Canada's Security Agency Accused of Spying on Canadians

TORONTO, Aug. 27— Canada's domestic security agency, which is responsible for investigating suspected subversion, espionage, terrorism and sabotage, has been shaken by allegations of spying on the Canadian Broadcasting Corporation, the Canadian Jewish Congress and a leading political party.

In the last two weeks, Toronto newspapers have published "read and destroy" documents of the agency, known as the Canadian Security Intelligence Service, suggesting an abuse of power reminiscent of the domestic spying in Canada and the United States in the 1970's.

As a result, the Security Intelligence Review Committee, a civilian body appointed by the Cabinet to oversee the intelligence agency, has been asked by Solicitor General Herbert Gray to conduct a formal review. And Parliamentary hearings are scheduled for next month.

The intelligence service is a civilian agency with 2,366 employees and a current annual budget of $207 million in Canadian dollars, or $150 million in American dollars. The agency, with headquarters in Ottawa, is exclusively charged with gathering intelligence but has no law enforcement role. It started up 10 years ago after a series of scandals about domestic spying in the 1970's by its predecessor, the Royal Canadian Mounted Police Security Service. Informant's Ties Questioned

Derek Lee, a member of Parliament from Toronto and chairman of the national security subcommittee in the House of Commons, said he wanted answers about Grant Bristow, who according to The Toronto Sun helped found, direct and finance a neo-Nazi group known as the Heritage Front while he was on the payroll of the intelligence agency as an informant over the last two to three years. He received as much as $50,000, or $36,000 in American dollars, the paper said. Mr. Bristow could not be reached for comment.

Mr. Bristow worked as a security guard in 1991 and 1992 for Preston Manning, leader of the populist Reform Party, now the third largest party in the House of Commons, after the governing Liberal Party and the Bloc Quebecois. Mr. Manning said he was concerned whether an agent was "trying to establish a link between our party and the Heritage Front" in an effort to discredit the party. Sought Data on Jewish Groups

In addition, Mr. Bristow sought to collect information last year on the Canadian Jewish Congress and some of its affiliated groups. Bernie Farber, a spokesman for the Jewish Congress, said Mr. Bristow had posed as a reporter for The Ottawa Citizen doing research on hate groups. The Jewish Congress has extensive files on the spread of neo-Nazism across Canada, and "he wanted to see what we had," Mr. Farber said.

Mr. Lee, chairman of the security subcommittee, said that this could be a case of an informant acting on his own and that the spy agency might not have broken any rules. Spying on CBC Reported

About a week after The Sun's report about Mr. Bristow's work for the intelligence service while helping to start the neo-Nazi group, The Toronto Star reported about the service and the CBC, saying the agency spied on CBC journalists who were preparing a TV documentary last year about racism in an army unit. Both newspapers had confidential agency documents to back up the allegations, and the Government is pressing to retrieve the documents, warning that possession of government secrets can violate the Official Secrets Act.

The issue has now become one of press freedom. The Star refuses to surrender its documents. The Sun has offered to turn its material over to a court and let a judge decide whether the Royal Canadian Mounted Police is entitled to the documents on behalf of the Government, .

Brian McInnis, a communications adviser to Douglas Lewis when he was Solicitor General under the Conservatives, acknowledged in a television interview that he had provided a classified document to The Star. He said that "it wasn't for money or anything like that" but that it was because he was disgusted with the actions of the spy agency. He was arrested on Thursday for violating the Official Secrets Act, questioned and released without charges.

The intelligence service, which rarely talks to the press, has issued news releases strongly denying that it has spied on either the CBC or the Reform Party. The agency said suggestions that it had spied on the CBC were "without foundation" and that "C.S.I.S. does not investigate lawful political parties."

An agency spokesman, Gaetan Blais, said it would be "inappropriate to comment" on any other matters until the intelligence committee completes its review, which is expected at the end of October.

With the allegations dominating the news over the last two weeks, many analysts say Canadians need to be reassured that the spy service is not being used for political purposes.

"All this may be a little midsummer hysteria over some silly skulduggery," a Globe and Mail editorial said on Thursday. "On the other hand, it may represent a reprehensible interference in the political process."