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"Ops." 110 Each project received a code name in the sequence. TH-1, TH-2, and North told the Committees that the projects ' had -not -progressed beyond the planning stage and, therefore;-he did not seek -a :Presidential . Finding authorizing any ofy these o erations'1S1J North testified that he 'discussed- the Enterprise's role in these projects with:Poindexter, but Poindexter said he did not recall such a conversation.112_The only :evidence that-the President knew of these sensi- tive?projects appears in-a September 15,'-1986, memo- randum from North to Poindexter. North asked Poin- dexter to brief the President on certain 'initiative's,` including one of the proposed joint U.S.-Israeli covert operations. -An 'attachment to the memorandum which North"suggested ,should be briefed to ..Casey :stated that, "covert funds could be made available" for this operation,' but the source of the funds.was not dis- closed.113 Poindexter noted on the memorandum that he approved North's -recommendation to brief the President on these operations and that it was "done." Poindexter testified that he did-not know or tell.the, President that the*'covert funds referred to by North were coming from the Enterprise.114 ~ ' ' The Lebanese Operation - -~~ Another initiative undertaken by North involved the use of DEA and Israeli contacts to fund and equip a force in -Lebanon. North described .the . proposed force as part: of _ a "long term operation" to give the United States some future military leverage on the ground in Lebanon. i l s _; , - - -.North-sent Poindexter a PROF note in June 1986 about Secord's progress in working with a Lebanese group on a hostage rescue operation: "After the CIA- took so long to organize and then botched the Kil- bum effort, Copp [Secord] undertook to see what could be done through one of the earlier DEA devel- oped [Lebanese] Contacts. Dick [Secord] has been working with Nir on this, and now has three people in Beirut and a - 40-man .' .' .- force working for us. Dick rates the possibility of success on this operation as 30% but that's better than nothing." 118 In closed testimony before the Committees, -North indicated that the project was. never carried out even though "we spent. a fairly significant amount of money on -.'. [this additional]'DEA operation." 117 Peter Kilburn, a 60-year-old librarian at the Ameri- can University in Beirut, was kidnapped, on Novem- ber 30, 1984. U.S. sources believed that, unlike the other hostages, Kilburn was being held by a criminal faction in Lebanon. At one point in the fall of 1985, North- had contemplated allocating Enterprise funds to support an operation intended to free him.118 The plan was terminated when Kilburn was murdered al- legedly by agents of Mu'ammar Qaddafi shortly after the American air raid on Libya in April 1986. Chapter 23 Other Countries : Otherzprojects :contemplated by--North involved aiding -anticommunist; resistance-'groups around-'the world.' North'told the Committees-that he"and.Direc-- tor Casey ."had seveial'discussions about'iriaking what he. called 'off-the-shelf,"-self-,generating activities -that would be able to do a number of 'these things. He' had mentioned specifically an ongoing operation."-In-_addi- tion, -North - testified, -concluded within my .own mind- the: fact. .that it might-require [other ongoing] operations [as -well]." 119 In ' testimony before the Committees,' North explained his motivation for assist' ing-resistance groups. -"We cannot be seen':" :-in-the world today as walking away and leaving' failure in our wake.t-We must be able to demonstrate, 'not-only in -Nicaragua, but .' .. elsewhere - where . freedom fighters have been told, we will support you, we must be able-to continue to do so." 120 -.. ::..- .. In April 1986, =North asked Secord and his partner Albert Hakim to use $100,000 from the Lake Re- .sourdes=Swiss - accounts -'to-'purchase :'conventional radio phone equipment for donation' to' - a political party in a , foreign country. _On April 29, two repre- sentatives of-a U.S. manufacturer met in Miami with Secord' and brie of Secord's associates, and the pur- chasing agent for the political party. At the meeting, the purchasing agent agreed to buy $100,000 of the radio equipment, and Secord-upon North's request- arranged for the Enterprise to wire this amount to the manufacturer. TheErria Another of North's -projects involved the purchase by the Enterprise of the M/V Erria, a small coastal freighter. of Danish: registry used to transport -goods between Europe and the Middle East. The Erria; built in -1973, was small, ' only.163 tffeet long, and weighed 710.tons.121 Before its purchase,:the Erria.was owned by its captain, Arne Herup.122 In 1984 and 1985, the Erria was used to run-weap- ons to the Persian. Gulf 'and then to Nigeria and Central America. Because of its Danish registry, the Erna, was able to escape the scrutiny of customs officials. IF" "When we ended up needing a ship to perform a certain .task," recalled North, "there was nowhere to get one on short notice, and so this orga- nization [the Enterprise] produced it practically over- night." Poindexter testified that Secord offered the ship because the Department of Defense could not provide 'a ship--suitable for the -covert operation.123 According to North, Casey -said "we can't find one anywhere else, get a ship. It didn't cost the taxpayers of the. United States a cent." 124 The money came from the Iran arms sales and other Enterprise funds. The Erria first came to the attention of the Enter- prise in April 1985, when it carried arms purchased through Secord to the Contras. En route to Central APPROVED FOR RELEASE DATE: NOV 2007 Chapter 23 America, the Erria came under surveillance by an unidentified "fishing boat" which Captain Herup as- sumed was Cuban.12s Herup took evasive action and brought the cargo successfully to a Central American country. 126 Herup's actions impressed Secord's asso- ciate, Thomas, Clines, and. when North needed a ship in April 1986, for covert operations, Clines suggested to Hakim that the Enterprise purchase the Erria from Herup, and keep him as Captain. . . ?? Hakim bought the ship for. $312,000 through Dolmy Business, Inc., one of the Panamanian compa- nies owned by the Enterprise, on April 28, -1986.127 Herup was asked to remain as captain for at least six months, with Danish agent Tom Parlow of SA Char- tering.' continuing as the ship's agent. Hakim and Clines told Herup that-they were working for the CIA and that at some future date they might ask him to transport. technical equipment for covert oper- ations. They promised that when the project was fin- ished, the ship would be returned to Herup at no cost. The Proposed Charter to the CIA for a Covert Operation "'.The first mission North contemplated for the Erria was for an extended covert operation. On April 28, 1986, Secord sent a KL-43 message to North propos- ing that the CIA' charter the vessel for that purpose: ".- ..? Abe, [Hakim] still in 'Copenhagen with our lawyer' finalizing purchase of ship. Deal has been made after three days of negotiation. The Danish cap- tain is up and eager for the mission-he now works for us. We are asking ... [of the CIA] for firm fixed price contract of $1.2 million for six months. He will probably balk at this price ..."lzn . - As Secord predicted, the Agency felt the rate was' excessive (several times the prevailing rate for similar assets). and it balked at chartering the ship. In addi- tion, the CIA' informed North that it was not interest- ed on technical grounds and that it did not feel that security-could be maintained because of the ship's' previous, use by North's associates to ferry arms to Central America. The' Agency indicated that Tom Clines'-,involvement was a negative factor of major _ --; proportions. 12! North. persisted. in his efforts to have the CIA lease the ship.. He then enlisted Poindexter's help. In, a May 14.. memorandum; -Vincent' M. Cannistraro of the SC staff urged. Poindexter- to take the. matter. up with Casey:. ,_ ~Status of Ollie's Ship.._Ollie -has offered the use of a Danish vessel for [a covert operation]. He. first offered' CIA a six month lease. CIA told mei that ,t they thought it' was too expensive, and thecost ,,. and time, involved in' refitting the vessel for (the].., mission :made the alternative option . . . more attractive. Ollie then offered to [perform the mis- _ sion] using his own resources. [C/NE] has told me that because of the alleged involvement of one Tom Clines (who was involved with Wilson and Terpil), CIA will have nothing to do with the Ship. 129 In the end, Casey supported Clair George's deci- sion that the ship was not suitable for Agency use. The Odyssey of the Erria _- - On May 9, 1986, the Erria commenced its oper- ations under its new owners, the Enterprise. The ship was to travel to pick up technical equipment. for a covert operation. . . On May 16 Herup was ordered to abort the mission and return to Larnaca, Cyprus..The new plan for the ship was to pick up any American hostages released as a result of the DEA initiative. En. route to Lar- naca; Herup received instructions to take up a posi- tion off the coast of Lebanon and to await further directions. 13 As described earlier in this Chapter, the DEA hos- tage ransom plan failed. Accordingly, after a 48-hour wait, Hakim ordered the ship to sail on; to Larnaca. On June 5, Herup received instructions to head for Gibraltar, but at the last moment the ship was divert- ed to Cagliari, Sardinia. From -there, he was told to take the ship to Setubal, Portugal, to await an arms cargo from Defex. The cargo at Setubal was not ready for loading, and Herup was instructed to return to Copenhagen, where he arrived on July 4.131 ' ' The Erria then was ordered to Szczecin, Poland, where. it arrived on July 10. The cargo it picked up was marked "machine parts," but actually consisted of 158 tons of Communist-bloc weapons, including AK- 47 assault rifles, hand grenades, mortars, and a variety of ammunition.132 The shipment was ? consigned to Energy Resources International, an Enterprise compa- ny. - - The Erria's next stop was Setubal; Portugal, where on July 19, it loaded an' additional 222 tons of arms from Defex Portugal in the presence of Parlow and Clines.133 Herup was told to set' his course for a Central American port. According to Hakim, the total cargo, which. he called the "stranded' shipment," cost $1.7 million; 134 Secord placed the cost. at about $2.4 million.135. En route to Central- America;' Parlow called Herup and told him to stop the ship:. Congress was in the process of repealing the Boland Amend- ment. The vessel sat in the water for 4 days. Captain Hemp then was ordered to return to.,Portugal;_ where he" was met by'Clines.13 s The Enterprise decided to find a buyer- for the 380- ton cargo, of arms now on board the Erria: Defex sold the arms to an intermediary for $1.2 million. The intermediary, in turn, sold the cargo' for $2,156,000 (including transportation), 137 to the CIA, which did not want to deal with the Enterprise because of Clines' involvement. The arms were transferred from Chapter 23 the Erna to another ship on September 20 for deliv- 138 ery to the CIA. Hakim and Secord continued their efforts. Herup was ordered to take the now-empty Erria to -Haifa, Israel, where it was to receive a new shipment *of arms. So as not to run afoul of the Arab boycott, the name of the ship was altered to read, "Ria," and false entries were placed in the Captain's log. On October 13, at Haifa, Herup loaded a crate containing -eight tons of Eastern Bloc arms that Nir had promised for the Contras. The captain also had been told he was to pick up pharmaceuticals for Iran. No pharmaceuticals were loaded. ... ; Herup was then ordered to go -to Fujairah in the Gulf of Oman. The-Iranians had promised North two Soviet T-72 tanks, but after the Erria waited 6 weeks in the Gulf, the plan failed to materialize. On Decem- ber 9, -Herup was ordered to open the. Israeli crate. He found only 600 well-used AK-47 assault rifles and 15 cases of ammunition-valued at approximately. S 100,000-a cargo not worth transporting to Central America. i s 9 77-026 0 - 67 - 13 After the revelations of the Iran-Contra covert op- erations in November 1986, Clines or Hakim ordered the Erria on December 14 to return to -Eilat, Israel, where the crate of,weapons that had been received in Haifa were unloaded. - - :.The Erria returned to Denmark later in December. Its missions on behalf of the Enterprise were at an end. The Erria was in a sense a metaphor for the other operations of the Enterprise-ventures : that began with ambitious expectations but accomplished noth- ing.=But the fate of these ventures-'cannot obscure the danger of privatization of covert operations . or the fact that the participants in the Enterprise had auda- cious plans 'for covert operations. Had the architects of the other: operations been emboldened by success, and not frustrated by failure, the Committees can only conjecture, with apprehension, what other uncon- trolled covert activities on behalf of the United States lay in store. __ - :.. Chapter 23 126. The commercial Bill of Lading shows the destination as a Central American port; however, the true destination of the cargo was a different Central American port. The ship arrived at that port on June 2, 1985. ER0001-02. 127. Dolmy Business, Inc., was organized as a corpora- tion under the laws of Panama, on September 11, 1985. ER03-09; ER10-12. See also: the Memorandum of Agree- ment and Bill of Sale covering the Erria. ER13-17; ERIS- 19. 127a. OLN Ex.-286. 128. C9605. Items for discussion at DCI meeting with Poindexter on 5/15/86. 129. N43472 (Memo from Cannistraro to Poindexter "Agenda for weekly meeting with DCI," 5/14/86.) 130. See summary log of the Erria, at ER0021; Erria log book, at ER0023-30; and ship's position May 23-29, as re- flected on page 14 of the Erria log book, at ER0031. 131. At this point, Albert Hakim and Dolmy Corporation owed SA Chartering S32,000 for fuel and wages, and it was for the purpose of collecting this debt that Tom Parlow directed Captain Herup to return to Copenhagen. Parlow sent a telex to CSF, stating falsely that SA Chartering had the vessel impounded for non-payment of account. CSF then promptly wired money to SA Chartering which was drawn against Dolmy's Credit Suisse account. 132. Her-up, Int., 4/29/87 at 68; Staff memo on Coastal Freighter Erria, 3/4/87, at 5; "National Syrian tied to North." B. Sun, 4/20/87, at IA, 9A. 133. Staff memo on Coastal Freighter Erria, 3/4/87, at 5. 134. See Chapter 22- 135. SC4104, Secord letter to Liman and Nields, "Arms Sales Profit Analysis." at 2. 116. Herup Int., 4/29/87, at 6-7. 137. Staff memo on Hakim/Secord ownership of Erria arms cargo, 4/30/87, at 2;'C4803-C4807, H87. The CIA did not get the whole cargo for that price. Some of the muni- tions were diverted by the intermediary, for use by North for other covert activities. 138. The transfer of the Erria's cargo took place in Cher. bourg, France. Five of the ship's containers were destined for one U.S. port, and 22 containers were destined for another U.S. port. See loading diagram at ER34. The rele- vant shipping documents, including cargo declaration, mani- fest, identification of crew, etc., at ER35-42, ER43-4. 139. ER32. See also Herup Int., 4/29/87, at 10. Chapter 1.4 "Taken to the Gleaners": ---.-------. The ' Iran Initiative- Continues* The United States had taken a firm position in Tehran. Although offered two hostages, McFarlane had refused to deliver the remaining HAWK parts unless all the hostages were released first. But this was to be the last show of toughness by the United States: just 2 months later, the United States delivered the same HAWK parts after obtaining the release of only one hostage. The Iran initiative continued until public reaction following its exposure in November 1986 forced its cancellation. -Before then, some of the players had changed: a new channel to Iran (the "Second Chan- nel")1 with a new Iranian emissary was found; Nir was cut out of the negotiations; and Secord and _:Hakim - took. his place. More missiles were sent to Iran, where they went to the radical Revolutionary Guard. But fundamental problems remained, and the Second Channel turned out to represent the same Iranian leaders as did the First. Channel. In the end, the United States secured the release of another hos- tage but three more were seized, at least one allegedly at the instigation of one of the Iranians with whom the U.S. negotiators had dealt earlier. Despite this, however, the U.S. negotiators agreed not only to se= quential release of the hostages biut also to seeking the freedom ? -of the convicted Da,va terrorists from . prison in Kuwait. The Bartering Continues The deadlock in Tehran did not end Manucher Ghor- banifar's role as an intermediary. A strange interde- pendence had developed among the parties: Iran still wanted the remaining HAWK parts and other high technology weapons from the United States; the United States wanted the hostages; Israel wanted direct or indirect relations with Iran; and Ghorbanifar wanted to be paid. Ghorbanifar had borrowed S15 million from Saudi entrepreneur Adnan Khashoggi to finance the HAWK parts shipment and Khashoggi, in turn, had borrowed the money from his financiers. But only one pallet of HAWK parts had been delivered in "'Our guys . . . they got taken to the cleaners." Secretary of State, George P. Shultz, testifying at the public hearings, 7/23/87, at 184. Tehran and Iran -refused to pay. Ghorbanifar could repay his debt to Khashoggi only by inducing the United States- to ship the rest of the parts. Only days after the Tehran mission ended, Ghor- banifar was on the phone with an-Israeli official seek- ing a meeting. Ghorbanifar blamed the failure of the Tehran trip on internal rivalries within the Iranian Government and complained about Robert McFar- lane's refusal to accept the offer to release two hos- tages for;the HAWK parts. The Israeli official restat- ed the U.S. position: there could be no further discus- sions unless- all.the.hostages were released first.2 Shortly afterward, CIA consultant George Cave was in communication with the Second Iranian, who also wanted the remaining HAWK parts delivered. The Second -Iranian claimed that Iran controlled the hostages and that if all the parts were delivered, two hostages would be released. When the HAWK radars were -delivered,..the two remaining hostages would be freed.3 The parts; :however, would -have to be deliv- ered first and the hostages would follow=the mirror image of the U.S. position. Cave rejected this proposi- tion-all the hostages would have to be released before any of the parts could be delivered.4 The par- ties remained far apart. Iran Discovers the Overcharge By the end of June, Iran had raised another reason for refusing to pay - Ghorbanifar and release the hostages: The Iranians--had obtained a "[m]icrofiche of factory prices" that "does not compare w/ prices charged."' On June 30, - Cave spoke by telephone to the Second Iranian -who complained that the Iranians had a microfiche price list showing the true price of the HAWK parts and that they had been overcharged by 600 percent. s The same day, Ghorbanifar called CIA official Charles Allen and told him that while he was being blamed for the overcharge, his markup was only 41 percent.? The sensitivity of the Iranians to overcharging had been known to the Americans for some time. In a December 4, 1985 PROF note to John Poindexter, Oliver North warned that the Iranians were unlikely to release the hostages in a "single transaction" be- cause they had been "'scammed' so many times in the t?? v rw ,Ma: ~ J NZ . 0O 3 N W u. r . ~ W W U tr V S J W U L a=I- zu H r F- La 11`,,0> } LN pp Z U. Uy O cUc~f < W N d Z rZ GUS. N te a. .S T 2 ?. 6 A 0 I- N u cc 2 u< u r r W } K cc IL M1 I wL 1FJJ . Z w.a r M ~?f W u W = g w N 7 M ty1 10 (A r W H I cc W4- (V 11 . 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