Oliver North lied to both the CIA and Iran to hide the fact that he overcharged the Khomeini government for arms so he could create a secret pool of cash to aid the Nicaraguan Contra rebels, independent prosecutor Lawrence Walsh said Friday.

When Iran discovered it was being charged six times the actual prices, the White House aide tried "to cover his tracks" by blaming Iranian middleman Manucher Ghorbanifar - and even asked the CIA to create a phony price list, Walsh said in a memo to a federal judge.The memo, providing new details of North's diversion of Iran arms sale profits to the Contras, also disclosed for the first time that North allowed use of surplus money from the Iran arms deals to aid the Contras as early as December 1985. It revealed that an aide to North, who will serve as a govern-ment witness, was aware of the diversion scheme.

Walsh apparently submitted the memo to show U.S. District Judge Gerhard Gesell that the government's 14-count fraud and conspiracy case against North was crafted narrowly enough to avoid divulging national security secrets during a trial.

He filed the papers as the judge completed seven days of closed hearings on North's arguments that he needs to use massive amounts of classified information for his defense against charges he defrauded the government by diverting arms sale money to the Contras. In a second memo, Walsh proposed a procedure for protecting such information during a trial by allowing jurors to see sensitive material but barring witnesses from mentioning it in their testimony.

In his 12-page memo on North's role in the diversion, Walsh traced the history of the arms deals with Iran, beginning with 1985 sales of Hawk missiles in which Israel served as the intermediary and retired Air Force officer Richard Secord transported the weapons.

When Iran aborted a November 1985 deal because it was dissatisfied with the weapons, most of the $1 million set aside to cover Secord's expenses still sat in a Swiss bank account, Walsh said.

"Aided by this infusion, in December 1985 (Secord) shipped a substantial quantity of weapons to the Contras," Walsh wrote. "Thus, the events of November afforded North his first opportunity to exploit arms sales to Iran in order to support the Contras; the stage was set for the diversion of 1986."