Independent counsel Lawrence E. Walsh said yesterday he will drop attempts to prosecute former CIA operative Joseph F. Fernandez after Attorney General Dick Thornburgh announced he will continue to refuse to permit classified CIA information sought by the defense to be used in the trial.

Thornburgh's decision, sources said, makes it unlikely that Walsh's office will indict other Central Intelligence Agency officials on false-statement charges for testimony given to executive and congressional branch investigators after the Iran-contra affair was made public.

"No matter how the administration rationalizes the non-production of this {classified CIA} information, it shows a lack of concern for applying the rule of law to officials of the intelligence community," Walsh said in a statement. He repeated his criticism, voiced last year when the issue first arose, that the Bush administration has an "overprotective attitude toward classified information."

Fernandez, a 22-year veteran of the agency, was the CIA station chief in Costa Rica from 1984 to 1986 and while there aided then-White House aide Oliver L. North in the secret resupply network for the contras at a time when Congress had prohibited all U.S. military aid to the Nicaraguan rebels. He was indicted in April 1989 for making false statements about his role and knowledge of the Iran-contra affair to the White House-appointed Tower Commission and the CIA inspector general.

Fernandez demanded use of classified CIA documents for his trial, information his lawyers said would show that CIA officials knew of and themselves were involved in aiding the contras and thus show that Fernandez had no need to lie about his activities.

Last November, following the recommendations of an interagency study group, Thornburgh filed an affidavit in U.S. District Court here saying the materials Fernandez demanded would cause "serious damage to national security" if it were disclosed.

Based on that affidavit, Judge Claude M. Hilton dismissed the charges against Fernandez on grounds he could not get a fair trial without the classified CIA materials.

Walsh appealed that decision, but it was upheld by the U.S. Court of Appeals in Richmond.

In a letter to Hilton yesterday, the Justice Department said Thornburgh had asked government agencies involved in national security matters to reevaluate their earlier decision.

Based in part on the appeals court opinion that Fernandez would be entitled to use not only the locations of CIA facilities but also their activities, the group made a "unanimous recommendation" that Thornburgh continue to prevent the information from being made public at the trial, the Justice Department letter said.

Officials from the CIA, the National Security Agency, the National Security Council and the Defense and State departments participated in the security review group that advised Thornburgh. Individuals who currently or formerly worked at all those agencies, except NSA, are among those whose Iran-contra testimony is under review by Walsh's investigators.