Supreme Court upholds special prosecutors' power to probe. The justices wound up their 1987-88 term with down-to-the-wire decisions on government investigations, capital punishment for juveniles, government funding of sex education, job discrimination, and union activities. Stories below and Page 40.

The United States Supreme Court tends to save some of its most important cases for last. In its final ruling for the 1987-88 term, the justices voted 7 to 1 to uphold a law that allows independent or special prosecutors to conduct official probes of alleged crimes by high-ranking government officials.

The long-awaited decision appears to clear an important obstacle to the current prosecutions of former White House aides Oliver North and John Poindexter and two others indicted in connection with the Iran-contra affair.

This ruling also allows the continuing investigations into the activities of Attorney General Edwin Meese III, accused of financial improprieties and possible conflict of interest.

In addition, it lifts doubts about the legality of the convictions of ex-Reagan administration staff members Michael Deaver and Lyn Nofziger.

Lawrence Walsh, independent counsel investigating the Iran-contra affair, was obviously pleased with the Supreme Court finding.

``The independent counsel statute provides a workable solution to a difficult problem,'' he said after the ruling was announced. ``We are gratified that the US Supreme Court has upheld the constitutionality of that statute,'' Mr. Walsh added.

The court's ruling is a blow to the defendants in the Iran-contra affair. They had argued that any information the independent counsel collected during the first few weeks of the investigation (when the independent counsel had received a court appointment but not a parallel executive-branch appointment) could not be used against them. Because of yesterday's decision, a good deal of testimony and documentation that would have been jeopardized can now be used in trial. The first trial, that of retired Marine Lieutenant Colonel North, will likely begin in August.

The court ruled that the special prosecutor law - provided by a portion of the Ethics in Government Act - does not violate constitutionally guaranteed separation of powers between the executive, legislative, and judicial branches of government.

Writing for the majority, Chief Justice William Rehnquist said: ``We observe first that this case does not involve an attempt by Congress to increase its own powers at the expense of the executive branch.

``Similarly we do not think the act works any judicial usurpation of proper executive functions.''

Chief Justice Rehnquist added: ``Finally, we do not think that the act impermissibly undermines the powers of the executive branch or disrupts the proper balance between the coordinate branches.''

Rehnquist allowed that the law limits the power of the executive to investigate and prosecute some alleged crimes. But he said there are sufficient safeguards against abuse.

For example, the independent counsel law, the court said, permits the US attorney general to decide when a special prosecutor is warranted and allows him to dismiss such an appointee for ``good cause.''

``Notwithstanding the fact that the counsel is to some degree `independent' and free from executive supervision to a greater extent than other federal prosecutors, in our view ... the act gives the executive branch sufficient control over the independent counsel to ensure that the president is able to perform his constitutionally assigned duties,'' Rehnquist explained.

A 38-page opinion was accompanied by a long dissent from Associate Justice Antonin Scalia.

Justice Scalia defended separation and balance of powers as what makes the US Constitution a unique and enduring document.

``In dictatorships of this modern world,'' he pointed out, ``bills of rights are a dime a dozen.''

Associate Justice Anthony Kennedy, the newest member of the court, had earlier disqualified himself from this case without giving an explanation.

A district court had upheld the statute. However, a federal appeals court in Washington struck it down on the basis that the independent counsel was an ``officer'' of the US and not an ``inferior officer'' (as provided by the statute) because she did not report to an superior officer within the executive branch. Also, the appellate tribunal held that the judicial branch could not constitutionally be given the power to appoint an executive official such as the independent counsel.

Staff writer Barbara Bradley in Washington contributed to this report.