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Victor Manuel Gallegos was a teen-ager when he joined the leftist Sandinista rebels who overthrew the Somoza dictatorship and its brutal National Guard.

Now, age 34, Gallegos and hundreds of others have rearmed and formed Nicaragua's newest rebel group - this time against the government of Violeta Chamorro, who won elections three years ago that ousted the Sandinistas.Led by Gallegos, about 150 members of the Revolutionary Front of Workers and Peasants attacked the city of Esteli, about 60 miles north of the capital Managua, last week.

As many as 50 people died in the clash between the rebels and soldiers of the Sandinista-controlled army backed by armored cars and helicopters. It was some of the fiercest fighting since the 10-year civil war ended in 1990.

The New York Times reported Monday that the army knew about the attack and allowed it to happen, partly so that former Sandinistas who pose a threat to the army could be crushed and partly to humble the government.

The newspaper quoted diplomats as saying that army leader Gen. Humberto Ortega also wanted to retaliate for President Chamorro's refusal to pardon Sandinista radicals.

It said buses carrying the rebels into Esteli passed an army base unmolested and soldiers in town waited three hours before fighting back.

Gallegos, best known by his nom de guerre "Pedro the Honduran," escaped and is being sought. He was born in the neighboring Central American nation of Honduras and came to Nicaragua as a child.

He had trained in Cuba and became a major in the Sandinista army who commanded troops in the battle against U.S.-backed Contra rebels.

Although initial reports said there were some former Contra rebels among the attackers, local media said the vast majority were former leftist Sandinista soldiers, disgruntled because the government has failed to provide them with land, tools and other help promised by the government.