put the envelope and packages in the two-drawer safe. He left the National Security Council in March, 1981, with the envelope still in the safe and without notifying Allen of what he had done with the envelope," the report said.
The money was then discovered on Sept. 15 by three military officers who were moving into Allen's old office. They turned the envelope and other items in the safe over to NSC employes who in turn took them to Meese on Sept. 21. Meese turned over copies of the documents to the FBI the same day. Again, no one told Allen.
The report indicates that the FBI investigation concentrated on bribery laws and prohibitions against public officials accepting valuable gifts and compensation from foreign governments, but found that none of those statutes were violated.
"In sum, when the uncontradicted facts are analyzed in the context of possible applicable criminal laws, it is clear there was no criminal violation by Allen regarding the $1,000," the department statement said.
"Allen did not intend to keep the money for his personal use," the report said. "Both Allen and his secretary agree on Allen's expressed intent to turn the money over through the proper channels."
One point that was not addressed was two phone calls by FBI director William Webster during the investigation, one to Allen and the other to Meese. Sources in the department have said Webster was authorized by Smith to make the calls.
DeCair declined to speculate on when a decision might be made on whether the special prosecutor provision might apply to Allen's receipt of the watches or the error in his financial disclosure form.
Allen says he accepted the watches before he took office and therefore did nothing improper. The Japanese involved contend he accepted one watch before the interview and the second one afterward.
Allen said yesterday he believes federal regulations permit officials to accept gifts of large value, even "priceless" gifts, from friends. The rules on receiving gifts apply only to gifts from individuals having dealings with the government or seeking to influence the government, not from friends, he said.
"The rules neither prevent or were intended to prevent receiving a gift from a friend, no matter if it is priceless," Allen said. " . . . There is nothing wrong unless it is in the mind of the giver and the attitude of the receiver."
The White House confirmed that it would be legal for Allen to accept a gift of unlimited value from a friend, as long as he reported it to the White House counsel within a year of its receipt.
On the question of his consulting firm, Allen said in a statement filed in February that he had stepped down as president of Potomac International Corp. and sold the firm in January, 1978. He also listed no interest in the consulting firm at the end of 1980.
However, after press inquiries, Allen acknowledged last week that he had made a mistake and amended his disclosure statement to say he sold the firm in January, 1981, and held an interest of from $100,000 to $250,000 at the end of 1980.
Allen also said that it was on the advice of the office of White House counsel that he did not list the names of any of his former business clients who paid him more than $5,000 in fees, as required on the White House financial disclosure form he filed upon becoming a White House employe.
Allen said that while he was the sole owner of the Potomac International Corp. consulting firm, he was technically just an employe of it. He said the counsel's office told him the fees of his clients were technically paid to the corporation, not him personally, which meant that he did not have to list his clients on his financial disclosure form.
"You know," Allen concluded, "I simply cannot understand why it is if we are held to a particular standard . . . the case of a lapse of memory or sloppily filling out a financial disclosure form should be reasons for a person having to leave office . . . . After all, we are ordinary individuals, who put our trousers on one leg at a time.
"To err is human. I know that sounds trite and tautological, but it's not meant to be."