In the three years ending in 1967, the U.S. Army seriously considered "reactivating" Gestapo leader Klaus Barbie as an intelligence agent in South America, where it had smuggled him in 1951 to prevent his extradition to France.

According to the 218-page report released Tuesday by the Justice Department on the U.S. role in concealing Barbie's identity, the Army twice thought of rehiring Barbie: in 1965, when it was considering starting an intelligence network in South America, and in 1967, when it was told that Barbie was a friend of many high-ranking Bolivian army officers.

The Justice report said that both times the Army was talked out of rehiring Barbie by the CIA. That is the first hint that the CIA was aware that the Army's Counterintelligence Corps had hired, protected and resettled Barbie, who was being hunted by France.

Barbie now awaits trial in that country for war crimes he is accused of committing while head of the Gestapo in Lyons during the German occupation of France.

The Justice report cites a CIA memorandum that "discouraged the Army's interest in reactivating Barbie."

According to the memo, the CIA told the Army that the "allegations of war crimes against Barbie required serious consideration . . . since exposure of the CIC's role in evacuating Barbie from Europe would have serious consequences," especially if the CIC used Barbie in South America.

According to the Justice report, the CIA also told the Army that Barbie would have to provide "unique information of significant importance under secure operational conditions" before the CIA would approve of the Army's reactivation of Barbie.

Justice said that the CIA expressed a "generally negative reaction to recontacting Klaus Barbie without a clear understanding that the potential gain outweighed the manifest risks."

Despite the CIA warnings, the Justice report said, the Army did not lose interest in Barbie until 1968, three years after first considering Barbie's reactivation. A message from the Army to the CIA dated in April, 1968, stated that the Army had "terminated" its interest in using Barbie as an agent.

"The Army rejected the possibility because of the sensitivity of the case," the Justice report said. "The CIA discouraged the idea, based on the Army's past role in assisting Barbie and insisted on assurances that Barbie could be operated with stringent security on highly important matters before it would consider approving his use."

Barbie lived in La Paz, Bolivia, for 33 years as Klaus Altmann, the name he had been given by the CIC when he was smuggled out of Europe in 1951 with a forged Bolivian entry visa and false identity papers.

He apparently ran a lumberyard in La Paz at the same time he was used as a "contact man" in South America by a German industrial firm, whose executives told the CIC about his friendship with Bolivian generals and colonels.

"This is what piqued the Army's renewed interest in Barbie," said a source close to the Justice investigation of Barbie. "The Army said to itself. 'Here's a tested former agent who's ingratiated himself to some high-ranking military people in South America where trouble might brew some day. Why not use him again?' "

The Justice report of Barbie's friendship with Bolivian generals may explain why Barbie was not extradited by Bolivia to France until this year, 11 years after his cover was exposed. In January, 1972, Beate Klarsfeld, a French Jew and war-crimes investigator, announced at a news conference in La Paz that Altmann was Barbie.

"Altmann" denied the charge. But a few weeks later France asked Bolivia to extradite him to stand trial in France for war crimes. Urged by the Anti-Defamation League of B'nai B'rith to press for Barbie's extradition, the State Department told Bolivia that "it was inclined to the view" that the United States had "no interest in protecting" Altmann.

The Justice report said that Bolivia's reply was, "That is good; you have no interest either positive or negative . . . , because it is strictly an internal Bolivian matter."

Nevertheless, France pressed the case. But its plea for extradition was denied by the Bolivian Supreme Court on Dec. 13, 1974, on the grounds that there was no extradition treaty between Bolivia and France.

Justice said that in its in-depth investigation of it turned up no evidence that Barbie was involved in drug trafficking or arms smuggling that took him to the United States.

Justice said that Barbie entered this country twice under the name of Altmann: in July, 1969, and in January, 1970. On both visits, he took a day trip to the Bahamas before returning to Miami, where he had flown both times from La Paz.

"On both occasions, he had an A-2 visa granted by the U.S. Embassy in La Paz," the Justice report said.

"A-2 visas were routinely granted by the embassy to holders of Bolivian diplomatic passports. At that time, the name Klaus Altmann was not entered in the State Department visa lookout books, and so there was no reason to associate Klaus Altmann with the name Klaus Barbie. In any event, the name of Klaus Barbie was not on the visa lookout either."

Why did Barbie visit the United States?

The Justice Department report said that at that time Altmann/Barbie was manager of a Bolivian shipping company half-owned by the Bolivian government.

Justice said, "There is no reason to think that Barbie was not in the U.S. because of his shipping affairs and no evidence that he did anything illegal or improper during his visits. It is also reasonably certain that his visits were not connected to any agency or activity of the U.S. government."

Despite the fact that Justice contends that no U.S. agency rehired or recontacted Barbie, it did turn up an apparent attempt by Barbie to pass on intelligence information on South America to the United States.

"A former official of the Bolivian Ministry of Interior, interviewed in La Paz in this investigation, stated that in the mid-1970s Barbie passed on to him certain information regarding intelligence operations in several countries in South America," the Justice report said.

"This official believed the information would be of interest to the U.S. government and passed it on to a U.S. representative. The Bolivian official did not remember if he told the U.S. government representative that the information came from Barbie, but he was sure that the information was unsolicited and that the U.S. government representative did not relay any information or desires through the Bolivian official intended for Barbie."