US Attorney General William French Smith has closed the investigation of national security adviser Richard Allen without recommending appointment of a special prosecutor.
The Justice Department said an FBI inquiry failed to turn up evidence of wrongdoing in Allen's acceptance of two watches from Japanese journalists who interviewed Nancy Reagan.
Nor did the inquiry find reason to conclude that Allen violated the criminal law when he included inaccuracies on the financial disclosure form he filed with the government in January.
President Reagan and his top advisers have declined to say definitively that Allen would return to his job if cleared by the Justice Departmemt.
The department three weeks ago dropped its inquiry into Allen's acceptance of