sanctions against Libya.

Yesterday, a New York Times story claimed Houston-based Coastal Corporation set up a subsidiary in Bermuda so it could continue to trade with the North African state.

And accountant Mr. Peter Leighton, one of men who had dealings with the Bermudian company Coastal International, confirmed the story was true.

The story has stunned Americans who believed companies had abided by sanctions against "enemy'' countries like Cuba and Libya.

The Times which put its story on the top of its front page yesyerday, said companies have seized on "porous laws'' and lax enforcement of US sanctions to do business with Cuba and Libya. Under the Trading With The Enemies Act American companies are forbidden to do business with foes of the U.S.

Major companies are accused of shipping sugar to Cuba and continuing interests in massive projects like the Man-Made River tapping water from beneath the desert to create an agricultural oasis in Libya.

The newspaper stated Coastal, a Texan oil exploration company, has been under Federal investigation for three years concerning a Libyan government project in Germany.

The New York Times stated: "A lot of people created foreign subsidiaries in the one month between the time the Reagan Administration declared sanctions and the time they went into effect.

"The Coastal Corporation, a Houston based oil exploration company, has used a subsidiary based in Bermuda to go into business with the Libyan government at an oil refinery in Germany.

"Coastal has been under Federal investigation for more than three years, law enforcement officials say. "But investigators have had trouble determining whether executives of the Houston project are involved in the Germany project, which would be illegal.'' The company denied any illegal dealings with other countries but Mr. Leighton said Coastal International was set up in 1980 by the Coastal Corporation as a non-controlled foreign corporation to avoid restrictive sanctions.

He said: "It was a spin off of the Coastal Corporation. It gave it a trading mechanism to enable it to trade with whoever it wanted to. It was looking for a management company and that is what we did from 1980.'' Mr. Leighton added when the US Government placed the sanctions on trading with Libya, Coastal was left with an obligation to continue working with Libya on the refinery in Germany.

So another company Holborn Ltd. was started allowing the refinery to run with Libyan supplied oil. He believes the "obligation'' was something in the region of $40 million which has now been settled.

Mr. Leighton said the company has now moved down to Aruba where it has a refinery.

Yesterday's Times went on to say that officials of the companies named claimed they were not violating the spirit of the sanctions, but the story questioned loopholes which influenced the laws' effectiveness.

A 1987 study found that 169 foreign subsidiaries of 80 US companies were doing at least $266 million worth of trade with Libya, the Times said.

Subsidiaries of US companies did more than $700 million worth of trade with Cuba in 1991, the newspaper added, citing Treasury Department statistics. That amount has since fallen because of the 1992 Cuba Democracy Act, which forbids even subsidiaries from doing business there.